LB 98242 | Course Paper

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Agency law is primarily federal law.

The Magnuson-Moss Act requires a full warranty on the sale of goods.

In some cases, the same neutral third party may act as both the mediator and then the

arbitrator.

In general, an oral contract for the sale of land is sufficient to prove terms of the

agreement in court.

Judicial decisions are law unless they are revoked later by new statutory law.

A person who has the legal right to bring an action in court has standing.

The average investor does not have to register securities when he or she wants to sell.

An accredited investor is allowed to accept private securities offerings under certain

specific guidelines set by the SEC.

Punitive damage awards in Japan are common and often very large.

On average, the U.S. Supreme Court hears 300 cases a year.

Shareholders are directly responsible for the daily management of a corporation.

Agents who go beyond their authority when the principal is disclosed or partially

disclosed are liable for breach of contract, not breach of implied warranty.

The Bill of Rights provides absolute individual freedoms.

Sometimes, language in the parties’ agreement limits the rigidity of the perfect tender

rule.

The mirror-image rule is applicable when a unilateral contract is involved.

Puffery standard China is very similar to the standard used in the U.S.

Securities may be sold during the prefiling period.

The social responsibility of a business is formed by expectations employees have of

employers.

The existence of deceptive advertisements alone is sufficient to prove damages for

recovery when individual civil suits are filed for deceptive practices.

Corporations have rights under the U.S. Constitution.

A corporation must be dissolved if over 50% of the shareholders die.

Subleasing of leased property by the tenant to another party is permissible unless

specifically prohibited by the lease.

If goods identified in a contract are destroyed before the risk passes to the buyer, the

seller must obtain substitute goods.

A corporate executive may be found criminally liable even if he did not know about the

company’s criminal violation.

The Small Business Administration is an example of an executive agency.

The U.S. Supreme Court has the power to dissolve an administrative agency.

An illusory promise is not an actual promise.

A promoter begins the corporate creation and organization process and, raises capital

for the new corporation.

A breach occurs whenever a party fails to perform her obligations under the contract.

The mirror-image rule has been adopted by the UCC.

In order to ensure that a case or controversy exists, the plaintiff must show:

A. An adverse relationship between the parties.

B. An actual legal dispute.

C. It is a proper matter for judicial determination.

D. An adverse relationship between the parties and an actual legal dispute.

E. An adverse relationship between the parties, an actual legal dispute, and it is a proper

matter for judicial determination.

What does the Fifth Amendment’s takings clause reference?

A. The right of the government to take private property for public use without paying

compensation to the owner.

B. The requirement that the government pay the owner just compensation if the

government wants to take private property for public use.

C. The right of the government to put individuals in jail for up to ten days without a

hearing.

D. The right of the government to put individuals in jail for up to five days without a

hearing.

E. The requirement that the government compensate an owner for anything destroyed

during a search.

Belinda orders a certain type of hybrid rose for her wedding. A disease sweeps through

that type of rose, and the florist could only obtain the roses at great cost if at all. Which

of the following is the appropriate term for the florist’s best defense?

A. Commercial unreasonableness

B. Commercial impracticability

C. Substantial hardship

D. Unforeseen circumstances

E. Unreasonable bride

__________________ regulates how companies issue corporate securities.

A. The Securities Act of 1933

B. The Securities Exchange Act of 1934

C. The Depression Act of 1932

D. The Oversight Act of 1935

E. The Stock and Bond Act of 1930

Tutoring Concerns. Wally and Sally want to go into business together and plan on

offering a tutoring service to high school and college students. Wally proposes that they

share control of the business and split profits equally and not bother with a written

agreement. Sally, however, is concerned about being able to pay their debts since they

will have to rent tutoring space and purchase computers and supplies. She is also

concerned about parents and students who may sue if the students’ test scores do not

improve. She tells Wally that she just bought a new boat and car, and that she does not

want her assets to be in jeopardy. She tells Wally that they should form a corporation to

shield their personal assets. Wally, however, says their personal assets are not in danger

with his proposal because they are a business and that, furthermore, forming a

corporation would likely result in double taxation. What type of arrangement, if any,

would avoid double taxation for the endeavor of Wally and Sally?

A. An S corporation

B. A limited liability company

C. A corporation

D. An S corporation, a limited liability company, and a corporation

E. An S corporation and a limited liability company, but not a corporation

Multiplication. Phyllis, who is 30 years old, works for We Add for You Accounting.

Phyllis has worked there for a number of years and is considering quitting in order to

spend more time with her three active triplets, Sunny, Fussy, and Perky. She asks her

boss, Bolivar, about the pension plan at We Add for You. Her boss tells her that she has

no entitlement to information until she is at least 60 years old. Phyllis also asks about

retaining her medical insurance protection if she quits and is told that she would have

no right to do so. Bolivar also throws in that he has been monitoring her conversations

and that he particularly enjoys the conversations between her and her single female

friends involving failed dating experiences. He asks her to keep those up. Phyllis tells

him that her personal phone calls are none of his business. Bolivar says that he can

listen if he wants because the phones are his. Phyllis ends up starting her own company

called We Multiply for You, and makes much, much more money. (In answering the

following questions, assume all federal laws apply and that any pension and medical

plan qualifies for regulation under federal law.) Which of the following is true regarding

Bolivar’s listening to the personal phone calls of Phyllis?

A. Bolivar can listen to the phone calls as long as he wants so long as he is Phyllis’

supervisor.

B. Bolivar can listen to the phone calls as long as he wants only if he is a sole proprietor

and truly owns the phones himself.

C. Bolivar can listen to the phone calls as long as he wants only if he has a policy

prohibiting the making of personal calls.

D. Bolivar can listen to the phone calls as long as he wants only if he notifies

employees first that he is going to do so.

E. Bolivar is prohibited from listening to the phone calls as long as he wants, and only

limited exceptions exist for the monitoring of calls.

A(n) ______ is the right to go onto someone’s land and take part of the land or a

product of it away from the land.

A. appurtenance

B. profit

C. easement

D. fixation

E. joint use

New Agency. Debby just got a job as an assistant in a new federal agency called the

Accounting Commission that was set up to regulate the accounting and auditing

profession. The agency is headed by commissioners who serve for fixed terms and

cannot be removed for cause. Additionally, no more than a majority of the

commissioners may be from the same political party. Her agency is getting ready to

issue rules. The enabling legislation that set up the Accounting Commission specified

that the agency could make rules but said nothing about the form of the rules. Debby’s

boss, Blaire, gave her some proposed rules and asked her to be sure that they were

published and to take care of the next step in the approval process. Blaire also told her

that at this point she was not very interested in hybrid rule making. Which of the

following is the appropriate agency classification for the Accounting Commission?

A. Executive

B. Independent

C. Administrative

D. Legislative

E. Judicial

Which of the following is true in regard to how Chinese law treats contracts entered

into by minors?

A. Because parents are considered responsible for their children’s actions, parents are

held responsible for any contracts entered into by their minor children.

B. Minors are held responsible only for contracts involving necessities.

C. Minors are not held responsible for any contracts, and contracting with a minor is

illegal subjecting the adult contracting party to prison time.

D. Children between ten and eighteen are deemed competent for entering into certain

contracts appropriate to each child’s mental state.

E. Children are held responsible only for contracts involving educational expenses.

Which of the following is found when one party was forced into an agreement by the

wrongful act of another?

A. Duress

B. Negligence

C. Fraud

D. Duress, negligence, and fraud

E. Duress and fraud, but not negligence

The bona fide occupational defense does not include which protected classes?

A. Race and color

B. Sex and religion

C. Sex and national origin

D. Race and religion

E. Race and sex

In most states, proximate cause is determined by __________.

A. statute

B. common law

C. foreseeability

D. but-for causation

E. strict liability

Which of the following was the result in Thrifty Rent-A-Car System v. South Florida

Transport, the case in the text in which in response to a claim for amounts due on a

franchise agreement involving the rental of vehicles, the defendant claimed that

hurricanes had rendered its rental car business commercially impracticable?

A. That a jury question existed as to whether the hurricanes made the business

commercially impracticable.

B. That as a matter of law, the defense of commercial impracticability was unavailable

to the defendant for reasons including that the absence of hurricanes was not a basic

assumption of the agreement.

C. That as a matter of law, the defense of commercial impracticability was available to

the defendant because the defendant established that it was current on its payments until

the advent of the hurricane season.

D. That as a matter of law, the defense of commercial impracticability was available to

the defendant because the defendant established that the hurricanes made the cost of

performance of the terms of the agreement unduly burdensome.

E. That as a matter of law, the defense of commercial impracticability was available to

the defendant because the plaintiff failed to establish that the defendant had been given

sufficient opportunity to recover from its business interruption due to several

hurricanes.

________________________ is the practice of advertising with claims that mislead or

could mislead a reasonable consumer.

A. Industry guides

B. Ad substantiation

C. Corrective advertising

D. Deceptive advertising

E. Consumer law

Once all of the terms of the contract have been fully performed, the contract is said to

be _____.

A. executory

B. executed

C. anticipatory

D. ended

E. stopped

Overextended Debtor. Dennis purchased a big screen television from ABC Electronics

and financed the purchase through ABC Electronics based on an agreement granting

ABC Electronics a security interest in the television and requiring that Dennis make

monthly payments. Three months later, because Dennis had bought a boat, a new car,

and an expensive engagement ring for his girlfriend, and some other items, he was

unable to continue making payments on the television. The manager from ABC

Electronics called and asked Dennis to return the television. Dennis refused on the basis

that ABC Electronics never perfected its interest in the television. Which of the

following is the proper designation under the UCC for the television?

A. It is a consumer good.

B. It is a pledge.

C. It is an allonge.

D. It is unsecured property.

E. It is both unsecured and unperfected property.

The Big Sale. Christy, the owner of ABC department store, needed to hire a number of

employees in a hurry because of a planned big summer sale. Bob was hired by Christy

to run a cash register and to assist customers with taking large purchases to their cars.

Bob encountered a particularly annoying customer, Frank. Frank started complaining

the minute he saw Bob. Frank complained about having to wait for Bob to assist him

with carrying his television purchase to his car, about the merchandise in the store, and

about the quality of the store’s employees. Bob tried to control himself while he carted

Frank’s television to the car. The final straw, however, came when Frank told Bob that

he should get the earring out of his ear, cut his hair, and act professionally. Bob threw

the television to the ground and punched Frank in the nose. Frank did investigation and

discovered that Bob has just been fired from his last three jobs for violent actions

against customers. Two of his former employers are willing to testify that if Christy had

called them, they would have disclosed Bob’s tendencies to her. Bob listed the former

employers on his application, but because she was in a hurry to hire employees, Christy

did not take the time to check with the former employers. Another problem confronting

Christy during the big sale is that Susie, a long-time employee of Christy who had

never caused any problem before, negligently dropped a box on the foot of Greg, a

customer. Greg had to have an X-ray and is threatening to sue both Christy and Susie.

Which of the following is true regarding whether Greg has any right of recovery against

Susie for his injured foot?

A. Greg has no right of recovery against Susie because of her status as an employee.

B. Greg has no right of recovery against Susie because she did not intentionally harm

him.

C. Greg has no right of recovery against Susie because of her status as an employee and

also because she did not intentionally harm him.

D. Greg has a right of recovery against Susie only if Christy is bankrupt.

E. Greg has a right of recovery against Susie.

Which of the following is an element of a legally binding contract?

A. Inquiry

B. Acknowledgement

C. Capacity

D. Knowledge

E. Affirmance

Under the UCC Section 1-205(1), any practice that members of an industry expect to be

part of their dealings is known as ____________________.

A. trade norm

B. course of dealing

C. anticipated trade dealing

D. usage of trade

E. course of performance

Cheap Principal. Jason, who is very knowledgeable regarding computers, agrees to

purchase computers for Nick’s business. Jason is retained for that purpose only, he is

paid a set rate for the job, and Nick exercised no control over the manner in which

Jason did his work. Jason purchased computers on credit from ABC Computers without

any mention of Nick. The computers worked well and were not defective in any way.

Unfortunately, Nick did not pay ABC Computers on a timely basis. Jason, therefore,

paid ABC Computers out of his own pocket because he wanted to be able to do

business with ABC in the future and also because his name was on the invoice. Jason

asked Nick for reimbursement, but Nick refused. Nick claimed that if Jason had only

waited, ABC Computers might have agreed to take less. Which of the following likely

represents Jason’s status in regards to his employment with Nick?

A. He was an independent contractor.

B. He was an employee.

C. He had a special status called employee-contractor, a term used to represent a

contractor who is neither an employee nor an independent contractor.

D. He was an express contractor.

E. He was an implied contractor.

Cat Chaser. Annette, who is angry because her neighbor, William, allows his dog to

chase her cat, decides that she wants to get even. She moves a number of farm animals

into her backyard and begins playing music at all hours of the night. She also steals a

nice lawn chair off of William’s deck. She intends to keep the chair and not give it back.

Annette further took a rake off of William’s deck that she plans to return after she

finishes raking her leaves. William did not give her permission to take the rake. William

is unhappy about the whole situation and wants to sue. What action would William have

against Annette for taking the rake?

A. Trespass to personal property.

B. Conversion.

C. Private nuisance.

D. Negligence.

E. Harassment.

Machine Malfunction. Bruno, the president of a corporation operating work out

facilities, convinced the board of directors to approve a large purchase of a type of

fitness machine called “Perfect Body.” Bruno had carefully investigated the machine

and did a presentation to the board on its purported benefits. Unfortunately, after the

purchase, it was announced that “Perfect Body” was actually a very dangerous machine

that should not be used. The manufacturer of “Perfect Body” went bankrupt, and the

corporation lost $200,000 on the purchase of the machines. The shareholders are furious

and want to sue Bruno and the directors. The board of directors agrees to allow Frances,

the ringleader of the shareholders, to purchase stock of the company at below its fair

market value. She purchases a considerable amount of stock on that basis, but says that

the shareholders plan to continue with an action against Bruno and the board members.

Under which of the following should Bruno and the board of directors defend

themselves in an action brought by shareholders for harming the corporation?

A. The Superior Judgment Rule

B. The Research and Investigation Rule

C. The Business Judgment Rule

D. The Rule of Corporate Integrity

E. There is no defense.

Which type of meeting is where of all creditors listed in the Chapter 7 required schedule

for liquidation?

A. A debt meeting

B. A control meeting

C. A creditors’ meeting

D. An enforcement meeting

E. A counseling meeting

Banking Problems. Constance and Blair are both loan officers at ABC Bank. Constance,

being somewhat dishonest, tells Henry, a customer of the bank who is wealthy and

rarely checks the status of outstanding loans and balances, that she is collecting money

for a local animal shelter. She asks him to sign a pledge that he will contribute $50 to

the animal shelter. In fact, she had him sign a promissory note made out to her for

$5,000, which she later endorsed to Richard. Henry proceeds back to one of his

businesses, a used car dealership. Taylor comes in to purchase a used car. He and Henry

agree that Taylor will purchase a used car for $3,000. Martha also comes in, and she

and Henry agree that she will purchase a used car for $4,000. Both Taylor and Martha

make out promissory notes payable to Henry. At the end of the day, Henry is looking

through the notes and decides that Taylor’s was mistakenly made out for $3,000. Henry

mistakenly, but honestly, believed that the deal was for $3,500. Therefore, he changes

the note to reflect that Taylor owed $3,500. Henry, on the other hand, simply did not

like Martha. He decided that $4,000 was not enough for the car. Accordingly, he

changed the note to $4,500. Which of the following is true regarding Martha’s liability

to Henry?

A. Because of the fraudulent alteration, Martha is not liable to Henry for any amounts

under the promissory note although she may be liable under some other theory.

B. Martha’s obligation will be enforced only in the amount of $4,000.

C. Martha’s obligation will be enforced in the amount of $4,500 unless she has a writing

signed by Henry to the effect that the deal was for 4,000. No other evidence would be

allowed.

D. Unless Martha has a written document from Henry to the effect that the agreement

was for $4,000 only, Martha and Henry will be legally required to split the remainder

with Martha being held responsible for $4,250.

E. Unless Martha either has a written document from Henry showing that the agreement

was for $4,000 or unless she can get Henry to admit that the agreement was for $4,000,

then Martha will be required to pay $4,500 because the obligation was upon Martha to

obtain confirmation of the terms of the original agreement.

Peanut Allergy. Kitty, who had a love of baking, decided to open her own bakery. She

decided that she did not need and did not want to pay for a lawyer to advise her on

different forms of ownership. Unfortunately, Kitty had not paid attention in business

law class. She proceeded, with little thought, to simply open her business called Kitty’s

Baking. Bobby came in to order some cookies for his girlfriend, Bitsy, who was allergic

to peanuts. Bobby told Kitty that he needed some cookies for Bitsy but that Bitsy had

allergies to peanuts. Kitty told him not to worry because she would make up a special

batch just for him. Kitty had hired some assistants because she was so busy. She told an

assistant, Cathy, to make up several batches of cookies for different customers including

Bobby and to leave out the peanuts in Bobby’s order. Cathy, however, forgot the

instruction and proceeded to make Bobby’s cookies with crushed peanuts. Bobby

picked up the cookies and gave one to Bitsy in the car while they were on the way to

the movie in Bobby’s new car. Bitsy became violently ill, vomited in Bobby’s car, and

had to have her stomach pumped. Bobby and Bitsy sought recovery from Kitty who

told them that Bitsy’s doctor bill and Bobby’s car cleaning bill were business debts, that

the business was new and not making any money at the moment, and that she had no

personal liability. Following the incident involving Bobby and Bitsy, Kitty discussed

with her parents her problems with the bakery. Kitty’s parents would like to invest in

her business and share in any profits, but they do not want to share in the management

responsibilities. What type of business did Kitty initially set up?

A. A limited liability company

B. A sole proprietorship

C. An individual proprietorship

D. A general company

E. An S corporation

Refusal to Pay. Business law teacher, Debby needed some yard work done. She told her

class that she would give $50 to the first person who mowed her yard. She also entered

into an agreement with Brenda to trim some shrubbery for $40. Max went to mow

Debby’s yard. Unfortunately, just as he finished mowing, a neighborhood dog bit him,

and he had to go to the emergency room for a couple of stitches. Debby refused to pay

Max on the basis that the agreement was not in writing and that Max ended up being

more trouble than he was worth. Max refused to pay the emergency room because he

said that they did not have a binding, bilateral contract. Brenda refused to trim the

shrubbery because she got a better offer and claimed that she was not bound on the

contract until she started to perform. Which of the following is an appropriate

characterization of the agreement between Debby and Max?

A. They had a bilateral, express contract.

B. They had a bilateral, implied contract.

C. They had a bilateral and unilateral contract.

D. They had a unilateral contract.

E. They did not have any type of enforceable agreement.

Useless Friend. Charles, who is very gullible, is friend with Bobby. Bobby, who cannot

be trusted, decides to try to bind Charles to a contract in Bobby’s favor. Bobby has

Charles sign a contract promising to wash Bobby’s car once a week for a month for $80.

The contract incorporated by reference terms on the back. The terms on the back were

in very small print and required Charles for one year to cook dinner for Bobby, do his

laundry, and clean his apartment. Bobby is also very angry with his former girlfriend,

Tessa, and decides to start rumors, that would constitute the tort of defamation, such as

that she has a vile disease, cheated on tests, and stole from friends. Bobby wants to

enlist the help of Charles but knows that Charles would be hesitant to assist in his

endeavors. One evening, however, Charles drank too much beer and was clearly

intoxicated – a fact apparent to Bobby. Bobby had him sign a contract agreeing to

defame Tessa for $50. When he sobers up, Charles tells Bobby that he was drunk and

that he has no intention of defaming Tessa, who also happens to be Charles’ new

girlfriend. He also finally takes a look at the contract involving work for Bobby and

tells Bobby that the contract is outrageous and that he has no intentions of going

through with any of it. Which of the following is true under the Restatement of

Contracts, Section 16, regarding the claim of Charles that he should be able to avoid the

contract involving Tessa because he was intoxicated?

A. Contracts of an intoxicated person are voidable by the intoxicant if the other party

had reason to know that because of the intoxicated person’s condition, that person was

unable to understand the nature and consequences of the transaction or was unable to

act in a reasonable manner in relation to the transaction.

B. Contracts of an intoxicated person are void if the other party had reason to know that

because of the intoxicated person’s condition, that person was unable to understand the

nature and consequences of the transaction or was unable to act in a reasonable manner

in relation to the transaction.

C. Contracts of an intoxicated person are enforceable because a person should be bound

by his or her actions.

D. Contracts of an intoxicated person are void only if it can be proven that the other

party was involved in encouraging the abuse of alcohol by the intoxicated person.

E. Contracts of an intoxicated person are voidable by the intoxicant only if it can be

proven that the other party was involved in encouraging the abuse of alcohol by the

intoxicated person.

A(n) _____ contract is a contract created by a party to an agreement that is presented to

the other party on a take-it-or-leave-it basis.

A. substantively unconscionable

B. adhesion

C. outrageous

D. procedurally unreasonable

E. unreasonable

Which of the following is an exception to the rule requiring consideration?

A. Promissory agreement.

B. Promissory estoppel.

C. Quasi estoppel.

D. Quasi agreement.

E. Promissory performance.

Which of the following occurs when a party threatens to file a nonfrivolous civil

lawsuit unless another party gives consent to the terms of a contract?

A. Duress

B. Undue influence

C. Durable fraud

D. Criminal influence

E. None of these

Which of the following occurs when the purchased goods are transferred to the buyer

from the seller at either the time of the sale or some time later by the seller’s delivery?

A. A voidable delivery contract

B. An average delivery contract

C. A simple delivery contract

D. A complex delivery contract

E. An acknowledged sale

What type of court order does a secured party need to take possession of the collateral if

the debtor defaults?

A. An order to take possession

B. An order to breach the peace

C. An order for retention of the collateral

D. An order for protective relief

E. The secured party does not need an order to take possession.

Blow-Up. Jeanie is hauling several containers of gasoline in her vehicle in preparation

for riding her personal watercraft. On the way home, Jeanie stops at the automatic teller

machine at her bank and exits her car. Holly pulls behind her and negligently rear-ends

Jeanie’s car. The car explodes and results in the bank building burning to the ground.

The bank sues Holly for negligence claiming that Holly should have to pay for the

entire bank building. The bank claimed that it should be able to recover under the res

ipsa loquitur doctrine. Which of the following is true regarding whether Holly is the

proximate cause of the bank burning?

A. Holly is not the proximate cause of the bank burning because it was not foreseeable

that Jeanie would have gasoline in the back of her car that would result in the fire.

B. Holly is not the proximate cause of the accident because her actions were not the

cause in fact of the accident.

C. Holly’s actions were not the proximate cause of the accident because actual causation

cannot be established.

D. Holly’s actions were the proximate cause of the bank’s burning because actual cause

is present.

E. Holly’s actions were the proximate cause of the bank’s burning because cause in fact

can be established.