Hill Computers is a retailer, which buys its inventory from Acme Co. on credit, giving
Acme a security interest in the inventory. Hubert buys a computer from Hill in the
normal course of business. Hubert’s title in the computer is:
a. a good title.
b. a voidable title.
c. Hubert has no title in the computer. Title does not pass to Hill and therefore to Hubert
until Hill pays its debt in full to Acme.
d. Hubert has good title that is subject to Acme’s security interest.
A donee beneficiary:
a. is not entitled to enforce a contract against either party.
b. usually does not give consideration in return for the gift.
c. will generally become a creditor beneficiary after his or her rights vest.
d. is an incidental beneficiary.
Mike owns a house in a poor area of a large city. Mike is on disability and his total
monthly income is $700. A sales representative visits his home, selling a water
purification system. Mike signs a contract that calls for monthly payments of $500 for
the next 10 years. The water system is worth no more than $1000. Mike thought he was
signing a permission slip allowing the salesman to conduct a free water test to
determine the toxins in the water. How would a court most likely describe this contract?
a. The contract is fully enforceable as written.
b. The contract is unenforceable because it is unconscionable.
c. The contract is enforceable, but only up to the value of the water system.
d. The contract is unenforceable because it is exculpatory.
Scott is trying to introduce oral evidence in court to alter the terms of a written contract
he had with Bonnie. Bonnie has raised the parol evidence rule as an objection to Scott’s
testimony. In which of the following circumstances will Scottnot be able to introduce
the oral evidence?
a. The contract has an integration clause in it and Scott’s point of contention is covered
in detail in the contract, although not to his favor.
b. There was a mutual mistake of a material fact when the contract was entered into.
c. The oral evidence is introduced to clarify the meaning of an ambiguous term used in
the written contract.
d. Scott claims that he was defrauded into entering into the contract and wants to testify
about the intentional misrepresentations of material facts.
Which of the following would be a breach of the implied warranty of merchantability?
a. A knife that cuts its user when slicing a bagel.
b. A radio that does not pick up FM signals.
c. A match that burns a spot in the carpet when accidentally dropped.
d. A watch that does not keep accurate time after getting wet.
Gary and Herman are partners in a lawn mower repair business in Ohio. While Gary is
on vacation, visiting his sister in Georgia, his sisters neighbor has trouble with her
mower and Gary fixes it for her. She insists on paying him. Gary:
a. may keep the payment since he did the work while he was on vacation.
b. must turn the money over to the partnership because he earned it doing the kind of
work that the partnership does.
c. may not accept the money because it would create a conflict of interest.
d. may not accept the money because it would mean he was taking a business
opportunity away from the partnership.
Janice wrote a song called “Feelings of Love.” She wrote the piano score and lyrics for
a class she was taking at college and turned it into her professor.
a. Janice’s song was automatically copyrighted when she wrote it down on paper.
b. If Janice wishes to enforce her copyright, she must first register her song with the
Copyright Office.
c. Both of the above are correct.
d. Neither a nor b.
When the Food and Drug Administration prohibits a certain drug from being marketed
in the United States, this is:
a. private law.
b. an administrative regulation.
c. legal negativism.
d. an executive order.
The right of the tenant to the undisturbed possession of the leased property is known as:
a. quiet enjoyment.
b. habitability.
c. lawful possession.
d. peaceful possession.
In which of the following cases will the federal accountant-client privilege protect the
information from being disclosed?
a. A criminal case.
b. A case involving the SEC.
c. A case concerning the preparation of tax returns.
d. A civil fraud case involving the IRS.
Which of the following is not true in applying the Williams Act?
a. An individual or group acquiring more than 5 percent of a companys publicly traded
stock must file a public disclosure document with the SEC.
b. A bidder must keep a tender offer open for at least 30 business days initially.
c. If any substantial change is made in the terms of the tender offer, it must be kept open
for at least ten business days following the change.
d. Any shareholder may withdraw acceptance of the tender offer at any time while the
offer is still open.
Which of the following property is not affected by a will?
a. Life insurance.
b. Joint tenancy property.
c. Retirement benefits.
d. All of the above.
It was payday. Navidida decided to run some errands and then deposit her check in the
bank over her lunch hour. So that she wouldn’t have to spend too long at the bank,
Navidida indorsed the back of the paycheck as follows, “Navidida Jones,” before
leaving work. While window shopping, Navidida lost the check. Roger finds Navidida’s
paycheck.
Environmental protection issues are regulated by:
a. federal statutory law.
b. state statutory law.
c. administrative regulations.
d. All the above.
Amy is on the board of directors of Computers Plus. Computers Plus is looking for a
warehouse to purchase. Amy owns a warehouse. In order for Amy to sell her warehouse
to Computers Plus:
a. the transaction must be fair to both Amy and Computers Plus.
b. the disinterested members of the board of directors may approve the transaction.
c. she must resign her position on the board of directors of Computers Plus before any
negotiations for the warehouse begin.
d. a court must review the opportunity to determine its favorability.
Which of the following is/are generally subject to a standard of strict liability for bailed
goods?
a. Contract carriers and common carriers.
b. Common carriers and innkeepers.
c. Common carriers.
d. Contract carriers.
Why do many major corporations actively encourage ethical behavior?
a. Unethical behavior always damages a business.
b. Unethical behavior can quickly destroy a business.
c. Unethical acts are always illegal.
d. All of the above are reasons that corporations actively encourage ethical behavior.
A security interest in money may be perfected by:
a. filing a financing statement.
b. creating a PMSI.
c. possession only.
d. redemption.
Which of the following contracts is most likely to be declared unconscionable?
a. A consumer sales contract which charges 300 times the fair market value of the
goods.
b. A consumer sales contract which limits the consumer’s remedies to repair or
replacement.
c. A contract between wholesaler and retailer which adds delivery charges at 15% of the
costs of the goods.
d. A sales contract between wholesaler and retailer which limits remedies such as
consequential damages.
Richard wrote a song called “College Days.” He copyrighted the composition and had it
professionally printed. A couple years later he was attending a business meeting about
1500 miles from his home. While sitting in a nightclub, he heard a small local band
perform a song called “College Memories.” The music and words were extremely
similar to his song. The composer of “College Memories” claims he never heard of
Richard’s song and that she is offended he would accuse her of stealing his work. If
Richard wishes to sue for copyright infringement, he must prove:
a. only that his song and the infringer’s song are substantially the same.
b. that his work was original, and the infringer actually copied his work or that the
infringer had access to his song and that the two works are substantially the same.
c. that he sustained money damages as a result of the infringement.
d. that he registered the song for a copyright.
Circuit City Stores, Inc. v. Commissioner of Revenue…
a. the issue was where were the goods identified.
b. the Court determined that the goods were not subject to Massachusetts sales tax
because title did not pass until they were picked up in new Hampshire.
c. The case involved insurable interest in good sold in one state but picked up in
another.
d. the court determined that until a specific serial number was recorded and the goods
were identified title could not pass.
The Fair Debt Collection Practices Act prohibits which of the following practices?
a. A debt collector falsely representing himself as a lawyer.
b. A debt collector telephoning the debtor at 8:00 a.m.
c. Visiting a debtor at work if the employer permits personal visits.
d. Using neighbors to locate the debtor.
If Walter becomes incompetent to manage his affairs:
a. his chosen attorney-in-fact can make decisions for him if he appointed the person in a
durable power of attorney with a springing power to become effective upon Walters
incompetence.
b. a court will appoint a guardian if Walter had no power of attorney.
c. his will becomes effective, and his executor or executrix will manage his business
and personal decisions.
d. Both a and b are correct.
Claude agrees to lease his house to Irvin for nine months, the lease to begin six months
from the signing of the contract. Under the statute of frauds:
a. the lease is not required to be in writing.
b. the lease is required to be in writing because of the one-year rule.
c. the parol evidence rule renders the lease voidable.
d. the lease is a collateral promise which must be in writing.
The identification of goods permits the buyer to:
a. obtain insurance on the goods.
b. take title to the goods in any manner that the parties agree upon.
c. enter into a contract with the seller.
d. Both a and b.
Adam decided to play a practical joke on Linda, a co-worker. As Linda was leaving the
office one night, Adam, wearing a mask, stepped out from behind some bushes. He
pointed a handgun made out of licorice at her and demanded her purse. He then pushed
the candy gun to her head and told her if she told anybody he’d kill her. Linda was very
scared during the whole incident. She did not think it was funny when Adam pulled the
mask off and took a bite out of the gun as he gave her the purse back. Did Adam
commit the tort of intentional infliction of emotional distress?
a. Yes, as his conduct was intentional.
b. Yes, but only if Adam intended to cause Linda serious emotional distress.
c. No, since he was only playing a practical joke.
d. No, since Linda was not physically hurt by Adam.
An individual engaged in illegal insider trading could be:
a. fined.
b. given a prison sentence.
c. required to pay the SEC three times the profit made.
d. All the above are correct.
Eintz Corp. hired Jose to bribe a foreign government official into awarding a $3 million
contract to Eintz. Eintz gave Jose $10,000 in cash to make the bribe payment and $2000
for Jose’s efforts. Instead of paying the bribe, Jose pocketed all of the money. If Eintz
sues Jose, Eintz will:
a. be able to recover the $12,000.
b. be able to recover the $3 million lost on the contract.
c. be able to recover the $2,000 but not the $10,000.
d. not be able to recover the $12,000.
Lori and Dan own a small restaurant as partners. Dan works several hours a day
cooking, waiting on tables, doing the books, and so forth. Dan believes he is entitled to
be paid at least a standard wage for all his work since, at the present time, the part-time
kitchen helpers earn more than he does! Lori claims Dan is not entitled to anything
other than one-half the net profits. Is Lori right?
a. Yes. The UPA states a partner may not collect a “wage” from the partnership business
under any circumstances.
b. Yes, as there is no agreement between Lori and Dan allowing for either of them to be
paid wages for work done at the restaurant.
c. No. Dan may collect only minimum wage, as required by federal law.
d. No. Dan may collect a fair wage for the work he has performed.
Larry is a certified public accountant in a firm which audits public companies. Larry is
accused of unethical conduct. Is Larry required to abide by the ethical standards of the
Public Company Accounting Oversight Board?
a. Yes.
b. He can be held liable only if he had actual knowledge of the particular guideline he is
accused of violating.
c. No, the PCAOB establishes audit rules, not ethical guidelines.
d. No, the PCAOB has no authority over Larry.
The European Union has adopted a currency known as the:
a. Yuri.
b. Common Union.
c. Yen.
d. Euro.
Wayne worked in an office. He had no criminal record, had never had a complaint made
against him about his work or his conduct, and had been a faithful employee for nearly
20 years. One day, Wayne followed his supervisor to his home and fatally shot him. The
estate of the supervisor sued the company, claiming it should have been aware of
Wayne’s growing frustration with work. The company’s best defense will be that:
a. there was no way to foresee that the incident would happen.
b. the incident occurred away from the office.
c. the killing was the result of a personal conflict between Wayne and the supervisor.
d. even if the company had been aware of Wayne’s difficulty with his supervisor, Wayne
did not have any criminal history.
Mid-American Oil had a contract with NSB Company to supply 1,000 gallons of oil by
September 1. The contract contained a provision which required all modifications to be
written and signed by the company presidents. In early August, an executive of
Mid-American talked with the purchasing agent of NSB who orally agreed to two
shipments of oil; one in September and the second one in December. By September 30,
when only 500 gallons had been delivered, NSB sued. The likely outcome of this
lawsuit is:
a. NSB wins because the modification was not supported by new consideration.
b. NSB wins because the modification has to be in writing.
c. Mid-American Oil wins because the UCC governs this case and no new
consideration is required.
d. Mid-American Oil wins because new consideration was present.
The courts will find an implied contract when:
a. justice demands it.
b. conduct of the parties indicates they intended an agreement.
c. there is promissory estoppel.
d. there is undue influence.
The Milicic v. Basketball Marketing Company, Inc. case illustrated the proper use of a
preliminary injunction.
You cannot be held liable for the actions of your agents if the agents are violating your
instructions.
With non-negotiable commercial paper, a transferees rights are conditional.
A tag attached to a tree in a nursery identifying the tree as a Southern Magnolia creates
an express warranty.
Violations of antitrust law are either per se violations or rule of reason violations. What
are the differences between these two types of violations? Give examples of each.
Emails and their attachments are not subject to pretrial discovery.
Liquidated damages are not permitted under the UCC.
Courts enforce all promises in the interests of simple morality.
Briefly discuss the enforceability of contracts by third parties.
Generally, neither a “time is of the essence” clause nor a “force majeure” clause will be
recognized by the courts because these types of clauses are seen as a violation of public
policy.
Mega Corporation, the bailor, negotiates a bailment agreement with Huge Corporation,
the bailee. Huge Corporation insists that an exculpatory clause be included in the terms
and conditions of the bailment agreement. Later, Huge Corporation negligently
(ordinary negligence, not gross negligence) damages the property which is the subject
of the bailment. Most courts will allow Huge Corp. to stand behind its exculpatory
clause and deny liability.
Aubry purchased a washing machine, a freezer, and a refrigerator from Gateway
Appliances on credit, giving Gateway a security interest in the appliances. The
appliances were for Aubry’s household use. Gateway did not file a financing statement.
Six months later, Aubry had a garage sale and sold the appliances to Tam. Tam bought
the appliances for her student rental property. Aubry left town owing money on the
appliances. If Gateway can trace the appliances to Tam, can Gateway repossess the
appliances? Explain in detail.
Chapter 7 bankruptcy petitions may only be filed voluntarily..
Larry decided to relocate to Germany. Larry hired Happy Homes, Inc. to find a buyer
and contract for the sale of his house in the U.S. The agency relationship between Larry
and Happy Homes must be evidenced with a written agreement.
As a general rule, employers have a legal obligation to disclose information about
former employees to potential future employers.