The Solomans own a cabin on the south side of Mount Henry. One day, the Solomans
told Bennie and Claudia they could live in the cabin and use it as they wished until the
Solomans wanted to use it again. Twelve years later, the Solomans informed Bennie and
Claudia that they were going to spend the summer at the cabin and that Bennie and
Claudia would have to make other arrangements for the summer. Bennie and Claudia
claimed that they had acquired title by adverse possession, because they had occupied
the property for the period of time required for adverse possession under state law (10
years in that state). Are Bennie and Claudia correct?
a. Yes, Bennie and Claudia were living on the property with exclusive, open possession
for a continuous period of time for the required 10 years.
b. Yes, Bennie and Claudia had the Solomans’ permission, therefore the possession was
not illegal.
c. No, Bennie’s and Claudia’s possession was with the Solomans’ permission and
therefore the claim was not adverse to the Solomans.
d. No, there was no warranty deed transferred to Bennie and Claudia.
If Crosby and Dash are in disagreement as to the exact amount of money that Crosby
owes Dash, then they may choose to form a new agreement at a set amount. If they both
perform the new agreement, their conduct would be an example of:
a. a rescission.
b. a contract modification.
c. a preexisting duty.
d. an accord and satisfaction.
Molly and Craig are the original parties to a contract. Craig is obligated to design a
Website for Molly. They subsequently make an agreement with Eric that Eric should
take the place of Craig and assume all of Craig’s rights and duties under the contract.
The agreement releases Craig from his obligations under the contract. This agreement
is:
a. a novation.
b. an accord and satisfaction.
c. an assignment.
d. a nullification.
An instrument is negotiable if it satisfies six standards. Which of the following is a
standard of negotiability?
a. The instrument can be oral provided there is proof beyond a reasonable doubt.
b. The instrument must be payable on demand.
c. The instrument must be conditional.
d. The instrument must state a definite sum of money.
The Australian government has opened a for-profit tourist information center in New
York City. If a dispute arises over the lease of the storefront, may the landlord sue the
Australian government in the United States courts?
a. Yes, because the Australian government was engaged in a commercial activity.
b. No, because of the Foreign Sovereign Immunities Act which forbids U.S. courts from
hearing any cases involving foreign governments.
c. It depends. The Australian government can only be sued if it signed a written waiver
giving up its immunity.
d. It depends. The Australian government can only be sued if it is a signatory on the
CISG.
Carey decided to incorporate her business under the name yStar Inc. Before yStar was
incorporated, Carey signed a contract in the name of yStar, Inc. to have some office
space remodeled. Which statement is correct?
a. yStar is liable on the contract because the contract was signed in its name.
b. yStar becomes liable on the contract as soon as it is incorporated.
c. yStar is liable on the contract if the contractor knows that the corporation does not yet
exist.
d. yStar will be liable on the contract only if the corporation adopts the contract.
The requirements for a patent include all EXCEPT:
a. the invention must be novel.
b. the invention must be nonobvious.
c. the invention must be commercially valuable.
d. the invention must be useful.
The percentage of people dying without a will is approximately:
a. 5%.
b. 25%.
c. 60%.
d. 90%.
Lucy owns 10 shares of stock in Quamba, Inc. Lucy wishes to place a proposal in a
company’s proxy statement to be voted on at the shareholders’ meeting. Pursuant to the
SEC rules, before Lucy is allowed to place her proposal on the proxy statement she
must:
a. have owned continuously for one year at least one percent of the company and
$2,000 or more of the stock.
b. have owned continuously for one year at least one percent of the company or $2,000
or more of the stock.
c. have the permission of the board of directors.
d. have been a stockholder for at least two years.
Mark works as a bartender at The Little Nipper, a local bar. Under state law, bartenders
are required to be licensed. The licensing requires filling out an application and
submitting a $50 application fee. The application does not require any special education
or experience, just the $50 fee. Craig enters Mark’s bar, orders a round of drinks for the
house, then notices that Mark’s license is not on display behind the bar. Craig learns that
Mark is not licensed and refuses to pay for the round of drinks. The Little Nipper sues.
What result?
a. Since this is an illegal contract, the courts will not enforce it.
b. Since Mark violated a regulatory statute, the contract is unenforceable.
c. Since this is a revenue-raising statute, The Little Nipper wins.
d. Since this is a revenue-raising statute, the licensing law is unconstitutional. Craig
wins.
Ron and several fellow workers of Vicy, Inc., a small manufacturing company, wished
to organize a union. When Vicy learned of this activity, it issued a bulletin to all
workers stating that a union will only hurt the company and that “we are a family that
can solve any problems ourselves — we do not need union activists from outside our
company trying to tell us what to do!” Which statement is correct?
a. As a small family business, Vicy can obtain an injunction halting the unionizing
drive.
b. If the union will hurt the company, Vicy can obtain an injunction halting the
unionizing drive.
c. If union activists from outside the company are involved in the unionization drive,
Vicy can obtain an injunction halting the drive.
d. The employees have the right to organize a union, regardless of Vicy’s status.
Under SEC rules, companies:
a. can require electronic delivery of proxy statements to save mailing costs and improve
operating efficiency of the corporation.
b. are required to post the information in the annual report and the proxy statement on
their Web site, but must mail to shareholders either hard copies of all the information or
a card telling them how the vote online.
c. must solicit proxies because a shareholder meeting is invalid unless a certain
percentage of shareholders attend in person or by proxy.
d. must give each shareholder a proxy, but not a proxy statement or an annual report, if
the company is a public company.
In order for a copyright holder to collect money damages from a person who used
copyrighted material, it must be proven that:
a. the infringement was intentional.
b. the copyright holder sustained more than $500 in actual damages.
c. the copyrighted material contained the copyright symbol, name of the copyright
holder, and the year of copyright.
d. None of the above.
Secondary boycotts:
a. are generally legal provided the boycott is peaceful.
b. are generally legal provided the boycott does not involve public employees such as
nurses or school teachers.
c. are not expressly permitted nor prohibited under federal law.
d. are generally illegal.
Sally prepared financial statements for MegaCorp knowing that the company would be
using her statements when applying for a loan at Big Bank. It is discovered she was
negligent in preparing the statements and Big Bank sued her. Sally is liable under the:
a. Ultramares doctrine.
b. foreseeable doctrine.
c. Restatement doctrine.
d. All the above.
Who has the right to manage the business of a corporation?
a. Shareholders.
b. Officers.
c. Bondholders.
d. The board of directors.
The importance of a Subchapter S corporation is:
a. its organizational structure.
b. its treatment of shareholders for income taxation purposes.
c. its requirement of restrictive transfer rights of the shares.
d. its small cost of formation.
If a court applies res ipsa loquitur:
a. the plaintiff needs to prove the case by a preponderance of the evidence.
b. the plaintiff must prove the case by clear and convincing evidence.
c. the defendant has the burden of proving he or she is not liable.
d. the defendant is strictly liable.
Betsy’s elderly father gave her written authority her to sell the family house. Her father
lived in Arizona and she lived in Minnesota. After about two months she found a buyer
for the house and signed an acceptance of the offer on March 21. Later that same day
she learned her father had died the day before (March 20). Other members of the family
did not want the family house sold and claimed that the acceptance Betsy signed was
void. The buyer of the house claims Betsy had the legal authority to sell the house and
that the contract is binding. Who is right?
Ollie leased a building in Old Town. Ollie installed a washer and dryer unit and a new
furnace in the basement of the building with new duct work throughout the building.
Upon expiration of the lease, Ollie intends to remove the washer and dryer, but not the
furnace. The washer and dryer can easily be removed without harming anything.
Removal of the furnace, however, will damage the building. Are the washer, dryer, and
furnace fixtures?
a. The washer, dryer, and furnace are all fixtures.
b. The furnace is a fixture, but the washer and dryer are not.
c. The washer and dryer are fixtures, but the furnace is not.
d. The furnace and the washer are fixtures, but the dryer is not.
Trein, Inc. entered into a one-year, $1 million contract with Mia, a sports celebrity, to
promote Trein’s products. E-presto Inc., a competitor of Trein, was interested in having
Mia promote its products but knew of her contract with Trein. E-presto offered Mia a
three-year, $5 million contract. Mia left Trein and signed with E-presto. If Trein sues
E-presto for tortious interference with a contract, E-presto:
a. will be able to establish a justification since E-presto was acting to protect an existing
economic interest.
b. will be able to establish a justification because, in talking to Mia, E-presto was
exercising its First Amendment freedom of speech.
c. will be able to establish a justification because to decide otherwise would subject Mia
to involuntary servitude.
d. will not be able to establish a justification.
Which of the following does not act as a revocation of a will?
a. Destruction of the will by a house fire.
b. The testator’s putting an X through it.
c. Physically destroying the will by intentionally shredding it.
d. Signing a new will that expressly revokes prior wills.
Angie, a minor, wants to avoid a contract she made with Cumberland Cycles. She may
disaffirm the contract by:
a. notifying Cumberland orally that she will not honor the agreement.
b. filing a lawsuit to have a court formally cancel the contract.
c. just refusing to perform her obligations under the contract.
d. All of the answers are correct.
Which of the following events occurs first with respect to the ending of a partnership?
a. Termination.
b. Winding up.
c. Dissolution.
d. Distribution of proceeds.
A state law prohibits firefighters and school teachers from going out on strike. Though
they are allowed to organize into collective bargaining units, state law prohibits them
from striking. Such a state law:
a. is legal.
b. is not legal since the U.S. Supreme Court has ruled such a state law violates the equal
protection clause of the Constitution.
c. is not legal since the federal law (NLRA) preempts state law.
d. is not legal because the right to form unions is illusory without the right to strike.
A buyer who is unable to obtain cover:
a. will be limited to the remedy of incidental damages.
b. will be limited to the remedy of consequential damages.
c. will lose the money or goods invested in the breached contract.
d. may be allowed the remedy of specific performance.
Johann, a well-known musician, agrees to give ten guitar lessons to Elton for $2,000.
Nothing in the contract itself prohibits a delegation. If Johann delegates his obligation
to Eugene, a second-year musical student and enthusiastic guitar player, then the
delegation will probably be:
a. permitted because contracts may be freely delegated.
b. permitted because the contract is just for music lessons.
c. prohibited because the contract is for service from a specific person.
d. prohibited by the UCC because this is a sale of services.
The United States and Argentina have signed the Convention on Contracts for the
International Sale of Goods (CISG). Oxtron, Inc., a U.S. company, and Leer, an
Argentinean company, have entered into a contract under which Oxtron is to ship
medical devices to Leer. The contract does not include a choice of law provision. The
contract will be governed by:
a. the CISG.
b. the UCC.
c. the domestic contract law of Argentina.
d. the domestic contract law of the United States.
Howson won a lawsuit against Hardwick for intentionally inflicting emotional distress.
The jury awarded Howson $500,000 in compensatory damages. It also awarded
Howson $4 million in punitive damages because Hardwick was quite wealthy and the
jury thought a large amount was necessary for Hardwick to feel the punishing effects of
the judgment. How does the jurys award fit into the guidelines offered by the U.S.
Supreme Court?
a. The punitive award is excessive because it exceeds the Supreme Courts suggested
ratio of compensatory damages to punitive damages.
b. The punitive award is excessive because the Supreme Court has stated that the trial
court may not use the defendants wealth as an excuse to award an unreasonably high
award.
c. The punitive award is excessive both because of the ratio of compensatory damages
to punitive damages and because the punitive damage award was based partly on the
defendants wealth.
d. The jury award is not excessive based on the Supreme Courts guidelines.
Ethical companies:
a. tend to earn higher returns than companies that engage in wrong-doing.
b. tend to have more creative employees than companies that engage in wrong-doing.
c. are guaranteed to be more profitable in the long run than companies that engage in
wrong-doing.
d. All of the above..
e. Both (a) and (b).
An agent may not engage in inappropriate behavior that reflects badly on the principal.
This rule applies to conduct:
a. during working hours.
b. during off-duty time.
c. during both working hours and off-duty time.
d. only by public officials.
Legal requirements for a will depend on state law, but generally include all but which of
the following?
a. A writing.
b. Signatures of at least three witnesses.
c. The testators signature.
d. Witnesses who will not inherit under the will.
Identify and discuss two specific causes of action a plaintiff can allege that deal
specifically with privacy rights.
Property of a person who dies without a will is distributed according to intestacy laws.
A buyer’s material breach gives the seller the right to refuse to deliver the goods.
The majority of work done by legislative bodies is performed in committees.
Explain the overall purposes of the Sherman Antitrust Act, the Clayton Act, and the
Robinson-Patman Act. How do each of these Acts relate to each other?
Under the UCC, a merchant is frequently held to a higher standard of conduct than a
non-merchant.
Nancy is an auditor. She works in a state that uses the Ultramares Doctrine. She
fraudulently prepared financial documents for her client, Star, Inc. Her client presented
the information to Moonglow, Inc. Moonglow was a potential creditor of Star, Inc., and
was seriously damaged by the fraudulent financial information. Moonglow sued Nancy.
She claims she is not liable to Moonglow, a third party, since she was not provided with
its name at the time the audit was prepared. Is she liable to Moonglow? Explain.
The prevention of significant deterioration (PSD) program was developed to prevent
deterioration in air quality that would create health problems for those affected.
In a recent case, In re Nuijten, the U.S. appeals court ruled that a method of encoding
additional information on electronic signals emitted from digital audio files was not
patentable because, although useful, the method was not a mechanical, electrical, or
chemical invention, a process, a machine, or the composition of matter.
Larry has owned $5,000 of stock in E-prise, Inc. for the past 18 months. Under SEC
rules, Larry can require that one proposal be placed in the company’s proxy statement to
be voted on at the shareholder meeting.
Identify and explain at least four situations where a written contract is either necessary
or recommended.
A derivative lawsuit is filed by the directors on behalf of the corporation against third
parties who have committed wrongful acts and/or breaches of contract.
Under all chapters of the Bankruptcy Code, most of the debtors assets are distributed to
creditors and the debtor has no obligation to share future earnings with creditors.
Reciprocal dealing is a type of vertical cooperative strategy.
If you lease a car rather than buy one on credit, you have no statutory consumer
protection.
The rules set out in the UPA defining the liability of partners to outsiders can be
modified by the partnership agreement.
Ad valorem duty is based on the fair market value of the imported good as of the date it
reaches the United States, not the price actually paid for the good when sold for export
to the United States.
Compare and contrast the perspectives of a lawyer and a client when approaching the
negotiation of a contract.
Under the Family and Medical Leave Act, an employee can take up to 12 weeks of paid
leave each year for certain personal and family illness situations.
Frank suffers from a mental impairment due to a brain injury from a airplane accident.
He contracts with Glena to purchase her dining room furniture. A month later, he tries to
void the contract. If he is unable to return the furniture, a court will not rescind the
agreement unless Frank can show that Glena acted in bad faith.