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.
Metro City operates its own municipal public drinking water system. With regard to
pollutants, this system is primarily subject to
a. the migratory bird rule.
b. the Oil Pollution Act.
c. the Rivers and Harbors Appropriations Act.
d. the Safe Drinking Water Act.
E-Bank, an online financial institution, gives financial information about Paula and
other customers to a federal agency without the customers permission. E-Bank may be
liable under
a. the Federal Trade Commission Act.
b. the Financial Services Modernization Act.
c. the Right to Financial Privacy Act.
d. the Uniform Electronic Transactions Act.
Glen falsely accuses Hu of stealing from Island Tours, Inc., their employer. Glens
statement is defamatory only if
a. a third party hears it.
b. Hu has not been caught.
c. the statement is puffery.
d. the statement is true.
Elle is an agent for Fine Cosmetics, Inc. Elle owes Fine Cosmetics the duty of
a. avoidance.
b. compensation.
c. indemnification.
d. performance.
Maksum floods virtual mailboxes with unsolicited junk e-mail, consisting of ads and
other messages. This e-mail is
a. spam.
b. bot.
c. piracy.
d. phish.
Grace applies for a homeowners insurance policy on her house with Heroic Insurance
Company through Ian, a broker. In this transaction, Ian is
a. an agent for both parties.
b. Graces agent, and not Heroics agent.
c. Heroics agent, and not Graces agent.
d. not an agent.
Dhani signs a check “pay to the order of Etan drawn on Dhanis account in First State
Bank and dates the check “May 1. Etan presents the check to the bank for payment on
December 15. This is
a. a dishonored check.
b. an overdraft.
c. a postdated check.
d. a stale check.
Fact Pattern 21-2
Sid, a director of Tech Software Company, learns that a Tech engineer has developed a
new, exciting video game. Sid buys Tech stock and tells his friend Uri, who also buys
Tech stock. When the new game is released three weeks later, Sid and Uri sell their
stock for a big profit.
Refer to Fact Pattern 21-2. Regarding Sids profits on the purchase and sale of Tech
stock, under Section 16(b) of the Securities Exchange Act of 1934 Tech may recapture
a. all of Sids profits.
b. half of Sids profits.
c. 10 percent of Sids profits.
d. none of Sids profits.
Rodeo Ranchs agent Slim is authorized to draw checks on Rodeo Ranchs account in
Town Bank. Upper Range Corporation is a Rodeo Ranch supplier. Slim writes a check
“pay to the order of Upper Range [signed] Slim, indorses the check in Upper Ranges
name, and deposits it in his account in Verity Bank. If Verity Bank collects payment, the
ultimate party most likely to suffer the loss is
a. no one.
b. Rodeo Ranch.
c. Town Bank.
d. Upper Range.
Lenore is the sole proprietor of Mall Kiosks. With respect to contracting for her own
business interests, Lenore is
a. an agent and has the authority.
b. an agent but does not have the authority.
c. not an agent and does not have the authority.
d. not an agent but does have the authority.
Cold Stuf, Inc., makes snowboards, which it sells to Deep Freeze Sports Store (DFS).
DFS sells Cold Stuf boards to consumers, including Ed. Ed is injured while using the
board. In a product liability suit based on strict liability, Ed may recover from
a. Cold Stuf only.
b. Cold Stuf or DFS.
c. DFS only.
d. no one.
GR8 Skates Company makes and sells a pair of skates to Hugh. GR8 fails to exercise
“due care to make the skates safe, and Hugh is injured as a result. GR8 is most likely
liable for
a. assumption of risk.
b. knowledgeable use.
c. negligence.
d. product misuse.
Fact Pattern 10-3
Estelle enters into a contract to buy 132 acres from Desmond to subdivide and sell in
quarter-acre lots for Country Acres, a residential development.
Refer to Fact Pattern 10-3. If Desmond breaches the contract, Estelles remedy would
most likely be
a. a certain ratio of the amount that Desmond has in liquid funds.
b. a percentage of Desmonds unrealized profit.
c. the difference between the lands contract and market prices.
d. specific performance.
Kyla is a salesperson for Liberty Financial Corporation. Micky is also a Liberty
salesperson. Neil is Kyla and Mickys supervisor. Owen is a Liberty customer. Liberty
may be liable for sexual harassment to Kyla by
a. Micky only.
b. Micky, Neil, or Owen.
c. Micky or Neil only.
d. Neil only.
Naomi, a businessperson, is charged with RICO offenses. Naomi may be subject to
penalties under RICO only if she
a. committed two or more certain federal or state crimes.
b. has never been convicted of a crime.
c. intends to commit future RICO offenses.
d. was previously convicted of a crime.
Rita believes that Shady Grove Apartments, Inc., her landlord, has violated the law in a
way that entitles her to withhold the rent. This remedy is generally associated with
a. breach of the covenant of quiet enjoyment.
b. breach of the implied warranty of habitability.
c. discrimination.
d. failure to provide security against crimes in common areas.
Curtis enters into a contract with Drive-Away Lease Company for a three-year lease of
a car. This contract is subject to
a. Article 2 of UCC.
b. Article 2A of the UCC.
c. Article 11 of the CISG.
d. the common law only.
Select Furniture Store sells household consumer goods. To create a purchase-money
security interest, Select Furniture must
a. assign, to a collecting agent, a portion of its accounts payable.
b. assign, to a collecting agent, a portion of its accounts receivable.
c. extend credit for part or all of the purchase price of the goods.
d. refer purchasers to a third-party lender.
On behalf of RiteNow Collection Agency, Sid poses as a police officer in an attempt to
collect payment from Tylo for a shipment of scuba equipment that she returned to
Undersea Company two months earlier. This violates
a. no federal law.
b. the Fair Credit Reporting Act.
c. the Fair Debt Collection Practices Act.
d. the Truth-in-Lending Act.
Vacation Village enacts an ordinance to allow only a few street vendors to operate in
certain areas, for the purpose of reducing traffic. A court would likely subject this
ordinance to
a. a police power test under the commerce clause.
b. a “rational basis test under the equal protection clause.
c. intermediate scrutiny under the due process clause.
d. strict scrutiny under the First Amendment.
Without authorization, Rolf contracts on behalf of Sari to have Tige paint the interior
and exterior of Saris house. Sari ratifies the contract. Later, Sari tries to rescind the part
of the contract relating to the exterior. This attempt will be
a. partly successful.
b. partly unsuccessful.
c. totally successful.
d. totally unsuccessful.
Ramblin Country Stables contracts to buy 1,000 horseshoes from Blacksmith, Inc., for
$1 per shoe. When the market price decreases to 50 cents per shoe, Ramblin refuses to
go through with the deal. Blacksmith can recover
a. $1,500.
b. $1,000.
c. $500.
d. $0.
In the ordinary course of business, EZ Funds Corporation offers credit to Fay and other
consumers and reports on the loans to credit agencies. To save time and money, EZ
generally does not correct or update its reported information. This is most likely to
result in
a. a levy of a nominal fine.
b. an assessment of damages.
c. an order of rescission of the loan contracts.
d. no sanctions.
Ollie buys a cup of coffee for $2, a magazine for $5, and a boombox for $600. The
requirement of a writing for the enforceability of a contract for a sale of goods at, or for
more than, a certain price is governed by
a. the common law.
b. the parol evidence rule.
c. the parties agreement.
d. the Uniform Commercial Code.
Clyde enters Desert Decathlon, an athletic competition in which Clyde has often
competed. Regarding the risk of injury, Clyde assumes the risks
a. attributable to the Decathlon in any way.
b. different from the risks normally associated with the Decathlon.
c. greater than the risks normally associated with the Decathlon.
d. normally associated with the Decathlon.
Pat enters into an agreement with Ole! Food, Inc., to operate a franchise in Region City.
Later, Ole! grants franchises to others within the city, Pat files a suit to close them. This
suit will likely
a. fail because excluding competitors violates the antitrust laws.
b. fail if Ole! did not give Pat exclusive rights to Region City.
c. succeed if Pat paid a franchise fee.
d. succeed if Pat was the first Ole! representative in Region City.
Dirk, an employee of Ergonomic Elevators, Inc., pays Ferbie, an employee of
Ergonomics competitor G-Force Risers Company, for a secret G-Force pricing
schedule. This is
a. an effective marketing strategy.
b. commercial bribery.
c. creative legal bookkeeping.
d. money laundering.
Liu signs a check “pay to the order of Marv drawn on Lius account in National Bank.
Liu later orders National not to pay the check, but the bank pays it over Lius order.
Subsequent checks written on Lius account “bounce. Most likely liable for the costs to
Liu is
a. any party to whom a subsequent check was written.
b. Liu.
c. Marv.
d. National.
Dot, a real estate agent, tells Elbert, a home seller, that her commission is 12 percent.
Elbert agrees that Dot can sell his house but refuses to sign a contract unless the amount
of the commission is reduced. After the house is sold, Elbert refuses to pay 12 percent.
Dot is most likely to recover
a. nothing.
b. on a theory of an express contract.
c. on a theory of an implied-in-fact contract.
d. on a theory of quasi contract.
Seafood Canning Corporation keeps a file of I-9 verifications forms. To inspect this file,
the appropriate government officer must obtain
a. a subpoena and a warrant.
b. a subpoena or a warrant, but not both.
c. not a subpoena, a warrant, or the employers consent.
d. the employers consent.
Fact Pattern 7-1
Minka uses her computer to secretly install software on hundreds of personal computers
without their owners knowledge.
Refer to Fact Pattern 7-1. Minkas software is harmful to the computers on which she
installed it. This program is
a. malware.
b. badware.
c. harmware.
d. infectware.
Lyle, vice-president of sales for Mi-T Electric, Inc., adheres to Judeo-Christian religious
ethical standards. With respect to their application, these standards are
a. absolute.
b. analytical.
c. discretionary.
d. utilitarian.
Stacy contracts to buy a franchise from Tender Steak House Company. In this contract,
as in most franchise contracts, the determination of the territory to be served is made by
a. a court.
b. Stacy.
c. Tender Steak House.
d. the Federal Trade Commission.
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?
A famous trademark may be diluted only by the unauthorized use of an identical mark.
In a limited liability partnership, a partners personal liability can be limited.
Discount Mart, Inc., files a suit in a state court against Elements Computer Corporation,
alleging that Elements breached a contract to sell 500 notebook computers to Discount.
During the course of the suit, Discount files a motion for judgment on the pleadings,
Elements files a motion for a directed verdict, and both parties file motions for
summary judgment. When and for what purpose are each of these motions made?
An insurance application is usually not part of the insurance contract.
An instrument payable “with interest must specify a particular rate to be negotiable.
If it can be shown that a trespass to personal property was warranted, a complete
defense exists.
An action may be legal and ethical.
Any third party beneficiary to a contract who is not an intended beneficiary is
incidental.
An advertisement that contains an endorsement by a celebrity may be deemed deceptive
if the celebrity does not actually use the product.
Unforeseen difficulties that justify a demand for additional compensation include risks
ordinarily assumed in business.
A seller must warn those who buy a product of harm that could result from the
foreseeable misuse of the product.
Congress cannot impose any restrictions on exports except taxes.
An applicant for insurance has a duty to disclose only material facts that the insurer
asks for.
Under the principle of comity, a foreign business that deals with a U.S. business may be
subject to U.S. law.