Book Title
Business Law with UCC Applications 14th Edition

Business Law 93437

March 1, 2019
In an involuntary bankruptcy filing, the petition itself becomes the order for relief and is
effective the moment it is filed with the court.
Patricia mistakenly believes she could personally hold a lottery to raise money for her
favorite charity. This could be used as a defense to being prosecuted for unlawful
A bank becomes a creditor when money is deposited in the bank by a customer.
Par value is the value placed on the shares of stock at incorporation by the Secretary of
Oral truth is not a defense to a suit for libel.
Alan promises to pay a debt that was discharged in bankruptcy. This promise requires
new consideration under state laws in most cases.
Stepchildren are given the same legal rights under estate law as natural children.
A demurrer is a defendant's motion asking a court to dismiss the plaintiff's lawsuit
because he or she has failed to state a claim upon which relief can be granted.
Any webpage advertisement on the Internet can usually establish jurisdiction under the
minimum contacts for personal jurisdiction.
Under the UPA aggregate theory, a partnership exists as an individual person with its
own separate identity.
On June 7, Sagan mails an acceptance of Randi's mailed offer to her. The acceptance is
received by Randi on June 10. The acceptance is effective upon receipt.
The Taft-Hartley Act authorized the NLRB to hold hearings on unfair labor practice
A Chapter 11 creditors' committee has the final say on the confirmation of the
reorganization plan, after which the debtor is discharged from any debts that arose
before the date of confirmation.
Clark promises to pay Mike $30 if Mike will mow Clark's yard. This is an example of a
bilateral contract.
No one who has a real defense is required to pay an instrument.
Limited liability means that shareholders cannot be held personally liable for the debts
of the corporation, but may still lose the amount of their capital investment.
If a mortgage is not recorded and a later mortgage is given on the same property, the
new mortgage is superior to the first.
A derivative is a financial tool that can be used to manage risks in the stock market.
The FLSA specifies that employees cannot work for more than 40 hours per week
unless they are paid double for all overtime.
In the case of simultaneous death of a husband and wife, property owned jointly by
both of the deceaseds is distributed equally between the heirs.
The primary objective of law is to maintain harmony, stability, and justice within a
When a person is entitled to receive actual notice of the termination of the agency
relationship, the only way to give notice is by certified mail.
A certificate of authority must be filed with a governmental agency in order for an
instrument to be signed by an agent.
Property insurance can be made less expensive by the use of a deductible.
The modern concept of good faith emerged from within the practices of the medieval
principles of the Law Merchant.
The Supremacy Clause of the U.S. Constitution states that the President can veto any
state law that conflicts with the U.S. Constitution.
The traditional legal view held that corporate managers could not be sued for making a
decision that hurt the corporation's profits.
A sight draft is payable as soon as it is presented to the drawee for payment.
The practice of charging less than the amount of interest allowed by law is called usury.
For a patient to succeed in a negligence case against a health care professional, the
patient must demonstrate that the health care provider owed a duty to that patient.
When a trust is established, legal and beneficial titles remain with the trustee.
Erin, a French student, boarded with a family in America for two months while she
studied. Every day, the American family gave Erin her own room and bathroom and fed
her breakfast and dinner. Erin would be considered a:
A. tenant.
B. direct owner.
C. lodger.
D. subletter.
Hamyes Chemical Works allows its employees to be exposed to certain chemicals.
George, an employee, reports this to his union and agrees to testify when the union
brings a claim that this is in violation of a union contract. George is immediately
discharged from the job. Haymes Chemical Works:
A. has rightly discharged George as his act amounted to breach of trust.
B. would be liable for legal action under the Wagner Act.
C. could be charged with coercion and harassment under the Taft-Hartley Act.
D. is protected under the First Amendment.
In contract law, the non-breaching party is compensated by the payment of
____________ damages to make up for their real financial losses.
A. punitive
B. compensatory
C. consequential
D. incidental
Which of the following is true regarding Convention on Contracts for the International
Sale of Goods (CISG)?
A. The CISG governs only the formation of a sales contract and the rights and duties
that arise from it.
B. The CISG is concerned with the validity of a contract that would be governed by
other laws.
C. The CISG applies to the liability of the seller for death or personal injury caused by
the goods to any person.
D. The CISG applies to auctions sales, sales of stocks, securities, negotiable instruments
or money.
____________ exists when an offeror communicates a valid offer with clear and
unambiguous terms to the offeree, and the offer has been accepted properly by the
A. Legality
B. Capacity
C. Consideration
D. Mutual assent
Which of the following is a disadvantage of entering into an international arbitration
A. The parties' choice of legal representation is limited to the forum in which the
dispute is to be heard.
B. Local laws of a particular nation may prevent a party from using certain arbitrators.
C. The parties cannot choose the arbitrators who will decide on the case.
D. Using an international arbitration agreement does not allow for uniform enforcement
of a judgment across nations.
Smith, an agent, buys and sells used computer equipment on behalf of New Life
Technologies, Inc. In the absence of an agreement, which of the following tasks may
Smith delegate to Elizabeth?
A. The authority to buy and sell used computer equipment.
B. Keeping a record of transactions Smith undertakes on behalf of New Life.
C. The authority to estimate the fair market value of used computer equipment.
D. The authority to fix the selling price of used computer equipment.
In which type of mortgage is the loan repaid when the borrower dies or the property is
A. Variable-rate mortgage
B. Conventional mortgage
C. Balloon-payment mortgage
D. Reverse mortgage
In a written contract, Hogan agrees to sell Jason kitchen cabinets and to deliver them
before December 21. On October 21, two months before the delivery is expected,
Hogan tells Jason that he will not sell him the cabinets. Which of the following can
Jason do in this situation?
A. He can sue Hogan for breach of contract, but must wait until December 21 to do so.
B. He can sue Hogan for breach of contract immediately.
C. He can sue Hogan for breach of contract if he is unable to find another vendor by
December 21.
D. He cannot sue Hogan for breach of contract, since Hogan served an advanced notice
to Jason.
Homeruns Co. manufactures baseball bats. It withdrew deals from a few retailers who
refused to put a particular price tag, as decided by Homeruns Co, on the bats. This act
of Homeruns Co.:
A. violates the per se rule.
B. is legal under the quasi-RPM arrangement.
C. violates the rule-of-reason standard.
D. is legal under the RPM agreement.
When Julie, aged 27, took flu medication, she became very light-headed and confused.
Alice, taking advantage of the situation, persuaded Julie to sell her watch that was
worth $1,000 to her for $100. Julie later realized what Alice did and decided to take
legal action. Which of the following is true as per contract laws?
A. Julie cannot sue Alice since she, as an adult, voluntarily sold the watch.
B. Julie has the right to get her watch back without returning the $100.
C. Alice is allowed to keep the watch and Julie should return the $100.
D. Alice should return the watch and Julie should return the $100.
The words "without recourse" on an indorsement means the indorser is:
A. liable personally, but not other parties.
B. not liable for any problems associated with the instrument.
C. not liable if the instrument is dishonored.
D. liable for only up to fifty per cent of the loss.
Which of the following is true of destination contracts?
A. It requires a seller to turn the goods over to a carrier for delivery to the buyer.
B. Both title and risk of loss pass to the buyer when goods are given to the carrier.
C. Title and risk of loss pass to the buyer once the seller tenders goods at a place as per
the contract.
D. The seller bears no responsibility for seeing that the goods reach their destination.
Brylea is paid 10% of the net profits by Delta Partnership as compensation for her work
for Delta. Delta ceases business, owing many creditors who attempt to collect from
Brylea, asserting that Brylea is a partner. Discuss Brylea's partnership status and
Silas, very angry because his new car broke down, yells out "Anyone wanna buy a
piece of junk for $100?" Ida overhears Silas and says, "I do, here's $100." What result?
A. Silas must sell his car for $100, since his statement was clear and definite.
B. Silas need not sell his car for $100, since he was clearly angry.
C. Silas must sell his car for $100, but only if he were speaking directly to Ida.
D. Silas must sell his car for $100, because his anger does convey serious intent.
The illegal practice of charging more than the amount of interest allowed by law is
A. libel.
B. in pari delicto.
C. slander.
D. usury.
The ____________ is responsible for regulating the transportation and the wholesale
price of natural gas and electricity sold for use in interstate commerce.
A. National Transportation Safety Board
B. Federal Trade Commission
C. Federal Energy Regulatory Commission
D. Federal Communications Commission
Big Union negotiates a wage increase for members of a bargaining unit. This wage
increase is:
A. only for union members.
B. only for workers whose names are listed in the contract.
C. for all workers who join the union.
D. for all workers in the bargaining unit.
All employees in the bargaining unit (i.e., a unit formed for the purpose of collective
bargaining) are benefited by the collective bargaining agreement negotiated by the
union, even if they have not paid union dues.
Carl has his lawyer prepare his will. Wanting to make a few minor changes, Carl places
some handwritten words in the margins, initials them, and scratches out words in the
typed text. Carl's changes:
A. create a codicil.
B. create a new will.
C. amend the typed will.
D. are legally ineffective.
The Titanic Partnership's loan from Big Bank is structured so that payments on the loan
are made out of profits and the amounts of the payments vary according to profitability.
Which of these best describes this arrangement?
A. This is evidence of a partnership between Titanic and Big Bank; additional evidence
may overcome this assumption.
B. This is conclusive evidence of a partnership between Titanic and Big Bank.
C. This may be evidence of a partnership between Titanic and Big Bank.
D. This is not evidence of a partnership between Titanic and Big Bank.
It is possible for the state governments in Wisconsin, Ohio, and Michigan to attempt to
alter the collective bargaining rights of firefighters, police officers, and teachers. Why?
A. These states have voted to keep the Wagner Act out of their states.
B. The Wagner Act does not apply to state government or local government employees.
C. The rulings of the agencies constituted under the Wagner Act are not legally binding.
D. The Wagner Act is applicable only to private organizations.
Which of the following legal detriments is known as forbearance?
A. Doing something that one has a legal right to do.
B. Doing something that one does not have legal right to do.
C. Giving up something that one has a legal right to keep.
D. Refraining from doing something one has a legal right to do.
Liz, a promoter, hired an office support staff for a corporation that had not yet been
incorporated. If there is a novation clause in a subsequent contract with the corporation
and the staff, which of these is correct?
A. The corporation will not be bound by any of Liz's contracts.
B. The office support staff will work without pay until the corporation becomes
C. Liz will escape potential liability under the novation contract entered into.
D. Liz and the corporation will be held equally liable under all contracts entered into.
The only individuals specifically excluded from filing under Chapter 11 are:
A. commodity brokers and stockbrokers.
B. chartered accountants.
C. lawyers and judges.
D. real estate developers.
Which of the following statements holds true of the FTC's Telemarketing Sales Rules?
A. Calling times are restricted to anytime during business days.
B. A telemarketer is allowed to call a consumer without requiring the consumer's
C. Telemarketers must state the total cost of the products or services offered and that the
sale is final or nonrefundable.
D. Telemarketers are excused from disclosing the name of the seller, and what they are
selling before they make their pitch.
If Texas signed a trade agreement with Mexico which established tariffs and importing
conditions for goods made in Mexico, the U.S. Constitutional objection to Texas'
actions would be based upon the:
A. principle of preemption.
B. doctrine of devolution.
C. principle of separation.
D. principle of supremacy.
Mill enterprises needs to raise a large amount of money. To raise the money, it sells its
fractional interest in orange groves, located in Florida, to Sunshine Co. in New York.
Sunshine Co. would be ensured a return in investment from the land purchased. Mill
enterprises has sold:
A. real estate.
B. debt instruments.
C. goods.
D. securities.
On May 15, 2015, Jason indorsed a check dated January 15, 2015, and payable by him
to ALS Check Cashing Service. ALS:
A. can be a holder in due course, even though the check is antedated.
B. cannot be a holder in due course as it has notice that the instrument is overdue.
C. cannot be a holder in due course only if ALS contacted the drawer who agreed to
honor the check.
D. can be a holder in due course only if ALS contacted the drawee who agreed to honor
the check.
Which of the following is true of the relationship between the drawee bank and its
A. The drawee bank becomes a creditor and the customer becomes a debtor at the time
of opening a checking account.
B. The drawee bank becomes an insurer and the customer the insured at the time of
opening a checking account.
C. The drawee bank becomes the customer's debtor at the time of opening a checking
account and agent while collecting checks.
D. The drawee bank becomes a debtor to the customer when the bank pays more than
the customer has on deposit.
If Drake, a shareholder of Sweet Corp., feels that he has been deprived of the right to
purchase some of the corporation's newly issued stock, he:
A. may bring a derivative suit against Sweet's corporate management.
B. may bring a direct suit against Sweet's corporate management.
C. may bring both a derivative suit and a direct suit against Sweet's corporate
D. has no legal recourse against Sweet's corporate management.
While the Washington family was gone for the weekend, their home was broken into
and robbed. Manny, a professional boxer who lived next door, saw the thief,
apprehended him, and forced him to return the stolen possessions. When the
Washingtons returned, Mr. Washington told Manny that he would give him $5,000 for
his efforts. The next morning, Mr. Washington gave Manny a check for $2,000. What
A. Mr. Washington broke his contract with Manuel.
B. Manny would lose if he brought a suit against Mr. Washington because Manny's
actions would be a past consideration.
C. The bargained-for-agreement obligated Mr. Washington to pay the boxer $5,000.
D. Mr. Washington would lose if Manny brought a suit against him to recover the
amount based on promissory estoppel.
Charleen goes to Big Basket Supermarket and fills her cart with food, pushing it up to a
checkout line. Discuss the type of contract between Charleen and Big Basket that would
obligate Charleen to pay for the food prior to leaving Big Basket, even if Charleen and
the clerk never say a word to each other.
Bigger Grocery Stores orders 100 cases of tomatoes from Produce Wholesale Co., but
receives 100 cases of bananas. Bigger asks Produce for instructions concerning the
wrong delivery, but receives no instructions. Bigger resells the bananas, considering
they are perishable goods. However, when Produce Wholesale learns this, it sues Bigger
Grocery Stores on grounds that it did not await instructions from Produce. Discuss the
Ben was driving 70 miles per hour in a 55-mile-per-hour speed zone when his car hit
Sandra's as she entered the highway. Ben had the opportunity to move into another lane
to avoid hitting, Sandra but failed to do so. Discuss the defenses of negligence available
to Sandra and Ben.
John liked the language of his grandfather's will and made a copy of it, and handwrote
in some changes to names and dates and signed this copy in the presence of witnesses.
Discuss if John's will is valid.
Ralph, of Miami, Florida, ordered "100 red widgets" from Maria's business located in
Seattle, Washington. Shipment was f.o.b. Seattle via Red Freight Co. By mistake Maria
sent "100 green doodads" to Ralph. The shipment was destroyed when the Red Freight
truck was involved in a traffic accident in Oklahoma City. Ralph had insurance
coverage that includes "items purchased that are in transit." Explain whether Ralph or
Maria has the risk of loss.
Grandpa has a stroke and becomes mentally incapacitated. Discuss the legal status of
any agency relationships that he may have granted and how Grandpa should have
planned in advance for this possibility.
Crystal is 86 years old and enters the hospital for observation after having fainted.
Crystal is depressed and, while in the hospital, gives her antique wedding ring to
Autumn, a good friend, saying to Autumn, "I won't be long in this world." After a
change in medication, Crystal improves and returns home, living another three years
before dying in a bus wreck while going on a fall foliage tour. Her will leaves her
antique wedding ring to her granddaughter, Sarah. Discuss who is entitled to ownership
of the ring with Autumn in possession of the ring.
The NLRB makes a rule which allows it to investigate, hold hearings, and issue
judgments. Big Co. believes this violates numerous basic U.S. Constitutional
provisions, including the separation of powers between branches of government. Big
Co. wants to challenge the NLRB in court. Discuss the appeals procedure.
Jason Jets, Inc. asked Southern Transport, a common carrier, to carry extremely
hazardous jet fuels to one of its bases in another state. Was Southern within its rights
when it refused to transport the fuel? Why or why not?
Josh, a college student, has been told by his friends that filing for bankruptcy after
graduation will discharge all his student loans. Discuss if this is correct.
Alex, aged 30, appeared to be normal, but suffered from the secret delusion that he was
a spy for the U.S. government on the trail of terrorists. Alex purchased a new car from
Marvel Motors, Inc. and drove it so recklessly "chasing terrorists" that the engine
burned up. Alex, not under medical treatment, seeks to rescind the car purchase and
have his money returned. Analyze the appropriate solution to this case.
McDougal Construction and Espinosa entered a contract to build the latter a two-story
house. However, after the company began its construction, Espinosa decided that she
wanted a terrace garden, making the house a three-story. McDougal indicated the
additional costs to Espinosa and completed the job including the terrace garden - neither
of which was in writing or included in the original contract. Espinosa paid McDougal
the original amount but did not pay the extra amount for the third story. Discuss if the
court will admit an oral testimony of the McDougal's to the original contract.
While Leah and Grant were lawfully married, Leah had purchased a $500,000 life
insurance policy on Grant's life, naming herself as the beneficiary. Subsequently they
got divorced and Grant died a year later. Grant leaves two surviving children, Tom and
Cindy. Who is likely to receive the proceeds of the $500,000 life insurance policy?
Timberland and Lumberland are members of the WTO. Timberland has a contract to
supply electrical and mechanical parts to Lumberland. Lumberland imposes tariffs on
the mechanical parts imported by it from Timberland. Timberland approaches the
dispute settlement board claiming that Lumberland was violating the trade agreement.
The DSB orders Lumberland to remove the tariffs, but Lumberland does not follow it.
Can the dispute settlement board order any other measure?
Big Co. would like to purchase a patent owned by Small Co. that Big believes could be
used to make a profitable product. Small has other assets and owes a variety of debts.
Discuss the advantages to Big if it only purchases the patent, rather than Small Co. in
its entirety.
Perez owned the Lakehurst Milk Company. When he found out that his employees were
going to form a union, Perez called a meeting to explain why he was opposed to
unionizing Lakehurst. Foster, an employee at Lakehurst, said Perez could not call such
a meeting. Was Foster correct? Why or why not?
Victoria is seriously injured when, during a thunderstorm, a large and seemingly healthy
tree located on private property falls on her car. Discuss if Victoria can file a negligence
lawsuit against the owner of the tree and be successful.