business law midterm 2

An agent contracted with a third party on behalf of the principal, but went beyond both his actual and apparent authority. The third party was never paid. Which of the following indicates the legal position of the third party? a. He can successfully sue the principal because the principal is always liable for the actions of his agent b. He can successfully sue the agent for breach of warranty of authority if the principal fails to ratify the contract c. Since the agent had no authority, the third party has no remedy against anyone d. He can ratify the deal and force the principal to go through with it e. He can sue for the tort of nuisance

b

Which of the following is considered to be a separate legal person in law? a. a sole proprietorship b. a partnership c. a corporation d. an agency e. a professional practice

c

If Mills agreed to sell the Boothe a used Nissan automobile, which in the contract was described as a 2012 Nissan Murano with a rebuilt transmission, Boothe could sue for_______________ if the vehicle turned out to be a 2010 Murano and the transmission was used, not rebuilt a. rescission b. compensation c. breach of contract d. damages e. the tort of decit

c

Privity of contract applies in which of the following situations? a. where an interest in land is involved b. where a trust in involved c. where an insurance contract is involved d. where goods are being sold e. where a trust has been created

d

Which of the following is an example of duress? A) Joe refuses to sell his car to Harry unless Harry offers him more money B) Joe, knowing of Harry's financial situation, refuses to sell him his car C) Joe counter-offers Harry's original offer D) Joe wants to purchase Smith's car from him, and Smith sells it to someone else E) Joe threatens to smash Harry's car if Harry won't sell it to him

E

A fraudulent misrepresentation which induces another person to enter into a contract can result in which of the following remedies? a. Rescission and/or an damages b. rescission only c. damages only d. rectification e. there is no remedy available for fraudulent misrepresentation

a

Al sells gravel to Bob on credit, Bob sells it to Chuck, an innocent purchaser. Then Bob runs away with the money, without paying Al. who will get eh gravel if the court holds that that the contract between Al and Bob was "void"? a. Al b. Bob c. Chuck d. Al and Bob e. Bob and Chuck

a

Connie enters into an agreement with Razmin, a local artist, to showcase a particular art show. The day before the show, the gallery where the sculpture was being stored burns to the ground. Which of the following represents the most likely outcome? a. The contract has been discharged through frustration b. Razmin has breached the contract b y failing to deliver the sculpture c. Razmin can simply provide a different sculpture to satisfy the contract d. Connie will need to pay Razmin the same price agreed to in the contract, because the fire was not Razmin's fault e. The contract is void

a

Damages as a remedy will not be available in which of the following situations? a. Jones, although being careful, makes an innocent misrepresentation persuading Smith to enter a contract with him b. Jones makes a fraudulent misrepresentation, persuading Smith to enter a contract with him c. Jones makes a negligent misstatement, persuading Smith to enter a contract with him d. A false statement made by Jones becomes a term of the contract e. Jones makes an intentional misrepresentation of the fact in order to get Smith to sign the agreement

a

Specific performance involves a court order to do something (to perform the contract), whereas a(n) ______________ usually involves an order to refrain from some offensive conduct a. injunction b. damages award c. equitable remedy d. quantum meruit award e. limitation period

a

The major problem with _________________ is the need to establish that the person being sued knowingly misled the victim a. fraudulent misrepresentation b. innocent misrepresentation c. negligent misrepresentation d. undue influence e. decit

a

The principle of substantial performance can best be described as which of the following? a. All or most of contractual obligations are fulfilled b. A major term of the contract is most likely fulfilled c. Minor terms of the contract are yet to be fulfilled d. Minor terms of the contract are disregarded e. Only exact compliance with the contract will qualify as performance

a

When a contract anticipates some catastrophic event, such as a riot, invasion, earthquake or flood, that will interfere with the performance of the contract this is referred to as a a. Force majeure clause b. condition precedent c. "subject to" clause d. condition subsequent e. frustration clause

a

When an anticipatory breach has taken place (where a person, before performance is due, states that he will not perform the contract) a. The victim may sue immediately and not wait to see if the contract is performed or not b. The victim must wait to see if the contract is performed, but damages are calculated from the time of refusal c. The victim can get someone else to do the job but then cannot sue the original party to the contract if it costs more d. Such a statement made before performance is due has no effect on the contractual obligations of the parties e. The victim may not be able to recover damages that occur after the anticipatory breach

a

When the courts find that undue influence is present, the resulting contract is a. voidable b. void c. unenforceable d. binding e. illegal

a

Which of the following is correct with respect to the ratification of an agent't contract? a. A principal can ratify a contract where the agent has gone beyond both his actual and apparent authority b. A principal can only ratify an agreement entered into by an agent if his name has not been used c. When a contract entered into by an agent is ratified by a principal ratifies the contract d. The agent can set a time limit within which the ratification must take place e. A contract can only be ratified if the principal was not able to enter into the contract herself at the time of ratification

a

Which of the following is false with regard to exemption (exclusion) clauses? a. Such clauses are prohibited in any sale of goods contact b. To be a part of the contract, such clauses must be brought to the attention of the parties before or at the time of the contract c. Even if there is an exemption clause in the contract, the court can hold that the exemption clause is of no effect if the branch is a "fundamental breach" d. Where there is no exemption clause in a contact, the court will strictly construe that clause; i.e., the wording of the clause must cover the situation that occurred e. An effective exemption clause is a barrier blocking the party wronged from his or her remedy eg. from damages

a

Which of the following mistakes voids a contract? a. Two parties contract from a shipload of coal, but unknown to both parties, at the time of the contract the ship had sunk and the coal had been lost b. Sally and Wacky had a serious misunderstanding about a term in the contract; the court found that the more reasonable interpretation was that of Sally c. Two parties contracted for the sale and purchase of a painting for the price of $800. When the contract was written up; the price was incorrectly stated as $900 d. Sam bought three gallons of paint, but found he had made a mistake; two would have been sufficient e. when Mr. and Mrs. Houston put their property up for sale, Sam without speaking to the Houston's or their agent about the land, offered close to the asking price because he thought it was suitable for growing wheat. after his offer was accepted, he learned it was not suitable for growing wheat

a

A and B entered into a contract for the purchase and sale of three grams of cocaine. B delivered the goods, but A didn't pay. if B sued for payment, the court would not enforce the contract because of which of the following? a. Mistake b. Illegality of object c. rescission d. non est factum e. rectification

b

Damages are availaable as a remedy where the misrepresentation has become a term of the contract that is breached, where the misrepresentation is ______________, and where there is negligence a. innocent b. fraudulent c. negligent d. material e. actionable

b

If an agent breaches his duty to his principal, his principal can sue the agent successfully for a. breach of warranty of authority b. breach of the agency agreement c. breach of agency act d. wrongful representation e. the tort of decit

b

In Meditek Laboratory Services LTD v. Purolator Courier LTD, a purolator employee delivered equipment to the wrong address and then falsified the documents. In a subsequent lawsuit, purolator relied on an exemption clause that limited its liability "whether or not from negligence or gross negligence" what properly describes the outcome of this case? a. The falsification of the documents was done by the employee, not the company itself , so purolator could not be liable b. The falsification of the documents was wilful, bot negligent, so purolator was not protected by this clause c. The exemption clause protected purolator because of the principle of "freedom of contract" d. The exemption clause was severed as being an illegal restraint of trade e. The exemption clause was not applied, becuase it was not evidenced in writing

b

Which of the following statements accurately describes the operation of a condition precedent? a. This occurs when one party shows up at the right time and place ready, willing, and able to carry out his obligations under the contract b. This is a term is a contract that must be met before the contract becomes fully operational c. This occurs when some event that the parties have not anticipated makes performance radically different from what they agreed to d. There is no such thing recognized in the common law

b

_________________ occurs when the court orders the defaulting party to live up to the terms of the contract a. An injunction b. Specific performance c. An accounting d. Quantum meruit e. Compensation

b

Fred and Carole were trying to create a list of the pros and cons of sole proprietorship, partnership, and corporation to determine the best structure for carrying on business. Which of the following is true in regard to being a general partner? a. A partner is liable for only the amount than he or she invested in the partnership firm b. Every general partner faces limited liability for the debts of the partnership c. Each partner is an agent for every other partner and of the firm itself, so a partner may be liable for the contracts made by an incompetent partner e. Retiring from a partnership by giving notice to his partners frees a partner from liabilities he faced while being a partner of the firm

c

Identify the true statement concerning the law of principal and agent a. Agency is only created by way of contract b. The principal and his agent owe each other the same duties c. An agent who puts himself in a position where his interests conflict with those of his principal is in breach of his duties even though no actual harm comes to his principal d. An agent with no express authority can never bind his principal into a contract with a third party e. An agent can never be liable to the third party himself while the principal will bear no such liability

c

If a contract states that the contact is "subject to the purchaser obtaining financing for $10,000 at 8% by 5:00pm, Friday , march 11" it means a. If the purchaser does not obtain the financing, he is in breach of contract b. If the purchaser does not obtain the financing, the contract is frustrated c. If the purchaser does obtain the financing and properly notifies the seller, the contract is then in full force and effect d. there is a contract whether the purchaser gets financing or not, because the statement is just a statement of intention and doesn't affect the contract e. the obtaining of financing is a condition subsequent and ends the contract

c

Sam hires Joe to negotiate and sign a contract with Ken on Sams behalf. Which of the following is true a. If Joe acts outside his express authority and negotiates and signs the contract with Ken, Sam may not be a party of the contract b. If Joe acts outside his implied authority, Sam will owe him for his services c. If Joe acts within his apparent authority, but outside his express or implied authority, Sam will be bound by the contract, but may sue Joe for breach of his agency contract d. If Joe acts outside express, implied, and apparent authority, Sam is not bound by the contract, even if he ratifies the contract e. If Joe acts outside his express, implied and apparent authority, he could be sued by Sam, but not by Ken, because he has no contractual relationship with Ken

c

Which of the following is correct with respect to an agent's performance of his duties? a. The agent may profit at the expense of the principal, if the agent comes into some previously unknown information b. The agent must never take advantage of the third party c. The agent must never compete with the principal d. When an agent fails to act in the best interest of the principal and is an independent contractor, this is just cause for constructive dismissal e. The principal need not reimburse the agent for any reasonable expenses incurred in the process of performing the agency responsibilities

c

Which of the following is correct with respect to the creation of a partnership agreement? a. Where two people agree to enter into a partnership, there is no partnership created unless all of the elements of a contract are present b. A partnership can be created only by contract c. For a partnership to exist, the relationship giving rise to it must be of an ongoing business nature, not a one-time promotion d. A partnership can be created by an intention to share the revenues between partners e. For a person to be a limited partner, there must be at least two general partners

c

With regard to the law concerning misrepresentation, which of the following is true? a. the case law allows a remedy for an opinion given by a non-expert b. a misrepresentation can be a true assertion of fact that induces (persuades) the party to contract c. if the buyer realizes the seller persuaded him to contract by misrepresentation, he will not be able to get the remedy of rescission if he was tainted with wrongdoing himself, i.e., not coming with "clean hands" d. damages as a remedy are not available where the misrepresentation becomes part of the contract e. rescission is available as a remedy for misrepresentation only if it is innocent misrepresentation

c

If a third party relies on the principals representation that the agent has the authority to act, which of the following is true? a. the principal can claim the agent had no authority b. the agent is solely liable for the conduct if it results in injury to the third party c. the principal can claim estoppel d. the principal cannot claim the the agent had no authority e. the agent can sue the principal for breach of contract

d

In certain cases a third party can hold a principal to a contract even though the agent acted outside the authorization given him by his principal and even though his principal elected not to ratify the contract made by the agent. The third party can enforce the contract because of a. the reasonable agent theory b. agency by express agreement c. the failure of the principal to register the agency agreement d. the agents apparent authority e. fiduciary duty

d

Mr. Frank, a foreman supervisor some 43 employees, was asked by his secretary to sign a form requesting additional supplies needed on the factory floor. He was not careless when he examined the form, but his secretary had cleverly arranged the signature line so that instead of signing a request form for supplies he signed a cheque payable to his secretary. What plea, if any, would be used to defend against her action on the cheque? a. Mistake b. Illegality of object c. Rescission d. Non est factum e. Rectification

d

Sole proprietors can look only to their own resources to finance the business operation; they cannot sell shares and are restricted to their own _______________ standing when borrowing money to finance the business a. asset b. debt c. profit d. credit e. retained earnings

d

Suppliers of goods and services try to eliminate their liability, and the courts have discouraged this by applying the principle that some failures are so significant that there is no performance of the contract, This concept is know as a. repudiation b. frustration c. anticipatory breach d. fundamental breach e. exculpatory clause

d

When two parties are involved in a misunderstanding as to the meaning of a term of the contract, which of the two following is usually applied by the court to settle the matter? A) The court will find that there is no contract because there is no meeting of minds B) non est factum C) caveat emptor D) the most reasonable interpretation of the terms E) the equitable remedy of rectification

d

Which of the following is a violation of the fiduciary duty of a partner? a. Where one partner uses information he has gained from the partnership for the advantage of the partnership b. Where a partner uses the partnership property for partnership business c. Where one partner carries on an business unrelated to the partnership with the permission of the partners d. Where one partner starts another business without the consent of the other partners which is the same as or in competition with the partnership business e. Where one partner learns of an investment opportunity in the field of the partnership and tells the partners. The partners decline on the opportunity, so he takes advantage of himself

d

Which of the following is an example of an agent as opposed to an employee a. Joe worked in the mail room of Smith Textiles, sorting mail b. Joe worked as a mechanic for Smith Used Cars LTD c. Joe worked as a janitor for Smith Textiles d. Joe worked a the purchasing agent for Smith Textiles LTD e. Joe worked as a delivery driver for Smith Textiles LTD

d

Which of the following statements is true with regard to an agents duties a. a real-estate agent may buy property from a third party if it is at a good price and then sell the property to his principal at a higher price b. an agent is not entitled to the agreed-upon commission and reasonable expenses undertaken on behalf of his principal in carrying out his duties c. an agent cannot act for two principals even with the knowledge and consent of those principals d. an agent msut always scrupulously account for the money coming into her hands on behalf of his principals e. an agent need not disclose all relevant information to the principal

d

A contract is terminated by agreement in which of the following situations? a. Breach b. frustration c. unilateral release d. a written statement by one party to cancel an accepted order e. the occurrence of a condition subsequent

e

A principal is not bound in contract with the third party with whom the agent dealt if the agent is a. within her express authority b. within her implied authority c. within her apparent authority d. outside her authority but the principal ratified it e. outside her actual and apparent authority

e

An agency relationship can be created by a. actual authority b. estoppel c. ratification d. apparent authority e. all of the above

e

It came to your attention that your great-grandmother had signed a contract pursuant to which she would be paying $5000 for an electronic organ that retails in reputable stores for $3000. Furthermore, the interest being charged is 18%, even though todays fell to a 20-year low. This debt is totally out of line with her pension income. It is apparent that she was misled by the door-to-door salesperson who came to her place. On these facts, which of the following laws is most likely to help her? a. undue influence only b. unconscionability only c. misrepresentation only d. non est factum e. both unconscionability and misrepresentation

e

Mr. Copperfield, a collector of movie memorabilia, bid $50,000 on the batmobile. After taking delivery, he discovered the car was not actually the car used in the film "Batman". it was merely one of five cars used to promote the film. He is suing the seller, Mr. Eisenberg. In which of the following cases would Mr. Copperfield not be entitled to a remedy? (assume that in each case the facts could be proven.) a. fraudulent misrepresentation by Mr. Eisenberg b. innocent misrepresentation by Mr. Eisenberg c. breach of contract by Mr. Eisenberg d. negligent misrepresentation by Mr. Eisenberg e. unilateral mistake by Mr. Copperfield

e

The claim of frustration is not available in which of the following circumstances? a. The subject matter of the agreement is destroyed b. An event that forms the basis of the contract does not take place c. The law changes, making performance illegal d. A government policy prevents performance e. A change in circumstances makes it difficult or more costly for one of the parties to perform

e

Which of the following is correct with respect to the agency relationship? a. Agents are those who act on behalf of others but are not employees b. The agency relationship must be created by contract c. No agency can be created without the consent of the principal d. For an agency contract to be valid, it must be in writing e. An agency agreement in writing and under seal is called a power of attorney

e

Which of the following statements describes the operation of a condition subsequent? a. This occurs when one party shows up at the right time and place ready, willing, and able to carry out his obligations under the contract b. This is a term is a contract that must be met before the contract becomes fully operational c. This occurs when some event that the parties have not anticipated makes performance radically different from what they agreed to e. There is a term in the contract that provides for the premature cessation (ending) of the parties' obligations upon the occurrence of some particular event

e

Which of the following statements is correct with respect to sole proprietorship? a. The sole proprietor has limited liability b. The sole proprietor need not adhere to any licensing and government regulations c. The sole proprietor must consult with other owners before making any major decisions regarding the business d. The sole proprietor has the same extent of liability as a shareholder e. The sole proprietor is responsible for the torts committed by an employee that takes place during the course of business

e

Which of the following statements regarding novation is false? a. Novation refers to the creation of a new contract through the substitution of a third party for one of the original parties to a contract, with everyone's consent b. Novation requires that the new debtor assume complete liability c. Novation requires the creditor to accept the new debtor as principal debtor, not merely as a gurantor d. Novation requires the creditor to accept the new contract in full satisfaction and substitution for the old contract e. Novation requires the inclusion of a force majeure clause in order to be enforceable

e