BADM 313: Final

A principal can ratify an agent's unauthorized contract even if the third party withdrew from the contract prior to ratification.

False

A promise not to sue another party is not consideration, because the promise does not convey any legal value to the other party.

False

A sale or return contract is a contract for goods that are primarily for buyer's use.

False

A seller of goods can never pass "better title" to those goods than the title that she has.

False

According to the provisions of UCC, an exclusive dealing contract imposes a duty only on the distributor to use his/her best efforts to sell the goods.

False

All contract rights are assignable.

False

All terms of contracts, even "fine-print" terms of standard form contracts, are always part of the parties' deal and binding on them, because parties have an obligation to read their contracts and are assumed to have done so.

False

An agent's implied authority is always considered superior in law, and thus can contradict principal's express statements.

False

An instrument that is payable on the happening of some uncertain event is negotiable.

False

An organizer is the individual that incorporates a business.

False

Andrew, being a partner, has appointed a caretaker for his property. Therefore, he has committed a wrongful dissociation.

False

Andy contracts with Yvonne to produce an advertisement for a Fourth-of-July fundraising party. Yvonne does not produce the advertisement until July 6. Here, Yvonne's breach of the contract is not a material breach unless the contract explicitly stated that time is of the essence.

False

Public policy never changes and is constant for judges to rule on.

False

Ratification has to be expressly made only in written form.

False

Silent partners have the duty to serve and bear the same liability for partnership debts as any other partner.

False

Sonia through fraudulent representations induced Gracie to execute a negotiable note payable to Sonia. Sonia is a holder in due course.

False

Speaking generally, a quasi-contract applies where there has been foreseeable reliance on an express promise.

False

Statutes that require proof of character and skill and impose penalties for violation are considered to be revenue-raising in nature.

False

Straight voting permits a single holder of more than 30 percent of the shares of a corporation to dominate management of the corporation.

False

Generally, if there is a good faith dispute over a matter, a person's threat to file a lawsuit to resolve that dispute is considered to be improper.

False

Generally, the age of majority for contracting purposes is 21 years.

False

If a bank maintains an electronic deposit and provides the customer with a statement indicating the amount of principal held on a certificate of deposit (CD), such a CD is negotiable.

False

Sammy entered into an oral contract with Macaulay for sale of goods amounting to $900. Sammy paid the amount. But Macaulay refused to deliver the goods. Sammy thus suffered serious losses because of Macaulay's breach of contract. Sammy sued Macaulay. At the same time Macaulay took the defense under statute of frauds. Under which principle is Sammy protected?

Promissory estoppel

Stella, Bob, and Chris are partners in Sole Services, a general partnership that operates a shoe store. One day Stella's ex-husband Dan comes into the store to buy shoes. Stella is still angry over the divorce. While Dan's back is turned to Stella, she stabs him with a knife, inflicting serious injuries. Dan wants to sue Stella, the partnership, and each partner. Who could be required to pay for Dan's injuries?

Stella only

Mr. Green contracts with Mr. Brown to repair his roof. Mr. Brown is about 75% done when the deadline of the contract occurs. Which legal standard would prevent Mr. Brown from being considered to be in breach of his agreement with Mr. Green?

Substantial performance standard

A right of first refusal on a share certificate allows the corporation to match the offer that a selling shareholder receives for his shares.

True

A signature is sufficient to form the basis of authenticity of a written contract.

True

A state's courts may exercise jurisdiction over a foreign corporation that has contacts in the state.

True

Partners have a right to be indemnified for expenditures they make for the partnership from their personal funds.

True

Partners who wind up the business of a dissociated partnership have implied authority to sell all the assets of the partnership.

True

Pat promises to install granite countertops in the home at 123 Main Street that Bruce is purchasing "provided that the escrow on the sale of 123 Main Street closes." The close of escrow on the sale of 123 Main Street is a condition precedent to Pat's promise.

True

Promissory estoppel protects reliance on a promise from one party to another.

True

Ratification is a process whereby a principal binds himself to an unauthorized act done by an agent, or by a person purporting to act as an agent.

True

Revised Article 3 of the UCC provides that the drawer of a cashier's check has the same obligation as the issuer of a note.

True

Sellers at a public auction are treated as makers of an invitation to offer.

True

Signing a promissory note is an example of establishing primary liability in a negotiable instrument.

True

Some courts allow promissory estoppel to bind parties to oral contracts that otherwise would be unenforceable under the statute of frauds.

True

Sometimes, Article 2 of the UCC holds merchants to standards different from the standards it applies to nonmerchants.

True

Amanda and Sally are close friends who form a limited partnership to open a salon. They refuse to put a buyout clause for withdrawing partners in the limited partnership agreement, assuming that their friendship and business will last forever. Amanda, as a general partner, contributes $100,000 and Sally, as a limited partner, contributes $125,000. Two years later, Sally accuses Amanda of falsifying the data and withdraws from the limited partnership. How much will Sally receive from the limited partnership?

$0

Joshua, Rachel, and Daniel formed an LLC to manage their accounting business. Joshua contributed $20,000 to the LLC. Rachel and Daniel contributed $40,000 each. A year later, the LLC needed capital injection and Joshua lent a credit of $50,000. However, nothing could save the LLC and it entered bankruptcy and got dissolved. Joshua was the only creditor of the LLC. If a total of $50,000 was obtained after the sale of all the assets of the dissolved LLC, how much will Rachel get?

$0

Brown, a CPA, helped Cook organize a partnership that was actually an abusive tax shelter. Brown induced clients to participate by making false statements concerning the eligibility of deductions and tax credits. As a result of these activities, Cook derived $100,000 gross income and Brown derived $50,000 gross income. According to federal tax law, what is Brown's penalty for promoting this abusive tax shelter?

$1,000

Mr. Green enters into a partnership with IT Doctors LLP. Mr. Green's capital investment into the business is $10,000. Shortly after joining the new business a client sues the IT Doctors LLP and wins a judgment of $750,000. How much is Mr. Green liable for?

$10,000

Steve, Martha, and Pete formed an LLC two years ago. Steve has contributed $100,000, Martha has contributed $50,000, and Pete has contributed $50,000 to date to the LLC. The LLC made a profit of $30,000 in two years. By default, how much will Steve's share of profits be?

$10,000

Wonder Widgets agrees to sell Bill Buyer 10,000 of its "Grade A" widgets at a price of $3.00 per widget. After Wonder breaches the contract by failing to deliver, Bill buys substitute widgets at a price of $3.20 per widget. For this purchase, Bill incurs $200 in reasonable expenses and saves $100 in shipping expenses. Bill then sues Wonder for $2,200. What, if anything, can Bill actually recover?

$2,100

Helen and Casey are partners. Helen contributes capital of $20,000 to the partnership and Casey contributes $10,000. They agree that Helen will receive 60 percent of all profits and that Casey will receive 40 percent. They have not decided how to share losses. The partnership makes a loss of $7,000. What is Casey's share of the loss?

$2,800

Bart agreed to deliver fruits worth $1,000 to a retail store. Bart and the store owner agree that if delivery is not made on time, Bart will pay the store some amount as liquidated damages, for the lost sales. Which of the following amounts would most likely be considered penal if they settle for it?

$25,000

Joe agreed on April 1 to sell and deliver 1,000 bushels of wheat to a grain elevator on June 1 for $10 per bushel. He then refused to deliver on June 1 because the market price was then $15 per bushel. How much can the grain elevator recover in damages from Joe?

$5,000

Ace Computers (AC) is a manufacturer. It entered into a contract with a retailer, Reliable Computer (RC) for the sale of 100 new XYZ model computers at $1,000 each, for delivery in 6 months. AC would thus make a profit of $50,000. Six months later however, the XYZ model has become almost relatively obsolete; its market price is only $600 at that time. RC refuses to accept or pay for those computers. If AC sues, how much should it be entitled to in damages? (Ignore any incidental expenses or cost savings to AC.)

$50,000, the profit AC would have made had RC not breached the contract.

Mr. Blue has invested in SuperMart Inc. Mr. Blue purchased $5000 worth of shares or 3% equity in the company. Shortly after investing SuperMart Inc. is found guilty of various civil wrongs and a judgment is entered in against the company for 3.1 million dollars. How much liability will Mr. Blue have?

$5000 will be the limit of his liability

S agrees to sell B 10,000 widgets at a price of $1.00 per widget. After B breaches the contract, S resells the widgets for $0.90 per widget. However, this costs S an additional $100 in sales commissions. S saved $200 in shipping costs as the new customer was located closer to its factory. What amount can S recover from B?

$900

Under the Electronic Funds Transfer Act how many days do operators of EFT systems have to investigate errors or provisionally recredit a consumer's account?

10 working days

What section of the UCC states that an order to a manufacturer requesting shipment of goods may be accepted by a prompt shipment of the goods?

2-206

Ken was a general partner in a limited partnership until March 2011, when he transferred all his transferable rights to his wife. A few days later, he was expelled from the limited partnership by other partners. If the limited partnership did not give any notice of dissociation, Ken will retain his apparent authority to transact for the limited partnership until:

2013.

After entering into a contract, a buyer becomes concerned that the other party may not be able to perform his contract obligations. The buyer demands assurance from the other party that the contract will be performed. What is the maximum time period that the buyer would have to wait before considering the other party has repudiated the contract?

30 days

According to Sarbanes-Oxley Act, how long must audit and review working papers be retained?

7 Years

The term commercial paper is defined as?

A contract for the payment of money.

King sent Foster, a real estate developer, a signed offer to sell a specified parcel of land to Foster for $200,000. King, an engineer, had inherited the land. Foster telephoned King the same day that he received his letter and accepted the offer. Which of the following statements concerning the contract is correct under the statute of frauds?

A contract was formed, although it would be enforceable only against King.

Which of the following forms of business always imposes double taxation on the earnings of the business?

A corporation

What is an injunction?

A court's order requiring a person to do something

Several states' constitutions place stricter limits than the MBCA on permissible considerations for issuance of common shares by corporations. Which of the following considerations is permissible under the MBCA but not permissible by such state constitutions?

A gratuitous promise to contribute $35,000 in cash to the corporation

Which of the following promises is subject to a "strict performance" standard? Assume that performance of the promise is not an express condition of the promisee's duty to perform.

A promise to deliver a deed

Which of the following is covered by the statute of frauds?

A real estate mortgage

Which of the following is true about a sole proprietorship?

A sole proprietorship cannot sue or be sued.

Amos, Beverly, Carlos, and Dan were partners in a partnership in which the agreement states that the partnership will continue until 2010. Amos died in 2006. What vote of the remaining partners is necessary to continue operating the partnership business?

A unanimous vote

Hamish invested in the securities of the ABC Corporation (ABC). He lost a great deal of money on those securities after ABC's president admitted that financial statements about the profitability of ABC had been materially exaggerated. Andy Accountant (AA) had audited those statements and had issued an unqualified opinion that they complied with GAAS and GAAP. Hamish has sued AA using Section 10(b) of the Securities Exchange Act of 1934 as the legal basis of his/her suit. To succeed, Hamish must prove that:

AA acted with scienter.

Chin wants to buy a small parcel of land. The seller requires a certified check as payment. Chin has a checking account with ABC bank; he prepares a check for the seller and then has the bank certify it. He then presents the check to the seller. Who may now be liable for payment of the amount of the check?

ABC bank only.

_____ is the authority the principal wants the agent to possess and is based on the principal's communications or manifestations to the agent.

Actual authority

Which of the following occurs at a corporation's organization meeting?

Adoption of bylaws to supplement the articles of incorporation.

Who among the following have the capacity to enter into a contract?

Adults that have divorced

an, a lawyer, sent an offer to Raymond on October 1 offering to sell Ian's car for $5,000. The offer did not contain a provision stating when it would terminate. Under these circumstances, when will that offer terminate?

After a "reasonable" period of time

Megan has purchased two tickets for a lucky draw at the local supermarket, which are with the store's cashier. Tracy, her friend, who knows about this, convinces the cashier that she is Megan and takes the tickets. She then goes and sells the tickets to Anya, who has no knowledge of the case. Which of the following statements is true?

Anya is the good faith purchaser.

Frank, a business law professor who has never sold a car before; sells his 1995 Honda Civic to Wanda. This sale is governed by:

Article 2 of the UCC.

Why does a rejection by the offeree terminate his power to accept the offer?

As a general rule, any form of rejection by an offeree terminates his power to accept the offer. This is so because an offeror who receives a rejection may rely on the offeree's expressed desire not to accept the offer by making another offer to a different offeree.

A person who makes a completely executory promise, in return for a negotiable instrument, has given value for it.

False

Nast Corp. orally engaged Baker & Co., CPAs, to audit its financial statements. The management of Nast informed Baker that it suspected the accounts receivable were materially overstated. Although the financial statements audited by Baker did, in fact, include a materially overstated accounts receivable balance, Baker issued an unqualified opinion. Nast relied on the financial statements in deciding to obtain a loan from Century Bank to expand its operations. Nast has defaulted on the loan and has incurred a substantial loss. If Nast sues Baker for negligence in failing to discover the overstatement, Baker's best defense would be that:

Baker performed the audit in accordance with generally accepted auditing standards.

Beth has just turned 17 years of age. She entered into a contract with ABC Corp. for the purchase of a used car, with full payment due in 30 days. The purchase price was $5,000. This car is necessary for Beth to use as transportation to her job, which she needs in order to pay tuition at the university where she is a freshman. Beth's parents have refused to help her pay for college. Three days later Beth changes her mind; she now wants to return the car because she has learned that it is worth only $4,000. $4,000 is in fact the reasonable value of this car. If Beth does not pay, and the seller sues, the outcome of this lawsuit will be that

Beth must pay $4,000.

Dart Corp. dismissed Ritz as its general sales agent. Dart notified all of Ritz's known customers by letter. Bing Corp., a retail outlet located outside of Ritz's previously assigned sales territory, had never dealt with Ritz. However, Bing knew of Ritz as a result of various business contacts. After his dismissal, Ritz sold Bing goods, to be delivered by Dart, and received from Bing a cash deposit for 20 percent of the purchase price. It was not unusual for an agent in Ritz's previous position to receive cash deposits. In an action by Bing against Dart on the sales contract, which of the following is true?

Bing will win the lawsuit because Dart's notice was inadequate to terminate Ritz's apparent authority.

Prof. Bob DeSlob writes a check on his Big Bank checking account for $1 payable to "Department of Business Law Coffee Club" to pay for his weekly membership and gives it to his colleague Carol. Bob does not place a decimal point after the "1" nor does he complete the line ending in "dollars." Carol, knowing that Bob can well afford it, prints in block letters the words "One Hundred" on the line ending in "dollars." Carol then gives the check to Dot, the Department secretary who is in charge of the Coffee Club. Dot presents the check to Big Bank for payment, and Big Bank charges $100 from Bob's account. Which of the following statements is most accurate?

Bob contributed to the alteration and may be barred from claiming forgery.

Bobby goes to buy a CD player from Sammy's Electronics. In testing one model, Bobby notices that the "scan" function does not allow scanning once a selection from a CD is playing. Bobby purchases the model despite this without mentioning the defect to Sammy. Bobby takes the CD player to his office where he uses it for three months before deciding that he wants to return it. Under these circumstances:

Bobby has accepted the CD player.

Mike signs a note payable to a bank. The bank indorses and negotiates the note to Fay, who then indorses and negotiates it to Sam. Sam presents the note to Mike, who dishonors it. Then Sam decides to pursue Fay and the bank on their secondary indorsers' liability. Against whom can Sam proceed?

Both Fay and the bank.

Rice is a promoter of a corporation to be known as Dex Corp. On January 1, 1985, Rice signed a nine-month contract with Roe, a CPA, which provided that Roe would perform certain accounting services for Dex. Rice did not disclose to Roe that Dex had not been formed. Prior to the incorporation of Dex on February 1, 1985, Roe rendered accounting services pursuant to the contract. After rendering accounting services for an additional period of six months pursuant to the contract, Roe was discharged without cause by the board of directors of Dex. In the absence of any agreements to the contrary, who will be liable to Roe for breach of contract?

Both Rice and Dex

Wheelies is an auto parts retailer. It operates a retail megastore in a city where the city ordinance prohibits retailers from being open on consecutive Sundays. The management of Wheelies realizes that their maximum sales happen on Sundays. They create a wholly-owned subsidiary, CarBasics, and start leasing the megastore building and its inventory to CarBasics every alternate Sunday. Who is liable for violating the city ordinance?

Both Wheelies and CarBasics

Which of the following is a personal defense against a holder in due course?

Breach of contract

Brizon, a toy company enters into a five-year agreement with Toys Paradise (TP), a toy shoppe. The agreement states that Brizon is to provide all the toys required by the distinguished shop at a fixed rate. During the first 3 years of the contract, Brizon uses its excess capacity to meet-up with the anticipated requirements and delivers between 1.25-1.5 million toys to TP. However, in the 4th year of the agreement TP wants Brizon to deliver approximately twice as many toys, so that the toys can be used at other outlets owned by TP. In such a case:

Brizon need not provide the required amount of toys.

Austen Construction, a general contractor, advertised for bids from subcontractors on the electrical work for the renovation of one of State University's parking structures. The advertisement announced that the contract will be awarded to the lowest responsible bidder. Bronte, a responsible electrical subcontractor, submitted the lowest bid to Austen for the electrical portion of the work. Austen informed Bronte that she should begin work immediately. Bronte then stated that she is "withdrawing" her bid from Austen. Which of the following statements is most accurate?

Bronte has accepted Austen's offer by submitting the lowest bid

What is the term for an agreement that makes the shareholder sell his shares back to the corporation at a price determined in the agreement and binds the corporation to purchase the shares?

Buy and sell agreement

Which of the following is NOT a defense specified in Revised Article 3?

By way of damages

Carlita retires from Mortex Associates, a partnership. The business is continued by the remaining partners. What is Carlita's liability on debts incurred while she was a partner?

Carlita is fully liable

Cathy Young, age 16, buys a 1973 Chevy Camaro from Mark Watson, age 23, for $400. Cathy's indulgent parents, who give her everything she wants, loaned her the money for the car. The reason for Cathy's purchase is that all her friends have cars and she feels left out without one. One week after buying the car, however, Cathy changes her mind and tells Mark that she wants to disaffirm the contract. When Mark comes to pick up the car and give Cathy her money, though, Cathy changes her mind again, telling Mark, "I'll stick by the deal." However, when Cathy's parents gave her a new car for her 17th birthday, she finally decides to disaffirm once again. Which of the following is correct?

Cathy can still disaffirm.

Jason believes that he is a limited partner in Yorktown Yankees Limited Partnership. Jason discovers that no limited partnership certificate has been filed with the secretary of state. What should he do?

Cause a proper certificate of limited partnership to be filed with the secretary of state.

What is the term for an instrument containing both an acknowledgement by a bank that it has received money and a promise to repay money?

Certificate of Deposit

Which of the following is an exception to a consideration requirement?

Charitable subscription

_____ is a process which begins with the buyer giving the seller a check, and the seller using the information on that check to name itself as the payee and forwarding it for collection through an automated clearing house.

Check conversion

According to the Supreme Court of the United States, a foreign corporation may be brought into a state's court in connection with its activities within the state, provided that the state does not violate the corporation's due process rights under the Fourteenth Amendment of the Constitution and its rights under the: .

Commerce Clause.

What is term for a clause that authorizes a creditor to go into court if the debtor defaults and to have a judgment entered against a debtor without a trial?

Confession of Judgment

An accident on a state highway rendered Jill in comatose state for nearly a month. There was an old nurse who used to take care of her then. After her recovery, Jill felt so indebted to the nurse that she contracted to transfer all her assets to her to fulfill her (Jill's) moral obligation. Although this contract lacks ______, it can be enforced.

Consideration

Which of the following observations is true under the UCC?

Consideration is not required to support a modification of a contract for the sale of goods.

Borg is the vice-president of purchasing for Crater Corp. He has authority to enter into purchase contracts on behalf of Crater provided that the price under a contract does not exceed $2 million. Dent, who is the president of Crater, is required to approve any contract that exceeds $2 million. Borg entered into a $2.5 million purchase contract with Shady Corp. without Dent's approval. Shady was unaware that Borg exceeded his authority. Neither party substantially changed its position in reliance on the contract. What is the most likely result of this transaction?

Crater will be bound because of Borg's apparent authority.

What is the term for when a shareholder causes a corporation to act to the benefit of an individual shareholder?

Domination

In which of the following situations is the obligor not likely to be fully discharged from his or her liability on a negotiable instrument?

Edward lends Monica $1,000 toward her college expenses. She gives Edward a promissory note for $1,000, which Edward accidentally tears up.

Carl writes a check made payable to "Patricia Sullivan or William Hayes." Who may negotiate the check?

Either Patricia or William may negotiate the check.

A person who rescinds a contract is entitled to the return of what?

Everything that person has given the other party

If the delivery term of the contract is _____ the place at which the goods originate, the seller is obligated to deliver to the carrier goods that conform to the contract and are properly prepared for shipment to the buyer, and the seller must make a reasonable contract for transportation of the goods on behalf of the buyer.

FOB

A party who has the right to rescind a contract may do so at any time

False

A & K Inc. obtains a charging order against Bob, a partner in Foter and Poter Partnership. Such an act will cause the partnership to dissociate.

False

A contract of adhesion is one that the courts will always enforce because of the strong public policy underlying such contract.

False

A corporation with one person who is the only shareholder, officer, and director will have its corporate veil pierced, making that person personally liable for all the obligations of the dominated corporation.

False

A court will enforce a noncompetition clause even if its restraints are unduly burdensome either on the public or on the party whose ability to compete would be restrained.

False

A deceased person's heirs have no power to order a bank to stop payment on checks written by the deceased prior to his death.

False

A delegator can be discharged from his/her obligation to perform his/her duty to the original promisee by a contract of novation.

False

A famous journalist predicted the result of an NBA match between the LA Groves and LA Phantoms in favor of the Phantoms, based on the present form of Groves. Accordingly, Mark placed a huge bet on the Phantoms and lost heavily. This is an example of misrepresentation of a material fact of a contract.

False

A holder in due course of a negotiable instrument always has the same rights as the individual that transferred the negotiable instrument to the holder.

False

A holder of a check or draft who wants to get payment on it should first present the check or draft to the drawer.

False

A majority of the members of an LLC must agree for a plan to merger.

False

A mining partner's interest is not freely transferable.

False

A noncompetition clause is also known as a "liability waiver."

False

A novation is said to take place when continuing partners release a dissociated partner from liability but creditors do not release him.

False

A partner may personally profit from a partnership transaction when he or she deals in good faith with the partnership.

False

A partnership does not have the authority to ratify the unauthorized act of partners.

False

Anne induces Ben's consent to contract under duress. Anne later assigns her rights under the contract to Carl. Ben may assert the doctrine of duress against Anne as a ground for avoiding the contract.

False

Article 2 of the UCC has no parol evidence rule.

False

Article 2 of the UCC mandates that the parties to a sales contract state in specific and unambiguous language the exact terms of the contract. Otherwise, courts will declare the contract unenforceable.

False

Because all goods are fungible, specific performance is not available under the UCC.

False

Boston Bank receives one of their payable checks made to the order of the Same Sex Alliance organization of Massachusetts for $1000. The check comes from a valid account and there are funds in that account to cover the check. The CEO of Boston Bank does not agree with the mission of the Same Sex Alliance so Boston Bank refuses to honor the check. Boston Bank is within its power as a bank to do this.

False

By issuing a qualified opinion, an auditor escapes liability for defects in financial statements audited by the auditor.

False

Courts will always enforce an exculpatory clause from a properly executed contract.

False

Emancipation is a formal agreement in writing to terminate a parent's right to control a child and receive services from him.

False

Even if the buyer has misrepresented his solvency to the seller in writing within three months before the delivery of the goods, the 10-day limitation on the seller's right to reclaim the goods still applies.

False

Exculpatory clauses that try to relieve a principal of liability for an agent's misrepresentations usually insulate the principal from tort liability and prevent the third party from rescinding the contract.

False

General shareholders will be paid dividends before Preferred shareholders receive them from a corporation.

False

Generally speaking, advertisements are considered to be offers.

False

If a buyer has a basis for rejecting a delivery of goods then the buyer can act whenever the buyer wishes to reject the goods after the delivery.

False

If a partnership leases a building that belongs to one of the partners, the property is said to be owned by the partnership.

False

If the buyer is not a merchant, then her obligation after rejection is limited to returning the goods to the seller.

False

If the goods delivered by the seller do not conform to the contract, the buyer need not pay for the units accepted at the price per unit provided in the contract.

False

In 1990, Revised Article 3 of the UCC was developed, which now has been adopted by all the states.

False

In a contract for Adam to sell Carrie a steam boiler, Carrie's obligation to pay is conditioned upon her personal satisfaction with the boiler. Even though the boiler meets every mechanical test imaginable, Carrie refuses to pay because she just doesn't like the boiler for some reason. She is not obligated to pay, because the contract said that he must be personally satisfied, and a contract is a contract.

False

In a partnership agreement, partners are not criminally liable when a partner commits a crime in the course and scope of transacting partnership business, even if they knew of the partner's criminal tendencies and placed him or her in a position in which he or she could commit a crime.

False

In a partnership, each partner has limited personal liability to partnership creditors.

False

In all partnerships, profits are shared according to the amount of capital contributed by each of the partners.

False

In general, an employee who has been fired and who wants to sue for breach of contract need not do anything to limit or mitigate his damages, such as looking for another job. This would unfairly benefit an employer who has wrongfully breached a contract.

False

In order to meet the requirements to form a contract the parties must have a future intent to agree and form a contract.

False

In order to pierce the corporate veil, a creditor needs to show that each shareholder does not actively participate in the management of the corporation.

False

In qualified indorsement, the indorser accepts the liability to make the instrument good, if the maker or drawer defaults on it.

False

In the absence of a decision by the members of an LLC, any member can demand the distribution of profits prior to the dissolution of the LLC.

False

Indorsers are not contractually liable on negotiable instruments they indorse.

False

It is always necessary for an agent to disclose the identity of the principal to any third person with whom he is contracting; else the contract becomes void.

False

It is possible to create a corporation without a government's permission.

False

Jason has knowledge of the fact that the check given to him bears Julie's forged signature. Despite the said fact, he presents the check to ABC Bank. ABC Bank pays Jason, under a mistaken belief that the signature on the check is authentic. Bank cannot recover that payment from Jason.

False

Kathy writes a check on her checking account with a bank. Kathy is the payee here.

False

Limited partners have the right to vote on partnership matters as a class.

False

Loans made by partners to a partnership are partnership capital.

False

Losses of the business allocated to a limited partner in a limited partnership or an LLLP offset his income from any other sources.

False

Mandatory dividend provisions enacted in corporate laws have generally been held legal.

False

Mark, John, and Graham are partners. Mark voluntarily and nonwrongfully leaves the partnership. However, the partnership has a three-year lease with Green Real Estate Inc. So long as Mark leaves the partnership, he is no longer liable for the lease agreement.

False

Mei issues purchase order to June for goods which costs $25,000. June agrees to provide the same but she doesn't sign the purchase order. Mei can file a suit for the breach of contract.

False

Memberships in a nonpublic corporation are freely transferable.

False

Mr. Green is a general contractor and is accepting bids from subcontractors for the building of a new hotel. Mr. Blue submits a bid for his work associated with the project. Mr. Green placed an offer which Mr. Blue accepted with his bid.

False

Once a contract made by a minor has been effectively ratified, it cannot be affirmed.

False

Ordinarily, contracts entered into by mentally impaired people are void, while contracts entered into by intoxicated people are voidable.

False

The Model Business Corporation Act has made the inclusion of purpose clause in the articles compulsory.

False

The importance of the terms FOB and FAS in contracts for the sale of goods is that they obligate the buyer to pay immediately upon delivery of the goods.

False

The main difference between a certified check and a cashier's check is that the bank is primarily liable on a certified check, but only secondarily liable on a cashier's check.

False

The maker of a promissory note is the person who is secondarily liable on the note.

False

The mutual agreement necessary to create an express contract is evidenced by writing.

False

The objective of the UCC in regards to remedies for contract breach is to punish the offending party.

False

The only manner in which a request for prompt or current shipment of goods can be honored is by a prompt or current shipment of the goods to the buyer.

False

The power to delegate under a contract is universal right and parties may not restrict the power to delegate in the contract.

False

The purpose behind the Model Business Corporation Act is to exploit the maximum potential of workers in a corporation.

False

The statute of frauds covers all contracts that are for an indefinite period of time.

False

The statute of frauds does not cover contracts in which marriage is the consideration.

False

There is a requirement that all contracts be in writing.

False

There is prescribed formal language that must be used to create an express condition as part of a contract.

False

Threats to institute legal actions cannot be considered improper threats that constitute duress.

False

To accept an offer for a bilateral contract, the offeree must perform the requested act.

False

Under Section 11 of the Securities Act of 1933, an auditor may escape liability by proving he/she had no reason to believe and did not believe that there were any misstatements or omissions of material fact in the financial statements he/she audited.

False

Under the MBCA, an incorporator may become jointly and severally liable for preincorporation contracts just by being an incorporator.

False

Under the Revised Article 3 of the UCC, the variable interest rate notes are not negotiable.

False

Under the most modern revision to Article 3, a depositary bank cannot become a holder of a check that is deposited by a customer without an indorsement.

False

Unlike many other federal consumer protection measures, the Electronic Funds Transfer Act does not require disclosure of important terms to the consumer.

False

Value is identical to simple consideration.

False

Warranties do not apply without the indorsement of the transferor.

False

When Carol Whittaker makes an offer to a contractor Jacob Phelps directing him to inform her of his acceptance through registered letter mail, she is making an ambiguous offer.

False

When determining the presence of the intent to accept, a subjective standard is used.

False

When partners disagree concerning an action to be taken in the ordinary course of business, the disagreement will be resolved only if all the partners agree.

False

Where an offer stipulates a certain means of acceptance, the offeree's acceptance is effective upon dispatch even if it uses means other than those specified in the offer.

False

While economic pressure may amount to undue influence, it cannot constitute duress.

False

The Barrel & Wine partnership is being wound up and liquidated. Net assets are to be distributed according to which of the following order of priority?

First to all creditors, then to partners as per their capital accounts

Edith purchases what is represented to be a new DVD player from Big Al's Electronic Emporium, by giving Al a check for $200 drawn on Big Bank. Edith then discovers that the DVD player is a used model and calls Big Bank to place a stop-payment order on the check. Big Al negotiates the check to John who qualifies as a holder in due course. John presents the check to Big Bank the next day, and Big Bank pays the check. Which of the following statements is most accurate?

For recourse, Edith would have to pursue Big Al on her misrepresentation claim.

Which of the following statements about standardized form contracts is false?

Frequently, the terms of standardized contracts are negotiable.

Marc and Sonia were the only members of the MS Limited Liability Company. Marc then sold all his rights in the LLC to Gertrude. As a result:

Gertrude gains the right to receive Marc's share of distributions.

Raider Corporation (RC) attempted to take over Targetnorth Corporation (TC) using a tender offer. The tender offer price was twice the market price for TC shares. As a defense to this, TC proposed to buy its shares owned by RC at triple the market price provided RC agreed not to purchase any more TC shares for the next five years. This kind of tender offer defense is called:

Greenmail

Jane wrote a check for $10. She wrote this check in a careless and negligent manner, making alteration easy. Ben altered this check to read $1,000. His alteration was crude and obvious to anyone paying attention. Ben cashed the check at Jane's bank. The bank was negligent in accepting this check, but it deducted $1,000 from Jane's account. Jane sued the bank, and the jury determined that Jane's negligence contributes 50 percent to the loss and the bank's negligence contributes 50 percent. How much is Jane entitled to recover from her bank?

Half the loss.

Cey Corp. entered into a contract to sell parts to Deck, Ltd. The contract provided that the goods would be shipped "FOB Cey's warehouse." Cey shipped parts different from those specified in the contract. Deck rejected the parts. A few hours after Deck informed Cey that the parts were rejected, they were destroyed by fire in Deck's warehouse. Cey believed that the parts were conforming to the contract. Which of the following statements is correct?

If the parts were nonconforming, Cey will bear the risk of loss, even though the contract was a shipment contract.

Which of the following is true regarding a transferor's liability on a transfer warranty?

If the transfer was by indorsement, the warranty extends to all subsequent transferees, and not just the immediate transferee.

Which of the following is true of the Check 21 Act?

It authorizes banks to transform information they receive in electronic form back into a paper copy of the check.

Because the articles of incorporation embody the basic contract between a corporation and its shareholders, shareholders must approve most changes in the articles. Which of the following is an example of "such changes" in the article?

Increase in the number of authorized shares

_____ is a ground for lack of capacity only when it is so extreme that the person is unable to understand the nature of the business at hand.

Intoxication

Sharon entered into a preincorporation share subscription agreement on January 1, 2006. The corporation was formed on February 1, 2006. What is the status of this agreement on March 1, 2006, under the Model Business Corporation Act?

It is binding even if Sharon has not already paid for the shares.

Which of the following is true about implied authority?

It is determined with reference to what is usual business for partnerships of the same general type.

Which of the following is true about a partnership?

It is not a tax-paying entity for federal income tax purposes.

Jim's contract with Frank obligated Jim to pay Frank $10,000. Frank properly assigns the contract to Abel. At that time, Abel notifies Jim about the assignment. Jim, however, forgets and pays the $10,000 to Frank. By this time, Abel is screaming for his money. However, by then, Frank goes into bankruptcy. In this case:

Jim is liable to Abel for $10,000

Joan carefully completes and signs a $1,000 note payable to Pete. Pete skillfully changes the amount of the note to $10,000, and negotiates it to Hilda for that amount. Hilda qualifies as a holder in due course. When Hilda presents the altered note to Joan for payment, Joan refuses to pay a penny more than $1,000. Which of the following is true?

Joan is not liable to Hilda.

Rebecca, a minor, rented an apartment from Jones for a period of one year when she had no place to stay. She disaffirmed the contract after four months, though she paid rent only for the first two months. Which of the following is true of the case?

Jones can recover the unpaid rent for two months.

Martha purchases a book from Just Books on credit and later sells the book to her friend, Christina. Christina in turn sells the book to David, who agrees to pay the balance to Just Books. Who is the creditor beneficiary in this exchange?

Just Books

Katie Kuric is the only shareholder, director, and officer of two corporations, Multimedia Corporation and Kuric Network Television Corporation (KNT). Multimedia produces television shows and movies. KNT broadcasts television programming over the air and on cable. KNT purchases much of its TV programs and movies from Multimedia. KNT often pays Multimedia for the TV shows and movies more than a year after payment is due, without being required to pay interest or a late payment penalty. What risk is Katie taking by allowing KNT to pay Multimedia late?

KNT's veil will be pierced because Multimedia's creditors are being defrauded.

Russell, 45, has been suffering from mental impairment for a long time. He signs a contract to sell his villa for $1 million to Andre. When Russell's wife Katie, who is also his appointed (by the court) guardian, gets to know of the deal, she wants to ends the contract. Which of the following statements is true?

Katie need not worry because the contract is void.

A(n) _____ is a limited partnership whose partners have elected limited liability status for all the partners.

LLLP

Lloyd is a partner in an ordinary partnership firm in the business of providing tax services. While serving a client on behalf of the partnership, Lloyd's partner Janet intentionally understates the client's taxable income on a federal tax return. When the true income is reported a few years later, the client is required to pay a penalty. The client sues the partnership and its partners. Which of the following is correct?

Lloyd is not liable to the client, unless he authorized Janet to understate the client's income.

Marlene, a self-employed 16-year-old whose parents are dead, buys a dress on credit for $50. After receiving the dress and discovering that its reasonable value is only $25, Marlene tries to disaffirm the deal before paying the $50. In this case:

Marlene can disaffirm, but she is only bound to pay $25.

On May 1, Ida makes a written offer to Miranda for the sale of Ida's car. On May 2, Ida mails Miranda a letter revoking the offer. On May 3, Ida telephones Miranda to tell him that he is revoking the offer. On May 4, Miranda learns that Ida has sold the car to Chris. On May 5, Ida's letter finally gets to Miranda. Ida's offer terminated on:

May 3

Which of the following is NOT an essential characteristic of a limited liability company (LLC)?

Members' ownership interest is completely and freely transferable.

Mike, a minor, buys some real estate as investment. The contract obligates Mike to make monthly installment payments for 10 years. Mike reaches the age of majority one month after making the contract. After this, Mike makes 25 monthly payments under the contract, but then decides that he wants to rescind the deal. Which of the following is most true?

Mike cannot disaffirm because he has already ratified the contract.

Mr. Smith and Mr. Blue enter into a partnership at will in which each owns half of the business. Mr. Blue decides to leave the partnership. What should Mr. Blue be paid for leaving the business?

Mr. Blue should be paid half of the value of the business.

Nina hired Sue to work as a janitor in Nina's apartment building. Sue was negligent in that she left a crack in the marble staircase unrepaired, without putting up a warning sign. Seth slipped on the staircase and suffered severe injuries. Who is liable for this accident?

Nina is liable for the accident under the doctrine of respondeat superior.

John is the promoter of Wheelies Corp., an automotive wheel manufacturing business. To escape personal liability on preincorporation contracts, John planned to make only nonbinding preincorporation contracts. He made one such contract in March 2011 with his friend David for supplying Wheelies with auto parts. After getting payment for the contract, David refused to make the supply. Wheelies has not been incorporated yet. Is David liable?

No, David is not liable because John is not liable on the contract.

Don is a partner of the firm Shaw Associates, which offers recruitment services. Don entered into a contract with Bradman & Sons to sell the land on which the partnership business is situated for $85,000. Is this contract enforceable?

No, because Don does not have the power to convey the partnership's real property.

Geometry Co. manufactures microchips for electrical products. Jojoba monopolizes the supply of gallium arsenide, which is used heavily in the manufacturing of microchips. Because of this monopoly and the demand for microchips, Geometry enters into a long-standing agreement with Jojoba for 20 years. For the first couple of years, due to the huge demand for the microchips, Geometry insisted on timely delivery of the raw material. However, once the demand slumped, Geometry asserted economic duress to avoid the contract. Will Geometry be successful?

No, because Geometry has already taken benefits under the contract for two year

"Tool For You" (TFY) is a company that sells power tools to consumers. The sales contract of TFY states that TFY will not be liable for any consequential damages that the consumer suffers as a result of using power tools purchased from them. Harry purchased a table saw from TFY for use in his hobby of woodworking. Harry was injured when the saw blade flew off. He wants to sue TFY but is not sure whether the contract provision limiting consequential damages will be enforced and seeks your opinion. Will he succeed?

No, because Harry is a consumer.

Jimmy and Pat had a long-standing professional relationship. In 2001, Jimmy's business began experiencing financial strain. The two friends discussed Jimmy's personal problems and financial difficulties, and Pat was concerned about his friend's depressed mental state. In 2003, Pat flew from Atlanta to New York to meet Jimmy. Prior to Pat's flight, Jimmy's employee had faxed copies of various construction contracts and correspondence relating to Jimmy's controversial projects for Pat to review. In late 2005, Pat billed Jimmy for a $40,000 balance that Jimmy owed on the alleged oral contract. In a letter to Pat, Jimmy stated: "I have paid you plenty and will not pay you any more. I have not called for any professional advice since then." Pat filed suit against Jimmy for breach of contract. Will Pat succeed?

No, because it was a friendly advice and not an actual contract.

Sue offers to buy a house from John and they were negotiating the price of the house. In the meantime, Sue confides in John's wife that she is willing to pay an amount of $50,000 for the house. Delighted to hear this, John's wife tells him the good news. John immediately calls up Sue and accepts her offer. Is there a binding contract?

No, because the offeror had not communicated the terms of the offer to the offeree

Amy bought Mississippi State Lottery tickets. Several days later, she learned that someone had won the lottery but that the winner had not yet come forward. She searched for her ticket to see if she had selected the winning numbers, but was unable to find it. Although the lottery ticket was gone, Amy still possessed the play slip she had used when she purchased the ticket. She checked the numbers on the play slip and discovered that she had the winning numbers for the lottery. Reasoning that the play slip would satisfy the Lottery office, Amy laid her claim. The Lottery Office took the position that Amy needed to produce the actual winning ticket as per the rules, and hence denied her claim. Amy sued the Lottery Office for breach of contract and unjust enrichment. Will she succeed?

No, because the rules of the contract prescribed the ticket must be shown to claim the money. Amy had accepted that rule when she entered into the contract and thus she is now precluded from claiming the prize money.

Helga owns an insurance business in Idaho. Her clients are all Idaho residents. She later sells her business to Carlos. As part of the deal, the contract contains a noncompete clause that prevents Helga from operating an insurance business anywhere in Idaho, Washington, or Oregon for a period of five years. Six months after this sale, Helga opens an insurance business in Oregon. If Carlos seeks to enforce the noncompete agreement against Helga, will he probably be successful?

No, because this agreement is not reasonable.

Sara tells Kate that she will give her $50 to clean her garage. When Kate is halfway done, Sara decides to revoke her offer. Is this a valid revocation?

No, because this is now a bilateral contract

You wish to download free software from the Internet. The download procedure includes a page titled "download now" that asks you to "please review" the licensing agreement that is available to you on another web page. The "download now" page has a button that initiates the download process. You click that button without going to the licensing agreement page and find that it contains an arbitration provision. Are you bound by this provision?

No, because you did not perform an action that indicated your assent to the licensing agreement.

Jim created a shoe-manufacturing corporation by contributing $1,000. He stayed as the sole shareholder and director of the corporation. To inject further capital into the corporation, he loaned the corporation $100,000 and secured the loan in exchange for all the corporation's assets. Five years into operations, the corporation has still failed to make profits and consequently files for bankruptcy. Who has been defrauded?

Nonshareholder-creditors

Helen worked for ABC Motors for 25 years. The president of ABC said to her: "In consideration of your past service for 25 years, I promise to give you a new car next week." However, he did not give the car. Is this promise legally enforceable?

No, legal consideration is absent

Russ purchases a new television set from Trista's TVs. The television set carries a four-year express warranty. It was purchased on November 1, 2002 and delivered on November 3, 2002. On February 3, 2007, after four years and three months of service, the set collapsed due to a defect covered by the warranty. Russ had discovered this defect on November 5, 2002 when he turned the television set on for the first time. When did the Code's statute of limitations begin to run?

November 3, 2002

Arthur offered to sell his house to Mike for $50,000. Even before Mike responded to the offer, Jack learnt of the offer and called up Arthur to accept the offer. Jack's action represents a(n) _____.

Offer

Paco Corp., a building contractor, offered to sell Roy several pieces of used construction equipment. Roy, engaged in the business of buying and selling equipment, accepted the offer. Paco's written offer had been prepared by a secretary who typed the total price as $10,900, rather than $109,000, which was the approximate fair market value of the equipment. Paco learned of the error in the offer and refused delivery of the equipment unless Roy agreed to pay $109,000. Roy has sued Paco for breach of contract. Which of the following scenarios is the likely outcome?

Paco will be able to rescind the contract because Roy should have known that the price was erroneous.

Pam enters into a contract with Jack to sell him 300 bales of hay. The bushels are kept in her warehouse, which is about 100 miles away from her place of business. The contract makes no express mention of the place of delivery. The place of delivery in such cases is:

Pam's warehouse

Mr. Blue gave Mr. Green $1000 to help his family out. Later Mr. Blue entered into a sales contract with Mr. Green and wanted the consideration to be in part the $1000. What is the term for the $1000?

Past Consideration

Maple Interiors, located in Boston, contracted to sell and ship sofas to Peach Furniture, located in Atlanta. The contract stated that the goods were to be shipped "F.O.B. Boston, via XYZ railroad." Maple delivered the sofas to XYZ railroad. They were shipped from Boston but never seen again. Both Peach and Maple had assumed that the other party had the risk of loss, so neither had obtained insurance. Who must bear this loss?

Peach must bear the loss because the risk passed to it after the sofas were delivered to XYZ railroad.

_____ are legal reasons for avoiding or reducing liability of an individual who is liable on a negotiable instrument.

Personal defenses

Jerry Hall makes out a note for $100 in such a way that someone could alter it to read $100,000. Someone alters the note and negotiates it to Pete Mason, who can qualify as a holder in due course. Which of the following statements is true for this situation?

Pete can collect $10,000 from Jerry.

Nathan wrote a new software and named it "Black Mamba." To commercialize it, he formed an LLC (with a 50-year term) with his friend Pete. Two years later, Nathan withdrew from membership of the LLC since his and Pete's working styles did not match in any way. Under which of the following conditions can Nathan ask for a judicial dissolution of the LLC?

Pete is using the profits from the LLC to sell a fake version of "Black Mamba."

The person who is designated to vote on behalf of the shareholder is called a(n):

Proxy

Pulse Corp. maintained a warehouse where it stored its manufactured goods. Pulse received an order from Star. Shortly after Pulse identified the goods to be shipped to Star and before moving them to the loading dock, a fire destroyed the warehouse and its contents. With respect to the goods, which of the following statements is correct?

Pulse has title and an insurable interest.

Fun Foods fraudulently induces Holly to buy a household products franchise by grossly misstating the average revenues of its franchisees. She discovers the misrepresentation after she has resold some products that she has received but before she has paid Fun Foods for the products. Holly wants to cancel the franchise contract on the basis of the fraud. What is the remedy available to her?

Quasi-contract

Quick Corp. has $270,000 of outstanding accounts receivable. On March 10, 1988, Quick assigned a $30,000 account receivable due from Pine, one of Quick's customers, to Taft Bank for value. On March 30, Pine paid Quick the $30,000. On April 5, Taft notified Pine of the March 10 assignment from Quick to Taft. Who is Taft entitled to collect the $30,000 from?

Quick Corp. only

Ralph, the owner of a medium-sized business, which is operated as a sole proprietorship, gives his vice-president, Wanda, authority to hire a new manager for the firm. Ralph gives Wanda detailed instructions about the salary she can contract to pay, but tells her that under no circumstances can she make commitments regarding the new manager's pension. Wanda contracts to hire Nick for the new managerial position. But to get Nick to sign up, she has to make certain specific pension commitments to him. Some years later, Nick sues Ralph for copping out on those pension commitments. Which of the following is true in this case?

Ralph is bound on the basis of Wanda's apparent authority.

Cyrano hired Roxanne to purchase a yacht. Cyrano did not want sellers to know that he was the buyer because he was very rich and he thought that sellers would demand a higher price if they were aware of this. So he instructed Roxanne to inform the sellers that she was acting for an anonymous buyer. Roxanne followed these instructions and entered into a contract to purchase a yacht from Richard. However, Cyrano did not like the yacht that Roxanne selected and refused to pay the purchase price. Richard insisted that Roxanne herself pay the purchase price. If Richard sues Roxanne to enforce the contract against her, what will be the outcome?

Richard will win because Roxanne did not disclose her principal's identity.

Stone, a merchant seller in Seattle, contracted with Rose, a merchant buyer in Rochester, for the sale of goods to be shipped by truck. The terms of the contract were "F.O.B. Seattle." Stone delivered the goods to the carrier. After leaving Seattle, the truck containing the goods was never seen again. Stone has demanded payment for the goods, and Rose has refused. If Stone sues, the outcome will be:

Rose will win because under the UCC this was a shipment contract.

Sharon and Martha are general partners in the SM general partnership. Sharon, acting with authority, negotiated and signed for a $500,000 loan to SM from a bank. SM has not repaid this loan. The bank can recover its loan from:

SM, Sharon, and Martha; they are jointly and severally liable.

Sandra hired Jeff to work as a taxi driver for Sandra. Jeff had a long criminal record for violent assaults, including three cases of vehicular homicide. However, Sandra was not aware of this and she does not check employees' criminal records. While Jeff was driving a passenger, Ben, they got involved in a heated argument. Jeff pulled Ben out of his car and hit him. Which of the following is true of this case?

Sandra is liable because of the direct liability doctrine. The typical direct liability case involves harm caused by the principal's negligence regarding the agent.

Courts may decline to enforce unconscionable terms or contracts. This provision has been laid down in:

Section 208 of Restatement (Second) of Contracts.

Shawn purchases a computer from Adelaide Electronics, and writes them a check of $1,000. However, after Shawn brought the computer home, it abruptly stopped working due to a virus attack. Shawn calls his bank ordering a stop-payment on the check. Adelaide Electronics gave the check to Jack Enterprises, their creditor. Shawn's bank honored the check when Jack presented it. Which of the following is true in this case?

Shawn cannot have his account recredited because he will not be able to show that he sustained any loss.

Smith and Benson make an oral contract for the sale of some land at a price of $500,000. After paying Smith $400,000 of the purchase price, Benson takes possession of the land. One month later, Smith wants to boot Benson off the land. His argument is that the parties' oral agreement is unenforceable under the statute of frauds. Which of the following is most correct?

Smith is incorrect, because Benson paid part of the purchase price and took possession.

Stella, Bob, and Chris are partners in Sole Services, a general partnership that runs a small shoe store. Stella and Bob want to buy the building that they are currently renting, but Chris does not agree. How will this disagreement be resolved?

Sole Services will not buy the building because this decision requires a unanimous vote of the partners.

In a partnership, partners may give everyone notice of a partner's authority or limitation on a partner's authority by filing a(n) _____ with the secretary of state.

Statement of Denial

A principal is liable for the misrepresentations made by an agent during a transaction with a third party.

True

Why does traditional contract law view any kind of an attempt by offerees to change terms as constituting a counteroffer?

Such an action implies a rejection of the offer by the offeree.

Svetlana Mills gives a check "payable to the order of Svetlana Mills," to a shopkeeper for some groceries. Here, the check would be considered as negotiated only upon the fulfillment of which of the following conditions?

Svetlana should indorse the check in her own name.

Ted is the president of Soprano Corporation (SC). Ted decided to have SC manufacture large, gas-guzzling SUV automobiles just before gasoline prices rose dramatically. As a result, SC lost billions of dollars. The shareholders of SC want to sue Ted for this bad decision that cost them billions. However, Ted had made a reasonable investigation before making this decision, he had a rational basis for it, and he had no conflicts of interest regarding this decision. What would be the probable outcome if the shareholders file a suit?

Ted is not liable under the business judgment rule.

Mr. Olive and Mrs. Pickle enter into a partnership to provide IT consulting services. The name of the business is IT Doctor. From the partnership account Mr. Olive purchases a laptop and an iPad. Who owns the laptop and iPad?

The business IT Doctor

Which of the following is NOT one of the implied warranties that the assignor gives to the assignee?

That the obligor is solvent.

In order to reduce creditor attempts to pressure debtors to reaffirm, which of the following acts requires that a reaffirmation promise be made prior to the date of the discharge and gives the debtor the right to revoke his promise within 30 days after it becomes enforceable?

The Bankruptcy Reform Act

Mark, an attorney, accepts an offer for an attorney position at The Firm. Prior to Mitch's first day at work, Harold, a managing partner, sends Mark an Employment Policy Manual which contains policies regarding attendance and confidentiality. Harold includes a note advising Mark to carefully review the manual as he would be expected to adhere to its policies. During his first week at The Firm, Mark is seen leaving the office at noon with copies of files tucked under his arm. He is also observed giving the copied files to a man not associated with The Firm. At the end of the week, Mark is terminated for violating the terms of the Employment Policy Manual. Which of the following is true?

The Employment Policy Manual is part of the implied contract between Mark and The Firm.

Which of the following is generally true about the Federal Trade Commission's (FTC) regulations of the holder in due course rule?

The FTC has seriously limited the rule's impact in consumer credit situations in which the consumer signs a note or an installment sales contract, or gets financing from a third party.

What is the standard applied to examine managers' duty of care?

The care expected from an ordinarily prudent man in similar circumstances.

Jim gave a postdated check dated December 30 to one of his creditors on December 22. However, the check was presented to Jim's bank on December 24, and the bank honored it. As a result, there was not enough money in his account to cover for another check he had written for December 27, and hence, the check bounced. The bank charged Jim a $20 fee for the bounced check. What is the bank's liability regarding this bounced check?

The bank has no liability.

In case a check is altered so skillfully that a bank is unable to detect the alteration, which of the following stands true?

The bank is allowed to charge to the account the amount for which the check originally was written.

Ace Software Co. signed a deal with Gill Associates, a partnership, and has extended credit to it. Paul, a partner in Gill associates, retires but his partners continue the business. In order to release Paul from the debt owned to Ace, which of the following must occur?

The continuing partners must release Paul from liability on the debt.

Mr. White enters into a contract to sell a car to Joe Jr. who is 15 years old and is considered a minor in the state where he lives. What is the status of the contract that Mr. White and Joe Jr. entered into?

The contract is voidable, and is enforceable till Joe Jr. cancels it.

Linda wanted to replace the old carpet in her home. She entered into a contract with Carpet Co., for the purchase and installation of a new carpet. The price of the carpet was $3,000 and the cost of the labor to install the carpet was $150. Later, Linda became dissatisfied with this transaction and now wants to sue Carpet Co. Linda wants to apply the contract rules of the UCC, but Carpet Co., wants to apply the contract rules of the common law. Which source of law should govern this case?

The contract rules of the UCC apply, because the predominant purpose of the contract was sale of goods.

Bob was a partner in F & B Co., a partnership. Bob dissociated himself from it on June 1, 2000. On December 1, 2000, F & B Co. entered into a contract with Carey. Under which of the following scenarios may Bob be held liable to Carey, even though he is no longer a partner?

The contract was entered into on the company's premises and Bob's name is still listed as a partner on the office door.

James goes to a dentist to have a tooth extracted. James never signs a written contract for this service, and he and the dentist never made an oral agreement either. Later, the dentist bills James who refuses to pay. The dentist sues James. Which of the following is true?

The dentist can recover under quasi-contract.

A principal is liable on a contract made by his agent if the agent had actual authority to make the contract.

True

Which of the following is true of the period during which parties can file a lawsuit for breach of a sales contract?

The parties to a contract may shorten this period to one year after the breach occurs.

Terrance and Barbara created a limited partnership, but inadvertently misstated its name in the certificate of limited partnership. How will their liability be affected by this?

The partners will have unlimited liability.

Leonard, Ted, and Julius are partners at Jutle Associates. They signed a two year lease agreement with Property Company for business purposes. Five months into the new agreement, Leonard dissociates from the partnership. Under what circumstances will Leonard no longer be liable on the lease agreement?

The three partners and Property Company enter into an appropriate novation agreement.

N-Gate Corporation (NGC) was defectively organized. As a result, not even a corporation by estoppel was formed. An NGC truck driver negligently ran over a pedestrian while delivering goods manufactured by NGC. The pedestrian now wants to sue. Who is liable in this situation?

The truck driver, the managers of NGC, and all the purported shareholders of NGC.

Mr. Yellow delivers a stack of newspapers to Mr. Green's store to see if he wants them. A note attached indicates the stack of papers is $50. Mr. Green without communicating an acceptance sold the entire stack of papers to his customers. What is the status of the agreement between Mr. Yellow and Mr. Green?

There is a contract because Mr. Green accepted by implied action

Abby orally offers to sell Carl 100 premium-grade fountain pens but neglects to state the price. Such pens typically sell for $1 each. Carl orally accepts. Immediately thereafter, Abby tries to back out of the deal. At this point in time, which of the following is most likely to be true?

There is a contract, because the offer contained all material terms

April Roberts ordered hundred 19-inch color television sets from Carl Soans and requested for a prompt shipment of the goods. Carl promptly shipped fifty 21-inch color television sets and fifty 19-inch color television sets without informing April that the shipment of nonconforming television sets was an accommodation. Which of the following is true?

There is an acceptance but Carl has breached the contract by shipping nonconforming television sets

Ian Kendler makes Brian Hyson an offer for a plot of land. In the offer, Kendler stipulates that the acceptance of the offer must be sent by registered mail but Hyson mails his acceptance through the regular postal service. Which of the following is true? Assume that the Restatement (Second) of Contracts does not apply.

There is no acceptance and no contract.

Kyle sent Tara a letter offering to sell Tara his car. Tara left the letter on her desk, where her roommate, Maggie, saw it. After reading the letter, Maggie wrote to Kyle and stated that she (Maggie) wanted to accept Kyle's offer. Which of the following is true?

There is no contract between Kyle and Maggie because Kyle did not communicate the offer to Maggie.

A bicycle manufacturer sells 100 bikes to Bill's Bike Shop. The contract says that Bill's may return any bike not sold within six months, and he will be reimbursed for them. Bill's Bike Shop burns down in one week after the delivery of the bikes, which are destroyed in the fire. Bill's bears the risk of loss for the 100 bikes.

True

A cashier's check is a check for which the same bank is both drawer and drawee.

True

A claim in recoupment is a claim of the person obligated on the instrument against the original payee of the instrument.

True

A contract made by a person who has been adjudicated to be insane and institutionalized or put under a guardian's care is void rather than voidable

True

A contract may be voidable even if the person making the misrepresentation believes in good faith that what he/she says is true.

True

A corporation with a reasonable debt-to-equity ratio will not have its veil pierced on the grounds of thin capitalization.

True

A department store sells a TV set to Wilson, who pays with a bad check. Wilson immediately sells the TV to Davis for $500. Davis knew nothing about how Wilson acquired the TV from the store. Davis has good title to the TV and will prevail against the store if it sues Davis for the TV or its value.

True

A drawer whose bank paid checks over a stop-payment order may not be entitled to have his account recredited, if he is unable to show he suffered any loss.

True

A general partner in an LLLP will have unlimited liability if the LLLP was formed defectively.

True

A new partner to a LLP is liable only to the amount of capital invested in the business.

True

A partner charged with winding up of the partnership has implied authority to take such appropriate actions necessary to accomplish the wind up.

True

A partner's transfer of his/her transferable interest has no effect on his/her status as a partner, absent a contrary agreement.

True

A party can withdraw repudiation before the other party has cancelled the contract or has materially changed position by clearly indicating that the person intends to perform his obligations.

True

A party injured by fraud in a contract for the sale of goods can both rescind the contract and sue for damages.

True

A written agreement to the effect that the parties do not intend to form a partnership is not conclusive if their actions provide evidence of their intent to form a relationship that meets the RUPA partnership test.

True

Abby promises to pay Brian $50 if he mows her lawn. Brian does not promise to mow Abby's lawn; however, later that day, Brian completely and satisfactorily does mow Abby's lawn. This is an example of a unilateral contract.

True

According to the general rules of interpretation of contracts, ordinary words are given their general meanings and the technical ones are given their technical meaning.

True

Alvin and Billy own 70 percent of Beta Corporation. Claude owns 30 percent of Beta Corporation. Alvin and Billy consistently vote and act in ways that benefit them, but harm Claude. Claude may claim oppression as a minority shareholder.

True

An LLC member has no individual liability on LLC contracts, unless he/she also signs LLC contracts in his/her personal capacity.

True

An accountant can be required to bring his/her working papers into court and to testify as to matters involving the client's tax records and discussions with the client regarding tax matters.

True

An accountant who substantially performs her duties to her client triggers the client's duty to pay the contract price, less any damages resulting from defects in her performance.

True

An advertisement offering a reward for the return of lost property is usually treated as an offer for a unilateral contract.

True

An agent who has total control over a piece of property has implied authority to contract for repairs.

True

An agreement that violates legislative and court-made rules and creates threat to public policy shall be denied enforcement on the ground of illegality.

True

An incidental beneficiary of a contract cannot recover under that contract.

True

An individual must be acting in good faith in order to become a holder in due course of a negotiable instrument.

True

An individual who was intoxicated when they signed a contract can escape the contract.

True

An oral contract within the UCC statute of frauds can be enforced without a writing only if it involves the sale of specially manufactured goods.

True

Ann and Susan want to enter into a partnership business, having a term of five years, of selling used cars. They have to prepare a partnership agreement in writing to be enforceable under the statute of frauds.

True

Anyone other than a bank, who purchases a check indorsed "for deposit only," has converted it; unless the indorser received the amount paid for the check or the bank deposited the check in the indorser's account.

True

Arthur and Brian have entered into a contract with an enforceable liquidated damages provision that states that Ben's recovery will be $10,000 in the event of Arthur's breach. Arthur breaches the contract. Ben loses $50,000 in consequential damages as a result. Ben's recovery is limited to $10,000.

True

At common law, the risk of loss for shipped goods falls upon the person or party who had "technical title" at the time the goods were damaged or destroyed.

True

Barks and Paws partnership is in the business of selling pit bull dogs. After operating the partnership for one year, the state outlawed the breeding and sales of pit bulls. Assuming this is the only activity of the partnership, dissolution of the partnership will be required.

True

Ben, a Big Bank checking account customer, wrote a check for $1,000 to Mia. At the time that Mia presents the check for payment at Big Bank, Ben has $1,500 in his account. However, the clerk mistakenly refuses to pay the check and stamps it NSF. Mia then goes to the local prosecutor, and Ben is later arrested for writing a bad check. Ben could recover from Big Bank the damages involved in his arrest, such as attorney's fees.

True

Bob authorizes Steward to borrow money on his behalf. Steward signs his name on a note in his individual capacity i.e. without disclosing that the signature is on behalf of Bob. Then Steward becomes liable for the note.

True

CISG applies only to sale of goods and commercial parties.

True

Consideration is what distinguishes enforceable agreements from gratuitous promises.

True

David, a debtor, owes debts to creditors Paul, Mark, and Gary. Paul, Mark, and Gary agree with each other and with David to release him from his debts, in exchange for his promise to pay Paul, Mark, and Gary 75 percent of the amount he owes each of them. This is called a composition agreement, and such agreements generally are binding contracts.

True

Deborah owes a debt to Casey. Sean contracts with Deborah to pay her debt to Casey. Casey is a creditor beneficiary of the contract between Sean and Deborah.

True

Delta Corporation's board of directors is considering a resolution that may cause severe liability to the directors. Wayne, a board member, disagrees with the decision. Unless he clearly registers his dissent, he may be liable.

True

During the early period of American history the state governments issued special charters that created corporations.

True

Edna Boyle contracts with The Melonville Times to advertise her garage sale to be held this Saturday. The ad is to run in the Friday and Saturday morning edition. If the ad does not run on time, The Melonville Times agrees to pay Edna $50.00. This liquidated damages clause is most likely enforceable.

True

Estoppel is the concept that a principal may be liable to a third party if that party justifiable believed that the agent had authority to act for the principal and there was a detrimental change in the third party's position.

True

Even if both parties consent to an agreement, if a court finds the agreement illegal then it will not enforce it.

True

If Grant promises to sell his regular season football tickets to Carson on condition that Indiana University wins the Rose Bowl, Indiana's winning the Rose Bowl is an express condition of Grant's duty to sell the tickets.

True

If a customer does not discover a forged check and report it to the bank within one year from the time of the statement containing the check, the bank is not obligated to recredit his account for the amount of the forged check.

True

If a note or draft contains a conspicuous statement that the promise or order is not negotiable, it is not a negotiable instrument even if it meets the test for negotiability.

True

If a state offers a granted privilege, like accountant-client privilege then the federal courts in that jurisdiction will also allow that privilege.

True

If an agent has authorized his subagent to make a certain contract and this authorization is within the authority granted to the agent by his principal, the principal is bound to the subagent's contract.

True

If no agreement is made between a buyer and seller on inspection then the UCC indicates that a buyer may inspect the goods at any time the buyer choses as long as it is reasonable.

True

If the buyer and seller have agreed to the manner in which the resale is to be made, the courts will enforce the agreement unless it is found to be unconscionable.

True

If the parties make an agreement that is partly printed and partly handwritten, the handwritten provisions prevail over the printed provisions in case of a conflict between them.

True

If the seller does not make a reasonable contract for delivery or notify the buyer and a material delay or loss results, the buyer has the right to reject the shipment.

True

If the seller fails or refuses to deliver the goods called for in the contract, the buyer can purchase substitute goods and recover as damages from the seller.

True

If the seller has justifiably withheld delivery of the goods because of the buyer's breach, the buyer may recover any money or goods he has delivered to the seller over and above the agreed amount of liquidated damages.

True

If there is a conflict between the express terms of the contract and the past course of dealing between the parties, the express terms of the contract prevail.

True

In a partnership, some classes of partners may have greater voting rights than others.

True

In determining whether consideration exists, the law is not concerned with any disproportion in value between the things exchanged in a contract

True

In general, the ULPA does not grant partners much power to expel other partners from the partnership.

True

In mixed goods-services situations, courts determine whether the contract is for the sale of goods by determining whether the good or the service is the dominant part of the transaction.

True

In order for a unilateral mistake to make a contract voidable, either the nonmistaken party must have caused or had reason to know of the mistake, or enforcement of the contract must be unconscionable.

True

In order to capitalize a newly formed corporation, the company will usually seek cash in exchange for equity securities, debt securities, or both.

True

In return for services Charles performed for Richard in the past, Richard promises to pay Charles $1000. There is no consideration for Richard's promise.

True

In the absence of a partnership agreement, the RUPA provides that any partner who has not wrongfully dissociated may perform the winding up.

True

Joe Smith is a recent graduate from Sunset College. While at Sunset College he majored in Business. In his interview for an auditor position at Supermart Inc. Mr. Smith convinced the hiring manager he knew enough accounting to perform the job, but in fact Mr. Smith does not understand Generally Accepted Auditing Standards (GAAS). Mr. Smith has failed to show professional care and could be liable for his actions as an auditor because of his lack of skills.

True

John is a partner of Aegon Services, a limited liability partnership firm. He committed fraud and embezzled $1 million from a client. The other partners would not be personally liable for John's malpractice.

True

Josh acquires beneficiary rights under a contract between Sunny and James. Any modification to that contract which discharges Josh of his rights under the contract will not be enforceable by the court.

True

Kevin offered to mow the lawn for his Uncle Jordan's for $100. To his offer, Uncle Jordan replied by saying "I know you're taking advantage of me but I accept." Uncle Jordan has indeed accepted the offer made by Kevin.

True

Michael and William contracted for Michael to mow William's lawn once a week for 20 weeks, at a price of $20 per week. Later, without terminating the first contract, the parties modify the contract as follows: Michael will mow William's lawn in exactly the same way for exactly the same time period, in exchange for William's promise to pay Michael $22 per week. There is no consideration for William's promise.

True

Mr. Blue and Mr. Green are in negotiations for a regular delivery of newspapers to Mr. Blue's business. Mr. Blue did not formally announce his acceptance to the offer. But when Mr. Green sent a shipment of newspapers as had been agree, Mr. Blue accepted the shipment and paid for them. According to the UCC Mr. Blue and Mr. Green have an enforceable contract.

True

Mr. Blue enters into negotiation with Mr. Green to build a house. Both parties expected a written and signed purchase agreement. After agreeing on terms, Mr. Green is told by his subcontractors that some of their prices have gone up. Mr. Blue objects and indicates that there was a contract when the parties agreed to the original terms orally. A court will find that indeed no contract existed since the parties expected acceptance to be in written form.T

True

Mr. Blue gave his favorite nephew Jim Jr, who is a mechanic, $1000 in January. Later that year he needed his car repaired. In the sales contract Mr. Blue indicated that the amount owed should be deducted from the money already paid. A court will find that Mr. Blue failed to give proper consideration for the contract.

True

Mr. Green agrees to purchase a lawn mower from Ms. White for $300. The act of payment of $300 by Mr. Green is consideration for the act of passing ownership of the lawn mower from Ms. White to Mr. Green.

True

Mr. Green contracts to repair his roof with Mr. Brown. Prior to the work starting a tornado destroys Mr. Green's home. Mr. Brown fails to perform the duty on the contract, but the court will not consider Mr. Brown in breach due to impossibility.

True

Mr. White contracts with Mr. Green for 100 black coffee mugs for a party. Mr. White decides he needs the mugs faster than the time allotted in the contract, and asks for a rush shipment. Mr. Green notifies Mr. White that he will ship 100 coffee mugs but that the only ones available are red. A court will find that the shipment of red mugs under the UCC is not a breach of the original agreement.

True

Mr. White sends his acceptance for a business contract to Mr. Green. But Mr. White put insufficient postage on the envelope. One day later Mr. Green revokes the offer through the mail. Mr. White upon receipt of the undelivered acceptance, Mr. White overnighted the acceptance letter to Mr. Green. The court will find if it applies the UCC rule that a valid acceptance occurred and subsequent contract is now created between Mr. White and Mr. Green.

True

Ms. White hired Mr. Blue to steal from Ms. Yellow. Ms. White is upset with how everything turned out and wants to sue Mr. Blue for breach of contract. But the court will refuse to recognize the contract and subsequently a breach of it because it is a contract for an illegal activity.

True

On June 1, Mike writes a check payable to Pete. Without ever being paid, the check is eventually negotiated to Hal, who receives it on September 15, with notice of the date on its face. Hal is not a holder in due course of the check.

True

Once a buyer has accepted goods, he cannot later reject them unless at the time they were accepted, the buyer had reason to believe that the nonconformity would be cured.

True

Ordinarily, an item is not considered to be a necessary if a parent or guardian already supplies the minor with similar items.

True

Specific performance requires that the seller is obligated to give the buyer the requisite goods covered by the contract.

True

Strictly speaking, a contract has nothing to do with the personal intent of the parties

True

Susie Q, business manager for Pizza Uno, sends a check to Papa Bakery. On the check the computer writes TWO DOLLARS in the description line field and has $200.00 in the numeric field. Susie signed the check and did not notice the mistake. The bank should honor the check for $2.00.

True

Susie Q. signs a promissory note with her typical signature, a X. Susie's mark will be sufficient to be considered a signature and establish liability in the instrument.

True

The Electronic Funds Transfer Act governs "check conversion" transactions.

True

The UCC defines good faith in commercial transactions as observance of reasonable standards for fair dealing.

True

The UCC has incorporated the Common Law concept of rescission as a remedy available to a buyer in a breach of contract dispute.

True

The UCC imposes a duty of good faith on the performance and enforcement of every contract it covers.

True

The buyer may reject an installment delivery only if the nonconformity substantially affects the value of that delivery and cannot be corrected by the seller in a timely fashion.

True

The charging order creditor is a lien creditor and is entitled to receive only the partner's share of the partnership distributions.

True

The decision on what form of business to make a startup business is important because it will affect how much the business owner is liable and has control over the new business.

True

The essence of a contract is that it is a legally enforceable promise or set of promises.

True

The mere presence of a Nevada corporation's vacant property in California is sufficient to subject the corporation to taxes in California.

True

The negotiable instruments of a corporation have to be signed by an agent of the corporation who is authorized to sign the instrument.

True

The offeror is said to be the "master of the offer." This means that offerors have the power to determine the terms and conditions under which they are bound to a contract.

True

The primary corporate objective is to make money for the shareholders.

True

The rules promulgated by the Restatement (Second) of Contracts often resemble the rules created by Article 2 of the UCC.

True

The shareholders of a corporation that has elected S Corporation status may report the income and losses of the business on their individual federal income tax returns.

True

The sources of assignment law today are the common law of contracts and provisions of the UCC.

True

The standards and principles of agency law's respondeat superior are applied in determining the liability of the partnership and of the other partners for the torts of a partner and other partnership employees.

True

The statute of frauds applies exclusively to executory contracts.

True

The threat to institute a criminal prosecution against another party in order to force that party into a contract is almost always duress.

True

The three requirements for a valid offer are: present intent to contract, definiteness, and communication to the offeree

True

The traditional rule is that, when the consideration given by the adult party under a minor's contract has been lost, stolen, or dissipated, the minor can disaffirm without compensating the adult for the loss in any way.

True

There is no limit on the number of members in a Nonprofit Corporation.

True

To encourage people to cancel illegal contracts, courts will allow a person who rescinds such a contract before any illegal act has been performed to recover any consideration that he has given.

True

Transfer of corporate assets to shareholders for less than fair market value is called "looting."

True

UCC 9-307 states that a buyer purchases a good in a normal type transaction is a good faith purchaser and owns the good free and clear of previous security liens on goods.

True

UCC covers accord and satisfaction by the use of an instrument called "full payment" check.

True

Under the "American rule" governing successive assignments, the first assignee in time has the superior right.

True

Under the Model Business Corporation Act (MBCA), a prospective shareholder may not revoke a preincorporation subscription for a one-year period, in the absence of a contrary provision in the subscription.

True

Under the RUPA, when the dissociated partner has not wrongfully dissociated and there is no partnership agreement on the issue, he should be paid within 120 days.

True

Under the Restatement (Second) of Contracts, intoxication will make a contract voidable if the other party has reason to know that the intoxicated person is so intoxicated that he/she cannot understand the transaction.

True

Under the doctrine of purported partners, a third party may hold liable persons who purport to be partners.

True

Under the doctrine of unconscionability, the courts would refuse to grant the equitable remedy of specific performance for breach of contract if the contract is oppressively unfair.

True

Unless specific language indicates otherwise then an assignment of a right will be interpreted to include a delegation of duty under a contract.

True

Watered shares are shares issued for consideration that has been overvalued impermissibly by the board of directors.

True

When a person owes an unconditional duty to another, then he/she must perform it unless the performance is excused.

True

When both the bank and the customer failed to use ordinary care to prevent alteration or forgery of checks then a comparative negligence is used to determine liability for damages.

True

When one of the parties offers a disproportionately small amount of money in settlement of a debt and refuses to pay more, it is a form of economic duress.

True

Wire transfer is used for transfer of funds across the country or around the world. This service is generally used by large business and financial institutions.

True

Jerry owns a parcel of land. Nate, one of Jerry's closest friends and an attorney, has persuaded Jerry to sell the land to Nate at a price substantially below fair market value. At the time Jerry sold the land, he was resting in a nursing home recovering from a serious illness. If Jerry desires to set aside the sale, which of the following causes of action is most likely to be successful?

Undue influence

Stan hired Mason to work as a janitor in Stan's apartment building. Mason was negligent. He left the floor in the building lobby wet and slippery, without putting up a warning sign. Martha slipped and fell on the wet floor. If Stan is liable for this accident, what is the source of his liability?

Vicarious liability

Wayne and Mia are friends in Idaho, where gambling is illegal and they are aware of it. Wayne and Mia bet $1,000 on which day Paradise Creek will flood its banks. They have no financial interest in Paradise Creek. Wayne wins this bet. Mia pays Wayne the $1,000, but later that day regrets it and sues Wayne to get her $1,000 back. The court would probably rule in favor of:

Wayne, since the court will "leave the parties where it finds them" in cases like this.

Debbie Jones and Bill Schneider exchanged standard order forms to formalize their contract for a batch of goods and realized that their standard forms do not agree on material terms. Under UCC section 2-207, when will there be a contract? Assume that Bill did not make its acceptance conditional on Debbie's assent to any additional or different terms.

When Bill's form is a definite and seasonable expression of acceptance.

When is the revocation of an offer effective?

When received by the offeree

While receiving a properly drawn and payable check on a person's account, which of the following circumstances make it a necessity for the bank to honor the check?

When there are sufficient funds in the account.

Sam agrees to make partial deliveries of goods over three months to Winston. The first delivery was late by two weeks. Why should Winston object to this late delivery?

Winston may waive his rights to cancel the contract if other deliveries are late

Anna hired Juan to act as her sales agent in her auto dealership. However, Anna has instructed Juan not to enter into any sales contracts before she has had a chance to review the transaction. However, one day Juan entered into a sales contract with William, without informing Anna first. Has Juan created a contract with William that is binding on Anna in this situation?

Yes, Juan did have apparent authority to act.

Able carefully drew a check for $10 on her checking account at ABC bank, payable to the order of Baker. Baker altered the check to read $100, and then negotiated it to Cain. Cain presented the check for payment to ABC bank, which paid Cain $100. The bank then deducted $100 from Able's account. When Able saw her bank statement she demanded that ABC credit her account for the altered check. ABC credited Able's account and then sued Cain. Is Cain liable?

Yes, because Cain violated a presentment warranty.

James has entered into a contract to sell his house to Mikhael. James knows that the house has a bad termite infestation that significantly reduces the value of the house. However, the topic of termites never came up and James did not volunteer any information about the termites. Mikhael is not aware of the termite problem. Under the law of most states, has legal misrepresentation occurred here?

Yes, because James is concealing the termite infestation from Mikhael.

In many public meetings, John has proclaimed himself to be an equal partner of Chan's partnership business. Chan's business ran into financial difficulties. John and Chan approached a creditor to obtain loan. The creditor gave the loan based on a false presumption that John was a partner in the business too. Can John be made liable for the loan?

Yes, because John is a purported partner; public representations of his partner status make him personally liable for the debt.

On Thursday, Trista Dylan receives a letter from Charlie Holmes offering to sell her a diamond ring and stating that: "if you choose to accept, you must do so prior to 2:00 p.m. tomorrow." Trista had a telegram of acceptance dispatched well before 2:00 p.m. on Friday but it is delivered to Charlie's home only at 2:15 p.m. Do Trista and Charlie have a binding contract?

Yes, because Trista dispatched the telegram prior to 2:00 p.m.

Ron was employed by Mass Co. in 1970. At that time, he was given an employee handbook that described the particular steps that had to be taken before an employee could be fired. Later on, in 2000, Mass published a new handbook by which all workers status were changed to employment-at-will workers. Mass then fired Ron. Ron claimed he was terminated without cause and was not afforded procedures described in the 1970 handbook, such as an appeal or review of the decision. He sued Mass under breach of contract based upon the 1970 employee handbook. Will he succeed?

Yes, because the modifications in 2000 were not by mutual consent and for consideration.

Marion purchased a digital camera, paying with a promissory note. The note stated that Marion promised to pay $300 (the purchase price of the camera) in 10 monthly installments of $30 plus interest. Payments are due on the first day of each month, starting in January 2010. The interest is to be calculated as "three percent over the Chase Manhattan Prime Rate." Is this instrument negotiable?

Yes, because the variable rate of interest is calculated by reference to an index.

Abel hired Carr to restore Abel's vintage car for $800. The terms of their oral agreement provided that Carr was to complete the work within 18 months. Actually, the work could be completed within one year. Can Abel insist that the work be completed within a year instead of the 18 months?

Yes, because the work can be completed within one year.

A loan made by a partner to partnership business is:

a liability of the partnership business.

To qualify as a contract, a set of promises must be based on a voluntary agreement, which is made up of an offer and a(n) _____ of that offer.

acceptance

National bank is reluctant to lend money to James and takes a note from him because of his shaky financial condition. However, the bank is willing to lend money to James if he signs the note and a friend also signs the note. Here the friend serves as the:

accommodation party.

When a promisee who has an existing claim agrees with the promisor that he will accept some performance different from that which was originally agreed on, both parties can use the remedy of:

accord and satisfaction.

The ULPA and the RULLCA permit limited partnerships and LLCs to merge with other businesses. For the merger procedure, the first requirement is that the companies have to:

adopt a conversion plan.

On August 1, Neptune Fisheries contracted in writing with West Markets to deliver to West 3,000 pounds of lobsters at $4 a pound. Delivery of the lobsters was due October 1 with payment due November 1. On August 4, Neptune entered into a contract with Deep Sea Lobster Farms which provided as follows: "Neptune Fisheries assigns all the rights under the contract with West Markets dated August 1 to Deep Sea Lobster Farms." The best interpretation of the August 4 contract would be that it was:

an assignment of rights and a delegation of duties by Neptune.

Bob's threat to breach an existing contract unless Lauren makes another contract with Bob is considered:

an element of duress, depending mainly on the coerciveness of the threat.

Justin agrees to start a life-size portrait of Julia beginning 2nd November. On the 28th of October he writes to Julia that due to unforeseeable circumstances he would not be able to perform his promise, Justin has used the doctrine of:

anticipatory repudiation.

UCC section 2-302(a)(1) states that in order for an individual to become a holder in due course the instrument must not on its face do what?

appear to be a forgery

Partners of a partnership:

are entitled to income of the partnership, which must be reported on their individual federal income tax returns.

Tim contracts with Home Dairy to deliver a bottle of milk to Tim's house every day. Home Dairy assigns Tim's contract to Mother Dairy. Tim is notified of the change and continues to get his daily bottle of milk. His contract is now with the new dairy. Mother Dairy is the:

assignee.

Morton Reeves, a building subcontractor, submitted a bid for construction of a portion of a high-rise office building. The bid contained material errors in computation. Lago Corp., the general contractor, accepted the bid with the knowledge of Reeves' errors. Reeves:

can avoid liability on the contract since Lago knew of his errors.

Bing engaged Dill to perform personal services for $2,200 a month for a period of four months. The contract was entered into orally on July 1, 1984, and performance was to commence September 1, 1984. On August 10, Dill anticipatorily repudiated the contract. As a result, Bing:

can immediately sue for a breach of contract

Maria and Joe entered into a contract for the sale of Maria's car. Delivery of the car and payment were to be made on March 1. Joe clarified that he needed the car so that he can commute between San Francisco and Oakland to his new job that is starting on March 2. Maria broke the contract and failed to deliver the car on March 1. Joe needed a car to commute so he rented a car at $30 per day for 20 days, which was the reasonable amount of time it took him to locate and buy another car. Joe sued Maria for his losses, including the $600 car rental. The $600 makes up the _____ damages.

consequential

Roe promises to build a house for Crown for which, Crown agrees to pay him $10,000 when the house is complete. This example is related to the concept of:

constructive condition.

Most of the common law of corporations deals with:

creditor and shareholder rights

Promoters of a youth-oriented magazine publishing business substantially complied with each of the mandatory conditions precedent to the incorporation of the business, but they forgot to include the incorporators' addresses in the articles of incorporation. As a result, a(n) _____ corporation was formed.

de jure

Denise contracts with Long Life Insurance Co., agreeing to pay premiums in return for which the company agrees to pay $500,000 to Denise's husband Barn when Denise dies. Barn is a(n):

delegatee.

If Viola owes Tina money, Tina may frame a document for the amount of the debt, naming Viola as drawee and herself or her bank as payee, and send the document to Viola's bank for payment. This document is a:

draft.

Shania Watson has a checking account at the Capital Bank of New York. She goes to Lowe's and agrees to buy an electric water heater priced at $700. She writes a check to pay for it. Shania is the _____ of the check.

drawer

If there is a conflict between the express terms of the contract and trade usage, the:

express terms of the contract prevail.

The corporate form of business has facilitated the rapid growth of development by allowing businesses to attain economies of scale compared to other forms of businesses by:

giving businesses a greater capacity to raise capital

Johnny LaRue sells men's jackets to men's clothing stores, including Melonville Man. Melonville Man orders a selection of men's jackets from LaRue's catalog, asking that LaRue select an assortment of goods for the buyer. LaRue takes advantage of this opportunity to get rid of the odd-sized jackets and those in pastel colors that are no longer popular. LaRue:

has violated the good faith requirement under sales contracts.

Daniel is a senior at State University. Brian, Daniel's father, is concerned about Daniel's study habits, given that Daniel spends most of his evenings at the campus pub instead of the library. Brian promises Daniel that he will send him on an expense-paid trip to Europe after his graduation if Daniel spends at least five evenings a week studying in the campus library for the remainder of his senior year. After returning home from his graduation, Daniel asks Brian about the European trip. Brian replies, "Your education was your reward. I don't owe you a trip to Europe." Brian is:

incorrect; Brian owes Daniel a trip to Europe because Daniel's acts are consideration

Where no separate consideration is exchanged for the legal and illegal parts of an agreement, the agreement is said to be _____.

indivisible

A computer manufacturer offered to sell sophisticated computer equipment to another country. Two days later, before the offer was accepted, Congress placed an embargo on all sales to this country; and therefore, the offer was terminated by the embargo. This is an example of:

intervening illegality

Under the _____, no writing is required where the guarantor makes a collateral promise for the main purpose of obtaining some personal economic advantage.

leading object rule

Payne entered into a written agreement to sell a parcel of land to Stevens. At the time the agreement was executed, Payne had consumed alcoholic beverages. Payne's ability to understand the nature and terms of the contract was not impaired. Stevens did not believe that Payne was intoxicated. The contract is:

legally binding on both parties.

Sklar, CPA, purchased from Wiz Corp. two computers. Sklar discovered material defects in the computers 10 months after taking delivery. Three years after discovering the defects, Sklar commenced an action for breach of warranty against Wiz. Wiz has raised the statute of limitations as a defense. The original contract between Wiz and Sklar contained a conspicuous clause providing that the statute of limitations for breach of warranty actions would be limited to 18 months. Under the circumstances, Sklar will:

lose because the clause providing that the statute of limitations would be limited to 18 months is enforceable.

Al hires Bob to move his furniture to his new house. On the day of the move, Bob does not feel like moving furniture, so he asks his friend Chuck to move the furniture. Chuck decides to leave before completing the move in order to watch a football game on TV. Al has to delay his move and hire another mover at a higher price. Al wants to sue Bob to recover for his damages. Given these facts, Al will most likely:

lose, because he failed to insist on Bob's performance.

Jill takes a loan from a bank. She signs a standard-form note prepared by the bank. The note obligates Jill to pay to the bank the amount of the loan, plus interest. Jill is the:

maker of the note.

Ahmed Cohen received a check for $5,000 for a used car he sold. The check was marked "pay to the order of Ahmed Cohen." On back of this check he wrote, in his handwriting, "Ahmed Cohen." This has the legal effect of:

making this instrument bearer paper.

A limited partnership:

may be taxed either as a partnership or as a corporation.

In general, the material alteration of a completed negotiable instrument:

means that a holder in due course can enforce the instrument against the maker, but only according to its original tenor.

Guy and Boyd make an oral contract whereby Guy agrees to sell Boyd, 480 widgets (goods) at a price of $480. Later, the parties want to modify the contract so that the price would become $520. This modification:

must be in writing.

On May 6, Robbie entered into a signed contract with Ed, whereby Robbie was to sell Ed a painting having a fair market value of $350,000 for $130,000. Robbie believed the painting was worth only $130,000. Unknown to either party, the painting had been destroyed by fire on May 4. If Ed sues Robbie for breach of contract, Robbie's best defense is:

mutual mistake.

The LLC is not ordinarily liable for the wrongful acts of:

nonmanager members in a manager-managed LLC.

Rice contracted with Locke to build an oil refinery for Locke. The contract provided that Rice was to use United Pipe Fittings. Rice did not do so. United learned of the contract and, anticipating the order, manufactured additional fittings. United sued Locke and Rice. United is:

not entitled to recover because it is an incidental beneficiary.

Toby, an Ohio real estate broker, misrepresented to Allen that Toby was licensed in Michigan under Michigan's statute regulating real estate brokers. Allen signed a standard form listing contract agreeing to pay Toby a 6% commission for selling Allen's home in Michigan. Toby sold Allen's home. Under the circumstances, Allen is:

not liable to Toby for any amount because Toby violated the Michigan licensing requirements.

Todd is a licensed real estate broker in Ohio. One of Todd's largest clients, Sun Corp., contracted in writing with Todd to find a purchaser for its plant in New York and agreed to pay him a 6% commission if he was successful. Todd located a buyer who purchased the plant. Unknown to Todd, New York has a real estate broker's licensing statute which is regulatory in nature, intended to protect the public against unqualified persons. Todd violated the licensing statute by failing to obtain a New York license. If Sun refuses to pay Todd any commission and Todd brings an action against Sun, he will be entitled to recover:

nothing.

Ted Nix purchased two acres of land from Sally Pine. Nix paid 15 percent at the closing and gave his note for the balance secured by a 30-year mortgage. Five years later, Nix found it increasingly difficult to make payments on the note and finally defaulted. Pine threatened to accelerate the loan and foreclose if Nix continued in default. Pine told Nix either to get the money or obtain an acceptable third party to assume the obligation. Nix offered the land to Quick Co. for $4,000 less than the equity Nix had in the property. This was acceptable to Pine and at the closing, Quick paid the arrearage, executed a new mortgage and note, and had title transferred to its name. Pine surrendered Nix's note and mortgage to him. The transaction in question is a(n):

novation

Winston contracts to sell a plot of land called Blackacre to Paris for $500,000. Winston breaches the contract and Paris sues him. Blackacre's reasonable market value at the time of the breach was $525,000. Paris can recover:

only $25,000.

A party who makes a preincorporation contract with a corporate promoter is liable on the preincorporation contract:

only when the promoter is liable on the contract

In technical legal terms, a party not equally in the wrong is said to be not in _____.

pari delicto

Mary Lee James, a certified public accountant at Edgewater, Florida, wishes to incorporate. According to the corporate law requirements, she needs to incorporate under the:

professional corporation acts.

A reaffirmation promise has to be made prior to the date of the bankruptcy discharge and gives the debtor the right to revoke his promise within 30 days after it becomes enforceable. This is the requirement of:

promises to pay debts barred by bankruptcy discharge

April and Brian entered into a completely integrated written contract. Before the written contract was completed, April made an oral statement to Brian regarding the terms of the contract. This statement was not contained in the written contract. Under the parol evidence rule, evidence of April's oral statement would be admissible if it were used to:

prove an additional term consistent with the written agreement.

A written agreement was signed by two parties and it was intended to be their entire agreement. The parol evidence rule will prevent the admission of evidence that is offered to:

prove the existence of a contemporaneous oral agreement that modifies the contract

Vernon and Josh are partners in an accounting firm. They agree that only Josh has authority to make contracts to perform audits of clients, an agreement known by Mantron Company. Nonetheless, Vernon and Mantron contract for the partnership to audit Mantron's financial statements. Vernon takes the contract to Josh, who reads it and says, "OK, we can perform the audit." In this situation, Josh has _____ the contract.

ratified

Union Bank lent $200,000 to Wagner. Union required Wagner to obtain a life insurance policy naming Union as beneficiary. While the loan was outstanding, Wagner stopped paying the premiums on the policy. Union paid the premiums, adding the amounts paid to Wagner's loan. Wagner died and the insurance company refused to pay the policy proceeds to Union. Union may:

recover the policy proceeds because it is a creditor beneficiary.

David entered into a contract to sell Ruth a parcel of land fully aware that Ruth's intention of purchase was to construct a high-rise commercial building. David was also aware that the subsurface soil condition of the property would prevent such construction. The soil condition was not readily discoverable in the course of normal inspections or soil evaluations. David did not disclose the existence of the condition to Ruth, nor did Ruth make any inquiry of David as to the suitability of the land for the intended development. David's silence as to the soil condition:

renders the contract voidable at Ruth's discretion.

The Private Securities Litigation Reform Act of 1995 requires an auditor to:

report to the Securities and Exchange Commission a client's illegal act that has a material impact on the financial statements of the client when the client has failed to take remedial action.

If the goods are covered by a negotiable warehouse receipt, then the: I

seller must endorse the receipt and give it to the buyer.

Since the level of doing business that constitutes intrastate business for qualification purposes has been difficult to define, the Model Business Corporation Act lists several activities that do not require qualification. One such activity is:

soliciting orders by mail that require acceptance outside the state.

To determine _____ unconscionability, courts will scrutinize the contract terms themselves to determine whether they are oppressive, unreasonably one-sided, or unjustifiably harsh.

substantive

A check drawn by a credit union on its account at a federally insured bank would be an example of a:

teller's check.

According to the Code, when there is an acceptance that contains terms that are different from the original terms of the contract, the contract will consist of _____ and the appropriate gap-filling presumptions of the Code.

terms on which the parties' writings agree

If the buyer has misrepresented his solvency to the seller in writing within three months before the delivery of the goods:

the 10-day limitation on the seller's right to reclaim the goods does not apply.

According to Revised Article 3 if a bank pays a check that contains a forged indorsement:

the bank has converted the check by wrongfully paying it.

Maco Corp. is a real estate development firm and regularly engages real estate brokers to act on its behalf in acquiring parcels of land. The brokers are authorized to enter into such contracts, but are instructed to do so in their own names without disclosing Maco's identity or Maco's relationship to the transaction. If a broker enters into a contract with a seller on Maco's behalf:

the broker will be held liable on contracts he/she signs without disclosing Maco as the principal.

A buyer is entitled to the remedy of specific performance when:

the contract is for unique goods.

If a negotiable instrument is payable on demand, it is overdue:

the day after demand for the payment has been made in a proper manner.

Under the Model Business Corporations Act, a director who is sued in connection with his/her duties to the corporation may be indemnified by the corporation when:

the director acted in good faith and his conduct was lawful.

The rationale for the fictitious payee rule is that:

the employer of the wrongdoer should bear the immediate loss of forged instruments.

In the context of overdue instruments, if a due date for the principal has been accelerated:

the instrument is overdue on the day after the accelerated due date.

In a "mixed" contract for the sale of both goods and services, the court will apply the contract rules of the UCC or of the common law, depending on whether:

the parties are both merchants.

In a "mixed" contract for the sale of both goods and services, the court will apply the contract rules of the UCC or of the common law, depending on whether:

the predominant purpose of the contract is goods or services.

If unforeseen conditions cause a partial inability to make delivery of the goods and thus make performance impracticable, then:

the seller must allocate production in any fair and reasonable manner among his customers.

Dan, President of BAZ Co., is happy with the extraordinary performance of Naomi, a BAZ Co. senior accountant. Dan informs Naomi that because of her superlative work in the past fiscal year, he is going to give her a 5 percent raise effective next month. Naomi, who has never heard of anyone at BAZ Co. getting a raise, is thrilled and thanks Dan. Later that day, Dan realizes that giving Naomi this raise might cause all senior accountants to demand salary increases. Dan decides not to give Naomi a raise after all. He believes that his promise to give her a raise is not legally binding. Dan is correct because:

there was no bargained-for exchange for the raise

Mark is a partner in Harbin Associates, a partnership. The term of the partnership agreement is one year and includes a clause on buyouts. After the term expires, Mark decides to dissociate while the remaining partners wish to continue. Under the RUPA:

they must buy out Mark of his interest on Mark's demand for the same.

Amy is hired by BigMart as a cashier. At the time of hiring, Amy is required to sign an arbitration agreement under which she agreed to settle any and all claims she might have relating to her employment by final and binding arbitration before a neutral arbitrator and in accordance with BigMart's "Dispute Resolution Rules and Procedures" which is a separate ten-page document containing complex procedural details. Under the agreement, Amy is required to pay for all arbitration-related costs, and BigMart can still sue Amy in civil court for claims arising from her employment. A court will most likely view this agreement as:

unconscionable because it is an adhesion contract that is oppressive.

Paul is hired by Soprano as a security guard. At the time of hiring, Paul signs an agreement that relieves Soprano from workers' compensation liability. This agreement is most likely:

unenforceable as a violation of public policy.

Reggie went to the Napa Valley Harvest Festival, when he stopped at Tracy's booth where she was selling paintings of vineyards. Reggie admired a painting of vineyards, which did not appear to be for sale. Reggie said to Tracy, "I will give you $200 if you give me that painting right now." Tracy said nothing in response, but she gave Reggie the painting, and Reggie gave her $200 in cash. This is an example of a contract that is now:

unilateral and executed.

Customs and practices of the business that are known by people in the business and that are usually assumed by parties to a contract for goods of that type are known as _____.

usage of trade

In January 2002, a court with the necessary subject-matter jurisdiction holds Marvin mentally incompetent and appoints a guardian for him. In November 2002, Marvin escapes his guardian's care and takes off on his own. While eating lunch with Clara, who knows about Marvin's condition, Marvin signs an agreement to sell a valuable property he owns. When he signs the contract, Marvin believes that he is the President of the United States signing an important treaty. The agreement between Marvin and Clara is best described as:

void.

Martin Nowak, an accountant, entered into a written contract with Jane Gibson to perform certain tax services for Jane. Shortly thereafter, Jane was assessed additional taxes and she wanted to appeal the assessment. Jane was required to appeal immediately and the workpapers held by Martin were necessary to appeal. Martin refused to furnish Jane with the workpapers unless he was paid a substantially higher fee than was set forth in the contract. Jane reluctantly agreed in order to meet the filing deadline. The contract as revised is:

voidable at Jane's option based on duress.

The apparent authority of a partner to bind the partnership in dealing with third parties:

will be effectively limited by a formal resolution of the partners of which third parties are aware.

Bill is 25 years old. His uncle had promised in writing to pay him $2,000 if Bill would refrain from drinking alcohol for one year. Bill refrained from drinking alcohol for one year. However, his uncle now refuses to pay Bill as agreed-upon. The uncle claims that because Bill suffered no detriment by refraining from alcohol, his non-drinking does not constitute legal consideration and therefore no contract was formed. If Bill sues his uncle, Bill will:

win because Bill had a legal right to drink alcohol

Bruce told Adam that he was selling his house in Syracuse, New York. Adam sent Bruce an e-mail containing an offer of $300,000 for the house. Bruce responded via e-mail that he wanted $315,000 for the house. After further e-mails, the parties finally agreed on a sale with a price of $310,000. A series of e-mails contained the terms of the sale, and all included a salutation containing their typewritten names. However, Bruce later decided to sell the house to Marty for $325,000. Adam sued Bruce, claiming that Bruce breached their contract for the sale of the house. Most likely, Adam will:

win, because the essential terms of the contract were set forth in the signed e-mails.