Which of the following is correct with respect to the buyer’s obligation of payment?
a. In the absence of agreement, payment is due at the time and place the buyer is to
receive the goods.
b. Payment by check is sufficient unless the seller demands currency and allows the
buyer a reasonable time in which to obtain it.
c. If the buyer so agrees, he must pay for the goods in advance of delivery.
d. All of the above are correct.
e. Both (a) and (c).
Which of the following is not a characteristics of a corporation?
a. It has perpetual existence.
b. It is a legal entity of its own.
c. It is able to be sued and to sue.
d. It is usually managed by its shareholders.
The duty of a possessor of land to persons who come on the land usually depends on
whether those persons are:
a. invitees, trespassers, or licensees.
b. reasonable persons.
c. fiduciaries.
d. involved in abnormally dangerous activities.
The most important federal statutes governing hazardous substances include:
a. SARA.
b. CEQ.
c. FIFRA.
d. (b) and (c).
e. (a) and (c).
Gerhardt is the president of the Speedway Bicycle Company. He also serves as a
director of the Flexible Tire Company. It occurs to Gerhardt that both companies could
benefit from a contract in which Flexible agrees to supply Speedway with tires for its
bicycles. If Gerhardt wishes to negotiate a contract between Speedway and Flexible,
which of the following is correct?
a. The contract will be void as a conflict of interest.
b. In most states, the contract might be permitted if it is fair and reasonable to both
corporations and if Gerhardt fully discloses all information relating to the transaction.
c. The contract is a clear conflict of interest and will be avoidable by either company
even with disclosure.
d. Both (a) and (c) are correct.
Theresa has a contract to teach eighth grade at Washington Middle School. She decided
she could make more money writing a book, so she assigns her teaching contract to her
friend, Stephanie, who is also a licensed teacher. The duties under the teaching contract:
a. are nondelegable.
b. which Theresa has attempted to delegate are personal in nature.
c. would no longer be required of Theresa if the school district agrees to accept
Stephanie’s services, because a novation would occur, which would relieve Theresa of
her obligation to the school district.
d. All of the above are correct.
Steven intentionally makes a material misrepresentation of fact regarding his
motorcycle to Thelma who agrees to buy the motorcycle based upon the
misrepresentation. This contract is:
a. void.
b. voidable.
c. executed.
d. unenforceable.
Kelly wrote a check to Trish, which Trish immediately changed from $20 to $120. She
negotiated the check to Carl for value, who in turn took it to Kelly’s bank for
certification. Kelly’s bank checked his account and certified the check since there were
sufficient funds to cover the check. Thereafter, Carl gave the check to Central Motors
(CM) as part of the down payment for his car. CM presents the check to Kelly’s bank
for payment and they discover the alteration. What consequence?
a. Bank can sue CM for breach of presentment warranty of no alteration.
b. Bank can charge Carl’s account for $120.
c. Bank can refuse to pay CM more than $20.
d. Bank must pay CM $120 and cannot sue them for breach of warranty.
Identify the ways a partnership is dissolved by operation of law under the UPA. List the
circumstances under which a court will order a dissolution of a partnership.
Donald, a minor, makes a contract with Albert, an adult, to buy a computer. One week
later, Donald has his eighteenth birthday. If shortly thereafter Donald tells Albert he will
pick up the computer the next week:
a. Donald has expressly ratified the contract.
b. the contract must be renegotiated, because Donald was a minor when it was made.
c. Donald can change his mind and avoid the contract, because it was made when he
was a minor.
d. the contract is void ab initio, because Donald was a minor at the time it was made.
Which of the following is NOT included within the Code definition of merchantability?
a. Reasonably fit for the ordinary purposes for which the goods are used
b. Pass without objection in the trade under the contract description
c. In the case of secondhand goods that they be of a quality that matches that of new
goods of the same type.
d. Are of fair, average quality.
Three of the airline companies agree that they will not go any lower than $100 each
way for coast-to-coast tickets. This is:
a. vertical price maintenance.
b. horizontal group boycott.
c. vertical market allocation.
d. horizontal price fixing.
Larson & Son manufactured welders that frequently malfunctioned, setting clothing on
fire and causing serious burns. Larson & Son sold all of its assets to Swenson Co.,
which continued to manufacture the Larson welder product line. Eighteen months after
Swenson’s purchase, one of Larson’s customers sued Swenson for injuries caused by a
welder purchased from Larson, one year prior to the purchase by Swenson. Under the
circumstances, Swenson Co.:
a. cannot be held liable, because it is a corporation.
b. cannot be held liable, because it did not manufacture the welder in question.
c. might be held liable for this debt in some states under strict tort liability.
d. could not be liable if Larson & Son still existed as a corporate entity.
An undertaking by a surety to protect an employer against the dishonesty of an
employee is a(n) ____ bond.
a. performance
b. fidelity
c. judicial
d. official
Chuck, Bob, and Bert form CB&B Partnership to run a specialty grocery store. Bert is
the day-to-day manager of the store, Bob buys the groceries, and Chuck does all the
administrative work. Bob decides he would like a new car to drive to visit prospective
wholesalers. He makes a contract with Big Ben Motors in the name of CB&B without
consulting Chuck and Bert. The partnership is:
a. bound by Bob’s actual implied authority to buy a car.
b. bound by Bob’s apparent authority to buy a car.
c. bound by Bob’s ostensible authority to buy a car.
d. not bound because buying a car is outside the scope of the partnership business.
Percy, age 17, purchased a used mobile home from a mobile home dealer for $20,000.
This price, however, was twice the reasonable value of the mobile home. One month
later, Percy wishes to disaffirm the contract. If the mobile home is considered a
necessary, then:
a. Percy can disaffirm the contract based on the wrongful act of the dealer.
b. Percy can disaffirm the contract because the minor can live in an apartment rather
than a mobile home.
c. Percy may keep the mobile home but is only liable for the reasonable value of the
mobile home.
d. Percy must keep the mobile home and abide by the original terms of the contract.
In a sale on approval:
a. possession but not title is transferred to the buyer for a stated period of time.
b. possession and title are transferred to the buyer for a stated period of time.
c. title but not possession is transferred to the buyer for a stated period of time.
d. title but not risk of loss remains with the seller until the buyer accepts the goods.
The desired effect of EFTS is to:
a. avoid the delay between issuance of a check and receiving the canceled check.
b. eliminate errors.
c. ease the mobility of society.
d. both avoid the delay between issuance of a check and final payment, and also to
eliminate paperwork.
The Rogers family has always wanted to buy the beautiful house at the top of the hill.
The owners of the house, the Thompsons, decided to sell and called Mr. Rogers. Before
he could get back in touch with Mr. Thompson, Mr. Rogers suffered a heart attack and
died. Mr. Rogers’ adult daughter, to whom the Thompsons had not spoken, still wants
the house. She may:
a. not accept since the offer is terminated.
b. not accept because she does not have the capacity.
c. accept since the contract offer is assignable.
d. accept since the offer cannot be revoked without notice.
Leonard is a traveling salesman for Bighorn, Inc. He calls on Ralphyl, one of his
regular accounts, in order to solicit another order. While in the store, Leonard collects a
past due account for Bighorn, but he doesn’t get another order. It has been a bad day in
which Leonard hasn’t had any orders. He is so angry about this when he leaves the store
that he drives negligently and hits a pedestrian with his car. In this case:
a. Bighorn has no liability for Leonard’s negligence, because Leonard is responsible for
his own negligent conduct.
b. since he was driving at the time of the negligent conduct, Leonard was no longer
within the scope of his employment.
c. Bighorn will be liable for Leonard’s negligence under the doctrine of respondeat
superior.
d. Leonard is an independent contractor and, therefore, Bighorn will have no liability
for his negligence.
The UPA grants each partner the right to an account whenever:
a. his partners wrongfully exclude him from the partnership business.
b. a partner makes a profit in violation of his fiduciary duty.
c. circumstances render it just and reasonable.
d. All of the above.
A contract contains a provision that states it will be effective for a “year.” The plaintiff
in a lawsuit claims that a “year” is obviously 12 months. The defendant claims that the
contract meant a 10-month school year. Parol evidence:
a. cannot be used to explain the term, because the plain meaning of a “year” is 12
months.
b. cannot be used to explain the term, because it is an integrated document.
c. can be used to clarify the parties’ intent because in this contract the term “year” is
ambiguous.
d. cannot be used, because the contract contains an express term that could have been
changed by the parties prior to the contract’s execution.
Blighs, Inc. would like to pay a dividend to its shareholders. It has only been in
business a few years and does not yet have any retained earnings. However, it has a new
product which is breaking all sales records. This quarter, Blighs anticipates about $3
million in earned surplus. It should be able to pay all of its bills as they become due.
Under which of the following tests would Blighs be able to pay a dividend? Explain.
a. Earned surplus test
b. Surplus test
c. Net assets test
A secured transaction consists of:
a. a debt or obligation to pay money.
b. the creditor’s interest in specific property that secures performance of the obligation.
c. Both (a) and (b).
d. None of the above.
Damages for reliance include expenses for:
a. lost profits.
b. injury to the person.
c. preparing to perform.
d. punishment of the breaching party.
Active recruitment of minority applicants to meet hiring goals is termed:
a. reverse discrimination.
b. affirmative action.
c. comparable worth.
d. BFOQ.
The liability of manufacturers and other sellers of goods for a defective product may be
based on all but which of the following?
a. Negligence and misrepresentation
b. Violation of a statutory duty
c. Warranty and criminal liability
d. Strict liability in tort
A tax client wishing to defer income he earned this year asks his accountant to misstate
information on his tax return. If the accountant does so, she may be subject to fines and
up to five years in prison.
A good faith purchaser acts honestly, gives value, and takes the goods without notice or
knowledge of any defect in the title.
One party’s unauthorized alteration of any of the material terms in a written contract
discharges the entire contract.
The union mark attached to many goods in the United States is a collective mark.
A composition of creditors is a bankruptcy form of relief under Chapter 13 of the
Bankruptcy Code.
In settling a liquidated debt, payment of a smaller amount before the due date would
constitute consideration, but paying a lesser amount on the due date at an agreed-upon
different place of payment would not be legally sufficient consideration.
In 2002 an act promoting the purchase, development, and use of industrially polluted
property was signed into law.
Under the Antitrust Criminal Penalty Enhancement and Reform Act of 2004, corporate
offenders who violate Sections 1 or 2 of the Sherman Act face fines of up to $100
million per violation.
The parol evidence rule only applies to written contracts.
An intoxicated person must have been so intoxicated as to have been unable to
understand the consequences of his actions or have been unable to act in a reasonable
manner in order to avoid a contract.
A typical automobile financing agreement would be a closed-end credit agreement.
The performance of a pre-existing contractual duty which is neither doubtful nor the
subject of an honest dispute is legally sufficient consideration to support a second
contract.
Implied warranties may arise from course of dealing or usage of trade in leases of
personal property under Article 2A of the Code, but not in sales of goods under Article
2.
Discuss how the common law of contracts, Article 2 of the Uniform Commercial Code,
and the Restatement of the Law of Contracts combine to form the law of contracts. Is
there a difference between how a court would regard Article 2 of the UCC and the
Restatement of the Law of Contracts? Why? Explain your answer.
If Corporation J and Corporation K combine all of their assets and create a consolidated
corporation; Corporation J and Corporation K will cease to exist.
A quorum will consist of a majority of shares entitled to vote if there are no provisions
for any other number in the articles of incorporation.
Under most intestate succession laws, a stepchild will not inherit unless legally adopted.
An assignor normally guarantees that the obligor will pay the assigned debt.