1) Securities offerings in unlimited amounts can be exempt from the registration
requirements in certain circumstances.
2) Any agreement that restricts output among competitors is a per se violation of
Section 1 of the Sherman Act.
3) The corporation is a creature of the common law.
4) A customer who fails to report a forged signature within thirty days from the date that
the bank statement showing the item was made available for inspection loses the legal
right to have the bank recredit his or her account.
5) Litigation is the process of resolving a dispute through the court system.
6) Good Cookin’ Products Company makes heat convection ovens. Heidi discovers that
her Good Cookin’ oven is defective and sues the maker for product liability based on
strict liability. To win, Heidi must show that she
a.bought the oven from Good Cookin’.
b.did not misuse the oven.
c.suffered an injury caused by the defect.
d.did not know of the defect.
7) Ollie obtains a health-insurance policy for his family from Protection Insurance
Company. The policy includes an incontestability clause. Under such a clause, after a
policy has been in force for a specified period or time, such as two or three years
a.Ollie cannot contest Protection’s insurable interest.
b.Ollie cannot contest Protection’s refusal to pay a claim.
c.Protection cannot contest Ollie’s eligibility for continued coverage.
d.Protection cannot contest Ollie’s statements in the application.
8) GR8 Daze Products, Inc., and Hot Springs Spas Stores enter into a contract for a sale
of hot tubs. Under a shipment contract, the seller must
a.allow the buyer to reject the goods for any reason.
b.deliver the goods to a particular destination.
c.inspect the goods before shipping them.
d.place the goods into the hands of a carrier.
9) Livestock Feedlot orders one hundred sacks of cattle feed from Mega Nutrient Feed,
Inc. Each sack is stamped with the phrase “Twenty percent protein.” This is
a.an express warranty.
b.an implied warranty.
c.a warranty of title.
d.puffery.
10) Energy Resources Company develops its marketing strategies in terms of what its
management perceives as its ethical obligations, which represent its
a.legal liability.
b.profitability.
c.standards of right and wrong.
d.unilateral corporate duties.
11) Fact Pattern 28-1B
Dana takes her car to Efficient Auto Repair Service, which repairs the car and bills
Dana for $500. She writes out a check drawn on First Choice Bank, but later, believing
that Efficient Auto did not repair the car properly, issues a stop-payment order.
Refer to Fact Pattern 28-1B. First Choice
a.is liable to Efficient Auto for the amount of the check.
b.must stop payment if First Choice has a reasonable time to act.
c.need not follow Dana’s order because it was issued after the check.
d.need not follow Dana’s order unless the check was certified.
12) Gustaf and Hilltop Country Club disagree as to the exact amount Hilltop owes
Gustaf for his landscaping work. They form a new agreement that, on fulfillment, will
discharge the prior obligation. This is
a.a covenant not to sue.
b.an accord and satisfaction.
c.a release.
d.promissory estoppel.
13) Steaks n’ Fries Restaurant Company’s decision makers view a particular risk in the
consumption of Steaks n’ Fries’ products as open and obvious. Continuing to market the
products without explicitly telling consumers of the risk could be justified from a
perspective of
a.duty-based ethics.
b.corporate social responsibility.
c.religious ethical principles.
d.outcome-based ethics.
14) Orson files a suit against Portia. Before going to trial, the parties meet, with their
attorneys to represent them, to present their dispute to a third party who is not a judge
but who imposes a resolution on the parties. This is
a.arbitration.
b.mediation.
c.negotiation.
d.not a legitimate form of dispute resolution.
15) Denny allows Elbert to store his trailer on Denny’s property for $20 a month while
Elbert works temporarily at a distant job site. Later, Denny notices rainwater collecting
in the trailer and covers it with a tarp at a cost of $50. This cost is most likely borne by
a.Denny and Elbert in equal measure.
b.Denny.
c.Elbert.
d.Cody’s employer.
16) Capital Bank’s policy requires that indorsements on checks exactly match the names
of the payees. Don, an employee of eData Company, issues and indorses several payroll
checks in the names of former employees and deposits them into his account at Capital.
eData files a suit against Capital to recover the funds. Most likely to suffer the loss is
a.Capital Bank on the basis of bad faith.
b.Don on the ground that he was a fictitious payee.
c.eData Company for failing to monitor its employee.
d.the employees in whose names the checks were issued and indorsed.
17) Comfort Foods Corporation makes and markets its products nationwide. To be
considered socially responsible when making a business decision, Comfort Foods must
take into account the needs of
a.its customers and the community only.
b.its employees and owners only.
c.its employees, owners, customers, creditors, suppliers, and the community.
d.no one.
18) Repair Tools Company contracts to deliver fifty heavy-duty steel floor jacks to
Serv-UR-Self Auto Stores on May 1 for which Serv-UR-Self agrees to pay. Repair
Tools tells Serv-UR-Self on April 15 that delivery will be delayed until June 1.
Serv-UR-Self may do all of the following except
a.force Repair Tools to deliver substitute goods before the time for the contract’s
performance.
b.await Repair Tools’ performance for a commercially reasonable time.
c.sue Repair Tools for breach of contract.
d.suspend its own performance.
19) Speedboat Corporation refuses to sell its products to Water World, Inc., a
recreational water products dealership. This is a violation of antitrust laws if it
a.has an anticompetitive effect on a particular market.
b.results in lower prices for consumers.
c.provides no economic benefits for consumers.
d.is likely to increase competition.
20) Conrad and Delilah are employees of EcoCrop Feed & Seed Corporation. Under the
Equal Pay Act of 1963, EcoCrop can legitimately pay different wages on the basis of
a.seniority.
b.job descriptions.
c.substantial equality of skill, effort, and responsibility.
d.gender.
21) Siri downloads and sells, in international markets via the Internet, e-textbooks
without the authors’ or publishers’ permission. The international treaty that applies to
pirated copyrighted works being distributed via the Internet is
a.the Federal Trademark Dilution Act.
b.the Madrid Protocol.
c.the Trade-Related Aspects of Intellectual Property Rights agreement.
d.the Anti-Counterfeiting Trade Agreement.
22) 13.Diverse Diversions, Inc., makes computer, video, and mobile device games.
Ember buys a hard copy of Final Infinity. Inside the package is a shrink-wrap
agreement. With respect to the contract for the game’s purchase, the shrink-wrap
agreement may not be enforced if
a.Ember does not read it.
b.Ember learns of it after contracting.
c.Ember learns of it before contracting.
d.the play of the game is poor.
23) Home Entertainment, Inc., warrants its goods to be free of defects. Ira issues a note
to obtain goods from Home Entertainment that proves defective. If Home
Entertainment presents the note for payment
a.Ira’s best defense would be breach of warranty.
b.Ira must pay the note.
c.Ira’s best defense would be fraud in the inducement.
d.Ira’s best defense would be failure of consideration.
24) Riverwalk Restaurants Corporation is a noninvestment company that wants to issue
stock of $3 million in a twelve-month period. Riverwalk, with less than $20 million in
annual sales, qualifies as a small business issuer. Before Riverwalk sells the stock, it
must provide investors with
a.an offering circular.
b.a notice of the issue.
c.a red herring prospectus.
d.a tombstone ad.
25) 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 $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 $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 $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 $30 per gallon if it
accepts the delivery. Discuss NationPoints’s contentions.
26) An involuntary bankruptcy occurs when the debtor forces his or her creditors into
bankruptcy proceedings.
27) The doctrine of commercial impracticability does not extend to problems that could
have been foreseen.
28) A warranty against infringement is a promise by the seller that the product is free
from any patent, trademark, or copyright claims of a third person.
29) When the parties terminate an agency, it is the principal’s duty to notify any third
parties who know of the existence of the agency that it has been terminated.
30) Rescission is the substitution of one party to a contract for a third party, who agrees
to assume the contractual duties.
31) Business has little incentive to try to influence the regulatory environment through
lobbying.