Refer to Fact Pattern 18-2. Digitals bank is
a. the cashing bank.
b. the depositary bank.
c. the intermediary bank.
d. the payor bank.
A common ethical dilemma faced by the management of Spencer Hydraulics
Corporation involves the effect that its decision will have on
a. one group as opposed to another.
b. the firm’s competitors.
c. the government.
d. the U.S. Chamber of Commerce.
An agreement is NOT one of the requirements of a valid contract.
a. True
b. False
Double D Ranch and Esau enter into a contract on August 1 for the sale of 200 cattle.
Esau cancels the con-tract ten days later. Double D is unable to sell the cattle to another
buyer. Double D is enti-tled to
a. force Esau to accept the cattle and recover the contract price.
b. keep the cattle and recover the contract price from Esau.
c. keep the cattle only.
d. recover the contract price from Esau but must destroy the cattle.
Lana applies for a firefighters job with Metro City, which responds with a letter setting
an appointment for a medical exam. The letter also states that it is “an employment offer
conditioned on the applicant passing the exam. This letter is
a. a bilateral contract that Lana accepted by applying for the job.
b. a quasi contract on which Lana can rely for employment.
c. a unilateral contract that Lana can accept by passing the exam.
d. no contract.
A customer must examine a bank statement and report any discovered forged signa-ture
to recover from the bank for the forgery.
a. True
b. False
The failure to pay a debt as promised is known as default.
a. True
b. False
A merchant is a person who deals in goods of the kind involved in the sales contract or
who holds herself or himself out as having skill or knowledge peculiar to the practices
or goods being purchased or sold.
a. True
b. False
The Securities Exchange Act of 1934 provides for continuous, periodic disclosures by
publicly held corporations.
a. True
b. False
Statutes often set forth rules specifying the terms of contracts.
a. True
b. False
Rhea is a director of Spex Corporation, which makes and sells sunglasses and other
eyewear. As a Spex director, Rhea sits on the board, which
a. governs Spex.
b. is governed by the Spex incorporators.
c. is governed by the Spex officers.
d. is governed by the Spex shareholders.
The First Amendment requires a complete separation of church and state.
a. True
b. False
Lawyers are not allowed to represent people in small claims courts in any of the states.
a. True
b. False
Ada is the maker of a note, on which Bart is secondarily liable. Cash & Credit
Company (C&C) is the current holder of the note. Bart will be obli-gated to pay the
note if
a. Ada defaults on the note.
b. C&C breaches a transfer warranty.
c. C&C negotiates the note to Delta Collection Agency, a third party.
d. C&C presents the note for payment.
Noni and Myra enter into a contract for a sale of clarinets and other wind instruments.
Noni does not deliver. Myra can normally recover as damages the difference between
a. any loss avoided and any profit gained.
b. the actual price and the hoped-for price.
c. the contract price and the market price.
d. the current prices in the parties locations.
Thorpe buys an HD TV from Viewpoint Electronics store, which agrees to keep the TV
for Thorpe until he picks it up. Before Thorpe gets the TV, a fire destroys the store and
the set. The loss is suffered by
a. neither Thorpe nor Viewpoint
b. Thorpe and Viewpoint.
c. Thorpe only.
d. Viewpoint only.
Jared is arrested and found guilty of a misdemeanor. His punishment will not include
a. imprisonment for six months.
b. a fine of $100.
c. death.
d. imprisonment for six months and a fine of $500.
On Monday, Neil tells Outdoor Landscaping, Inc., that he will pay Outdoor $500 if
various tasks are completed by Friday. On Wednesday, when Outdoor has finished more
than half of the work, Neil says that he has changed his mind. These parties had
a. an expired contract when Neil said that he had changed his mind.
b. aquasi contract when Neil said that he would pay for certain work.
c. aunilateral contract as soon as Outdoor began to perform.
d. no contract.
Strict liability depends on privity of contract between an injured party and a seller.
a. True
b. False
Premier Clothing, Inc., a U.S. firm, obtains a judgment in a U.S. court against Quang
Tri, Ltd., a Vietnamese business. Whether the courts judgment will be enforced by a
court in Vietnam depends on the Vietnamese courts application of
a. the act of state doctrine.
b. the doctrine of sovereign immunity.
c. the principle of comity.
d. the World Trade Organization.
Tariffs are imposed only on exports.
a. True
b. False
Through agents, a principal can conduct multiple business operations simultaneously.
a. True
b. False
Daves uncle tells Dave that if “he feels that Dave deserves it, he will give Dave $1,000
when Dave graduates from college. Daves uncles promise is
a. illusory.
b. enforceable.
c. a forbearance.
d. a preexisting duty.
A promissory note can be a negotiable instrument.
a. True
b. False
An independent contractor is an employer who controls his or her agents performance.
a. True
b. False
Dumping is the exporting of environmentally polluting goods to a foreign market.
a. True
b. False
The U.S. corporation Fun Toys, Inc. sets up a firm in China. The parent company
remains in the United States and retains complete ownership of the China branch as
well as complete authority and control over all phases of the operation. This is
a. adistribution agreement.
b. a wholly owned subsidiary.
c. a joint venture.
d. direct exporting.
Roald writes a check for $700 to Savannah. Savannah indorses the check in blank and
transfers it to Twitchell, who alters the check to read $7,000 and presents it to Union
Bank, the drawee, for payment. The bank cashes it. Roald discovers the alter-ation and
files a suit against the bank. Roald can recover
a. $7,000.
b. $6,300.
c. $700.
d. 0.
Isabel obtains a fire insurance policy on her home from Justice Insurance Company.
The home is lost in a fire, but the parties dispute the amount of Justices liability under
an ambiguous clause in the policy. A court would most likely
a. interpret the clause against Isabel.
b. interpret the clause against Justice.
c. rewrite the clause and apply it as rewritten.
d. strike the clause from the policy.
The courts do not consider legitimate competitive behavior permissible if it results in
the breaking of a contract.
a. True
b. False
An Iowa state statute requires amusement parks to maintain equipment in specific
condition for the protection of patrons. Jacks Fun Park fails to maintain its equipment.
Keely, a patron, is injured. Jacks has committed
a. abuse of process.
b. battery.
c. false imprisonment.
d. negligence.
Vivian and Rob enter into a contract under which Vivian will clean Robs house every
week for a year. Under the E-SIGN Act, in order for e-signatures to be enforceable for
this contract
a. Vivian and Rob must both agree to use e-signatures.
b. only Vivian needs to agree to use e-signatures.
c. only Rob needs to agree to use e-signatures.
d. Vivian and Rob must both register their e-signatures with the federal government.
Brasilia, a real estate broker licensed only in Connecticut, con-cludes a land sale in
Delaware. She can
a. collect the commission if it has not been paid.
b. keep the commission if it has already been paid.
c. foreclose on the property to obtain any unpaid amount.
d. not collect the commission, keep it, or foreclose on the property.