1) Laws and government regulations affect almost all business activities.
2) Under a life insurance policy, in the absence of contractual exclusion, any cause of
death is one of the insurer’s risks.
3) When one party breaches a contract, the other party can only sue for damages.
4) The doctrine of sovereign immunity provides that only a head of state can make trea-
ties with another nation.
5) Sexual harassment occurs when sexual favors are demanded in return for job
opportunities, promotions, salary increases, or other benefits.
6) No state requires franchisors to provide presale disclosures to prospective
franchisees.
7) When a release of hazardous chemicals from a site occurs, potentially responsible
parties can avoid liability through transfer of ownership.
8) Each member of the World Trade Organization is obligated to treat other members at
least as well as it treats the country that receives its most favorable treatment with
regard to imports or exports.
9) In most legal controversies, there is one single correct result.
10) The Securities and Exchange Commission (SEC) requires companies to file certain
information electronically so that it can be posted on the SEC€s EDGAR database.
11) Employees of private (nongovernment) employers have some privacy protection
under the U.S. Constitution.
12) Forest & Field Company makes and leases a backhoe to Gallagher. Due to a defect
attributable to Forest & Field’s negligence, Gallagher is injured in an accident in which
his neighbor Helga is also hurt. In a product liability suit based on negligence, Forest &
Field may be liable to
a.Gallagher only.
b.no one.
c.Gallagher and Helga.
d.Helga only.
13) Stella is fifteen. In most states, for contractual purposes, Stella would be considered
a minor until she is
a.sixteen.
b.eighteen.
c.seventeen.
d.twenty-one.
14) Fact Pattern 28-2B
Belle draws a check on her account in Capital Credit Bank in New York, payable to
Distribution Marketing, Inc., in San Francisco. Distribution Marketing deposits the
check in its account at Equity Bank. Equity Bank deposits the check in the Federal
Reserve Bank of San Francisco, which transfers it to the Federal Reserve Bank of New
York. That Federal Reserve Bank sends the check to Capital Credit.
Refer to Fact Pattern 28-2B. Capital Credit, Belle’s bank, is
a.the cashing bank.
b.the depositary bank.
c.the intermediary bank.
d.the payor bank.
15) Rosario is a chef and caterer who hires out on a per-project basis to companies with
on-location work sites, as well as to hosts of banquets, corporate meetings, concerts,
weddings, and other events. In this capacity, Rosario is
a.an agent.
b.an employee.
c.an independent contractor.
d.a principal.
16) Savory Bean Company makes and sells a sweet espresso coffee beverage under the
name “Sugar Sugar.” Tropic Roast, Inc., later markets a similar drink under the name
“Sweet Sweet.” This is most likely
a.copyright infringement.
b.patent infringement.
c.trademark infringement.
d.not infringement.
17) Fact Pattern 37-1B
Bryn, Cornell, and Duke are general partners in Equity Lending, a consumer credit,
mortgage, and investment firm. Their agreement states that it is a breach of the
agreement for any partner to assign his or her interest to a creditor without the consent
of the other partners.
Refer to Fact Pattern 37-1B. The partners decide to dissolve Equity Lending. Duke
collects and distributes the firm’s assets. This results in
a.nothing with respect to the firm’s existence.
b.the continuation of the firm’s business.
c.the termination of the firm’s legal existence.
d.the temporary suspension of the firm’s business.
18) Reed owns one share of stock in SK8 Boards Corporation, as evidenced by a stock
certificate. Reed loses the certificate. Reed’s ownership of the stock is
a.forfeited immediately.
b.forfeited within ten days of a third party’s claim to ownership.
c.forfeited within thirty days if she cannot find the certificate.
d.not affected.
19) Gretel, an inventor, has tools in her workshop, including hammers, a table saw, and
drills. She has a patent on her most recent invention, a kitchen gas grill. She licenses the
patent to Home Appliances, Inc., a company in which she owns stock. Her tangible
personal property includes the
a.workshop tools.
b.Home Appliances stock.
c.patent on the gas grill and license to Home Appliances.
d.all of the choices.
20) Naomi tells Ogden, who has no knowledge of Shakespearean comedy, that she will
tutor him in the subject for $50. As an offer, this is
a.effective.
b.not effective because comedy is not a serious subject.
c.not effective because Naomi’s tutoring will be subjective.
d.not effective because Ogden has no knowledge of the subject.
21) Plumbing & Pipes Supply Company issues a promissory note as a demand
instrument with a due date of October 5 . Quantum Loan Company accepts the note.
Quantum Loan has notice that the note is overdue if the firm takes the note
a.after October 5.
b.before October 5.
c.on October 5.
d.at any time.
22) Medical Eye Clinic Corporation enters into a contract with local musician Natalie,
who agrees to perform for a meeting of Medical Eye’s personnel to be held in its main
office building. Before the date of the meeting, Natalie refuses to perform, citing a
higher-paying gig. Meanwhile, Medical Eye contracts to sell the building to Optical
Center, Inc., but before the transaction is complete, Perfect Vision Company offers to
pay a higher price. Medical Eye refuses to transfer the building to Optical Center. In
separate suits by Medical Eye against Natalie and by Optical Center against Medical
Eye, each plaintiff seeks specific performance. How might the court rule in each case,
and why?
23) Generally, in a Chapter 11 case, no orders affecting the estate will be entered
without the consent of the creditors’ committee or after a hearing in which the judge is
informed of the committee’s position
24) A majority of the states treat a partnership as an entity for most purposes.
25) Unless a corporation violates a law, its actions do not raise questions about the role
of corporations and the effect of corporate ethics on profit.
26) For five years, clothing makers and marketers Style-One Corporation and Trend
Now, Inc., both use the phrase “Looks Great” on their labels. Style-One files a suit
against Trend Now, claiming trademark infringement. Trend Now argues that the phrase
generally is not associated with any particular firm and that other companies use the
same phrase on their labels and in their ads. In whose favor is the court most likely to
rule, and why?
27) An agent can represent two principals in the same transaction as long as neither of
them knows about it.
28) Ridley is an officer of Sun Watts, Inc. Ridley knows that a Sun Watts engineer
recently developed a new, inexpensive method for collecting, storing, and converting
solar power into fuel. Ridley takes advantage of this information to buy Sun Watts stock
from Taylor and, after the discovery is announced, to sell the stock to Ulrich at a profit.
Taylor claims that this is a violation of federal law. Is Taylor correct? If so, what federal
law has Ridley violated, and what are its possible penalties?
29) Federal agencies must consider ways to reduce the economic impact of new
regulations on small businesses.
30) If an offer does not specify a time for acceptance, the offer terminates at the end of
a reasonable time.
31) An occurrence or event that makes performance temporarily impossible operates to
discharge the parties’ contractual duties.