Case study-AW422

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1. Generally, a shareholder of a corporation
a. has a duty of diligence to the corporation.
b. is personally liable for liabilities of the corporation.
c. is not personally liable for the liabilities of the corporation.
d. is entitled to be involved in decisions that impact the profitability of the

2. Cans, Inc. is a corporation. Responsibility for the overall management of Cans, Inc. is entrusted to
a. the board of directors.
b. the corporate officers and managers.
c. the owners of the corporation.
d. the shareholders.


3. Which of the following is true?
a. All contracts must be in writing in order to be valid.
b. A contract for the sale of land must be in writing in order to be valid.
c. A contract for a 6 month property lease must be in writing in order to be valid.
d. A contract for the sale of five dollars’ worth of pickles must be in writing in order to be valid.

4. Based only on the facts below, which of the following contracts must be in writing?
a. Contract to receive lottery payments every year for the rest of my life.
b. Contract to purchase a TV that costs $400 and will arrive at my house tomorrow. I do not have to start paying for the TV until 2015, although I can pay for it sooner if I so choose.
c. Contract to purchase a computer that costs $350. I must pay for it within 2 years from the start of the contract.
d. Contract to sell an antique hat that costs $150. The contract is dated today. Pursuant to the contract, the seller will give the hat to the buyer in 7 weeks and the buyer will provide the money to the seller 11.5 months after that.


5. Adam indicates that he is acting as an agent on behalf of an unidentified client when he enters into a contract with Beth. (In other words, Adam tells Beth that he is signing on behalf of a principal, but does not tell her the name of the principal.) Liability to Bethfor nonper¬formance of the con¬tract may be imposed on
a. Adam only.
b. the unidentified client only.
c. Adam and the unidentified client.
d. none of the above.


6. Rich offers to sell Sorel his bird for twenty dollars. Rich makes a firm offer. He promises he will not revoke the offer for one week. Three days later, he revokes the offer because he realizes that the price is unfair (way below market value). Sorel sues Rich for revoking the offer. This is a common law case. How will the judge rule?
a. The judge will rule in favor of Sorel because Rich breached a firm offer.
b. The judge will rule in favor of Rich because the firm offer did not have consideration.
c. The judge will rule in favor of Rich because the price was unfair.
d. Both (b) and (c).


7. Zaco lost his job working for Moony and was forced to take a position working as a driver for The Incredible Monkey Store (IMS). IMS requires its customers to pay by check. Zaco does not have the authority to change this policy or to change the prices. However, Zaco tells customers on his route that they can pay him with cash at a reduced price. When IMS learns of Zaco’s collections, it takes no action to stop Zaco. Zaco sells a number of items for IMS this way. But after a month, IMS realizes that this is a bad deal – IMS asks for a return of the sold products and is willing to return the money, because it wants to sell those products at the regular price. IMS will probably not be allowed to get the products back due to the doctrine of
a. express authority.
b. emergency authority.
c. estoppel.
d. ratification.


8. Zaco and Moony are best friends and decide to go into business together. They enter into a contract to work together on the development of a movie house for alien pictures. Moony is at first unsure about entering into the contract, but Zaco convinces Moony that the business is going to be extremely profitable. As time goes by, Moony realizes that the contract is not what he expected. It is too much work for Moony, and the business is not even profitable! Zaco does not have many obligations under the contract, and he spends most days tanning his furry body on a beach blanket at the children’s park. (He tries to make friends, but none of the children like him.) Additionally, Moony has found out that Zaco drugged him the day they drafted the contract, and thus Moony did not realize what the contract actually said. Moony wants to get out of the contract. Under the law, which of the following argument(s) can Moony make in order to get out of the contract?
a. The contract is not enforceable because of adverse economic consequences.
b. The contract is not enforceable because results that do not match expectations.
c. The contract is not enforceable because of the lack of Moony’s genuine assent.
d. The contract is not enforceable because Zaco is a weirdo who scares children.

9. Elin, an agent for First Credit Corporation (FC), enters into a contract with Great Expectations, Inc. (GE), supposedly on FC’s behalf. However, Elin did not actually have the power to enter into this contract. This contract will be enforceable if it is ratified by
a. any third party.
b. Elin.
c. FC.
d. GE.

10. Glida is an ice cream store in Miami. Glida hires Jim as an employee to drive the Glida ice cream truck around town every afternoon when school ends. Jim is supposed to stay within town limits, but he sometimes takes detours away from town. If Jim gets into an accident while on one of these detours, will the victim of the case be able to successfully sue Glida?
a. Yes, because the truck is owned by Glida.
b. No, because Jim did not have the authority to take the detour. He got into an accident when he was in a place where he wasn’t supposed to be.
c. Maybe, depending on whether this is normal detour and frolic within the scope of employment.
d. Yes, because employers are always responsible for the accidental torts of their employees.


11. Jonathon is afraid that Zaco is going to kill him. Zaco has been threatening him for weeks! In order to incentive Zaco not to kill him, Jonathon enters into a contract where Zaco agrees that he won’t kill Jonathon for 3 years, and at the end of three years, Jonathon will pay Zaco $100,000. They both sign the contract, and Zaco lives up to his part of the bargain. He does not kill Jonathon. At the end of three years, Zaco demands payment, but Jonathon refuses! Zaco sues Jonathon for breach of contract. Based on the facts given, who will win in court?
a. Zaco will win because Jonathon breached the contract.
b. Jonathon will win because this is a void contract because it has an illegal purpose.
c. Jonathon will win because the contract is invalid because it lacked consideration.
d. Jonathon will win because $100,000 is an unfair price.

12. Janet and Julie work at ABC Interiors. Janet is a designer who works with cli¬ents of ABC on interior design projects. ABC closely supervises all of its design¬ers, and dictates their work schedules. Julie works part-time in the evenings cleaning the offices. Julie is ABC’s
a. agent but not employee.
b. employee and agent.
c. employee or independent contractor, depending on whether ABC controls her work.
d. independent contractor.


13. Based on the information above, ABC’s designers are most likely
a. Employees.
b. Independent contractors.
c. Agents.
d. None of the above.


14. Which of the following is true?
a. A disadvantage of the limited liability company is double taxation.
b. In a limited partnership, the limited partners are responsible for management decisions.
c. An advantage of the partnership is limited liability.
d. A corporation is more difficult to form than a partnership.

15. According to the law, Joyce works for Kappa Services Corporation as an independent contrac¬tor, and not as an employee, if

a. Joyce says that she works as an independent contractor.
b. Joyce works on a permanent basis.
c. Kappa does not control Joyce’s work.
d. Kappa withholds taxes from its payments to Joyce.


16. Jennifer hires a painter to paint her kitchen. This is a common law contract (what you read about in chapter 12). Pursuant to the contract, the kitchen is supposed to be completed by June 5th. In May, the painter asks Jennifer if he can have 5 extra days to complete the job, because it is difficult to find certain materials that he needs. Jennifer agrees, and they write an amendment to the contract which states that the painter will have until June 10th to complete the job. He finishes the job on June 10th, and he does a great job. But Jennifer sues for breach of contract! How will the court most likely rule?
a. For Jennifer, because the job was not completed by June 5th.
b. For the contractor, because the job was completed before June 10th.
c. For Jennifer, because this is a void contract.
d. For the contractor, because he did a great job.


17. Louis, a certified public accountant, and Maria, an in¬surance salesperson, enter into an agency relationship. How can this relationship be terminated?
a. only by the mutual agreement of both parties.
b. lapse of time.
c. by the act of one party.
d. both (b) and (c).


18. In a limited liability company,
a. the members (i.e. owners) are personally liable for all liabilities of the company.
b. the members (i.e. owners) are not personally liable for liabilities of the company.
c. the members (i.e. owners) experience “double” taxation.
d. none of the above.


19. Angela enters into an agreement with Adam to act as his agent in the sale of illegal drugs. Adam does not sell the drugs, but instead uses the drugs for his own enjoyment. Angela can re¬cover damages from Adam for
a. breach of contract.
b. the price that a reasonable person would be willing to pay for the drugs.
c. Both (a) and (b).
d. nothing because the agreement was illegal.


20. Latem, Inc. is a Delaware corporation that conducts business in many states. Among its shareholders and directors, a dispute arises that the corporation’s articles of incorporation and by-laws and various corporate documents are silent about (i.e. the documents of the corporation do not provide a procedure to resolve the dispute). The dispute concerns company activities that take place in Miami, Florida. The dispute is gov¬erned by
a. the Florida corporation statute.
b. the Delaware partnership statute.
c. the majority vote of the shareholders.
d. the Delaware corporation statute.


21. Trans Inc. hires Alice to drive a truck from New York to California. She is supposed to follow a certain path but stops in Kansas one afternoon so that she can visit her aunt. She drives 150 miles off the path. On her way back to the highway, she gets into an accident 32 miles away from the highway. The jury rules that driving 150 miles off the highway was way too far to be considered within the scope of employment. The jury says that 40 miles is a reasonable distance within the scope of employment (normal detour and frolic), but any distance beyond 40 miles is not within the scope of employment. Which of the following is true?
a. The accident victim can successfully sue Trans Inc. because Alice is an employee and businesses are always responsible for the torts of employees.
b. The accident victim cannot successfully sue Trans. Inc. because the 150 mile detour was not within the scope of employment.
c. The accident victim can successfully sue Trans. Inc. because the accident occurred 32 miles away from the highway.
d. The accident victim cannot successfully sue Trans. Inc. because Alice is the person who was driving the truck, so she alone is responsible.
22. Which of the following is true?
a. In most U.S. states, limited liability partnerships are restricted to certain professions, such as accountants or lawyers.
b. In most U.S. states, limited partnerships are restricted to certain professions, such as accountants or lawyers.
c. Corporations require the purchase of liability insurance.
d. None of the above.

23. Jill introduces Kelly to her friends as “my agent”. Kelly is not Jill’s agent, but pretends to act as Jill’s agent in several business transactions with those friends. Jill may be liable for the business actions
a. under the doctrine of estoppel.
b. because Kelly had express authority.
c. because Kelly had implied authority.
d. because Kelly had emergency authority.


24. Zaco is fired from his high powered position as CEO of Aliens R Us because he harasses many of the human employees. He has a hard time finding a new job, and eventually accepts a position as manager of a computer store in Queens, NY. As part of his managerial position, Zaco has the authority to decide the hours in which the store will be open, even though his contract does not explicitly indicate that he has the power to make this decision. This is an example of

a. apparent authority.
b. illegal authority.
c. express authority.
d. implied authority.


25. Gil is a purchasing agent for H&H Ranch with the authority to buy cat¬tle at a certain auction. After the cattle have been bought, the agency rela¬tionship terminates
a. automatically.
b. following notice to all actual cattle sellers.
c. following notice to all potential cattle sellers.
d. following published notice in a local newspaper.


26. Mighty Products, Inc., and New Capital Corporation form a joint venture. A joint ven¬ture is most similar to
a. a corporation.
b. a partnership.
c. a sole proprietorship.
d. a syndicate.


27. In a limited partnership,
a. Only the general partner assumes personal liability for the business.
b. None of the partners assume personal liability for the business.
c. All of the partners assumer personal liability for the business.
d. All of the partners undertake the management of the business.
28. A limited liability company,
a. Is always managed by a group of managers.
b. Is always managed by all the members.
c. May be managed by a group of managers or all of the members.
d. Is not legal in Florida.

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29. A _____ is very easy to form, and may even be formed accidentally!
a. Corporation
b. Partnership
c. Limited liability company
d. None of the above

30. Lucy forms an LLC called Monkeys, LLC in 2000. The LLC is active for 6 years, but in 2006 Lucy forgets to pay her dues and the LLC falls inactive for 3 years. During this time, Monkeys, LLC enters into a contract with Birds, Inc. (Lucy signs for Monkeys, LLC as the sole member, but the contract is in the name of Monkeys, LLC.) At the end of the 3 years, she has her company is reinstated. The company has been active ever since.

Birds, Inc now wants to sue Monkeys, LLC for breach of contract for three million dollars. The problem is that Monkeys, LLC assets are worth only one million dollars, whereas Lucy has much more money. You are the lawyer for Birds, Inc. What is your advice?
a. Birds, Inc. may only sue Monkeys, LLC because the contract was with Monkeys, LLC. Since Monkeys LLC is an LLC, Lucy is protected from personal liability.
b. Birds, Inc. can sue Lucy because she signed in the name of a nonexistent principal, and she is thus personally liable for the contract.
c. Birds, Inc. can sue the LLC and Lucy because Lucy owns the company.
d. Birds, Inc. can only sue Lucy because an LLC cannot be sued in court.
31. Which of the following statements regarding covenant-not-compete clauses is accurate?

a. Such covenants are not enforceable in the United States.
b. If a covenant not to compete is found in a contract for the sale of a business, it will not be enforceable against the prior owner of the business unless the new business owner shows that the covenant is necessary to support a legitimate business interest.
c. If a covenant not to compete is found in an employment contract, it will not be enforceable if the territory is too broad.
d. Both (b) and (c).
32. You and your sister are the only shareholders of a small corporation. The corporation breached a contract with its supplier. Who can the supplier sue in order to obtain the money he is owed?
a. The supplier can sue you and your sister, but cannot sue the corporation because only people can be sued in court.
b. The supplier cannot sue anyone.
c. The supplier can sue the corporation, but you and your sister will most likely be fully protected from all personal liability.
d. The supplier can sue the corporation, as well as you and your sister.

33. The bouncer at a night club (who was hired to help keep the night club safe) accidentally hurts a dangerous customer who had been attacking other patrons. (The bouncer was trying to keep the other patrons safe.) Can the customer sue the night club?

a. Yes, under the doctrine of respondeat superior (let the master answer).
b. No, because the bouncer alone is responsible.
c. No, because the customer was aggressive.
d. Yes, because an employer is always responsible for the acts of its employees.

34. Under the common law (what your learned in chapter 12), a firm offer
a. Is irrevocable (i.e. cannot be taken back)
b. Is revocable (i.e. can be taken back), unless there is consideration
c. Is revocable
d. is illegal
35. Under the UCC, a “merchant’s firm offer”
a. Is revocable, unless there is consideration.
b. Is irrevocable, even without consideration.
c. Is always revocable.
d. Is revocable unless the merchant also provides a warranty.

36. Article 2 of the UCC applies to which of the following sales?
a. Sale of a house.
b. Sale of a computer.
c. Sale of maid service.
d. All of the above.
37. Certain provisions of the UCC apply only to merchants. Which of the following sales would be covered by such provisions?
a. Sale of a used car by a used car salesman.
b. Your sister is selling you her old car so that she can buy a new one. She has never sold a car before.
c. Your neighbor is selling you her old car so that she can buy a new one. She once sold a car 20 years ago.
d. A child who sells his school lunch to another student because he doesn’t like it.
38. An agency relationship was created between Sally (the agent) and Arthur (the principal). It was not created by agreement, but instead due to estoppel. What kind of authority does Sally have in this relationship?
a. Actual authority
b. Express authority
c. Apparent authority
d. No authority
39. Which of the following statements about an agency relationship is true?
a. It can be terminated unilaterally by either party.
b. It can be terminated unilaterally by either party except in a case where “the agency coupled with an interest rule” applies.
c. It cannot be terminated unilaterally by either party.
d. Agency relationships are illegal i
n the United States.
40. Ordinarily, under the common law,
a. the court will invalidate a contract if it is deemed unfair.
b. a contract between an adult and a minor is void.
c. a person must provide verbal or written acceptance to an offer in order to form a valid contract.
d. a person may accept an offer by taking an action (i.e. a verbal or written acceptance is not required).


41. Which of the following is false?
a. The presence of an offer is a requirement of a valid contract.
b. The presence of an acceptance is a requirement of a valid contract.
c. All contracts must be in writing in order to be valid.
d. A contract must be legal for it to be enforceable in court.


42. After living in the United States for ten years, Moony becomes homesick and decides to return to his native planet Xintar. He offers his house to Zaco for $300,000. Zaco accepts the offer, pays Moony the money, and moves into the house. They do not draft a written agreement. Moony moves back to Xintar, but soon realizes that Xintar society is no longer what it used to be. The children are wild and the environment has become heavily polluted. After 6 months, Moony has had enough! He returns to earth and shows up at Zaco’s door. Zaco opens the door, and invites Moony in. Moony cannot believe what Zaco has done with the place! It is beautiful! There are mirrors everywhere, which Xintar aliens love (because they are a narcissistic bunch). Moony wishes he could have his old house back. He remembers that he never signed an actual contract with Zaco, and wonders if he can get his home back due to the lack of contract. He comes to you, an attorney, for advice. What will you tell him?
a. You cannot get the house back because you entered into an oral contract, and oral contracts are valid.
b. You can get the house back because a real estate contract must be in writing; there are no exceptions.
c. You can try to get the house back because the contract was not in writing; however, Zaco may be able to keep the house do to the doctrine of part performance.
d. You are too short to sue in court (you must be at least 4 feet tall).


43. Ann, an 18 year old college student, is badly in need of money. If she doesn’t get some money soon, she will have to drop out of school. Accordingly, she enters into a contract to sell her car to her 17 year old neighbor, Ben. Ben is a genius, and has made lots of money trading stocks online. He drafts the contract so that it is unfair to Ann – Ben will be paying much less money than the car is worth! One week before Ann is supposed to bring the car to Ben and receive her money, she finds out that Ben is underpaying and that she can sell her car for double the price! During that same day, Ben realizes that he does not like the color of the car, and would rather buy a different car. Which of the following is true?
a. This contract is void.
b. This contract is voidable by Ann.
c. This contract is voidable by Ben.
d. This contract is valid. (In other words, it is not voidable by either party.)

44. Jay tells Kim that he will buy her textbook from last semester for $80. Kim agrees. Jay and Kim have
a. an express contract.
b. a unilateral contract.
c. a quasi-contract.
d. no contract (because all contracts must be in writing).


45. Moony works for a cell phone company. His employment agreement states that he was hired to create a new cell phone screen that is water resistant. After working at the company for five months, Moony succeeds in creating a water resistant screen. What type of invention is this?
a. “Service” invention
b. “Shop right” invention
c. “Free” invention
d. None of the above


46. In the above example, Moony decides not to tell his employer about his invention, so that he can sell it to another company and make the profit for himself. He tries to sell his invention to AT&T, but his employer finds out about the invention and sues Moony to stop the sale. Moony argues that he is legally entitled to the invention, and the employer argues that it is entitled to the invention. Who should win this case?
a. Moony
b. The employer
c. Moony and the employer are each entitled to 50% of the invention
d. Neither should win, because the government is entitled to all inventions
47. Definitions of social responsibility may include

a. Do no harm
b. Consider consequences for the community
c. Follow the law (this may be view as the minimum requirement of social responsibility)
d. All of the above


48. Moony is up to no good again! He contracts with Drew to enter into an illegal marketing scheme. Moony does not successfully complete his obligations under the contract. Drew can re¬cover from Moony for
a. breach of contract.
b. breach of implied warranty.
c. breach of the duty of performance.
d. nothing.


49. Moony is walking down the street when he sees an elderly woman fall into a hole. There is a crowd of people watching, and a bunch of people immediately rush to help the woman. Which of the following statements is correct?
a. According to the ethical principle of “last resort”, Moony is not required to help the woman.
b. According to the ethical principle of “last resort”, Moony is required to help the woman.
c. According to the ethical principle of “last resort”, Moony is not allowed to help the woman.
d. It is illegal for Moony to help the woman.
50. A warranty
a. will not be enforced by the courts unless it is express.
b. of merchantable quality is implied in every merchant’s contract of sale pursuant to the UCC.
c. of wholesomeness automatically arises when food and beverages are sold.
d. both (b) and (c).
51. Tom goes to the market to buy lotion for his wife’s rash. He tells Cindy, the market owner, that he needs lotion to cure his wife’s rash, and Cindy advises Tom to buy “Pearl” lotion. Tom buys it and brings it home to his wife. The lotion smells great and make’s his wife’s skin very soft. However, it does not cure her rash. Her rash remains the same. Is it possible for Tom to get his money back for the lotion?
a. No, because the lotion did not hurt Tom’s wife in any way.
b. Yes, due to breach of an express warranty.
c. No, because the lotion is of merchantable quality.
d. Yes, due to breach of an implied warranty of fitness for a particular purpose.
52. Zaco gets a haircut from Jessica, a hairstylist in town. As part of the deal, Jessica also gives Zaco three bottles of shampoo, three bottles of conditioner, and a special brush for alien hair. Which of the following is true?
a. This deal is governed by the common law.
b. This deal is governed by UCC article 2.
c. This deal may be governed by the common law or UCC Article 2, depending on the outcome of the predominant fact test (i.e. which is the dominant part of the deal – the hair styling service or the sale of goods?)
d. This deal is governed by real estate law.
53. Article 2 of the Uniform Commercial Code (UCC) applies to
a. service contracts.
b. employment contracts.
c. the sale of services and goods.
d. the sale of goods.
54. Since winning the lottery, Moony has been living the high life. He eats at many fancy restaurants and wants only the best! One night, he comes home sick from a steak dinner. He feels terrible all night and goes to the doctor the next morning. The doctor tells him that he had food poisoning. Moony wants to sue the restaurant. Based on the facts given, which of the following claims is most applicable?
a. Breach of warranty of wholesomeness
b. Breach of warranty because the product didn’t conform to the model or sample
c. Breach of warranty of fitness for a particular purpose
d. None of the above is applicable
55. Alan is salesman who regularly sells televisions. His sales are covered by the UCC. One day Zaco goes to Alan’s store to get a quote for how much it would cost buy a TV. Alan quotes him the price of $1,000. Alan puts the quote in writing, signs it, and writes that it is a firm offer that he promises not to revoke for an entire week. Zaco goes home happy – he is not sure about the price and glad that he has a week to get some other offers and determine whether this is a good deal. Three days later, Zaco is getting ready to accept the offer, when he receives a call from Alan. Alan tells Zaco that he is revoking the offer. He made some miscalculations and realizes that $1,200 is a fair price. Zaco wants to sue Alan for taking back his offer before the week was up. You are the judge. How will you rule?
a. Rule for Alan, because under the common law a firm offer without consideration is revocable.
b. Rule for Zaco, because under UCC law a merchant’s firm offer is irrevocable.
c. Rule for Zaco, because under the common law a firm offer is irrevocable.
d. Rule for Alan, because under UCC law a firm offer is revocable.
56. Parrots 4 Ever hires Zaco to clean bird cages. Zaco is not given an employment agreement. Zaco turns out to be a terrible employee. He is constantly fighting with his coworkers and scaring off the birds. Which of the following is correct?
a. According to the traditional employment at will doctrine, Parrots 4 Ever is permitted to fire Zaco.
b. Under U.S. law, Parrots 4 Ever is not allowed to fire Zaco unless Zaco does something illegal while at work.
c. Under U.S. law, Parrots 4 Ever is allowed to fire Zaco, but only after giving Zaco a reasonable period of time to improve.
d. Under U.S. law, Parrots R Us must fire Zaco.
57. A customer goes into a store looking for a dress. She tells the store owner that she wants a purple and yellow dress that will fit her elderly grandmother, who is only 4 feet tall. The store owner finds her a beautiful purple and yellow dress for a great price. The customer is overjoyed! The next day she comes back into the store. She is very angry. With her, stands a tiny woman wearing a large purple hat with a small yellow bird. “I want my money back!” demands the customer. “This dress is too long for my granny.” “Too bad!” replies the owner. “I said nothing about whether or not the dress would fit her! This dress is a standard length! There is nothing wrong with it! Your grandmother is a SHRIMP!”
The customer comes to you for advice. What will you tell her?
a. The customer does not have a case against the store because the owner did not say that the dress would be short enough for the grandmother (i.e., no warranty was given).
b. The customer has a case against the store for breach of implied warranty of wholesomeness.
c. The customer has a case against the store for breach of implied warranty of merchantability.
d. The customer has a case against the store for breach of implied warranty of fitness for a particular purpose.
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