1) Orsais a shareholder inPickles& PreservesCorporation. In some states, Orsamay be
liable to the firm’s creditors for unpaid corporate debts if she
a.accepts a dividend knowing that it was paid from retained earnings.
b.receives shares issued by the firmfor less than fair-market value.
c.fails to fulfill her fiduciary duty to the majority shareholders.
d.sellsher shares.
2) Apples & Pears Orchards contracts to hire Brigit for one year to tend the fruit in its
commercial orchards but reserves the right to cancel the employment on thirty days’
notice at any time after Brigit begins work. This promise is
a.enforceable.
b.illusory.
c.unliquidated.
d.unforeseen.
3) Finlay dies without a will. The distribution of Finlay’s property, including his
beachfront house near Gulf Shores, Alabama, is prescribed by
a.a court-appointed executor.
b.federal probate statutes.
c.state intestacy laws.
d.Finlay’s relatives.
4) Mason creates a trust to prevent his son, Newt, the beneficiary, from assigning his
rights to future payments of income from the trust. This is
a.a charitable trust.
b.a constructive trust.
c.a spendthrift trust.
d.an illegal trust.
5) Fact Pattern 17-B1
Able Contractors, Inc., enters into a contract with Beau to repair, rebuild, and remodel
Coastal Marina & Boardwalk, using products from Delta Lumber & Marine. Eatwell
Caf© is next to Coastal Marina.
Refer to Fact Pattern 17-B1. Coastal Marina is
a.a delegatee.
b.an assignee.
c.an incidental beneficiary.
d.an intended beneficiary.
6) Like other corporations, Restwell HotelsInc. can extend its operations through
a.liquidating and distributing its assets.
b.buyingthe assets of, or a controlling interest in, another corporation.
c.filingarticles of dissolution with the state.
d.appointing a receiver to wind up the corporate affairs.
7) Dom, an EZ Baked Goods salesperson, follows Flora, a salesperson for Gooey
Pastries, Inc., as she attempts to make sales to food stores. Dom solicits each of Flora’s
customers. Dom is most likely liable for wrongful interference with a
a.bargaining relationship.
b.business relationship.
c.contractual relationship.
d.customer relationship.
8) Big American Oil Company joins with a foreign cartel to control the price of oil. If
the cartel has a substantial effect on U.S. commerce, a suit for violation of U.S. antitrust
laws can be brought against
a.Big American Oil and the foreign cartel.
b.the foreign cartel.
c.Big American Oil.
d.all of the choices.
9) Grease & Lubricants Inc. makes its products without required pollution control
technology, causing a discharge of oily waste into the nearby Holly Lake. This activity
can result in
a.a criminal fine or imprisonment only.
b.a criminal fine, imprisonment, or an injunction only.
c.a criminal fine, imprisonment, an injunction, or damages.
d.an injunction only.
10) Rafaela Art Gallery and Sequoia Exhibitions form a joint venture. When a dispute
arises, Rafaela files a suit against Sequoia. The court is most likely to apply the same
principles to this joint venture as it applies to
a.business trusts.
b.cooperatives.
c.corporations.
d.partnerships.
11) Dru signs a check “pay to the order of Eppie” drawn on Dru’s account in First State
Bank. Greta forges Eppie’s indorsement. First State pays the check. Most likely
a.Dru will be liable for the amount.
b.Eppie will have to pay Dru for the amount.
c.First State will have to recredit Dru’s account.
d.the Federal Reserve will reimburse all parties for their costs.
12) World Shipping Corporation enters into contracts with distributors and other buyers
in e-commerce and in traditional commerce. The UETA applies, if at all, only to those
transactions in which the parties agree to use
a.electronic means.
b.paper documents.
c.updates and cross-checks to orally verify any e-terms.
d.notarized documents.
13) The National Park Service hires Outdoor Play, Inc., to replace outdated playground
equipment in a handful of national parks. For this action, an environmental impact
statement is most likely
a.prohibited because the action does not affect the environment.
b.required because the action is €federal.€
c.unnecessary because the action is not €major.€
d.voluntary because the action does not affect the environment.
14) Elaine owns the Fabric & Yarn store. Goldie is a salesperson in the store. When
Goldie makes a sale to Heather, the sale is binding on
a.Elaine.
b.Goldie.
c.Fabric & Yarn only – and only if Elaine is present at the sale.
d.no one.
15) Mariah creates a t-shirt design that expresses support for Nathan, a presidential
candidate, and distributes t-shirts imprinted with the design to her friends. The t-shirts
are an example of
a.unprotected speech.
b.controlled speech.
c.symbolic speech.
d.illegal speech.
16) Dawson owns Evergreen, a complex under construction that will include
commercial and residential suites, as well as a parking garage. Dawson allows First Call
Construction, Inc., the contractor, to complete a stage of construction late. This waives
Dawson’s right to sue for
a.this delay only.
b.any subsequent breaches by First Call.
c.any future breaches by First Call or any subcontractor.
d.none of the choices.
17) Fleet Delivery Corporation is a public company with a market capitalization of less
than $75 million. Fleet is poised to issue securities in a transaction that, under the
Securities Act of 1933, is ″exempt.″ This enables Fleet to
a.reduce the compliance costs by not requiring an auditor report.
b.buy and sell the securities without liability for €recaptures.€
c.make forward-looking financial forecasts without liability.
d.withhold inside information from accredited investors.
18) Rollo is the chief executive officer of Specialty Magazines, Inc., which is required
to file certain financial reports with the Securities and Exchange Commission (SEC).
Under the Sarbanes-Oxley Act of 2002, Rollo must
a.certify that the reports are complete and accurate.
b.designate a corporate official to assume liability for inaccuracies.
c.do nothing.
d.read the reports and be prepared to answer questions about them.
19) Eden signs a promissory note payable to the order of First Mortgage 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 payable with interest.
d.nonnegotiable, because the exact amount payable cannot be determined from the face
of the instrument.
20) Quiana, an employee of Reservations for Less, Inc., pays Svetlana, an employee of
Reservations for Less’ competitor Travel Cheap, Inc., for a secret Reservations for Less
pricing schedule. This may be
a.an effective marketing strategy.
b.commercial bribery.
c.insider trading.
d.money laundering.
21) Every act of the partner concerning partnership business and “business of the kind”
and every contract signed in the partnership’s name bind the partner, but not the firm.
22) Moral pressure constitutes false imprisonment.
23) On the back of an envelope, Clark writes, “I promise to pay Dobie or bearer $700
on demand. [Signed] Clark.” What type of instrument is this? Is it negotiable? If not,
why not?
24) Any collateral promise falls outside the Statute of Frauds and does not need to be in
writing to be enforceable.
25) A void contract imposes certain legal obligations on the parties but is not otherwise
enforceable.
26) Article 2A of the UCC covers any transaction that creates a lease of goods or a sub-
lease of goods.
27) Statements of fact made during the bargaining process are express warranties.
28) A seller has an insurable interest in goods as long as he or she retains title to the
goods.
29) Either party may appeal a jury’s verdict but only the defendant may appeal a judge’s
ruling.
30) In a transaction for the sale of an auto painting facility, Bright Auto Colors
Company tells Custom Cars Corporation that the paints and other supplies on-site are
included. The contract says nothing about the supplies on-site, but does state, “This
document supersedes all oral promises relating to the sale.” Are the supplies part of the
sale? Why or why not?