Book Title
Business Law with UCC Applications 14th Edition

Business Law 84093

March 1, 2019
A credit cardholder is liable for all unauthorized charges if he or she does not report the
unauthorized charges within twenty days of receiving a statement on which the
unauthorized charges appear.
Carl is tall and looks like he is 21 years old. Carl lies about his age to purchase a home
entertainment system for $1,000. In most states, Carl may disaffirm his purchase.
Statutory law regulates the social system by telling people what they can and cannot do.
A right-to-work law outlaws only the union shop, but not the closed shop.
Originally, the Bill of Rights was not included in the Constitution because many
founders believed that the power to regulate and protect rights, if it existed at all, was
the responsibility of the states, not the national government.
Ethical rules of conduct developed by various professions are often easy to understand
and follow.
ADR clauses are only beneficial to those parties with the strongest position within a
contractual relationship.
In a bailment, neither the bailor nor the bailee intends that title to the property should
The (Uniform Commercial Code) UCC is a model code designed to unify statutes
governing almost all commercial transactions.
Tia is severely injured in an auto accident and dies four months later from these
injuries. Her beneficiaries may collect under a double indemnity provision.
Some states authorize landlords to use force to evict tenants.
The party to a note who promises to pay money is called the payee.
A stale check is a check that is presented for payment more than three months after its
Jennifer orally contracts to purchase a television for $450. This contract is legally
If Xena writes a check in pencil that is subsequently altered by Mutley, Xena has
recourse against her bank that paid the altered check.
A "holder in due course" takes an instrument without notice that anything is wrong with
the underlying transaction.
All business entities are considered "legal persons" under federal and state statutes.
The "scope of employment" involves the range of activities for which the servant is
Rational ethics, often referred to as objective ethics, states that people's ethical
decisions can be judged only by understanding their situations.
Under American law, a crime cannot be committed unless some act has occurred.
Sellers always retain an insurable interest in the goods, even if they do not have title to
Jim ran a stop sign hitting Martin's car, and both were injured. Jim is now the injured
party and Martin is the tortfeasor.
An indorser who receives consideration for an instrument is required to provide a
warranty that she has no knowledge of the bankruptcy of the maker, acceptor, or
A lockup agreement requires that a friendly suitor is given an option to buy a valuable
piece of property owned by the target corporation should a hostile bidder gain control of
the corporation.
The Gibbons v. Ogden (1824) case held that commercial activity that occurred within a
state was subject to federal regulation if that completely in-state activity affected
interstate commerce.
Only personal property can be used to secure a debt.
The Electronic Fund Transfer Act applies to transactions between banks and businesses.
Miko and Gina enter into a written contract. If Miko assigns her part of the agreement
to Teresa and Teresa tells Gina of the assignment, Miko is bound by an implied
warranty that Gina will respect the assignment.
Big Corp. advertises that "nine out of ten physicians prefer our products" when in fact
the marketing research, done by Independent Research Co., was flawed. Big Corp. may
be charged with false advertising, even if it believes the statement was true.
The Platonic Stabilizing standard refers to a legal balancing act between the various
liability standards and the individualized nature of each case.
Leo offers to sell his ranch to Iris for $500,000, but before Iris accepts, Leo dies. Leo's
heirs have no obligation to honor the contract.
Jackson transfers his business accounts receivable to Friendly Finance Company.
Friendly would be considered the assignee.
Cyber defamation involves false statements communicated through the Internet to
others that in some way casts doubt upon the ownership or the quality of an item of
property or a product offered for sale.
Jacy wants to submit a shareholder proposal and should submit the proposal to
management at least 120 days before the shareholders' meeting.
An oral contract for the sale of specially manufactured goods involving a price of $500
or more is not enforceable unless it is in writing.
Joe signed a promissory note for $5,000 to cover the cost of roofing repairs by Acme
Roofing Company. Acme transferred the note to Big Bank who sued Joe when he failed
to pay the note. Joe believes that Acme did not do the repairs properly. If Joe wants to
bring Acme into court, then Joe's answer should contain a:
A. counterclaim against Acme.
B. cross-claim against Acme.
C. third-party complaint against Acme.
D. new lawsuit against Acme.
A deed becomes effective when:
A. it is recorded in the public records.
B. the signatures are acknowledged.
C. it is delivered to the grantee.
D. it is prepared and signed by the grantor.
On May 1st, Alpha Oil Company sends an electronic offer via the "cloud" to Zeno
Refining Co. as follows: "Offer to sell 10,000 barrels of crude oil at $85 per barrel, will
hold the offer open until July 1st." On July 2nd Zeno responds with an acceptance to
Alpha. But by the time of Zeno's response, the market price of crude oil has risen to $98
per barrel. Alpha says no contract, and Zeno threatens to sue. What result?
Under the 2005 Bankruptcy Act, debtors are required to meet which of the following
conditions file for Chapter 7 bankruptcy?
A. They must provide a federal income tax return for the most recent tax year.
B. Their income should be more than the state median income.
C. They must be involved in a fishing or farming business.
D. They should be commodity brokers or stock brokers.
Star Software Systems and Henry orally agree for Henry to write special accounting
software. This software usually takes three years to complete, but can be done sooner.
Does Henry have an enforceable legal agreement with Star?
A. Yes, the agreement is enforceable because Henry could possibly complete writing
the software within a year.
B. No, the agreement is unenforceable because it is not written and signed.
C. Yes, the agreement is enforceable, but only to the extent of work Henry completes
within the first year of the contract.
D. No, the agreement is unenforceable since the contract involves a tangible work
A union must register its bylaws with the:
B. Department of Commerce.
C. Federal district court.
D. Secretary of Labor.
Which of the following contracts should be in writing to be enforceable in courts under
the Statute of Frauds?
A. Contracts that can be completed within one year.
B. Contracts to pay the debt of another.
C. Contracts involving sale of all types of goods.
D. Contracts in consideration to employment.
Cal, an investor, lost $15,000 after purchasing corporate stock based on a false
registration statement. Under the Securities Act of 1933, Cal:
A. can sue the accountant if he can show the registration statement was misleading
about a material matter.
B. may sue the accountant who prepared the registration statement under the Securities
Exchange Act of 1954.
C. may sue the accountant who prepared the registration statement under the Securities
Act of 1933.
D. may sue the corporation of stock fraud under the Securities Exchange Act of 1934.
Which of the following statements about "the wage and hour provisions of the FLSA" is
A. Full-time students cannot be employed.
B. They apply to all people employed in an administrative capacity.
C. Exempt workers are generally identified as those who manage other employees.
D. They require minimum wage for the employment of apprentices.
Which of the following is true of warranties by indorsers?
A. The indorser is not entitled to enforce the instrument.
B. The indorser warrants that the instrument is subject to a defense of any party that can
be asserted against the indorser.
C. The indorser warrants that he or she has knowledge of the bankruptcy of the maker,
acceptor, or drawer.
D. The indorser warrants that there has been no alteration or other irregularity.
Ching keeps a pet snake in her apartment. While Ching is hosting a party at her
apartment, the snake escapes from its cage and bites a guest, seriously injuring the
guest. The guest knew before attending the party that Ching has a pet snake in her
apartment. If the guest sues Ching for the injury resulting from the cobra bite, Ching:
A. will be strictly liable.
B. may defend based on assumption of risk.
C. is liable only if she intentionally released the snake from its cage.
D. has no liability since the incident was unforeseen by her.
Mina does not like the way the Adams Co. Production Union, which represents
employees at her Adams Co. plant, is representing her interests and wants to privately
negotiate her own contract with Adams Co. Which of the following statements is most
likely true?
A. Mina has the right to negotiate her own terms of employment.
B. Production Union represents Mina; hence, she cannot negotiate her own contract.
C. Production Union only represents the workers who want to be represented.
D. Mina must have NLRB approval to negotiate her own contract.
____________ occurs when the dominant party in a special relationship uses excessive
pressure to convince the weaker party to enter into a contract that greatly benefits the
dominant party.
A. Business compulsion
B. Physical duress
C. Undue influence
D. Economic duress
Jason has observed an old car parked in the alley behind his apartment for three months.
It has no license plates on it and the tires are flat. Jason concludes that the car has been
abandoned and takes possession of the car, gets it running, and decides to use it in a
demolition derby. At this point, Alex claims that the car is his. To have title to the car,
Jason must prove:
A. Alex deserted the car.
B. Alex did not intend to return for the car.
C. Alex deserted the car and did not intend to return for it.
D. Alex had promised the car to Jason as a gift.
A limited liability company is best thought of as a cross between a partnership and a:
A. sole proprietorship.
B. governmental institution.
C. limited partnership.
D. corporation.
A meritorious unfair labor practice charge filed with the NLRB first goes to:
A. arbitration.
B. a hearing.
C. federal district court.
D. mediation.
Samantha was looking for a certain shade of thread to complete her needlework on a
tablecloth. At a local shop, however, she was unable to decide which of the five selected
shades would be the closest match to the cloth. The shop owner allows Samantha to
take the selected shades home and decide which one she would want to have. This is an
example of which of the following?
A. Destination contract
B. Sale on approval
C. Sale on acceptation
D. Approval contract
The comprehensive trade coalition involving the United States, Canada, and Mexico is
known as the:
A. Uruguay Round Agreements.
B. North American Free Trade Agreement.
C. Geneva Conventions.
D. United Nations Conventions.
The built-in dishwasher in Fernando's apartment is most like a:
A. courtesy.
B. personal property.
C. trade fixture.
D. fixture.
Starbucks Coffee contracts with Juan Valdez coffee farms to purchase "all the coffee
beans Starbucks needs for the next twelve months." The parties have a(n)
____________ contract.
A. enforceable; open price
B. enforceable; requirements
C. unenforceable; output
D. unenforceable; firm offer
Which of the following is true of oral contracts for the sale of goods of $500 or more?
A. All oral contracts are unenforceable unless they are for the sale of goods of $500 or
B. An oral contract is not enforceable, unless a written confirmation is received and
signed by one party, and sent to the other for approval.
C. An oral contract by a merchant is enforceable if a written confirmation is received by
another merchant who does not object to within 10 days.
D. An admission in court about the terms of the contract does not negate the general
A(n) ____________ can make a(n) ____________ because it deals in ____________ in
the ordinary course of business or has knowledge or skills peculiar to those goods.
A. obligor; gift; specially manufactured goods
B. merchant; firm offer; goods of the kinds sold
C. merchant; open price contract; goods of the kinds sold
D. seller; firm offer; goods of the kind sold
Local business activity carried on within state boundaries is known as:
A. public commerce.
B. interstate commerce.
C. intrastate commerce.
D. local commerce.
Catherine and Jacob have a written contract to buy and sell "100 cases of widgets." The
100 cases is a typo, so after signing the contract they orally agree to modify the contract
to "1,000 cases of widgets." If later the parties are in litigation concerning the amount
of widgets involved in the contract, can evidence of the oral change be introduced into
A. No, since this violates the parol evidence rule.
B. Yes, since both signed the original contract.
C. Yes, since this is an exception to the parol evidence rule.
D. No, since this violates the best evidence rule.
____________ is an ADR technique by which parties hire a retired judge or a
magistrate to hear the dispute, following rules used in an official trial.
A. Partnering
B. A private civil trial
C. Early neutral evaluation
D. Med-arb
Two drivers challenge each other to a drag race on a public highway. This is an example
of acting with:
A. a purpose.
B. knowledge
C. recklessness.
D. negligence.
A nonprofit organization, Save the Tigers, wants to contest Anna's will, since she
promised to leave property to them at the annual Charity Banquet. Save the Tigers has:
A. a right to submit evidence that Anna was of unsound mind.
B. a right to submit evidence that Anna was subjected to undue influence.
C. no right to contest the will.
D. no right to contest the will, but may challenge the ownership of the property in
What type of insurance policy requires the payment of premiums throughout the life of
the insured and pays the beneficiary the face value of the policy upon the insured's
A. Limited-payment life insurance
B. Universal life insurance
C. Straight life insurance
D. Term life insurance
David went to the store to purchase a $15 MP3 player, advertised in the paper. The
salesperson was encouraged by the store not to sell that MP3 player since it created a
loss for the store. Instead, the salesperson told David that although the MP3 player was
on sale, it was an undesirable, bottom-of-the-line product, and that David would be
much happier with an Apple iPod Nano CD player for $250. The store:
A. acted in good faith when it tried to offer a better product.
B. can be sued under the policy of negligence and strict liability.
C. can be held guilty of a bait-and-switch scheme.
D. can be held guilty of fraudulent misrepresentation.
The RUPA has eliminated:
A. all management rights enjoyed by partners.
B. the concept of tenancy in partnership.
C. partnership entity status.
D. each partner's interest in the firm.
Martin Luther King, Jr. refused to obey the injunction in Birmingham in the early
1960's that prohibited King from speaking publicly merely because he was black. He
was jailed for his disobedience. King felt that there was a higher law than the law of the
land. King's actions were most likely based on a(n) ____________ ethical model.
A. positive law
B. natural law
C. utilitarianism
D. social contract
The ___________ Act prohibits contracts, combinations, and conspiracies in restraint of
A. Robinson-Patman
B. Federal Trade Commission
C. Sherman Antitrust
D. Clayton
Generally, if there are no modern court decisions or statutes dealing with an issue in
dispute, the court hearing the case will:
A. apply common law.
B. inevitably devolve.
C. be unable to decide the case.
D. ask the U.S. Supreme Court for an advisory opinion.
Holly bought a house for $200,000. She put down $40,000 in cash, and took out a
$160,000 loan from the Midland Bank to cover the rest of the cost. However, Holly
found that she could not make her mortgage payments. Midland Bank foreclosed on the
mortgage, sold the house for $150,000, and told Holly that she was liable for the
$10,000 difference between what she paid for it and what the bank sold it for. Did
Midland act within its rights? Explain.
Jill's account with Small Bank is improperly charged with a $3,000 substitute check that
was actually Bob's check drawn on Small Bank. Discuss Jill's legal rights and what she
must do to rectify this situation.
Dreamwork Bank uses the substitute check procedure to rapidly obtain payment of
items deposited by its customers. An employee of the bank fraudulently alters some
substitute checks so that they are for greater amounts than the original paper check and
embezzles the difference. Discuss the bank's warranties in this situation.
Carey was injured when hit by a truck driven recklessly by Steven, an employee of the
American Trucking Company. On what basis may Carey sue the American Trucking
Company when Steven was the individual being reckless?
Taft takes out an insurance policy on his wife, Kathryn, when he learns that she is to be
stationed in another country that is at war. She gets killed while on duty in the war zone.
Can Taft collect on the life insurance policy? Explain.
Cars and Cars sells rebuilt parts to repair shops. Allan is Cars and Cars' agent in
Smallville. He is paid a commission, but also has a quota to meet. Cars and Cars
appoints a second agent, Amanda, in Smallville. This makes it difficult for Allan to
meet his quota and also reduces his commissions. Discuss if Cars and Cars has violated
any duty it owes Allan.
DSK Construction interacts with many contractors and subcontractors, often for
long-term projects. Disputes among the various parties often take a long time to be
settled as different parties have different demands. Which method of ADR will help
DSK and its contractors prevent disputes before they escalate?
Ariel and Titus own adjoining tracts of land divided by a fence that has been in place
since 1978. In order to obtain a bank loan, Ariel has a survey made of his land and
discovers that the fence is twenty feet off the property line. Ariel and Titus cannot agree
to move the fence and end up in litigation. Discuss the likely result of the suit.
Mike and Mickey live at the opposite ends of Texas, some 750 miles apart. They want
to make a contract via computer rather than using paper, since this will be faster and
more convenient. Considering the three current model codes, what steps must Mike and
Mickey take under each to make a legal binding agreement?
NewCo. plans to sell stock to investors with a website offer form. Discuss the federal
securities regulations, if any, with which NewCo. must comply.
Big Co. has made a variety of unsecured, undisclosed, large personal loans to top
management officials. Belinda audits Big and discovers this problem. Discuss what
type of audit opinion Belinda is likely to issue.
The International Criminal Court wants to try a U.S. citizen for alleged war crimes. The
U.S. protests, asserting that the court lacks jurisdiction. Discuss the validity of this
Cade, the owner of Cade Body Shop, Inc. is in the habit of paying business expenses
from his personal checking account. One such check to Parts Warehouse, Inc. is
dishonored, and Parts attempts to collect from Cade personally who asserts that only
Cade Body Shop, Inc. is liable. Discuss the legal resolution of this problem.
Justin learns that the air bags that his employer, Excel Auto Corporation, installs in its
new cars can kill or seriously injure young children when the bags deploy in an auto
accident. When he reports this to responsible Excel officials, they redesign and recall
the old airbags at considerable expense since "it is the best thing to do for the driving
public." Name and explain the ethical system Excel used to make this decision.
Rebecca sells Qadir goods that are located in the Matrix Warehouse and gives Qadir a
warehouse receipt at 5 P.M. Matrix closes at 5 P.M. That night, the goods are destroyed
by a fire at the Matrix Warehouse. Have the goods been tendered to Qadir by Rebecca?
Sergie orally agrees to pay Zenith Finance Co. a $300 loan debt that was discharged in
bankruptcy after Zenith told Sergie that repaying the debt would help him "rebuild his
credit", since Zenith would report his payments to credit reporting agencies. Discuss the
On September 1, Isabel contracts with Ned to sing at Ned's restaurant starting on
October 1 and ending on October 15 of the following year. Discuss if this contract must
be written and signed to be legally enforceable.
Fraser entered into a written contract with the Plastica Company to purchase 100 plastic
black bats for a Halloween party he was hosting. The terms of the contract called for
Plastica to deliver all 100 bats by October 25. On October 20, Fraser received from
Plastica 85 plastic bats and 15 paper red bats. A letter accompanying the shipment
stated, "We no longer make plastic black bats. For the inconvenience, we will charge
you 15 percent less than the price we originally agreed upon." Was the contract between
Fraser and Plastica an executed contract? Explain.

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