1) In a manufacturing arrangement, a franchisor transmits to a franchisee the essential
ingredients or formula to make a particular product.
2) If a bank wrongfully dishonors a cashier’s check, a holder can recover only the
amount of the check.
3) Preferred stock is included among the liabilities of a business because it is equity.
4) An accountant is not liable for an omission in a registration statement to a purchaser
of securities if the omission had no causal connection to the purchaser’s loss.
5) Acceptance of goods precludes the buyer or lessee from exercising the right of
rejection.
6) The relevant product market includes only products that, although produced by
different firms, have identical attributes.
7) The mere possession of land without right is called a tenancy at will.
8) Intangible personal property may be bailed.
9) A contract entered into by a minor is voidable at the option of either of the
contracting parties.
10) Under the UCC, an offeree can accept an offer to buy goods by a prompt shipment
of conforming goods.
11) For most crimes, the state must initiate prosecution within a certain number of years
after the crime occurs.
12) The franchisor may require that the business use a particular organizational form
and capital structure.
13) When there is an ambiguity in an insurance policy, the provision generally is
interpreted against the insurance company.
14) A-One Loans, Inc., holds a security interest in kitchen and restaurant equipment
owned by Brunch n’ Lunch Bistro. A-One assigns its interest in the equipment to
Commercial Investments Corporation. Commercial Investments becomes the secured
party of record
a.automatically.
b.if A-One advises Brunch n’ Lunch of the assignment.
c.if Commercial Investments advises Brunch n’ Lunch of the assignment.
d.if Commercial Investments files a uniform amendment form.
15) Arnie is a member of Bowling & Billiards, LLC, a limited liability company. Arnie
can participate in the firm’s management
a.only to the extent that he assumes liability for the firm’s debts.
b.only to the extent of his investment in the firm.
c.to any extent.
d.to no extent.
16) Eleanora offers Flossy the amount of an investment in Flossy’s start-up business
venture if she marries Eleanora’s son Glenn. This promise is enforceable
a.only if it is in writing.
b.only if the amount of the investment is more than $500.
c.only if Glenn agrees to marry Flossy.
d.under no circumstances.
17) Band Instruments, Inc., sells seventy-six trombones to Community & School Band
Source, Inc. To avoid liability for most implied warranties, Band Instruments should
state in writing that the trombones are sold
a.as is.
b.by a merchant.
c.in perfect condition.
d.with no known defects.
18) Reality Financial Corporation, a U.S. firm, files a suit against Switzerland in a U.S.
court. Switzerland claims foreign sovereign immunity. Under the Foreign Sovereign
Immunities Act
a.Reality Financial must show that Switzerland is not entitled to sovereign immunity.
b.Switzerland must show that it is entitled to sovereign immunity.
c.the court must dismiss the suit without any showing.
d.the court may hear the suit but its decision will have no effect.
19) Johan steals Krispin’s car and sells it to Lemar. Krispin can recover the car from
Lemar
a.only if Lemar did not know that the car was stolen.
b.only if Krispin pays to Lemar the amount that Lemar paid to Johan for the car.
c.only if Lemar knew that the car was stolen.
d.under any circumstances.
20) Disc & Shoe Brakes Corporation, a brake manufacturer, sells its products to
Eastside Motors, a retailer, at lower prices than it charges Fast Brake, a competitive re-
tailer. This price discrimination is legal
a.under any circumstances.
b.unless its effect is to cause a competitor a loss of any business.
c.unless its effect is to substantially lessen competition.
d.unless there is no effect on a competitor.
21) Suisse Internationale, a Swiss maker of athletic equipment, enters into a price fixing
agreement with Total World Sports, a U.S. wholesaler of Suisse’s products. U.S. courts
will apply U.S. antitrust laws if
a.the agreement was made in Switzerland.
b.the agreement was made in the United States.
c.the price fixing has a substantial effect on U.S. commerce.
d.the Swiss government agrees to be sued in the United States.
22) Dinner Theater files a suit against Entertainers Agency, Inc., to enforce a contract.
The only written evidence of the contract is a memo on Entertainers’s letterhead signed
by Fiorello, a company officer. The contract can be enforced if the memo includes
a.a correct title, such as “Dinner Theater-Entertainers Artist Contract.”
b.Fiorello’s title.
c.all essential terms.
d.a reference to the source of the funds to be paid.
23) Builders Construction files a voluntary petition for bankruptcy. In listing its assets,
Builders intentionally omits certain assets, including plots of undeveloped real estate.
After Builders is granted a discharge, Commercial Electric Company, one of Builders’
unsecured creditors whose claims were discharged, learns of the fraud. Commercial
Electric can
a.do nothing.
b.enforce its claim against Builders.
c.file an involuntary petition for bankruptcy against Builders.
d.take possession of the stones with or without a breach of the peace.
24) Fact Pattern 26-1B
Destiny obtains a check payable to her order from Eugenia. Destiny signs the back and
adds the notation “without recourse.”
Refer to Fact Pattern 26-1B. By writing “without recourse” with her signature, Destiny
a.avoids the risk of loss from theft of the instrument.
b.relieves herself of liability on the instrument.
c.converts the check into a nonnegotiable instrument.
d.locks the instrument into the bank collection process.
25) Optima Medico Corporation, a U.S. firm, signs a contract with Pharma Beneficial,
Ltd., a Canadian firm, to give Pharma the right to sell Optima’s products in Canada.
This is
a.a distribution agreement.
b.a joint venture.
c.direct exporting.
d.licensing.
26) 5.Orel incorporates his business as Posts & Wire Corporation in Texas. He and his
group of shareholders intend to make a profit from their sales of fencing materials.
Posts & Wire is
a.a nonprofit corporation.
b.not a corporation.
c.an alien corporation.
d.a private corporation.
27) 7.Larue buys an iPod for $150 and a new laptop for $1,200, and signs a one-year
employment contract for a $4,800 monthly salary to start at the beginning of the next
month. The Statute of Frauds covers
a.the employment contract, and the laptop and iPod purchases.
b.the employment contract and the laptop purchase only.
c.the employment contract only.
d.the laptop and iPod purchases only.
28) A suit is filed against DrillBits Corporation, alleging that the firm committed the
offense of monopolization. To determine whether DrillBits has monopoly power
requires looking at
a.the price of a share of DrillBits’ stock.
b.DrillBits’ size alone.
c.DrillBits’ production methods and marketing techniques.
d.the relevant market.
29) Frescoand Garcia form a partnership-HVAC Pros. Garcia’s capital contribution is
$10,000, and Fresco’sis $15,000. The partnership agreement provides that profits are to
be shared, with 40 percent for Garcia and 60 percent for Fresco. Later, Garcia makes a
$10,000 loan to the partnership when it needs working capital. When the partnership is
dissolved, its assets are $50,000, and its debts are $8,000. How should the assets be
distributed?
30) Consequential damages are foreseeable damages that arise from a party’s breach of
a contract.
31) A principal is always directly responsible for an agent’s misrepresentation made
within the scope of the agent’s authority.
32) Dissociation normally entitles the partner to buy his or her interest from the
partnership.
33) Sellers are required to take precautions against every conceivable misuse of a
product.
34) A principal or employer normally is not liable for an agent’s crime even if the crime
was committed within the scope of authority or employment.
35) An incidental third party beneficiary cannot sue to enforce the contract because the
benefit is unintentional.
36) Before a lawsuit begins, the court must have proof that the defendant was notified
of the lawsuit.