Orin creates a living trust to pass his assets, including stock in Petro Oil Company and
other business investments, to his heirs. One advantage of this arrangement is that
a. income taxes do not have to be paid on trust earnings.
b. the assets are sheltered from the payment of estate taxes.
c. the assets can be transferred without going through probate.
d. the trust does not come into existence until the grantor’s death .
Bulbous Cordials, Inc., a U.S. firm, enters into an agreement with Columbiana Cacao,
S.A., a South American firm, to fix the price of dark chocolate in the U.S. market. If the
agreement is a per se violation of U.S. antitrust laws, a U.S. court could exercise
jurisdiction over
a. Bulbous Cordials and Columbiana Cacao.
b. Bulbous Cordials only.
c. Columbiana Cacao only.
d. neither Bulbous Cordials nor Columbiana Cacao.
Big Drill Oil Company employees one hundred workers. Big Drill must do all of the
following except
a. keep occupational injury and illness records for each employee.
b. report any work-related diseases directly to OSHA.
c. report any employee death due to a work-related incident to OSHA within eight
hours.
d. pay employees higher wages for working in more dangerous areas.
When processing a check, Superior Bank encodes information, such as the amount of
the check, on the item. Superior thereby warrants to any subsequent bank or payor
a. the item has been returned to the drawer.
b. nothing.
c. the check has been processed manually.
d. the encoded information is correct.
Michael, a citizen of Ireland, and Nina, a citizen of the United States, enter into a
contract. When Nina breaches the contract, Michael obtains an award of damages in an
Irish court. He asks a U.S. court to enforce the award. The U.S. court defers to and
enforces the Irish court’s decree. This is
a. a travesty of justice.
b. the act of state doctrine.
c. the doctrine of sovereign immunity.
d. the principle of comity.
Megan, a resident of Ohio, runs a red light in Texas and hits Sarah, a Texas resident.
Sarah files suit against Megan. The statute that allows the Texas court to exercise
jurisdiction over Megan is called a(n)
a. long arm statute.
b. in personam statute.
c. in rem statute.
d. out-of-state jurisdiction statute.
Edy obtains a property insurance policy with First Source Insurance Company for Edy’s
fishing trawler. First Source can cancel the policy
a. if Edy appears as a witness in a case against First Source.
b. if Edy fails to pay the premiums.
c. if Edy makes changes that add to the trawler’s value.
d. under no circumstances.
Fern contracts to buy a franchise from Gooseberry Grocers, Inc. The contract is silent
on the issue of territorial rights. Gooseberry allows a competing franchise to be
established near Fern’s store, which suffers a significant loss in profits. This is most
likely a violation of
a. no law.
b. the ban on certain types of anticompetitive agreements.
c. the Federal Trade Commission’s Franchise Rule.
d. the implied covenant of good faith and fair dealing.
SealCoat Paving enters into a contract with Royal Golf & Tennis Club to provide
surface material for Royal’s tennis courts by April 1 for a tournament to begin May 1.
The contract specifies an amount to be paid if the contract is breached. This is a
liquidated damages clause if the amount is
a. meant to pay for additional liquid sealant in the event of damage.
b. a reasonable estimate of the loss on a breach.
c. designed to penalize the breaching party.
d. intended to quickly provide cash to the nonbreaching party.
Sweets Store buys chocolate from Tasty Candies, Inc. The parties agree that the
chocolate will be shipped “F.O.B. Sweets” via United Railroad Corporation. The
chocolate is lost in transit. The loss is suffered by
a. Sweets and Tasty, but not United.
b. Sweets only.
c. Sweets, Tasty, and United.
d. Tasty only.
Flip Gymnastics & Karate, Inc., grants a franchise to Gibby to operate a Flip gym. Flip
may require Gibby to pay the franchisor a percentage of his
a. annual sales or volume of business.
b. weekly payroll expense.
c. monthly overhead savings.
d. none of the choices.
Dondi contracts to buy a custom espresso maker from Caffee Specialties, Inc., for
$4,500, but Caffee fails to deliver. Dondi buys the appliance elsewhere for $5,500.
Dondi’s measure of damages is
a. $1,000.
b. $1,000 plus incidental damages.
c. incidental damages only.
d. $0.
Consumer Mortgage Loans provides Demi with a mortgage to buy a home. Under the
terms, Demi can choose to pay only the interest portion of the monthly payments and
forgo paying of the principal for five years. This is
a. a fixed-rate mortgage.
b. an adjustable-rate mortgage.
c. an interest-only mortgage.
d. a violation of the law.
Bud approves on behalf of Codybut without authorizationa contract with Dik to build a
new silo. Cody does not ratify the contract. Later, Dik tries to enforce the deal. This
attempt will be
a. partly successful.
b. partly unsuccessful.
c. totally successful.
d. totally unsuccessful.
Celfone Corporation is required to file a registration statement with the Securities and
Exchange Commission. This statement must contain
a. a copy of prospectuses to be provided to investors.
b. a description of securities being offered for sale.
c. a record of pre-registration sales in securities.
d. a sample of advertising to be used to attract investments in Celfone.
Longway Trucking, Inc., files a suit against Midge, an accountant, under the antifraud
provisions of the Securities Exchange Act of 1934 and Rule 10b-5 of the Securities and
Exchange Commission. To succeed in recovering damages, Longway must show that
Midge
a. acted with scienter.
b. bought or sold a security.
c. is incompetent.
d. knows nothing about securities.
Venerable Company leases office furniture to Design Architects, Inc., under a contract
that states, “Bailee agrees to pay Bailor for any damage to the furniture.” During the
lease, while the furniture is in Design’s possession, it is stained by inks used in
computer printers, copiers, fax machines, and so on. Most likely liable for the damage
is
a. Venerable.
b. Design.
c. “Bailor.”
d. no one.
Global Investments Corporation buys and sells securities. Section 10(b) of the
Securities Exchange Act of 1934 applies to
a. only the purchase or sale of a security involving an insider.
b. only the purchase or sale of a security involving short-swing profits.
c. only the purchase or sale of a security involving a tipper and tippee.
d. the purchase or sale of any security.
Based on Nan’s conduct, Odel reasonably believes that Poppy has the authority to act
on Nan’s behalf even though Poppy does not have the actual authority to do so. In this
circumstance, Poppy has
a. apparent authority.
b. express authority.
c. implied authority.
d. no authority.
Silas Paving Co. contracts to buy some construction machinery from Massive
Earthmovers, Inc. Before either party performs, Massive sells its assets to Phoenix
Equipment Corp. On learning of the sale, Silas is concerned about its contract with
Massive. Silas should
a. demand assurances of performance from Massive.
b. consider the contract repudiated and sue Massive for breach.
c. buy the machinery from a different supplier and bill Massive for the price.
d. buy the machinery from a different supplier and bill Phoenix for the price.
Gourmet Foods, Inc., requires all distributors of its products to sell them at a specified
minimum price. Under the Sherman Act, this is a violation
a. if the anticompetitive effects outweigh the competitive benefits.
b. if the competitive benefits outweigh the anticompetitive effects.
c. under any circumstances.
d. under no circumstances.
Pricey Auto Corporation gives notice to Quint that Pricey is terminating their franchise
arrangement. Winding up the business requires
a. a new franchise agreement.
b. nothing more than closing immediately.
c. Quint’s death, disability, or insolvency.
d. the return of Pricey’s property.
Shade Tree Lending Corporation advertises loans as fixed-rate loans but, in fact, their
rates or payment amounts will change. This is
a. a legal and ethicalbut morally arguablefinancial ruse.
b. a legalbut unethicalbusiness practice.
c. a necessary tactic to generate a profitable loan in today’s market.
d. a violation of the law.
Signe offers to sell Thomas her textbook but conditions the sale on Thomas accepting
the offer by March Signe may revoke the offer
a. before Thomas accepts the offer.
b. before March 1, whether or not Thomas has accepted the offer.
c. only after Thomas accepts the offer.
d. only after March 1.
Fact Pattern 21-1
Mary’s home is in a state that has a $30,000 homestead exemption. Mary defaults on a
$60,000 debt that she owes to Nina. Mary’s home is sold at auction for $80,000.
Refer to Fact Pattern 21-1. Nina may recover
a. $0.
b. $30,000.
c. $50,000.
d. $60,000.
Smithy Saddlery is a saddle shop subject to the laws of New York. In New York, the
highest-ranking (superior) law is
a. a case decided by the New York Court of Appeals.
b. a rule created by a New York state administrative agency.
c. a provision in the New York constitution.
d. a statute enacted by the New York legislature.
Dora leases a house from Evan for a two-year term. To ensure the validity of their lease,
it should include
a. a description of the premises.
b. a due date for the payment of the property taxes.
c. a requirement that Dora perform structural repairs to the house.
d. a requirement that Evan carry liability insurance.
Faye owns the land on which Golden Spurs Ranch is situated, plus the ranch house,
barn, and other structures permanently attached to the land. Faye’s brother Huey owns
everything else in the ranch’s operationlivestock, feed, and so on. The personal property
is owned by
a. Faye and Huey.
b. Faye only.
c. Golden Spurs Ranch.
d. Huey only.
A contract between Slim and Goldie may not be assigned if it
a. does not expressly permit assignment.
b. involves a sale of goods.
c. involves personal services.
d. is oral.
As a judge, Bonnie applies common law rules. These rules develop from
a. administrative regulations.
b. court decisions.
c. federal and state statutes.
d. proposed uniform laws.
Fact Pattern 25-2
Beth, who has a disability, is an employee of Corporate Office Company (COC). After
the installation of new doors on COC’s building, Beth finds it nearly impossible to get
in and out. For repeatedly failing to be on time, COC replaces Beth with Dian, who
does not have a disability.
Refer to Fact Pattern 25-2. To successfully defend against Beth’s claim, COC will have
to show that
a. Beth consistently failed to meet the essential requirements of her job.
b. COC cannot make changes to the doors without undue hardship.
c. Dian is qualified for Beth’s position.
d. the doors were not installed as an act of intentional discrimination.
Community Trust Bank provides Devlin with a mortgage to buy a home. The rate of
interest is fixed for seven years. At the end of that period, a large payment for the entire
balance of the mortgage loan is due. This is
a. a balloon mortgage.
b. an adjustable-rate mortgage.
c. an interest-only mortgage.
d. a violation of the law.
Fact Pattern 27-1
Brad, Carlos, and Dora are general partners in Eastside Physicians, a medical clinic.
Refer to Fact Pattern 27-1. The partners decide to dissolve Eastside. Dora collects and
distributes the firm’s assets. This results in
a. nothing with respect to the firm’s existence.
b. the continuation of the firm’s business.
c. the termination of the firm’s legal existence.
d. the temporary suspension of the firm’s business.
A party’s oral agreement to pay another’s debt is NOT enforceable if the party’s main
purpose is to derive a benefit for himself or herself.
The American Law Institute was the only organization involved in developing the
Uniform Commercial Code.
Even after a tenant assigns a lease, the tenant may be obligated to pay rent.
A cooperative must be incorporated.
If there is no definite period stated, a firm offer by a merchant is irrevocable without the
necessity of consideration for up to six months.
Performance standards for major sources of air pollution require the use of the any
available technology, or AAT.
Penalties for aiding or assisting in the preparation of false tax returns are limited to one
penalty per taxpayer per tax year.
Accountants may be subject to criminal penalties for violations of federal securities
laws.
The establishment clause of the U.S. Constitution prohibits the federal government
from establishing a state-sponsored religion.
A price-fixing agreement is an agreement by two or more sellers to boycott a particular
person or firm.
In most states, state law determines the amount of a debtor’s property that is exempt
from distribution on bankruptcy.
A signature must be the full name of a party.
The incompetence of a customer revokes a bank’s authority to pay an item.
Killing a wild animal amounts to assuming ownership of it.
A lender can make a higher-priced mortgage loan based on the value of the consumer’s
home without verifying the consumer’s ability to repay the loan.
Malpractice is professional negligence.
Under the exclusionary rule, all evidence must be included in a criminal prosecution.
The UCC imposes some different rules on merchants.