Exam 3 - Review Q's

Question 1

Brown’s car broke down and he called AA Towing, Inc., to tow it from its location to a repair show. There is no discussion of a price, and Brown and AA do not sign any documents. After the tow, AA sends Brown a bill. With respect to Brown’s obligation to pay the bill, this:

a) an express contract
b) an implied-in-fact contract
c) an implied-in-law contract
d) no contract

Answer 1

b) an express contract

Question 2

Under the mailbox rule, an acceptance is valid when received. T/F

Answer 2

False

Question 3

Bobby offers to sell his Harley motorcycle for $5,000 to Charlie. Comparing to the prices for similar Harleys, Charlie says, “I won’t pay more than $3,000.” Bobby says, “No way, man.” Bobby’s offer was terminated by:

a) Charlie
b) Harley
c) Bobby
d) Bobby’s offer is still open

Answer 3

a) Charlie

Question 4

An invitation to submit bibs for a construction project is an offer. T/F

Answer 4

False

Question 5

If there is a statute that prohibits a certain action, a contract to do it is unenforceable. T/F

Answer 5

True

Question 6

Max Shephard agrees to sell his pet store to Lacy. As part of the sale, Max promises never to open a similar, competing store anywhere. Max’s promise is most likely:

a) invalid because it is part of a sale of an existing business
b) valid because Jon and lacy apparently have the capacity to contract
c) valid because it is part of a sale of an existing business
d) invalid because of the unreasonable terms of area and time restrictions

Answer 6

d) invalid because of the unreasonable terms of area and time restrictions

Question 7

A court adjudicates Billy mentally incompetent and appoints Grace to be his guardian. Later, without Grace’s knowledge, Billy signs a contract to sell his farm to Sheldon for its market value. The contract is:

a) void
b) enforceable if Billy knew the market value of the farm
c) enforceable if Billy was the legal owner of the farm
d) enforceable if Billy understood the consequences

Answer 7

a) void

Question 8

Hank’s Elevator, Inc. and Crops Co., enter into a contract for Crops to transport a silo of soybeans for which Hank’s agrees to pay. When Crops’s schedule conflicts, the firm contacts RediTransport Company, to which Crops “assigns all rights under the contract.” This transfer is:

a) a delegation only
b) an assignment only
c) an assignment and a delegation
d) neither an assignment nor a delegation

Answer 8

c) an assignment and a delegation

Question 9

Bell, Inc. offers to sell a retail store to Horizon Company. Horizon says that it will pay Bell $500 to hold the offer open for five business days. This:

a) creates a counteroffer
b) makes the offer irrevocable for five days if Bell accepts
c) negates Bell’s offer by changing the price term
d) voids Bell’s offer by extending the time term

Answer 9

b) makes the offer irrevocable for five days if Bell accepts

Question 10

Beachtime Pools, Inc., agrees to build a swimming pool for Candy, but fails to build it according to the contract specifications. Candy hires Do-We Fix-It Company to finish the project. Candy may recover from Beachtime:

a) the contract price less costs of materials and labor
b) the contract price
c) the costs needed to complete construction
d) profits plus the costs incurred up to the time of the breach

Answer 10

c) the costs needed to complete construction

Question 11

Mikayla enters into a contract with Logan to provide surface material for Mikayla’s tennis courts by April 1 for a tournament to begin May 1. The contract specifies an amount to be paid if the contract is breached. This is a liquidated damages clause if the amount is:

a) an excessive estimate of the loss on a breach
b) a reasonable estimate of the loss on a breach
c) designed to penalize the breaching party
d) intended to quickly provide cash to the non-breaching party

Answer 11

b) a reasonable estimate of the loss on a breach

Question 12

Jingles and Bells, Inc. and Celina, Inc., sign a document that states JINGLES AND BELLS, INC. agrees to write ad jingles for Celina, Inc. and Celina, Inc. agrees to pay JINGLES AND BELLS, INC. for the service. JINGLES AND BELLS, INC. and Celina, Inc. have:

a) an express contract
b) an executed contract
c) an implied-in-law contract
d) a quasi contract

Answer 12

a) an express contract

Question 13

Tom enters into a contract with Gerry to provide Tom with a marketing plan for Tom’s business. If Gerry breaches the contract, Tom has a duty to:

a) reduce the damages that Tom might otherwise suffer
b) reduce the loss that Gerry might otherwise suffer
c) punish Gerry and deter others from similar acts
d) take no action

Answer 13

a) reduce the damages that Tom might otherwise suffer

Question 14

Misrepresentation of an opinion is an element of fraud. T/F

Answer 14

False

Question 15

A promise to do something that one has a prior legal duty to do is not consideration. T/F

Answer 15

True

Question 16

Krane contracts to work exclusively for Best Company form November 1 to December 31 for $12,000. On October 30, Best cancels the contract. Krane finds another job for November and December but earns only $10,000. Krane files a suit against Best. As compen­satory damages, Krane can recover:

a) $2000
b) $12,000
c) $10,000
d) none of the above

Answer 16

a) $2000

Question 17

To be legally sufficient, consideration must include something of economic value. T/F

Answer 17

False

Question 18

A bargained-for exchanged is one of the elements of consideration. T/F

Answer 18

True

Question 19

A principal is not liable to a third party for any contract made by the agent acting outside the scope of his or her authority. T/F

Answer 19

True

Question 20

Traders, Inc. hires Bennett to act as its agent to purchase Choco Trade company. Traders tells Bennett to reveal only that he is buying the firm on behalf of a third party, without telling Choco’s seller who that third party is. Traders, Inc. is:

a) a disclosed principal
b) a partially disclosed principal
c) an undisclosed principal
d) an implied principal

Answer 20

b) a partially disclosed principal

Question 21

Jack LaBane hires Kelly to act as his agent to purchase Juice and & Fitness, Inc. LaBane tells Kelly to reveal that she is buying the company on behalf of a third party and to tell Juice’s seller who that third party is. LaBane is:

a) a partially disclosed principal
b) an apparent principal
c) an undisclosed principal
d) a disclosed principal

Answer 21

d) a disclosed principal

Question 22

Hog and Feed Company hires Bart to work on Hog’s shipping dock, accepting deliveries, approving shipments out, check the loading of hogs, and dealing with other companies’ drivers. With respect to Hog, Bart is most likely:

a) an independent contractor
b) an agent
c) a principal
d) a work for hire

Answer 22

b) an agent

Question 23

Subs, Inc. hires Brown to manage one of Sub’s seven shops. Subs agrees to pay Brown a salary, plus commission. Subs outlines the standards that should be followed, the goals that should be attained, and the methods that should be used. Brown is most likely Sub’s:

a) principal
b) independent contractor
c) employee
d) work for hire

Answer 23

c) employee

Question 24

Bret is a sales representative for Grander, Inc. Green is injured through Bret’s negligence. Grander may be liable to Green if Bret’s conduct occurred:

a) in the course and scope of Bret’s employment
b) during normal business hours
c) outside the parties’ employment relationship
d) due to a condition Grander was not and could not have been aware of

Answer 24

a) in the course and scope

Question 25

Smith, 67, grants an ordinary power of attorney to Percy to handle a list of financial transactions on Smith’s behalf. This power will terminate on:

a) any transaction causing a loss to Smith
b) the one year anniversary of the date signed
c) Smith’s sixty-eight birthday
d) Smith’s death or incapacity

Answer 25

a) any transaction causing a loss to Smith

Question 26

Smith and Brown have formed a partnership without a partnership agreement. Brown contributed eighty percent of the partnership capital and does eighty percent of the work. If the partnership earns of profit of $200,000 after its first year, how much of the profit can Brown legally claim?

a) All of it, because he contributed the majority of capital and does the majority of the work
b) $160,000
c) All of it, because there is no written partnership agreement otherwise
d) $100,000
e) $40,000

Answer 26

d) $100,000

Question 27

The Uniform Partnership Act requires that partners have a ____ relationship with the partnership.

a) Principal agent
b) Professional
c) Responsible
d) Fiduciary

Answer 27

d) Fiduciary

Question 28

Financing of a corporation involves:

a) Paying debts
b) Acquiring capital
c) Accounts receivable
d) Retained Earnings

Answer 28

b) Acquiring capital

Question 29

All of the following are forms of debt financing except:

a) Bonds
b) Notes
c) Common stock
d) Loans

Answer 29

c) Common stock

Question 30

A limited partner has the right to participate in the management or operation of the partnership. T/F

Answer 30

False

Question 31

A limited liability company is operated in compliance with state law. T/F

Answer 31

True

Question 32

Which of the following is true about closely-held corporations?

a) Their stock is traded on national or international stock exchanges
b) Their shareholders are considered to be general partners
c) Their stock is held by a small number of people, usually friends of family
d) Their shareholders are not allowed to serve as directors

Answer 32

c) Their stock is held by a small number of people, usually friends of family

Question 33

If preferred stock is convertible, it can usually be converted into

a) Stock dividends
b) Promissory notes
c) Common stock
d) Bonds

Answer 33

c) Common stock

Question 34

What is the best definition of a “proxy”?

Answer 34

Delegation of authority by shareholders to cast a vote

Question 35

Capitol Mortgage, LLC is a limited liability company, which means that unless it chooses otherwise, the firm will be taxed as:

a) a corporation
b) a partnership
c) a joint venture
d) a sole proprietorship

Answer 35

b) a partnership

Question 36

Publicly held corporations are those owned by the government. T/F

Answer 36

false

Question 37

Corporate shareholders generally enjoy all of the following rights except to:

a) vote for directions
b) receive income through dividends, when declared
c) share in net assets upon dissolution
d) receive periodic interest payments

Answer 37

d) receive periodic interest payments

Question 38

What is the best definition of a corporation?

Answer 38

a legal entity that pays taxes, is created by state law, and raises capital by issuing stock to investors

Question 39

All of the following are types of corporations except for which one?

a) General partnership
b) C Corporation
c) Subchapter S
d) Closely held

Answer 39

a) General partnership

Question 40

A partner may use partnership property for any purpose without accounting to the partnership. T/F

Answer 40

False