Luke is a director of Motor Parts Corporation. Luke makes decisions with respect to
Motor Parts in good faith, in what he believes is the firms best interest, and without
violating any duties owed to it. If, despite these circumstances, Luke exercises poor
business judgment, under the business judgment rule Luke is
a. immune from liability.
b. liable only to the extent that he gains as a result.
c. liable only to the extent that Motor Parts suffers as a result.
d. wholly liable.
To raise $12 million to expand operations, Star Corporation makes a stock offering
directly to sixty accredited investors and twenty sophisticated, but unaccredited
investors. Star plans to notify the SEC of sales. Under the Securities Act of 1933, this
issue may qualify as an “exempt transaction
a. as is.
b. if all of the investors are also given certain material information.
c. if the offering is also made available to the general public.
d. under no circumstances.
Fact Pattern 26-2
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 26-2. Under SEC Rule l0b-5, Sid would not be liable if he had
waited to buy Tech stock until
a. after Sid told Uri of the new game.
b. after Uri bought Tech stock.
c. after the public release of the game.
d. just before the game was released.
Fact Pattern 1-1
The Texas Supreme Court decides the case of Livewire Co. v. Power Corp. Of nine
justices, five believe the judgment should be in Livewires favor. Justice Bellamy, one of
the five, writes a separate opinion. The four justices who believe the judgment should
be in Powers favor join in a third separate opinion.
Refer to Fact Pattern 1-1. The opinion joined by the four justices who favor Power is
known as
a. a concurring opinion.
b. a dissenting opinion.
c. a majority opinion.
d. a per curiam opinion.
Business Rental Corporation (BRC) and Cartage Trucking Company enter into a
contract for a lease of ten hydraulic lifts. Under the perfect tender rule, BRC must ship
or tender goods to the lessee that
a. approximately conform to all of the details of the contract.
b. entirely conform to the contract except in one or two details.
c. exactly conform to the contract in every detail.
d. substantially conform to the contract in most details.
Jen files a suit against Kopper Kettle Company. While the suit is pending, Kopper
Kettle merges with Luminous Pans, Inc., with Luminous absorbing Kopper Kettle.
Now, liability in the suit, if any, rests with
a. Jen.
b. Kopper Kettle.
c. Luminous.
d. no one.
Regal Manufacturing Company contracts to sell sweaters to Superb Styles Store. Before
the sweaters are delivered, Superb indicates that it will not be able to pay. Regal can
resell the goods
a. either after finishing the job (and identifying the goods), or after stopping the job.
b. only after finishing the job and identifying the goods.
c. only if Regal immediately stops the job.
d. under no circumstances.
John steals an old, battered bicycle that is parked, unlocked, in front of a convenience
store. He repairs, paints, and replaces parts on the bike until it is like new. The original
owner, Kim, claims the bike. The bike belongs to
a. John and Kim as tenants in common.
b. John because he made substantial improvements to it.
c. John because Kim claimed it only after John improved it.
d. Kim because John stole it.
John is sales manager for Kleen N Brite Products, Inc. Compared to Johns personal
activities, his business activities most likely involve
a. more complex ethical issues.
b. no ethical issues.
c. simpler ethical issues.
d. the same ethical issues.
Jo files a suit against Lara in a Missouri state court. Laras only connection to Missouri
is an ad on the Web originating in Nebraska. For Missouri to exercise jurisdiction, the
issue is whether Lara, through her ad, has
a. a commercial cyber presence in Missouri.
b. conducted substantial business with Missouri residents.
c. general maximum contact with Missouri.
d. solicited virtual business in Missouri.
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.
Owen, in Pennsylvania, and Quik Jobs, Inc., in Maryland agree to have their dispute
resolved in arbitration according to the law of Virginia. This is a ground for a court to
a. do nothing.
b. review the merits of the dispute.
c. review the sufficiency of the evidence.
d. set aside the award.
UniOil, a U.S. firm, owns property in Venezuela. When the government of Venezuela
seizes the property, UniOil asks a U.S. court to order the propertys return. The court
rules that Venezuela is exempt from the courts jurisdiction. This is
a. a travesty of justice.
b. the act of state doctrine.
c. the doctrine of sovereign immunity.
d. the principle of comity.
When Jeffs car breaks down, he asks Kwik Tow, Inc., to tow it from its location to
Loyal Repair Shop. There is no discussion of a price, and Jeff and Kwik do not sign any
documents. After the tow, Kwik sends Jeff a bill. With respect to Jeffs obligation to pay
the bill, this is
a. an express contract.
b. an implied contract.
c. a quasi contract.
d. no contract.
One night, Bertram discovers Clu, an intruder, in Bertrams Deli Delite store after the
store is closed. Bertram shoots and kills Clu. With respect to criminal prosecution for
this use of deadly force, under a duty-to-retreat law Bertram
a. is presumed innocent or may be exempt from prosecution.
b. must prove that he first told Clu to “Get out! or to “Retreat!
c. must prove that he first tried to retreat or that his life was in danger.
d. must prove that Clu did not try to retreat or acted without regard for his own life.
Dwayne can be described as “a reasonably competent general practitioner of ordinary
skill, experience, and capacity. This is the normal standard for judging the performance
of
a. a client.
b. an accountant.
c. an attorney.
d. a tax preparer.
According to the dissent in Casserlie v. Shell Oil Co., an inquiry into a sellers motive in
setting prices is necessary to determine if the seller acted
a. in good faith.
b. with the motive of driving competitors out of business.
c. with the intent of making the most profit in the least time.
d. to set commercially unreasonable and discriminatory prices.
Guaranty Bank receives a check drawn on the account of Get-Rich Industries, Inc., one
of the banks customers, at 3 p.m. Friday. Garry, the presenter of the check, is not one of
the banks customers. The bank uses deferred posting with a 2 p.m. cutoff hour. If it
decides to dishonor the check, it must do so by midnight
a. Saturday.
b. Sunday.
c. Monday.
d. Tuesday.
The legislature of the state of Missouri enacts a new statute that sets standards for the
liability of businesses selling defective products. This statute applies
a. only in Missouri.
b. only in Missouri and its border states.
c. in all states.
d. in all states but only to matters not covered by other states laws.
Vieux Carré S.A., a French firm, imports its goods into the United States and offers
those goods for sale at “less than fair value. “Fair value is the price of
a. comparable goods in a select “basket of other countries.
b. Vieux Carrés goods in France.
c. Vieux Carrés goods in the United States.
d. Vieux Carrés goods on the world market.
Odell owns Payroll Company, a bookkeeping service losing market share to Quik Work,
Inc. Odell pays Remy $5,000 to steal a list of Quiks clients, to whom Odell will
aggressively market Payrolls services. This deal is
a. enforceable.
b. void.
c. voidable at the option of either party.
d. voidable at the option of the party having less bargaining power.
The law of Chile, Germany, or Japan is
a. global, transnational law.
b. national law.
c. private international law.
d. public international law.
Longway Trucking, Inc., files a suit against Midge, an accountant, under the antifraud
provisions of the Securities Exchange Act of 1934 and Rule 10b-5 of the Securities and
Exchange Commission. To succeed in recovering damages, Longway must show that
Midge
a. acted with scienter.
b. bought or sold a security.
c. is incompetent.
d. knows nothing about securities.
Mountain Mining Company, a U.S. firm, owns property in Bolivia. The government of
Bolivia seizes the property for an illegal purpose without paying just compensation.
This is
a. confiscation.
b. defalcation.
c. dumping.
d. expropriation.
Carol files a suit against Downwind Boat Corporation. Downwind responds that it
appears from the pleadings the parties do not dispute the facts and the only question is
how the law applies to those facts. Downwind supports this response with witnesses
sworn statements. This is
a. a counterclaim.
b. a motion for judgment on the pleadings.
c. a motion for summary judgment.
d. a motion to dismiss.
World Investment & Trading, Inc. (WIT), encourages its employees to build trust with
its customers and other companies. Unfounded complaints and exaggerated charges
leveled against WIT online would most likely be regarded by a court as
a. an expression of fact.
b. a form of speech protected by the First Amendment.
c. an inappropriate online disclosure.
d. libelous.
Ezra, an accountant, intentionally misstates a material fact to mislead Fruit Packing
Industries, Inc., a client. Fruit Packing justifiably relies on the misstatement to its
detriment. Ezra is most likely liable for
a. actual fraud.
b. constructive fraud.
c. destructive fraud.
d. virtual fraud.
City Banks financing statement in collateral owned by Delta Waters Corporation will
expire in less than a year. Filed timely, a continuation statement could extend the
effectiveness of the financing statement for
a. one year.
b. two years.
c. five years.
d. ten years.
Brenda is a purchasing agent for Commodities Exchange Corporation. Dennis, a
Commodities corporate officer, gives Brenda written authority to buy for the firm as
many computers and peripheral devices as necessary. The next day, Dennis calls Brenda
and tells her to buy only fifty notebook computers and nothing else. Brenda shows the
written authority to E-Products, Inc., and enters into a contract with E-Products to buy
sixty notebook computers and a selection of printers, scanners, and extra storage media.
E-Products ships the order to Commodities. Is Commodities liable to E-Products under
the contract? Is Brenda liable? In each case, if so, why? If not, why not?
Nouri is declared mentally incompetent. Omar, Nouris friend, insists that she transfers
her assets to him “for safekeeping. A court might conclude that this gift is not effective
on the ground that there was no
a. acceptance.
b. delivery.
c. donative intent.
d. relinquishment of control.
Fact Pattern 20-2
24-Hour Credit Corporation issues high-cost and high-fee mortgage products to people,
including Benny, who could not easily obtain credit under other loan programs.
Refer to Fact Pattern 20-2. Under federal law, if 24-Hour Credit fails to provide certain
material disclosures with respect to the loan, Bennys right to rescind the loan
a. expires at midnight on the day the loan is finalized.
b. is immediately revoked.
c. is extended for up to three years.
d. is tolled for the duration of the loan payments.
GR8 Products, Inc., warrants its goods to be free of defects. If Heck issues an
instrument to obtain goods from GR8 that prove defective, Heck can avoid paying on
the instrument
a. only if it is a check.
b. only if it is a note.
c. whether it is a check or a note.
d. under no circumstances.
In Restful Motels suit against Sleepy Hotels, Inc., the jury returns a verdict in Restfuls
favor. Sleepy files a motion stating that even if the evidence is viewed in the light most
favorable to Restful, a reasonable jury should not have found in its favor. This is a
motion for
a. a judgment in accordance with the verdict.
b. a judgment on the pleadings.
c. a new trial.
d. judgment n.o.v.
Rolling Transport & Storage Corporation wants to insure its warehouse to obtain the
maximum possible recovery for the lowest possible premium. To obtain the maximum
recovery under a coinsurance clause, the percentage of the value of the property that
should be insured is
a. 80 percent.
b. 90 percent.
c. 100 percent.
d. 120 percent.
The chief aim of the European Union and other trade organizations is to minimize trade
barriers among their members.
When Looking Glass Corporation wishes to issue certain securities, it must provide
sufficient information for Alice, and other unsophisticated investors, to evaluate the fi-
nancial risk involved. Specifically, the law imposes liability for making a false
statement or omission that is “material. What sort of information would Alice consider
material?
Tariffs are taxes on imports.
Some promises are not legally binding contracts.
To be enforceable, a writing evidencing an oral contract that would otherwise be
unenforceable must be signed by the party who seeks to enforce it.
Corporate officers and directors owe no duty to individual shareholders.
Each state establishes rules that govern the conduct of attorneys
There are additional disclosure requirements for a high-cost mortgage loan.
A bribe must consist of money to be a crime.
Any product may be made entirely safe for all consumption.
Firms overseas have almost total legal protection against government acts in the
countries in which they operate, under the act of state doctrine.
The terms “procedural due process and ‘substantive due process mean the same thing.
If a buyer wrongfully refuses to accept goods that conform to a contract, the seller can
maintain an action to recover the damages sustained.
If property is owned as community property, each spouse owns an undivided one-half
interest in it.
A blank indorsement specifies no particular indorsee.
If, before the time for performance, a buyer communicates an intent not to perform, the
seller can consider the buyer in breach and pursue a remedy.
During a storm on Blue Lake, a boat sinks, but its owner Cappy survives. Cappy plans
to return to the site of wreck to salvage its equipment and his possessions, but he
delays. Meanwhile, Dick, an amateur diver, discovers the wreck and strips it clean of
useful items. Cappy learns of the recovery and files a suit against Dick, claiming that
the items are his. Dick responds that the sunken boat was abandoned and therefore he
has good title to everything to which he took possession. What is the court likely to
rule, and why?
The measure of damages for breach of a construction contract depends on which party
breaches and when.
To be enforceable, a contract for a sale of goods priced at $50 or more must be in
writing.