Book Title
Business Law with UCC Applications 14th Edition

Business Law 73595

March 1, 2019
A furniture store that puts up its inventory as collateral for a loan will grant the lender a
floating lien.
Garcia purchases a used shotgun from Andy, who had purchased it from Jane, who
purchased it from Maria, who had stolen it from Songhee. Only Maria has broken the
warranty of title.
If XYZ Co. was improperly incorporated, it may nevertheless possibly qualify as a de
facto corporation.
When no consideration is given for an assignment, creditors of the assignor may have
the assignment rescinded on the grounds that it is a fraudulent conveyance.
The No Electronic Theft Act (NET Act) refers to a federal law that makes it illegal to
use technological means to bypass or override programs designed to prevent access to a
copyrighted work.
The UCC has eliminated the use of the seal in all sale-of-goods contracts.
A bargain-and-sale deed is one that transfers all warranties of title to property.
Realpolitik is a universal normative principle that follows a set pattern that can be used
to understand natural processes or human behavior.
Notwithstanding the written lease agreement, state and local laws have the right to
restrict or expand the respective rights and duties of the landlord and the tenant.
Proper tender means the seller must put and hold conforming goods at the buyer's
disposition prior to 2:00 P.M. local time.
If managers choose to run an LLC on their own, then management rights are
apportioned among the members, according to the capital contributions made by each
member to the LLC.
International power depends upon the type of international institution that is charged
with oversight responsibilities.
Only two members of the PCAOB may be CPAs.
A federal question can involve the U.S. Constitution, a federal statute, or a treaty.
A pooling agreement means that shareholders join together in a permanent arrangement
and agree to vote the same way on a particular issue.
In a c.o.d. shipment, the buyer has paid for what turns out to be defective goods. It
means the buyer has made a binding acceptance of the goods.
Jurisdictions that recognize the implied contract exception do not allow employers to
preserve an employment-at-will arrangement by using a disclaimer.
Under the Bankruptcy Code, states are allowed to use exemptions created by the state
legislature, rather than the federal exemptions.
During inflationary times, when bank interest rates are high, insurance policies are
usually poor sources for loans at low interest rates.
A civilization is a group of people in a series of different nation-states that share certain
common characteristics, including their history, religion, traditions, beliefs, often
language, and sometimes ancestry.
If Enrico purchases a house subject to a mortgage, Enrico agrees to continue paying the
An e-contract must have additional consideration to be as valid as a paper contract.
According to the UCC, a contract for the sale of goods comes into existence when any
reasonable means under the circumstances is used to communicate the acceptance.
If a time for performance is not stated in the contract, then the contract must be
performed immediately.
Big Bank pays a check made by Franklin, payable to Ellen to a forger who signed
Ellen's name. Big Bank is not liable to Franklin.
A codicil is considered invalid if it does not refer to the existing will to which it applies.
One of the problems with utility thinking is that it often results in actions that are
clearly unethical and potentially illegal.
Most oral contracts are valid.
A corporation is a legal entity created under international law that gives individuals the
capacity to operate an enterprise.
Aliens, minors, and non-shareholders are automatically barred from being members of a
company's board of directors.
In August 2014, Zano orders 10 guitars from Music Retailers for his class which is
scheduled to start in January, 2015. After two months, Music Retailers notifies him that
it cannot fill his order by the start of his class. This notification is an anticipatory breach
of contract.
Mia works as an assistant in a pharmacy. Her receipt of monthly wages, by itself, makes
her a partner in the pharmacy.
The Articles of Confederation created a strong national government.
Insurance transfers the risk of economic loss from the insured to the insurance
Vivian, Ewell's friend, believes that Ewell's contract with Mickey is unfair to Ewell.
Even though Vivian does not have any tangible stake in the contract, she may sue since
she has privity due to her interest in Ewell.
Regulation CC requires banks to make funds available to depositors according to a
prescribed schedule.
A ____________ is a network of interacting conditions which ____________ one
another, while at the same time ____________ change from agents outside and inside
the system.
A. legal ecosystem; adjust to; reinforces
B. complex adaptive system; reinforce; adjusts to
C. legal ecosystem; reinforce; adjusting to
D. complex adaptive system; adjusts to; reinforces
Which of the following is true of the "Cooling-Off" Rule?
A. It gives consumers an opportunity to change their minds after signing contracts with
people who come to their homes for product sales.
B. It allows sales of consumer goods or services under $25, made away from the seller's
place of business, to be cancelled within three business days after the sale.
C. It requires the seller to give the buyer one copy of a cancellation form, which the
buyer may send to the seller any time before the third business day after the sale.
D. It does not apply to consumer product parties given in private homes and to sales
made in rented hotel rooms or restaurants.
If an abandoned shipwreck is found outside the boundaries of a state, what law applies?
A. Only the Abandoned Shipwreck Act
B. Only the law of finds
C. Only the law of salvage
D. Either the law of finds or the law of salvage
Citral Co. orders its employees not to join a labor union. It makes it clear that any
employee joining the union would merit a demotion and a drastic cut in the pay
A. Citral Co. has simply exercised its right to freedom of speech.
B. Citral Co. is trying to protect its business interest by legal means.
C. Citral Co. has violated the law by passing these orders.
D. Citral Co. has not violated the law, as these instructions do not cause any physical
harm to anybody.
Lucia had a homeowner's insurance policy on her house. While she was away on
vacation, her porch got burned to the ground. After the fire, her house was burglarized
and goods worth thousands of dollars were stolen from it. When Lucia arrived home,
she called the police. While a police officer was interviewing her in her dining room, a
chandelier fell on him and knocked him unconscious. Which losses will Lucia's
homeowner's policy cover?
A. The losses due to theft and the injuries sustained by the officer, but not the losses
incurred by the fire.
B. The losses due to fire and the injuries sustained by the officer, but not the losses
incurred by theft.
C. The losses incurred due to fire and theft, but not the injuries suffered by the police
officer while on her property.
D. The losses incurred due to fire and theft as well as the injuries suffered by the police
officer while on her property.
If Tom is a potential investor in Delta Co. he should receive a ____________ prior to
A. contract summary
B. prospectus
C. closing settlement statement
D. registration statement
A document of title allows the person who possesses it to:
A. receive the goods named in the document.
B. conclusively prove ownership of the goods named in the document.
C. receive the goods named in the document free of any creditor claims.
D. conclusively prove that the goods are free of defects.
____________ refers to all relevant technical knowledge about the field to which the
invention belongs.
A. Patent watch
B. Trade secret
C. Priority right
D. Prior art
The principle of repentance calls for an expression of remorse by:
A. the combatants.
B. only the defeated.
C. all nations.
D. the United Nations.
Which of the following is generally true of arbitration?
A. The arbitrator can make suggestions, but not issue binding decisions.
B. The arbitrator is a non-lawyer from the relevant industry.
C. The arbitrator must be chosen from among the disputing parties.
D. The arbitrator's decision can be appealed in court.
Eva, a Mercy Hospital patient, received medication intended for another patient and, as
a result, suffered severe complications. In a malpractice case against Mercy, regarding
the administering of the wrong medication to Eva, most likely expert testimony:
A. will be required.
B. will be required only if it happened once.
C. will not be required only if the other patient was in a different area of the hospital.
D. will not be required.
An equitable remedy may be available in all of the following cases except:
A. specific performance.
B. damages.
C. an injunction.
D. a restraining order.
Which of the following is the official authorization of a corporation to do business in a
A. Articles of incorporation
B. Certificate of incorporation
C. Articles of organization
D. Certificate of authority
When both parties to an illegal agreement are equally wrong in the knowledge of the
operation and effect of their contract, they have formed a(n) ____________ contract.
A. restrictive
B. in pari delicto
C. usurious
D. nondisclosure
An oral stop payment ordered by a drawer is valid:
A. for 14 calendar days only.
B. if it is received in time and in such a manner as to afford the bank a reasonable
opportunity to act on it.
C. for only one year, unless renewed in writing.
D. only on limited items payable on his or her account, and cannot be used for checks
with a value of $500 and above.
Elaine asked Meredith if she could borrow Meredith's iPhone to text her mom pictures
of an awards ceremony. Meredith gave Elaine the iPhone and asked for nothing in
return for this favor. This transaction was most likely a:
A. bailment for the sole benefit of the bailor.
B. mutuum.
C. mutual-benefit bailment.
D. bailment for the sole benefit of the bailee.
Sam gives a check to Tina who indorses it over to Amanda. Amanda is called the
If Daphne gave value for and cashes Lisa's check, what legal rights, if any, does Daphne
A. Daphne may insist upon an unqualified indorsement.
B. Daphne may not insist upon any particular type of indorsement.
C. Daphne may insist upon both an unqualified indorsement and a restrictive
D. Daphne may insist upon an unqualified, restrictive and special indorsement.
When forming a limited partnership, it is critical to know that:
A. general partners have limited liability for the firm's debts.
B. a certificate of limited partnership must be filed with the Secretary of State's office.
C. limited partners are participating investors.
D. general partners can only take a limited part in the management of the firm.
Developing, formulating, and applying rules in line with our values is the job of:
A. ethics.
B. conduct.
C. law.
D. rationalism.
The ____________ clause has been interpreted to mean that the Supreme Court has the
legal authority to short-circuit any state statute that contradicts the U.S. Constitution.
A. necessary and proper
B. general welfare
C. commerce
D. supremacy
In a ____________, a qualified debtor creates a plan that alters the repayment schedule.
A. firm offer
B. requirements contract
C. reorganization
D. contract for sale
Ignacio wins a monetary judgment at trial, but is denied an award of attorney's fees. The
losing party, Salazar, acts to challenge the adverse trial court decision before an
appellate court. Ignacio also wants to appeal the denial of attorney's fees. Ignacio
should file a:
A. cross-claim.
B. motion for summary judgment.
C. cross-appeal.
D. counterclaim.
The ____________ gives the president of the United States special powers to deal with
actual or threatened strikes that affect interstate commerce or that endanger the nation's
health and safety.
A. Wagner Act
B. Taft-Hartley Act
C. Landrum-Griffin Act
D. Norris-LaGuardia Act
The four fundamental legal principles that are designed to protect the corporate
structure are (1) corporate status as an entity, (2) corporate constitutional rights, (3)
corporate citizenship and (4):
A. anticipatory repudiation.
B. unconscionable contract.
C. mutual recession.
D. limited liability.
____________ is based on the belief that because corporate decision making influences
more individuals and groups than just the shareholders and the managers, corporate
decisions should be made by an impartial group of corporate outsiders.
A. Corporate democracy
B. Governmental control
C. Shareholder democratic control
D. Independent director control
Carlos instructs his sales agent, Edgar, not to sell on credit to Andrew because Carlos
has experienced problems collecting from Andrew for prior purchases. Edgar sells on
credit to Andrew, who pays properly. Has Edgar violated any obligation to Carlos?
A. No, Edgar has not violated any obligation since Andrew paid properly.
B. Yes, Edgar has violated the duty to exercise reasonable judgment.
C. No, Edgar has not violated any obligation, since Edgar did not evaluate Andrew's
credit worthiness correctly.
D. Yes, Edgar has violated the duty to obey all instructions of the principal.
In compliance with the agency contract and the fiduciary relationship, various
obligations are imposed on the agent. One of the obligations generally involves the duty
to obey all instructions and be loyal to the principal. In obeying the instructions of the
principal, the agent is duty-bound to remain within the scope of authority (i.e., the range
of acts authorized by the principal).
____________ that have not been fully performed by both parties, may be repudiated
by a minor at any time.
A. Contracts for necessaries
B. In pari delicto contracts
C. Executed contracts
D. Executory contracts
Stan commits securities fraud and takes $5,000,000 from a variety of investors. Stan is
convicted of a crime and then sued by the investors. Stan files for bankruptcy. What
relief will the bankruptcy filing grant Stan?
A. Automatic stay on all cash advances paid to a creditor under an open-ended credit
B. Automatic stay and discharge of any debt created with the securities fraud
C. Automatic stay, but no discharge of any debt created by the securities fraud
D. Automatic stay and discharge of all debts incurred
If Jennifer, a landowner, wants Smith, a neighbor, to stop polluting a stream that flows
into Jennifer's land, Jennifer should request a court to grant:
A. noneconomic compensatory damages.
B. economic compensatory damages.
C. an injunction.
D. an appeal bond.
Sagan is borrowing money from Big Bank. His friend Leda, who works for Graille
Systems, signs the loan agreement promising to pay the debt if Sagan does not. In this
scenario, ______________ is the obligee, and ____________ obligor.
A. Sagan, Big Bank
B. Leda, Big Bank
C. Graille Systems, Sagan
D. Big Bank, Sagan
Rare art was stolen from the Zerba Art Museum during a war and thirty years later is
located in the Alpha Art Museum in another country. Who has title to the art, if Alpha
did not know the art was stolen?
A. Alpha, since it is innocent of wrong doing
B. Zerba, since the art was stolen
C. Alpha, since Zebra has relinquished title in the thirty years
D. Zerba, since it had not sent the art voluntarily
A trust that is created by a will is called a(n):
A. conveyance in trust.
B. declaration of trust.
C. intervivos trust.
D. testamentary trust.
A promoter can escape liability by having the corporation and the third party create
A. novation.
B. estoppel.
C. operating agreement.
D. certificate of organization.
Which of the following is true of public interest and public policy?
A. Public interest promotes behaviour complying with the public consensus, while
public policy refers to the idea that certain activities affect the entire social structure.
B. Public interest is the consensus and public policy is the coercive social engineering
strategy by which that consensus is implemented.
C. Public interest promotes the making of safe goods to coerce the public policy to
maintain a social structure that promotes health and safety, and prevents illness and
D. To meet the goal of public policy, public interest insists that manufacturers, sellers,
and distributors compensate a victim, who is injured by an unsafe product.
Marilyn is a contractor-computer programmer who works for SIM Co. in its principal
place of business in New Jersey. Marilyn designs a corporate information system (CIS)
for Matrix Corp., a SIM Co. client, which has its offices in New York City.
Unfortunately, the CIS crashes before Marilyn is paid for her work and all of Matrix's
records are lost, requiring Matrix to spend $300,000 to reconstruct the system. Matrix
sues SIM Co. for breach of contract. Marilyn believes that the crash was not caused by
her CIS and that she should be paid by SIM Co. Discuss the options Marilyn and SIM
Co. have in responding to the suit.
Joe sells his stock in Big Co. to Mary. Discuss what Mary must do to be recognized as a
shareholder in Big Co.
The FFEA, a federal agency, was charged with the task of drafting a series of rules to
implement the New England Fusion Reactor Initiative. The FFEA anticipates that the
new rules will involve drastic changes for all the concerned parties. Rather than simply
writing the rules and placing them before the affected parties, what action might the
FFEA take to minimize the other parties' dissatisfaction with the rules? Explain.
Brad and Sally, a married couple, died at the same time in a tornado in a state that has
adopted the Uniform Simultaneous Death Act. Brad's will left his property to Sally and
then to his children if she were to die before him. Sally's will left her property to Brad
and then to charity. Discuss the distribution of their property.
The Cuyahoga Experimental Research Company and the Chagrin River Genetics
Laboratory Association planned to construct a laboratory for research into the Human
Genome Project. The laboratory would be located on land that was owned by four
shipping companies. The owners of the companies objected to the way in which their
land was appropriated for the project by the government and the research companies.
The owners also objected to the planned location of the research facility because they
were afraid that some sort of genetic accident might harm the crops and farm animals
that were shipped through their terminal which was adjacent to the research facility.
Which form of ADR would be ideally suited to hear this dispute? Explain.
Al is considering making a purchase from an online merchant. Discuss the relative
advantages Al has if he uses a credit card or a debit card for the purchase.
When Garibaldi rented an office from the landlord, Jonas Properties, Jonas agreed to
reimburse Garibaldi a fair share of the expenses he incurred in redecorating the office.
After the project was completed, Jonas refused to pay for any of the expenses. Analyze
the situation in a case where Garibaldi files a lawsuit against Jonas for breach of
When Hanson received her paycheck, she indorsed it in blank, placed it on her desk,
and went to get a cup of coffee. The check accidentally blew out of an open window.
Matson, a stranger to Hanson, found the check on the sidewalk below, took it to a bank,
and cashed it. Was the transfer of the check to the bank a negotiation? Why or Why not?
On September 1st, Wild Willy's Club orally gives an order to T-Shirts R Us Inc. for
T-shirts worth $600. The T-shirts have the date and location of Wild Willy's annual
Christmas party on December 15th printed on them. In late October, Wild Willy's calls
T-Shirts to cancel the order. T-Shirts has already processed the order and the T-shirts are
ready to be shipped. Discuss in detail whether or not this oral order is enforceable once
the T-shirts have been made.
Fritz is a professional painter and owns a truck worth $10,000 and tools worth $3,000.
He owns a very modest house worth $17,000. He has numerous unsecured debts
totaling $500,000 and considers filing for bankruptcy. Discuss the bankruptcy
alternatives for Fritz.
Matthew opens a checking account with Big Bank in the state of Blue. His National
Guard unit is activated for military duty, and Matthew is sent abroad. He makes no
deposits to or withdrawals from the account for fifteen months. Matthew gets married
and moves to the state of Red when released from active service. May Big Bank or Blue
lawfully assert a claim to Matthew's checking account?
Nicholas entered into a written contract with Mondo Choco, Inc., agreeing to pay
Mondo Choco $700 for several hundred assortments of holiday chocolates for the
employees of his corporation. Mondo Choco failed to deliver the chocolates by the date
set in the contract. Nicholas then told Mondo Choco that he would cover the sale.
A Massachusetts law prohibited governmental agencies of Massachusetts from buying
goods from companies that conducted business with Myanmar. If the U.S. Supreme
Court were to strike down this law, what might be the basis?
Hercules Steel Castings Company, Inc. manufactures steel castings. It does not follow
the permissible limits with regard to the release of polluting gases in the air. It has also
failed to report violations of pollutions control laws to the federal government. Which
act does it violate and which agency would have the power to prosecute this
Big Bank is unable to provide notice of dishonor for three days because a fiber optic
cable was accidentally cut by a construction worker. Will Big Bank be liable for its
failure to act in a timely manner?
Big Choppers orally contracts with Jane to make a custom motorcycle for Jane for
$30,000. When completed, Jane refuses to accept the motorcycle or pay for it. Discuss
the validity of the oral contract.
Tom is a real estate agent for Great Housing Co., which plans to purchase and build on
a plot of land near Leadville. Tom learns that the building site may have been polluted
with lead, but does not inform Great Housing Co. Great Housing Co. purchases the land
and discovers the pollution when construction starts. Great Housing Co. asserts that it
did not know of the lead pollution and should not be required to pay the clean-up cost.
Discuss Great Housing's assertion.
Bernadette contracts in writing to sell Emily a flatbed trailer so that Emily's son can use
the trailer as the base of a homecoming parade float on October 17. Bernadette knows
all about the parade, but the written contract only requires Bernadette to deliver the
trailer "in October" and Bernadette uses the trailer for her projects until October 20
when she tenders delivery to Emily. Emily refuses the trailer and refuses to pay the
contract price since her son no longer needs it. Discuss in detail what evidence is
admissible in a suit by Bernadette against Emily for breach of contract.
Simon sells illegal drugs for JY Laboratories with the understanding that JY
Laboratories will receive fifty percent of the gross profits. JY Laboratories fails to
honor this agreement. Discuss whether Simon may sue JY Laboratories to enforce the

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