Fact Pattern 25-3
Chocolate! Chocolate! Corporation is a new company that needs to borrow money to
meet its payroll. Dayna, president and owner of Chocolate! Chocolate!, asks Evermore
Credit Union to loan the funds to Chocolate! Chocolate!
Refer to Fact Pattern 25-3. Generally, for a contract between Evermore and Dayna with
respect to liability for Chocolate! Chocolate!’s loan to be enforceable, it must be in
writing if Dayna is
a. a surety.
b. a lienor.
c. a garnishee.
d. a guarantor.
The Association of Software Makers, which does not include all software producers,
refuses to deal with any parties who do not carry the products of its members. Under the
Sherman Act, this is
a. a per se violation if it eliminates competition or prevents entry into a given market.
b. a per se violation under all circumstances.
c. subject to the rule of reason.
d. not a violation.
Petunia is a debtor. Her employer Quantum Investments, Inc., her ex-husband Rob, her
alma mater State University, and Timely Credit Company are her creditors. For these
parties, a petition in bankruptcy for relief through an individual’s repayment plan could
be filed by
a. Petunia only.
b. Petunia, her employer, or her creditors only.
c. Petunia or her creditors only.
d. Petunia’s employer only.
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.
Raw Material, Inc., and Sewn Fabric Corporation enter into a contract for a sale of
muslin. The terms do not clearly indicate whether it is a destination or shipment
contract. A court would most likely presume that it is
a. a bailment contract.
b. a destination contract.
c. a shipment contract.
d. a transportation contract.
The Federal Aviation Administration uses notice-and-comment rulemaking. The final
rule in such a proceeding is sometimes referred to as
a. a legislative rule.
b. an interpretive rule.
c. an adjudicatory order.
d. an executive edict.
The credit department of Metro-Mart calls Nikki at work about an overdue bill. Nikki’s
employer objects. Metro-Mart continues to call Nikki at work. This is a violation of
a. no federal law.
b. the Fair and Accurate Credit Transactions Act.
c. the Fair Debt Collection Practices Act.
d. the Truth-in-Lending Act.
Ben, who runs a livestock breeding business, owes the Circle C Ranch $40,000. Ben
agrees to pay the Circle C a percentage of his profits each month until the debt is paid.
Because of this agreement, the Circle C is
a. Ben’s creditor and partner.
b. Ben’s creditor only.
c. Ben’s partner only.
d. neither Ben’s creditor nor his partner.
Fact Pattern 25-4
Dillon and Evan are brothers. They agree to act as guarantors on a loan made by their
sister, Fiona. Fiona defaults on the payments and Dillon refuses to pay. Evan pays the
debt.
Refer to Fact Pattern 25-4. Evan can recover from Dillon under
a. the right of proportionate liability.
b. the right of reimbursement.
c. the right of contribution.
d. no right, because the parties are brothers.
Bess runs Creditors Asset Recovery. She recruits clients by misrepresenting the facts
and pretending to be licensed in various occupations in Michigan. Bess’s conduct most
likely warrants
a. an ethical admonishment but no other sanctions.
b. an injunction plus other sanctions.
c. no sanctions but no praise.
d. praise for her aggression in recovering the assets of “deadbeat” debtors.
Rich Financial, Inc., files a financing statement regarding a transaction with Supreme
Business Company. To be valid, the financing statement must contain all of the
following except
a. a description of the collateral.
b. a statement of the purpose for the transaction.
c. Rich’s name.
d. Standard’s name.
Realty Credit Company and Security Mortgage Corporation plan to consolidate. Most
likely, the articles of consolidation will be filed with
a. the county recording office.
b. the local realtors’ association.
c. the state’s secretary of state.
d. the federal Bureau of Land Management.
Steel Tool Company makes and sells tools. One of the tools is believed to be hazardous.
The appropriate government agency may require Steel to
a. export the tool and sell it only abroad.
b. increase the price to cover the cost of any injuries or damage.
c. reduce the price to indicate the hazard to consumers.
d. remove the tool from the market.
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.
Fact Patter 36-2
Petro Drilling Corporation combines its assets and debts with those of Oil Refining
Company to form New Energy, Inc.
Refer to Fact Pattern 36-2. New Energy assumes
a. all of Petro’s and Oil’s assets.
b. half of Petro’s and Oil’s assets.
c. none of Petro’s and Oil’s assets.
d. only debts that Petro and Oil incurred after a combination was proposed.
Consolidated Trucking Company transports radioactive materials. Darla suffers from
cancer. To succeed in a strict liability action against Consolidated, Darla must show that
her injury was caused by
a. Consolidated’s failure to use reasonable care to prevent harm to Darla.
b. Consolidated’s intentional lack of regard for the general public.
c. Consolidated’s operation.
d. radiation from any source.
Everyday Loans, Inc., takes possession of Ferbie’s stock in Glade Electronics
Corporation to perfect Everyday’s security interest in the stock. This is
a. after-acquired property.
b. a pledge.
c. a purchase-money security interest.
d. proceeds.
Orin owns Pilot’s Landing Office Park. His ownership rights include the right to sell or
give away the property without restriction, as well as the right to commit waste, if she
chooses. Orin’s ownership interest is
a. a fee simple absolute.
b. a leasehold estate.
c. a life estate.
d. the power of eminent domain.
Grain from Harvest Farms is wrongfully commingled with grain from Idyllic Fields,
which obtains possession of all of the grain. This is
a. a bailment.
b. accession.
c. confusion.
d. production.
Sullivan and Taylor want to form a corporation to provide catering services. The first
step in the incorporation procedure is to
a. file the articles of incorporation.
b. hold the first organizational meeting.
c. secure a corporate name.
d. select a state in which to incorporate.
Region Construction Company has a right to drive its trucks across Staple Business,
Inc.’s property, which is adjacent to Region’s office. This right is
a. a leasehold estate.
b. a license.
c. an easement.
d. a profit.
Patricia commits an act via e-mail against Othman Finance Company, a business in
California, where the act is a cyber crime. Patricia resides in New York where the act is
not a crime. Prosecution of Patricia in California involves questions of
a. jurisdiction.
b. “maximum contacts.”
c. the immunity of Internet service providers.
d. encryption.
Yvon asks Zac, “Do you want to buy one of my fishing rods?” This is
a. a valid offer.
b. not a valid offer because the terms are not definite.
c. not a valid offer because Yvon did not state an intent.
d. not a valid offer because Zack did not respond.
Hi-Tech Company contracts to sell fiber optic cable to Internet Services, Inc. Hi-Tech
may bring an action to recover the purchase price and incidental damages if Internet
a. accepts the cable and pays for it.
b. accepts the cable but does not pay for it.
c. rejects the cable.
d. revokes acceptance of the cable.
Leather Products Stores, Inc., rejects a shipment of goods that does not conform to its
contract with Manufactured Cowhide Corporation, but is unable to obtain instructions
from the seller. Leather Products may
a. resell or return the goods only.
b. resell or store the goods only.
c. return or store the goods only.
d. resell, return, or store the goods.
Boris is an accountant. Under the Sarbanes-Oxley Act of 2002, the degree of
government oversight over the public accounting practices of Boris and other
accountants was
a. decreased.
b. increased.
c. new.
d. unchanged.
Nico is a passenger in a car driven by Owen, whose negligence causes an accident,
injuring himself. Nico, uninjured, accompanies Owen to Parkside Hospital in an
ambulance. The ambulance is hit by a car driven by Quin, injuring Nico. Nico files a
suit against Owen, whose best defense is
a. assumption of risk.
b. contributory negligence.
c. negligence per se.
d. superseding cause.
Mica buys 1,000 bales of hay from Nuevo Farms. The parties agree that the hay will be
transported F.A.S. via Overland Transport, Inc. Nuevo Farms’ truck carrying the hay
explodes before reaching Overland Transport. The loss is suffered by
a. Mica and Nuevo Farms, but not Overland Transport.
b. Mica, Nuevo Farms, and Overland Transport.
c. Mica only.
d. Nuevo Farms only.
Truck Transport Company is subject to a decision by the National Labor Relations
Board. Truck Transport appeals the decision, arguing that it is arbitrary and capricious.
This could mean that the decision
a. followed a consideration of legally appropriate factors.
b. justifiably changed the agency’s prior policy.
c. was accompanied by a rational explanation.
d. was plainly contrary to the evidence.
A state trial court has before it Eagle Manufacturing Co. v. Four Feathers Products
Corp., a case with no binding authority. The court can
a. not refuse to decide the Eagle case.
b. postpone deciding Eagle indefinitely.
c. postpone deciding Eagle until there is binding authority.
d. refuse to decide Eagle.
After a consolidation, the new corporation inherits all of the consolidating corporations’
rights.
A landlord is usually required to give some period of notice to terminate a periodic
tenancy.
The measure of damages for the breach of a contract for a sale of land depends on
which party breaches and when.
“Unless otherwise explicitly agreed,” title passes to the buyer at the time and place at
which the seller physically delivers the goods.
The Americans with Disabilities Act of 1990 defines disabled persons as persons
impaired mentally or physically “in any way.”
Federal statutes apply to all states.
The injury suffered by a nonbreaching party due to the breach of a contract may be
remedied by payment of compensatory damages.
Corporate officers hire corporate directors.
The first bank to receive a check for payment is the depositary bank.
An exculpatory clause in an employment contract is always enforceable.
In general, a buyer’s duty to pay for tendered goods becomes absolute before the buyer
has had an opportunity to inspect the goods.
Common stock provides a proportionate interest in the corporation with regard to
control.
A corporation’s internal management structure is described in its articles or bylaws.
Generally accepted accounting principles represent guidelines rather than a standard of
care.
A party’s lack of understanding of contract terms can deprive him or her of any
meaningful choice.
State laws may not regulate a business’ s disposal of toxic wastes.
The UETA applies to an e-transaction unless the parties “opt out.”
The implied warranty of habitability does not apply to substantial physical defects that a
landlord knows about.