Matchless Clothing Company buys clothing assembled by Nantra, Ltd., a foreign firm
that employs young children for long hours and low pay. Nantras nation does not
enforce its child labor laws. Human International Politics (HIP), a political activist
organization, discovers Matchlesss connection to Nantra and plans to reveal this
information. Before HIP does so, however, Matchless publicly releases the information
itself and announces that it is severing its relationship with Nantra. Matchless publicizes
its action in its advertising, and the companys sales and profits increase, apparently as a
direct result. Has Matchless acted unethically in any way? From an ethical perspective,
is Matchlesss conduct in this situation more important than whatever its motive might
be?
During a heated legislative debate, Representative Peony makes a statement of fact
damaging Senator Roses good reputation. Peony knows the statement is not true. In this
situation, Peony is most likely
a. liable for defamation.
b. not liable for defamation because only Roses reputation was hurt.
c. not liable for defamation because Peony enjoys a privilege.
d. not liable for defamation because nobody listens to such debates.
Ethel signs a note “payable to the order of Fidelity Bank. Fidelity indorses the note in
blank and negotiates it to Ghani, who sells it to Huck. Liability associated with the
transfer of the note from Ghani to Huck is
a. fitness.
b. quality.
c. signature.
d. warranty.
Skyla and Terry want to form and do business as Unique Boutique Corporation. Most
statutes governing the formation and use of corporations are guided by
a. city or county corporate codes.
b. the Entrepreneurs Corporate Handbook.
c. the federal Administrative Procedure Act.
d. the Revised Model Business Corporation Act.
In the following situations, two parties claim the same goods. Who is most likely to
prevail in each circumstance? Explain.
(a) Olan steals Phils television set and sells it to Quincy, an innocent purchaser, for
value. Phil learns Quincy has the set and demands its return.
(b) Riley takes his television set for repair to Silky, a merchant who sells new and used
television sets. By accident, one of Silkys employees sells the set to Tuna, an innocent
purchaser-customer, who takes possession. Riley wants his set back from Tuna.
Ron makes a contract with Stu that indirectly benefits Tim, although neither Ron nor
Stu intended that result. Tim is
a. a delegatee.
b. an assignee.
c. an incidental beneficiary.
d. none of the choices.
Loni, Michel, and Nita are investors in Oceanic Exploration, a business trust. A
business trust is managed by its
a. directors and officers.
b. general partners.
c. managing members.
d. trustees.
Bob receives a check from Chris. Without Bobs knowledge, Dan indorses it in his own
name and deposits it in his account at Elm City Bank. In Bobs subsequent suit against
the bank for the money, the court will most likely rule in favor of
a. Bob, because Dans signature is not authorized.
b. Bob, because Elm City Bank is not a holder in due course.
c. Elm City Bank, because Dans signature is not authorized.
d. Elm City Bank, because it is a holder in due course.
Diamond Financial Planners employs Elle, Diamonds most productive performer. Elle,
however, dissatisfied with the commission structure, quits to work for Feldstar
Investments, Inc. Elle takes her list of Diamond clients to induce them to switch to
Feldstar. Laws related to trade secrets cover
a. Diamonds list of clients.
b. Elles performance methods.
c. Feldstars commission structure.
d. none of the choices.
Rural Credit Corporation lends money to Sven, a farmer, and the owners of other
agricultural enterprises within its region. To compensate for the higher risk of
bankruptcy among its debtors when the prices of agricultural products decrease, Rural
Credit can
a. become less selective in granting credit.
b. increase the interest rate charged to a few borrowers.
c. increase the interest rate charged to everyone.
d. require less security (collateral).
Olivia applies for a job with Petro Company. Petro does not hire Olivia because of her
ethnicity, or national origin. This is
a. reverse discrimination.
b. disparate-impact discrimination.
c. disparate-treatment discrimination.
d. not discrimination.
Loni delivers her Mazda to be repaired at Niles Body Shop. Loni agrees to pay cash.
Nile performs, but Loni does not pay. Nile tells Loni that he will keep the car until she
pays. This is
a. a judicial lien.
b. a mechanics lien.
c. an artisans lien.
d. a violation of most states laws.
Good Tire Company and Hiway Auto Service enter into a contract for a sale of tires.
Good Tire is a merchant who deals in goods of the kind sold. Under the UCC, an
implied warranty of merchantability arises
a. automatically in sales contracts.
b. only if the buyer asks for it.
c. only if the seller does not expressly disclaim it.
d. only in conjunction with lease contracts, not sales contracts.
Stan incorporates his scientific products business as Tech Precision Supply, Inc. This
firm could have perpetual existence in
a. a few states.
b. all states.
c. most states.
d. no states.
Topographical Engineers, Inc., which is new to its business, offers its services at less
than half their possible market price to United Road Crew Construction, Inc., which
knows the services value. Uniteds decision to accept the offer without commenting on
the price could be justified by
a. the concept of unconscionability.
b. the doctrine of promissory estoppel.
c. the principle of freedom of contract.
d. the Statute of Frauds.
Refined Commodities, Inc., agrees to deliver ten tons of sheet metal to Select Builders
Corporation. The agreement states that delivery is to be within “3 days, although the
parties intend “30 days. Refined cannot convince Select to amend the contract. Refined
should seek
a. damages.
b. reformation.
c. rescission.
d. specific performance.
Mila, who captains a commercial fishing boat, obtains a policy from North Coast
Insurance Company, which agrees to pay $500,000 to Milas beneficiary on Milas death.
This is
a. floater insurance.
b. life insurance.
c. major medical insurance.
d. marine insurance.
Holiday Sales Company and Global Distributors, Inc., enter into a contract for the
delivery of imported specialty goods. Until the goods are delivered and paid for, these
parties have
a. an executory contract.
b. no contract.
c. a quasi contract.
d. an informal contract.
United Disposal, Inc., operates a hazardous waste disposal site that accepts waste
transported by Ace Trucking Company from General Manufacturing Corporation.
United sells the site to Investment Properties, Inc. A release of the waste is discovered
at the site, and the Environmental Protection Agency (EPA) cleans it up. The EPA can
recover the cost of the cleanup from
a. United only.
b. United or General only.
c. United, General, or Ace only.
d. United, General, Ace, or Investment Properties.
Chocolate Sundry LLCs members and managers are Devlin, Effie, and Flavia. After
Devlins relationship to the firm ends, Effie and Flavia agree to discontinue the business.
This is
a. illegal.
b. optional.
c. required.
d. wrongful.
Consumer Shops, Inc., signs a lease for a storefront owned by Downtown Building
Company. Unlike a purchaser of real property, Consumer Shops
a. acquires only temporary possession of the premises.
b. enjoys exclusive possession of the premises.
c. holds only temporary title to the premises.
d. retains temporary, exclusive possession and title to the premises.
Rex signs a check “pay to the order of Sophie drawn on Rexs account in Town Bank. To
impose liability on Rex if Town Bank dishonors the check, Sophie should present it for
payment within
a. one year.
b. six months.
c. ten days.
d. thirty days.
Liu files a suit against Macro Sales, Inc., in a New Jersey state court based on a Web
site through which New Jersey residents can do business with Macro. The court will
most likely exercise jurisdiction over Macro if the interactivity of the site is seen as
a. a ‘substantial enough connection with the state.
b. “downloading from the state.
c. not connected with the state.
d. “uploading to the state.
Significant business develops in Mexico for Natural Beauty Cosmetics, Inc., a U.S.
firm. Natural Beauty appoints Ojos, Ltd., a Mexican firm, to act as Natural Beautys
marketing representative in Mexico. This is
a. a joint venture.
b. franchising.
c. indirect exporting.
d. licensing.
Emil wants to initiate a suit against Fast Credit Company by filing a complaint. The
complaint should include
a. an explanation of the proof to be offered at trial.
b. a motion for judgment n.o.v.
c. a motion for judgment on the pleadings.
d. a statement alleging the facts showing the court has jurisdiction.
Relax-o Chair Company contracts to deliver 100 chairs to Stuffy Furnishings Store on
May 1 for which Stuffy agrees to pay. Relax-o tells Stuffy on April 15 that delivery will
be delayed until June Stuffy may
a. await performance, sue Relax-o, or suspend its own performance.
b. only await Relax-os performance for a commercially reasonable time.
c. only sue Relax-o for breach of contract.
d. only suspend its own performance.
In studying the legal environment of business, Professor Dooleys students also review
ethics in a business context. Ethics includes the study of what constitutes
a. fair or just behavior.
b. financially rewarding behavior.
c. legal behavior.
d. religious behavior.
Verna files a petition in bankruptcy in a liquidation proceeding. If the court administers
the means test and concludes that Verna is abusing the bankruptcy process by filing for
a liquidation, the court will most likely
a. force Verna to file for relief through an individual repayment plan.
b. discharge Vernas debts.
c. distribute Vernas property to Vernas creditors.
d. issue an automatic stay against any actions by Vernas creditors.
Bo and Clancy decide to do business as Deck & Patio Awnings. To be a partnership, this
association can result from an agreement that is
a. express, but not from an agreement that is implied.
b. implied, but not from an agreement that is express.
c. oral, written, or implied by conduct.
d. written, but not from an agreement that is oral or implied.
Fact Pattern 12-A1
Jesse defends against a breach-of-contract suit by College Credit Corporation by
claiming that their deala student loan accruing interest at a certain rate and payable
beginning on a certain datewas unfair because the consideration for their contract was
inadequate.
A court is most likely to evaluate the adequacy of consideration if
a. a thing exchanged has no intangible value to one of the parties.
b. something exchanged is not of direct economic or financial value.
c. the items exchanged were of unequal value.
d. there is a gross disparity in the value of the consideration exchanged.
Federal law prohibits sending unsolicited commercial e-mail to randomly generated
e-mail addresses.
Any agreement among competitors to fix prices constitutes a per se violation of
antitrust law.
Shade Tree Landscaping Company enters into a contract with Jill to landscape Jacks
yard, using Fertile Nursery to supply trees and bushes. Maria owns the lot next to Jacks
property. The landscaping is a gift from Jill to Jack, who is Jills friend, but they are not
related. What type of beneficiary is Jack? What type of beneficiary is Maria? What type
of beneficiary is Fertile Nursery? If Shade Tree refuses to do the job, who can enforce
the contract against it?
A receipt issued by a warehouser for goods stored in a warehouse is a bill of lading.
Wanda owes Xtra Credit Company $5,000 but refuses to pay. Xtra Credit obtains a
garnishment order and serves it on Wandas employer, Young Nursery & Garden, Inc. If
Young complies with the order and Wanda stays on the job, is one order enough to
garnish all of Wandas wages for each pay period until the debt is paid?
Sian, an accountant, prepares a tax return for a client, Toy Sales Company. Vita, who is
not an accountant, prepares a tax return for Wus business, Xtra Delivery Service. Is an
accountant who prepares a tax return for a client liable for any false statements in the
return? Is a person who is not an accountant and who prepares a tax return for someone
else liable for any false statements in the return?
Starr Cardio, Inc., is a small business. Ted, Uma, and eleven other members of the Starr
family own all of its stock. Currently, Starrs income is taxed at the corporate level and,
after being distributed to the family members, at the shareholder level. Can Starr retain
its corporate status but otherwise avoid this double taxation? If so, how?
An offer must be practical to be effective.
Use of the word consideration in an agreement means that consideration has been
given.
Zoning laws manage the development and use of land.
A party to an agency may have the right to terminate the relationship but not the power.
A clients negligence is never a defense to a charge of negligence against an accountant.
Blizzard Entertainment, Inc., one of the owners of the World of Warcraft (WoW)
computer game, is involved in a lawsuit with MDY Industries, LLC, the owner of
Glider, a software program that plays WoW for its players while they are away from
their keyboards. Blizzard asks the court to direct MDY to stop selling and distributing
Glider. The courts opinion in the case is at MDY Industries, LLC v. Blizzard
Entertainment, Inc., 616 F.Supp.2d 958 (D.Ariz. 2010). What is the name for the
remedy that Blizzard is seeking? What type of remedy is it? What court decided this
case? Specifically where can the courts opinion be found?
A choice-of-law clause designates the jurisdiction for the litigation of disputes arising
under a contract.
A limited liability company that has only one member cannot be taxed.