Rodeo, S.A., which is based in Spain, enters into a contract for the sale of seven
hydraulic lifts to Tonnage Shipping Company, which is based in the United States. This
contract is governed by
a. Spanish law.
b. the provisions in the laws of both countries that are similar.
c. Article 2 of the UCC.
d. the United Nations Convention on Contracts for the International Sale of Goods.
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.
Kitsch Niche Corporation is a noninvestment company that wants to issue $3 million of
stock in a twelve-month period. Kitsch Niche, with less than $20 million in annual
sales, qualifies as a small business issuer. Before Kitsch Niche sells the stock, it must
provide investors with
a. an offering circular.
b. a notice of the issue.
c. a red herring prospectus.
d. a tombstone ad.
Tilly, the chief financial officer for USA Products Corporation, attempts to apply
Christian precepts in making ethical decisions and in doing business. In applying
duty-based ethical standards that are derived from a religious source, Tilly would
consider the motive behind an act to be
a. irrelevant.
b. the least important consideration.
c. the most important consideration.
d. the only consideration.
Diners Café orders five gallons of transfat-free cooking oil from Restaurant Supply, Inc.
The seller mistakenly ships the wrong oil, which the buyer keeps, despite the
nonconformity. The oil is destroyed in a kitchen fire. The loss is suffered by
a. Diners and Restaurant Supply, but not Dinerss customers.
b. Diners, Restaurant Supply, and Dinerss customers.
c. Diners only.
d. Restaurant Supply only.
Jaime operates Internet gambling sites in countries where this is legal. Jaime accepts
e-payments at the sites and pays winnings through foreign-based banks. U.S. federal
law bars
a. using e-payments at online gambling sites.
b. placing bets in countries where Internet gambling is legal.
c. paying gambling winnings through foreign-based banks.
d. none of the choices.
Travis sends Una a link to a purported e-birthday card that when clicked on downloads
software to her computer to record her keystrokes and send the data to Travis. He uses
the data to obtain her personal information and access her financial resources. This is
a. identity theft.
b. birthday bashing.
c. regifting.
d. Windows shopping.
Halley, a lawyer on the staff of International Group, applies the utilitarian theory of
ethics in business contexts. Utilitarianism focuses on
a. moral values.
b. religious beliefs.
c. the consequences of an action.
d. the nature of an action.
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.
Thermal Appliances Corporation, a U.S. firm, orally agrees to sell six freezers to Pisa
Pizza, Ltd., in Italy. Thermal fails to deliver. Under the United Nations Convention on
Contracts for the International Sale of Goods (CISG), Pisa Pizza can
a. enforce the agreement.
b. not enforce the agreement because it is not in writing.
c. not enforce the agreement because the CISG does not apply.
d. not enforce the agreement because Thermal is a U.S. firm.
Oven Products Company makes microwave ovens. Pico discovers that his Oven
Products oven is defective and sues the maker for product liability based on strict
liability. To win, Pico must show that
a. Oven Products sold the oven to Pico.
b. Pico knew and appreciated the risk caused by the defect.
c. Pico suffered an injury caused by the defect.
d. the “defect was a commonly known danger.
Fits Like A Glove Shoes, Inc., and Retail Footwear Stores enter into a contract for a sale
of shoes. The contract indicates that the price includes transportation costs to a specific
destination by including the term
a. C.I.F.
b. delivery ex-ship.
c. F.A.S.
d. F.O.B.
Kris contracts to work exclusively for Little Manufacturing Company during May for
$5,000. On April 30, Little cancels the contract. Kris finds another job during May but
earns only $3,000. Kris files a suit against Little. As compensatory damages, Kris can
recover
a. $3,000.
b. $2,000.
c. $1,000.
d. $0.
Jon agrees to sell his K9 Sports Equipment store to Lacy. As part of the sale, Jon
promises never to open a similar, competing store anywhere. Jons promise is most
likely
a. invalid because it is part of a sale of an ongoing business.
b. invalid because of the unreasonable terms of area and time.
c. valid because it is part of a sale of an ongoing business.
d. valid because Jon and Lacy apparently have the capacity to contract.
Opal signs a promissory note payable to the order of Payday Loan Company. The note
states that it is payable “with interest at the legal rate. This note is
a. negotiable.
b. nonnegotiable, because it does not specify a rate of interest.
c. nonnegotiable, because it is a promissory note.
d. nonnegotiable, because it is payable only with interest.
Trudy and Uri enter into a contract for the sale of Trudys house for which Uri agrees to
pay her $250,000. Uri wants to transfer his right to the ownership of the house to Val,
his niece. This transfer generally
a. cannot be prohibited.
b. cannot be allowed.
c. can be prevented.
d. can be circumvented.
Krystal is a federal judge. Krystals judicial decisions are part of case law. This law
includes interpretations of primary sources of law. These sources include
a. administrative regulations.
b. articles in law reviews and other legal journals.
c. compilations summarizing court decisions on particular topics.
d. legal encyclopedias.
Kelly files a suit against Lewis in a state court. The case proceeds to trial, after which
the court renders a verdict. The case is appealed to an appellate court After its review of
Kelly v. Lewis, the appellate court can
a. affirm, reverse, or remand all or part of the lower courts decision.
b. only affirm or reverse all or part of the lower courts decision.
c. only remand all or part of the lower courts decision.
d. only reverse or remand all or part of the lower courts decision.
In business deals, Fiona, the chief executive officer of Glazed Donuts, Inc., follows
duty-based ethical standards. These are most likely derived from
a. a corporate ethics code.
b. a cost-benefit analysis.
c. philosophical reasoning.
d. the law.
Fact Pattern 21-3
Dhani, an accountant for Eureka, Inc., learns of undisclosed company plans to market a
new laptop. Dhani buys 1,000 shares of Eureka stock. He reveals the company plans to
Fay, who buys 500 shares. Fay tells Geoff, who tells Hu. Both Geoff and Hu buy 100
shares. They know that Fay got her information from Dhani. When Eureka publicly an-
nounces its new laptop, Dhani, Fay, Geoff, and Hu sell their stock for a profit.
Refer to Fact Pattern 21-3. Under the Securities Exchange Act of 1934, Hu is most
likely
a. liable for insider trading.
b. not liable because Hu is only a tippee, not a tipper.
c. not liable because Hu is too far down the chain of disclosure.
d. not liable because Hu traded on the basis of a true fact.
E-Shopping Corporation inserts Fiesta Mall, Inc.s trademark as a meta tag in
E-Shoppings Web sites key-words field without Fiestas permission in a manner that
suggests Fiesta authorized the use. This is
a. copyright infringement.
b. patent infringement.
c. trademark infringement.
d. not infringement.
Luminescent Silicon Corporation, which controls 40 percent of the computer-chip mar-
ket in the United States, merges with Micro Processors, Inc., which controls 15 percent
of the same market. This merger is
a. a violation only if the result more clearly concentrates the market.
b. a violation only if the result makes it more difficult for potential competitors to enter
the market.
c. a violation if the result more clearly concentrates the market and makes it more
difficult for potential competitors to enter the market.
d. not a violation.
Britney, an employee of Computer Associates, is arrested at work. A grand jury issues a
formal charge against Britney for larceny. This charge is
a. an arraignment.
b. an indictment.
c. an information.
d. an inquisition.
Helio Company can process hydrogen into an inexpensive fuel for internal combustion
engines. As an innovator in its market, Helio currently has the power to affect the price
of its product. This is
a. market power.
b. predatory pricing.
c. price discrimination.
d. price-fixing.
A franchise agreement between Simple Software Company and Total Game, Inc., is
silent on a time for termination of the franchise. Simple may
a. never terminate.
b. terminate at any time.
c. terminate on reasonable notice.
d. terminate on three days notice.
Global Distribution Corporation suggests that its employees apply the “categorical
imperative to ethical issues that arise at work. This requires that the employees
a. categorize the issues according to legality, morality, and profitability.
b. consider only the benefits that would accrue to them personally.
c. look only at the result, regardless of the means to attain it.
d. weigh the consequences that would follow if everyone acted the same.
The government of Japan sets a limit on the amount of rice that can be imported from
the United States. This is
a. a dumping duty.
b. an antidumping duty.
c. a quota.
d. a tariff.
Quincy draws a check payable to “Replay Stadium to buy two season tickets to the next
years State College football games. This instrument is
a. a bearer instrument.
b. an order instrument.
c. valid but nonnegotiable.
d. void.
Delite Toys, Inc., makes EZ Goo, a famous childrens toy. Without Delites consent, Fast
Adhesives Company begins to use “ezgoo as part of the URL for Fasts Web site. Fast
claims that no consumer would confuse the Web site with the toy. Fast has committed
a. copyright infringement.
b. patent infringement.
c. trademark dilution.
d. no actionable violation.
Baked Goods Company agrees to supply Comida Café with all the corn chips that it re-
quires for a year. A sudden demand for ethanol results in a shortage of corn, and the
price rises sharply. Baked Goods asks Comida to pay a higher price for the chips. This
request is
a. invalid as an attempt at extortion or the so-called holdup game.
b. invalid under the preexisting duty rule.
c. valid as a risk ordinarily assumed in business.
d. valid due to the unforeseen difficulty of the sudden price increase.
Copy Products, Inc., uses, in its ads, a trademark that is similar, but not identical, to the
famous, registered mark of Imitated Goods, Inc. Copys unauthorized use of the mark
constitutes trademark dilution provided
a. consumers are confused.
b. Copy and Imitated are competitors.
c. Copys use is intentional.
d. Copys use reduces the value of Imitateds mark.
Senator Wyden and other politicians want to restrict the flow of technologically
advanced products and data from the United States to other countries. To restrict or
encourage exports, Congress can
a. do nothing.
b. assess antidumping duties.
c. impose export taxes.
d. set export quotas.
Listen Up! Corporation books and promotes concerts and other entertainment events,
for which Listen Up! also sells tickets. In weighing a challenge to Listen Up!s
“monopolistic ticket prices, a court looks at the relevant geographic market. This
encompasses
a. only areas in which Listen Up! does not have monopoly power.
b. only areas in which Listen Up! has monopoly power.
c. the area in which Listen Up! and its competitors sell, and their customers buy, the
tickets.
d. the entire United States in all cases.
In a dispute over a sale involving a bicycle, Dain argues that as to this deal Enyas
Hobby Shop, where Dain bought the bike, is a merchant. A court may determine
whether Enyas is a merchant by assessing whether
a. it has sold any bikes within the last year.
b. it holds itself out by occupation as having knowledge or skill unique to the bike in
the transaction.
c. its owner enjoys biking.
d. it subscribes to Bike, a biweekly trade magazine.
Don writes a check to Eve drawn on Dons account at First Bank. Eve presents the check
for payment to First Bank, which accepts it. The bank is
a. not liable for payment.
b. primarily liable for payment.
c. secondarily liable for payment.
d. simultaneously liable, with Don, for payment.
Article 2 of the UCC governs contracts for sales of services.
In State X, persons must be at least eighteen years old before they can purchase
alcoholic beverages. The state also has passed a law requiring that persons who prepare
and serve liquor in the form of drinks in commercial establishments be licensed. The
only requirement for obtaining a yearly license is that the person be at least eighteen
years old. Moffitt, aged thirty-five, is hired as a bartender for Lone Star Restaurant.
Bekins, an alumnus of State X University, brings twenty of his friends to the restaurant
to celebrate State X Us football victory. Bekins orders four rounds of drinks, and the bar
bill exceeds $200. When Bekins learns that Moffitt has failed to renew his bartenders
license, Bekins refuses to pay, claiming the contract is unenforceable. Is Bekins correct?
Explain.
To be negotiable, an instrument must be signed in the lower right-hand corner.
An injured partys common-law suit against a polluter may be dismissed for lack of
standing.
Constructive delivery occurs when property is physically transferred.
A bailment must be in writing to be valid.
All employment laws apply to independent contractors.
If a contract for a sale of goods does not include a price term, a reasonable price can be
determined by looking at the market for the goods.
Certain employers must provide their employees with up to twelve weeks of family or
medical leave during any twelve-month period.
Political speech that would otherwise be protected by the First Amendment is
prohibited if its source is a corporation.
Under the doctrine of strict liability, liability is imposed strictly according to fault.
A financial institution must encode a returned check with certain information.
Tariffs are taxes on imports.
Only a board of directors can initiate the dissolution of a corporation.
A person who enters into a contract when he or she is intoxicated can void the contract
if the terms are obviously favorable to the other party.
To support the imposition of strict product liability, a product must be substantially
changed from the time it is sold to the time an injury occurs.