LEGL 2301 Exam 3

Rico's Grill, Inc., is solely owned by Rico Vito. Rico's Grill borrows $10,000 from a local bank to finance the purchase of a new range. The payments are to be made monthly over a two-year period. The bank:

need not make any special disclosures

Ariana is an officer of New Stage, a theater production company. Without telling any other officers or the board of directors, she decides that New Stage should try to sell gardening tools over the Internet. She makes contracts with suppliers and a Web-based remote-order-fulfillment company. The only action that may not be taken is:

she can file a lawsuit against the corporation for damages.

Henry and Ryan each invest $10,000 in a limited partnership as limited partners, so each has a 50% interest. Tracey sues the limited partnership and obtains a $100,000 judgment. Henry's liability is:

$10,000.

Grocer's Choice is the largest employer in the Pacific Northwest. It is covered by numerous federal employment laws. As such, it is required by the Family and Medical Leave Act of 1993 (FMLA) to provide employees with up to:

12 weeks of unpaid family or medical leave during any 12-month period.

Carolina files for Chapter 7 bankruptcy and the automatic stay goes into effect. Even so, which of the following creditors may continue to collect the debt owed by Carolina?

Carolina's first husband to whom she owes monthly support payments

Dave has forty acres where he grows corn and soybeans. He also has five milk cows and some chickens. Dave sells organic milk and eggs at the local farmers' market. He also drives a school bus. Most years, about 70% of Dave's income is from his agricultural activities and 30% is from his school bus-driving job. If Dave declares bankruptcy, he will file under:

Chapter 12

Adam is a sole proprietor. He must file for bankruptcy to reorganize his debt under a repayment plan so he can pay his creditors and continue operating his business. He should file a:

Chapter 13 bankruptcy

Julie, Manuel, and Emilio are three dentists who formed a limited liability partnership (LLP) for their dental practice. Emilio accidentally removes the wrong tooth of a patient. The patient sues the partnership for negligence and wants to hold all three doctors personally liable. A court will most likely find:

Emilio personally liable for negligence, but not Julie and Manuel.

A surety can be required to pay an obligation only after the principal debtor defaults and usually only after the creditor has made an attempt to collect from the debtor

FALSE

An involuntary bankruptcy occurs when the debtor forces his or her creditors into bankruptcy proceedings

FALSE

Only a few types of property—a debtor's wages or bank account, for example—can be garnished

FALSE

Redcap Dairies sells yogurt that it knows to be contaminated by a harmful mold. Redcap Dairies would be held responsible to consumers under the:

Federal Food, Drug, and Cosmetic Act

Maria works for MegaCorp, a large privately owned company specializing in sales of ball bearings. MegaCorp introduces filtering software to block access to certain non-work related Web sites, as well as sites containing sexually explicit images. Would Maria be successful if she legally challenged the new policy?

No, because private employers generally are free to use filtering software to block access to certain Web sites.

Byron works at Stich-Rite Clothing Factory. The company is required to maintain safe working conditions under the:

Occupational Safety and Health Act.

Julie's father has been diagnosed with dementia and Julie needs to be home to take care of him for six consecutive weeks. Julie asks her employer, BigCo, for six weeks of medical leave under the Family and Medical Leave Act (FMLA) and for her regular salary to be paid. Is BigCo obligated to grant this request?

Partially yes, as the Family and Medical Leave Act requires granting employees twelve weeks of medical leave per year for a qualifying reason. However, that leave does not have to be paid leave.

Patricia hires Albert to sell Patricia's expensive sports car. Albert agrees on a sale with Zeke, who wants to purchase the car for its powerful engine and well-kept condition. Albert does not disclose Patricia's identity to Zeke. Albert also does not disclose the fact that Albert is an agent for someone else. Zeke tenders the purchase price to Albert, but Patricia refuses to deliver the car as agreed. In this situation:

Patricia is bound to perform.

Lizzie works for Gary in his dance supply shop and is authorized to sell inventory but not to order new merchandise. Rena, a sales representative for a new line of dance wear, comes into the store, and Lizzie places an order with her. When Gary learns the details of Lizzie's purchase, he wants to ratify the contract. The one condition that is NOT necessary for ratification is:

Rena must withdraw from the transaction before Gary ratifies it.

Michael, Sarah, and Mindy are partners in a limited partnership that buys commercial real estate. Michael and Sarah are limited partners and Mindy is a general partner. Business is booming so Mindy asks Sarah for help. Sarah offers to buy land from LandInvest Co., and holds herself out as a representative of the limited partnership. Sarah drafts the contracts, participates in the negotiation, and completes the sale on her own. Sarah also takes on bookkeeping and related tasks to free up Mindy to locate new sellers. If a dispute arises with LandInvest Co. related to the contract and LandInvest Co. sues the limited partnership, it is possible that:

Sarah will be held personally liable even though she is a limited partner, and Mindy will also be held liable as a general partner.

During Belinda's Chapter 7 bankruptcy proceedings, the bankruptcy judge distributes her estate to creditors, but denies her a discharge, so she remains liable for the remaining unpaid portion of all claims. Which of the following would provide the court grounds to deny a discharge?

She fraudulently concealed or destroyed financial records during the course of the bankruptcy

Contracts in which creditors discharge debtors' debts for amounts less than what is owed are referred to as composition agreements

TRUE

If a homeowner defaults, or fails to make the mortgage payments, the lender has the right to foreclose on the mortgaged property

TRUE

Liens generally take priority over other claims against the same property

TRUE

Elliot is suing Acme, Inc., for a breach of contract, but because Acme has very little in assets, he asks the court to pierce the corporate veil and hold the officers personally liable. In which of the following situations would the court likely approve Elliot's request?

The corporation was undercapitalized from the beginning and never had sufficient assets to operate as a viable business.

To make, sell, and distribute candy that Ethan has developed, he incorporates his business and designates his sister and brother as corporate officers. He sells them shares of stock. No shares are offered to the public. The three agree that if any one of them decides to leave the business, the others will buy that person's stock. Ethan's corporation is most likely:

a close corporation.

Misha owes money on several different credit cards. He owes enough money that he may be forced to declare bankruptcy. Rather than declare bankruptcy, he asks the creditors to reduce his debt amounts so that he can pay them off. The creditors and Misha sign a contract that provides for the payment of some of the debt and the elimination of the rest of the debt. This is called:

a composition agreement

Rena incorporates her business, Rena's Rhinestones, in her home state of Maryland. She wants to expand and sell some of her jewelry in Virginia. In Virginia, her company will be considered:

a foreign corporation, and she will probably have to obtain a certificate of authority to do business there.

A court awards a judgment to Loan Collection Agency, who is the creditor, against Margret, who is the debtor. After the judgment, the creditor requests a court order to seize Margret's property to ensure that the judgment will be collectible. This is

a judicial lien a writ of execution

Doug, Frank, and Sarah want to form an entity for their new accounting firm. They want to ensure that each avoids personal liability for the malpractice of the other partners so they should form:

a limited liability partnership.

Tuller wants to start a commercial trucking business and also wants to form his own limited liability company (LLC). Tuller, as the only member of the LLC, will make all relevant decisions, contribute all of the investment, and be responsible for all of the risks and rewards. Tuller's proposed LLC will be accepted by:

a majority of states.

Dara gives her agent, Marla, money to purchase a new commercial oven. Marla takes the money and deposits it into her personal checking account. Marla then accidentally spends some of Dara's money. Marla has violated her duty of:

accounting.

Bartell contracts with LaRonda to remodel and retile a bathroom. LaRonda finishes the job and gives Bartell a bill for $14,000 for labor and materials. Bartell refuses to pay. In this case, LaRonda may seek:

a mechanic's lien

Hady's Health Services advertises numerous "miracle cures" such as a hair growth cure for baldness. The FTC has received numerous complaints about several of these cures. The FTC most likely will require Hady's to stop false advertising for all of its products by issuing:

a multiple product order

Gina buys a piece of pottery from Woodward for her principal, Kelvin. If Woodward knows that Gina is buying the pottery on behalf of someone other than herself but does not know the identity of that person, Kelvin is:

a partially disclosed principal.

Lysco, Inc., gives to all 15,000 of its shareholders the right to purchase newly issued shares of Lysco stock in proportion to the percentage of shares they currently own and before anyone else is offered the shares. This right is known as:

a preemptive right.

Norman is a franchisee of MegaFurnishings, a furniture store. Norman breaches the franchise agreement. The contract states that the franchisee, Norman, must be given notice of termination but does not specify a time for termination in the agreement. In this case, MegaFurnishings must give:

a reasonable time, with notice, to wind up the business

Susan agrees to act as a surety for Harris. Harris defaults on his loan, and Susan repays the bank because Harris declares bankruptcy. Susan now has:

a right of subrogation

Erin and Dooley, a married couple, borrow $120,000 from Capital & Credit Bank to buy a home. When Erin and Dooley divorce, they are unable to make payments on the mortgage. The market value of the home has declined to less than the balance of the loan. Capital & Credit agrees to a sale of the property for this amount. This is

a short sale

Tranh owns a home with a fixed-rate mortgage. Unfortunately, the real estate market has a downturn and his home is now worth less than he owes on the mortgage. In addition, Tranh is laid off from his job. Rather than go through the time and cost of a foreclosure, the bank gives Tranh permission to sell the property for the market value and agrees to forgive the balance of the loan. This is called:

a short sale

Christina has been sued and is worried about losing her "stuff." She understands that there is an exemption for housing, but doesn't want to lose all of her belongings. She most likely will be able to keep all of her personal property listed below except:

a very expensive vase that she purchased on a trip to China

Laura and Juan have an agreement where Laura will sell Juan's baseball card collection while he is out of the country. Juan does not give any specific instructions on how this should be done. To fulfill her duty of obedience, Laura must:

act in good faith.

Acme Co. just completed the incorporation process and received its articles of incorporation from the state. At the first organizational meeting of the new company, the officers' most important task is to:

adopt bylaws.

Micah and Jonah want to start a corporation but want to be taxed as a partnership. They should form:

an S corporation.

Dina and Michelle buy a house together and sign a document to borrow some of the money for the house. The contract provides that they will pay a single rate of interest for the first five years of the loan and then the rate will vary depending on a specific index rate. This type of contract is:

an adjustable-rate mortgage

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

an adjustable-rate mortgage

Rick agrees to customize Melissa's wedding ring. The cost is $10,000. After the job is complete, Melissa refuses to pay. As long as Rick retains possession of the ring, he may seek to recover the cost of the labor with:

an artisan's lien

Napoleon owns Napoleon's Construction and agrees to renovate Mrs. Cernan's bathroom. She will provide him with the plans and then he will do the work in the manner he determines is most cost effective and appropriate. Napoleon is likely to be classified as:

an independent contractor.

Carmen is the vice president for marketing for Nita's Web Design. She also sits on the board of directors. Carmen would be considered:

an inside director

Dean is not Paul's agent, but Paul tells Charlie that Dean has always been a good friend and can "handle any of my business affairs." If Dean were to later enter into a contract with Charlie on Paul's behalf, Dean would be acting under an:

apparent authority.

Tyler and Stanton are members of an LLC. They have no operating agreement. Tyler and Stanton have a dispute. They look to the LLC statute for an answer, but the statute does not cover this situation. In this case, courts often:

apply state partnership law.

Roland files a petition in bankruptcy. After all his assets have been sold and the proceeds distributed among his creditors, Roland's remaining debts

are discharged

Jason, Julian, and Rebecca are members of a longstanding and successful LLC. The three members want to dissolve their LLC and distribute their assets but they know the LLC has debts. Once all the LLC's assets have been sold, the proceeds:

are distributed to pay off creditors first and member capital contributions next. Any remaining amounts are then distributed to members in equal shares or according to the operating agreement.

To start his business, Neil borrows money from every source available to him, including all his credit cards and a line of credit at his bank. The business fails, and Neil files a voluntary Chapter 7 petition in good faith to discharge his debts. In the meantime, he returns to work as an attorney, where he makes over twice the median family income in his state. Neil's debts will most likely:

be paid, at least in part, after his case is converted to a Chapter 13 repayment plan

Tammy, age sixty-three, works for Westcon, Inc. Tammy has been showing up for work late, and has a habit of placing confidential work files on her personal computer in violation of company policy. Jack, Tammy's manager, fires Tammy for these reasons. Jack also considers an incidental benefit of Tammy's discharge the fact that they can get someone younger in Tammy's position. If Tammy files an Age Discrimination in Employment Act (ADEA), she will:

be unsuccessful in court because Tammy's age was not the but for reason for her discharge.

Jason instructs his agent Miguel to obtain a piece of artwork from Martina by threatening to beat her if she refuses to sell the artwork. Miguel follows Jason's instruction and beats Martina when she refuses to sell the item. In this situation:

both Jason and Miguel are liable for Martina's injuries.

Katrina and Shannon form a general partnership to operate a gourmet kitchen business. In most states, if they do not specify their respective management rights then:

both partners have equal management rights

Charlie tells Jamal that Marisol has agreed to allow him to sell her racing bicycle. Marisol is present at the time, hears the conversation, and says nothing. Jamal agrees with Charlie to buy Marisol's bike. Marisol then refuses to sell the bicycle. Marisol claims that she is not bound by the agreement formed by Charlie and Jamal because Charlie is not her agent. Marisol likely is:

bound by the contract, under a theory of agency by estoppel.

As a director and officer of Max Transport, Inc., Max would most likely be considered to have breached his duty of loyalty if he:

buys stock in Arnold's Transport, Inc., a competing trucking firm.

Jamel hires independent contractor Stevenson to create users' manuals for Jamel's small appliances. Jamel:

can create an agreement in writing that designates Stevenson's work as work for hire.

Jordan files for bankruptcy because he has debts of $1 million that he cannot pay. He would like to sign a document to assure his kind aunt Matilda that he will repay all of the $30,000 that she lent him. Jordan could have this debt discharged in the bankruptcy but would rather not. In this situation, Jordan:

can sign a reaffirmation agreement

Judy's cousin, Skip, tells Judy that he will sell her car for her when she leaves the country for a church mission for two years. Skip tells her that he will do it for no charge to her. While Judy is gone, Skip forgets about the agreement and does not attempt to sell the car. Judy:

cannot recover anything from Skip because he had no duty to perform since he was a gratuitous agent.

Gerald files a petition in bankruptcy. An automatic stay will apply to actions by creditors seeking to collect Gerald's debts comprised of

car payments

Kris represents Josh in the sale of his house as his real estate agent. Kris is entitled to:

compensation.

Tim is considering forming a business and wants to ensure he avoids double taxation. In order to best meet his objective, he should avoid forming a:

corporation.

Keenan wants to incorporate his business. He buys business cards and labels with the name "Keenan's Kwips" on them and begins selling gag gifts. Keenan follows the rules for incorporation in his state, including a statement that he is the sole shareholder, and he is granted a certificate of incorporation. The only problem is that Keenan has an error in his address on all the paperwork. Keenan's business is probably a:

de jure corporation.

Martha has a small tailoring business that employs five tailors and three shop assistants. Because business is going well, Martha decides to expand. She purchases twice as much cloth, thread, and buttons, and she borrows money to expand her store space. Initially, business continues to increase, but then there is a sharp drop-off and Martha cannot pay her debts. She declares bankruptcy and files a petition for Chapter 11 with the court. The court allows Martha to continue to operate her business. Martha is a:

debtor in possession

Ace Products manufactures and markets a product called Grow Tall. Ace claims in its advertising, without supporting evidence, that Grow Tall will make its users grow a minimum of six inches taller than their current height. The Federal Trade Commission (FTC) will likely find that the ad is:

deceptive, and the FTC may issue a cease-and-desist order

Min applies for a job as a receptionist at an accounting firm. If she is denied a job because she is of Asian origin, she may be a victim of:

disparate-treatment discrimination.

Madeline very much wants to be a franchisee of BurgerBarn, a popular chain-style business operation. BurgerBarn shows Madeline the franchise contract, which includes the requirement that all franchisees obtain materials and supplies exclusively from BurgerBarn. Madeline objects to this provision. This contract term is:

enforceable because franchisors are permitted to require franchisees to obtain materials and supplies only from them

Jasmine's General Store advertises cans of X-brand tomatoes for $.33 per can, although she does not have any in stock. When customers arrive to buy the tomatoes, Jasmine tells them that her stock of tomatoes has been sold and that she cannot get more at the lower price. She tells customers she has Y-brand tomatoes in stock for $.55 per can and that the Y-brand tomatoes are far superior to the X-brand. Jasmine is:

engaging in bait-and-switch advertising

Nancy joins with other creditors to force Odette, a debtor, into bankruptcy. One of the goals of bankruptcy law with respect to creditors is to

ensure equitable treatment of creditors who are competing for a debtor's assets

The University Smyth has an admissions policy that requires a certain number of points to be automatically awarded to minority applicants. This type of policy is likely a violation of the:

equal protection clause.

The directors and officers of Sports Color, Inc., vote to refuse to declare a dividend. Believing that the refusal is unreasonable, the shareholders can:

file an action to require the directors to declare a dividend.

Betty, a corporate director, has engaged in a number of acts that constitute a conflict of interest between her and Global Mfg., Inc. The corporation shareholders want to remove her, and in most jurisdictions can do so:

for cause.

Mark is a director of Bromley Corp. Mark also owns a printing company named BooksMark. Bromley Corp. needs a marketing brochure printed. If BooksMark is being considered as the printer for that brochure, Mark must:

fully disclose his interest to the other board members and abstain from voting on the matter.

Western Fitness advertised a new Omnibike that was specially designed to help users lose weight faster. It cited the example of Julie, who lost weight faster on the Omnibike than with other exercise products. What Western Fitness did not disclose is that in their study of thirty users of the Omnibike, Julie was the only one who lost weight faster than with other exercise products. Western Fitness's claims are:

half-truths, which would likely constitute deceptive advertising

American Insurance Co. reviewed its customers for creditworthiness. American Insurance found that a number of its customers had lower credit scores than expected. Without disclosing the reason, American Insurance increased the rates of insurance on new customers who had credit scores below a certain threshold. American Insurance:

has committed a willful violation of the Fair Credit Reporting Act

Selma, an elderly widow, gives her young neighbor, Steven, written power of attorney. This means that Steven now:

has express authority to act as Selma's agent.

Marvin and Maria start selling handmade jewelry to distributors nationwide and intend to form an LLC. Marvin and Maria enter into four contracts with distributors while the LLC is in the process of being formed, but before the LLC is formally in existence. Once Marvin and Maria form the LLC:

if the LLC adopts the contracts, it can then enforce the contract terms.

Ruis Corporation, a publicly held corporation, has thirty-five members on its board of directors. In order to conduct business efficiently, the chairman of the board is proposing that five committees be created: the executive committee, the human resources committee, the marketing committee, the research and development committee, and the sales committee. Seven members of the board would serve on each committee and each board member would serve on only one committee. This is:

illegal, because the Sarbanes-Oxley Act requires an audit committee.

Yakov hires Melina to be his Vice President for Marketing. The job description is pretty broad but does not include the ability to hire or terminate lower-level employees in the Marketing division. If Melina has this power, it is based on her:

implied authority.

Galen and Leslie are directors, but not officers, of Tropical Travels, Inc. Tropical Travels becomes embroiled in a controversy over airline kickbacks. As directors, Galen and Leslie can be named in any lawsuit that may result from the company's actions. If they have any expenses related to the lawsuit, they may be compensated for those under their right of:

indemnification.

Veronica's corn cakes are packaged with labels that say, "Veronica's delicious popped corn cakes. 20 popped corn cakes. Net weight: 5.3oz. Manufactured in Plano, Texas." Regarding the Fair Packaging and Labeling Act, the label is missing:

information about the packager or distributor

Ramona discovers that a credit reporting agency shows her having not paid a loan that she paid off last year. She writes to the credit reporting agency and requests an investigation. The agency must:

investigate and delete any errors in Ramona's report

Before filing a Chapter 7 bankruptcy petition, Tricia sells her diamond watch to Dale Kehoe BMW whom she owes for the purchase of a used car, because Tricia and Dale are close friends and neighbors. The transfer:

is a preference that can be avoided

Floors R Us, a franchisor, cancels its franchise agreement with Bernardo, the franchisee, without any notice. Floor's action:

is likely a wrongful termination

Mary is a data-entry employee at Computer Services, Inc., a small computer company. Mary's sole job is to input information into a computer from paper invoices and spreadsheets. Mary develops chronic carpel tunnel syndrome, rendering her unable to type. As a reasonable accommodation, she requests that her employer hire a new employee to do the data entry on her behalf. Mary's request:

is not a reasonable accommodation because Mary's request would place an undue hardship on the company.

Erin works for a dry-cleaning company that has a contract with the U.S. government. To save on cleaning fluid, her boss orders her to wash some clothes that are supposed to be dry-cleaned in a washing machine. When the courier hired to pick up the cleaned garments arrives, Erin tells him about her boss' actions. Erin tells no one else about what is going on and is later fired. Erin:

is not protected by the whistleblower statute because she failed to inform the proper party of the contract violation.

John works at San Marino Food Store as an assistant store manager. John's boss, Michael, does not approve of John's interest in football. Michael believes that baseball is the better sport. As a result, Michael fires John. Assuming no other contractual relationship exists between John and his employer, John:

is not protected from discharge because he is an employee at will.

Abigail works for a large pharmaceutical company as a scientist. While testing a potential new drug, she learns that company managers are illegally falsifying results that are being sent to the Food and Drug Administration (FDA) in order to streamline drug approvals. Abigail reports this practice to federal law enforcement. Company managers learn about Abigail's disclosures and fire her. Abigail:

is protected from wrongful discharge by the exception based on public policy.

Orville and Perry are negotiating a franchise agreement. Perry, the potential franchisee, asks Orville for information about the franchise. In this case, Orville:

is required to disclose certain material facts that a prospective franchisee needs in order to make an informed decision concerning the purchase of a franchise.

Sam goes out shopping, and using his wife Juanita's credit card he buys $221-worth of groceries. Under agency law, Juanita will probably be deemed:

liable for the purchase, based on the creation of an agency by operation of law.

Tina designed a new type of handbag that has proven to be very popular. She begins manufacturing these handbags on a large scale and considers her options for setting up a business to market the bags nationwide. She opts for a distributorship franchise, under which she will:

license distributors to sell her handbags

Executives at MegaCorp refuse to promote Nora, and then fire her, because of a preference to have only men in top leadership positions. Nora files a lawsuit against MegaCorp claiming sex discrimination. During the lawsuit, MegaCorp learns that Nora had been stealing company assets for five years. A possible outcome of this information may:

limit the amount of damages for which the employer is liable.

Charlotte and Regina are opening a new business venture to sell gourmet cupcakes. One of the important characteristics in starting a limited liability company is:

limited liability for members.

Tammi purchases stock in Vivaldi Corporation. Vivaldi Corporation later encounters legal issues and faces significant legal claims. As a shareholder, Tammi's liability is:

limited to her investment in the stock.

Quentin operates an ice cream franchise which has shops throughout the United States. CoolCream Co., the franchisor, supplies the ingredients and formula so that Quentin can create the ice cream in his store and sell it fresh to customers. This relationship is known as a:

manufacturing or processing-plant arrangement

Eastminster Presbyterian Church has an opening for a new head pastor. Mohammed, who is a Muslim, applies for the job. The church declines to hire him and continues to look for other applicants. If Mohammed files a claim of illegal discrimination against the church, the church:

may assert a bona fide occupational qualification (BFOQ) defense.

Anson is a citizen of Connecticut. He suffers severe injuries in a car accident. He hires a Michigan attorney to bring a multimillion-dollar claim against the car manufacturer. The attorney belongs to an LLC whose members are from several states including Connecticut. After losing the product liability claim, Anson brings a malpractice lawsuit against the attorney. He:

may file in a state court in Connecticut or Michigan.

Kim hires Michelle to go to the art gallery and purchase a specific painting for him. The painting costs $1,500. Because this is the purchase and sale of goods for more than $500, the contract for the painting must be in writing. In order to have a legal purchase of the painting, Kim:

may have Michelle sign on his behalf if the agency agreement is in writing.

Julio lives in an area with a high percentage of Hispanic workers. Many of these workers are legal immigrants who have relatively little college training. If, when Julio applies for his job, he is given an examination designed for a college graduate, and if he and most Hispanic applicants fail to pass the test, the employer:

might be engaged in disparate-impact discrimination.

Donald is buying a house and obtains a loan from the lender. The document Donald signs giving the lender an interest in Donald's house as security for a debt is called a:

mortgage

Gary, Harold, Daniel, and Brian form a real estate partnership in 2013. In 2015, Brian dissociates himself from the partnership. After a partner's dissociation, under the Uniform Partnership Act the partnership:

must purchase his or her partnership interest based upon the buyout price

Doug is the vice president of product development for a corporation that makes flavored honey. Doug proposes to the board that they approve three new products: chili-flavored honey, seaweed-flavored honey, and black-licorice honey. Doug and his team have market tested the flavors, and they received positive reviews from focus groups. The board approves the flavors, which then fails miserably and cost the company thousands of dollars. If some shareholders sue the board for its decision to market the flavors, the board most likely will:

not be held responsible because of the business judgment rule.

Carl is negotiating a franchise contract with Frank's Deli, a franchisor and a competitor of McDonald's. Frank's Deli is willing to give Carl 'territorial rights' to Orange County, where Frank will open his franchise. Frank's Deli, however, will not specifically state that the franchise given to Carl is exclusive. The territorial rights clause will most likely:

not help Carl keep out other franchises because the territorial rights are not exclusive

Kera is an hourly employee of Xeon, Inc., who earns a wage of $10.00 an hour. During a busy season, Kera works fifty hours in one week. Xeon pays Kera $11.00 an hour for her overtime pay. Xeon is:

not in conformance with the Fair Labor Standards Act because Xeon is obligated to pay no less than 1.5 times Kera's regular pay for hours she worked over forty in one week.

Genevieve is a member of the board of directors and the chief financial officer of The Shoe Fits. Under the duty of care that she owes the corporation, Genevieve does not need to:

oversee every aspect of the business, including such things as ordering merchandise and arranging for janitorial services

Sarah has to move from the East Coast to the West Coast for her job. Elmo agrees to act as Sarah's agent to sell her New York condo. As her agent, Elmo owes Sarah all of the following duties except:

payment.

Sarah owns half of Smith Realty, Inc., and her brother, Bill, owns the other half. Sarah routinely uses the company car, which is supposed to be only used for taking clients to view property, to run her personal errands. She also routinely uses company funds for personal uses, but always pays the money back into the corporation. When Smith Realty failed to pay its lawyer for work completed on its behalf, the lawyer sued both Smith Realty as well as Sarah and Bill personally. In this situation the court likely will:

pierce the corporate veil due to Sarah's commingling of interests.

Carl tells Jenny that he will give her a raise if she agrees to have a romantic relationship with him. In legal terms, this is known as:

quid pro quo harrassment

George owns 300 shares of preferred stock in a company. By owning preferred stock, George has:

priority over holders of common stock as to dividends.

Sarah asks Sergio to mow her lawn. Sergio, who is overloaded with work, contracts with Dan to do the work for him as an independent contractor. As Dan is mowing, Sarah walks out of her house and the lawnmower throws a rock and hits Sarah, causing serious injuries. In this situation, Sergio is:

probably not liable for Sarah's injuries.

Aliza files for bankruptcy. In addition to the amount she owes her secured and unsecured creditors, she owes her friend Megan $500. In order to be entitled to receive a portion of Aliza's estate, Megan, along with the other creditors, should file a:

proof of claim

Suzy signs a written agreement with Phillip, giving Phillip the right to cast Suzy's votes for a certain group of people nominated for the Syllibar Corporation board of directors. This agreement between Suzy and Phillip is known as a:

proxy.

Preston wants to be his own boss and is considering starting a business. He has to decide which form of business organization to adopt and will most likely consider all of the following except:

publicity and public relations

Melon Lawn Co. advertises its new XJ200 lawn mower. Salespersons describing the XJ200 on behalf of Melon Lawn describe it as a "fabulous new mower" that will "take landscaping by storm." Melon Lawn's salespersons are engaging in:

puffery

Cheryl knows that Jake is looking to buy a new scooter. She sees one that would be perfect and negotiates with the seller on Jake's behalf. She signs a contract for the scooter using her name but clearly indicating that she is working for Jake. She actually is not. When Jake sees the scooter, he loves it and agrees to pay the contract price. If agency exists in this situation, it is agency by:

ratification

Marsha is a sole proprietor of a small quilting shop. She has considered changing her business structure, but she cannot find an alternative structure that would give her the main advantage she enjoys as a sole owner. The main advantage is that she:

receives all the profits

As a surety for a loan that Duke did not pay, Caden pays the debt in full. If Duke does not declare bankruptcy, Caden has a right of:

reimbursement

Mitchell hires Christina to go from Florida to New York and negotiate a contract for his company. He gives her specific instructions on what should be in the contract and a written letter that gives her authority to sign on his behalf. Christina books a plane ticket, flies to New York, hires a cab, and successfully negotiates the contract. If Christina is paid for the plane ticket and cab fare, as well as meals while in New York, it is most likely under the principal's duty of:

reimbursement.

The Consumer Product Safety Commission (CPSC) determines that a battery-powered mini-truck in which children ride is unsafe. The CPSC has the power to:

remove the trucks from the market

Tough TVs, a corporation, makes a profit in its first year of existence. The managers of the corporation decide to reinvest the profits. The reinvested profits are called:

retained earnings.

Yen grants his cousin, Art, a franchise in Yen's sandwich shop. Yen writes the agreement so that he controls every detail of Art's shop, such that it is exactly the same as Yen's original shop. Yen even consults with Art about hiring employees and safety practices. One of Art's employees fails to clean up a spill and a customer is injured. The customer sues Yen. In this case, Yen:

risks liability under the doctrine of respondeat superior

Irene wants to start a business selling T-shirts. Irene's top priority is that she alone has complete control over management decisions at all times. Irene should most likely form a:

sole proprietorship.

Francine is interested in starting a new financial services company where she will manage the investments of others. She wants to generate her own funding as well as lead the business once it gets started. Francine will assume all risks and rewards of the new enterprise. Francine would be considered an entrepreneur because she is:

someone who initiates and assumes the financial risk of a new business enterprise

Lindsey promises Mountain State Bank that she will be responsible for a loan taken out by her niece, Emma. The agreement is that at the moment the debt is due, Mountain State may demand repayment from Lindsey. This is known as a:

suretyship

Geraldo receives mechanized telemarketing calls for sales of time-share homes even though he registered on the national "Do Not Call" registry. This registry was established by an amendment to the FTC's:

telemarketing sales rule

Wally is blind and would like to work for the Dairy Times writing articles on the dairy industry. Wally uses voice-recognition software that allows him to dictate articles to his computer. His computer is specially designed for visually impaired individuals. The Dairy Times interviews Wally but offers the job to a sighted person instead. Dairy Times may have violated:

the ADA

Mary is a lender who offers credit throughout the United States. John applies for credit to start a restaurant business. Mary denies John credit because she believes that older persons like John are not reliable for paying back debt. Mary has violated:

the Equal Credit Opportunity Act

Josh works for a federal governmental agency that requires drug testing as a condition of employment. He wants to challenge the constitutionality of the testing in court. For his case, Josh will attempt to rely on:

the Fourth Amendment.

Matt and Chad form an LLC, and Matt later decides to withdraw as a member. They do not have a provision in their operating agreement regarding withdrawal of a member but they do live in a state that has adopted the ULLCA, which means that:

the LLC must purchase Matt's interest at fair value within 120 days.

Cowland, Inc., manufactures a low-cost generic meat alternative. It adds a filler to the meat that it does not list on its label. Cowland's actions violate federal requirements relating to the labeling of food products. These requirements are enforced by:

the U.S. Food and Drug Administration (FDA) and the U.S. Department of Agriculture (USDA).

The Scooter Store notified its employees at 5:00 P.M. on Friday that it was laying off two-thirds of its workforce as of that day and told them not to come in on Monday. It failed to provide advance notice to anyone and in doing so likely violated:

the Worker Adjustment and Retraining Notification Act.

Xavier consults with an attorney and some business acquaintances from the chamber of commerce about the management of his LLC. He is told that management may take one of two forms, a member-managed LLC or a manager-managed LLC. In the second form:

the managers may be members, nonmembers, or a combination of both.

Mary, Thomas, and Franklin form an LLC for the purpose of running a restaurant. Each invests $10,000 into the LLC. Two weeks after the LLC is formed, Joanne patronizes the restaurant and suffers from severe food poisoning. If Joanne sues the LLC:

the members could be liable for $10,000 each, the amount of their investment.

Product Management, LLC, has forty members. Two of the members died the previous year. Under the Uniform Limited Liability Company Act (ULLCA), on the death of the two members:

the other members may continue to carry on the LLC's business unless the operating agreement provides otherwise.

The seven members of Fast Commerce, LLC, want to start their company as quickly as possible. The members, in their haste, do not bother to draft an operating agreement. If a dispute arises between two of the members:

the state LLC statute will apply to the dispute.

Alex files a petition for bankruptcy under Chapter 7. He owes $2.37 million to assorted creditors. Two months before filing, he sold his beach house, which was valued at $600,000, to his brother Jonah for $150,000. If the trustee objects to the sale, most likely:

the trustee will avoid the transfer and take back the house as part of Alex's estate

Mack is an oil executive. He wants to start a new company with different partners to explore some drilling opportunities. His attorney advises him about the various business forms. When discussing the LLC form, his attorney mentions that one of the biggest disadvantages of the LLC form is that:

there is no uniform law governing LLCs in the United States.

A door-to-door salesperson convinces David and his wife Sonia to buy a vacuum cleaner. The next day, they learn that the same vacuum cleaner is available at a local discount store for one-third the price that they paid for it. In most states, David and Sonia have:

three days to cancel the transaction

Nikki and Jim own a corporation together. Nikki owns 48 shares of stock and Jim owns 52. They consider themselves investors, so they elect a board of three directors to oversee the business. To ensure that Nikki can elect at least one director, the corporation should:

use cumulative voting.

William, Irene, Jason, Barbara, and Immunographics, Inc., form a partnership for the purposes of developing designs for medical products. This partnership is:

valid because corporations can be a partner in a partnership

When Kimberly begins working for Pharmco Industries, the company tells her that at a future date, after so many years of employment with the company, she can receive retirement pay. Her rights to receive pay upon retirement would be considered:

vested.

Sarah is employed at Tulip Factory, Inc., as an accountant. Sarah takes military leave and two months later returns from military service. Tulip Factory managers offer Sarah a new job as a junior bookkeeper. This decision:

violates the USERRA because returning service members are to be reemployed in the jobs that they would have attained had they not been absent for military service.

Harold owes Soundstage Services for services rendered two years ago for which he has not paid. Soundstage's owner calls Harold at home once a week at four o'clock in the morning claiming that he is working for a collection agency and asks when payment will be made. The owner of Soundstage is in:

violation of the Fair Debt Collections Practices Act

Trey owns 250 shares of common stock in a toy-store company. This means that he owns a percentage of the company based on the proportion of shares he owns out of the total shares issued by the company. With this ownership he also acquires rights to:

vote.

Kurt is fifty-two years old and has worked for a company covered by the Age Discrimination in Employment Act (ADEA) of 1967. He wants to bring a claim of age discrimination against his employer because he was replaced by a younger, lower-paid worker. To make out a prima facie case of age discrimination, Kurt does not have to establish that he:

was replaced by someone who was below the age of forty.

Eddie and Eric enter into a partnership agreement to sell gourmet dog biscuits. If they do not specify how long the general partnership will last, the partnership will end:

whenever either partner wants to end it

Jason is a small-business owner. He has a dry cleaning business. One year, Jason has to replace nearly all of his equipment, and the rent on his building increases. Jason borrows money to cover his expenses. Business is slow, however, and Jason eventually realizes he must declare bankruptcy. Neither Jason nor his creditor wants the expense and hassle of going to court. They can settle their creditor-debtor relations outside of court through a:

workout

Eric brings a valuable watch to Sherry's clock shop for repairs. One of Sherry's assistants mistakenly allows Eric to take the watch without paying for the repairs. Sherry sues Eric to recover payment for the repairs, and she asks the court to direct the sheriff to seize and take custody of the watch before the trial. Sherry is seeking a:

writ of attachment

Edward brings a valuable piece of jewelry to Luisa's shop for repairs. One of Luisa's assistants mistakenly allows Edward to take the jewelry without paying for the repairs. Luisa sues Edward to recover payment for the repairs, and wins. Edward does not have the cash to pay Luisa. Luisa asks the court to issue an order to the sheriff to seize some of Edward's property to pay off the debt. Luisa is seeking a(n):

writ of execution