Dean Builders agrees to purchase all of its sump pump requirements for the new houses
it builds from Satisfactory Sump Pump, Inc. These two business have had similar
agreements the last three years and Dean’s requirements have averaged 100 sump
pumps per year. This year there was an unusually wet spring and Dean’s requirements
doubled to 200 sump pumps. Because of the high demand for sump pumps, the market
price of the pumps tripled. Satisfactory Sump Pump, Inc. delivers 100 pumps at $75,
the contract price. Satisfactory has exhausted its inventory and cannot deliver any more,
so Dean buys the other 100 pumps from other suppliers at $225 each. Dean sues
Satisfactory Sump Pump, Inc. for the additional expense. What is the most likely result?
a. Satisfactory Sump Pump, Inc. wins; output and requirements contracts are not
enforceable since no quantity is stated.
b. Dean wins; Satisfactory Sump Pump, Inc. agreed to meet the needs of Dean and did
not do so, which is a breach.
c. Satisfactory Sump Pump, Inc. wins; requirements contracts are governed by a good
faith standard, and it was unreasonable for Dean to demand so many additional pumps.
d. Dean wins; the requirement of good faith applies only between merchants, and Dean
is not a merchant.
Which statement regarding FIPS is true?
a. FIPS are only recommendations, not law.
b. FIPS originated from the Department of Justice.
c. FIPS has been ineffective in shaping privacy policies.
d. FIPS was established after the 9/11 terrorist attacks.
There are five categories of distinctive marks. Which is NOT one of them?
a. fanciful marks
b. arbitrary marks
c. generic marks
d. marks with secondary meaning
First Bank loaned $400,000 to Thomas, taking a security interest in his yacht. Thomas
defaulted on the loan and First Bank repossessed the boat. First Bank sold the yacht at a
public sale. The sale yielded $50,000 more than the debt. First Bank
a. must pay Thomas the $50,000.
b. is entitled keep the $50,000.
c. must share the $50,000 equally with Thomas.
d. must pay the surplus to the Secretary of State.
A tag attached to a tree in a nursery identifying the tree as a Southern Magnolia creates
an express warranty.
a. True
b. False
The Toxic Substances Control Act regulates
a. chemicals other than pesticides, foods, drugs, and cosmetics.
b. insecticides.
c. natural gas.
d. pesticides.
A completed act can be the basis for consideration.
a. True
b. False
The doctrine of precedent is binding on all courts from county courts to the U.S.
Supreme Court..
a. True
b. False
Micah signed a check in the lower right-hand corner and Andrew signed on the back.
The presumption is that
a. Micah is the issuer.
b. Micah is the acceptor.
c. Andrew is the drawer.
d. Andrew is the maker and Micah is an indorser.
Which of the following is NOT one of the five ways to discharge a negotiable
instrument?
a. Payment
b. Cancellation
c. Alteration
d. Presentation
Larson entered Forrester’s Auto Mart to purchase a used car. Larson found a vehicle
with a sales price of $11,000. After Forrester answered all of Larson’s questions,
Forrester and Larson agreed to a sale. As Larson was leaving to get the money to pay
for the car, Forrester told Larson that he thinks Robert Redford formerly owned the car.
Larson later learned that Robert Redford had never owned the car. If Larson seeks to
rescind the deal based on Forresters statement, Larson will
a. win because he relied on the misrepresentation.
b. win because there was a misrepresentation of a material fact.
c. lose because he will not be able to prove reliance on the misrepresentation.
d. lose because Forrester made a unilateral mistake.
Which of the following is a standard provision frequently found in contracts?
a. choice of forum
b. understanding
c. choice of compensation
d. mediation
Miguel reprogrammed a cellular telephone so that it intercepted electronic funds
transfers and rerouted them to Miguels bank account. What crime has he committed?
a. Insurance fraud
b. Wire fraud
c. Mail fraud
d. Embezzlement
Generally, Rita signs her name using an infinity symbol rather than her legal name. Rita
signed an instrument using this symbol. Which statement is correct?
a. The instrument cannot be negotiable. To be a negotiable, the instrument must be
signed in Rita’s legal name.
b. The instrument cannot be negotiable. To be negotiable, the instrument must be signed
in Rita’s given name.
c. The instrument cannot be negotiable. To be negotiable, the instrument must be signed
using letters from the alphabet.
d. The instrument can be negotiable. Rita intended to indicate her signature.
The doctrine of stare decisis, though vital to the creation of the common law when this
country was settled, is not important to our modern, complex society.
a. True
b. False
Primary methods of alternative dispute resolution include litigation and mediation.
a. True
b. False
If a public company decides not to solicit proxies for a shareholder meeting, it need not
give shareholders the information that would have been required in a proxy statement.
a. True
b. False
Which of the following is a true statement regardingthe European Unions Privacy
Directive?
a. It requires an “opt-out” system under which tracking tools can be used unless the
consumer specifically “opts-out” of the program.
b. The directive establishes data protection for Europeans’ commercial transactions that
take place in EU member countries only.
c. It requires an “opt-in” system under which tracking tools cannot be used unless the
consumer specifically grants permission for their use.
d. The directive does not recognize that privacy can exist in public places.
The Good Housekeeping Seal of Approval is an example of a
a. trademark.
b. service mark.
c. collective mark.
d. certification mark.
In the Zion Temple First Pentecostal Church of Cincinnati, Ohio, Inc. v. Brighter Day
Bookstore & Gifts case, the court found that, because of an error in the company’s
catalog, there was no right to cure a nonconformity with the sleeves of the choir robes
delivered to Zion.
a. True
b. False
A “fundamental change” in a corporation would be illustrated by
a. E-prise, Inc. merging with Vitta Corporation.
b. E-prise electing new members to the board.
c. Vitta Corporation adding a new product to its product line.
d. Vitta Corporation setting the date for its annual meeting.
Monic, a college professor, makes 30 photocopies of a magazine article and passes the
article out to her students. The students are assigned to read the article and write an
opinion paper about it. Has Monic violated copyright law?
a. Yes. Though the author will probably not enforce his or her rights under this
situation, Monic has technically violated federal copyright law.
b. Yes. Though educators have a right under the “fair use doctrine” to make limited use
of copyrighted materials, Monic violated the law when she made photocopies of an
entire article and distributed them to her students.
c. No. Monic has acted within the fair use doctrine.
d. No, as up to 50 photocopies of articles are always permissible.
Article 9 applies to any transaction intended to create a security interest in personal
property or fixtures.
a. True
b. False
Under the laws of most states, a corporation cannot be held responsible for committing
crimes.
a. True
b. False
Jaime offered to buy Kevin’s bike. Jamie is the
a. offeree.
b. offeror.
c. mortgagor.
d. trustee.
Chance is a traveling marketing representative for a publishing company. He is an
independent contractor and was hired without negligence. One afternoon while driving
to a meeting, Chance negligently runs a stop sign and causes an accident. Judy is
injured. Judy can
a. hold both Chance and his company liable for her injury.
b. hold the company but not Chance liable.
c. hold Chance but not the company liable.
d. not hold Chance or his company liable for her injury.
Forever Yours, Inc. has a secured and perfected security interest in Sally’s big-screen
TV. On the filing date of Sally’s Chapter 7 petition, the balance of the debt owed to
Forever Yours is $2,000. The value of the TV is estimated at $1,500. This means that
Forever Yours
a. is secured for the entire debt, $2,000.
b. is unsecured for $500, the excess of the debt over the value of the TV.
c. has a high priority claim of $500. This means that Forever Yours, Inc. will be allowed
$500 worth of other unsecured property before other unsecured creditors get anything.
d. is unsecured for the entire debt.
In a breach of warranty case, the buyer must
a. notify the seller of defects within a reasonable time.
b. bring any lawsuit no later than three years after the defect was discovered.
c. extend the statute of limitations in writing rather than orally if they choose to allow a
longer time for bringing suit.
d. notify the seller of defects within six months of their discovery or they cannot bring a
lawsuit.
Halbeck, LLC was negligent in its audit of E-treme, Inc. Unbeknownst to Halbeck,
E-treme used the financial statements to secure a loan from Great State Bank. Under the
Ultramares doctrine, Halbeck will be liable to Great State Bank for its losses on the
loan.
a. True
b. False
Barb has been a children’s day care provider for several years in the small town of
Sallton. She has decided to give it all up and move to the big city for excitement and
adventure. She sells her business to Ken, agreeing not to open a competing business
within five miles of Sallton for a period of nine months. After five months of the big
city life, Barb is broke and moves back to Sallton. She opens a small day care business.
Ken sues on the noncompete clause. What is the most likely result?
a. Ken wins. The agreement is enforceable.
b. Barb wins. The agreement is denying her the right to do the only thing she knows
how to do.
c. Barb wins. The agreement is not enforceable because it is not ancillary to a legitimate
bargain.
d. Barb wins. The agreement is not reasonable as to time.