38 starred

Réussis tes devoirs et examens dès maintenant avec Quizwiz!

Bea transfers shares of stock that she owns in Coin Laundry Corporation to Dick. A shareholders' meeting takes place before his ownership is entered in the firm's stock book. A vote at the meeting can be cast by a. Bea and Dick. b. Bea. c. Dick. d. none of the choices. ANSWER: b

Dana is a member of Earthground Coffee, LLC, a limited liability company. Dana is liable for Earthground's debts a. in proportion to the total number of members. b. to the extent of her investment in the firm. c. in proportion to her profit derived from the firm. d. to the full extent.

. Harry and Ilene want to market a new line of kayaks and related gear under the brand name Journeys as a corporation—Journeys Inc. To avoid income taxes at the corporate level, they should form a. an alien corporation. b. a close corporation. c. an S corporation. d. a private corporation. ANSWER: c

. Like the bylaws of other corporations, the bylaws of Rocks, Paper & Scissors, Inc., a. establish the operating name of the corporation. b. establish the value and classes of corporate stock. c. were adopted at its first organizational meeting. d. were submitted for approval to the public official in charge. ANSWER: c

Allen wants Wilderness Outfitters to join with him to form and do business as Canyon River Rafting Corporation. A corporation can be owned by a. natural persons only. b. other businesses only. c. other businesses or natural persons. d. none of the choices. ANSWER: c

As the beneficiary of a business trust, Bob's liability for trust debts and obligations is a. limited to his capital investment in the trust. b. limited to his personal assets. c. nothing. d. unlimited.

Beth and Carol want to form a limited liability company to manage their business, DoReMi Music. Their state has adopted the Uniform Limited Liability Company Act, which has been adopted in a. all states. b. no state. c. less than one-fifth of the states. d. about half of the states.

Brad is a shareholder of Cloud Servers Inc. He will be deemed to have a fiduciary duty to Cloud and its minority shareholders if he has a sufficient number of shares to a. assert the business judgment rule. b. bring a shareholder's derivative suit. c. exercise de facto control. d. participate in a cumulative vote. ANSWER: c

Elise is a director for Fro-Yo Inc. Elise is also a director for Gelato Ice, Inc. When Fro-Yo's board considers a contract with Gelato, Elise must a. resign from Fro-Yo or Gelato. b. resign from Fro-Yo and Gelato. c. make a full disclosure of any conflict of interest. d. use her business judgment to rule on the deal. ANSWER: c

Equestrian Stables Corporation's articles list an incorrect address for its incorporator. Under this circumstance, Equestrian Stables is most likely a. a corporation by estoppel. b. a de facto corporation. c. a de jure corporation. d. ultra vires. ANSWER: c

44. Seed Packets, Inc., a garden seed company, requires its customers to pay by check. Taylor, a Seed Packets driver, tells customers that they can pay her with cash. When Seed Packets learns of Taylor's collections, it does not act to stop them. Taylor steals some of the cash. Under the doctrine of apparent authority, Seed Packets will most likely a. suffer the loss. b. recover the amount of the cash payments from its customers. c. increase its prices to cover the amount of the stolen cash. d. hold its accountant liable for apparently authorizing the cash collections. ANSWER: a

48. Holly is a director of International Foods, Inc. As a director, with respect to the corporation, Holly is a. a fiduciary. b. an incorporator. c. an officer. d. an employee. ANSWER: a

Adam is a shareholder of Bay Boats Inc. with preemptive rights. With these rights, he can a. buy a prorated share of a new issue of stock before other buyers. b. choose to have the firm act exclusively in a certain area. c. preempt managerial decisions that affect shareholders. d. sell a prorated share of a new issue of stock before other sellers. ANSWER: a

Arnold buys a backhoe from Big Dig Equipment Inc. Arnold is unaware that Credit Collection Company holds a lien against the backhoe when he buys it. If Credit Collection repossesses the backhoe, Arnold can a. recover from Big Dig for breach of warranty. b. do nothing. c. file criminal charges against Big Dig and Credit Collection. d. recover damages from Credit Collection for breach of warranty.

As a corporation, Paper Products Company can pay dividends if a. their payment allows the firm to remain solvent. b. their payment causes the firm to become insolvent. c. they are paid from an unauthorized account. d. they are paid when the firm is insolvent. ANSWER: a

As the trustee of a business trust, Travis is required to a. distribute the trust's profits. b. assume responsibility for the trust's debts. c. draft a written trust agreement. d. none of the choices.

Avis is an officer of Budget Building Corporation. With respect to binding Budget to contracts, Avis's authority a. may be actual or apparent. b. must be actual and apparent. c. must be actual and not apparent. d. cannot be actual or apparent. ANSWER: a

Band Instruments, Inc., sells seventy-six trombones to Community & School Band Source, Inc. To avoid liability for most implied warranties, Band Instruments should state in writing that the trombones are sold a. as is. b. by a merchant. c. in perfect condition. d. with no known defects.

Barbara and Johann are parties to a contract. They agree on a novation. The novation requires a. the existence of a previous, valid obligation. b. consideration greater than $5,000. c. performance of the original contract by all of the parties. d. an accord and satisfaction.

Barley that fills County Grain Co-op's silo is fungible if the barley is a. alike naturally, by agreement, or by trade usage. b. fundamentally different. c. fun, good, and edible. d. rotting due to a leaky roof and a delay in shipping.

Based on Oona's conduct, Porcio reasonably believes that Qasim has the authority to act on Oona's behalf even though Qasim does not have the actual authority to do so. In this circumstance, Qasim has a. apparent authority. b. express authority. c. implied authority. d. no authority. ANSWER: a

Bayou Development Corporation hires Coastal Brokerage Associates to sell the condominiums in a building at Bayou Development's resort. The agency will terminate a. after the condos have been sold. b. if the prices of the condos must be reduced to sell them. c. once Bayou Development obtains insurance to cover the property. d. when Bayou Development pays Coastal Brokerage its first commission. ANSWER: a

Ben is a shareholder of Commerce & Trade Inc. As a shareholder, Ben does not have a. a right to compensation. b. dividend rights. c. inspection rights. d. preemptive rights. ANSWER: a

Ben manages a warehouse and its inventory for Coffee Shops, Inc. To operate this part of the business, Ben's authority can be inferred a. from the position Ben occupies. b. by a reasonable party with whom Coffee Shops does business. c. to contradict Ben's express authority. d. under no circumstances. ANSWER: a

Bernard is an expert on exotic flowers. Custom Floral Arrangements, Inc., hires Bernard to order exotic flowers for its arrangements. Bernard does not examine the quality of the flowers he orders on behalf of Custom Floral. Bernard has breached a. the duty of performance. b. the duty of loyalty. c. no duty. d. the duty of notification. ANSWER: a

Bert, Chaka, and Doug are co-sureties of Erica's debt to Finance Loan Company. Bert pays Erica's entire debt. Bert's right to seek proportionate payments from Chaka and Doug is the right of a. contribution. b. exemption. c. reimbursement. d. subrogation.

Bread & Bagels Bakery (B&B) enters into a contract with CinePass for discounted movie tickets for B&B's employees. CinePass breaches the contract and B&B enters into a contract with Dine+View for the same service at a lower price. B&B might be awarded nominal damages to a. establish, as a matter of principle, that CinePass acted wrongfully. b. provide B&B with funds for a foreseeable loss beyond the contract. c. provide B&B with funds for its loss of the bargain. d. punish CinePass and set an example to deter others from similar acts.

Champions Corporation licenses the trademarks to its products to Direct Marketing, Inc., to reproduce on caps, sweatshirts, and similar goods for sale. This is a. a franchise. b. none of the choices. c. a business loan. d. a sole proprietorship. ANSWER: a

Cherry Creek Development, LP, is a limited partnership that invests in residential real estate projects. Its limited partners include more than 150 sophisticated investors and investment professionals. A Cherry Creek limited partner loses his or her limited liability if he or she a. participates in the firm's management. b. does not participate in the firm's management. c. invests in a project that Cherry Creek has declined. d. votes to sell or dissolve the firm. ANSWER: a

Chet is a partner in Diligent Accounting Service. Chet can inspect Diligent's books and records a. in their entirety. b. only as the firm's management permits. c. only for a reasonable purpose. d. only in relation to Chet's capital contribution. ANSWER: a

Clark hires Dion to act as his agent to purchase Expo Sports Arena, Inc. Clark tells Dion to reveal that he is buying the firm and its assets on behalf of a third party and to tell the seller who that third party is. Clark is a. a disclosed principal. b. not a principal. c. an undisclosed principal. d. a partially disclosed principal. ANSWER: a

Commercial Rents Corporation agrees to lease a pressure washer to Delivery Trucks, Inc., which agrees to pick it up at E Street Warehouse. Before Delivery Trucks retrieves the washer, it is stolen. The loss is suffered by a. Commercial Rents. b. Delivery Trucks. c. E Street Warehouse. d. the thief.

Construction Products Company and Dante enter into a contract for a sale of bricks and stones. Construction Products knows the purpose for which Dante will use the goods. Under the UCC, an implied warranty of fitness of a particular purpose arises a. if the buyer is relying on the seller to select suitable goods. b. if the buyer asks for it. c. if the seller is a merchant who deals in goods of the kind sold. d. in conjunction with lease contracts, not sales contracts.

Copper Circuit, Inc., and Direct Electric LLC sign an agreement that provides for the payment of "$1,000 by whichever party commits a material breach of the contract that creates damages difficult to estimate but approximately $1,000." This is a. a liquidated damages clause. b. a nominal-damages clause. c. a waiver-of-breach clause. d. a penalty clause.

Corporate business matters are presented at a shareholders' meeting of Hollywood Lights Inc., and other corporations, in the form of a. resolutions. b. proxies. c. articles of incorporation. d. bylaws. ANSWER: a

Countryside Bank provides Dhani with a standard mortgage with an unchanging rate of interest to buy a home. Payments on the loan remain the same for the duration of the mortgage. This is a. a fixed-rate mortgage. b. an adjustable-rate mortgage. c. a workout agreement. d. a violation of the law.

Craig, Donna, and Eve do business as Fast-Track Career Consultants. Eve's relationship to Fast-Track ends, but the firm continues to do business. This is a. dissociation. b. dissolution. c. most likely illegal. d. unethical. ANSWER: a

Custom Cabinets & Carpentry Company has a claim against Duane's property to satisfy a debt that takes priority over other claims against the same property. This is a. a lien. b. a violation of most state laws. c. a composition agreement. d. a contract of suretyship.

Dan defaults on a debt to Rachel. Rachel will not be able to recover the debt from a. the sale of Dan's prize-winning pet dog. b. the sale of Dan's investments in stocks. c. Dan's wages. d. Dan's lottery winnings.

Daphne defaults on a debt to Country Loan Corporation. As a creditor, Country Loan can place liens on all of Daphne's property except a. motor vehicles used to commute to work. b. stock in various corporations. c. items that the debtor selects. d. vacant commercial property.

Delany and Efron want to form a limited partnership to do general business bookkeeping with an emphasis on tax accounting. In most states, a limited partnership will be created when Delaney and Efron a. file a certificate of limited partnership. b. execute a partnership agreement. c. accept their first client. d. make their capital contributions. ANSWER: a

Dewey is a corporate officer of Energy Corporation. Dewey serves in a representative capacity for the corporation's owners. With respect to binding the corporation to contracts, Dewey is a. an agent and has the authority. b. an employee and does not have the authority. c. an independent contractor and does not have the authority. d. not an agent, an employee, or an independent contractor but does have the authority. ANSWER: a

Dian, an agent for Expo Motors, Inc., writes a letter to Flynn on November 1 stating that she will sell him a 2017 Subaru Outback for $25,000 between November 1 and December 31. Dian's letter to Flynn is a. a merchant's firm offer. b. an acceptance. c. an option contract. d. none of the choices.

Dino hires Eve to perform at Dino's Club, but Eve later breaches the agreement to accept a higher-paying job at Five Star Arena. Dino files a suit against Eve. The court will most likely a. award damages to Dino. b. cancel Dino and Eve's contract. c. order Eve to perform the contract. d. reform Dino and Eve's contract.

Drainage & Irrigation Equipment, Inc., contracts to sell its assets to Earth & Sky Aquatic Corporation. Before either party has performed, rescission of this contract requires a. a mutual agreement to rescind. b. an accord and satisfaction. c. a novation. d. a settlement agreement.

Dreem Land Corporation and Earthbound Investments Company transfer their property to Financial Managers, Inc., which manages the property and distributes the profits to Dreem and Earthbound. This form of a business organization is a. a business trust. b. a joint stock company. c. a joint venture. d. a syndicate.

Edie fraudulently induces Franco, a consumer, to sign a promissory note to buy a speedboat. Edie sells the note to Gus, who takes it for value, in good faith, and without knowledge of the fraud. With respect to the defense against payment on the note to Edie, Franco can a. assert this defense against Gus. b. file for a property exemption. c. exercise the right of subrogation. d. obtain a deficiency judgment.

Emmett, an agent for Fridley, signs an agreement with Glover on Fridley's behalf but neglects to tell him that the agreement requires the payment of a certain tax. The government prosecutes Fridley for failing to pay the tax. He is a. liable, because notice to Emmett is notice to Fridley. b. liable, because notice to Glover is notice to Fridley. c. not liable, because Emmett did not notify Fridley of the tax. d. not liable, because Glover did not tell Fridley about the tax. ANSWER: a

Equine World enters into a contract with FabuloSales to provide Equine World with a plan to repurpose its marketing strategy. If FabuloSales breaches the contract, Equine World has a duty to a. reduce the damages that Equine World might otherwise suffer. b. reduce the loss that FabuloSales might otherwise suffer. c. punish FabuloSales and deter others from similar acts. d. take no action.

Ernie is a director of Five-Star Properties, Inc. Ernie is a property appraiser. Five-Star makes several purchases in which it pays too much. Ernie approves all the transactions without evaluating them. He is most likely liable for breach of a. the duty of care. b. none of the choices. c. the duty of loyalty. d. the business judgment rule. ANSWER: a

Fact Pattern 18-1 Medical Accounts Collection enters into a contract to employ Natalie as a billing and credit manager for two years. During the first year, Natalie is often absent without explanation and when present fails to adequately do her job. Refer to Fact Pattern 18-1. Natalie's performance is most likely a. a material breach. b. a minor breach. c. a reasonable breach. d. no breach.

Fact Pattern 18-1 Medical Accounts Collection enters into a contract to employ Natalie as a billing and credit manager for two years. During the first year, Natalie is often absent without explanation and when present fails to adequately do her job. Refer to Fact Pattern 18-1. Natalie's performance most likely a. discharges Medical Accounts from the contract. b. has no effect on Medical Accounts' performance. c. undercuts Medical Accounts' duties under the contract. d. suspends Medical Accounts' duty to perform.

Fact Pattern 18-2 Flora, who owns and operates Garden Fresh Organic Farms, agrees to sell Harvesters Grocery a minimum quantity of fresh fruits and vegetables every week for three months. If the market price for organic produce exceeds the price in the contract with Harvesters, and Flora decides not to deliver the order, her contract with the grocery is a. breached. b. discharged. c. not affected. d. suspended.

Fact Pattern 20-1 Farmers Produce, Inc., and Growers Market enter into a contract for the delivery of locally grown fruits and vegetables. The parties use a standard Farmers Produce form that contains some of the terms the parties agree on but not others. Some of the produce spoils before it can be cooked, served, and eaten, or sold. Growers Market refuses to pay for the spoiled goods. Refer to Fact Pattern 20-1. Farmers Produce responds that it did not waive payment for spoiled goods in the parties' previous transaction. Farmers Produce is arguing that the court should take into account a. the course of dealing. b. the course of performance. c. the usage of trade. d. none of the choices.

Fact Pattern 29-1 Petro Oil Refinery asks Quality Bank for a loan to increase its oil inventory. Quality requires Robin, Petro's president, sign a personal guaranty to pay the debt if Petro defaults. Meanwhile, to sell fifty barrels of refined oil to Slick Lubricants, Inc., Petro asks its outside accountant Tina to co-sign a credit application. Refer to Fact Pattern 29-1. If Tina signs the application but fails to condition her signature on Petro's agreement to pursue its legal remedies against Slick before looking to her, then Tina is a. a surety. b. a lienor. c. a guarantor. d. a creditor.

. Contractors Service, Inc., enters into a contract to build a restaurant for Dierdre's Soup Spoons Bistro with Dierdre's payment due on August 1. On August 1, her bank is closed, and for this reason, she claims that she cannot pay on time. In this situation a. Dierdre's bank is liable to Contractors Service. b. Dierdre is in breach of contract. c. the contract is discharged. d. the contract is suspended.

. Don is Equipment Repair Company's chief executive officer. On Equipment Repair's behalf, Don solicits business, hires and fires workers, and handles finances. With respect to Equipment Repair, Don is most likely a. a principal. b. an employee. c. an employer. d. an independent contractor. ANSWER: b

. Mother & Daughter Jewelers breaches its lease with Longview Mall and vacates the premises six months before the end of the term. In some states, Longview would have to a. avoid reletting the premises to recover damages. b. use reasonable means to find a new tenant to mitigate damages. c. relet the premises to recover any damages. d. sell the premises to recover any damages.

43. Sara and Terry agree while talking on the phone to form a partnership to enter into the business of real property management. To be enforceable under the Statute of Frauds, their agreement must a. be filed in the appropriate state office. b. be in writing. c. be signed by a notary public. d. not involve a third party. ANSWER: b

48. Home-Baked Bread Company hires Ike to sell the company's products in a certain area. Home-Baked Bread agrees to pay Ike a salary, plus commission, for a trial period. They also agree that Ike can sell using any methods and during any hours that seem appropriate. The key factor in whether Ike is Home-Baked Bread's employee is a. the amount of Ike's salary. b. the control Home-Baked Bread has over the details of the work. c. the length of the trial period. d. the size of Ike's sales area. ANSWER: b

54. Dairy Products, Inc., and Eden Farms Corporation form a joint venture to make and test-market Frosty Ice Cream. A joint venture is usually formed for a. an implied duration of not more than six months. b. a single transaction or project. c. a stated duration of not more than one year. d. a perpetual existence.

Fact Pattern 29-1 Petro Oil Refinery asks Quality Bank for a loan to increase its oil inventory. Quality requires Robin, Petro's president, sign a personal guaranty to pay the debt if Petro defaults. Meanwhile, to sell fifty barrels of refined oil to Slick Lubricants, Inc., Petro asks its outside accountant Tina to co-sign a credit application. Refer to Fact Pattern 29-1. If, after the loan agreement is signed, Slick agrees to a higher rate of interest without telling Tina, then Tina is a. discharged from the agreement. b. liable at the higher rate of interest. c. liable at the lower rate of interest. d. liable for the principal only.

Fact Pattern 32-2 Faye works as an administrator and receptionist for Garage Door Store. The store withholds federal taxes from Faye's pay, and controls the methods and details of the performance of her work. Faye is not authorized to modify the prices or other terms of a sale at the store. Homer installs Garage Door products at the buyers' locations. Refer to Fact Pattern 32-2. Garage Door hires Janitorial Service Company to clean the store. Garage Door gives Janitorial Service instructions as to what needs to be cleaned and when. With respect to Garage Door, Janitorial Service is a. an independent contractor. b. an employee only. c. an employee and agent. d. an principal. ANSWER: a

Fact Pattern 36-1 Jumbo Juice Inc. offers entrepreneurs the opportunity to operate a franchise under the Jumbo Juice trade name as a member of a select group of dealers that engage in retail juice sales. Refer to Fact Pattern 36-1. Before a franchise contract is signed, Jumbo Juice must explain a. the contract's termination provisions. b. the nature and operation of a franchise. c. the laws governing franchising. d. all of the choices. ANSWER: a

59. Digital Wizards, Inc., a franchisor of computer technicians, wishes to standardize the pricing practices of its franchisees because they have engaged in price-cutting to increase their respective shares of the market. The most prudent action might be for Digital Wizards to a. mandate the prices at which its franchisees sell their services. b. suggest the prices at which its franchisees sell their services. c. require its franchisees to pay a premium based on their market share. d. threaten its franchisees with a suit for material breach of contract. ANSWER: b

63. Spicy Wonder Hot Dog Vendors, Inc., grants its agent Teona an exclusive territory in which to sell Spicy Wonder Hot Dog products. Spicy Wonder Hot Dog cannot compete with Teona in that territory under the principal's duty of a. compensation. b. cooperation. c. indemnification. d. reimbursement. ANSWER: b

A contract between Fresh Fruit Corporation and Green Grocer, Inc., requires Fresh Fruit to deliver goods to Green Grocer's place of business. This is a. a bill of lading. b. a destination contract. c. a shipment contract. d. a warehouse receipt.

A contract for a sale of land from Bayside Properties, Inc., to City Development Corporation contains an erroneous legal description. The most appropriate remedy for these parties is a. a quasi contract. b. reformation. c. rescission. d. specific performance.

Amy and Bob enter into a contract for Bob to perform waste management services for Amy's commercial properties. Later, Bob alters a material term—increases the price—without Amy's knowledge or consent. Amy a. can alter a material term, such as the payment date, without Bob's consent. b. can treat the contract as discharged. c. must adapt his performance accordingly. d. must determine whether Bob's alteration constitutes substantial performance.

Ann is a corporate officer for Blooming Flora, Inc. As a corporate officer, Ann is a. the head of the board of directors. b. an employee of the firm. c. the employer of the firm. d. in charge of approving the shareholders. ANSWER: b

Beginners Run Ski Shop sells a pair of skis to Crystal. When Crystal first uses the skis, they snap in two. The cause is something that Beginners Run did not know about and could not have discovered. Beginners Run breached a. the merchant's implied duty of inspection. b. the implied warranty of merchantability. c. no duty or warranty because Beginners Run knew nothing about the defect that made the goods unsafe. d. no duty or warranty because consumers should reasonably expect to occasionally find a product that does not work as warranted.

Big Beef, Inc. raises calves to sell. Big Beef breeds its cows in April, and the cows calve in February of the following year. In January Andrea contracts with Big Beef to buy fifty calves. Identification takes place in a. January, when the contract is signed. b. April, when the calves are conceived. c. February, when the calves are born. d. a reasonable period of time.

Brad and Carol are partners in Doctors for Children, a medical clinic. Brad's dissociation from the firm results in a. the automatic termination of the firm's legal existence. b. the partnership's buyout of Brad's interest in the firm. c. the immediate maturity of all partnership debts. d. the temporary suspension of the partnership's business. ANSWER: b

Brad leaves an iPod at Computer Sales & Repair (CSR) to have the battery replaced. CSR sells the iPod to Doris, who does not know that it belongs to Brad. Brad can recover from a. no one. b. CSR. c. Doris. d. Apple, Inc., the maker of the iPod.

Brenda, a salesperson at a Cabinets & Countertops store, tells D'Antoni, a customer, "Buy your cabinets here, and I'll install them for half of what the store would charge." D'Antoni buys the cabinets, which Brenda installs for half the store's price. Brenda keeps the money. Brenda has breached a. no duty. b. the agent's duty of loyalty. c. the principal's duty of indemnification. d. the agent's duty of obedience. ANSWER: b

Burgers & Brews, Inc., files its articles of incorporation with the appropriate government agency. Not likely to appear in the articles is the name of a. each incorporator. b. each shareholder. c. the corporation. d. a registered agent. ANSWER: b

Business Travelers Hotel Corporation hires Conrad, a real estate agent, to locate hotel properties for the company. Conrad learns of a hotel available for $3.2 million, informs Business Travelers, and makes an offer of $2.9 million on Business Travelers's instruction. The offer is rejected. Conrad a. breached the agent's fiduciary duties to the principal. b. complied with all of the agent's duties to the principal. c. failed to exercise the degree of skill required of an agent. d. did not act strictly for the benefit of the principal. ANSWER: b

Chemical Refining Corporation hires Disposal & Recovery Company to work as an independent contractor. Whether Chemical Refining will be liable for torts committed at the site by Disposal & Recovery depends on a. what Disposal & Recovery bid for the job. b. whether unusually hazardous activities are involved. c. which party obtained insurance to cover tort liability. d. who is paying Disposal & Recovery. ANSWER: b

Clay Pots pays Dora $25,000 to propose an online marketing campaign. Two days later, Dora tells Clay Pots that she has accepted a job with its competitor Earthenware Inc. and cannot plan the campaign. As compensatory damages, Clay Pots can recover a. $250,000. b. $25,000. c. $2,500. d. $0.

Fact Pattern 37-1 Ann starts up Bowls Bistro to serve and sell soups and salads. Ann leases space in an office building owned by Carly. The lease requires a base rent of $1,250, plus 10 percent of Bowls Bistro's profits, each month. The term is two years. Ann hires Demi to take and fill customers' orders at an hourly wage of $15.00, plus tips. 39. Refer to Fact Pattern 37-1. Ann and Carly are a. not partners, because Carly does not have an ownership interest or management rights in Bowls Bistro. b. not partners, because the lease includes "base rent." c. not partners, because the rent includes only 10 percent of the profits. d. partners in a partnership for two years. ANSWER: a

Clean Mouth Clinic offers to buy from Dental Supplies Company a certain quantity of floss and other items for a certain price. Dental can accept the offer by a. a material alteration of the terms within a reasonable time. b. a promise to ship or a prompt shipment of the goods. c. a prompt shipment of the goods only. d. a shipment of nonconforming goods with a notice of accommodation.

Fact Pattern 37-1 Ann starts up Bowls Bistro to serve and sell soups and salads. Ann leases space in an office building owned by Carly. The lease requires a base rent of $1,250, plus 10 percent of Bowls Bistro's profits, each month. The term is two years. Ann hires Demi to take and fill customers' orders at an hourly wage of $15.00, plus tips. Refer to Fact Pattern 37-1. Ann and Demi are a. not partners, because Demi does not have an ownership interest or management rights in Bowls Bistro. b. not partners, because the pay includes an hourly wage. c. not partners, because the pay includes only 10 percent of the profits. d. partners in a partnership. ANSWER: a

Fact Pattern 37-2 Kristin and Lindsey are partners in Mobile Devise, an online marketing firm. 49. Refer to Fact Pattern 37-2. Kristin signs a contract with Nature's Best Chocolate, a candy maker, apparently on Mobile's behalf. The contract is binding on a. Kristin, Lindsey, and Mobile. b. Kristin only. c. Mobile only. d. Nature's Best only. ANSWER: a

Fact Pattern 37-2 Kristin and Lindsey are partners in Mobile Devise, an online marketing firm. Refer to Fact Pattern 37-2. Lindsey dissociates from Mobile. Kristin signs a contract with Organic Olives, a food seller, apparently on Mobile's behalf. Organic Olives does not know of Lindsey's dissociation. The contract is binding on a. Kristin, Lindsey, and Mobile. b. Kristin only. c. Mobile only. d. Organic Olives only. ANSWER: a

Colin, Debby, and Erin agree to be partners in Fajita Pizza, splitting the profits equally. Colin contributes 65 percent of the capital. When Fajita Pizza is dissolved, its liabilities are greater than its assets. The losses are paid by a. all of the partners in proportion to their capital contributions. b. all of the partners in proportion to their shares of the profits. c. Colin because he contributed most of the capital. d. Debby and Erin because they contributed the least of the capital. ANSWER: b

Fact Pattern 37-3 Bryn, Cornell, and Duke are general partners in Equity Lending, a consumer credit, mortgage, and investment firm. Their agreement states that it is a breach of the agreement for any partner to assign his or her interest to a creditor without the consent of the other partners. 54. Refer to Fact Pattern 37-3. Bryn, Cornell, and Duke decide to admit Giselle as a new partner in Equity Lending. Giselle's liability for partnership debts incurred before her admission is a. limited to her capital contribution to the firm. b. limited to her personal assets. c. nothing. d. unlimited. ANSWER: a

Fresh Dairy, Inc., is the offeror and Gelato Ice Cream Company is the offeree under a unilateral sales contract in which Hector's Helado Corporation is also interested. Gelato is not notified of Fresh Dairy's performance within a reasonable time. Gelato a. may treat the offer as having lapsed. b. must assume that Fresh Dairy has started to perform. c. must contact Fresh Dairy. d. must notify Hector's.

Garry drives a truck as an employee for Heavy Hauling, Inc. Garry would most likely be considered acting outside the scope of her employment if he a. crashed into a car at the airport while off duty. b. hit a pedestrian in a parking lot during a "working" lunch. c. ran over an attendant at Quik's gas station while refueling the truck. d. smashed into a store-front while intoxicated on-duty. ANSWER: a

Gary buys from Hook, Line & Sinker Corporation the exclusive right to sell its trademarked fishing gear in a certain area. Their franchise agreement requires Gary to pay certain administrative expenses. Their agreement may also require the franchisee to pay a percentage of the franchisor's a. advertising costs. b. personal expenses. c. retirement income. d. all of the choices. ANSWER: a

George borrows funds from Hometown Credit Union (HCU) to buy real property. George signs a written instrument that gives HCU an interest in the property as security for the debt's payment. This is a. a mortgage. b. an artisan's lien. c. a workout agreement. d. a suretyship arrangement.

Grocers Mart buys one hundred cases of berries from Hilltop Farms. The parties agree that the berries will be transported "F.O.B. Hilltop Farms" via Refrigerated Trucking Company. Refrigerated's truck and the berries are lost in a fire following an accident. The loss of the berries is suffered by a. Grocers. b. Hilltop. c. Refrigerated. d. all of the parties as tenants in common in equal measure.

Guido and Hal want to rescind their contract under which Guido sold Hal a mountain bike for $100. To rescind the contract a. Guido must return the $100 and Hal must return the bike. b. Guido must return the $100 only. c. Hal must return the bike only. d. the parties can keep the "benefits" of their bargain.

Gwen and Hugo do business as Gwen & Hugo Civil Engineers, a partnership. This firm is governed by the Uniform Partnership Act a. in the absence of an express agreement. b. in the absence of an implied agreement. c. only under an express agreement. d. under all circumstances. ANSWER: a

HandiTools, Inc., sells power tools, power tool parts, and related supplies under "full" warranties. Under the Magnuson-Moss Warranty Act, this means that HandiTools must provide a. free repair or replacement of any defective part. b. a toll-free number for a HandiTools-approved service company. c. a complete catalog of products and parts available for sale. d. repair or replacement of any defective part at a reduced charge.

Haute Dogs, Inc., sells a franchise to Irene's Cuisine, a lunch truck. Irene's Cuisine is a. a franchisee. b. a franchisor. c. a partner. d. a principal. ANSWER: a

Helen's debt to Imprint Printers is past due. Imprint obtains a judgment against Helen, but she refuses to pay it. Imprint asks the court for an order that directs the sheriff to seize and sell any of Helen's nonexempt real or personal property that is within the court's geographic jurisdiction. This is a request for a. a writ of execution. b. a composition agreement. c. an order that would violate most state laws. d. an order of garnishment.

High Plains Distribution Inc. hires Inez to work on its shipping dock, accepting deliveries, dispatching trucks, and dealing with customers and other companies' drivers. With respect to High Plains, Inez is most likely a. an agent. b. an independent contractor. c. a principal. d. a work for hire. ANSWER: a

Home Appliance Corporation contracts with Instate Trucking Company to take a selection of appliance repair parts to Journey Airlines, Inc., with Journey to transport the goods to a KeepSafe Company warehouse. Instate Trucking, Journey Airlines, and KeepSafe each acknowledge possession of the goods by a document of title. Instate Trucking, Journey Airlines, and KeepSafe are a. bailees. b. buyers. c. lessees. d. none of the choices.

Home Construction LLC enters into a contract with Irene to build a house. Before Home starts to work, the market price for its services increases—in effect, Home will lose money by if it fulfills its contract with Irene. Home notifies her that it will not perform. Home's obligation to perform is a. breached. b. discharged. c. rescinded. d. suspended.

Ingmar asks Jessie to contract with Jessie's high school classmates to babysit Ingmar's new baby. Jessie orally agrees to do so. This is a. an agency by agreement. b. an agency by estoppel. c. an agency by ratification. d. not an agency relationship. ANSWER: a

Instead of setting up a business to market her own products, Rita considers entering into a distributorship franchise with Sports Equipment Corporation. This involves the transfer of a. a license. b. a trade name. c. the formula to make a certain product. d. the ownership of the business. ANSWER: a

Insurance Sales Corporation hires Jeremy to act as its agent. Insurance Sales's right not to perform a contract entered into by Jeremy, if he breaches their agency agreement, is the right of a. avoidance. b. indemnification. c. nullification. d. termination. ANSWER: a

Consumers Choice store accepts a shipment of EZ2U-brand tablets from Digital Devices, Inc. Consumers Choice later discovers a defect in the tablets, revokes acceptance, and returns the tablets via GoBack, Inc. During the return, the tablets are lost. The loss is suffered by a. Consumers Choice. b. Digital Devices. c. GoBack. d. Consumers Choice's customers by an increase in prices of other goods.

Investment Holdings Corporation hires Jeri, a business appraiser, to locate investment possibilities for Investment Holdings. Jeri learns of a salsa and hot sauce manufacturing company available for a reasonable price, but neglects to tell Investment Holdings. Most likely, Jeri a. breached the agent's fiduciary duties to the principal. b. did nothing wrong. c. failed to take advantage of a business opportunity. d. assumed that the information was confidential. ANSWER: a

Ken owns and operates Living Earth Garden Shop as a sole proprietorship. When Ken dies, Living Earth will automatically a. dissolve. b. pass to Ken's heirs. c. pass to the state. d. be offered for sale to its creditors and competitors. ANSWER: a

Lana agrees to work as Michelle's personal assistant for one year but dies in the ninth month of the contract. Lana's estate a. is discharged from any contractual liability. b. must find a competent assistant to fulfill the contract. c. must pay damages. d. must refund any money paid to Lana on the contract.

Laurel borrows $150,000 from Marketplace Mortgage Loans to buy a home. The financing documents require Laurel to maintain the property, obtain homeowners' insurance, and pay all property taxes and other assessments through the lender. With respect to these terms, a court is most likely to a. enforce them. b. refuse to enforce them. c. rescind them. d. rewrite them.

Lee wants to go into the business of architectural design. Among the reasons that might convince Lee to set up his business as a sole proprietorship would be a. its greater organizational flexibility. b. its limited liability. c. its perpetual existence. d. the ease of transferring the business to other family members. ANSWER: a

Lenders Loan Company and Mortgage Service Corporation—Nadya's creditors—contract with Nadya for the discharge of her liquidated debts on payment of a lesser sum. This is a. a composition agreement. b. a subrogation. c. a suretyship agreement. d. in violation of most states' laws.

Lew's Landscaping Service substantially performs its contract with Metro Office Park. Metro's duty to perform a. remains absolute. b. is discharged. c. is excused. d. is suspended.

Lima, an agent for Mindwonder Games LLC, executes an unauthorized contract with NOW Marketing Inc. The deal is highly advantageous to Mindwonder, and the company ratifies the contract. The contract is a. valid. b. vicarious. c. void. d. voidable. ANSWER: a

Lucille is married to Marcus. Lucille buys food for their children's lunches and charges the cost to Marcus's account. This is a. an agency by operation of law. b. an agency by estoppel. c. an agency by ratification. d. not an agency relationship. ANSWER: a

Mai-Lin's Martial Arts, Inc., grants a franchise to Naomi to operate a Mai-Lin's school. Mai-Lin's may require Naomi to pay the franchisor a percentage of her a. annual sales or volume of business. b. weekly payroll expense. c. monthly overhead savings. d. income from unrelated business activities. ANSWER: a

Marcos buys a pneumatic drill from NuTools Inc. Owen leases a table saw from Piecework Tools Sales & Lease Company. Later, Marcos and Owen become aware of defects in the goods that indicate breaches of warranty. An action for breach of warranty accrues when a. the seller or lessor tenders delivery. b. the buyer or lessee becomes aware of the breach. c. the nonbreaching party notifies the breaching party of the breach. d. four years have passed since the breach occurred.

Medico Inc. enters into a contract to sell medical supplies to New Hospital Corporation, which sells some of the items to Physicians Clinic, which later sells them to Oscar, a patient and consumer. Article 2 of the UCC applies to the sales transactions between a. all buyers and sellers. b. Medico and New Hospital only. c. New Hospital and Physicians Clinic only. d. Physicians Clinic and Oscar only.

Music, Inc., sells fifty MP3 players to Noise Stores, Inc. To avoid liability for most implied warranties, in some states Music could simply state in writing that the players are sold a. as is. b. by a merchant. c. in perfect condition. d. with no known defects.

Nell's debt to Olsen is past due. Olsen obtains an order of garnishment to require Nell's employer Pro Transmission Service, Inc., to pay part of Nell's paycheck to Olsen. The law a. limits the amount that can be taken from Nell's take-home pay. b. permits Olsen to dismiss Nell because her wages are garnished. c. practically does not allow Olsen to collect the awarded amount. d. requires Pro to retain Nell as an employee until the debt is paid.

Oberon buys a Pro Club Health & Fitness, Inc., franchise, which the franchisor later terminates. In determining whether the termination was proper, a court will generally a. balance the rights of both parties. b. emphasize the right of Pro Club to its business operation. c. focus on the right of Oberon to be dealt with fairly. d. underscore the interest of consumers in affordability. ANSWER: a

Olive borrows money from Capital Loan Company. For Capital to obtain a writ of execution, Olive must a. be unable or refuse to pay the amount of a judgment. b. be unable to redeem her exempt property. c. be notified in writing (in a "writ") of the lender's intent. d. surrender possession of her property to a court.

Cow's Milk Creamery, Inc., needs a certain part for its pasteurizing equipment to continue its operations and orders one for $3,000 from Dairy Supplies Company. Cow's Milk tells Dairy Supplies that it must receive the part by Tuesday or it will lose $10,000. Dairy Supplies ships the part late. Cow's Milk can recover a. $13,000. b. $10,000. c. $3,000. d. $0.

Curt enters into a contract with Drivers Lease Company for a three-year lease of a car. This contract is subject to a. none of the choices. b. Article 2A of the UCC. c. Article 11 of the CISG. d. the common law only.

Darla serves in a representative capacity for Ellen. To accomplish the objectives of this relationship, Darla's authority can be implied a. by contradiction. b. by custom. c. by any subjective measure. d. under no circumstances. ANSWER: b

Denise borrows $90,000 from Clear Lake Credit Union to buy a home. Denise loses her job and fails to make payments on the mortgage, but assures Clear Lake Credit that she will soon secure a new job. The lender agrees to postpone the payments. This is a. a right of redemption. b. a forbearance. c. a short sale. d. a workout agreement.

Denny, a certified public accountant and an investor, and Ethel, an insurance salesperson and a realtor, may create an agency relationship for a. a legal business purpose only. b. any legal purpose. c. any purpose. d. no purpose. ANSWER: b

Dollars & Sense, Inc., is incorporated in the state of New Jersey and is doing business in the state of New York. In New York, Dollars & Sense is properly referred to as a. a domestic corporation. b. a foreign corporation. c. an alien corporation. d. a public corporation. ANSWER: b

Ed, a partner in Farm Equipment Sales, applies for a loan with Growers Bank allegedly on Farm Equipment's behalf but without the authorization of the other partners. The bank knows that Ed is not authorized to take out the loan. Liability in the event of default will be imposed on a. none of the choices. b. Ed. c. Farm Equipment. d. Growers Bank. ANSWER: b

Even-Bilt Construction contracts to build a warehouse for Discount E-Sales Company. Even-Bilt completely performs. Discount E-Sales is entitled to a. damages. b. nothing more. c. to be excused from performance. d. suspend performance.

Olive, an agent for Precision Paving Corporation, enters into an unauthorized contract with Quality Asphalt, Inc., purportedly on Precision's behalf. Precision does not ratify the contract. Liability may be imposed on a. Olive to Quality for misrepresenting her authority. b. Precision to Quality for not ratifying the contract. c. Quality to Precision for entering into an unauthorized contract. d. Precision to Olive for not ratifying the contract. ANSWER: a

Pam buys from Midtown Motors a used sport utility vehicle (SUV). The SUV was manufactured by GEM Vehicles, Inc., and previously owned by Ron. Regarding title to the SUV, Pam acquires a. whatever title Midtown had. b. whatever title Gem had. c. whatever title Ron had. d. no title.

Paradise Footwear buys a franchise from Quad Shoes Inc. This relationship, like all other franchise relationships, is governed by a. contract law. b. no law. c. the Franchise Disclosure Document, or FDD. d. the Automobile Dealers' Day in Court Act. ANSWER: a

Pat's Pet Houses, Inc. sells shelters for animals under "limited" warranties. Under the Magnuson-Moss Warranty Act, this means that the warranties on the shelters from Pat's a. limit the buyers' recourse in some fashion. b. are only good for some buyers. c. cover only some of the shelters. d. are oral instead of written.

Phoenix, a salesperson for Quality Fruit, Inc., shows Robert, a buyer for Sweet Home Fruit Company, samples of peaches, stating that any shipment will match the samples. This statement is a. an express warranty. b. an implied warranty. c. a warranty of title. d. puffery.

Quade is an expert in twentieth-century art. Rachel visits Quade's gallery, seeking to buy artwork as an investment. Quade shows her a painting that in his opinion is by Picasso. Quade's statement is a. an express warranty. b. an implied warranty. c. a warranty of title. d. puffery.

Quinn contracts to provide ten tons of scrap steel at $500 per ton to Rendered Materials, Inc. An unforeseen shortage of scrap steel suddenly develops, making it impossible for Quinn to fulfill the contract for less than $5,000 per ton. Quinn's best defense against performing the contract would be that a. performance of the contract is commercially impracticable. b. procuring the steel would force Quinn into bankruptcy. c. the law has rendered performance of the contract illegal. d. the specific subject matter of the contract has been destroyed.

Rachel is an agent for Sports Logo Merchandise, Inc. Rachel makes an innocent misrepresentation when entering into a contract on behalf of Sports Logo with Team Marketing & Sales Corporation. Sports Logo a. is directly responsible for Rachel's misrepresentation. b. is estopped from performing the contract. c. may rescind the contract. d. must ratify the contract. ANSWER: a

Rally Corporation enters into a contract to sell ski gear to Sno-Sports Inc., which sells a pair of the skis to Tyra, a consumer, who later sells them to Upton, another consumer. Article 2 of the UCC applies to the sales transactions between a. all of the buyers and sellers. b. Rally and Sno-Sports only. c. Sno-Sports and Tyra only. d. Tyra and Upton only.

Ralph agrees to lease an apartment from Susan for one day to see Thomas, the president of the United States, deliver a speech in the street below. The speech is canceled three days before its scheduled date. The contract is a. discharged. b. not affected in terms of Ralph's obligation to pay Susan. c. postponed until another event is scheduled. d. breached.

Ralphy is a minor. In most states, Ralphy may not be a. a principal. b. an agent. c. an employee. d. an independent contractor. ANSWER: a

Ray is a delivery driver for Sicilian Pasta Company. Ray does exactly what the company tells him. Ray is a. an employee. b. a work for hire. c. an independent contractor. d. a principal. ANSWER: a

Refined Metals Company and Superior Fabrication, Inc., enter into a contract under which Refined agrees to deliver a certain quantity of sheet metal to Superior each month. The contract does not include a price term. In a suit between the parties over the price, a court will a. determine a reasonable price. b. impose the lowest market price. c. impose the highest market price. d. return the parties to the positions they held before the contract.

Replay Sports Stores and SportsPower Products, Inc., enter into a contract for a sale of trampolines. SportsPower Products is a merchant who deals in goods of the kind sold. Under the UCC, an implied warranty of merchantability arises a. automatically in most contracts for a sale of goods. b. only if the buyer asks for such a warranty. c. only if the seller expresses such a warranty. d. only in conjunction with lease contracts, not sales contracts.

Restful Inn Motel Corporation wants to terminate its franchise arrangement with Steve's Cabins. Their contract does not provide for notice of termination or set a time for winding up the business. This means that to wind up, Steve's a. has a reasonable time, with notice. b. has whatever time Restful Inn determines, with or without notice. c. is entitled to notice, but nothing more. d. must close immediately. ANSWER: a

Rita contracts to work for Social Media Corporation (SMC) during April for $4,500. On March 31, SMC cancels the contract. Rita declines a job of a different type and rank with Tech Talk, Inc., which would have paid $3,500. Rita files a suit against SMC. As compensatory damages, Rita can recover a. $4,500. b. $3,500. c. $1,000 in shares of SMC stock. d. $0.

River Vista Inc. enters into a contract with Stable Realty Management to manage and maintain River Vista's commercial real estate. Their contract provides that neither party can recover damages for a non-fraudulent or unintentional breach. This is a. a limitation-of-liability clause. b. an exculpatory clause. c. a liquidated damages clause. d. a quasi contract.

Roasters Corporation and Outdoor Barbecues, Inc., enter into a contract for a sale of a commercial grill. The contract requires Roasters to deliver the goods to Speedy Delivery Company for transport to Outdoor. Risk of loss passes to Outdoor when a. Roasters delivers the goods to Speedy. b. Roasters and Outdoor enter into their contract. c. Speedy transports the goods to Outdoor. d. Outdoor begins to use the grill.

Fact Pattern 18-2 Flora, who owns and operates Garden Fresh Organic Farms, agrees to sell Harvesters Grocery a minimum quantity of fresh fruits and vegetables every week for three months. Refer to Fact Pattern 18-2. If Flora dies before the deliveries begin, her contract with Harvesters is a. breached. b. discharged. c. not affected. d. suspended.

Rod is an employee of Savers Bank. In deciding whether Rod acts within the scope of his employment when he commits a tort against Tracy, a court will not consider whether a. Rod indicated that he was acting on behalf of Savers Bank. b. Savers Bank authorized the act. c. Savers Bank furnished the means by which the injury was inflicted. d. the act is one commonly performed by employees for their employers. ANSWER: a

Roma and Swain are partners in Roma & Swain Attorneys, LLP, a limited liability partnership. Roma supervises their firm's associate Taylor, who negligently fails to appear in court on behalf of Umberto, a client. Liability to Umberto rests only with a. Roma and Taylor. b. Roma. c. Taylor. d. Roma and Swain. ANSWER: a

Ron is a director of Start-Up Inc. He is also a chief corporate officer in the firm and receives compensation for both positions. He is a. an inside director. b. an outside director. c. a well-rounded participant. d. in violation of the law. ANSWER: a

Rondi holds herself out as possessing special accounting skills. As an agent, she must exercise the degree of skill or care expected of a. a person having those skills. b. an average, unskilled person. c. a reasonable person. d. the principal. ANSWER: a

Ruth owns Skyview, a complex under construction that will include commercial and residential suites, and a parking garage. She allows Town Contracting, the contractor, to complete a stage of the project late. This waives Ruth's right to sue for a. this delay. b. any subsequent breaches. c. any past breaches. d. none of the choices.

Safety Supply Corporation in New York sells a truckload of protective suits, masks, and other safety gear to Toxic Recovery, Inc., in Connecticut, "F.O.B. New York." Safety Supply arranges with US Truckline to transport the goods. The cost of the transport will be paid by a. Safety Supply. b. Toxic Recovery. c. US Truckline. d. Toxic Recovery's clients by an increase in the price of loss control services.

Selections, a general partnership, operates a gift shop. Selections has five partners. Tony has a one-third interest in the partnership. Each of the other partners has a one-sixth interest. With respect to management decisions a. a majority of the partners must agree. b. Tony rules. c. the senior partner decides. d. four of the partners must agree. ANSWER: a

Sigrud buys spiked mountain-climbing shoes from Rockridge Gear store. Rockridge does not know that Sigrud plans to wear the shoes to climb Tower Mountain. When Sigrud is on the mountain, the spikes come out of the shoes, causing her to fall and be injured. Rockridge breached a. an express warranty. b. an implied warranty of fitness for a particular purpose. c. an implied warranty of merchantability. d. none of the choices.

Smith & Jones, Accountants, is a limited liability partnership (LLP). The major features of an LLP are that it limits the personal liability of the partners and a. it allows the partnership to continue as a pass-through tax entity. b. LLP statutes do not vary from state to state. c. it can only do business in the state in which it was formed. d. only a few states have enacted LLP statutes. ANSWER: a

Spuds Corporation buys from Tater Farms, Inc., a potato crop that Tater plans to plant and harvest during the next growing season. Spuds plans to sell the potatoes to Tasty Foods Restaurants. After the potatoes are planted, but before they are harvested, an insurable interest in the crop exists in a. Spuds and Tater, but not Tasty Foods. b. Spuds, Tater, and Tasty Foods. c. Tater only. d. none of the choices.

Sugar & Spice, Inc., and Taste Treats stores enter into a contract for a sale of confections. Sugar & Spice, a merchant who deals in goods of the kind sold, makes express warranties in connection with the sale. Under the UCC, at the time a contract is formed, an express warranty can be disclaimed or modified a. by clear, conspicuous language called to the buyer's attention. b. by implied affirmations of fact relating to the goods. c. in any way that the seller sees fit for the ordinary purpose. d. in no way.

Sybil agrees with Tyrone and other professional athletes to sign contracts with promoters and others on the athletes' behalf. Sybil is a. an agent. b. an employee. c. an employer. d. a principal. ANSWER: a

Talk, Inc., offers to buy from Ultra Corporation 1,000 smartphones. Without notifying Talk, Ultra timely ships phones of a different quality. With respect to the offer and a possible contract, this shipment is an acceptance and a. a breach. b. an accommodation. c. complete performance. d. a counteroffer.

Trucks & Trailers, Inc. (T&T), and United Express Service enter into a contract for a lease of vehicles. T&T is a merchant who deals in goods of the kind leased. Under the UCC, an implied warranty of merchantability arises a. automatically in most contracts for a lease of goods. b. only if the lessee asks for it. c. only if the lessor expresses such a warranty. d. only in conjunction with sales, not lease, contracts.

Vehicle Wholesale Company and Walt's Retail Motors enter into a contract for a sale of used cars. Vehicle Wholesale assures Walt's that it has valid title to the vehicles. Under the UCC, warranties of title arise a. automatically in most sales contracts. b. only if the buyer asks for such a warranty. c. only if the seller expresses such a warranty. d. only in conjunction with lease contracts, not sales contracts.

Vida is a purchasing agent for Wholesome Foods with the authority to buy grain up to a certain quantity. After the grain is bought, the agency relationship terminates a. automatically. b. following notice to all actual grain sellers. c. following notice to all potential grain sellers. d. following published notice in a local newspaper. ANSWER: a

Water Pipe Company includes in its contracts a provision that reads, in large red letters, "There are no warranties that extend beyond the description on the face hereof." This disclaimer negates a. the implied warranty of fitness for a particular purpose. b. the implied warranty of merchantability. c. the implied warranty of title. d. none of the choices.

Without authorization, Lars contracts on behalf of Mina to have Nemo paint the interior and exterior of Mina's house. If Mina decides to ratify the contract, she must affirm a. all of the contract. b. any part of the contract, with Lars liable to Nemo for the difference. c. any part of the contract before performance begins. d. any part of the contract at any time. ANSWER: a

. Beth, acting within the scope of her authority for the Cake Bake Shop, contracts with Eden Valley Orchards to buy an assortment of fruit. Cake Bake is liable on the contract, and Beth is not, if Cake Bake is a. a disclosed principal. b. a partially disclosed principal. c. an undisclosed principal. d. not a principal. ANSWER: a

. Daryl, Elsa, and Ferris are the directors of Go Apps, Inc. Go also has four officers and fourteen shareholders. Dividends can be ordered by the firm's a. board. b. minority shareholders. c. officers. d. majority shareholders. ANSWER: a

. Ed's Electric substantially performs its contract with Forest Hills Apartments, Inc., to deliver and install an alarm system and parking lot lighting. Forest Hills is entitled to a. damages. b. nothing more. c. to be excused from performance. d. suspend performance.

. Grande Floors, Inc., and Home Decor Stores enter into a contract for a sale of carpeting. Grande Floors, a merchant who deals in goods of the kind sold, makes express warranties in connection with the sale. Under the UCC, at the time a contract is formed, an express warranty can be disclaimed or modified a. by clear, conspicuous language called to the buyer's attention. b. by implied affirmations of fact relating to the goods. c. in any way that the seller sees fit for the ordinary purpose. d. in no way.

. Power Products Corporation permits its directors to be elected by cumulative voting. This a. allows minority shareholders to be represented on the board. b. assures directors that they will be selected by their peers. c. guarantees Thor's executive officers of the final choice. d. insures against persons who may "cloud" the corporate direction. ANSWER: a

. Ruby Red Corporation is incorporated in South Carolina. In that state, Ruby Red is a. a domestic corporation. b. a foreign corporation. c. an alien corporation. d. a non-entity. ANSWER: a

. Tax Accounting, LLC, is a member-managed limited liability company. If the law in Tax Accounting's state is like the law in most states, unless the members have agreed otherwise, voting rights are apportioned according to a. capital contributions. b. participation in management. c. the number of members. d. members' seniority.

Fact Pattern 37-3 Bryn, Cornell, and Duke are general partners in Equity Lending, a consumer credit, mortgage, and investment firm. Their agreement states that it is a breach of the agreement for any partner to assign his or her interest to a creditor without the consent of the other partners. Refer to Fact Pattern 37-3. Cornell's assignment of his interest in Equity Lending to Financial Consultants Corporation results in a. nothing with respect to Cornell or Equity Lending. b. the automatic termination of Equity Lending's legal existence. c. Cornell's liability for all of Equity Lending's debts. d. Cornell's wrongful dissociation and liability for any damages. ANSWER: d

Farm & Ranch is an unincorporated cooperative. Unincorporated cooperatives are often treated like a. business trusts. b. corporations. c. limited liability companies. d. partnerships.

Floyd and other consumers form Grocers Mart Cooperative. This form of business organization makes it possible for these consumers to a. avoid personal liability for the acts of the cooperative. b. obtain an exemption from state laws governing corporations. c. pay no taxes on their business income. d. pool their resources to gain an advantage in the marketplace.

Gail is the beneficiary of a business trust. As a beneficiary, she is required to a. distribute the trust's profits. b. assume responsibility for the trust's debts. c. draft a written trust agreement. d. none of the choices.

Gina is a director on the board of Home Furnishings Inc. As a director, she may not a. authorize major corporate policy decisions. b. decide to issue stock and bonds, and declare dividends. c. select and remove corporate officers. d. subordinate the firm's welfare to her personal interests. ANSWER: d

Global Outfitters Outlet and Holly, a consumer, enter into a contract for a sale of camping gear. If the contract includes a clause that is perceived as grossly unfair to Holly, its enforcement may be challenged under a. the mirror image rule. b. the principle of fair trade. c. the predominant-factor test. d. the doctrine of unconscionability.

Greg, a salesperson for Home Improvement Center, tells Irena, "This is the best floor sander I've ever seen." This statement is a. an express warranty. b. an implied warranty. c. a warranty of title. d. puffery.

Ida orally agrees to pay Jim to seed and harvest a quarter of Ida's farm acreage for four hay seasons. After Jim prepares the land and plants the first crop, Ida says that their deal is off. Jim can most likely recover on a theory of a. reformation. b. restitution. c. liquidated damages. d. quasi contract.

Inez hires Josh to paint her portrait to her satisfaction for $4,000. When Josh finishes the portrait, Inez announces that she is not satisfied with it. Inez a. must pay Josh the contract price. b. must pay Josh half of the contract price as a compromise. c. must pay Josh only the cost of his materials. d. does not have to pay Josh.

Isabel orally agrees to buy a unique collection of nineteenth-century cowboy memorabilia for $10,000 from Jessie and sends $2,500 as a down payment. When Isabel pays the rest of the price, Jessie refuses to ship the collection. Isabel should seek a. damages. b. restitution. c. rescission. d. specific performance.

Jason contracts with Golf Carts Unlimited, Inc. to buy five golf carts. The contract lists the five carts as GC001, GC002, GC003, GC004, GC005. Identification a. will take place only when Jason pays for the golf carts. b. requires that Jason verify his identity to take possession of the carts. c. cannot take place until the contract is reviewed by a court. d. has taken place.

Jill agrees to act on Kit's behalf, subject to Kit's control, and Kit trusts Jill to so act. This describes a relationship between a. an employee and an agent. b. a work for hire and a worker. c. an employer and an independent contractor. d. a principal and an agent. ANSWER: d

Kevin is an agent for Lookout Mountain Accountants, Inc. On Lookout Mountain's behalf and at its request, Kevin pays Nathan for software designed for the management of Lookout Mountain's services. Kevin's right to obtain the amount of those payments from Lookout Mountain arises under the principal's duty of a. compensation. b. cooperation. c. indemnification. d. reimbursement. ANSWER: d

Khan offers to buy Lonnie's 1967 Mustang only if an appraiser estimates that it can be restored for less than a certain price. This requirement is a. an implied condition. b. a concurrent condition. c. a condition subsequent. d. a condition precedent.

Lorena is appointed as an agent for Milled Grains, Inc. The agency agreement is silent as to the level of sales that Lorena is expected to achieve. She must a. achieve nothing because the agreement says nothing on the issue. b. attain the level that Lorena achieved with her previous employer. c. maintain the level Milled Grains attained before Lorena became an agent. d. use reasonable diligence and skill in selling. ANSWER: d

Luke and Maya form Northeast Air Express, a general partnership. The essential elements of this partnership do not include a. a sharing of profits and losses. b. a joint ownership of the business. c. an equal right to management in the business. d. goodwill. ANSWER: d

Made in the USA Clothing Inc. gives notice to Neely that it is terminating their franchise arrangement. Winding up the business requires a. a new franchise agreement. b. nothing more than closing immediately. c. Neely's death, disability, or insolvency. d. the return of the franchisor's property. ANSWER: d

Metro Holding Company agrees to sell a vacant lot to New Town Property LLC. The contract provides that if Metro does not close the deal by October 15, it must pay New Town one-half of the contract price. This provision is not enforceable because it is a. a liquidated damages clause. b. an exculpatory clause. c. a limitation-of-liability clause. d. a penalty clause.

Nina, the owner of Organic Farm, a sole proprietorship, wants to obtain additional capital to operate. This can be accomplished by a. a bank loan. b. a Small Business Administration Loan. c. a state grant. d. any of the choices. ANSWER: d

Orlando is a limited partner in Port of Call Exports, a limited partnership. By participating in the firm's management, Orlando is liable for its obligations a. in proportion to the number of partners in the firm. b. to no extent. c. to the extent of his capital contribution to the firm. d. to the full extent. ANSWER: d

Over the course of a year, Retail Marketers, Inc., sells goods from its inventory and one of its warehouses. In exchange, Retail receives checks and other items that substitute for cash, which Retail uses to repay a loan from Savings Bank. Article 2 of the UCC governs a. the checks. b. the payment of the loan. c. the sale of the buildings. d. the sale of the goods.

Paramount Bookstores buys fifty cases of an assortment of books from Quixotic Publishing Company with the right to return the unsold books in lieu of payment. This is a. a bailment. b. a lease. c. a sale on approval. d. a sale or return.

Pay-Mor Convenience Stores, Inc., is a franchisor. Randy operates a Pay-Mor franchise. Sam is one of Randy's employees. As a franchisor, if Pay-Mor controls the day-to-day operations of the business to a significant degree, it may be liable for tortious acts by a. no one. b. any person on the franchise premises. c. only persons with legitimate reasons to be on the franchise premises. d. Pay-Mor, Randy, or Sam. ANSWER: d

Pipes & Culverts Company orders six irrigation pumps from Quality Plumbing, Inc. The pumps are stored in Restorers Warehouse. Under the terms of the order, Quality must give Pipes & Culverts a warehouse receipt for the goods, which the buyer will then pick up. Title to the goods passes to Pipes & Culverts when a. Quality stores the drives. b. Pipes & Culverts orders the drives. c. Pipes & Culverts picks up the drives. d. Quality gives Pipes & Culverts a warehouse receipt for the drives.

Private Security Service employs Olsen as an agent. Without Private Security's knowledge but otherwise acting within the scope of employment, Olsen commits a crime. The state can successfully prosecute a. none of the choices. b. Private Security. c. Private Security or Olsen. d. Olsen. ANSWER: d

Quaff n' Quench Café buys twenty-five crates of oranges from Reynaldo Produce, Inc. The parties agree to ship the oranges "F.O.B. Quaff n' Quench " via Swiftline Trucking Company. The oranges rot in transit. The loss is suffered by a. Quaff n' Quench. b. Sham. c. F.O.B. d. Reynaldo.

Quest Outdoor Store orders RiverRun-brand kayaks from Sports Merchandise, Inc. Sports Merchandise mistakenly ships kayaks of the wrong size, which Quest rejects and returns via Trans-State Shipping Company. During the return, the kayaks are lost. The loss is suffered by a. Quest . b. Trans-State. c. RiverRun. d. Sports Merchandise.

Raoul is a surety for Suzie's loan from Turnkey Credit, Inc. Raoul's right to "step into the shoes" of Turnkey, after paying Suzie's debt, and exercise any of the Turnkey's rights against Suzie is the right of a. contribution. b. redemption. c. reimbursement. d. subrogation.

Ready Repair Service enters into a contract to fix washers and dryers in Scrub n' Dry Company's coin-operated laundries. If Ready Repair breaches the contract, Scrub n' Dry can a. do nothing but make a deal with a different service provider. b. do nothing but temporarily suspend operations and wait. c. file a criminal complaint against Ready Repair. d. sue Ready Repair for damages.

Ron, a representative for Statewide Freight Inc., delivers a receipt issued by Tina, the owner of United Warehouse, for goods in storage to World Products, Inc., a buyer of the goods. This is a. a shipment contract. b. a bill of lading. c. a destination contract. d. a warehouse receipt.

Ronaldo's debt to Sofia is past due. Ronaldo obtains a judgment against Sofia to collect the debt, but Sofia will not pay. Ronaldo requests a writ of execution. The property that is seized under the writ of execution must be a. in Ronaldo's possession. b. in Sofia's possession. c. in the possession of Sofia's employer or other third party. d. within the court's geographic jurisdiction.

State University provides housing on campus and in some adjacent off-campus neighborhoods. To lease a university house or apartment, a person must be student at State. This requirement is a. an implied condition . b. a concurrent condition. c. a condition subsequent. d. a condition precedent.

Stefani and Tyler agree in an exchange of e-mail to form a partnership to buy and sell real property. Their partnership agreement is legally binding a. only if a copy of the agreement is filed in the appropriate state office. b. only if the agreement is printed in hard copy and signed by the parties. c. only if the parties exchange valid consideration. d. without more. ANSWER: d

Store Outfitters Company and Towncraft retail stores enter into a contract for a lease of cash registers. Store Outfitters assures Towncraft that it has valid title to the goods. Under the UCC, a warranty of title arises a. automatically in most lease contracts. b. only if the lessee asks for such a warranty. c. only if the lessor expresses such a warranty. d. only in conjunction with sales contracts, not lease contracts.

Tech Talent, Inc., is a corporation. Techno Talent's implied powers enable it to a. none of the choices. b. depart significantly from traditional corporate formalities. c. bind the corporation to an action that will greatly affect its purpose. d. borrow funds and lend funds. ANSWER: d

The shares of Home Mortgage Corporation are publicly traded in securities markets. Home Mortgage Corporation is a. a close corporation. b. a privately held corporation. c. a public corporation. d. a publicly held corporation. ANSWER: d

Toro, S.A., which is based in Mexico, enters into a contract for the purchase of portable livestock fencing from United Fencing Company, which is based in the United States. This contract is governed by a. Mexican law. b. the provisions in the laws of both countries that are similar. c. the Uniform Commercial Code. d. the United Nations Convention on Contracts for the International Sale of Goods.

Without creating a separate business organization, Roy starts up Sole Savers, a new, pre-owned auto sales enterprise. Roy is a. none of the choices. b. a franchisor. c. a franchisee. d. a sole proprietor. ANSWER: d

Fact Pattern 20-1 Farmers Produce, Inc., and Growers Market enter into a contract for the delivery of locally grown fruits and vegetables. The parties use a standard Farmers Produce form that contains some of the terms the parties agree on but not others. Some of the produce spoils before it can be cooked, served, and eaten, or sold. Growers Market refuses to pay for the spoiled goods. Refer to Fact Pattern 20-1. Farmers Produce files a suit against Growers Market, claiming that the buyer assumed the risk of the spoilage of the unsold goods. The court may allow evidence of this term if it finds that the parties' contract is a. fully integrated. b. not fully integrated. c. none of the choices. d. a complete and final statement of their agreement.

Fact Pattern 32-1 Nadine and Orin work at Pumps & Pipes Inc. Nadine is a sales representative who works with Pumps's customers, including contractors, government agencies, farmers, and others, as well as individual consumers. Pumps closely supervises all of its sales reps, and dictates their schedules. Orin is an engineer who works in Pumps's design department. Refer to Fact Pattern 32-1. With respect to third parties, Nadine is Pumps's a. employee, agent, and independent contractor. b. employee and agent. c. employee but not agent. d. independent contractor. ANSWER: b

Fact Pattern 33-1 Berry indicates that she is acting as an agent on behalf of an unidentified client—Cuisine Catering, LLC—when she enters into a contract with Désean. Refer to Fact Pattern 33-1. Liability to Désean for nonperformance of the contract may be imposed on a. none of the choices. b. Berry and Cuisine Catering. c. Berry only. d. Cuisine Catering only. ANSWER: b

Fact Pattern 36-1 Jumbo Juice Inc. offers entrepreneurs the opportunity to operate a franchise under the Jumbo Juice trade name as a member of a select group of dealers that engage in retail juice sales. 62. Refer to Fact Pattern 36-1. Jumbo Juice makes earnings claims to potential investors. For those claims, the franchisor a. can have a hypothetical basis. b. must have a reasonable basis. c. must have an actual basis. d. can have any or no basis. ANSWER: b

Flo, an agent for Grover, enters into a contract on Grover's behalf with Hong that must be in writing to be enforceable under the Statute of Frauds. Failure to comply with the equal dignity rule, with respect to this contract, can make the contract voidable at the option of a. Flo. b. Grover. c. Hong. d. none of the choices. ANSWER: b

Ford is the sole proprietor of Go, a game app subscription service. As a sole proprietor, on the business's profits, Ford pays a. no income taxes. b. only personal income taxes. c. only business income taxes. d. both personal and business income taxes. ANSWER: b

Frank enters into an agreement with Grab n' Eat Burgers, Inc., to operate a franchise in Homeville. Later, the franchisor grants franchises to others within the same territory, causing Frank to suffer a significant loss in profits. In Frank's suit against the franchisor, his best argument is that Grab n' Eat a. violated the antitrust laws. b. violated the implied covenant of good faith and fair dealing. c. violated the Federal Trade Commission's Franchise Rule. d. granted Frank the first Grab n' Eat franchise in Homeville. ANSWER: b

Frank performs a contract with Gene to add a garage to Gene's property, but Gene does not pay. Frank can file a lien on Gene's property if, from the last date labor or materials were provided, he acts a. immediately. b. within 60 to 120 days. c. within two years. d. within a reasonable time.

Fred buys running shoes from Gear Store, telling the clerk that he wants the shoes to compete in High Pace Triathlon. The shoes break apart during the competition, causing Fred to fall and sustain an injury. The seller most likely breached a. an express warranty. b. an implied warranty of fitness for a particular purpose. c. an implied warranty of merchantability. d. none of the choices.

GMO Grain Corporation and Hybrid Yields, Inc., form a joint stock company. The ownership of a joint stock company is represented by a. partnership certificates. b. shares of stock. c. title documents. d. trust certificates.

Garden & Field stores order a specific assortment of rose bulbs from Hybrid Flora Company. Hybrid mistakenly ships a selection of annuals, which Garden & Field rejects and returns via Intra-state Transport, Inc. During the return, the annuals are lost. The loss is suffered by a. Garden & Field. b. Hybrid Flora. c. Intra-state Transport. d. Garden & Field's customers by an increase in the prices of other goods.

Gas & Wood Stove Shop receives Hearthwarm-brand stoves from Independent Dealer, Inc., under a sale or return agreement. While the stoves are in Gas & Wood's possession, title is held by a. Independent Dealer. b. Gas & Wood. c. Gas & Wood's creditors. d. Hearthwarm.

Global Games Corporation employs Heidi as an agent. Global Games gives Heidi an exclusive territory in which to sell its products. Global Games cannot compete with Heidi in that territory under the duty of a. compensation. b. cooperation. c. indemnification. d. reimbursement. ANSWER: b

Home Remodelers, Inc., and Imogen enter into a contract for a sale of cabinets and countertops. Home Remodelers, a merchant who deals in goods of the kind sold, notes that its goods come with an implied warranty of merchantability. Under the UCC, this means that the goods are reasonably a. fit for the buyer's particular purpose. b. fit for the ordinary purpose for which such goods are used. c. suitable for resale at an acceptable price. d. the best quality that money can buy.

Household Appliance Corporation sells Ideal-brand vacuum cleaners to Jolly Discount Stores and other retailers. Household Appliance will have an insurable interest in the players as long as a. Household Appliance remains in business. b. Household Appliance retains title to the goods. c. the goods are in existence. d. there is no risk of loss.

In a dispute over a sale involving a bicycle, Dain argues that as to this deal Ed's Hobby Shop, where Dain bought the bike, is a merchant. A court may determine whether Ed's is a merchant by assessing whether a. it has sold any bikes within the last year. b. it holds itself out by occupation as having knowledge or skill unique to the bike in the transaction. c. its owner enjoys biking. d. it subscribes to Bike, a biweekly trade magazine.

Isaac holds one ton of perishable fruit in storage for Juice Smoothies Corporation. Juice Smoothies does not pay for the storage. Isaac sells the fruit to Kayo Beverage Company. This sale represents a. a breach of contract. b. a mitigation of damages. c. liquidated damages. d. a quasi contract.

Jack sells a grand piano to Kyle for $5,000 and a gold ring to Lauren for $999. A writing is required to enforce the sale of a. the piano only. b. the piano and the gold ring. c. neither the piano nor the gold ring. d. the gold ring only.

Jason and Kelly enter into a contract for Jason to renovate Kelly's house by a certain date. Jason never performs. After the applicable limitations period has passed, Kelly decides to bring a suit against Jason for breach. This suit a. must be filed within ten to twenty years, depending on state law. b. can no longer be brought. c. can be filed within four years after Kelly decides to sue. d. must be filed between four and five years after Kelly decides to sue.

Jessie's debt to Kayla is past due. Kayla brings a legal action against Jessie to collect the debt. Kayla asks the court to order Liberty Bank, in which Jessie has an account, to pay a portion of the funds to Kayla. This is a request for a. a writ of execution. b. an order of garnishment. c. an order that would violate most state laws. d. a composition agreement.

Juan and Isidro enter into a contract to buy, restore and reopen the Coastal Park Carousel. Before either party begins to perform, they agree to cancel their deal. This is a. specific performance. b. mutual rescission. c. accord and satisfaction. d. novation.

Julie owes Ryan $10,000. When the debt comes due, Julie refuses to pay. Ryan obtains a judgment to collect the debt. Using a writ of execution, the court orders the sheriff to seize Julie's boat and sell it to pay the debt. The boat sells for $15,000. Ryan will receive a. $15,000. b. $10,000. c. $7,500. d. $15,000 minus the collection costs.

Kali contracts to sell Leony her car for $3,000. This contract will be fully discharged when Kali and Leony a. agree to sign a bill of sale. b. exchange the car for the $3,000. c. sign a receipt. d. shake hands and go their separate ways.

Kanye goes to a Lawn & Yard store to tune up his mower. Marty, the service technician, learns that Kanye's lawn is overgrown and rocky, and advises the use of a certain type of oil, plug, filter, and blade. Later, the mower breaks down due to the use of the items recommended by Marty. Kanye may recover from Lawn & Garden for breach of a. an express warranty. b. an implied warranty of fitness for a particular purpose. c. an implied warranty of merchantability. d. none of the choices.

Lena is a salesperson for Musical Instruments, Inc. She tells Nayda, a customer, that an instrument has a certain quality when, as Lena knows, it does not. In reliance, Nayda buys the instrument. Liable for this misrepresentation is a. no one. b. Lena. c. Musical Instruments. d. Nayda. ANSWER: b

Lighter Than Air, Inc., and Mario enter into a contract for a sale of a hang glider. Lighter Than Air, a merchant who deals in goods of the kind sold, makes implied and express warranties in connection with the sale. The Magnuson-Moss Warranty Act was designed to prevent deception in warranties by a. displacing the UCC as the primary source of warranty rules. b. making warranties easier to understand. c. prohibiting disclaimers of warranties. d. requiring sellers to give written warranties for consumer goods.

Liz buys a car from Midtown Motors, paying with a check that is later dishonored. Liz later offers the car to Nick for cash. As the seller in the transaction with Nick, Liz's title to the car is a. valid. b. voidable. c. void. d. good.

Maggie is a surety for Jo's debt to Bill. Bill and Jo decide to make material changes to the original contract without informing Maggie. Maggie is a. bound by the contract including the changes. b. discharged completely. c. bound by the contract according to the original terms. d. bound by the contract unless she objects within thirty days.

Meatpackers, Inc., enters into a contract with Nevada Ranch for the delivery of a certain number of beef cattle on a set schedule. The ranch delays the first delivery for five days, aware that Meatpackers loses a certain percentage of profit each day. An award to Meatpackers of consequential damages would a. establish, as a matter of principle, that the seller acted wrongfully. b. provide the buyer with funds for a foreseeable loss beyond the contract. c. provide the buyer with funds for its loss of the bargain. d. punish the seller and deter others from similar acts.

Metro Hospital, Inc., employs New Collection Company as an agent for the collection of Metro's unpaid accounts. While garnishing O'Shea's wages, New Collection misstates the amount and collects too much. O'Shea can recover from a. Metro only. b. Metro or New Collection. c. New Collection only. d. none of the choices. ANSWER: b

Mountainside Coffee Company and Nature's Cuisine, Inc., enter into a contract for a sale of coffee beans. The contract includes the term "F.O.B. Ocean City," which is the location of Nature's Cuisine. This means that the contract is a. a bill of lading. b. a destination contract. c. a shipment contract. d. a warehouse receipt.

Neil, a majority shareholder of Oil Changes Inc., effectively excludes Polly, a minority shareholder, from the benefits of stock ownership in the firm. Polly can a. assert the business judgment rule. b. bring a suit for damages. c. exercise de facto control. d. force a cumulative vote. ANSWER: b

Nell is considering forms of business organization for Optic Center, a medical eye clinic. An advantage of a limited liability partnership is that, depending on the applicable state statute, partners can avoid personal liability for a. their own wrongful acts. b. any partnership obligation. c. their own and other partners' wrongful acts. d. none of the choices. ANSWER: b

Norton grants an ordinary power of attorney to Olena to locate potential real estate investment opportunities on Norton's behalf. This power will terminate on Norton's a. taking advantage of one of the investment opportunities. b. death or incapacity. c. sixty-fifth birthday. d. hiring an actual attorney to exercise the power granted to Olena. ANSWER: b

NutriRich, Inc., sells fifty cases of Omega 3 capsules to Good Health stores, but before Good Health takes physical possession, the cases are lost. Under the UCC, the parties' rights and obligations with respect to the loss depend on the concept of a. identification. b. insurable interest. c. risk of loss. d. title.

Ocean Vessels, Inc., and Pacific Harbor Company enter into a contract for a sale of a boat. Ocean is a merchant who deals in goods of the kind sold. The goods are defective. Under the UCC, the implied warranty of merchantability is breached a. only if Ocean did not know of and could not have discovered the defect. b. only if Ocean did not know of the defect. c. only if Ocean knew about or could have discovered the defect. d. regardless of what Ocean knew or could have discovered.

Olivia is a partner in Pacific Traders. In the majority of states, with respect to any partnership obligations that Olivia does not participate in, know about, or ratify, she would be liable for a. none of the obligations. b. all of the obligations, jointly and severally. c. all of the obligations, jointly but not severally. d. only the contractual obligations. ANSWER: b

Omar and Penn want to discharge their contract by executing a new agreement with performance different from what they originally promised. They can best accomplish this by a. a mutual agreement to rescind. b. an accord and satisfaction. c. a novation. d. an alteration of the original contract.

OnlineSales.com uses an e-agent to take a purchase order from a consumer over the Internet. The e-agent fails to provide an onscreen confirmation of the order. The effect of any error in the order can be avoided by a. OnlineSales.com. b. the consumer. c. both parties. d. none of the choices. ANSWER: b

Outdoor Outfitters Store contracts to buy fifty tents from Pitched Camp, Inc. Unless the contract states otherwise, it is assumed to be a. none of the choices. b. a destination contract. c. a shipment contract. d. a delivery ex-ship.

Oxley contracts to buy a pizza oven from Restaurant Supplies Warehouse (RSW) for $2,500, but RSW fails to deliver. Oxley buys the appliance else-where for $3,500. Oxley's measure of damages is a. $1,000. b. $1,000 plus incidental damages. c. incidental damages only. d. $0.

Planners & Builders, Inc., enters into a contract with O'Reilly to refurbish a garage on his property as an auto repair shop. O'Reilly's neighbor Nora challenges the project as a violation of the local zoning laws. A court orders a halt to the project. O'Reilly's contract with Planners & Builders is a. breached. b. discharged. c. not affected. d. suspended.

Portia owes Bjorn $500 on their roof repair contract, but refuses to pay. To collect, Bjorn files a mechanic's lien. Under a mechanic's lien, security for the debt is represented by a. Portia's personal property. b. Portia's real estate. c. the $500 owed under the contract. d. the contract.

Raul agrees to ship to Ben one hundred ceiling fans for $5,000. Raul initials his notes of the deal, which include the terms, and files the notes in his office. Ben initials his own notes of the deal, which include the terms, and files the notes in his office. Raul fails to ship the fans. Against Raul, as a contract, the deal is a. enforceable, because under the UCC a contract need not written. b. enforceable, because Raul's initialed notes are a sufficient writing. c. enforceable, because Ben's initialed notes are a sufficient writing. d. not enforceable.

Renew Turf, Inc., enters into a contract with Sports Park to provide surface material for Sports Park's baseball fields by October 1 for a series to begin October 5. The contract specifies an amount to be paid if the contract is breached. This is a liquidated damages clause if the amount is a. meant to pay for additional liquid sealant in the event of damage. b. a reasonable estimate of the loss on a breach. c. designed to penalize the breaching party. d. intended to quickly provide cash to the nonbreaching party.

Rice River Farms offers to sell Sensei Sushi Restaurants, Inc., five hundred bushels of rice. Sensei responds, "We agree to buy five hundred bushels only if the rice is Grade A quality." This statement is a. a breach. b. a counteroffer. c. a confirmation. d. an acceptance.

Ricky agrees to sell his Sunrise Breakfast Café to Tia. As part of the deal, Ricky signs a covenant not to open a competing business within a hundred-mile radius for ten years. If this covenant is later determined to be unreasonable, the appropriate remedy is most likely a. damages. b. reformation. c. rescission. d. specific performance.

Ridgeline Bank provides Shirley with a mortgage to buy a home. The rate of interest is fixed for three years and then adjusts annually. This is a. a fixed-rate mortgage. b. an adjustable-rate mortgage. c. a creditor's composition agreement. d. a guaranty agreement.

Ridgeview Mining Inc. agrees to deliver a certain quantity of oil to Static Energy Corporation. The agreement states that delivery is to be within "9" days, although the parties intend "90" days. Ridgeview cannot convince Static to amend the contract. Ridgeview should seek a. damages. b. reformation. c. rescission. d. specific performance.

Rig Heli-Pads, Inc., enters into a contract to employ Scott as an on-site project manager for two years. If Rig breaches the contract, Scott has a duty to a. do nothing. b. reduce the damages that Scott might otherwise suffer. c. rescind the contract with Rig. d. punish Rig and set an example to deter others from similar acts.

Roberta introduces Steve to her friends as "my associate." Steve purports to act as Roberta's agent in several business transactions with those friends. If Roberta is liable for Steve's actions, it will be because their relationship is a. an agency by agreement. b. an agency by estoppel. c. an agency by operation of law. d. not an agency relationship. ANSWER: b

Sara contracts to work exclusively for Thermal Company during July for $5,000. On June 30, Thermal cancels the contract. Sara finds a similar job for the month of July but earns only $3,000. Sara files a suit against Thermal. As compensatory damages, Sara can recover a. $3,000. b. $2,000. c. $1,000. d. $0.

Savory Sandwiches LLC wants to present information in "disclosure documents" via the Internet to prospective franchisees. Among other legal requirements with which the franchisor must comply, prospective franchisees must a. agree to settle any lawsuits that may arise over the documents. b. be able to download or save all electronic documents. c. provide e-mail addresses for Level Fencing to verify users' authenticity. d. register with the Federal Trade Commission via Level Fencing's Web site. ANSWER: b

Start-Ups, LLC, is a limited liability company without a written operating agreement. Among the members, a dispute arises concerning the division of profits. Under most LLC statutes, the profits will be a. distributed according to members' proportionate ownership in the firm. b. divided equally among the members. c. forfeited to the state. d. reinvested in the business until the dispute is resolved.

Stitches Corporation enters into a contract to sell denim clothing to Trend Fashion Company, which in turn sells the clothing to consumers. In contrast to standards that apply to consumers, the UCC imposes on merchants a. less strict legal standards. b. special business standards. c. stricter ethical standards. d. the same overall standards.

The board of Management Consultants, Inc., can delegate some of its responsibilities to a. the firm's incorporators. b. the firm's officers. c. the firm's shareholders. d. no one. ANSWER: b

The incorporation of the town of Halfway, Oregon, is approved by the state. Halfway is a. a publicly held corporation. b. a public corporation. c. a private corporation. d. not a corporation. ANSWER: b

Watercraft, Inc., employs Vladimir as a sales agent for a trial period. At the end of the period, Watercraft and Vladimir disagree on the amount of the commissions Vladimir is due for sales that he made. Vladimir may demand a. a constructive trust. b. an accounting. c. nothing. d. specific performance. ANSWER: b

Western Rodeo LLC is a limited liability company (LLC). Like other LLCs, for federal jurisdictional purposes, Western Rodeo is most likely a citizen of a. all states in the United States. b. every state of which its members are citizens. c. any state in which it does business. d. no state—an LLC is not a "citizen."

Wings2Go Corporation fails to hold an organizational meeting. In this circumstance, Wings2Go is most likely a. a corporation by estoppel. b. a de facto corporation. c. a de jure corporation. d. ultra vires. ANSWER: b

Fact Pattern 18-2 Flora, who owns and operates Garden Fresh Organic Farms, agrees to sell Harvesters Grocery a minimum quantity of fresh fruits and vegetables every week for three months. Refer to Fact Pattern 18-2. If bad weather destroys Flora's crops, the obligation to deliver produce to Harvesters is a. breached. b. discharged. c. not affected. d. suspended.

. A firm named Biometric Research makes an attempt to incorporate for a purpose other than making a profit. Biometric is a. a foreign corporation. b. an alien corporation. c. a nonprofit corporation. d. not a corporation. ANSWER: c

. Finn and Glenda want to form and do business as Hobby Crafts Corporation. A corporation is a. a natural person. b. a tangible thing. c. an artificial being. d. a visible contemplation. ANSWER: c

. Reliable Insurance Company employs Stuart as an agent. To terminate Stuart's authority, Reliable Insurance must notify a. only third parties who are aware of the agency relationship. b. the public generally. c. Stuart and any third parties who are aware of the agency relationship. d. Stuart only. ANSWER: c

. Rita and Salvatore do business as Tech Fixers, a partnership. In most states, for the purposes of collecting judgments and having accounting performed, this firm would be treated as a. an aggregate of individuals. b. a person. c. an entity. d. a non-entity. ANSWER: c

. Roy, a director of Service & Sales Corporation, does not attend a board meeting for three years. During that time, Terry, the firm's president, makes improper loans that cost the company $10 million. Roy is most likely liable for breach of a. the business judgment rule. b. the duty of care. c. the duty of loyalty. d. none of the choices. ANSWER: c

40. Romero employs Supplies Procurement Service as an agent under a written agreement that describes the rights and duties of both parties. This is a. apparent authority. b. equal authority. c. express authority. d. implied authority. ANSWER: c

57. Mirena serves in a representative capacity for Netanya. Orla is injured through Mirena's negligence. Netanya may be liable to Orla if Mirena's conduct occurred a. due to a propensity Netanya was not and could not have been aware of. b. during normal working hours. c. in the course and scope of Mirena's employment. d. outside the parties' employment relationship. ANSWER: c

Banquet Furnishings, Inc., and Christina enter into a contract for a lease of tables, chairs, and items for a wedding reception. Banquet Furnishings, a merchant who deals in goods of the kind sold, generally describes the goods, details technical specifications, and shows a sample. Under the UCC, if these are inconsistent a. the general description displaces the sample. b. the general description displaces the technical specifications. c. the sample takes precedence over the general description. d. the sample takes precedence over the technical specifications.

Based on Esteban's conduct, Floyd reasonably believes that Glynis has the authority to act on Esteban's behalf even though Glynis does not have the actual authority to do so. Floyd makes a payment to Glynis for Esteban. Glynis keeps the money and disappears. Esteban a. can demand that Floyd make a repayment directly to Esteban. b. can obtain damages from Floyd for Glynis's misconduct. c. may be estopped from denying that Glynis had authority. d. must repudiate Glynis's misconduct to avoid liability. ANSWER: c

Bee Hive Honey, LLC's members include Charlie and Donna. For purposes of suing and being sued, Bee Hive Honey is a. an aggregate of its members. b. a non-entity c. a legal entity apart from its members. d. a non-participating third party.

Big Red Drinks, Inc. contracts to buy two tons of cranberries from Super Fruits, Inc. The contract states that Super Fruits is required to ship the cranberries to Big Red Drinks by Speedy Wind Air Freight. The contract is a. a bill of lading. b. a destination contract. c. a shipment contract. d. a warehouse receipt.

Brad buys a bulldozer from Construction Equipment Corporation, which he leases to Deep Digg, Inc. In this situation, the lessee is a. Brad. b. Construction Equipment Corporation. c. Deep Digg, Inc. d. none of the choices.

Candy Corporation orders Double Chocolate Bars from Edibles Distribution Company. Edibles identifies the goods. Before they are shipped to Candy Corporation, an insurable interest in the goods exists in a. Candy only. b. Edibles only. c. both Candy and Edibles. d. neither Candy nor Edibles.

Car n' Truck Body & Paint Company orders custom paint from Diverse Hues Inc., but Diverse does not deliver. Car n' Truck will probably be unable to enforce the agreement if the parties omitted a. a price term. b. a delivery date. c. a quantity term. d. shipping arrangements.

Cathy buys an exclusive territory in which she is authorized to set up a plant to make Delite Dairy products. After receiving the recipes, Cathy begins making Evie's-brand yogurt and other Delite products. This is a. a chain-style franchise. b. a distributorship franchise. c. a manufacturing franchise. d. not a franchise. ANSWER: c

Cliff is a member of Dental Clinic, LLC. Cliff can participate in the firm's management to a. the extent that he assumes liability for the firm's debts. b. the extent of his investment in the firm. c. any extent. d. no extent.

Contractors LLC agrees to build a store for Discount Retail, Inc., at a specific location. Before construction begins, the local zoning law is changed to prohibit commercial buildings at that location. In this situation a. Contractors is in breach of contract. b. the local zoning authority is in breach of contract. c. the contract is discharged. d. Discount must compensate Contractors for its lost profit.

Dakota Energy Company employs Evan to negotiate the purchase of mineral rights for future mining projects. Evan secretly buys some of the property and sells it to Dakota at a profit. Evan has breached a. no duty. b. the agent's duty of accounting. c. the agent's duty of loyalty. d. the principal's duty of compensation. ANSWER: c

Darin is a limited partner in Eco Baits, a pest control service organized as a limited partnership, which cannot pay its debts. Darin is liable for the debts a. in proportion to the number of partners in the firm. b. to no extent. c. to the extent of her capital contribution to the firm. d. to the full extent. ANSWER: c

Dennis and Eve want to form and do business as a corporation—Farm-2-Fork Inc. A corporation is a. a natural being. b. a tangible thing. c. an artificial legal person. d. a non-entity. ANSWER: c

Downtown Contractors LLC and Equipment Rental Corporation are parties to an oral agreement for a one-year lease of a crane with payments totaling more than $10,000. They may satisfy the Statute of Frauds by a. mutually agreeing not to commit fraud. b. repeating the terms in a phone call. c. setting out the terms in a memo. d. shaking hands on the deal.

Drive-Away Autos, Inc., sells cars to consumers. To avoid liability for oral express warranties, each Drive-Away sales agreement should note that a car is sold a. as is. b. in perfect condition. c. subject to warranties included in the written contract only. d. with no known defects.

EZ Credit, Inc., lends $1,000 to Joe. Kay acts as Joe's surety. If Kay pays the loan, she gets a. any right that EZ had against Joe, but not a right to be repaid by Joe. b. a right to be repaid by Joe, but not any right that EZ had against Joe. c. any right that EZ had against Joe and a right to be repaid by Joe. d. none of the choices.

Eden Valley Ranch and Farm Supply Corporation enter into a contract for a sale of fencing materials. Farm Supply, a merchant who deals in goods of the kind, makes implied and express warranties in connection with the sale. Under the UCC, if these are inconsistent a. all implied warranties displace all express warranties. b. all express warranties displace all implied warranties. c. the implied warranty of fitness for a particular purpose takes precedence. d. the implied warranty of merchantability takes precedence.

Edgar refuses to pay Delia $500 for the cost to repair Edgar's washing machine and dryer, which Delia still possesses. Delia has a lien on the machines, which will terminate a. if she continues to maintain possession. b. if she does not file a written notice of lien within thirty days. c. if she voluntarily surrenders possession. d. at the end of the machines' warranty period.

Effortless Workouts, Inc., offers to sell a treadmill to Farouk and sends it to him on a trial basis. This is a. a bailment. b. a delivery ex-ship. c. a sale on approval. d. a sale or return.

Emma is interested in buying a franchise from Fine Jewelry, Inc. The franchisor must disclose material facts that Emma needs to make an informed decision concerning this purchase, according to a. no law. b. federal antitrust laws. c. the Federal Trade Commission's Franchise Rule. d. the Petroleum Marketing Practices Act. ANSWER: c

Emma is one of three partners in Fast Work, a commercial janitorial service. With respect to her interest in the firm, when she dies, her heirs are most likely entitled to a. nothing. b. a payout of her capital contribution without more. c. the buyout price paid by the firm for the interest. d. one-third of the value of the interest. ANSWER: c

Excavate n' Fill, Inc., enters into a contract with Fred to fill and landscape an abandoned quarry on Fred's land. Fred advances Excavate n' Fill 10 percent of its cost. The parties rescind the contract. Excavate n' Fill's refund of the payment is a. a penalty. b. liquidated damages. c. restitution. d. reformation.

Fact Pattern 19-1 Andre enters into a contract to buy 350 acres from Belle Vista Farms to cultivate grapes and open a winery. Refer to Fact Pattern 19-1. If Andre breaches the contract, Belle Vista's remedy would most likely be a. the amount that Andre expected to invest in the project. b. a percentage of Andre's unrealized profit. c. the difference between the land's contract and market prices. d. specific performance.

Fact Pattern 20-1 Farmers Produce, Inc., and Growers Market enter into a contract for the delivery of locally grown fruits and vegetables. The parties use a standard Farmers Produce form that contains some of the terms the parties agree on but not others. Some of the produce spoils before it can be cooked, served, and eaten, or sold. Growers Market refuses to pay for the spoiled goods. Refer to Fact Pattern 20-1. Growers Market contends that the practice in the trade with respect to payment for spoiled produce justifies its refusal to pay. Growers Market is arguing that the court should take into account a. the course of dealing. b. the course of performance. c. the usage of trade. d. none of the choices.

Fact Pattern 29-1 Petro Oil Refinery asks Quality Bank for a loan to increase its oil inventory. Quality requires Robin, Petro's president, sign a personal guaranty to pay the debt if Petro defaults. Meanwhile, to sell fifty barrels of refined oil to Slick Lubricants, Inc., Petro asks its outside accountant Tina to co-sign a credit application. Refer to Fact Pattern 29-1. If Tina signs the application only after language is included that requires Petro to exhaust its legal remedies against Slick before looking to her, then Tina is a. a surety. b. a lienor. c. a guarantor. d. a creditor.

Fact Pattern 29-2 Robin's home is in a state that has a $30,000 homestead exemption. Robin defaults on a $60,000 debt that she owes to Suburban Mortgage Company. Robin's home is sold at auction for $80,000. Refer to Fact Pattern 29-2. If Suburban Mortgage recovers less than it is owed, it can realize the difference from a. any property that Robin owns. b. only exempt property that Robin owns. c. only nonexempt property that Robin owns. d. property that any other member of Robin's family owns.

Fact Pattern 32-1 Nadine and Orin work at Pumps & Pipes Inc. Nadine is a sales representative who works with Pumps's customers, including contractors, government agencies, farmers, and others, as well as individual consumers. Pumps closely supervises all of its sales reps, and dictates their schedules. Orin is an engineer who works in Pumps's design department. 40. Refer to Fact Pattern 32-1. With respect to third parties, Orin is Pumps's a. employee, agent, and independent contractor. b. employee and agent. c. employee but not agent. d. independent contractor. ANSWER: c

Fact Pattern 32-2 Faye works as an administrator and receptionist for Garage Door Store. The store withholds federal taxes from Faye's pay, and controls the methods and details of the performance of her work. Faye is not authorized to modify the prices or other terms of a sale at the store. Homer installs Garage Door products at the buyers' locations. . Refer to Fact Pattern 32-2. At the shop, Faye is a. an independent contractor. b. an employee only. c. an employee and agent. d. a principal. ANSWER: c

Fact Pattern 32-2 Faye works as an administrator and receptionist for Garage Door Store. The store withholds federal taxes from Faye's pay, and controls the methods and details of the performance of her work. Faye is not authorized to modify the prices or other terms of a sale at the store. Homer installs Garage Door products at the buyers' locations. Refer to Fact Pattern 32-2. Garage Door authorizes Homer to sell garage door upgrades and accessories at the buyers' locations at prices that Homer negotiates with those buyers. With respect to sales at those locations, Homer is a. an independent contractor. b. an employee only. c. an employee and agent. d. a principal. ANSWER: c

Fact Pattern 36-1 Jumbo Juice Inc. offers entrepreneurs the opportunity to operate a franchise under the Jumbo Juice trade name as a member of a select group of dealers that engage in retail juice sales. Refer to Fact Pattern 36-1. To potential investors, Jumbo Juice must provide a. actual earnings figures. b. hypothetical earnings figures. c. projected earnings figures. d. none of the choices. ANSWER: c

Fact Pattern 37-3 Bryn, Cornell, and Duke are general partners in Equity Lending, a consumer credit, mortgage, and investment firm. Their agreement states that it is a breach of the agreement for any partner to assign his or her interest to a creditor without the consent of the other partners. Refer to Fact Pattern 37-3. The partners decide to dissolve Equity Lending. Duke collects and distributes the firm's assets. This results in a. nothing with respect to the firm's existence. b. the continuation of the firm's business. c. the termination of the firm's legal existence. d. the temporary suspension of the firm's business. ANSWER: c

Faye is interested in buying a franchise from Gas n' Snax Stores Inc. This transaction, like other franchise deals, is regulated to protect a. certain types of anticompetitive agreements. b. franchisors from dishonest prospective franchisees. c. prospective franchisees from dishonest franchisors. d. the government's power to restrict freedom of contract. ANSWER: c

Ferris is refinishing his kitchen floor and needs a floor sander to complete the job. Ferris's neighbor Gena suggests that he call Home Repair Rentals, Inc. Home Repair leases Ferris a floor sander. In this transaction, the lessor is a. Ferris. b. Gena. c. Home Repair. d. none of the parties.

Fleet Trucking, LLC, buys a white van from Go Motors, Inc. , on credit under a guaranty signed by Herbie, Fleet's president, making him personally liable if the company does not pay. Herbie is a. a surety. b. a lienor. c. a guarantor. d. a creditor.

Flynn buys a Greasy Burger, Inc., franchise. Greasy requires that its franchisees buy its products exclusively for every phase of their operations. Because Flynn wishes to buy less expensive products, he challenges the requirement. His best argument is probably that the requirement violates a. the implied covenant of good faith and fair dealing. b. the Federal Trade Commission's Franchise Rule. c. federal antitrust laws. d. the franchisor's marketing image. ANSWER: c

Fong contracts to buy a franchise from Genuine Asian Sushi House Company. In this contract, as in most franchise contracts, the determination of the territory to be served is made by a. other Genuine Asian franchisees within the same state. b. Fong. c. Genuine Asian Sushi House. d. the Federal Trade Commission. ANSWER: c

Gas, LP, is a limited partnership to which its partners have contributed capital. Gas's creditors include Piping, Inc. On Gas's dissolution, its assets will be distributed to pay a. the partners and Piping proportionately. b. the partners before Piping. c. Piping before the partners. d. neither Piping nor the partners. ANSWER: c

Gliding Light, LLC, and Hang Gliders, Inc., are parties to a contract. They subsequently agree that High Riders Inc. should take Gliding Light's place and assume all of its rights and duties under the contract. This is a. a mutual agreement to rescind. b. an accord and satisfaction. c. a novation. d. a settlement agreement.

Global Enterprise enters into a contract with HealthCare Insurance to obtain insurance for Global employees. HealthCare breaches the contract and Global is awarded compensatory damages. The purpose is to a. establish, as a matter of principle, that HealthCare acted wrongfully. b. provide Global with funds for a foreseeable loss beyond the contract. c. provide Global with funds for its loss of the bargain. d. punish HealthCare and deter others from similar acts.

Global Talk Corporation sells phones and other mobile devices. Under most circumstances, Global Talk will be presumed to have warranted that its title to the goods is a. the same as each brand's name. b. none of the choices—a warranty of title is not presumed. c. good and valid. d. the best that money can buy.

Great Harvest Farms offers to sell Hearty Bakeries, Inc., fifty bushels of wheat. Hearty's representative Ilene responds, "We agree to buy fifty bushels only if the wheat is Grade A quality." Between Great Harvest and Hearty Bakeries a. a contract is formed. b. a contract is formed only if Great Harvest can deliver the wheat fast. c. Ilene's statement is not an acceptance. d. Ilene's statement is an acceptance.

Greenway Corporation and Happy Trails, Inc., combine their efforts to build a network of biking and hiking trails along an unused railroad spur. Their form of business organization is a. a business trust. b. a joint stock company. c. a joint venture. d. a syndicate.

Handicrafts & Hobbies Store agrees to hire Iliana for one year at a salary of $600 per week. When Handicrafts & Hobbies cancels the contract, Iliana spends $150 to obtain a similar job that pays $450 per week for a year. Iliana is entitled to recover a. the amount of the wages that Handicrafts & Hobbies promised only. b. the difference between the wages at the two jobs only. c. the difference between the wages at the two jobs plus $150. d. $150 only.

Jacob offers to sell Bill a collection of baseball cards. For their transaction to be a sale under the UCC, Bill a. must pay for the cards in cash. b. must pay for the cards with services. c. may pay for the cards with cash, goods, or services. d. must pay the fair market value of the cards.

Jay is a surety for Karen's loan from Little Bank. Jay's right to be reimbursed by Karen after having paid her debt is the right of a. contribution. b. redemption. c. reimbursement. d. subrogation.

Jewelry & Coin Company hires Kelly Ann to buy gems and precious metals from various sources on its behalf. In this relationship, Jewelry & Coin is a. an employee. b. an independent contractor. c. a principal. d. an agent. ANSWER: c

John contracts with Kelly to buy a certain number of cattle for Kelly's Circle K ranch. John makes a deal with Lawson, the owner of a local herd, and makes a down payment. Kelly fails to pay the rest of the price. Lawson sues John for breach of contract. John's right to hold Kelly liable for any damages that he has to pay is the right of a. compensation. b. cooperation. c. indemnification. d. reimbursement. ANSWER: c

Josefina owns a condominium that she leases to Katrina. Josefina gives her daughter Lucia $450 on her sixteenth birthday. Josefina sells her car to her neighbor Maria for $1,500. UCC Article 2 covers a. the lease with Katrina. b. the gift to Lucia. c. the sale to Maria. d. all of the choices.

Kay and Linda decide to do business as Marketing & Promotion. To be a partnership, this association can result from an agreement that is a. express, but not implied. b. implied, but not express. c. oral, written, or implied by conduct. d. written, but not oral or implied. ANSWER: c

Kim and Lyle are partners in K&L Sales, which exports technical equipment. If Congress declares that the equipment can no longer be exported, K&L a. can continue its business for one twelve-month period. b. can continue its business indefinitely. c. dissolves immediately unless the partners change its business. d. is immediately subject to criminal prosecution and penalties. ANSWER: c

Laura owns and operates Meditation Center without creating a separate business organization. She receives all the profits from the fees for the classes and the sales of the center's merchandise. This is most likely a. a partnership. b. a franchise. c. a sole proprietorship. d. none of the choices. ANSWER: c

Leah and Mason are parties to a contract for the sale of Mason's day care facility to Leah. Before the deal closes, they agree to substitute Nell for Leah as a party to the deal. This novation does not require a. the existence of a previous, valid obligation. b. the agreement by all of the parties to the new contract. c. performance of the original contract by all of the parties. d. a new, valid contract.

Leif contracts to sell his Micro Brewery & Pub to Naomi on April 1. On March 15, Leif tells Naomi that he will not go through with the deal. Naomi can recover a. the cost of any other property that Naomi would find suitable. b. the cost of a similar, nearby brewery and pub. c. the Micro Brewery & Pub. d. nothing.

Leslie pays Mobile Electronics $600 for a new phone. Under the UCC, this is a. a merchant's firm offer. b. a lease. c. a sale. d. a requirements contract.

Lew is a director of Mines, Inc. Using information that is not available to the public, he makes a profit trading in Mines securities. Lew is most likely liable for breach of a. none of the choices. b. the business judgment rule. c. the duty of loyalty. d. the duty of care. ANSWER: c

Loni delivers her Mazda to be repaired at Nile's Body Shop. Loni agrees to pay cash. Nile performs, but Loni does not pay. Nile tells Loni that he will keep the car until she pays. This is a. a judicial lien. b. a mechanic's lien. c. an artisan's lien. d. a violation of most states' laws.

Manufacturing Corporation orders twelve safety videos from Productions, Inc., which delivers the videos. This is most likely a. a gift. b. a lease of goods. c. a sale of goods. d. a service contract.

Marine Expeditions, Inc., pays Nate's Boats $4,000 to use an oceangoing vessel for a month. For the purposes of the UCC, this is a. a merchant's firm offer. b. an option contract. c. a lease. d. a sale.

Megan, an agent for Nabob's, a department store, orders one hundred dresses from Original Designs Inc. Absent a specific agreement between the parties to the contrary, title will pass to Nabob's when a. Megan signs the contract. b. Original Designs signs the contract. c. Original Designs physically delivers the dresses. d. Nabob's pays for the dresses.

Mikayla, an agent for Nahir, enters into a contract on Nahir's behalf with Onora that must be in writing to be enforceable under the Statute of Frauds. Mikayla's authority to enter into this contract is not in writing. Under the equal dignity rule, this contract is a. enforceable. b. void. c. voidable at Nahir's option. d. voidable at Onora's option. ANSWER: c

MotorCo Inc. makes and sells auto parts to retail repair services, vehicle sales outlets, and consumer parts stores. On one MotorCo box is a label that reads "Contains one gross (144) sparkplugs, assorted sizes." This statement is a. an implied warranty of fitness for a particular purpose. b. an implied warranty of merchantability. c. an express warranty. d. none of the choices.

Nora and Owen do business as Profit & Property, a real estate investment partnership. In acting on the firm's behalf in a deal with Village Mall, Nora takes advantage of an opportunity to make a secret profit on her own behalf. To her firm, Nora is liable for a. breach of the duty of care. b. breach of contract. c. breach of the duty of loyalty. d. nothing. ANSWER: c

On March 1, Eugene retains Farley to act as his authorized agent. On April 1, Eugene dies. On April 2, before Farley knows of Eugene's death, he enters into a contract on Eugene's behalf. The contract is a. binding on Eugene's heirs. b. binding on Farley. c. void. d. voidable. ANSWER: c

Oren and Pat are parties to a contract for the management of Oren's residential rental properties. A dispute arises between them over the obligations due under the contract. They negotiate a compromise and form a different agreement to substitute for the original one. This settlement agreement does not require a. the existence of a previous, valid obligation. b. the agreement by the parties to the new contract. c. a third party. d. a new, valid contract.

Organicos Café orders five gallons of PureMaid-brand trans fat-free olive oil from Quico Cooking Supplies, Inc. Quico mistakenly ships soy oil, which Organicos keeps, despite the nonconformity. The oil is destroyed in a fire. The loss is suffered by a. all of the parties as tenants in common in equal measure. b. PureMaid. c. Organicos Café. d. Quico Cooking Supplies.

Orly's Adventure Travel and Paquito's Wild River Tours form a joint venture. Orly can participate in the venture's management to a. the extent that she assumes liability for the venture's debts. b. the extent of her investment in the venture. c. any extent. d. no extent.

Porches & Verandas, Inc., agrees to build a screen porch for Quinn, but fails to complete the job. Quinn hires Ramadas, Inc., to finish the project. Quinn may recover from Porches & Verandas a. the contract price less costs of materials and labor. b. the contract price. c. the costs needed to complete construction. d. profits plus the costs incurred up to the time of the breach.

Quince owns a used-car lot where Ray works as a salesperson. Quince tells Ron not to make any warranties for the cars. To make a sale to Sylvia, however, Ron adds a 50,000-mile warranty. Later, Sylvia sues Quince for breach of warranty. Quince's right to hold Ron liable for any damages Quince has to pay Sylvia is the right of a. avoidance. b. cooperation. c. indemnification. d. reimbursement. ANSWER: c

Quinn enters into a series of agreements with Reba involving a sale of a Suite Dreams Motel, including the land, building, furnishings, shares of stock in Suite Dreams Company, and a contract with Trudy to create an ad campaign. Reba suspects that Quinn may be misrepresenting the facts. The UCC Statute of Frauds governs a. the sale of any of the property evidenced by a writing. b. the entire deal, including the marketer's services. c. the sale of the furnishings priced at $500 or more. d. the sale of the land and the building.

Refined Grains, Inc., agrees to sell to Sunny Cereal Company a certain quantity of refined oats each week but no mention is made of where the goods are to be delivered. In general, the UCC requires that the delivery take place at a. a neutral place of business halfway between the parties' locations. b. a "reasonable" place of delivery. c. Refined's place of business. d. Sunny's place of business.

Rehab Center signs an agreement with Savers Bank to borrow $40,000 at 20 percent interest. Later, the state legislature passes a law lowering the maximum permissible rate of interest to 15 percent. Rehab's best argument for avoiding payment to Savers is that a. performance of the contract is commercially impracticable. b. payment of the loan would force Rehab into bankruptcy. c. the law has rendered performance of the contract illegal. d. the specific subject matter of the contract has been destroyed.

Renee contracts with Scott to pay him $25,000 for his work on Renee's new album "Hip Pop." After Scott performs, they sign an accord, in which Renee promises to pay him $21,000 within thirty days instead of $25,000 later. But she does not pay. Scott can sue Renee on a. neither the accord nor the original obligation. b. the accord only. c. the accord or the original obligation. d. the original obligation only.

Rico borrows $110,000 from Sterling Bank to buy a home. If he fails to make payments on the mortgage, the bank has the right to repossess and auction off the property securing the loan. This is a. attachment. b. execution. c. foreclosure. d. redemption.

Riverside Mill and Standard Contractors enter into a contract for a sale of lumber. The mill knows the purpose for which the buyer will use the goods. Under the UCC, an implied warranty of fitness of a particular purpose arises a. if the buyer is relying on the seller to select suitable goods. b. if the buyer asks for it. c. if the seller is a merchant who deals in goods of the kind sold. d. in conjunction with lease contracts, not sales contracts.

Roofing Company buys asphalt roofing tiles from Shingles, Inc. The parties agree that the tile will be shipped "F.O.B. Shingles's warehouse" to Roofing's location via Shipping Corporation. The tiles are lost in transit. The loss is suffered by a. Shipping. b. Shingles. c. Roofing. d. Roofing's customers by an increase in the prices of goods and services.

Rosario is a chef and caterer who hires out on a per-project basis to companies with on-location work sites, as well as to hosts of banquets, corporate meetings, concerts, weddings, and other events. In this capacity, Rosario is a. an agent. b. an employee. c. an independent contractor. d. a principal. ANSWER: c

Safe4U Lenses, Inc., assures ThruVu Optical Company that Safe4U's lenses will not crack within a certain range of pressure. ThruVu buys the lenses to prescribe to its customers. When cracks develop within the stated range, ThruVu files a suit against Safe4U. The court is most likely to rule in favor of a. Safe4U, because its statement was an expression of opinion. b. Safe4U, because ThruVu chose Safe4U's products voluntarily. c. ThruVu, because Safe4U's statement was an express warranty. d. ThruVu, because Safe4U's statement constituted puffery.

Sara and Tim enter into a contract for a sale of orchids. With respect to the specific contractual provisions set out in the UCC, these parties may a. agree to different terms only to a reasonable extent. b. agree to different terms unless they "get caught." c. agree to whatever terms they wish. d. not agree to different terms.

Sasha's debt to Tully is past due. Tully brings a legal action against Sasha to collect the debt. To ensure that a judgment in Tully's favor will be collectible, he asks the court to order the seizure of Sasha's property. This is a request for a. a contract of suretyship. b. an order that would violate most state laws. c. a writ of attachment. d. an order of receivership.

Sheila is a shareholder of Travels & Trips Inc. She has the right to inspect corporate books and records a. only if she is also a director. b. without restrictions. c. for a proper purpose. d. under no circumstances. ANSWER: c

Soup Factory, Inc., uses a Web site to provide downloadable information to prospective franchisees. This electronic information is the equivalent of an offer that must comply with a. no law. b. federal antitrust laws. c. the Federal Trade Commission's Franchise Rule. d. the Petroleum Marketing Practices Act. ANSWER: c

Spicy Sauces, Inc., and Tom's Bottling Plant have a manufacturing franchise arrangement. This involves the transfer of a. a license. b. a trade name. c. the formula to make a certain product. d. the ownership of the business. ANSWER: c

Stephanie enters into a contract to work as a lifeguard at Tim's Water Park for the summer in exchange for a weekly paycheck and free admission to the park's attractions. If the duties under this contract are discharged like those under most contracts, the duties will be a. avoided. b. breached. c. performed. d. rescinded.

Swift Trucking, Inc., and Trailer Rents Corporation are parties to an oral agreement for a one-year lease of six doublewides with payments totaling more than $40,000. They may satisfy the Statute of Frauds by a. mutually agreeing not to commit fraud. b. repeating the terms in a phone call. c. setting out the terms in a memo. d. shaking hands on the deal.

Teresa buys a franchise from Urgent Medical Clinics, LLC. If their agreement is like most franchise agreements, it will specify that Urgent Medical can terminate the franchise a. at will. b. for any reason. c. for cause only. d. for no reason. ANSWER: c

Tile & Grout (T&G) contracts to resurface the insides of the pools at Water Park. T&G knows that without the resurfacing, Water Park will have to delay its seasonal opening. T&G does not perform as promised. As consequential damages, Water Park can recover a. the cost of new pools. b. the difference between T&G's price and the eventual cost of resurfacing. c. the loss of profit from the delayed opening. d. nothing.

Ursula buys a Verismooth boat from a Watercraft store, which agrees to keep the boat for Ursula until she picks it up. Before Ursula gets the boat, an unforeseen tornado destroys the store and the boat. The loss of the boat is suffered by a. Ursula. b. Verismooth. c. Watercraft. d. the government agency that failed to foresee the tornado.

Valu Food Markets is an incorporated cooperative. Like other incorporated cooperatives, Valu Food distributes profits to its owners on the basis of a. the amount of capital they contribute. b. the degree to which they participate in management. c. their transactions with the cooperative. d. the requirements of the state in which it was incorporated.

Varoom Motors, Inc., allows Weber to take a Xtrem-brand motorcycle for a "test run." Weber tries the cycle for a few hours, returns, and buys it. This is a. a bailment. b. a lease. c. a sale on approval. d. a sale or return.

Wheels Inc. sells bicycles. Under most circumstances, Wheels will be presumed to have warranted that its title to the bikes is a. the same as each brand's name. b. none of the choices—a warranty of title is not presumed. c. good and valid. d. the best that money can buy.

. Fits Like A Glove Shoes, Inc., and Retail Footwear Stores enter into a contract for a sale of shoes. The contract indicates that the price includes transportation costs to a specific destination by including the term a. C.I.F. b. delivery ex-ship. c. F.A.S. d. F.O.B.

. Forest Lumber Company orally contracts with Gail for the purchase of five acres of Gail's timberland. Gail makes the transfer but Forest Lumber does not pay the price. Gail could most likely recover on a theory of a. reformation. b. restitution. c. liquidated damages. d. quasi contract.

. Largo is an agent for MaryElise. MaryElise gives Largo clear instructions to enter into contracts on her behalf only on Mondays, Wednesdays, or Fridays. Largo enters into a contract on her behalf on Tuesday. Largo has breached a. the duty of performance. b. the duty of loyalty. c. no duty. d. the duty of obedience. ANSWER: d

45. Quisa and Reilly are partners in Sport Bikes, which rents and sells bikes, bike accessories, and related gear. Quisa manages the business. Unless the partnership agreement states otherwise, Quisa is a. entitled to compensation in proportion to her effect on the business. b. entitled to compensation in proportion to her effort. c. entitled to compensation in proportion to her capital contribution. d. not entitled to compensation. ANSWER: d

47. Rosa is a partner in Silver Dragon, a partnership consisting of the owners of a restaurant. Silver Dragon incurs debt for new dining tables and chairs. With respect to this debt, Rosa is a. not liable. b. only liable to the amount of her capital contribution. c. only liable in proportion to the number of partners in the firm. d. personally liable to the full extent. ANSWER: d

53. Linus hires Mieko to act as his agent to purchase Ngoc's Southeast Asian Buffet. Linus tells Mieko to reveal only that she is buying the restaurant on behalf of a third party, without telling Ngoc's seller who that third party is. Linus is a. a disclosed principal. b. not a principal. c. an undisclosed principal. d. a partially disclosed principal. ANSWER: d

69. Orin hires Pat, a real estate broker, to sell her oceanfront house. The house is destroyed in a hurricane before being sold. Pat is Orin's agent a. until Orin's insurer pays Pat's commission. b. until the destroyed house is sold. c. until the destroyed house is rebuilt and sold. d. no more. ANSWER: d

Aerospace, Inc., makes and sells flight navigation equipment, through independent salespersons, to retailers for resale to consumers. The Magnuson-Moss Warranty Act covers a. implied warranties, oral statements, and written promises. b. only implied warranties that consumers are aware of. c. only a salesperson's oral statements. d. only a seller's written promises.

Ann offers to buy Beth's land only if an appraiser estimates that its current value is more than a certain price. Later, the appraiser deems the worth of the land to be less than Beth's price. Ann and Beth's obligations a. must still be performed. b. must now be renegotiated. c. are on "hold." d. are discharged.

Beth and Connie do business as Diamond Investments. In acting on the firm's behalf, Beth makes an honest error in overestimating the value of a particular stock purchase. To her firm, Beth is a. liable for breach of the duty of care. b. liable for breach of the duty of accounting. c. liable for breach of the duty of loyalty. d. not liable. ANSWER: d

Bill sells Corner Deli, a sole proprietorship, to Debra. This is a. a franchise. b. not a transfer of ownership without the other owners' approval. c. not a transfer of ownership—a sole proprietorship cannot be transferred. d. a transfer of the ownership of the business. ANSWER: d

Brent and Char are limited partners in Dental Center, a limited partnership. In terms of the firm's books and information regarding partnership business, Brent and Char are entitled to a. access in proportion to their participation in management of the firm. b. access to the parts that directly relate to their capital contributions. c. no access. d. complete access. ANSWER: d

Bud approves on behalf of Cody—but without authorization—a contract with Dik to build a new silo. Cody does not ratify the contract. Later, Dik tries to enforce the deal. This attempt will be a. partly successful. b. partly unsuccessful. c. totally successful. d. totally unsuccessful. ANSWER: d

Builders, Inc., agrees to construct an office building for Champ Fitness Clubs, Inc. The project proceeds according to plan, but before it is done, Champ tells Builders to quit. Builders may recover a. the contract price less costs of materials and labor. b. the contract price. c. the costs needed to complete construction. d. profits plus the costs incurred up to the time of the breach.

Building Restoration, Inc. (BRI), enters into a contract to refurbish an old train depot for Casual Dining, Inc., to open as Eat Up Restaurant. If BRI completes most of the work promised in the contract, its performance will be a. absolute. b. complete. c. material. d. substantial.

Carl starts up, and assumes the financial risk of, DataWorks, a new Web marketing enterprise. Carl and DataWorks must meet legal requirements relating to a. business name and state tax registration. b. occupational licensing. c. intellectual property laws. d. all of the choices. ANSWER: d

Carlo is a director of Desserts Italiano, Inc. Carlo opposes a tender offer that is in the company's best interest because its acceptance would cost his position as a director. Carlo is most likely liable for a breach of a. none of the choices. b. the business judgment rule. c. the duty of care. d. the duty of loyalty. ANSWER: d

Chord Guitars Inc. sells guitars to consumers. A Chord salesperson says to a potential customer, "This Chord is the best guitar you'll find anywhere." This statement is a. an implied warranty of fitness for a particular purpose. b. an implied warranty of merchantability. c. an express warranty. d. puffery.

Chuck hires Danielle, a real estate broker, to act as his agent to sell his land for $150,000. Oil is discovered beneath the land, causing its market value to increase considerably. The agency agreement is likely a. continued with a proportionate increase in Danielle's sales commission. b. continued until Danielle tells prospective buyers of the discovery. c. terminated by act of the parties. d. terminated by operation of law. ANSWER: d

Coffee Roasters, Inc., sells whole bean and ground coffee to Delicioso Deli under an existing contract. When the cost of coffee beans increases, Delicioso agrees to a price increase, but later wants to cancel the contract. Delicioso may a. cancel the contract immediately. b. cancel the contract only after accepting a final shipment. c. cancel the contract only on reasonable notice. d. not cancel the contract.

Containers, Inc., sends its standard order form to Distribution Corporation to evidence a sale of packing materials. Distribution responds with its own standard purchase order form. Additional terms in the purchase order automatically become part of the contract unless a. the terms materially alter the original contract. b. the original offer expressly required acceptance of its terms. c. the offeror objects to the new terms within a reasonable time. d. any of the choices.

Custom Auto, LLC, is a limited liability company. Its members include Dennis and Emma. Like other LLCs with more than one member, unless indicated otherwise, the firm will automatically be taxed as a. a person. b. a corporation. c. a sole proprietorship. d. a partnership.

Del owns Everlast Painting, a sole proprietorship. Del's liability is a. limited by state statute and varies from state to state. b. limited to the extent of capital expenditures. c. limited to the extent of his or her original investment. d. unlimited. ANSWER: d

Dharma enters into a contract to manage the operations of Esther's dental office for one year, renewable for subsequent one-year terms. If this contract is discharged like most contracts, it will be a. canceled. b. breached. c. altered. d. performed.

Diane organized, and owns and operates, Reliable Roofing, a construction outfit, in the simplest form of business organization. This is a. a limited partnership. b. a limited liability company. c. a corporation. d. a sole proprietorship. ANSWER: d

Donald approves on behalf of Evelyn—but without authorization—a contract with Farouk to build a new silo. Evelyn does not ratify the contract. The deal with Farouk is a. an enforceable contract with Donald. b. a voidable contract. c. an enforceable contract with Evelyn. d. an unaccepted offer. ANSWER: d

Dry Gulch Farms hires Elliot to repair its irrigation system on site on a certain date for $2,500, but Elliot does not show up as agreed. Dry Gulch hires Fernando to do the job for $2,000. Dry Gulch may recover from Elliot a. nothing. b. compensatory damages. c. consequential damages. d. nominal damages.

Eliza buys a new motorcycle from Fab Cycles, Inc. The most important factor in determining whether an express warranty is created is whether a. Eliza expresses to Fab Cycles what she wants warranted. b. Eliza's desire for the cycle becomes part of her motivation to deal. c. Fab Cycles expresses to Eliza what it expects of its customers. d. Fab Cycles's promise becomes part of the basis of the bargain.

Equipment Rentals Corporation (ERC) agrees to lease two backhoes to Dig & Fill Construction, Inc. Before any interest in the backhoes can pass from ERC to Dig & Fill, they must be a. in ERC's physical possession. b. in Dig & Fill's physical possession. c. listed in a document of title and filed in the appropriate state office. d. in existence and identified as the goods in the contract.

Fact Pattern 18-2 Flora, who owns and operates Garden Fresh Organic Farms, agrees to sell Harvesters Grocery a minimum quantity of fresh fruits and vegetables every week for three months. Refer to Fact Pattern 18-2. If a strike delays delivery of the produce beyond the time for performance, Flora's contract with Harvesters is a. breached. b. discharged. c. not affected. d. suspended.

Fact Pattern 19-1 Andre enters into a contract to buy 350 acres from Belle Vista Farms to cultivate grapes and open a winery. Refer to Fact Pattern 19-1. If Belle Vista breaches the contract, Andre's remedy would most likely be a. the amount that Andre expected to invest in the project. b. a percentage of Belle Vista's unrealized profit. c. the difference between the land's contract and market prices. d. specific performance.

Fact Pattern 29-1 Petro Oil Refinery asks Quality Bank for a loan to increase its oil inventory. Quality requires Robin, Petro's president, sign a personal guaranty to pay the debt if Petro defaults. Meanwhile, to sell fifty barrels of refined oil to Slick Lubricants, Inc., Petro asks its outside accountant Tina to co-sign a credit application. Refer to Fact Pattern 29-1. If Robin is a guarantor, then the guaranty is required to be in writing because of a. the debtor's right of redemption. b. the co-signer's right of contribution. c. the creditor's transfer of possession. d. the Statute of Frauds.

Fact Pattern 33-1 Berry indicates that she is acting as an agent on behalf of an unidentified client—Cuisine Catering, LLC—when she enters into a contract with Désean. 51. Refer to Fact Pattern 33-1. Cuisine Catering is a. a disclosed principal. b. an apparent agent. c. an undisclosed principal. d. a partially disclosed principal. ANSWER: d

Fact Pattern 36-1 Jumbo Juice Inc. offers entrepreneurs the opportunity to operate a franchise under the Jumbo Juice trade name as a member of a select group of dealers that engage in retail juice sales. 60. Refer to Fact Pattern 36-1. To potential investors, Jumbo Juice must disclose a. the range of goods and services included. b. the value of the franchise. c. the estimated profitability of the franchise. d. all of the choices. ANSWER: d

Bay City Merchants Corporation has six shareholders, four of whom are members of the same family. All of Bay City's shareholders agree in writing to operate without shareholders' meetings. Under the Revised Model Business Corporation Act, this most likely warrants a. no penalties or sanctions. b. the imposition of a fine on Bay City. c. the imprisonment of Bay City's shareholders. d. the piercing of Bay City's corporate veil. ANSWER: a

Beth and Curt form Day-to-Day Care, Inc. Ultimate responsibility for policy decisions necessary to the management of corporate affairs rests with Day-to-Day's a. board of directors. b. incorporators. c. officers. d. shareholders. ANSWER: a

Data Analytics, LLC, is a limited liability company. Unless the articles of organization specify otherwise, it will most likely be assumed that the firm is a. member-managed. b. manager-managed. c. an aggregate of member and non-member managers. d. run by an outside professional management group.

EZ Hauling holds itself out to customers as being a corporation but makes no attempt to incorporate. In this circumstance, EZ Hauling is most likely a. a corporation by estoppel. b. a de facto corporation. c. a de jure corporation. d. a benefit corporation. ANSWER: a

Faye and Grant are shareholders of Hearthside Hotels, Inc. As shareholders, they must approve a. a merger. b. a decision to pursue new business opportunities. c. none of the choices. d. a contract between management and labor. ANSWER: a

Global Shipping Corporation and Harbor Warehouse Company transfer their property to Investment Managers, Inc., which manages the property and distributes the profits to the beneficiaries. This form of business organization is a. a business trust. b. a joint stock company. c. a joint venture. d. a syndicate.

Ida and Jay are the shareholders and the directors of Keystone Property Management Inc. Lily and Mike are Keystone officers. The responsibility for the overall management of this firm rests with a. Ida and Jay, as the directors. b. Lily and Mike, as the officers. c. Ida and Jay, as the shareholders. d. all of the parties. ANSWER: a

Nina is a director of Outback Outfitters, Inc. Under the standard of due care owed by directors of a corporation, Nina's decisions must be informed and a. reasonable. b. unquestionable. c. indefensible. d. perfect. ANSWER: a

Pat owns one share of stock in Quik-Stop Stores, Inc., as evidenced by a stock certificate. Because stock is intangible personal property, Pat's ownership of the stock a. exists independently of the stock certificate. b. cannot exist without a tangible stock certificate. c. cannot exist without the original stock certificate. d. cannot be transferred without the stock certificate. ANSWER: a

Phone Apps, LLC, is a limited liability company. Among its members, a dispute arises that the operating agreement does not cover. The dispute is governed by a. the applicable state LLC statute. b. the Uniform Limited Liability Company Act. c. the principles of partnership law. d. the federal LLC statutes.

Pro Audio, Inc., would like to change its corporate status to that of an S corporation. To qualify, Pro Audio must a. be a domestic corporation. b. have more than one hundred shareholders. c. be a benefit corporation. d. all of the choices. ANSWER: a

Rollo is a member of Smooth Operators LLC, a limousine service. Rollo's relationship to Smooth Operators ends, but the firm continues to do business. This is a. dissociation. b. dissolution. c. a violation of the law. d. unethical but not a violation of the law.

Sean is the incorporator of Twisty's Pretzels Corporation. Ross is a shareholder, Phyllis is a director, and Velma is an officer. The day-to-day operations of Twisty's are overseen by a. Velma. b. Ross. c. Sean. d. Phyllis. ANSWER: a

. Blair and Chanel are holders of common stock in Discount Retail Stores, Inc. Like other holders of common stock, they have a residual position in the overall financial structure of Discount Retail, because they a. are guaranteed to receive more than the amount of their investment. b. are the last to receive returns for their investment. c. have priority to the firm's assets if it becomes insolvent. d. reside in the state of the firm's incorporation. ANSWER: b

64. Trans-Pacific Company and USA Export, Inc., form a business organization to engage in importing and exporting. Its property is held in the names of the members and its shareholders have personal liability. This organization is a. a business trust. b. a joint stock company. c. a joint venture. d. a syndicate.

Fact Pattern 40-1 Don is a shareholder of Energy Renew, Inc. When the directors fail to undertake an action to redress a wrong suffered by the corporation, Don files a suit on the firm's behalf. 67. Refer to Fact Pattern 40-1. Don's suit is a shareholder's a. reimbursement suit. b. derivative suit. c. business-judgment rule suit. d. preemptive suit. ANSWER: b

Fact Pattern 40-1 Don is a shareholder of Energy Renew, Inc. When the directors fail to undertake an action to redress a wrong suffered by the corporation, Don files a suit on the firm's behalf. Refer to Fact Pattern 40-1. Any damages recovered by the suit will normally go to a. Energy Renew's shareholders, excluding Don. b. Energy Renew. c. Energy Renew's directors. d. Energy Renew's shareholders, including Don. ANSWER: b

Integrated Devices, Inc., is a private, for-profit corporation that is owned by five shareholders who are members of the same family. Integrated is a. an S corporation. b. a close corporation. c. a nonprofit corporation. d. none of the choices. ANSWER: b

Interstate Paving, Inc., issues bonds. Bonds a. are issued by businesses only. b. are referred to as fixed-income securities. c. feature voting rights. d. require periodic interest payments from their owners. ANSWER: b

Jim is considering forms of business organization, including the limited liability company (LLC), for his business—Kettle Popt-Korn. Most states require that an LLC have a. a corporate veil, but no minimum number of participants. b. at least one member. c. at least two members. d. at least one non-member manager.

Lauren, Maria, and Nina form a syndicate to buy a professional soccer franchise. This syndicate could be set up as a. a joint venture. b. a corporation. c. a sole proprietorship. d. a limited liability company.

Licensed fishing outfits in Bayou City form a business organization to provide, without profit, an economic service to its members. This is a. a business trust. b. a cooperative. c. a corporation. d. a joint stock company.

Michel is a citizen of France. With respect to a limited liability company in the United States, Michel can a. act as a creditor, but cannot otherwise invest or participate. b. become a member. c. not become a member, but can participate in its operations. d. not become a member or otherwise participate in its operations.

Mike is a shareholder of Natural Gas, Inc. Natural Gas uses cumulative voting to elect directors. This means that the number of Mike's votes is determined by the number of a. years that he has been a shareholder. b. members of the board to be elected multiplied by the total number of voting shares that he holds. c. shareholders present at the shareholders' meeting. d. shareholders' meetings that he has attended. ANSWER: b

Rural Development Company and Suburban Real Estate Corporation form a joint stock company. A joint stock company can be formed for, at the most, a. an implied duration of not more than six months. b. a perpetual existence. c. a single activity or transaction. d. an express duration of not more than one year.

Security Insurance, Inc. has a board of five directors. Security's bylaws do not state any quorum requirements. In most states, a quorum for Security's board meetings would be a. one director. b. three directors. c. four directors. d. all of the directors. ANSWER: b

Sierra is a holder of preferred stock in Rio Grande Irrigation, Inc. Sierra has priority over holders of Rio common stock as to a. nothing. b. payments of dividends. c. the date on which Rio must repurchase the shares. d. upward changes in the market price of the shares. ANSWER: b

The abbreviation "P.A." in the name "Conrad & Drake, Accountants, P.A." means that this organization is a. a private association. b. a professional association. c. a public association. d. a publicly administered corporation. ANSWER: b

Flo and Glen form Health Food Inc. to coordinate the purchase, sale, and delivery of food products from organic farms to hospitals and other institutions. The stated purpose is to make a profit and to have a material positive impact on society and the environment. Health Food is a. a nonprofit corporation. b. not a corporation. c. a benefit corporation. d. a private corporation. ANSWER: c

Hollywood Lights, Inc. substantially complies with all conditions precedent to incorporation. Hollywood is most likely a. a corporation by estoppel. b. a de facto corporation. c. a de jure corporation. d. a benefit corporation. ANSWER: c

Home Healthcare, LLC's owners are Inez and Jan. For purposes of entering into contracts, Home Healthcare is a. an aggregate of its owners. b. a non-entity c. a legal entity apart from its owners. d. a non-participating third party.

Jess and Keri are members of Livewire LLC, a limited liability company. In most situations, with respect to Livewire's debts, Jess and Keri are shielded from a. all liability. b. no liability. c. personal liability. d. "corporate veil" liability.

Lightning Corporation and Mind, Inc., two game creators, wish to combine their capabilities to make and market Nano, a special limited-edition game. The appropriate legal entity for this project is most likely a. a business trust. b. a joint stock company. c. a joint venture. d. a syndicate.

Rob owns Solar Panels Corporation. He uses Solarl's funds to pay his personal expenses, creates Thermal Power Inc. to engage in the same business as Solar, transfers Solar's assets to Thermal, and petitions Solar into bankruptcy. This most likely warrants a. a bonus to Rob for financial maneuvers. b. a discharge for Solar in bankruptcy. c. a pierce of the corporate veil. d. a review of Thermal's articles of incorporation. ANSWER: c

Rosa and Sean are shareholders of Tasty Tacos, Inc. Rosa's written authorization to Sean to vote Rosa's shares at a shareholders' meeting is a. a violation of the duty of care. b. a preemptive right. c. a proxy. d. a quorum. ANSWER: c

. Ben incorporates his app business as Clickology, Inc. Under most state corporation statutes, Clickology can have a. only a finite, yet-to-be-determined existence. b. only a one-year, nonrenewable existence. c. only a one-year, renewable existence. d. perpetual existence. ANSWER: d

. Riley is elected as a director to the board of Salty Snacks, Inc. He will most likely serve for a term of one a. decade. b. four-year period. c. lifetime. d. year. ANSWER: d

. Rita and Susan want to form and do business as Trips & Travel, Inc. They will serve as the firm's directors and officers, and will initially hold all of the stock in the company. A corporation is owned by a. the board of directors. b. the officers. c. the employees. d. the shareholders. ANSWER: d

. Rogue Art Gallery and Sequoia Exhibitions form a joint venture. When a dispute arises, Rogue files a suit against Sequoia. The court is most likely to apply the same principles to this joint venture as it applies to a. business trusts. b. limited liability companies. c. corporations. d. partnerships.

. Wiley incorporates his business as Wiley's Wire Inc. in Arizona. He and his group of shareholders intend to make a profit from their sales of fencing wire. Wiley's is a. a nonprofit corporation. b. not a corporation. c. a benefit corporation. d. a private corporation. ANSWER: d

Boutique Bodega Corporation would like to change its corporate status to that of an S corporation. To qualify, the shareholders must not be a. corporations. b. estates. c. individuals. d. partnerships. ANSWER: d

Charlie, Dora, and Ethel are the first directors on the board of Face Time Corporation, a social media host. Subsequent directors are elected by a majority vote of Face Time's a. users. b. employees. c. officers. d. shareholders. ANSWER: d

Dane is a director of Eco Packing Company. Dane's rights, as a director, do not include a right to a. reimbursement. b. inspection. c. participation. d. self-dealing. ANSWER: d

Eve is a director of Fab Style Corporation. Without informing Fab, Eve goes into business with Gro Trend, Inc., in competition with Fab. Eve is most likely liable for breach of a. none of the choices. b. the business judgment rule. c. the duty of care. d. the duty of loyalty. ANSWER: d

Jen and Kay would like to form Lunch Garden, Inc., to enter the food vending business. Most likely, the articles of incorporation for the firm will not include a. the corporate name. b. the name and address of a registered agent. c. the number of shares that the corporation is authorized to issue. d. the minutes of the first organizational meeting. ANSWER: d

Leon, Michael, Nolan, and O'Neill join together to buy a professional basketball franchise. Their selected form of business organization is an investment group, which is also known as a. a business trust. b. a joint stock company. c. a joint venture. d. a syndicate.

Ned and Olsen want to form and do business as a corporation—Pastries & Pies Inc. Its existence depends generally on a. city or county corporate codes. b. the Entrepreneur's Corporate Handbook. c. the federal Administrative Procedure Act. d. state law. ANSWER: d

Oil Reserves, Inc., and Petro Corporation form a joint venture to design and test petroleum storage facilities and equipment. When a dispute arises, Oil Reserves files a suit against Petro. The court is most likely to apply the same principles to this joint venture as it applies to a. sole proprietorships. b. limited liability companies. c. corporations. d. partnerships.

Owen is a registered agent for Pods & Phones, Inc., which incorporated in California. As a registered agent, Owen a. agreed to sell stock in the firm before it existed. b. applied to California on the firm's behalf to obtain its corporate charter. c. represents the firm as a marketing agent. d. receives legal documents on behalf of the firm. ANSWER: d

Robyn owns one share of stock in SportBoards Corporation, as evidenced by a stock certificate. She loses the certificate. Her ownership of the stock is a. forfeited immediately. b. forfeited within ten days of a third party's claim to ownership. c. forfeited within thirty days if she cannot find the certificate. d. not affected. ANSWER: d

Shauna is an officer for Tropical Shirts Corporation. Due to a bad choice of shirt-maker on Shauna's part, the company's costs increase. Shauna is most likely liable for breach of a. the business judgment rule. b. the duty of care. c. the duty of loyalty. d. none of the choices. ANSWER: d

Vince buys 500 shares of common stock in Water Services, Inc. As a shareholder of record, Vince owns a proportionate interest with regard to Water's a. net assets. b. control. c. earnings. d. all of the choices. ANSWER: d

38 starred

Ensembles d'études connexes

PSY 330 Chapter 2 Quiz

Chapter 16- Innate Immunity: Nonspecific Defenses of the Host

midterm

ATI Perfusion Quiz

Accounting chapter 17 special journals: purchases an cash payments

Trigonometric Graphs (Precalculus)

RENAL - 4th semester

Test #3

Psych 4

Chemistry Flame Test Lab

Series 7: Unit 5--Corporate Bonds

Chapter 11

Completa Oracion con el Verbo/ El imperativo Informal

Causes of amenorrhea

Male Repro Pot (Pharm on last pages)

Ch. 9 Review Questions

Application Software Quiz 11

Chapter 7

Upper Limb

Unit 3 Adaptive quizzing