BUSINESS LAW Final Exam Practice Questions

1 BUSINESS LAW Final Exam Practice Questions2 BUSINESS LAW – Bus 340 PRACTICE QUESTIONS The following practice questions, both the question type and content, are similar to the type and format of questions on the final exam. Please use them a study aid to prepare for the final exam. 1. In a civil lawsuit against Ellen, Fred obtains an injunction, which is: a. a remedy at law. b. an equitable remedy. c. not possible under our U.S. system of jurisprudence. d. none of the above. 2. Our society has laws for which of the following reasons: a. to provide stability and predictability in personal and business affairs. b. to provide society with guidance as to what acts are considered legally and legally wrong. c. to provide penalties and sanctions for wrongful acts. d. all of the above. 3. Common law rules develop from: a. statutes enacted by Congress and the state legislatures. b. the principles behind the decisions in hypothetical disputes. c. the principles behind judicial decisions in actual legal disputes. d. propositions voted on by state residents and enacted into law. 4. What is the doctrine under which judges are obligated to follow the precedents established in prior decisions? a. stare decisis. b. res ipsa loquitur. c. commom law d. post hoc. 5. In a particular case, if a court decides that an established rule of precedent is incorrect or inapplicable, the court: a. must refuse to decide the particular case. b. must apply the precedent. c. may rule contrary to the precedent. d. must “stand on the decided case.”3 6. Statutory Law can best be defined as: a. laws enacted by legislative bodies at any level of government. b. a body of law created by administrative bodies in order to carry out their duties and responsibilities. c. rules of law announced or created in court decisions. d. all of the above. 7. Primary sources of law include: I. the U.S. Constitution and the constitutions of the various states. II. Statutes, or laws, passed by Congress and by state legislatures. III. Publications that summarize and interpret the law, such as legal treatises and Restatements of Law. IV. Regulations created by administrative agencies and ordinances or other rules adopted by cities, counties and special districts. a. III only. b. II, III, and IV. c. I, II, III, and IV. d. I, II, and IV only. 8. Ann convinces DD’s Cleaners, a dry-cleaning business, to enter into a longterm purchase contract with her company, Chem-Clean, for dry-cleaning solution. However, unknown to Ann, DD’s is only in her second year of a five-year contract with Zed’s Solutions Inc., a dry-cleaning solution company that Ann is constantly fighting for business. As a result of DD’s new contract with Ann, DD’s Cleaners stops purchasing cleaning solution form Zed, breaching the current five-year contract with Zed. Zed sues DD for breach of contract and Ann (Chem-Clean) for wrongful interference with a contractual relation. Zed’s likelihood of success against Ann (Chem-Clean) is: a. very good – because Ann induced the breach of contract. b. not good – because Ann did not have knowledge of the existing contract. c. very good – because all that Zed must show is that Ann reaped the benefits of the broken contract. d. a and c, but not b. d. a and c but not b Explanation:4 The reason behind this is because there had been a predetermined legal tender for the Zed and so there aught to be a move to the completion without the interference of the breaching of the contract by the third party involved. 9. Substantive Law can best be defined as: a. body of law concerned with wrongs committed against the public as a whole, which are enforced by local district attorney offices. b. a body of law consisting of all laws that establish the methods of enforcing the established rights and obligations. c. a body of law consisting of laws that define, describe, regulate, and create legal rights and obligations. d. all of the above. 10. Irma files a civil action against Jim. To succeed, Irma must prove her case: a. beyond a reasonable doubt. b. by indisputable proof. c. within an iota of truth. d. by a preponderance of the evidence. 11. Dana, a resident of California, owns a farm in Oregon. A dispute arises over the ownership of the farm with Bob, a resident of Nevada. Bob files suit against Dana in Oregon. Regarding this suit, Oregon: a. can exercise “long arm” jurisdiction. b. can exercise in personam jurisdiction. c. can exercise in rem jurisdiction. d. cannot exercise jurisdiction. 12. Procedural Law can best be defined as: a. the law that establishes the methods of enforcing the rights established by substantive law. b. the law that defines, describes, regulates, and creates legal rights and obligations. c. the law that requires that all similarly situated individuals be treated similar. d. none of the above. 13. An intentional tort must have which of the following elements: a. volitional movement by the defendant which causes injury. b. intent to commit an act which causes harmful or offensive contact. c. failure to exercise the standard of care that a reasonable person would exercise in similar circumstances creating a dangerous situation.5 d. a and b, but not c. e. a, b, and c. 14. Mark pushes Don. Don falls to the ground and breaks his arm. Under the civil law, Mark is liable to Don for Don’s injury: a. only if Mark had a bad motive or acted with malice. b. only if Mark intended to break Don’s arm. c. if Mark intended to push Don. d. never because Mark did not intend to break Don’s arm.6 15. During a phone conversation between Alan and Beth only, Alan falsely accuses Beth of stealing money from their former employer, Consolidated Industries. This is: a. libel, but not slander. b. slander, but not libel. c. fraud d. none of the above because the communication was not published. 16. Jill accuses Ken of committing the tort of assault. A person commits an assault if they create in another a reasonable apprehension or fear of: I. Future Harm. II. Immediate Harm III. Past Harm. a. I and III only. b. I, II and III. c. I only. d. II only. 17. Gene files a suit against Phil in a California state court. Phil’s only connection to California is an ad on the Internet originating from Main. For California to exercise jurisdiction, the issue is whether Phil’s Internet ad represents: a. commercial cyber presence. b. virtual business nexus as defined by the Supreme Court. c. a federal question. d. sufficient minimum contacts with the forum state. 18. Steve, the head of security for A-1 Hardware Store, detains John, whom Steve suspects of shoplifting. John sues Steve and A-1, alleging that the detention was false imprisonment. Steve and A-1 would most likely be liable if John could show: a. that he did not actually shoplift. b. that he had not shoplifted in the past. c. had probable cause to leave the premises. d. was detained for an unreasonably long period of time. 19. The tort of Negligence can best be described as: a. an intentional act which causes injury. b. liability without fault.7 c. legal liability for failing to act as a reasonably prudent person under the circumstances. d. all of the above. 20. Dana, an engineer, is hired to oversee construction of a new bridge in San Francisco. When the bridge collapses due to faulty construction, Dana is sued by those injured in the collapse under a theory of Negligence. As a professional, Dana is held to the same standard of care as: a. the ordinary reasonably prudent person in general society. b. a reasonably prudent member of her profession in the same or similarcommunity. c. a person of average intelligence. d. none of the above. b. a reasonably prudent member of her profession in the same or similar community Explanation: The reason behind this is that the under the jurisdiction of negligence, the law would basically gear in the move to decipher what a reasonable person of the same sort would have done and the care is administered in the same line. 21. Delta Trucking, Inc. operates a trucking distribution service throughout the United States. The U.S. Congress recently enacted legislation outlawing the use of triple trailer trucks on any interstate within the United States. A triple trailer truck is a semitruck with three trailers attached together. Delta would like to challenge this legislation in court. Delta’s best argument would be: a. that the application of this statute violates procedural due process. b. that Congress lacks in personam jurisdiction. c. Congress can only regulate intrastate activities not interstate activities. d. that Congress has exceeded its constitutional authority to regulate interstate commerce as granted in the Commerce Clause. 22. A state statute requires amusement park owners to maintain their equipment in specific condition for the protection of their patrons. Ed, who owns an amusement park, fails to adhere to the requirements of the statute. As a direct result of this failure, Fran, a patron, is injured. Fran sues Ed under a theory of negligence. In an effort to prove Ed breached his duty of care, Fran’s best theory would be: a. custom or usage.8 b. res ipsa loquitur. c. negligence per se. d. diversity of citizenship. 23. ABC Airline Flight 72 crashes shortly after take-off. There are no survivors. Betty sues ABC Airline under a theory of negligence. In an effort to prove ABC’s breach of their duty of care, Betty’s best argument would be: a. custom or usage. b. res ipsa loquitur. c. negligence per se. d. none of the above.9 24. While shopping at a Wal-Mart in Sacramento, CA, Ann trips over a box of shotgun shells sitting in the aisle waiting to be unpackaged and placed in the display case. Before she fell, Ann received a phone call from a close friend on her cell phone and was not paying attention. Ann sues Wal-Mart under a theory of negligence. Wal-Mart’s defense is that Ann is comparatively negligent. If a court finds that Ann was 90% at fault, then Ann: a. cannot recover any monetary compensation for her injuries. b. can still recover, but the recovery is reduced by her percentage of fault. c. can recover completely for all her damages without reduction. d. California does not recognize comparative negligence. 25. Jake is an employee delivery driver for Don’s Furniture. While delivering a sofa and loveseat to Mr. Smith, Jake accidentally hits Todd causing severe injury. Todd sues Don’s Furniture for Jakes negligence. Don’s Furniture: a. is not liable. b. may be liable under the doctrine of respondeat superior. c. may be liable under a theory of strict liability. d. may be liable under a theory of res ipsa loquitur 26. The broad categories of the Commerce Clause power are: I. channels of interstate commerce. II. instrumentalities of interstate commerce. III. articles moving in interstate commerce. IV. those activities “substantially affecting” interstate commerce. V. fixtures, as defined by the Supreme Court. a. I, II, and III only. b. I, II, III, and IV. c. IV only. d. I, II, III, IV, and V.10 Fact Pattern #1: Use the following fact pattern to answer questions 27 - 30. Rob is driving into the school parking lot when he sees Julia talking with Dave. He becomes extremely jealous at this sight of this conversation. Rob wants to park quickly and get over to Julia to prevent Dave from “hitting” on his girl. He punches the gas, accelerating around the corner when he hits a spot of oil. Rob looses control of his vehicle, jumps over the curb and runs over Dave, seriously injuring him. Julia is not injured and had her back to Dave when he was struck. Julia did not see the accident nor was she in fear of being struck. After hitting Dave, the car continues to slide and runs into a fireworks stand located across the street from the parking lot. The stand goes up in flames and fireworks start shooting off in all directions. A Flying Tango Bottle Rocket ignites and shoots 100 yards to the north. The rocket flies directly into a gas trucks fuel opening as the driver prepares to refuel his truck. The truck explodes sending debris in all directions and many people are injured by the flying debris. Tom the truck driver and Sue a patron of the station are severely injured. Tim was also a patron at the station who witnessed the entire wild event. Tim was never in danger and was not injured. 27. Refer to fact pattern #1: Dave sues Rob for battery. Dave’s chances for success with his claim for battery are: a. very good – because Rob failed to act as a reasonably prudent person under the circumstances. b. not good – because Rob did not act with the intent to cause a harmful or offensive contact. c. very good – because of res ipsa loquitur. d. all of the above. 28. Refer to Fact Pattern #1: Sue sues Rob under a theory of negligence. Rob’s best argument in defense of sues claim is: a. Sue has no legally recognized cause of action. b. Sue has no standing to assert her claim. c. Sue was not a foreseeable plaintiff. d. Sue assumed the risk. 29. Refer to fact pattern #1: After the incident, Julia recognizes what an idiot Rob is and breaks up with him. In addition, to pour gas on the fire, Julia files a claim against Rob for Negligence and Assault. As to the assault claim, Julia’s chances for success are: a. very good – because Julia was almost run over by Rob and should recover. b. not good – because Julia was never in a reasonable apprehension or fear of immediate harmful touching.11 c. very good – because apprehension should not be confused with fear. d. none of the above 30. Refer to fact pattern #1 and question 29 above. As to Julia’s Negligence claim, Rob’s best argument for his defense of Julia’s claim is: a. Julia lacks standing. b. Julia was not a foreseeable plaintiff. c. Julia suffered no injury as a result of his negligence. d. Julia assumed the risk and was contributory negligent. 31. Tom is charged with arson. The burden of proof to find Tom guilty of the crime charged is: a. beyond all doubt. b. beyond a reasonable doubt. c. clear and convincing evidence. d. a preponderance of the evidence. 32. Don and Jeff are involved in a disturbance at their favorite steak house. Don is charged with a misdemeanor and Jeff is charged with a felony. Which one of the following statements is true: a. a misdemeanor is a crime punishable by a fine or by confinement for a period of one to three years. b. a felony is punishable by death or imprisonment for more than six months. c. a felony is punishable by death or imprisonment for more than one year. d. None of the above. 33. In an effort to take Erin’s purse from her, Don pushes Erin to the ground while ripping the purse from her hand. The use of force or fear is required for this act to constitute: a. burglary. b. forgery. c. larceny. d. robbery. 34. Jay, while on his way into Wal-Mart, wrongfully takes an unopened carton from Wal-Mart’s loading dock by throwing it into his trunk and driving away. Jay is charged with embezzlement and larceny. Which one of the following is his best defense to the embezzlement charge:12 a. there was no actus reas. b. he was not trespassing. c. he was not in lawful possession of, or entrusted with the property. d. none of the above. 35. Jake, a bank officer, deposits into her own account checks that are given to her by bank customers to deposit into their accounts. The fraudulent appropriation of a person’s property or money by another person entrusted with it is: a. larceny. b. embezzlement. c. forgery. d. robbery. 36. Carla creates a fraudulent scheme to solicit investments in a non-existent business opportunity. Carla sends Tom, via U.S. Mail, a fictitious investment information packet and Tom decides to invest with Carla and sends her a check via Federal Express. Carla could be charged with which one of the following crimes: a. insider trading. b. robbery. c. mail fraud. d. none of the above. Fact Pattern #2: Use fact pattern 2 to answer questions 37 – 40. Dave and Laura are dating. Dave lost his job and needs some quick cash. Dave devises a plan to rob a local mini-mart and convinces Laura to be the “getaway” driver. They are driving a large late model Chevy Suburban. While robbing the store at gunpoint, Dave yells “give me all of the money or I will blow your brains out.” Jake, the mini-mart clerk, pulls out a gun and shoots at Dave striking him in the leg. Dave, believing that his life is in danger, returns fire while running out of the mart. A bullet hits Jake killing him. While running out of the store, Dave accidentally fires another shot that ricochets off the tile flooring, hits the solid metal ice cream freezer and then strikes Suzy, a patron of the mart, killing her. Dave makes it to the car and Laura, and they race away from the scene at a high rate of speed. Laura, visibly shaken at the sight of Dave bleeding from the gunshot wound begins to shake and cry uncontrollable. As a result, she loses control of the car and slams into a small sports car carrying Steve and his Wife Lisa. Both Steve and Lisa are killed on impact. Both Dave and Laura are arrested. 37. The District Attorney is going to charge Laura with a Homicide for the death of Suzy, the store patron, what is the most likely charge?13 a. Murder, because the whole thing was premeditated and deliberate. b. Involuntary Manslaughter, because the killing was an accident. c. Felony Murder, because the killing occurred during the commission of a felony, Robbery. d. No homicide charge is warranted because she was not directly involved with killing.14 38. Dave is charged with First Degree Murder for the killing of Suzy. Which statement best describes this charge: a. First Degree Murder is the correct charge because it was an intentional killing that was deliberate and premeditated. b. The charge should be Voluntary Manslaughter not First Degree Murder because he acted with adequate provocation. c. Involuntary Manslaughter is the correct charge because it was an accident. d. Felony Murder is the correct charge in this case because the killing occurred during the commission of a felony. 39. Dave is charged with Murder for the killing of Jake, the store clerk. In his defense, Dave argues self-defense and that he was only defending himself and should not be charged with murder. What is the likelihood of success of the defense of self-defense under these circumstances? a. Good, deadly force was warranted because Dave was in fear for his life as he was threatened with imminent death or serious bodily injury. b. Not Good, because Dave cannot claim self-defense because he was the initial aggressor. 40. With respect to the deaths of Steve and Lisa, what are the proper charges for both Dave and Laura? a. Felony Murder is the correct charge for both Dave and Laura because the killing occurred during the commission of a felony. b. Involuntary Manslaughter is the correct charge for both Dave and Laura because the killing was an accident, not premeditated and was not committed during the felony. c. First Degree Murder for both because the act was deliberate and premeditated. d. No charge at all because this was an unfortunate accident. 41. Sid finds out that his wife, Betty, is having an affair with Joe his best friend. Sid is enraged by the affair and decides to kill Joe. Sid purchases a handgun and develops a plan to get Joe alone near the ocean where he can kill him and dispose of the body. A month later, Sid follows through with the plan, kills Joe, and disposes of the body in the ocean. The state Sid lives in separates homicides into first and second-degree murder, voluntary and involuntary manslaughter, and felony murder. Sid should be charged with: a. Voluntary Manslaughter because it was committed in the “heat of passion” and with provocation.15 b. First Degree Murder because it was premeditated and deliberate murder. c. Felony Murder. d. Second Degree Murder because it was not premeditated. 42. Same facts as question 41 above except that assume Sid walks in on his wife and Joe in the throws of passion, so to speak. Upon seeing this, Sid is so upset that he attacks Joe killing him. With these additional facts, Sid’s attorney would most likely argue that Sid should only be charged with: a. Voluntary Manslaughter because it was committed in the “heat of passion” and with provocation. b. First Degree Murder because it was premeditated and deliberate murder. c. Felony Murder. d. Assault with a deadly weapon. 43. According to the Exclusionary Rule: a. persons who have biases that would prevent them from fairly deciding a case may be excluded from jury service. b. certain business records may be protected from subpoena by the government. c. certain parties to a criminal action may be excluded from a trial. d. illegally obtained evidence must be excluded from consideration in a trial. 44. Which of the following are exceptions to the search warrant requirement established by the 4th Amendment to the U.S. Constitution: I. Search Incident to Lawful Arrest II. Inevitable Discovery III. Hot Pursuit and Evanescent Evidence IV. Plain View V. Miranda Exception a. I, II, III, and IV. b. III, V and IV only. c. I, II, III and V only. d. I, III, and IV only. 45. Mens rea is defined as: a. the voluntary physical act required for criminal liability.. b. a guilty mind, intent, or the mental state required for establishing criminal liability.16 c. the common law principal for imposing criminal liability on corporate entities. d. none of the above.17 46. An offer is: a. a voluntary act by the offeree whereby the offeree exercises the power conferred upon him by the offer. b. a serious, present manifestation of an intention to contract, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it. c. an invitation to negotiate. d. None of the above. 47. An acceptance is: a. a voluntary act by the offeree whereby the offeree exercises the power conferred upon him by the offer. b. a manifestation of an intention to contract, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it. c. an invitation to negotiate. d. None of the above. 48. In a breach of contract claim, Ed asserts that Nicole breached their contract for the sale of Nicole’s house. Nicole responds that she never intended to enter into a contract with Ed. The court would evaluate whether a contract was formed using: a. the subjective theory of contracts. b. the objective theory of contracts. c. the conscious intent theory of contracts. d. None of the above. 49. A bilateral contract is created when one party gives a promise in exchange for the other party’s: a. promise b. performance of a particular act. c. both a and b. d. None of the above. 50. Nick offers to pay Stan $400 if he paints his fence. Stan can only accept the offer by painting the fence. If Stan paints the fence, he and Nick will have formed: a. a bilateral contract. b. a unilateral contract. c. a quasi contract.18 d. None of the above. 51. Refer to Question 50. Now assume that Stan paints half the house and Nick tells him to stop painting because he is revoking his offer. If Stan files a lawsuit against Nick for breach of contract, is Stan or Nick likely to prevail? a. Nick, because he has the right to revoke his offer at any time prior to acceptance. b. Stan, because he has substantially performed under a unilateral contract. 52. After repeated, failed attempts to teach his pure-bread golden retriever to fetch. Bill, out of frustration and desperation yells, “This stupid dog will never learn, if I thought someone would buy him for the $499 I paid, I would sell him right now!” Fred, a passerby, hands Bill $499 in cash and says, “I accept, thanks for the new dog.” Fred’s act: a. constitutes a valid acceptance of a valid offer, a contract is formed. b. does not constitute a valid acceptance because $499 dollars in not considered valuable consideration in the sale of goods. c. is not a valid contract because it must be in writing. d. does not constitute a valid acceptance, because there was no offer, a reasonable person would not believe that Bill manifested a serious intent to sell her dog. 53. Joe, a professional athlete goes to Dr. Feelgood for surgery on his injured foot. Dr. Feelgood tells Joe that he will most likely be fully healed and able to play football within two months. Joe agrees to the surgery as this would allow him to play in the championship game. Joe does not heal within a two months and cannot play in the championship game. Joe sues Dr. Feelgood for breach of contract. Dr. Feelgood is: a. is liable for breach of contract and Joe is entitled to damages. b. is liable for breach of contract, but is limited to punitive damages. c. is not liable for breach of contract, because the statement was an opinion. d. is not liable for breach of contract, but Joe does not have to pay the medical bills. 54. In writing, Grant offers to sell his Honda Civic for $10,000 to Ivy. Ivy responds, in writing, “comparable autos are selling for $5,000, I accept your offer if you will reduce the price to $5,000.” Ivy’s response: a. is a valid acceptance of Grant’s offer – contract formed. b. is merely an invitation to negotiate. c. is a counteroffer which works to reject Grant’s original offer.19 d. both a and c are correct. 55. Phil advertises a reward of $300 on the internet to the “first person to find and return his lost dog, Rocky.” He posts a picture of Rocky for identification. This advertisement is: a. an offer, because it clearly states that Phil is binding himself if performance is completed (a unilateral contract). b. an offer, because he is clearly seeking a return promise (a bilateral contract). c. not an offer, because it is not directed to a specific person. d. an option contract. 56. Refer to fact pattern 10. Now assume that Joe, a local Vet, who does not have any knowledge about Phil’s reward, finds and returns Rocky to Phil. Joe, after returning Rocky, learns of the reward and calls Phil demanding the $300 dollar reward. Joe argues that they have formed a valid agreement and that Phil owes him the reward. Which of the following statements are true? a. there was never a valid offer, so Joe is not entitled to the reward. b. Joe performed the acceptance and is entitled to the reward. c. Joe did not know about the offer so he is not legally entitled to the reward. There was no consideration exchanged. d. both a and c. 57. Brian offers to sell Ditto his butterfly collection. Before accepting the offer, Ditto learns, from Sue, that Brian sold his butterfly collection to her. Brian is: a. liable to Ditto for breach of contract. b. not liable, because the sale of the butterfly collection to sue and Ditto’s knowledge of the sale revokes the offer made to Ditto. c. not liable, because Brain never intended to sell his collection to Ditto. d. none of the above. 58. On 1/1, Bob offers to sell his computer to Carol, but conditions the sale on Carol accepting the offer by 1/7. On 1/3 Bob revokes his offer. Which statement best describes Bob’s action: a. it is a breach of the contract created by Bob and Carol. b. it is a valid revocation of the offer. c. Bob can revoke the offer, but only after 1/7.20 d. none of the above.21 59. Starbucks offers to sell Big Jolt Java, Inc., 100 bags of its high caffeine content coffee beans. Big Jolt sends a letter to Starbucks indicating that it will pay Starbucks $500 to keep the offer open for 10 days. Starbuck’s agrees. This: a. additional language creates an illegal adhesion contract, unenforceable because it is contrary to public policy. b. is a valid option contract which makes the offer irrevocable for 10 days. c. creates a voidable contract. d. none of the above. 60. In a written correspondence, Ken offers to sell his 3 acre ranch, known as “Ken’s Hideaway,” to his brother Jake for $325,000 closing in 45 days. Jake replies, in writing, “I accept, I will purchase your ranch for $325,000, but the deal will close in 90 days.” A day later, Ken sells his ranch to Bill for $325,000 closing in 90 days. Jake files a lawsuit against Ken for breach of contract. Which statement best describes the situation between Ken and his brother Jake? a. offer, acceptance and consideration were present, a valid contract was formed. b. no contract, Jakes response is not an acceptance, but a counteroffer and rejection of Ken’s original offer. c. none of the above. 61. Refer to fact pattern in Question 60. Now assume that Jake responds, “I accept. But would you consider closing in 90 days.” Jake’s response is: a. a valid acceptance. b. a counteroffer and rejection of original offer. c. mere price negotiation. d. none of the above. 62. Zed offers Cad, in writing, $1,000 for his 1995 Toyota Tercel that has a fair market value of $3,000. Cad, desperate for money, knowingly and voluntarily accepts the offer but later has second thoughts and sues Zed to recover his car. In regards to the consideration exchanged, a court would likely: a. set aside the agreement as unfair because the purchase price/consideration was not fair market value. b. set aside the agreement because there was no mutual assent. c. uphold the agreement and not question the adequacy of the consideration. d. both a and b.2223 63. Lady Gaga (“Gaga”), a performing artist, enters into a 20 million, two-year performance contract with the Mirage Hotel and Casino in Las Vegas, Nevada. Gaga performs during the first year of the contract, but then refuses to perform unless the Mirage agrees to pay an extra 5 million, increasing the payment for the deal from 20 million to 25 million. Gaga offered no reason for demanding the extra 5 million, but said only that she would stop performing if the Mirage did not agree to pay. Realizing that all of Gaga’s performances are already sold out, the Mirage reluctantly agrees to pay. At the end of the 2 year deal, the Mirage refused to pay the extra 5 million to Gaga. Gaga sued for breach of contract. The court would likely rule that the extra 5 million agreed to is: a. valid and enforceable because the parties mutually agreed to the additional sum of money. b. enforceable because of the unforeseen difficulties. c. unenforceable due to the preexisting duty rule and thus there was no consideration because she was already under a duty to perform. d. both a and b are correct. 64. On 1/7, Scott sends a letter to Aaron offering to sell his Xbox video game system for $100. On 1/10, Aaron mails a letter of acceptance. On 1/11, prior to receiving Aaron’s letter, Scott faxes a letter to Aaron revoking his offer to sell his Xbox. As to the correspondence sent by Scott and Aaron. a. Aaron’s letter is merely a counter-offer, so Scott has the power to revoke. b. Scott’s revocation is valid, no contract exists. c. Aaron’s acceptance is effective upon dispatch and a valid contract exists. d. no contract because this contract must be in writing. 65. Refer to the fact patter in Question 64. However, now assume that Aaron sends a letter on 1/9 rejecting the offer. On 1/10, Aaron changes his mind and sends an acceptance letter to Scott indicating his willingness to purchase the Xbox. What is the effect of Aaron’s acceptance sent on 1/10? a. a contract exists, the mailbox rule makes the acceptance effective upon dispatch thereby creating a valid contract. b. the rejection is effective upon dispatch, no contract exists. c. if Aaron sends a rejection and then an acceptance, the first to arrive controls. d. a quasi contract is created.24 66. ABC Realty Company and Fine Investments, Inc., enter into a contract for a sale of land. To be enforceable, the contract must be in writing if the land is valued at: a. over $50.00. b. over $500.00. c. over $5,000.00. d. all transfers of an ownership interest in land must be in writing. 67. City Transport Corporation and Midwest Warehouses, Inc. enter into a 2 year lease agreement for a warehouse space in Sacramento. To be enforceable: a. the lease must be in writing only if the total amount of the lease is over $300 in value. b. the lease must be in writing only if both entities are considered California corporations. c. the lease must be in writing because all leases over 1 year must be in writing to be enforceable. d. all of the above. Fact Pattern for Questions 68 and 69 Dave’s Hobby Town (owned by Dave) and Eva’s Yarn Shoppe (owned by Eva) are adjacent stores with adjoining parking lots. Dave offers Eva a discount on purchases from Dave’s store if Eva will not tow the cars of Dave’s customers who park in Eva’s lot. 68. Dave’s discount is legally sufficient consideration: a. because it is a promise to give something of value. b. only if Dave gives Eva cash instead of the discount. c. only if Eva actually buys something from Dave. d. this is not legally sufficient consideration. 69. Eva’s promise is an example of: a. consideration in the form of a promise to forebear. b. an illusory promise. c. something that lacks legally sufficient value to be consideration. d. illegal and unenforceable. 70. On Tom’s 18th birthday, he decides he no longer wants to keep a car he bought from Select Motors, when he was 17. Tom’s right to disaffirm the contract will depend on:25 a. the car’s condition when Tom bought it. b. the car’s current condition. c. whether Tom acts to disaffirm within a reasonable period of time. d. whether Select Motors will agree to allow him to disaffirm. 71. Mary makes an oral contract with Paul that would ordinarily be unenforceable under the Statute of Frauds. If the court finds that Paul relied on Mary’s oral promise and suffered some detriment, they may enforce the oral agreement under: a. the doctrine of promissory estoppel/detrimental reliance. b. the doctrine of the “main purpose” exception. c. the parol evidence rule. d. none of the above. 72. Jill and Karl contract for the sale of Jill’s horse for $1,000. Both Jill and Karl believe that the horse is a direct descendant of Seabiscuit, the legendary racing horse, and this belief forms a basic understanding of the transaction. After entering into the contract, but prior to payment, it is discovered that the horse is not related to Seabiscuit. As a result, Karl is: a. entitled to another horse equivalent to the value of Seabiscuit descendant. b. not required to pay due to the mutual mistake of the parties. c. not required to pay due the unilateral mistake of the parties. d. required to pay because he “assumed the risk” of the purchase. 73. Jack offers to sell his house to Bill. He prepares a written offer but mistakenly transposes some numbers and offers to sell for $189,000 instead of $198,000 as he really intended. He sends the offer to Bill who accepts the offer in writing. Bill’s acceptance is: a. unenforceable because of the Statute of Frauds. b. unenforceable because of the bilateral/mutual mistake of the material fact. c. enforceable because Jack must bear the responsibility for his unilateral mistake. d. none of the above. 74. Harold believes his old baseball bat has little value, but Murray is convinced it is a valuable collector’s item. Harold sells it to Murray for $100 before learning it is worth $1,000. The contract: a. may be rescinded because a mutual mistake was made. b. may serve as the basis for a court order to Murray to return the bat. c. may be rescinded because Murray used his superior knowledge.26 d will not be canceled because the mistake relates to the value of the item.27 75. Will falsely states a material fact to Jacqueline, who relies on it to her detriment. Will’s statement: a. constitutes fraud – nothing more is necessary. b. constitutes fraud only if Jacqueline justifiably relied on the statement and Will intended to deceive Jacqueline. c. were made in writing. d. none of the above. 76. Steven, who is Wesley’s guardian, convinces Wesley that buying a certain parcel of land from Steven’s brother-in-law at a price greatly inflated from market value is a great deal. If Wesley sued to rescind the contract, his best argument for lack of mutual assent would be: a. duress. b. fraud. c. puffery. d. undue influence. 77. Intoxicated but fully aware of the nature of the contract and the consequences of his actions, Bill agrees to a two-year cell-phone service contract with Wonder Talk, Inc., at an above average market price. This contract is: Inc. a. not enforceable because Bill lacked capacity. b. not enforceable because the contract clearly favors Wonder Talk, c. enforceable. d. not enforceable because either party could disaffirm the contract. 78. A court adjudicates Huck incompetent and appoints Inez to be his guardian. Later, without, Inez’s knowledge, Huck signs a contract to sell his farm to Kyle for its fair market value. The contract is: a. enforceable if Huck comprehended the consequences. b. enforceable if Huck knew the market value of the farm. c. enforceable if Huck was the record owner of the farm. d. void. 79. Jon agrees to sell his K9 Sports Equipment store, located in Sacramento, California to Lucy. As part of the sale, Jon agrees in writing to never open a similar, competing store anywhere in the state of California. Jon’s promise is most likely: a. invalid because it is part of a sale of an ongoing business.28 b. invalid because of the unreasonable terms of duration and geography. c. valid, because of the basic premise of freedom of contract. d. none of the above. 80. Moore Properties, Inc., (MP) offers, in writing, to sell to DCB Development Corporation (DCB) a certain half-acre of land for $112,000. DCB accepts and signs the contract. At which time, MP discovers that the price should have been $121,000. MP files an action asking a court to make the contract unenforceable. What is the likely result? a. very good, this is a bilateral mistake and the contract is voidable by either party. b. not good, but the court would make the parties split the difference. c. not good because this is a unilateral mistake on the part of MP. d. none of the above. 81. Grover contracts to sell two tracts of land to Hank. Both parties believe that the tracts consist of 4 acres of land for $500,000. After a survey, it is discovered that the land is a total of 6 acres. What affect does the survey have on the contract? value. a. none, it is a valid, enforceable contract. Courts will not look at b. it is valid, enforceable because of the fraud by the surveyor. c. it is void, unenforceable because of the fraud by the surveyor. d. it is voidable because it is a bilateral/mutual mistake. 82. In written form, Mr. Pitt’s offers to sell his home to Mr. Armstrong. Prior to Armstrong’s acceptance, Mr. Pitt’s dies from unforeseen circumstances. With respect to Armstrong’s ability to accept, the death of Pitt’s: a. does nothing, Armstrong can still accept and bind Pitt’s heirs to the contract. b. allows Armstrong the choice of cancelling or continuing with the contract. c. automatically revokes and terminates the offer, so Armstrong has no power to accept. d. none of the above. 83. Refer to the facts of Question 82. Now assume that Pitt’s does not die and Armstrong accepts the offer. However, after acceptance a fire destroys Pitt’s house (the subject matter of the contract). What effect does the destruction of the house have on the agreement?29 a. discharges the obligations of both parties under the agreement. b. suspends the agreement until a new house can be built. c. Armstrong must buy the land at an agreed upon price. d. none of the above. 84. Consumer Goods, Inc. breaches its contract with Local Stores Company. Local Stores files suit to recover compensatory damages, which are typically assessed: a. only in contracts for the sale of goods valued in excess of $500. b. to compensate the non-breaching party the loss of the benefit of the bargain. c. to penalize or punish a party for failing to carry out its contractual obligations. d. none of the above. 85. Nora contracts to work for ABC Investments during June for $2,500. On May 1, ABC cancels the contract. Nora refuses to accept a similar job with First State Bank, which would pay $2,000 for the month of June. Nora files suit against ABC. As compensatory damages, Nora can recover: offer. a. $2,500 which is the full value of the bargain. b. $2,000 because this is what she was worth based on the second c. $500 because she had a duty to mitigate her damages. d. nothing. 86. Paul contracts to buy a Quality-brand computer from Royal Networking Systems for $5,000, but Royal fails to deliver. Paul buys the computer from another company for $6,700. Paul’s measure of damages is: a. $1,700. b. $1,700 plus punitive damages, if any can be proved. c. incidental damages only. d. nothing. 87. Helen contracts to sell her house located on the 18th fairway of Pebble Beach Golf Course to mike on July 1. On July 1, Helen tells Mike that she will not go through with the deal. Mike files suit against Helen. Mike’s best remedy is:30 a. a suit for damages, the difference between the contract price and the market price. b. a suit for specific performance, forcing Helen to convey the land. c. he has no remedy for Helen’s breach because it is a land sale. d. none of the above. 88. Alpha Engineers, Inc. needs a drill to continue its operations and orders one from Mining Supplies Company for a cost of $1,500. Alpha tells the supplier that it must receive the drill by Tuesday or it will lose $5,000 (the profit for a job they have scheduled on Tuesday). The supplier agrees to have the drill to Mining Supplies by Monday. Mining Supplies ships the drill late and it does not arrive by Tuesday. Alpha sues for breach of contract. Alpha can recover: a. nothing because breach of contract damage awards are limited to compensatory damages only. b. $5,000, because this amount was foreseeable damage as a direct result of the breach of contract - consequential damages. c. $1,500 only, because they should not have to pay for the drill due to the breach. d. none of the above. 89. Nationwide Retail Corporation seeks punitive damages in a suit against Regional Distributors, Inc. Generally, punitive damages: tort. a. may always be recovered in a breach of contract claim. b. may be recovered in contract only if it relates to real estate. c. may be recovered in contract only if it relates to the sale of “goods.” d. are generally not recoverable in contract, but may be recovered in 90. Home Delivery Corporation and Interstate Transport Inc. sign an agreement that provides for the payment of “$1,000 by whichever party commits a material breach of the contract.” The parties agree that damages are difficult to estimate but agree that $1,000 is a good estimate at the time the contract is signed. This is an example of: a. a liquidated damages clause. b. a mitigation of damages clause. c. a nominal damages clause. d. a penalty clause.31 91. Ozzy is an Chief Operations Officer of Prudent Financial Corporation (PFC). Ozzy serves in a representative capacity for PFC’s owners. With respect to binding PFC to contracts, Ozzy is: a. an agent and has the authority. b. an agent but does not have authority. c. not an agent and does not have authority. d. not an agent but does have the authority. 92. Joe hires Kim to negotiate lease contracts for his company. He does not control her work schedule nor dictate how she is to perform her job. He only pays Kim commission when the lease contract is signed (completion of the job). Kim is most likely a(n): a. independent contractor. b. employee c. owner of the company. d. shareholder of the company. 93. Sal agrees to act on Tom’s behalf, subject to Tom’s control, and Tom trusts Sal to so act. They set out the terms of their agreement in a written document, which they both sign. This is: a. an agency by ratification. b. an agency by estoppel. c. an agency by express agreement. d. not the creation of an agency relationship. 94. The representation of another person called a principal, by an agent, in dealings with third parties is called a(n): a. cooperating broker agreement. b. agency. c. power of attorney. d. none of the above. 95. Which of the following are ways to create an agency relationship? a. verbal/oral express agreement. b. ratification. c. estoppel. d. all of the above.32 96. Allen is a real estate agent for ABC Realty a real estate brokerage company which is owned and operated by Jim, a licensed real estate broker. The Smiths hire Allen to represent them in the sale of their home. What legal principal would require that the agency agreement between the Smith’s and Allen be in writing to be valid and enforceable? a. the Fiduciary Duty Rule. b. the Rule of Respondeat Superior. c. the Equal Dignities Rule. d. the Rule of Vicarious Liability.33 97. A relationship founded on trust and confidence which obligates the agent to act in the best interest of the principal is called a(n): a. fiduciary duty. b. estoppel duty. c. ostensible duty. d. none of the above. 98. An agency created by a principal who intentionally, or by want of ordinary care, causes a third person to believe that another person is his agent who is NOT really his agent would be a(n): a. express agency. b. agency by ratification. c. ostensible (estoppel) agency. d. power of attorney. 99. You made a statement that induced a person to act in reliance on that statement. The legal principle that now prevents you from asserting facts that are contrary to your previous statement is known as: a. estoppel. b. ratification. c. statute of frauds. d. none of the above. 100. A situation in which the agent acts without the principal’s authority or outside the authority granted, but upon learning of the conduct, the principal approves or affirms the action is known as an agency created by a(n): a. express agreement. b. ratification. c. ostensible authority. d. power of attorney. 101. Broker Bob, who was not your agent, told prospective tenant the he was your agent and had authority to lease your property. Bob leased your property to tenant and you accepted the rent from the tenant. Your act of accepting the rent has: a. created an agency by ratification. b. created a real property interest coupled with an interest. c. the power of a waiver. d. none of the above.34 102. A fiduciary relationship exists between: a. the principal and agent. b. the agent and the third party. c. the principal and the third party. d. all of the above. 103. Home Development Company (HDC) employs Stella to buy property for a future residential development. Stella secretly buys some property and sells it to HDC for a profit. Stella has breached: a. no fiduciary duty. b. the duty of accounting. c. the duty of loyalty. d. the duty of notification. 104. Cory employs Daily Delivery Agency as an agent under a written agreement that describes the rights and duties of both parties. This is: a. express authority. b. equal authority. c. implied authority. d. apparent authority. 105. Todd hires Joy to act as his agent to purchase three real estate parcels owned by different individuals. Todd’s intent is to construct a strip mall and he does not want each individual owner to know that he is acquiring all three parcels. As a result, he instructs Joy to reveal only that she is buying the property on behalf of a third party, without telling the land owners who the third is. Todd would be considered: a. a disclosed principal. b. an implied principal. c. an undisclosed principal. d. a partially disclosed principal. 106. Same fact pattern as question 15 above. Assume that Todd breaches the real estate purchase contract with one of the owners. Who would be liable in contract? a. Todd but not Joy. b. Joy but not Todd. c. Todd and Joy both have liability in contract. d. neither Todd nor Joy is liable in contract.35 Please use the following fact patter to answer questions 107 – 110. Brian is a delivery driver for Eclectic Furniture Company (ECF) located in Midtown Sacramento. ECF is owned and operated by Dan. Sue, an Elk Grove resident buys a sofa from ECF and pays for it to be delivered to her home. Brian is on his way to deliver Sue’s new sofa when he receives a call from his buddy Jay. Jay owes Brian $100 dollars (which Brian has been bugging him about for over 2 months) and tells Brian that he has the money and if he wants it he better come by his house and get it, “before I spend it on beer and pizza.” Brian is anxious to get his money and decides to travel up Highway 50 to Rancho Cordova to get his $100 dollars. Brian reaches Jay’s home and gets his money. While leaving Jay’s house he meets up with Dave, a friend of Jays who Brian dislikes with a passion. Brian and Dave get into a verbal argument and Brian punches Dave in the face injuring him. Brian then flees the scene and finally gets to Elk Grove to deliver Sue’s sofa. He pulls off the freeway and heads toward Sue’s house. His cell phone rings again and he glances down to see who is calling. At that moment, he crashes into the car in front of him severely injuring the Fords (the occupants of the car). 107. The Fords file a negligence lawsuit against ECF (and Dan) as the owner. The likelihood of success is: a. not good - Brian is negligent not Dan (ECF) therefore no liability. b. not good – neither Brian nor Dan was negligent. c. good – because Brian’s negligent act occurred during the course and scope of his employment. d. none of the above. 108. The Fords file a negligence lawsuit against Brian. The likelihood of success is: a. good – Brian has liability for his own negligent conduct. b. not good – only Dan (ECF) is liable because Brian is an employee/agent acting within the scope of employment. c. not good – Brian has immunity from liability under the common law theory of vicarious liability. d. none of the above. 109. Dave files a battery (tort) lawsuit against Brian and Dan (ECF). Dave asserts that Dan and ECF are liable for the acts of their employee/agent. What is the likelihood of success against Dan (ECF)? a. good – the doctrine of respondeat superior holds employers liable for the conduct of their employees. b. good – because Dan knew and perhaps directed Brian to commit the tort.36 c. not good – employers do not generally have liability for the intentional torts of their employees, especially those occurring outside the course and scope of employment. d. none of the above. 110. As a delivery driver for Dan (ECF), Brian would most likely be considered acting outside the scope of his employment if he: truck. a. crashed into a car at the airport while off duty/not working. b. hit a pedestrian in a parking lot during a “working” lunch. c. ran over an attendant at a gas station while refueling the delivery d. smashed into a store-front while intoxicated on a delivery. 111. Fred hires Gert, a real estate broker, to act as her agent to sell her house. The house burns down before being sold. With respect to the agency relationship and agreed upon service: land. a. if is still in full force and Gert has the right, by contract, to sell the b. it is still in full force and Gert has the right to sell the home once the insurance pays to rebuild the home. c. is terminated by operation of law. d. none of the above. 112. An agency would be terminated in which of the following ways: a. lapse of time or expiration of its term. b. full performance. c. death of the agent. d. all of the above. 113. Joe wants to go into the business of construction contracting. Among the reasons that would probably convince Joe to set up his business as a sole proprietorship would be: a. ease of creation and centralized decision making. b. its limited liability nature. c. its perpetual existence. d. all of the above. 114. Kelly, the owner of Llama Farms, a sole proprietorship, wants to obtain additional business capital but does not want to lose control of the business. This can best be accomplished by: a. selling the business.37 b. issuing stock. c. bringing in partners. d. borrowing funds.38 115. Jim organized and operates, Jim’s Landscaping Service. Jim did not do anything formal to create his business, the law would consider him: a. a sole proprietorship. b. a corporation. c. a partnership. d. a limited liability company. 116. Guy and Hanna do business as G-H Associates. If G-H is a partnership, it is governed by the Uniform Partnership Act: a. only in the presence of an express partnership agreement. b. in the absence of an express partnership agreement. c. under all circumstances. d. none of the above. 117. Sonny and Tyler agree while talking on the phone to form a partnership. Their partnership agreement is legally binding: a. only if a third person knows of the agreement. b. only if the agreement is reduced to writing. c. only if the parties exchange valid consideration. d. without more. 118. An action in which a court disregards the corporate entity and holds the shareholders personally liable for corporate debts and obligations is known as: a. respondeat superior. b. piercing the corporate veil. c. corporate response doctrine. d. all of the above. 119. Tyler and Joe open up Exotic Cuts, an upscale barber shop in the suburbs. They do not enter into an express partnership agreement. Tyler puts in $50,000 to start the business and Joe is the trained stylist who does all of the haircuts. Assume that the business is very successful, how would the profits be divided? a. since Tyler put in most of the money, he is a controlling partner and would be entitled to more of the profit. b. the profit in a business is not distributed to the owners. c. the profit would be split between the partners. d. none of the above.39 120. Refer to fact pattern 119 above. Now assume that the shop is getting busy and they decide to hire another stylist, Jane (as an employee). On Jane’s first day she trips while cutting Jason’s hair and accidentally stabs him in the neck. Jason is severely injured, sues Exotic Cuts and gets a judgment in the amount of $200,000. Whom may Jason attempt to enforce the judgment against? Cuts I. the assets, cash and any insurance policies of Exotic II. Tyler’s personal assets III. Joe’s personal assets IV. Jane’s personal assets a. I only. b. II only. c. I, II, and III. d. I, II, III, and IV. e. none of the partners are liable for the Jane’s negligence. 121. Refer to fact pattern 30 above. Now assume that prior to hiring Jane, Exotic Cuts brings on Steve as a limited partner. Steve infuses $20,000 of much needed cash into the business for a 5% share of Exotic Cuts. Whom may Jason attempt to enforce the judgment against now? Cuts I. the assets, cash and any insurance policies of Exotic II. Tyler’s personal assets III. Joe’s personal assets IV. Steve’s personal assets a. I, II, III, and IV as all partners are jointly and severally liable. b. I, II, and III only as only the General Partners are jointly and severally liable. c. I only as this is a limited partnership and no partners are liable beyond their initial contribution. d. I and II as only Tyler is the General Partner because he contributed all of the capital funds to start the business. e. none of the partners are liable for Jane’s negligence. 122. Rick and Sandy are limited partners in Total Profit Enterprises, a limited partnership. A limited partner has NO right to: a. acquire an interest in the firm. b. contribute property to the firm. c. engage in activities independent of the firm’s business. d. participate in the firm’s day to day management.40 123. QuizBooks LLC is a limited liability company. Like any other LLC, which of the following are characteristics of the LLC business form: I. members are not personally liable for debts/obligations of the LLC II. LLC can choose to have “pass-through” taxation III. members are personally liable for the debts of the LLC IV. Articles of Organization must be filed with the state in which they choose to organize a. I only. b. II and III only. c. I, II, and III only. d. I, II, and IV only. 124. Tony is the sole shareholder of O.K. Oil Corporation. Tony uses O.K.’s funds to pay his personal expenses, to create Pure Fuel Corporation to engage in the same business as O.K. Oil, and transfers all of the assets of O.K. Oil to Pure Fuel. Tony then files/petitions O.K. Oil into bankruptcy. This would most likely warrant: a. a huge bonus for his creative financial maneuvers. b. a valid discharge of all O.K.’s debts in bankruptcy. c. a piercing of O.K.’s corporate veil to seek enforcement of liability against the shareholder, Tony. d. none of the above. 125. The single greatest feature of a corporate business structure is: a. limited liability for its shareholders. b. joint and several liability for its shareholders. c. double taxation. d. “pass-through” taxation.