When a conflict arises among the documents that involve Express Flights Corporation,
the first priority for resolving the conflict is given to
a. resolutions of the board of directors.
b. Express Flights’s bylaws.
c. state statues.
d. the U.S. Constitution.
Speedy Shipping Corporation applies to TransInsurance Company for a fire insurance
policy on Speedy’s warehouse. On the application, Speedy misrepresents the age of the
property to obtain a lower premium. When a fire soon destroys the warehouse,
TransInsurance can
a. deny payment, because a fire destroyed Speedy’s warehouse.
b. deny payment, because of Speedy’s fraud in the application.
c. not deny payment, because a fire destroyed Speedy’s warehouse.
d. not deny payment, because the application is not part of the policy.
A federal law regarding the labeling of pesticides directly conflicts with a state law. The
state law will be rendered invalid due to the
a. supremacy clause.
b. commerce clause.
c. federal spending power.
d. First Amendment.
Muffins-2-Go buys a truck from Street Vehicles, Inc., under a contract signed by Riley,
Muffins-2-Go’s president, making him personally liable if Muffins-2-Go does not pay
the loan. Riley is
a. a guarantor.
b. a surety.
c. a co-surety.
d. a co-creditor.
Sonia manages a Tasty Pastry store for United Food Company. To manage the business,
Sonia’s authority can be implied by
a. an inference from the position Sonia occupies.
b. any inference a reasonable customer or supplier would make.
c. any inference Sonia chooses to make.
d. no inference.
Sangfroid Business Corporation can be compelled to dissolve by
a. its creditors only.
b. itself, through its shareholders and directors, only.
c. itself, through its shareholders and directors, or the state.
d. the state only.
Summit Sales Corporation orders goods from OverStock Company. Summit plans to
market the goods to consumers generally. OverStock identifies the goods. Before they
are shipped to Summit, an insurable interest in the goods exists in
a. Summit and OverStock, but not consumers generally.
b. Summit, OverStock, and consumers generally.
c. Summit only.
d. OverStock only.
Leo buys an exclusive territory in which he is authorized to set up a plant to make
Midwest Dairy, Inc., products. After receiving the formula, Leo begins making
Nice-brand ice cream and other Midwest products. This is
a. a chain-style franchise.
b. a distributorship franchise.
c. a manufacturing franchise.
d. no franchise.
James is in an art gallery when Mitch, who has no special art expertise, points to a
painting and says, “That artist is so good. That piece will be worth a fortune in a few
years!” James buys the painting, which does not turn out to be valuable. James tries to
return the painting and recover his purchase price. A court will
a. order the art gallery to pay James the full purchase price.
b. order Mitch to pay James the full purchase price.
c. enforce the contract between James and the art gallery.
d. enforce the contract between James and the art gallery, but order Mitch to pay James
the full purchase price.
Emily checks her luggage at Flyaway Airlines’s ticket counter before boarding her flight
to Houston, Texas. Subject to a bailment is
a. Emily.
b. Emily’s luggage.
c. Emily’s ticketed seat on the flight.
d. none of the choices.
Josh is a director of Sippy Soups, Inc. Josh opposes a tender offer that is in Sippy’s best
interest because its acceptance would cost him his position as a director. Josh is liable
for a breach of duty of
a. no duty or rule.
b. the business judgment rule.
c. the duty of care.
d. the duty of loyalty.
Corporate Properties, Inc., attempts to acquire a substantial number of the shares of
Downtown Investment Corporation through a public offer to Downtown’s shareholders.
This is
a. a consolidation.
b. a tender offer.
c. a short-form merger.
d. a termination.
Pepsi-Cola Bottling Company is
a. a chain-style franchise.
b. a distributorship franchise.
c. a manufacturing franchise.
d. not a franchise.
Loomis Weaving Company contracts to sell sweaters to Style Mart stores. Before the
sweaters are delivered, Style Mart indicates that it will not be able to pay. Loomis 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 Loomis immediately stops the job.
d. under no circumstances.
Lexy, a salesperson for My-T-Fine Corporation, learns that My-T-Fine will increase the
dividend it pays to shareholders. Lexy buys 10,000 shares of My-T-Fine stock. When
the price increases, Lexy sells the shares for a profit. Lexy would not be liable for
insider trading if the information about the dividend was
a. material when she sold the stock.
b. public after she bought the stock.
c. public before she bought the stock.
d. speculative when she bought the stock.
KO Marketing Company, a U.S. firm, signs a contract with Librador Corporacion, a
Chilean firm, to give Librador the right to use Innovative’s animation techniques and
characters in product promotions. This is
a. a distribution agreement.
b. a joint venture.
c. direct exporting.
d. licensing.
Treadwell Tire Manufacturing Company employs Uri as an agent. To terminate Uri’s
authority, Treadwell 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.
Leigh wants to go into the business of construction contracting. Among the reasons that
would probably convince Leigh to set up his business as a sole proprietorship would be
a. its greater organizational flexibility.
b. its limited liability.
c. its perpetual existence.
d. the ease of transferring the business to other family members.
Jim files a uniform financing statement giving notice to the public that he has a secured
interest in collateral belonging to Phil, who is the debtor named in the statement. This
uniform statement form is now used in
a. all states.
b. no states.
c. only one statePennsylvania.
d. some states with several different forms used in other states.
Rocko owes Sybil $1,000 for yard work Sybil performed for Rocko. The money is due
on May 1. On April 30, Rocko goes to the bank to get the money and discovers that the
bank will be closed until May 2. Rocko
a. will be in breach of contract when he fails to pay Sybil on May 1.
b. will not be in breach of contract when he fails to pay Sybil on May 1 due to objective
impossibility.
c. is discharged from any contractual liability to Sybil.
d. will not be in breach of contract when he fails to pay Sybil on May 1 as long as he
pays the $1,000 plus ten percent interest on May 2.
Benny dies without a will, with no surviving spouse or child. Benny’s 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.
Sparky offers Teodora $1,000 for her collection of rare coins. She accepts. If a dispute
arises, a court would likely
a. enforce the deal after questioning the adequacy of consideration.
b. not question the adequacy of the consideration.
c. rewrite the deal after questioning the adequacy of consideration.
d. set aside the deal after questioning the adequacy of consideration.
Painless Dental Equipment Company is incorporated in Colorado. In Wyoming,
Painless is
a. a domestic corporation.
b. a foreign corporation.
c. an alien corporation.
d. a non-entity.
Kelly, the owner of Llama Farms, a sole proprietorship, wants to obtain additional busi-
ness capital but to maintain control. This can best be accomplished by
a. borrowing funds.
b. bringing in partners.
c. issuing stock.
d. selling the business.
Kathleen offers to buy Richard’s prize stallion for $10,000 only if a licensed
veterinarian certifies that the horse is sound for breeding. After inspecting the stallion,
the veterinarian concludes that the stallion is sterile and thus not fit for breeding.
Kathleen
a. must still buy the stallion.
b. does not have to buy the stallion.
c. must still buy the stallion, but may pay a lower price.
d. does not have to buy the stallion, but must buy another horse of similar value from
Richard.
A court deems an agreement between Silver Saddles Saddlery and Time Tested Tack,
Inc. to be a per se violation of the Sherman Act. The court is
a. prevented from determining whether the agreement’s benefits outweigh its
anticompetitive effects.
b. required to unanimously decide whether the agreement’s benefits outweigh its
anticompetitive effects.
c. required to apply the rule of reason.
d. required to issue a formal complaint against Silver Saddles and Time Tested Tack.
Krissa, a horse breeder, shows Maggie, a customer looking for a new stallion for her
breeding program, a stallion and tells her that the stallion is very fertile and can easily
breed twenty mares per year. Krissa’s statement is
a. an express warranty.
b. an implied warranty.
c. a warranty of title.
d. puffery.
Mead, Nero, and Olen do business as Pipe & Plumbing Services. After Mead’s
relationship to the firm ends, Nero and Olen agree to discontinue the business. This is
a. dissociation.
b. dissolution.
c. gross negligence.
d. simple misconduct.
Fay is admitted to Global Associates, an existing partnership. A partnership debt
incurred before the date of her admission comes due. Fay is
a. not liable for the debt.
b. only liable for the debt up to the amount of his capital contribution.
c. personally liable only to the extent the other partners do not pay.
d. personally liable to the full extent of the debt.
The Texas Supreme Court decides the case of Livewire Co. v. Power Corp. Of nine
justices, five believe the judgment should be in Livewire’s favor. Justice Bellamy, one
of the five, writes a separate opinion. The four justices who believe the judgment should
be in Power’s 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.
Megan, an agent for a department store, orders one hundred dresses from Sal’s Clothing
Shop for the Spring Blossom Sale. There is no specific agreement in the sale contract
indicating when title will pass to the department store. The title will pass to the
department store when
a. Megan signs the contract.
b. Megan and the Sal’s Clothing Shop agent sign the contract.
c. Sal’s Clothing Shop physically delivers the dresses to the department store.
d. Megan pays Sal’s Clothing Shop for the dresses.
Refined Commodities, Inc., agrees to deliver ten tons of sheet metal to Select Builders
Corporation. The agreement states that delivery is to be within “3” days, although the
parties intend “30” days. Refined cannot convince Select to amend the contract. Refined
should seek
a. damages.
b. reformation.
c. rescission.
d. specific performance.
Investors Fund, a large financial institution, announces that it will start monitoring its
employee’ electronic communications. If Mary, an Investors Fund employee, resists this
policy, her best argument is that the monitoring violates
a. employee privacy rights.
b. worker health and safety.
c. federal labor law.
d. the employment-at-will doctrine.
Elvin publishes a book titled First Place, which includes a chapter from Frank’s
copyrighted book Olympic Winners & Losers. Elvin’s use of the chapter is actionable
provided
a. consumers are confused.
b. Elvin’s use is intentional.
c. Elvin’s use reproduces Frank’s chapter exactly.
d. Elvin does not have Frank’s permission.
Laurel borrows $150,000 from Marketplace Mortgage Loans to buy a home. The
financing documents require Laurel to maintain the property, obtain homeowner’
insurance, and pay all property taxes and other assessments through the lender. With
respect to these terms, a court is most likely to
a. enforce them.
b. refuse to enforce them.
c. rescind them.
d. rewrite them.
A security agreements may provide for coverage of after-acquired property.
Compensatory damages compensate the injured party for injuries sustained due to loss
of the contract and also punish the party that breached the contract.
Because the Constitution does not specifically a right to privacy, this right is denied to
people.
A covenant not to sue does not always bar further recovery.
An accountant can avoid liability by proving that his or her negligence was only the
proximate cause of the client’s loss.
A mechanic’s lien can be enforced to obtain payment for work that adds value to real
property.
Different standards for air quality apply to existing sources of pollution and major new
sources.
The Sherman Act, the Clayton Act and the Federal Trade Commission Act are all
examples of legislation designed to curb anticompetitive business practices.
The words used in an insurance contract are interpreted against the party who applied
for the policy.
A bank that encodes information on an item after its issue warrants to any subsequent
bank that the information is correct.
A creditor must exhaust all legal remedies against the principal debtor before holding
the surety responsible for payment.
A franchise is a contractual arrangement.
Special damages are awarded for damage caused by special circumstances beyond a
contract.
In a joint venture, the parent company in the United States retains complete ownership
and authority over all phases of the operation.
All states require that members of certain professions to have licenses.
If it can be shown that a trespass to land was warranted, a complete defense exists.
If a customer’s debit card is lost or stolen, the customer will not be liable for any
unauthorized use of the card.