Book Title
Business Law with UCC Applications 14th Edition

LGST 97449

March 1, 2019
United States Generals Groves and LeMay advocated preventative war against the
Soviet Union.
A business receiving money by electronic transfer is known as the beneficiary.
Appellate courts use the clearly erroneous standard to determine whether a judge in the
lower court has, in some way, misused his or her authority.
Admiralty courts were empowered to hear cases involving commercial disputes, and
since the juries were made up of merchants, the law merchant was used to adjudicate
the cases.
Under the doctrine of strict liability, when a product is obviously dangerous, a
manufacturer has no duty to warn consumers of potential injuries.
The UPA clearly states that a partnership should be considered a separate legal entity
with an existence separate from the partners.
In general, once a voting trust has been created, it cannot be ended until the specific
time period has run its course.
The FACT Act focuses on contracts that involve the sale of computer software,
multimedia products, and any other type of computer information.
The funds of the Troubled Asset Relief Program (TARP) are managed and allocated by
the President of the United States.
The Norris-LaGuardia Act of 1932 forced companies to cooperate with union
organizers and thus, keep people working.
Blyth Enterprises' male managers are paid $25 per hour, but female managers are paid
$22 per hour. If the jobs are substantially equal, Blyth must pay the female managers
$25 per hour.
The SEC has the power to develop regulations that will create a "whistleblowing
bounty program" analogous to the one used by the IRS.
The authority to codify international law is the official mission of the International
Court of Justice.
A commercial unit is a single whole for the purpose of sale, the division of which
impairs its character or value on the market.
The ADA forbids discrimination on the basis of a disability if the disabled individual
can do the essential functions of the job with "reasonable accommodations."
Elke has a contract with Acme Gravel Co. If she transfers her rights under the contract,
this is called an assignment.
Alfred drives his car very fast in a school zone when the school is releasing students at
the end of the school day. A student dies when he is hit by Alfred's car. Alfred has
committed involuntary manslaughter.
The purpose of a complex adaptive system is the survival and improvement of the legal
When a borrower does not qualify for a conventional mortgage, he might ask for and
receive a subprime loan.
The issue of soundness of mind is raised only when someone contests a will on that
To be legally enforceable, an express warranty must be in writing.
Med-arb is a process that combines negotiation and mediation to deliver effective
An insurance policy is an unconditional promise to pay money a claim.
Membership on a Chapter 11 creditors' committee normally consists of the creditors
who hold the seven largest secured claims against the debtor.
In many states, to successfully sue for intentional infliction of emotional distress, a
plaintiff must prove he or she has suffered some accompanying physical injury.
Proximate cause is the same as "cause in fact."
A transfer of a contract right is called a delegation.
An incidental beneficiary is an outside party that can legally enforce the contract made
by those in privity of contract.
A written stop payment order is effective for six (6) months.
An SMP is a set of rules written by an employer telling employees what they can and
cannot do when using electronic communication devices and electronic messaging
To be in a position to bring suit on a sales contract, the seller of goods must make
tender of delivery.
Ownership of a check is transferred by indorsement by its payee.
In the case of an open offer, there must be serious intent, clear and reasonably definite
terms, and communication to the offeree.
When Tina was fifteen years of age, she gave Sam a negotiable note payable five years
later. Sam negotiated it to Neighborhood Bank, who became a holder in due course.
Tina may assert her age as a defense against Neighborhood Bank to disaffirm the
Most of the time, an advertisement is specific enough to constitute an offer.
Contributory negligence is a defense that completely prevents the plaintiff (the injured
party) from recovering any damages.
When there is a breach of contract, the injured party has the right to ask a court to
somehow remedy the situation.
Offering oral statements about the validity of an instrument is known as "uttering."
Buyers obtain an insurable interest even though they might later reject or return the
goods to the seller.
Matrix, Inc. contracts with Smalltown Economic Development Corp. to build a factory
in Smalltown that will employ 1,000 workers from Smalltown. Matrix later breaches
this contract, and Smalltown citizens who were expecting to be employed sue Matrix
for breach of its contract. Smalltown citizens' best argument for damages involves the
legal doctrine of:
A. quasi contracts.
B. privity of contracts.
C. intended beneficiaries.
D. implied-in-fact contract.
Harvey and Myra Church were interested in buying land from Sam and Barb Houston.
When the Churches asked about the appraised value of the property, the Houstons said
that the appraisals ranged from $185,000 to $198,000. Without looking at any
appraisals, the Churches agreed to buy the property for $185,000. After the contract was
signed, the Houstons provided an appraisal listing the value as $155,000. When the
Churches refused to go through with the deal, the Houstons sued to recover the
difference between $185,000 and the lower price for which the house was later sold.
The Churches counterclaimed the contract should be rescinded based on their mistaken
assumption about the value of the house. The Churches best argument for rescission
would be based on:
A. the active fraud of the Houstons.
B. a bilateral mistake of value.
C. the Churches unilateral mistake of value.
D. the Houstons exertion of undue influence.
Charlotte is declared mentally incompetent by a court and is unable to participate as a
partner in AMLAP Enterprises. Charlotte wants to leave the AMLAP partnership, but is
contractually obligated for three more years. Can Charlotte leave the AMLAP
A. Yes, she can do so without any liability to the partnership.
B. No, there is no right to leave.
C. Yes, she has a right to leave, but is liable for breach of contract.
D. No, there is no right to leave unless all the partners agree.
The principle of ____________ requires the victor in a war to accept the surrender of
the enemy and treat the defeated combatants with dignity and respect.
A. honorable surrender
B. repentance
C. restoration
D. unconditional victory
A shoplifter steals a can of soda and tries to escape. He threatens and fights the clerk
when confronted. This is an example of:
A. burglary.
B. extortion.
C. embezzlement.
D. robbery.
If George believes in a "state of nature", where people must fend for themselves rather
than give up the freedom to do as they please, and in return receive a guarantee that
other individuals will curb their behavior, he would most likely be rejecting the
____________ ethical theory.
A. market value
B. state of society
C. social contract
D. cost-benefit
The Panon Corporation is incorporated in Tennessee, but its corporate headquarters is in
Massachusetts. As a result, the Panon Corporation is:
A. considered a citizen of only Massachusetts.
B. considered a citizen of only Tennessee.
C. not considered a citizen of either Massachusetts or Tennessee.
D. considered a citizen of both Massachusetts and Tennessee.
Auto Rebuilders, Inc. orders original 1995 model parts for a Ford Mustang Cobra from
Car Wreckers, Inc. Car Wreckers boxes the parts for shipment, but finds another
purchaser who is willing to pay more and refuses to ship the parts to Auto. Auto is
unable to find the parts for sale elsewhere, but is uncertain about what legal remedy to
pursue. What remedy is best suited for this situation?
A. Cover and sue for compensatory damages
B. Sue for specific performance
C. Writ of replevin
D. Cure and sue for incidental damages
The process of ____________ occurs when many mortgages are bundled together and
sold as bonds to institutions, such as pension funds.
A. perfection
B. foreclosure
C. acceleration
D. securitization
According to the UCC, conflicting secured interests are generally resolved:
A. according to whether an attached security interest in inventory has priority over a
conflicting security interest in the same inventory.
B. by consumers' perfected security interests of which they have no knowledge.
C. based on whether the seller's inventory prevails over buyers of goods in the ordinary
course of business (except farm products).
D. according to priority in time of filing or perfection.
In the "Opening Case," the Roman Catholic Archdiocese of Washington D.C. sued the
Department of Human Services claiming the Affordable Care Act (ACA) interferes with
its First Amendment right to privacy.
The ____________ outlaws the unauthorized transfer, possession, or use of a means of
identifying another person to violate federal law.
A. Aggravated Identity Theft Act
B. Identity Theft Criminality Act
C. Identity Theft Penalty Enhancement Act
D. Uniform Electronic Transactions Act
____________ is a method of commercial dealing that is commonly used in a particular
field or industry.
A. Usage of trade
B. Contract for sale
C. Good faith
D. Firm offer
Greta, an agent, receives money from clients of Wayne, her principal, on the fifteenth of
each month. In the absence of an agreement, how frequently must Greta account to
Wayne for the money she receives?
A. Typically during the financial year end
B. Immediately upon receiving the money
C. Within a year of receiving the money
D. Within a reasonable period of time after the money is received
Maria, aged 16, from a wealthy family, purchases designer jeans on credit for $300. The
true fair market value for the jeans is $75. Which of the following is true of this case?
A. Maria can disaffirm the purchase because designer jeans are not a necessary.
B. She cannot disaffirm, because her family is wealthy.
C. She is liable to pay $300, as per contract.
D. She may not disaffirm and is liable for $75.
Opponents of _______________ have challenged it because they believe it is an
unconstitutional deprivation of their right to a trial by jury and equal protection under
the law.
A. mandatory mediation
B. mandatory arbitration
C. mandatory med-arb
The Statute of Frauds: ______________________.
A. States that all contracts have to be in writing to be enforceable in the court of law
B. Decrees oral contracts to be invalid and hence not upheld or enforceable by law
C. States that certain types of contracts have to be in writing to be enforceable
D. Maintains that agreements can be oral while contracts have to be in the written
All ____________ are ____________, but not all agreements are ____________
because an agreement may not be ____________.
A. agreements; contracts; enforceable; in writing
B. agreements; contracts; contracts; equitable
C. contracts; agreements; contracts; legally enforceable
D. contracts; agreements; contracts; in writing
John and Marsha park their car in the BigCinema parking lot. They have created a
bailment with BigCinema.
Generally, a security interest is perfected when the:
A. secured party has done everything that the law requires to give the secured party
greater rights to the goods than others have.
B. secured party has a legally enforceable right to take that property and sell it to satisfy
the debt.
C. buyer takes the property subject to a mortgage and the seller agrees to continue
paying the debt.
D. goods are sold, but regained as soon as the debtor takes possession of the new
Which of the following would be considered a criminal act?
A. Martin had a heart attack while driving his semitrailer on a highway, causing a
head-on collision with another trailer, and resulting in a 40-car pileup and 17 deaths.
B. Last summer, Sam made and sold crack cocaine and marijuana to teenagers in his
neighborhood, leading to drug network and addiction amongst teenagers of that locale.
C. Karen, obsessed with thoughts of her husband's affair with his colleague, wrote in
her diary detailed plots of how to kill the woman.
D. Helen thinks she cannot get through each day without taking LSD, a psychedelic
Under the doctrine of ____________, courts determine the constitutionality of statutes,
regulations or executive actions, taking into account any ____________ in its analysis.
A. statutory interpretation; persuasive precedent
B. statutory interpretation; binding precedent
C. judicial review; persuasive precedent
D. judicial review; binding precedent
Gerald orders 1,000 cupcakes from Haddock Bakers for a Christmas Eve party.
However, Haddock fails to deliver the cupcakes as per the schedule mentioned in the
contract, and does not send any notification to Gerald. Gerald orders the cupcakes from
Marlene's Cakes that evening. Gerald's order from Marlene's Cakes is called a
A. writ of replevin
B. specific performance
C. cover of a sales contract
D. cure of nonconforming product
The ____________ clause of the U.S. Constitution reads that Congress is empowered to
lay and collect taxes, duties, imposts, and excises, and to pay the debts of the United
A. necessary and proper
B. general welfare
C. commerce
D. supremacy
Jackie is interested in the property of the Big Partnership, in which Jackie is a full
partner. She wants to mortgage the property in order to collateralize loans for the
organization. However, not all the partners agree with Jackie. What is Jackie's legal
position with regard to the mortgage under UPA?
A. Her partners' non-agreement is legally irrelevant.
B. Jackie's interest in the partnership property cannot be assigned.
C. Jackie can mortgage her share of the organization's property.
D. UPA does not address this issue, and a court will decide on a case by case basis.
Under the UPA, a tenancy in partnership includes the provision that a partner's interest
in partnership property cannot be assigned (i.e., transferred by mortgage, pledge, or
otherwise) to a nonpartner, unless the other partners agree to the transfer.
The ____________ is an attempt by the federal government to reduce the use of
unsolicited commercial e-mails on the Internet.
A. Can Spam Act
B. Mail and Telephone Order Rule
C. Truth-in-Mailing Act
D. Anti-Slamming Law
Under the provisions of which of the ____________ will an employee who has served
in the armed forces and successfully completed his/her tour of duty be reinstated upon
returning to work in his/her previous position on the job.
Paulina rented a room at the Desert Inn Hotel and left her diamond ring on the dresser
in her room when she went to dinner. When she returned, the ring was gone. Paulina
discovered that the room door did not automatically lock when she closed it; instead it
required her to use her key. Is Desert Inn liable for her loss?
A. Yes, since innkeepers are insurers of their guest's property.
B. No, since Paulina was negligent in determining that her room door was not locked.
C. Yes, since innkeepers are in a bailment relationship regarding guest's property.
D. No, since Paulina must inquire about Desert Inn's security system.
The ____________ case held that a farmer's production of wheat for use only on his
own farm was held to impact interstate commerce.
A. Gibbons v. Ogden
B. Wickard v. Filburn
C. Hughes v. Wendel
D. Mangus v. Miller
Claus tells CPA Vernon that he needs an audit to borrow money from Big Bank. Claus
pays Vernon, and Claus takes Vernon's audit to Big Bank who makes the loan. When
Claus defaults on the loan, Big discovers numerous liabilities that the audit did not
reveal. Can Big Bank sue Vernon for negligence in a state that recognizes the
near-privity rule?
A. Yes, because Vernon breached the trust that Claus had placed in him.
B. No, because Big and Vernon did not have a contract.
C. Yes, because Big was an actually named third party.
D. No, because Vernon does not guarantee the collection of Big's loans.
In what respect is a bailment legally different from a sale?
A. Title does not transfer in a bailment.
B. Title transfers in a bailment, but no price is involved.
C. In both, there is a transfer of title, but in a bailment the title reverts to the bailor at
the end of the bailment.
D. In a sale, the title transfer includes all rights of ownership, but in a bailment, the title
transfer includes limited rights of ownership.
A bailment—e.g., when an item is left at a store to be sold on consignment—does not
meet the definition of a sale because title does not pass between the parties.
____________ damages are reasonable expenses that indirectly result from the breach,
such as expenses incurred in stopping delivery of goods, transporting goods, and caring
for goods after the buyer's breach.
A. Compensatory
B. Resale
C. Punitive
D. Incidental
If Bellard Co. tells its employees that voting for the union is a mistake, its statement is:
A. protected by the Taft-Hartley Act.
B. prohibited by the NLRB.
C. only allowed in right-to-work states.
D. protected by the Landrum-Griffin Act.
Harvey orders high-end stoves and ranges from Bosch to sell in his appliance store,
Harvey's Appliances. When the stoves arrive, Harvey discovers that the stoves are not
what he ordered. Bosch can:
A. revoke the acceptance.
B. cure the delivery.
C. cover the tender.
D. seasonably revoke the tender.
A large machine is purchased by Vida and is sometimes used for her personal work and
sometimes used for work by the partnership of which she is a member. Discuss what
factors a court will consider in deciding if the machine is partnership property.
Wellington and Haggerty were partners in a souvenir shop. It is a traditional general
partnership. While on a regular delivery trip, Wellington caused an accident when he
ran a red light. Haggerty claimed that only Wellington was liable for the injuries
sustained by the other driver. Was Haggerty correct? Explain.
The City of Newburyport contracted with Ace Paint Contractors for the repainting of a
steel bridge. The contract specifically called for the use of a particular brand of paint
called Nopeel Paint. It was later discovered that Ace used another brand of paint.
Discuss the situation if Nopeel Paint decides to bring a lawsuit against Ace Paint
John is a mechanical engineer. He has designed a car which uses water rather than fossil
fuel to run. Is John's invention eligible to be patented?
Joslin orders merchandise by phone from Marginal Enterprises with no stated delivery
date. When she does not receive it after a month, she contacts Marginal who indicates
that due to a strike at their production plant, delivery that normally takes one month will
take two months. Discuss Joslin's legal options.
Donna is the holder of a note that has been indorsed so many times that there is no
space left on the back of the note for indorsements. Donna wants to transfer the note for
$200 to Acme Finance, but wants to indorse on the face of the note "without recourse,
Donna ". Acme wants to staple a sheet of blank paper to the note and have Donna
simply sign "Donna" there. Discuss whether Donna or Acme is correct concerning the
location of Donna's signature and if Donna is legally entitled to indorse "without
Joe wants to sue directly in his state's Supreme Court (a state in which the Supreme
Court is the highest court), since his suit involves a question of genetic testing that has
never been heard by a trial court of general jurisdiction in Joe's state. Can Joe sue
directly in his state's Supreme Court? Explain.
Forty year-old Kelsey, a homeowner with a wife and two children, made out his will the
day he was institutionalized for alcohol abuse. When he drew up the will, Kelsey was
experiencing severe withdrawal symptoms, including impaired memory, insomnia, and
tremors. Describe how a court would evaluate whether Kelsey was of sound mind when
he made out his will.
Eva is fired by Big Clothing Co. for refusing to commit perjury. Discuss the elements
required for Eva to win a wrongful discharge suit based upon a violation of public
Tye, a director at Big Co., suspects wrongdoing within Big Co. and after investigation,
uncovers legal violations. Discuss the steps that must be taken under current law in light
of this discovery.
Julia decides not to dump her used motor oil in the creek that runs behind her garage
since that would damage individuals who live downstream and upset the peace and
harmony in which she has lived with these neighbors. Name and explain the ethical
system Julia has used to make this decision.
Bob purchases a $1,000 negotiable promissory note from a stranger for $100 that
appears to be valid. Will Bob qualify as a holder in due course?
Matrix Corp. is fined by the Occupational Safety and Health Administration for
violations of workplace safety regulations. Matrix challenges the fine on the basis that it
was not allowed to have a jury trial before being fined. What resolution will result?
Wong and Burton owned several hundred shares of preferred stock in Classic, Inc.
Carmine was a patient at the Galion Memorial Hospital. While Carmine was out of the
room, Riley accidentally spilled a pitcher of water on the floor of Carmine's room.
Before cleaning up the water, Riley took her lunch break. When Carmine returned to his
room, he slipped in the puddle of water, fell, and injured himself. Carmine sued Riley
and the hospital for negligence. At the trial, Carmine argued that there was no need for
an expert witness to testify as to the standard of care rendered by the nurse. Was
Carmine correct? Explain.
Reed needed expensive medical treatment for the injuries he suffered in a fire that
ravaged his home. Lacking medical insurance and unable to obtain a bank loan, Reed
turned to Lance, a local person known for his gambling prowess. Lance offered Reed
$15,000 if Reed would repay him $23,000 in 36 monthly installments of $521 each.
According to the laws in Reed's state, the maximum amount of annual interest that can
be charged on loans is 20%. Explain whether Lancet's loan was legal.
Todd offered in writing on Monday to sell his desk to Mike for $150. Todd's offer stated
that unless Mike rejected Todd's offer by Thursday, it would be considered accepted.
Mike did not reply until Saturday, when he rejected the offer and refused to buy the
desk. Todd insists that Mike is bound to purchase the desk, since he did not reject the
offer by Thursday. Discuss the validity of the contract and the legal obligation of Mike.
While cleaning out her desk, Chen found a certified check she had received eight
months earlier and had forgotten to cash. When she brought the check to the bank on
which it was drawn, the bank refused to cash it. Discuss the legal rights of the parties in
this case.
Cassandra purchased a truck at a Middleburg police auction of abandoned property. The
truck, in fact, had been stolen and the original owner, Ariel, subsequently asserted a
claim to it. Discuss if Cassandra has any claims against Middleburg or Ariel.