Fact Pattern 9-2
Brad 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.
Refer to Fact Pattern 9-2. If, as Brad claims, the consideration in this problem is
inadequate, it may indicate a lack of
a. accord in Brads satisfaction with the value of the deal.
b. bargained-for exchange or mutual assent.
c. flexibility on the part of College Credit to accommodate Brads needs.
d. “heft, ‘substance, or “weight in the terms of the contract.
Doctors Medical Associates obtains an insurance policy that protects its members
against negligence claims by their patients. This is
a. casualty insurance.
b. fidelity or guaranty insurance.
c. malpractice insurance.
d. workers compensation insurance.
Fact Pattern 17-1
Echo takes her car to Fix-It, Inc., which repairs the car and bills Echo for $500. Echo
writes out a check drawn on Capital Bank, but later, believing that Fix-It did not repair
the car properly, issues a stop-payment order.
Refer to Fact Pattern 17-1. Capital Bank pays the check. Capital
a. can sue Echo for a wrongful stop-payment order.
b. can sue Fix-It for breach of contract.
c. can sue no one because it paid a check that was not properly payable.
d. is liable for Echos loss due to the wrongful payment.
Arizona enacts a statute that directly conflicts with a federal law. Under the supremacy
clause of the U.S. Consitution,
a. Arizonas statute is rendered invalid.
b. the federal law is rendered invalid.
c. Arizonas statute and the federal law are both rendered invalid.
d. Arizonas statute and the federal law apply concurrently.
Hobby Farms, Inc., owns rural property that it leases to various tenants, including Ira.
Iras transfer of his entire interest in the leased property to a Jason is
a. an assignment.
b. an eviction.
c. a right of entry.
d. a sublease.
Players Video Game Centers, Inc., wants to issue stock of $1 million in a single offer-
ing. Players must provide all investors with material information about itself, its
business, and its securities if
a. all investors are accredited.
b. under any circumstances.
c. any investors are accredited.
d. any investors are unaccredited.
Kay and Leo copy and exchange MP3 music files over the Internet without anyones
permission. With respect to songs owned by Natural Recording Company, this is
a. copyright infringement.
b. fair use.
c. licensing.
d. protected expression.
Open Country, Inc., makes grills, camp ovens, and other outdoor cooking appliances.
Under the Restatement (Third) of Torts: Products Liability, Open Country could be
liable for a warning defect if there is a foreseeable risk of harm posed by one of its
products and
a. the omission of a warning renders the product not reasonably safe.
b. there is a reasonable alternative design.
c. there is a lack of care in making of the product.
d. none of the choices.
Opal asks Paolo, who does not understand English, to sign what Opal says is an
application to open a bank account. In fact, the “application is a note. If sued on the
note by an HDC, Paolos best defense would be
a. extreme duress.
b. fraud in the execution.
c. fraud in the inducement.
d. mistake.
Kim sends an offer to Leo to cut down and remove a tree for $200. Kim says, “If you
say nothing, I will consider you to have accepted my offer. If Leo does not respond, he
will be deemed to
a. accept the offer.
b. make a counteroffer.
c. reject the offer.
d. none of the choices.
Tire Manufacturing Company employs Uri as an agent. To terminate Uris authority, Tire
Manufacturing must notify
a. only third parties who are aware of the agency relationship.
b. the public generally.
c. Uri and any third parties who are aware of the agency relationship.
d. Uri only.
Musica Production Company and Nora enter into a contract for Nora to write six songs
for which Musica agrees to pay her. Nora transfers her right to payment under the
contract to Omni Entertainment Agency. Nora is
a. a delegator.
b. an assignor.
c. a payor.
d. a righter.
Bilt-Well Construction Corporation makes a side payment to a government official in
Nigeria to obtain a contract. In the United States, this is
a. illegal and unethical.
b. illegal but not unethical.
c. unethical but not illegal.
d. legal and ethical.
Sophie and Tiny incorporate their beverage-container business as U-Twist Products,
Inc. The first board of directors may be appointed by the firms
a. employees.
b. incorporators.
c. officers.
d. shareholders.
Benny dies without a will, with no surviving spouse or child. Bennys survivors include
his granddaughter Callie, his nephew Duncan, and his cousin Earl. In most states, his
estate would pass to
a. Callie.
b. Duncan.
c. Earl.
d. the state.
Chip is a director of Diners Restaurants, Inc. Chip would breach his duty of loyalty if
he
a. becomes a director of Fluffy Mattresses, Inc., a noncompeting firm.
b. buys a controlling interest in Gulpin Foods Corporation, a competing firm.
c. votes for Diners to buy a controlling interest in Eateries, Inc., which causes Diners to
suffer a loss.
d. votes against Diners purchase of a controlling interest in Eateries, Inc., which causes
Diners to suffer a loss.
Myra owns a house, which she advertises for sale for $200,000. On May 1, Nicole
offers Myra $180,000 for the house. On May 5, Myra delivers to Nicole a form that
includes additional terms but does not state a price. At 9 a.m. on May 6, Nicole signs
the form and gives it to Odell, her administrative assistant, with instructions to mail it.
At 10 a.m., Myra calls to tell Nicole that the deal is off. The next day, Odell mails the
signed form to Myra. When Myra refuses to sell the house, Nicole files a suit against
her, alleging breach of contract. Myra claims that there was no contract. What are
arguments supporting each partys position? What is the court likely to rule? Explain.
Catalina promises high returns to Darby and other investors, who then agree to trust
their funds to Catalina. She uses these funds to pay previous investors. This is
a. a Ponzi scheme.
b. a stock option.
c. an accredited investor.
d. a tombstone ad.
Oscar is Precise Service Companys chief executive officer. On Precises behalf, Oscar
solicits business, hires and fires workers, and handles the finances. Precise pays Oscar
varying amounts, depending on his “needs. Oscar is most likely
a. a principal.
b. an employee.
c. an employer.
d. an independent contractor.
Bruno is an accountant. Under the Sarbanes-Oxley Act of 2002, the degree of
government oversight over the public accounting practices of Bruno and other
accountants was
a. decreased.
b. increased.
c. eliminated.
d. unchanged.
Fact Pattern 6-1
Minka uses her computer to secretly install software on hundreds of personal computers
without their owners knowledge.
Refer to Fact Pattern 6-1. Minkas software is harmful to the computers on which she
installed it. This program is
a. malware.
b. badware.
c. harmware.
d. infectware.
Elegant Carpets, Inc., and Fantastic Floors Stores enter into a contract for a sale of
carpeting. Under a shipment contract, the seller must
a. allow the buyer to reject the goods for any reason.
b. deliver the goods to a particular destination.
c. inspect the goods before shipping them.
d. place the goods into the hands of a carrier.
The holding in Notz v. Everett Smith Group, Ltd. shows that majority shareholders
should
a. act ethically and legally in the best interest of their corporation.
b. always act in the best interest of minority shareholders.
c. always act in their own best interest.
d. give control of their corporation to a disinterested third party.
The payment of Brians debt to Chuck is guaranteed by Brians personal property. This is
a. a reorganization.
b. a secured transaction.
c. a suretyship agreement.
d. a violation of most state laws.
Jerzy is an accountant whose clients include Kopper Kettle Restaurants, Inc. For a
violation of securities laws, Jerzy may be subject to
a. comprehensive liability.
b. corporate liability.
c. criminal liability.
d. no liability.
National Consumer Goods Corporation and Paula Purchaser agree to resolve their
dispute in arbitration. The arbitrators decision is called
a. a conclusion of law.
b. a finding of fact.
c. an award.
d. a verdict.
Smitty, driving while intoxicated, causes a car accident that results in the death of
Tiffany. Smitty is arrested and charged with a felony. A felony is a crime punishable by
death or imprisonment for
a. any period of time.
b. more than one year.
c. more than six months.
d. more than ten days.
The process behind the production of “Fast Pace, a racecar video game, is protected by
a. copyright law.
b. patent law.
c. trademark law.
d. trade secrets law.
Scot and Tiffany enter into an implied-in-fact contract. The parties conduct
a. defines the contracts terms.
b. finds the contracts facts.
c. terminates any unintended consequences.
d. undercuts any terms based on the facts.
Petulia is a debtor. Her employer Quantum Investments, Inc., her alma mater State
University, and TimePay Credit Company are her creditors. For these parties, a petition
in bankruptcy for relief through an individuals repayment plan could be filed on
Petulias behalf by Petulia and
a. none of the other parties.
b. her employer or her creditors.
c. her creditors only.
d. her employer only.
Xavier enters into a contract to operate a Yummy Yogurt franchise, which Yummy
agrees to support as long as Xavier maintains his business license. Yummys duty to
perform is
a. absolute.
b. conditional.
c. licentious.
d. operational.
In all states, Sports Fitness Club Company and other corporations can pay dividends
from
a. gross profits.
b. net profits.
c. retained earnings.
d. surplus.
Unless the parties agree otherwise, the buyer must make payment at the time and place
that the goods are received.
On a lessees insolvency, the lessor can stop delivery of the goods.
Under a letter of credit, the issuer is bound to pay the beneficiary after the beneficiary
complies with the terms of the letter.
An accountant is required to discover every impropriety, defalcation, and fraud in a
clients books.
An involuntary bankruptcy occurs when the debtors credit does not cover all of his or
her debts.
For an agents implied authority to be effective, a principal must confirm it in writing.
A motion for a judgment notwithstanding the verdict seeks to set aside a verdict and
enter a new verdict in favor of the non-prevailing party.
Hawk Corporation begins making and selling motorcycles in 2000 under the mark
“Hawk. Ten years later, Hawk.com, Inc., a different company selling medical
equipment and supplies, begins to use “hawk as part of its URL and registers it as a
domain name. Can Hawk Corporation stop Hawk.coms use of “hawk? If so, what must
the motorcycle-maker show?
Ethical codes of conduct can set the ethical tone of a firm.
The extreme risk of an activity is a primary basis for imposing strict liability.
Waterfront Hotels Corporation in Boston offers a job to Carol, who lives in Denver.
Carol orally agrees to work for Waterfront for two years. She moves her family to
Boston and begins work. Three months later, she is fired for no stated cause. She files a
suit against the employer for reinstatement or pay. Waterfront pleads the lack of a
written contract. In whose favor is the court likely to rule, and why?
Sierra borrows $175,000 from Regional Home Finance Corporation to buy a home. The
loan is a twenty-year, 3/1, adjustable-rate mortgage, with an initial interest rate of 4.0
percent for three years and potential increases of up to 3.0 percent to a cap of 10
percent. Before the loan is completed, the lender discloses the amount of the loan
principal, the initial interest rate, the initial annual percentage rate, and associated fees
and costs. Not disclosed are material details about the amounts of the payments when
the interest rate changes. Before the first increase takes effect, Sierra decides that she
wants to rescind the loan. What is a “twenty-year, 3/1, adjustable-rate mortgage? Can
Sierra rescind this loan? Why or why not?
Dumping is the exporting of environmentally polluting goods to a foreign market.
A principal is not liable to a third party for any contract made by the agent acting
outside the scope of his or her authority.
To rescind a contract for fraud, a plaintiff must prove an injury.