Commercial Law
Question Bank
Course Introduction
Commercial Law provides an in-depth examination of the legal principles governing business and commercial transactions. This course covers topics such as the formation and enforcement of contracts, the sale of goods, agency, negotiable instruments, secured transactions, and the regulatory framework affecting businesses. Students will explore case law and statutory provisions to understand how commercial law facilitates trade, resolves disputes, and balances the interests of parties engaged in commerce. The course equips students with practical knowledge applicable to real-world business scenarios, important for anyone considering a career in law, business, or related fields.
Recommended Textbook Business Law and the Legal Environment Standard Edition 6th Edition by Jeffrey F. Beatty
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Chapter 1: Introduction To Law
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Q1) Identify and explain the parts of the following case name: Palsgraf v.Long Island Railroad Co.,248 N.Y.339,162 N.E.99,New York Court of Appeals.
Answer: The case name is Palsgraf v.Long Island Railroad Co.Palsgraf and the Long Island Railroad Co.are the parties to the lawsuit.The order of the names does not necessarily identify which party initially brought the lawsuit.The part stating "248 N.Y.339,162 N.E.99" is the legal citation,which indicates where to find the case in a law library.The first part of the citation means the Palsgraf case can be found on page 339 of the 248th volume of the official court reporter of the state of New York.The decision is also reported starting on page 99 of the 162nd volume of the Northeast Reporter,a regional reporter.The reported case was heard by the New York Court of Appeals.
Q2) President Nixon issued wage-price controls in an effort to stabilize the economy.This use of executive power was:
A) an illegal usurption of legislative powers which belong to the Congress.
B) a valid use of power, known as an executive order.
C) a valid use of power creating a treaty.
D) an illegal usurption of the regulatory powers of administrative agencies.
Answer: B
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Page 3
Chapter 2: Business Ethics And Social Responsibility
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Q1) Li is the vice president of marketing for Felson,Inc.,a manufacturer of children's clothing Felson is considering building a factory in a developing country,where there are few restrictions on working conditions,wages,or maximum work hours.Which viewpoint: utilitarian or deontological would support this move? Why?
Answer: A utilitarian viewpoint would support building a factory in a developing country because: Felson would save money,enabling them to lower their prices to consumers. Workers in developing countries are willing to work,even under harsh conditions,because they need the money. Industrialization,even with sweatshops,leads to economic growth for a society. Without the factory,the workers in this country may even starve.
Q2) In 1919,Henry Ford was sued because:
A) he used corporate profits to support humanitarian and charitable works.
B) he diverted corporate profits for personal gain.
C) the Dodge brothers wanted a bigger role in management.
D) his factory was deemed to be a sweatshop.
Answer: A
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Page 4
Chapter 3: Dispute Resolution
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Q1) The biggest change in litigation in the last decade is:
A) an explosive rise of electronic discovery.
B) a decrease in the use of discovery.
C) the replacement of interrogatories with depositions.
D) the use of juries in appellate courts.
Answer: A
Q2) An inmate in a state prison claims his United States constitutional rights prohibiting cruel and unusual punishment are being violated by the state correctional facility.This case:
A) may not be decided by a federal court since it involves a state facility.
B) must be decided by the state court where the inmate established residency before going to prison.
C) is a federal question case over which the federal courts have jurisdiction.
D) cannot be heard, as prisoners lose the right to sue.
Answer: C
Q3) A judge can serve as both a federal judge and a state court judge at the same time.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Common Law,Statutory Law,And Administrative Law
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Q1) The power of federal agencies is limited by:
A) statutory control in the enabling legislation and the Administrative Procedures Act.
B) political control by Congress and the President.
C) judicial review.
D) All of the above.
Q2) The U.S.Supreme Court's holding in Ward's Cove Packing v.Atonio:
A) differed from the holding in Griggs v. Duke Power Co. partly because the Court was more conservative at the time Ward's Cove was decided.
B) upheld the ruling in Griggs v. Duke Power Co.
C) found that overt racial discrimination existed.
D) set forth a "business necessity" requirement for employment hiring practices.
Q3) TECO Coal Corporation mines and ships more than six million tons of coal annually.TECO is comprehensively regulated by the U.S.Bureau of Mines.The U.S.Bureau of Mines may conduct a surprise inspection of one of TECO's mines:
A) only if it has a search warrant.
B) only if it has a subpoena.
C) only if it has reason to believe a violation of a regulation has occurred.
D) without a search warrant to ensure safety.
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Chapter 5: Constitutional Law
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Q1) Nevada passed a law banning all commercial billboards along state highways to improve the appearance of the environment.If this law were to be challenged,which of the following would a court examine to determine if the law is constitutional?
A) It would have to be established that the law furthers an interest of the state of Nevada to create a more aesthetically pleasing environment.
B) It would have to be shown that the law directly and materially advances the state's goal of a more aesthetically pleasing environment.
C) It would have to be shown that the law reaches no further than necessary to promote the state goal.
D) All of the above.
Q2) Tim received a letter from his state college stating he had been expelled from the school.The letter stated his finance professor reported him to the Dean's office for cheating and that a committee had decided to expel him.He was reminded in the letter he had been disciplined earlier that same year for plagiarizing a term paper.Tim believes his due process rights have been violated by the college.Discuss what factors should be considered to determine the validity of Tim's claim.
Q3) Discuss the Miller test to determine if a creative work is obscene.
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Page 7
Chapter 6: Intentional Torts And Business Torts
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Q1) Working out some frustrations after a bad game,Jessica angrily hits a baseball and then sees it is flying toward the umpire.She yells,"Watch out!" The umpire ducks and the ball misses him.Since there was no physical contact,no assault or battery occurred.
A)True
B)False
Q2) Opinion is generally a valid defense in a defamation lawsuit because it is not meant to be a factual statement.
A)True
B)False
Q3) Rodney was employed by Deluxe Discount Store.Rodney's manager directed him to check the prices of dog food at Huge Savings Store.The manager of Huge Savings Store saw Rodney writing down prices and asked him to leave.Rodney,fearful that he would be fired by Deluxe,refused to leave.Rodney committed the tort of:
A) larceny.
B) trespass.
C) misrepresentation.
D) conversion.
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8
Chapter 7: Negligence And Strict Liability
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Q1) Discuss the concepts of contributory negligence and comparative negligence.
Q2) In Hernandez v.Arizona Board of Regents,the court held that individuals who:
A) intentionally provide alcohol to minors can be liable for negligence to injured third parties.
B) intentionally provide alcohol to minors cannot be held liable for negligence to injured third parties.
C) carelessly provide alcohol to minors can be held liable for damages for resulting injury to third parties.
D) none of the above.
Q3) Annette drove through an intersection without looking and hit Vincent's car that he had driven into the intersection without obeying a stop sign.Annette sued Vincent.The jury found that Annette's fault contributed 20 percent to the collision and determined that her total loss was $100,000.Under comparative negligence,the jury should award Annette:
A) $20,000.
B) $80,000.
C) $100,000.
D) nothing.
Q4) List and discuss the elements necessary to establish negligence.
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Chapter 8: Crime
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Q1) The Sixth Amendment declares that a person cannot be tried twice for the same criminal offense.
A)True
B)False
Q2) There is only one valid reason to punish criminals -- deterrence.
A)True
B)False
Q3) Sarah,an employee of Amex Corporation,committed a serious criminal act in an attempt to obtain a large sales order for her employer.A court found her guilty of the felony and also found the corporation guilty of criminal conduct.The company was fined $1 million.The court:
A) erred in fining the company since finding both Sarah and the corporation guilty violates the Double Jeopardy Clause of the Constitution.
B) acted properly if this were a federal proceeding; however, it did not act properly if this were a state proceeding.
C) acted properly if this were a state proceeding but not if this were a federal case. D) acted properly in this case.
Q4) Compare and contrast money laundering and embezzlement.Give an example of each.
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Chapter 9: International Law
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Q1) Zebra Toy Company invests a large sum of money in retail stores located in a foreign country.Zebra intends to bring its foreign earnings back home to the United States.This practice is known as:
A) repatriation of profits.
B) inflow profit streaming.
C) expropriation.
D) comity.
Q2) The primary antitrust law in the United States is the:
A) Wagner Act.
B) Sherman Act.
C) SEC Act of 1933.
D) Robinson-Patman Act.
Q3) The European Union is one of the world's most powerful regional associations with 42 member nations as of 2011.
A)True
B)False
Q4) The United States is the world's largest exporter of agricultural products.
A)True
B)False
Q5) Explain the origin and purpose of the World Trade Organization.
Page 11
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Chapter 10: Introduction To Contracts
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Q1) Paid surrogacy contracts are viewed by the legislative majority in all states as immoral and illegal.
A)True
B)False
Q2) A valid contract can legally be voided by either party.
A)True
B)False
Q3) Discuss the requirements of promissory estoppel.
Q4) Mary goes into Honest Harry's Electronics and purchases a TV.Mary agrees to pay for the TV in 30 days on the store's "30 days same as cash" plan.This is an executory contract.
A)True
B)False
Q5) The common law governs contracts for:
A) services.
B) real estate.
C) employment.
D) All of the above.
Q6) List and briefly describe the basic elements of a contract.
Page 12
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Chapter 11: Agreement
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Q1) Briefly discuss how an offer can be accepted.Include offers for both bilateral and unilateral contracts.
Q2) Nella offers to sell her crop of strawberries,which have just been picked,to Morgan's Market.Since she does not specify a time limit for acceptance,Morgan's can accept the offer the following week,as long as Nella has not revoked it.
A)True
B)False
Q3) If both parties believe they have a binding contract,this belief any later questions about the validity and enforceability of the agreement.
A)True
B)False
Q4) In seeking to determine whether there is a meeting of the minds,the courts look to how a reasonable person would objectively view the language or actions of the parties.
A)True
B)False
Q5) Discuss the effect of the Uniform Commercial Code on the law of sales contracts in the area of open terms.
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Chapter 12: Consideration
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Q1) Police Officer Paul apprehends a wanted criminal and then demands the $10,000 reward offered by Crime Stoppers.Which of the following statements is true?
A) Police Officer Paul is not entitled to the reward because past consideration is never valid consideration.
B) Police Officer Paul is entitled to the reward because he puts his life on the line every day.
C) Police Officer Paul is not entitled to the reward because he was under a pre-existing duty to make the arrest.
D) Police Officer Paul is not entitled to the reward but may have an argument under promissory estoppel.
Q2) Courts normally require consideration to be approximately equal on both sides of the bargain.
A)True
B)False
Q3) Consideration can be a promise or an act.
A)True
B)False
Q4) Discuss the concept of consideration.
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Chapter 13: Legality
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Q1) To be valid,a noncompete clause must be:
A) ancillary to a legitimate bargain.
B) reasonable in time, geographical area, and scope of activity when ancillary to the sale of a business.
C) necessary to protect trade secrets, confidential information, or customer lists developed over an extended time when ancillary to an employment contract.
D) All of the above.
Q2) An insurance contract is not considered to be a legalized form of gambling because: A) one must have an insurable interest in the person being insured.
B) insurance contracts are underwritten by reputable companies.
C) insurance activities are regulated by the state department of insurance.
D) All of the above.
Q3) A gambling contract is legal unless it is specifically prohibited by state statute. A)True B)False
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15
Chapter 14: Capacity And Consent
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Q1) Peter,a minor,purchased a car from ACME Motors.Using a fake ID,he misrepresented his age to be 18.The contract is fully executed.Which of the following is correct?
A) Peter cannot disaffirm the contract because a car is a necessary.
B) Peter cannot disaffirm the contract because of his misrepresentation.
C) Peter can disaffirm the contract, because a minor must be saved from his own poor judgment, including his lie.
D) Either b or c may be applicable depending on the law of the jurisdiction in which the contract was formed.
Q2) Reed,a 15-year-old,has run out of money while on a trip away from home.Martha gives him food,a place to sleep,and his bus fare home,in exchange for Reed's promise to pay $200 after he got home.Is Reed's promise enforceable?
Q3) Discuss two types of misrepresentation and how they differ.List the three things a party must show to rescind a contract based on misrepresentation.
Q4) The age of majority to contract in all states is 21.
A)True
B)False
Q5) Discuss the concept of a "material fact" in fraud situations.
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Page 16
Chapter 15: Written Contracts
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Q1) Tony signed a contract agreeing to purchase a used,high-powered boat for $10,000.Prior to signing the contract,the sales representative explained that the boat motor was guaranteed for six months for all labor and parts.The written contract contained nothing about the warranty; however,it did have an integration clause in it.Tony had problems with the boat motor,causing expensive repairs.Tony returned the boat to the sales representative for the repairs,only to learn the salesman denied knowing anything about a six-month warranty.If Tony sues,discuss the likely outcome.
Q2) List the types of agreements that are within the statute of frauds and explain the consequences if the parties do not comply with the requirements of the statute of frauds.
Q3) When a contract falls within the statute of frauds but is not reduced to a writing,the contract is:
A) illegal.
B) unenforceable.
C) void.
D) voidable.
Q4) Explain the reason behind having a statute of frauds and give arguments for and against having such a statute.
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Page 17
Chapter 16: Third Parties
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Q1) Contract prohibitions against assignments are invalid as a matter of public policy.
A)True
B)False
Q2) First Bank has agreed to loan Teresa $10,000 for use in her cosmetics business.If Teresa sells the business to Melissa before the loan is disbursed,Teresa can assign her right to the loan to Melissa.
A)True
B)False
Q3) Robert hired James,a CPA,to prepare his tax returns.James was too busy and delegated the work to Sara,also a CPA.This delegation is:
A) enforceable, as Sara is also a CPA.
B) enforceable, as there was no expectation James would do the work.
C) not enforceable, as Robert hired James to perform personal services.
D) not enforceable, as this violates public policy.
Q4) An assignment is effective from the moment it is made,regardless of whether the assignor notifies the obligor.
A)True
B)False
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Page 18
Chapter 17: Performance And Discharge
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Q1) Name and describe the types of conditions,explain how conditions are created,and discuss whether it is important to identify the type of condition in a contract.
Q2) Assume that Jessie and Lester have formed a contract whereby Jessie agrees to deliver 10,000 dozen "Grade A Large Eggs" to be shipped in recycled paper cartons.A shortage of paper makes paper cartons much more expensive,so Jessie uses styrofoam cartons and ships the eggs.Lester is entitled to cancel the contract based on this deviation of terms in the contract.
A)True
B)False
Q3) If a condition does not occur:
A) public policy will require only substantial performance by the party for whom the condition failed.
B) the requirement of good faith will be eliminated.
C) one party will probably be discharged without performance being required.
D) it is considered an anticipatory breach.
Q4) What does the term "substantial performance" mean? What factors are generally considered when determining whether one of the parties has substantially performed?
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Chapter 18: Remedies
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Q1) Larry purchased a Leisure Lawnmower because the company salesperson intentionally misled him by assuring him that the mower was self-propelled,had a mulching feature,and had a five-year unlimited manufacturer's warranty.When Fred finds out that his new Leisure Lawnmower is not self-propelled,does not mulch,and has a 90-day warranty,he may successfully sue for:
A) reformation of the contract only.
B) restitution only.
C) restitution and possibly punitive damages.
D) compensatory damages only.
Q2) In breach of the partnership agreement,Trimble,a partner in the partnership of Morris,Newt,and Oppie,Ltd.quits the partnership and goes to work for a competitor.The former partners may ask the court for:
A) specific performance requiring Trimble to return to work for Morris, Newt, and Oppie, Ltd.
B) an injunction to prevent Trimble from working in competition with the former partners.
C) special damages under the rule of Hadley v. Baxendale.
D) liquidated damages as compensation for the breach.
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Page 20
Chapter 19: Practical Contracts
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Q1) Emily runs a children's clothing boutique which takes in local homemade items on a consignment basis.Her standard form contract indicates that Emily has the right to put items on sale without prior approval,but does not specify what effect the sale has on the consignor's payment percentage.Her intent is to keep the same profit she would have had without the sale.She is using ambiguity in her contract to increase her sales and profit.
A)True
B)False
Q2) Standard provisions in a contract that are often listed under the heading "Miscellaneous" are called:
A) boilerroom.
B) boilerplate.
C) boilerpot.
D) boilertape.
Q3) If you have an established relationship with a buyer,you can sell small tracts of land without a written contract.
A)True
B)False
Q4) Outline the parts of a typical contract.
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Chapter 20: Introduction To Sales
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Q1) Jasmine agrees to purchase 1500 tons of recycled glass from Louie,the price to be determined at the time of delivery.Is such an agreement enforceable? Compare the common law with Article 2 of the UCC.
Q2) Jones contracts to buy a computer from Martin for $1500.The contract calls for Martin to service the computer quarterly for the first year and to tutor Jones on how to use the software.Is this contract covered by the UCC or common law?
Q3) Patsy is shopping for a used car.She finds a car she likes at Morley Motors.Discuss the standard of conduct the UCC imposes on the parties in performing the sales transaction.
Q4) During the development of commercial law centuries ago,businessmen throughout England and Europe:
A) settled disputes in trade organizations rather than in civil courts.
B) relied on a body of rules which became known as the lex mercatoria.
C) began to treat their own customs as law.
D) All of the above.
Q5) The UCC imposes a duty of good faith in the performance of all contracts.
A)True
B)False
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Chapter 21: Ownership And Risk
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Q1) Dick steals Jane's camcorder and sells it to Sid.Jane can recover the camcorder from Sid:
A) under any circumstances.
B) only if Sid knew that the camcorder was stolen from Jane.
C) only if Sid did not know that the camcorder was stolen from Jane.
D) only if Sid paid less than the fair market value for the camcorder.
Q2) Buyer is located in Des Moines,Iowa and seller is located in Sacramento,California.The contract specifies F.O.B.Des Moines.This contract is a:
A) destination contract.
B) sale or return.
C) shipment contract.
D) sale on approval.
Q3) The term F.O.B.:
A) can indicate a destination or shipment contract.
B) stands for "freight on board."
C) requires the seller to insure the goods for the buyer's benefit.
D) shifts the risk of loss to the buyer when the goods are identified.
Q4) Only one party can have an interest in particular goods at a particular time. A)True
B)False
Page 23
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Chapter 22: Warranties And Product Liability
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Q1) An express warranty can be created by which of the following?
A) An affirmation of fact or promise.
B) A description.
C) A model.
D) All of the above.
Q2) Which of the following is not guaranteed under an implied warranty?
A) The goods are free of hidden security interests or liens.
B) The goods are not subject to a rightful claim by a third party.
C) The goods are merchantable.
D) The goods may be returned for a refund or replaced in the event of any defect.
Q3) A statute of repose places an absolute limit on when a lawsuit may be filed regardless of when the defect is discovered.
A)True
B)False
Q4) To prove an express warranty,courts require evidence that the buyer relied on the seller's statement.
A)True
B)False
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24
Chapter 23: Performance And Remedies
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Q1) A homeowner has a contract with a firewood supplier to bring a rick of hardwood at the beginning of each month from October through March.If the supplier has brought a mixture of hard and soft woods for the first three deliveries,the homeowner cannot reject a delivery in January just because it includes some soft wood.
A)True
B)False
Q2) When a party to a contract notifies the other party that it will not perform the contract as agreed,this conduct is referred to as:
A) specific performance.
B) cover.
C) repudiation.
D) assurance.
Q3) Liquidated damages are not permitted under the UCC.
A)True
B)False
Q4) Define these terms: usage of trade; course of dealing; and course of performance.
Q5) Identify seven possible remedies for a buyer when the seller breaches a contract.
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Chapter 24: Secured Transactions
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Q1) First Federal loaned Madeline $20,000 to purchase a new van.The van was for Madeline's personal and family use.First Federal's security interest is a purchase money security interest which perfects only upon filing a financing statement.
A)True
B)False
Q2) Wedney,Inc.sold a meat processing machine to Yoro Chickens,taking a security interest in the machine.Yoro Chickens defaulted on the loan.Wedney repossessed the machine.Wedney would like to retain the machine to use as a model.Which of the following statements is correct?
A) Wedney must notify the debtor that it intends to retain the machine and give Yoro 20 days to object.
B) By taking possession, Wedney automatically foreclosed on the collateral. Wedney has valid title and need do nothing else.
C) Since the machine is equipment, Wedney cannot retain the machine. Wedney must dispose of the collateral in a commercially reasonable manner.
D) Wedney can retain the machine but must pay Yoro the surplus, the difference between the fair market value of the machine and the amount of the debt.
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Chapter 25: Creating A Negotiable Instrument
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Q1) A draft is always a check,but a check is not always a draft.
A)True
B)False
Q2) Margo is in possession of a check issued to her by Felix.The check states,"Pay to the order of Margo." If Margo wishes to transfer the check to Pete to pay a debt she owes him,all she needs to do is strike out her name on the front of the check,write in Felix's name and give it to him.
A)True
B)False
Q3) Charlene Brown has possession of a check made out to the order of Charlene Brown (herself)which she received in payment for writing a manuscript for her publisher.Charlene is a holder in due course and the publisher cannot claim any "real" defenses to payment.Charlene has an unconditional right to be paid for the check.
A)True
B)False
Q4) A claim in recoupment can be used against a holder in due course.
A)True
B)False
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Chapter 26: Liability For Negotiable Instruments
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Q1) Jessie is the maker of a $1000 promissory note in favor of Tyler.Tyler subsequently indorses the note to Ryan by signing just his name.Ryan in turn indorses it to Breanna by indorsing the back of the note,"Without recourse,Ryan." Breanna then indorses it to Liz,the present holder,with a special indorsement.
If Liz collects payment from Tyler,then Tyler can demand payment from:
A) Ryan and Breanna.
B) Ryan only.
C) Jessie only.
D) Breanna only.
Q2) A drawee has primarily liability on a draft.
A)True
B)False
Q3) Sandy may be charged a fee,but will not face criminal penalties for writing checks on an account with insufficient funds to pay them.
A)True
B)False
Q4) List the warranties a transferor of a negotiable instrument makes.
Q5) Explain when presentment warranties apply.Identify the presentment warranties on a check and a promissory note.
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Chapter 27: Accountants' Liability
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Q1) Halbeck,LLC was negligent in its audit of E-treme,Inc.Unbeknownst to Halbeck,E-treme used the financial statements to secure a loan from Great State Bank.Under the Ultramares doctrine,Halbeck will be liable to Great State Bank for its losses on the loan.
A)True
B)False
Q2) Ron is an accountant who was contacted by Zebra Toy Company to prepare financial statements.Zebra Toy Company told Ron that it wished to present these documents to Lion Wholesalers,Inc.,a large supplier of toys.If Lion is convinced that Zebra Toy Company is financially solid,it will issue Zebra a large line of credit. After Ron prepares the financial documents,Zebra presents the information to Lion Wholesalers and also to Tiger Toy Company,another wholesaler of toys.Zebra wishes to obtain a line of credit from Tiger as well as from Lion.If Ron committed a serious error by overstating Zebra Toy Company's financial soundness and the two creditors,Lion and Tiger,are damaged as a result,can these third parties recover damages from Ron? Explain.
Q3) Discuss the advantages and disadvantages of using IFRS.
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Chapter 28: Agency Law
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Q1) If apparent authority is present,the principal is liable for even the unauthorized acts of the agent.
A)True
B)False
Q2) Andrew has been hired to do some work for Rossi Enterprises.What factors would a court consider in determining if Andrew is an employee or an independent contractor? Why does the designation matter?
Q3) As a general rule,an agent is liable on contracts entered into on behalf of a fully disclosed principal.
A)True
B)False
Q4) Betsy's elderly father gave her written authority her to sell the family house.Her father lived in Arizona and she lived in Minnesota.After about two months she found a buyer for the house and signed an acceptance of the offer on March 21.Later that same day she learned her father had died the day before (March 20).Other members of the family did not want the family house sold and claimed that the acceptance Betsy signed was void.The buyer of the house claims Betsy had the legal authority to sell the house and that the contract is binding.Who is right?
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Chapter 29: Employment Law
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Q1) During the hiring interview,Supervisor Staci told Henry that as long as he did his job as requested,he would have a job until he retired.Courts have been willing to enforce such an oral promise under the Truth in Hiring doctrine,even if the company's top management did not approve the statement.
A)True
B)False
Q2) Wrongful discharge claims are generally based upon all EXCEPT:
A) public policy.
B) criminal law.
C) contract.
D) tort law.
Q3) Does the Family and Medical Leave Act apply to professionals like CPAs?
A) Yes, if they work for a company with at least 50 workers.
B) Yes, but only if they are paid on an hourly basis.
C) No, but the professional firm must provide adequate vacation and sick days.
D) No, unless the employer specifically provides coverage.
Q4) Some courts have held that employee handbooks create binding contract terms.
A)True
B)False
Q5) Discuss the requirements of the Family and Medical Leave Act.
Page 31
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Chapter 30: Labor Law
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Q1) Zoe,who works as a retail clerk,wishes to talk with her co-workers about organizing a union.Her employer forbids her from talking with other workers about union activity in the presence of customers and threatens to fire her if she joins the union.Does the employer have a legal right to make this threat to Zoe?
A) Yes, the employer may limit time and place of discussions about union organizing.
B) Yes, but only if expressly authorized by state law.
C) No, an employee has the right of free speech at anytime.
D) No. An employee may limit the time and place of conversation, but may not threaten to fire the employee.
Q2) The workers at Thom Trucking went on strike over wages.Thom Trucking may hire permanent replacement workers.
A)True
B)False
Q3) If employees wish to organize a union,the employer is prohibited from distributing written notices to employees stating it is opposed to union activity within the company.
A)True
B)False
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Chapter 31: Starting A Business
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Q1) In order to obtain limited liability,Tom and Doris formed an LLC to operate their catering business.They sometimes deposited the proceeds from catering jobs into their personal checking accounts and if they needed to pay personal bills and were short of funds,they used the business account.If creditors of the business cannot get payment for their invoices,is there anything a court can do to help the creditors?
Q2) Compare and contrast the following forms of business organization: sole proprietorship,general partnership,limited partnership,limited liability company,and corporation as to ease of formation,liability of owners,management,and tax implications.
Q3) Briefly discuss the limitations on a corporation electing Subchapter "S" status.
Q4) Seventy farmers in Morgan County joined together to gain the advantages of purchasing seed and fertilizer in bulk and of obtaining better prices when distributing and selling their crops.These farmers have formed a: A) business trust. B) cooperative.
C) franchise.
D) joint venture.
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Chapter 32: Partnerships
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Q1) Nicholas and Holly are partners in a toymaking shop.If Rudolph obtains a judgment against Nicholas for injuring Rudolph while Nicholas was on partnership business,Rudolph must try to collect from the partnership before going after Nicholas' personal assets.
A)True
B)False
Q2) Kayla and Marshall formed a partnership.Marshall incurred a debt in the ordinary course of the partnership business.If the debt is not paid,the creditor may sue:
A) only Marshall.
B) only the partnership.
C) the partnership and the partners together or in separate lawsuits or in any combination.
D) only Marshall and the partnership in a lawsuit together or the creditor loses any right to sue the partnership.
Q3) Lily is involved in the winding up of her partnership.Lily is not entitled to compensation for her work since she is a partner.
A)True
B)False
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Chapter 33: Life And Death Of A Corporation
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Q1) Incorporators are required to sign the charter,deliver it to the proper state officials,and purchase a certain percentage of the initial stock offering.
A)True
B)False
Q2) Preemptive rights are:
A) not legal in the majority of states.
B) designed to prevent dilution of a shareholder's ownership in the company.
C) required to be offered to shareholders by the Model Act.
D) designed to indemnify managers who act in good faith.
Q3) Which of the following statements is correct?
A) Bonds are long-term debt secured by company assets.
B) Debentures are long-term unsecured debt.
C) Notes are short-term debt and may be secured or unsecured.
D) All the above are correct.
Q4) In Delaware,lawsuits involving corporations are tried in a special court called:
A) corporate court.
B) CEO's court.
C) common court.
D) chancery court.
Q5) Discuss how a corporation is terminated.
Page 35
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Chapter 34: Corporate Management
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Q1) Major Corporation wants to acquire control of Forte Company.What are some legal steps Forte can take to resist a hostile takeover?
Q2) Which of the following must be approved by the shareholders if a company is attempting to avoid a hostile takeover bid?
A) White knights.
B) Staggered board of directors.
C) Supermajority voting.
D) All the above.
Q3) One of the directors of Independent Pallet Mill purchases 100 acres of timberland.In order for him to sell the timber from this land to Independent,what must he do? If he does not act properly in this situation,what duty would he violate,and what would be the result?
Q4) List and discuss the three ways to acquire control of a corporation.
Q5) In the Unocal Corp.v.Mesa Petroleum Co.case,the court said the board of directors could act with the primary goal of keeping themselves in office.
A)True
B)False
Q6) What is the definition of the business judgment rule?
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Chapter 35: Shareholders
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Q1) The proceeds,if any,of a derivative lawsuit go to:
A) the shareholders of the corporation.
B) the shareholders who actually filed the lawsuit.
C) the board of directors.
D) the corporation.
Q2) A majority of shareholders of FamLi Co.wish to expel Glenn,a minority shareholder.In most states,the company cannot expel Glenn unless:
A) it pays a fair price for Glenn's stock.
B) there is a legitimate business purpose for expelling him.
C) Both of the above.
D) Neither a nor b
Q3) If directors serve on the boards of multiple corporations,the executives of those corporations are less likely to be overpaid.
A)True
B)False
Q4) Loraine is a shareholder of Taley Corp.She would like to inspect and copy the company's minute book,accounting records,and shareholder lists.Under what circumstances is Loraine allowed to inspect or copy corporate records?
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Chapter 36: Securities Regulation
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Q1) Larry was working at his job at the landfill when he got off his tractor to take a break.He noticed some papers on the ground and went to throw them on a trashpile.As he held the papers he saw a confidential report from MegaCorp stating it would be announcing the development of a new super computer in two weeks.Larry has no relationship with MegaCorp.Larry mortgaged his house and borrowed all the money he could to purchase $200,000 worth of MegaCorp stock.Larry bought the stock for $32 a share.When the announcement was made public,MegaCorp's stock skyrocketed.Larry sold his stock a few weeks later and made a huge profit.Larry has:
A) committed a criminal act.
B) violated SEC regulations but not the criminal law.
C) committed an act of improper insider trading.
D) done nothing legally wrong.
Q2) Jackie learned of insider trading information while talking to Mark,a director of a large corporation.She took advantage of the information to buy stock and make a huge financial gain.If she is accused of violating securities law,what must the government prove in order to gain a conviction against Jackie?
Q3) The Securities Act of 1933 established the Securities and Exchange Commission. A)True B)False
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Page 38
Chapter 37: Bankruptcy
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Q1) Forever Yours,Inc.has a secured and perfected security interest in Sally's big-screen TV.On the filing date of Sally's Chapter 7 petition,the balance of the debt owed to Forever Yours is $2,000.The value of the TV is estimated at $1,500.This means that Forever Yours: A) is secured for the entire debt, $2,000. B) is unsecured for $500, the excess of the debt over the value of the TV. C) has a high priority claim of $500. This means that Forever Yours, Inc. will be allowed $500 worth of other unsecured property before other unsecured creditors get anything. D) is unsecured for the entire debt.
Q2) Which of the following is a primary goal of bankruptcy:
A) to preserve as much of the debtor's property as possible. B) to divide the debtor's assets fairly between the debtor and the creditors. C) to divide the debtor's assets fairly among the creditors.
D) All of the above.
Q3) Creditor claims are divided into classes and the highest class must be satisfied in full before going to the next category.
A)True B)False
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Chapter 38: Antitrust
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Q1) Under modern antitrust law analysis,a company with a market share between 70 and 90 percent has a monopoly.
A)True
B)False
Q2) Explain horizontal price-fixing and vertical minimum and maximum price-fixing.Discuss their status under antitrust laws.
Q3) The traditional formula for determining damages for a violation of the Robinson-Patman Act was to:
A) calculate the estimated amount of lost profits.
B) determine the difference between the two prices and multiply the difference by the number of units purchased.
C) allow a jury to determine the amount of punitive damages without using any particular formula.
D) All the above.
Q4) Reciprocal dealing is a type of vertical cooperative strategy. A)True B)False
Q5) Discuss when monopoly power is not a violation of Section 2 of the Sherman Act.
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Chapter 39: Consumer Law
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Q1) The FTC may consider an act unfair if it simply violates public policy.
A)True
B)False
Q2) The Magnuson-Moss Warranty Act covers all consumer products regardless of their cost.
A)True
B)False
Q3) Victoria has a MasterCard with a credit limit of $9,000.This is:
A) open-end credit.
B) closed-end credit.
C) an installment loan.
D) a secured debt.
Q4) Such a provision within the credit card contract is:
A) unconscionable.
B) an illegal contract of adhesion.
C) not binding, as a person cannot waive the statutory rights granted to him by federal credit card legislation.
D) valid unless state legislation prohibits such clauses.
Q5) Explain the difference between a debit and a credit card and discuss the potential liability for a lost or stolen card.
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Chapter 40: Environmental Law
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Q1) Acid rain is caused primarily by:
A) sulfur emissions from coal-burning utility plants.
B) automobile emissions, especially from large cities.
C) pesticides.
D) large-scale farming operations that raise livestock.
Q2) Local regulation is more effective than state or federal regulation in controlling air pollution.
A)True
B)False
Q3) The Clean Air Act of 1970 directed the EPA to reduce automobile pollution levels by:
A) 50 percent within 10 years.
B) 75 percent within 8 years.
C) 90 percent within 6 years.
D) 80 percent within 20 years.
Q4) The Environmental Protection Agency (EPA)was created by Congress to:
A) consolidate environmental regulations under one agency.
B) protect corporate investors.
C) prevent conflicts between the Departments of Commerce and Interior.
D) eliminate discrimination.
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Chapter 41: Cyberlaw
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Q1) Unsolicited commercial e-mail (UCE)or unsolicited bulk e-mail (UBE)messages:
A) are commonly known as "cookies."
B) constitute about 80 percent of all e-mail.
C) are estimated to be fraudulent either in content or packaging in approximately one-fourth of all cases.
D) although annoying, do lower the cost of connecting to the Internet.
Q2) After Ashley was denied credit for a new car,she checked her credit report with Equifax.The report showed that several credit cards had been issued to her recently,and they had large,unpaid balances.Ashley had not applied for or received these cards.She found out that someone had stolen personal information she had entered onto her computer and used the information to fraudulently obtain the credit cards.Ashley:
A) is a victim of identity theft.
B) is protected under the Identity Theft and Assumption Deterrence Act.
C) can seek restitution in court.
D) All of the above.
Q3) Consumers have been active in requesting government regulation of web data collection to protect their privacy.
A)True
B)False
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Chapter 42: Intellectual Property
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Questions
Q1) James and his band played a very familiar song.However,they made up different words for the song that were intended to be funny.James's version of the popular song with different words is known as:
A) a "knock off."
B) a parody.
C) a "mockarama."
D) a "link."
Q2) A company's trade secret lasts for:
A) 20 years after the application is filed.
B) 70 years after the death of the creator.
C) 10 years, but it can be renewed for an unlimited number of terms as long as it is used. D) as long as it is kept confidential.
Q3) The name "Johnson Garage Doors" cannot be a trademark because a surname is already being used and other people have the right to continue to use the name.
A)True
B)False
Q4) Briefly discuss a patent,copyright,and trademark.
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Chapter 43: Real Property And Tenant-landlord Law
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Q1) The purpose of recording a deed or other real estate transaction is to:
A) establish the rights between the grantor and the grantee.
B) assure the grantee that a transfer of real property is now complete.
C) establish the type of deed granted (i.e. warranty deed, special warranty deed, or quitclaim deed).
D) put the rest of the world on notice that the transaction occurred between the grantor and the grantee.
Q2) Which of the following types of concurrent ownership does not provide for rights of survivorship?
A) Joint tenancy.
B) Tenancy in common.
C) Tenancy by the entirety.
D) All of the above provide for rights of survivorship.
Q3) The city of Richmond needs land owned by the Neelans to expand a middle school.The Neelans do not want to sell.Discuss what course of action the city can take and the basis for this action.
Q4) Sandra and Joe own a hobby farm as tenants in common.They also own a vacation home as joint tenants.What is the difference between the tenancy in common and joint tenancy?
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Chapter 44: Personal Property And Bailment
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Q1) Select the correct answer:
A) Rosie rents a locker at the airport, and she puts a bag in the locker. Rosie keeps the locker key. In this case, the bag has been delivered to and accepted by the airport. The airport is a bailee.
B) Hill rents a boat to Dan. The boat is located at a lake 30 miles away. Hill gives Dan keys to the boat. Dan drives to the lake and takes possession of the boat. In this case, the boat has been delivered to and accepted by Dan, and Dan is a bailee.
C) Unknown to Lon, Jeff left a bike at Lon's house. Lon has not found the bike and he is not likely to find it because Jeff left the bike under the front porch. In this case, Lon is a bailee of the bike.
D) Ken parked a car in a self-service lot and Ken kept the keys. The parking lot is a bailee.
Q2) Most of the goods contained in a freight train (a common carrier)were destroyed when a tornado wrecked the train.The carrier was sued for damages by all the shippers that had merchandise on the train.Is the carrier strictly liable for the damage done to the goods by the tornado?
Q3) Discuss a bailor's liability for defects in the bailed property.
Q4) Distinguish between a contract and a gift.Give an example of each.
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Chapter 45: Planning For The Future: Wills,Trusts,And
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Q1) Property of a person who dies without a will is distributed according to intestacy laws. A)True
B)False
Q2) Legal requirements for a will depend on state law,but generally include all but which of the following?
A) A writing.
B) Signatures of at least three witnesses.
C) The testator's signature.
D) Witnesses who will not inherit under the will.
Q3) Dr.Gavornne advises his very ill patients to prepare a living will.The purpose of a living will is:
A) to make a disposition of property.
B) to express a desire not to have extreme medical treatment that would prolong their lives.
C) to transfer life insurance.
D) to consent to organ donation.
Q4) An executor who is related to the testator is not entitled to compensation.
A)True
B)False
47
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