Nouveau Riche Corporations officers, directors, and shareholders buy and sell
securities. SEC Rule 10b-5 applies to
a. only the purchase or sale of a security by a financial corporation.
b. only the purchase or sale of a security involving an officer or director.
c. only the purchase or sale of a security involving a shareholder.
d. the purchase or sale of any security.
Sid induces Ty to enter into a contract for the sale of a warehouse about which Sid
fraudulently misrepresents a number of material facts. Sid also tells Ty that his
commission is 6 percent, but their signed, written contract states “12 percent. The parol
evidence rule governs
a. contracts that are induced by fraud.
b. contracts that must be in writing to be enforceable.
c. the admissibility in court of oral evidence.
d. the reformation of oral and written statements into one contract.
O.K. Valve Company applies for a patent for a valve. Meanwhile, O.K. licenses its
products, including the valve, to Petro Pumps, Inc., which uses the valve to make oil
pumps. Under the terms of the license, Petro agrees to pay royalties on O.K.s “patented
products. When a patent is granted on the valve, O.K. asks Petro to pay royalties on the
sales of its pumps. Petro wants to challenge the validity of O.K.s patent. According to
the majority in MedImmune, Inc., v. Genentech, Inc. case, a patent licensee can
challenge the validity of a licensed patent
a. only after breaching the license agreement.
b. only before breaching the license agreement.
c. without breaching the license agreement.
d. under no circumstances.
With respect to Egors land, Fig has an easement, Gabe has a profit, and Huck has a
license. A right to possess the land is owned by
a. Egor.
b. Fig.
c. Gabe.
d. Huck.
Quality Steel Corporation files a suit against Rite Tool Company, claiming that the
consideration for their contract is inadequate. The court will most likely not examine
the adequacy of the consideration if
a. it is obvious that the consideration is adequate.
b. Rite Tool asserts that there is adequate consideration.
c. something of value passed between the parties.
d. the consideration is worth more than $100.
Megan and Nicole do business as One World Realty. In acting on the firms behalf in a
deal with Property Acquisition Company, Megan fails to account for the profit. To her
firm, Megan is
a. liable for breach of the duty of common sense.
b. liable for breach of the duty of economic sense.
c. liable for breach of the duty of loyalty.
d. not liable.
Liberty Bank provides Michelle with a standard mortgage with an unchanging rate of
interest to buy a home. Payments on the loan remain the same for the duration of the
mortgage. This is
a. a fixed-rate mortgage.
b. an adjustable-rate mortgage.
c. an interest-only mortgage.
d. a violation of the law.
Lovey is a shareholder of Matchless Corporation with preemptive rights. With these
rights, Lovey can
a. buy a prorated share of a new issue of stock before other buyers.
b. choose to have Matchless act exclusively in a certain area.
c. “preempt managerial decisions that affect shareholders.
d. sell a prorated share of a new issue of stock before other sellers.
Drew contracts to sell a residential duplex to Evan. The contract provides that if Drew
does not close the deal by September 15, he must pay Evan one-half of the contract
price. This provision is not enforceable because it is
a. a liquidated damages clause.
b. a mitigation clause.
c. a nominal damages clause.
d. a penalty clause.
CPA Accounting, LLC, is a limited liability company. If the law in CPAs state is like the
law in most states, unless the members have agreed otherwise, participants in the firms
management will be considered to include
a. all members.
b. no member.
c. one member.
d. two members, including at least one general partner.
Office Equipment Leasing, Inc. (OEL), agrees to lease five computer workstations to
Product Promotion Corporation (PPC). Before any interest in the workstations can pass
from OEL to PPC, they must be
a. in existence and identified as the goods in the contract.
b. in existence only.
c. identified as the specific goods designated in the contract only.
d. none of the choices.
Opie offers to sell his guitar to Pinky for $100. Pinky agrees and writes a check payable
to the order of Opie for the price. This check is
a. a formal contract.
b. an informal contract.
c. a social contract.
d. no contract.
Jay is a member of Kitchen Cookouts, LLC, a limited liability company. Jay is liable
for Kappas debts
a. in proportion to the total number of members.
b. to the extent of his investment in the firm.
c. to the extent that the other members do not pay the debts.
d. to the full extent.
According to the dissents opinion in Media General Operations, Inc. v. National Labor
Relations Board, in determining whether a discharge for an employees “outburst in
violation of a workplace rule violates the NLRA, the court should focus on whether
a. the arrest of the employee is warranted.
b. the NLRA generally protects the employee from discharge.
c. the remark undermines workplace discipline.
d. the rule is fair and justifiable.
Pay-to-Buy.com, Inc., applies to the U.S. Patent and Trademark Office for a patent on
an online payment system. Business process patents are more likely to lead to litigation
than patents oa tangible inventions because business process patents often involve
a. fields that provide services.
b. machines.
c. processes that incorporate computer programs.
d. transformations of particular articles into different states or objects.
China and India form an agreement to govern their commercial exchanges with one
another. This is
a. a bilateral agreement.
b. a lateral agreement.
c. a multilateral agreement.
d. a unilateral agreement.
Rural Holding Company (RHC) possesses farmland. RHC has the right to use the
property, including harvesting the crops, for ten years. RHC does not have the right to
extract the coal under the land. This is
a. a fee simple absolute.
b. a leasehold estate.
c. a life estate.
d. an easement.
Fact Pattern 17-3
Mike loses his National Bank access card. He realizes his loss the next day but waits a
week to call National. Meanwhile, Opal finds and uses Mikes card to withdraw $3,000
from Mikes account.
Refer to Fact Pattern 17-3. Mike is responsible for
a. $0.
b. $50.
c. $500.
d. $3,000.
Quality Energy Company, a U.S. firm, and Royal Petro, a Dutch firm, enter into a
contract that includes an arbitration clause. This clause must provide that the arbitrator
will be
a. any specified third party.
b. the American Arbitration Association.
c. the Dutch Arbitration Organization.
d. the International Chamber of Commerce.
Posing as a representative of Global Games Company, Ferris e-mails Evan, a job
seeker, asking him to forward personal banking information so that if he is hired,
payroll checks can be deposited directly into his account. Evan supplies the data, which
Ferris promptly sells to Dixie. This is
a. no crime.
b. employment fraud.
c. phishing.
d. vishing.
On the back of a check payable to Nero, he writes “Pay to Odell, without recourse and
signs it. This
a. does not effect the checks negotiability or any partys liability.
b. relieves Nero of liability on the check.
c. relieves Odell of liability on the check.
d. renders the check nonnegotiable.
Trek Transport Company uses a mark associated with its name to distinguish its
services from those of other trucking firms. This mark is
a. a certification mark.
b. a collective mark.
c. a service mark.
d. trade dress.
Mari buys 500 shares of common stock in National Livestock Traders, Inc. As a
shareholder of record, Mari owns a proportionate interest in terms of
a. control, earnings, and net assets.
b. control only.
c. earnings and net assets only.
d. neither control nor earnings and net assets.
Fact Pattern 31-1
First State Bank issues a letter of credit in favor of Oboe Company, an American firm,
to facilitate an international sales contract to buy resources from Lapland Mining, Ltd.,
a Finnish company.
Refer to Fact Pattern 31-1. In a letter of credit, the beneficiary is
a. Lapland.
b. Oboe.
c. First State Bank.
d. none of the above.
The United States is a member of the World Trade Organization, which, among its
members,
a. does not affect trade barriers.
b. maximizes trade barriers.
c. minimizes trade barriers.
d. outlaws trade barriers.
Tracy borrows $30,000 from Secure State Bank. The lender accepts Tracys equity in her
home as collateral, which can be seized if the loan is not repaid on time. With respect to
any proceeding that occurs if Tracy fails to make the payments, this loan is
subordinated. This means that it
a. takes a higher priority.
b. takes a lower priority.
c. has the same priority as the primary mortgage.
d. fluctuates with the market value of the property.
Squeaky Clean Corporation wants to make an offering of securities to the public. This
offering is not exempt from registration under the Securities Act of 1933. Before
Squeaky sells its securities, it must provide investors with
a. a forward-looking financial forecast.
b. an investment contract.
c. a prospectus.
d. samples of its products.
The payment of Yvess debt to Zac is guaranteed by Yvess personal property. Their
agreement describes Yvess subject property by serial number. To establish Zacs interest,
this is
a. irrelevant.
b. not sufficient.
c. sufficient if it accurately describes the parties agreement.
d. sufficient unless it is too tedious to review.
Research Statistics Corporation uses a merit system to pay its employees according to
their job performance. Suki, a female, and Troy, a male, are Research employees with
comparable jobs. Due to superior performance, Suki is paid more than Troy. This is
a. disparate-impact discrimination.
b. gender discrimination.
c. not discrimination.
d. reverse discrimination.
Michael, a citizen of Ireland, and Nina, a citizen of the United States, enter into a
contract. When Nina breaches the contract, Michael obtains an award of damages in an
Irish court. He asks a U.S. court to enforce the award. The U.S. court defers to and
enforces the Irish courts decree. This is
a. a travesty of justice.
b. the act of state doctrine.
c. the doctrine of sovereign immunity.
d. the principle of comity.
Clu serves in a representative capacity for Digger. Elmo is injured through Clus
negligence. Digger may be liable to Elmo if Clus conduct occurred
a. due to a propensity Digger was not and could not have been aware of.
b. during normal working hours.
c. in the course and scope of Clus employment.
d. outside the parties employment relationship.
Vance points a gun at Workman, threatening to shoot him. Workman hits Vance, causing
his death. Charged with homicide, Workman can successfully claim as a defense
a. insanity.
b. duress.
c. entrapment.
d. self-defense.
Marie claims that a Nebraska state statute infringes on her “procedural due process
rights. This claim focuses on
a. procedures used in making decisions to take life, liberty, or property.
b. the content of the statute.
c. the similarity of the treatment of similarly situated individuals.
d. the steps to be taken to protect Marys privacy.
Baked Goods Company agrees to supply Comida Café with all the corn chips that it re-
quires for a year. A sudden demand for ethanol results in a shortage of corn, and the
price rises sharply. Baked Goods asks Comida to pay a higher price for the chips. This
request is
a. invalid as an attempt at extortion or the so-called holdup game.
b. invalid under the preexisting duty rule.
c. valid as a risk ordinarily assumed in business.
d. valid due to the unforeseen difficulty of the sudden price increase.
Fact Pattern 27-1
Town Transport Company (TTC) agrees to pick up two containers for Unlimited Sales,
Inc., and store their contents, to be delivered later. While TTC unloads one container,
the other disappears from TTCs loading dock.
Refer to Fact Pattern 27-1. TTC can avoid liability
a. by proof that TTC did not convert the goods and was not negligent.
b. by proof that TTCs warehouse is located in a high-crime area.
c. by proof that Unlimited Sales was negligent in hiring TTC.
d. under any circumstances.
The Federal Reserve System acts as a clearinghouse where banks exchange checks.
The intention to enter into a contract is judged by objective facts as interpreted by a
reasonable person.
Ethical reasoning is the process through which an individual rationalizes whatever
action he or she chooses to take.
All collateral promises must be in writing to be enforceable.
A close corporation cannot operate as an S corporation.
The most common way to discharge a contract is by breach.
Compensatory damages are only available for victims of intentional employment dis-
crimination.
Constructive eviction occurs when a tenant moves off the premises in retaliation against
the landlord.
An accountant normally will be held liable to the client for incorrect judgment.
Fraud occurs only when there is reliance on a statement of opinion.
A principal is responsible for all intentional torts committed by an agent.
Punitive damages are almost never available in contract disputes.
A business firm may have to comply with the laws of any jurisdiction in which it
actively targets customers.
No state has adopted the Uniform Commercial Code in its entirety.
An agency can terminate once its purpose is achieved.
Subrogation refers to the right of a co-surety to recover from the other co-sureties the
amount paid above his or her proportionate share of a debt.
The incompetence of a customer revokes a banks authority to pay an item.
Transfer warranties attempt to impose liability on the wrongdoer or the party who dealt
most immediately with the wrongdoer.
A check is a special type of certificate of deposit.