To borrow money to finance the start-up of his business, Rollo executes an instrument
in favor of Security Bank. For the instrument to be negotiable, the signature must be
a. anywhere on the instrument.
b. anywhere on the lower half of the instrument only.
c. in the lower left-hand corner of the instrument only.
d. in the lower right-hand corner of the instrument only.
Eduardo is a debtor. Furniture Mart is Eduardo’s employer. Guaranty Credit, Inc., and
the government are Eduardo’s creditors. For these parties, a petition in bankruptcy for
relief through an individual’s repayment plan could be filed by
a. Eduardo alone, Furniture Mart alone, or Guaranty Credit and the government jointly.
b. Eduardo only.
c. Guaranty Credit and the government only.
d. the government only.
A suit is filed against DrillBits Corporation, alleging that the firm committed the
offense of monopolization. To determine whether DrillBits has monopoly power
requires looking at
a. the price of a share of DrillBits’ stock.
b. DrillBits’ size alone.
c. DrillBits’ production methods and marketing techniques.
d. the relevant market.
Arnold buys a backhoe from Big Dig Equipment Inc. Arnold is unaware that Credit
Collection Company holds a lien against the backhoe when he buys it. If Credit
Collection repossesses the backhoe, Arnold can
a. recover from Big Dig for breach of warranty.
b. do nothing.
c. file criminal charges against Big Dig and Credit Collection.
d. recover damages from Credit Collection for breach of warranty.
Regal Autos, Inc., sells cars to consumers. To avoid potential liability for oral express
warranties, each Regal sales agreement should note that a car is sold
a. as is.
b. in perfect condition.
c. subject to warranties included in the written contract only.
d. with no known defects.
Motor Vehicles Service Company orders NoBounce-brand shock absorbers from Parts
& Tools, Inc., to be delivered by the seller. Before Parts & Tools’ truck arrives with the
goods, Motor Vehicles tells Parts & Tools it will not pay. The shock absorbers are
destroyed in transit. The loss is suffered by
a. all of the parties’ insurance companies pro rata.
b. NoBounce’s insurance company.
c. Motor Vehicles to the extent of a deficiency in Parts & Tools’ insurance coverage.
d. Parts & Tools to the extent of a deficiency in Motor Vehicles’ insurance coverage.
Corbin, a partner in Dentists & Orthodontists Clinic, applies for a loan with Evermore
Bank allegedly on the firm’s behalf but without the authorization of the other partners.
Evermore knows that Corbin is not authorized to take out the loan. If Corbin defaults on
the loan, liability for its unpaid amount will be imposed on
a. Corbin and Doctors, jointly.
b. Corbin only.
c. Doctors only.
d. Evermore only.
Fact Pattern 9-1B
Barney hires Clean Air, Inc., to install a new air conditioning system in his Dental
Clinic, LLP. Barney does not have the right to control the details of Clean Air’s
performance.Refer to Fact Pattern 9-1B. The relationship between Barney and Clean
Air is
a. client and independent contractor.
b. employer and employee.
c. master and servant.
d. principal and agent.
HazMat Waste Corporation operates a hazardous waste storage facility. Concerned that
there may be a release of chemicals from the site, HazMat sells the property to
Investment Holdings, Inc. If there is a release, HazMat is most likely
a. liable.
b. not liable because the site was sold before the release.
c. not liable because HazMat was concerned about the release.
d. not liable because HazMat no longer operates the facility.
Fact Pattern 28-1B
Truck & Transfer Inc. agrees to pick up two containers for United Home Products
Corporation and store their contents, to be delivered later. While Truck & Transfer un-
loads one container, the other disappears from the company’s loading dock.
Refer to Fact Pattern 28-1B. These facts give rise to
a. a presumption of negligence by Truck & Transfer.
b. a presumption of theft by a third party.
c. a presumption of theft by Truck & Transfer.
d. United Home’s liability for the container’s loss.
Hu, Ivan, and Juana apply to work for King Poultry Company. These individuals’
identities and eligibility to work must be verified by
a. King Poultry.
b. Hu, Ivan, and Juana.
c. Hu, Ivan, and Juana’s countries of origin.
d. U.S. Citizenship and Immigration Services.
Location! Realty, LLC, is a limited liability company. Like other LLCs, for federal
jurisdictional purposes, Location! Realty is most likely a citizen of
a. all states.
b. every state in which its members are citizens.
c. no state.
d. only the state in which it was formed.
Garden Field Farms and Haute Gourmet Restaurant, Inc., enter into a contract for a sale
of lettuce. After Garden Field ships the lettuce but before Haute Gourmet receives it,
the buyer declares bankruptcy. Garden Field can stop delivery of the goods in transit
a. only if the quantity is deficient.
b. only if the quantity exceeds the contract amount.
c. only if the quantity is at least a truckload.
d. regardless of the quantity.
Ski Resorts, Inc., wants to add a new run to its facility in a national park on federal
land. For this action, an environmental impact statement is
a. prohibited.
b. required.
c. unnecessary.
d. voluntary.
Nikita, an employee-agent of Operational Processes, Inc., is authorized to access
company trade secrets. Nikita downloads those secrets onto a thumb drive. She then
quits Operational’s employ and goes to work for Quantum Analysis, Inc., an
Operational competitor, with whom she shares the secrets. With respect to the agent’s
duty of loyalty to her principal, this is
a. unethical, but not illegal.
b. neither unethical nor illegal.
c. illegal, but not unethical.
d. unethical and illegal.
Lisa brings a successful lawsuit against her employer Metal Mold & Die Corporation
for unlawful discrimination. Lisa may be awarded
a. back pay, but not retroactive promotions.
b. retroactive promotions, but not back pay.
c. damages, but not back pay.
d. back pay, retroactive promotions, and damages.
Lauren, Marcella, and Norell form a syndicate to buy a professional soccer franchise.
This syndicate could be set up as
a. a joint venture.
b. a corporation.
c. a sole proprietorship.
d. a limited liability company.
Thirty-one days before filing a petition in bankruptcy, Gavin transfers property and
makes payments that favor one creditor over another. These are
a. affirmation agreements.
b. preferences.
c. secured interests.
d. unsecured debts.
Fact Pattern 20-2B
Robin’s home is in a state that has a $30,000 homestead exemption. Robin defaults on a
$60,000 debt that she owes to Suburban Mortgage Company. Robin’s home is sold at
auction for $80,000.
Refer to Fact Pattern 20-2B. If Suburban Mortgage recovers less than it is owed, it can
realize the difference from
a. any property that Robin owns.
b. only exempt property that Robin owns.
c. only nonexempt property that Robin owns.
d. property that any other member of Robin’s family owns.
Level Fencing Company wants to present information in “disclosure documents” via the
Internet to prospective franchisees. Among other legal requirements with which Level
Fencing must comply, prospective franchisees must
a. agree to settle any lawsuits that may arise over the documents.
b. be able to download or save all electronic documents.
c. provide e-mail addresses for Level Fencing to verify users’ authenticity.
d. register with the Federal Trade Commission via Level Fencing’s Web site.
Discount Retail Corporation may be engaging in conduct that violates the Sherman Act.
To bring an action against the firm requires that its conduct have a significant impact on
a. international commerce.
b. Internet commerce.
c. interstate commerce.
d. intrastate commerce.
Home2U Stores, Inc., sells household consumer goods. To create a purchase-money
security interest, Home2U must
a. assign, to a collecting agent, a portion of its accounts payable.
b. assign, to a collecting agent, a portion of its accounts receivable.
c. extend credit for part or all of the purchase price of the goods.
d. refer purchasers to a third-party lender.
Mario chooses a personal representative to deal with his real estate, bank accounts, and
investments after his death. Mario should also choose an online executor. An online
executor is responsible for dealing with a decedent’s
a. all of the choices.
b. e-mail addresses.
c. social media profiles.
d. blogs.
Congress enables the Environmental Protection Agency to regulate air and water
pollution. This congressional act is
a. divine right.
b. a delegation of legislative power.
c. a gap-filling power.
d. arbitrary and capricious.
Closed meetings of the National Security Agency and other federal administrative
agencies are permitted when
a. the subject of the meeting concerns accusing a person of a crime.
b. open meetings would frustrate the implementation of future actions.
c. the subject of the meeting involves matters relating to future litigation or rulemaking.
d. all of the choices.
Iago believes that he is a victim of a form of employment discrimination that falls under
the Civil Rights Act of 1964. Compliance with this statute is monitored by
a. employees and job applicants, not an administrative agency.
b. employers and businesses, not an administrative agency.
c. the courts and Congress, not an administrative agency.
d. the Equal Employment Opportunities Commission.
Bonds & Stocks Corporation, and its officers, directors, and shareholders, buy and sell
securities. SEC Rule 10b-5 applies to the purchase or sale of
a. a security by a financial corporation only.
b. a security involving a corporate insider only.
c. a security involving short-swing profits only.
d. any security.
Lorena is appointed as an agent for Milled Grains, Inc. The agency agreement is silent
as to the level of sales that Lorena is expected to achieve. She must
a. achieve nothing because the agreement says nothing on the issue.
b. attain the level that Lorena achieved with her previous employer.
c. maintain the level Milled Grains attained before Lorena became an agent.
d. use reasonable diligence and skill in selling.
Rubi sends Sage a certified check for $5,000. Sage deposits the check into her account
at Town Bank. The next business day, the bank confirms a $5,000 increase in Sage’s
account. She then wires Rubi $500 for “fees.” Later, the bank discovers that the check is
counterfeit. On these facts, the bank can deduct from Sage’s account
a. $5,500.
b. $5,000.
c. $500.
d. 0.
Over the course of a year, Suites & Sets Corporation sells household furnishings to
customers to whom it extends credit. Suites & Sets orders the furnishings from The
Storage Depot’s warehouse, from which the items are shipped via common carrier to
Suites & Sets customers. Article 2 of the UCC governs
a. all of the parties’ sales of the goods.
b. Suites & Sets’ extension of credit.
c. The Storage Depot’s storage of the goods.
d. each company’s management of its operations.
Dairy Products, Inc., and Eden Farms Corporation form a joint venture to make and
test-market Frosty Ice Cream. A joint venture is usually formed for
a. an implied duration of not more than six months.
b. a single transaction or project.
c. a stated duration of not more than one year.
d. a perpetual existence.
Pest Eradication, Inc., makes a pesticide with a one-in-a-million risk to people of
developing cancer from exposure. This substance must be
a. disposed of before anyone develops cancer.
b. registered before it is sold.
c. taken off the market and placed in temporary storage.
d. used only in a way that avoids exposure to people.
Big Beef, Inc. raises calves to sell. Big Beef breeds its cows in April, and the cows
calve in February of the following year. In January, Andrea contracts with Big Beef to
buy fifty calves. Identification takes place in
a. January, when the contract is signed.
b. April, when the calves are conceived.
c. February, when the calves are born.
d. a reasonable period of time.
Dulcey agrees to cosign a promissory note for Excavation Equipment Leasing & Sales
to buy a backhoe. The note is payable to Federal Bank. Dulcey is an accommodation
a. drawee.
b. indorser.
c. maker.
d. drawer.
When the harassment of co-workers creates a hostile working environment, an
employee may have a cause of action against an employer.
The rights and remedies of secured parties are not cumulativeif a creditor is
unsuccessful in enforcing rights by one method, he or she cannot pursue another
method.
A sole proprietor does not own the entire business.
To be negotiable, an instrument must be in writing.
The franchise is not strictly speaking a business organizational form.
A buyer who rightfully rejects nonconforming goods may obtain cover or cancel the
contact, but may not seek damages.
A director or officer is liable to the corporation or its shareholders for honest mistakes
of judgment and bad business decisions.
In the distribution of the debtor’s estate, secured creditors take priority over unsecured
creditors.
Under what circumstances would Quality Market, a small store in Rustic, an isolated
town, be considered a monopoly? If Quality Market is a monopoly, is it in violation of
antitrust law?
All checks are time instruments.
When there is a breach of an underlying contract for which an instrument was issued,
the drawer of a check can order his or her bank to stop payment on the check.
The entrustment rule basically allows innocent buyers to obtain legitimate title to goods
purchased from merchants even if the merchants do not have good title.
Under the UCC, a contract for a sale of goods that does not include the quantity will not
fail for indefiniteness.
NationPoints Trucking, Inc., has a requirements contract with Oil & Gas Corporation
that obligates Oil & Gas to supply NationPoints with all the gasoline it needs for its
vehicles for one year at $2.30 per gallon. A clause inserted in small print in the contract
by NationPoints, and not noticed by Oil & Gas, states, “The buyer reserves the right to
reject any shipment for any reason without liability.”
For six months, NationPoints orders and Oil & Gas delivers under the contract without
any controversy. Then, because of a war in the Middle East, the price of gasoline to Oil
& Gas increases substantially. Oil & Gas tells NationPoints it cannot possibly fulfill
their contract unless NationPoints agrees to pay $2.50 per gallon. NationPoints, in need
of the gasoline, agrees in writing to modify the contract.
Later that month, NationPoints learns it can buy gasoline at $2.40 per gallon from
Purified Fuel Company. NationPoints refuses delivery of its most recent order from Oil
& Gas, claiming, first that the contract allows it to do so without liability, and second,
that it is required to pay only $2.30 per gallon if it accepts the delivery. Discuss
NationPoints’s contentions.
Sebastian was the manager of Thai Bistro, a restaurant specializing in Southeast Asian
foods. Sebastian opened a bank account in Thai Bistro’s name, signing the account
signature card as “owner.” Umeko, who was often at Thai Bistro and had free access to
its office, told others that she was “an owner” and “a partner.” She also opened a bank
account in Thai Bistro’s name, and signed the account signature card as “owner.”
Sebastian told Vijay, the owner of Wong Noodles, Inc., that Umeko was a member of a
partnership that owned Thai Bistro. On this basis, Wong Noodles delivered its goods to
Thai Bistro on credit. In reality, Thai Bistro was actually owned by a corporation. When
the unpaid account totaled more than $10,000, Wong Noodles filed a suit against
Umeko to collect. On what basis might Umeko be liable for the debt?
No partner is deemed to be an agent of the other partners and of the partnership.
Under a finance lease, the lessee can stop performing and making lease payments if the
leased equipment turns out to be defective.