On April 18, Marco bought a sailboat from a local marina. The boat was defective and
did not turn about properly. Marco used the boat extensively all summer and the boat
was no longer in the same condition as when it was bought. By September 30, Marco
had waived his right to revoke acceptance.
The transfer of commercial paper in such a manner that the transferee becomes a holder
is known as:
a. assignment.
b. negotiation.
c. indorsement.
d. accommodation.
The management of Corporation A forms Corporation B in which the management
owns some stock and institutional investors own the rest. Corporation B issues bonds to
institutional investors to raise cash, with which it purchases the assets or stock of
Corporation A. The assets of Corporation A are used as security for the bonds issued by
Corporation B. This action by management is best described as a:
a. leveraged buyout.
b. cash-out combination.
c. short-form merger.
d. compulsory share exchange.
Steven has a typed copy of a contract, which he would like to have Thomas sign.
Thomas, who needs glasses to read typing, doesn’t want to sign until he has read the
document, but Steven convinces Thomas to sign it anyway, because it is a ‘standard”
contract for this type of situation. Is the contract which Thomas signed binding upon
him?
a. No, because he did not read it.
b. No, because he entered into it based upon fraud in the execution.
c. Yes, because he has made a unilateral mistake of law.
d. Yes, because he was negligent in not ascertaining its contents.
A valid will must be witnessed. Which of the following statements about witnesses is
correct?
a. Most states require only one witness to a will.
b. The witnesses must see the testator write the will.
c. The witnesses must sign the will in the presence of the other witnesses.
d. Under the law in all states, witnesses lose any bequests to them in a will they witness.
Most zoning ordinances provide that a nonconforming use may be terminated:
a. immediately.
b. after 6 months of the structure’s future useful life.
c. when a nonconforming structure is destroyed or substantially damaged.
d. All of the above.
Mark, a college student, agreed to sell his horse to Henry for $1,000. The contract
required Mark to take the horse on that same day to Idlewild Stables where Henry was
going to board the horse. Henry paid Mark the money, patted the horse and said, “I’m
glad you’re mine, you beauty,” and drove off. Mark then led the horse into the trailer
and set off for the two-hour drive to Idlewild. Has there been a sale?
a. No, not until delivery to Idlewild.
b. No, not until Henry sees the horse again.
c. Yes, since Henry already paid for it.
d. Yes, since the contract was made earlier in the day.
In which of the following situations is there a third party incidental beneficiary who
would be unable to enforce the agreement?
a. Wholesalers, when the buyer of a business promises the seller that he will pay
outstanding debts to wholesalers who have supplied inventory for the business.
b. Workers, where a contractor agrees to post a performance bond to assure payment of
workers and material men.
c. A debtor, where a new partner enters an accounting firm and agrees to pay a share of
debts incurred prior to his admission to the firm.
d. A doctor, when an automobile accident policy states that the insurance company will
reimburse the insured for medical expenses incurred as a result of an automobile
accident.
The Speelman v. Pascal case held that:
a. a gratuitous assignment is terminated by the assignor’s death, even if the assignor
made an effective delivery of the assignment prior to his death.
b. assignments of rights to sums that are expected to become due to the assignor are
enforceable.
c. assignments cannot be made of sums that are not presently due but are expected to
become due in the future.
d. personal contracts are not assignable.
Andrew noticed Michael and his pregnant wife Georgette walking down the street and,
as a joke, drove his car within inches of Michael. Michael wasn’t injured, but his wife
suffered severe mental distress and needed to be hospitalized in order to save the
pregnancy. Andrew has:
a. no liability to Georgette, because he has not committed a tort against her.
b. committed the tort of battery against Georgette.
c. committed the tort of battery against Michael but has committed no tort against
Georgette.
d. committed the tort of intentional infliction of emotional distress against Georgette.
Which of the following duties would NOT be delegable?
a. John has a contractual duty to pay Isaac $50.
b. Karl has a contractual duty to deliver 50 bushels of corn to Michael by October 1.
c. Jeffrey has a duty to mow Georgia’s lawn at least once a week.
d. Arthur has a duty to teach an accounting class at a community college during the fall
semester.
In the World-Wide Volkswagen Corp. v. Woodson case, the Supreme Court found that:
a. for a state to exercise jurisdiction over the parties to a lawsuit, there must be
sufficient minimal contacts between the defendant and the state.
b. the occurrence of an accident within a certain state is a sufficient circumstance for
that state to exercise jurisdiction over the parties.
c. the Due Process Clause of the Constitution was violated because of inadequate notice
to the defendant.
d. a business must solicit business in a particular state, either through salespersons or
advertising, in order to be subject to the jurisdiction of that state’s courts.
Notice of dishonor of an instrument must be given:
a. by a bank before midnight of the third banking day following the banking day on
which it receives notice of dishonor.
b. by a bank before midnight on the next banking day following the banking day on
which it receives notice of dishonor.
c. by a nonbank, with respect to an instrument taken for collection, within three
business days following the day on which it received notice.
d. in all situations within seven calendar days following the day on which dishonor
occurred.
Give an example of each of the following:
AB Corporation consolidates with ZX Corporation to form A-Z Corporation. The debts
of AB Corporation are:
a. assumed by the stockholders of AB Corporation.
b. discharged by the process of consolidation.
c. assumed by A-Z Corporation.
d. discharged by the issuance of new stock in A-Z Corporation.
Commercially reasonable charges for the care and custody of goods that a buyer has
rejected are known as:
a. incidental damages.
b. liquidated damages.
c. consequential damages.
d. cover charges.
The Securities and Exchange Commission is an independent, judicial agency which
administers state and federal securities laws.
Ty threatened to have Lisa’s father prosecuted for embezzlement unless Lisa signed a
contract to pay Ty 12 monthly payments of $500 each to purchase his car. Lisa cannot
avoid the contract based on duress since the threat was toward Lisa’s father rather than
Lisa herself.
Martha puts an ad in her company’s newsletter saying she would pay $5,000 for a
first-issue Grace Kelly stamp to the first person who accepted her offer. Martha decides
she would rather go on a European vacation and changes her mind about investing in
the stamp. Martha posts a sign at the executive water fountain saying the offer is no
longer valid. A foreman from a branch plant takes a flight to the Chicago main office to
see Martha and accept her offer. Martha does not owe him any money to pay for a
breach of contract.
Through his observation of human behavior, psychologist Lawrence Kohlberg
developed a model of moral development. Describe the stages of moral development
that were studied and developed by Kohlberg and the relevance of this model for ethical
business behavior.
The State Opera Company has a contract with a famous tenor to perform in its
production of La Boheme. If the singer chooses, he may delegate his duties under the
contract to an equally well-known tenor.
All independent contractors are agents, but not all agents are independent contractors.
One business by itself cannot violate Section 1 of the Sherman Act.
One common type of restrictive covenant restricts the use of property to residential
purposes.