Business Law - Exam 2 Practice Questions

A collection agency threatened to sue Martha for the unpaid hospital bills from her heart operation. She signed a promissory note at a high but not illegal rate of interest. What result?

Tommy's parents died in a plane crash and he went to live with his guardian, Aunt Rose. Rose had a very small house and did not have a separate bedroom and bath for 12-year-old Tommy. She and Tommy decided to use some of his inheritance to pay for an addition to the house. He had some shares of stock transferred into Rose's name so that she could sell them when the money was due to be paid. The stock transfers are:

Eliza was an antique expert. She went to a tea party at Grandma Jones' house and saw a magnificent Queen Anne table out on the back porch. She asked Grandma about it and was told it was in the way so they were going to store it in the barn. Eliza offered to buy it from her for $200. The next week, Grandma saw it in Eliza's store on sale for $3,000. Which of the following is true?

James threatens to hit Kenneth on the head with a baseball bat unless Kenneth signs a contract agreeing to pay James $300 for his latest painting. Because of the threat, Kenneth signs the contract.

During a visit to Joe's Jewelry, Patrick looked at a watch that appeared in every way to be a Rolex. Having no reason to believe that this watch was not a Rolex, Patrick paid $2,000 for the watch. Later, Patrick discovered that the watch was a fake Rolex. Patrick can:

Larry and Fred had been negotiating for a landscaping contract for Fred's business. Larry began by offering to do the work for $6,000 and they had been talking about doing a little less work for around $5,000 in their most recent discussions. Finally, Fred called Larry and said that he was going to be off in the foreign office for the next month and that he wanted the work to be done while he was gone; he'd send over a contract the next day on his way to the airport. The contract arrived, stipulating payment of $15,000 for the work that had been discussed. Larry decides to go ahead and do the work. When Fred gets the bill for $15,000 a month later, he

A contract was made for 125 bales of cotton to arrive on a ship named "Peerless" from Bombay. Unbeknownst to either party to the contract, there were two ships named "Peerless," both of which were sailing from Bombay. One sailed in October and the other in December. The buyer had in mind the ship sailing in October, but the seller had in mind the ship sailing in December. Each party held his belief in good faith. When the goods failed to arrive on time, the buyer sued for breach of contract.

Sam wants to sell his Golden Retriever dog to Jordan. Sam tells Jordan that the dog is three years old and that he will point, back, and retrieve. Although the dog is three years old and will point at birds, he will not back (honor another dog's point). Al relies on these statements and purchases the bird dog. The buyer has most probably been a victim of:

Tom tries to sell his Aston-Martin to Victoria for $12,000. Tom tells Victoria, "I paid $12,000 for the car in 1978 and it's worth twice that today." Tom really paid $8,000 for the car in 1978. If Victoria buys the car, basing her decision on Tom's statement, which of the following correctly states the situation?

Kyle wants to buy a six-passenger car. The salesperson tells him that the two-seat sports car Kyle sees on the car lot would be just perfect for six people. Kyle test drives the car and then buys it.

David offers to sell Elmer a house located in another state. Elmer accepts the offer and agrees to buy the house. Unknown to either party, the house has been destroyed by a tornado.

Jason agrees to sell to Barbara a vacant lot adjoining a house which he owns. The vacant lot is "Lot 2, block 1," and the house is located on "Lot 1, block 1." When the typist types the contract, she mistakenly types "Lot 1, block 1" on the contract. Neither Jason nor Barbara notices the error when they read the contract.

Stewart entered into a contract with Will to have Will build a 10-unit apartment complex on Elm Street in Randolph County. Unknown to both parties, this land had recently been rezoned and only single-unit dwellings can be constructed.

Steven has a typed copy of a contract, which he would like to have Thomas sign. Thomas, who needs glasses to read typing, doesn't want to sign until he has read the document, but Steven convinces Thomas to sign it anyway, because it is a "standard" contract for this type of situation. Is the contract which Thomas signed binding upon him?

Albert found a stone in his yard and took it to Bob, a jeweler, for evaluation. Although Bob knew what the stone was, he told Albert that he wasn't sure as to the nature of the stone, but that he thought it was a topaz. Bob then offered to buy the stone for $25 and Albert agreed. Later Albert found out the stone was an uncut diamond worth about $700.

Fred is a concert violinist who is scheduled to perform at Carnegie Hall for the first time. He buys what he is told is a Stradivarius violin from a well-known, reputable dealer in quality violins, and he pays the going rate for a Stradivarius. He later learns the violin is an imitation, although it is such a good imitation that even the dealer thought it was authentic.

Jill contracts to purchase Kevin's automobile under the belief that she can sell it at a profit to Linda, but after Jill has bought the car, she finds out that Linda isn't interested in buying it.

Alex wants to submit a bid on a city sewer project. He computes the cost, but mistakenly omits the cost of one item. Accordingly, he submits a bid of $430,000 to the city. The next highest bid is $675,000, and the rest of the bids are even higher. The city is happy to have such a low bid, so it accepts Alex's bid and awards him the contract for the job, even though the city engineer is of the opinion the job cannot be done for less than $650,000.

Ralph sold a motel to Steve by stating that he had paid $250,000 for it and that his net average annual profit from the business has been $40,000. In reality he paid $100,000 for the motel and has earned a net average annual profit of only $30,000. Steve made no attempt to verify the statements until after the transaction was completed.

The State of Florida enters into a contract with Treasure Salvors governing the salvage of a Spanish galleon that sunk in the 1600's. Under the terms of the contract, the salvagers agree to relinquish 25% of the items recovered to the State of Florida in return for the right to salvage on state lands. At the time the parties enter into the contract, they both believe that the seabed where the ship lies is state land. Subsequently, the United States Supreme Court holds that the continental shelf on which the ship rests has never been owned by Florida. The salvagers sue to rescind the contract.

Aunt Ellie promises her 21-year-old nephew, Robbie, that she will pay him $100 if he quits smoking for a month. If Robbie does, is there a binding contract?

Janet promises Eli $4,000 for one of his original paintings on the condition that she receive $5 million from her mother's will.

Stan purchased 400 pairs of gloves from Isaac at a contract price of $800. Fifty of the gloves were defective, and a dispute arose as to the amount due and owing under the contract. Stan refuses to pay the $800, and Isaac is threatening to sue. Which of the following is correct with regard to this transaction?

Marilyn contracted with Bravo Builders to build an addition to her house for $15,000. After digging the foundation, Bravo decides that it will take more work and more concrete than it had originally thought and that it will need to charge an additional $5,000 for the job. Assuming Marilyn agrees, which of the following is correct?

Carlos ordered an aluminum storm door from Sears for $249.99. Before it was delivered, Sears ran an ad in the paper for the same storm door at $179.99. Carlos calls Sears and demands the advertised price. They say okay.

Mary agrees to sew Georgia's prom dress for $50 plus costs. Georgia decides that she wants ruffles around the neck and calls Mary who says it will now cost $60. When Mary finishes the dress (with ruffles), Georgia must pay:

Sue owes $5,000 to the First National Bank for a student loan which will come due on January 1 next year. She has been offered a two-year graduate fellowship, but she will not be able to pay the loan back if she accepts the fellowship. The bank manager tells Sue that if she pays $3,000 now, they will forgive the loan. Should Sue accept the offer?

Jack moved from New Hampshire to Florida and decided to have an air conditioner installed in his car. After it was installed, Jack received a bill for $1,200. Jack called the dealer and told him he'd never heard of this service costing more than $500. They argued, but the dealer finally agreed to take $900. Is the agreement enforceable?

Wayne helped Hank study all night for an important exam. After Hank got an A on the exam, he told Wayne, "I will give you $10 for helping me get a good grade." Wayne said, "Thanks, I'll take it."

Mark paid off his brother Steve's debt to the loan shark on condition that Steve wouldn't be contacted by the loan shark for payment. The loan shark says that he doesn't have to honor that promise because Steve didn't pay. Mark would help his cause by accurately pointing out which of the following to the loan shark?

Alice says to Brian, "If I decide to buy a word processor next year, I will buy it from you." This is an example of:

Nancy, who lives in Birdville, wants to open a McHenry Roast Chicken franchise. Mark, a representative of McHenry, told Nancy, "If you will buy a lot and build a building in River City, we will give you a franchise." Nancy bought the lot and built the building as instructed, only to discover that McHenry had awarded the franchise to a large corporation. McHenry claims no liability to Nancy since there was no consideration. Which statement is most accurate?

Darla offers to pay Edward $6,000 for Edward's car, provided that Darla receives that much from her uncle's estate, which is currently being probated. She expects to know for sure how much she will receive within a week or so.

Jason's mother would like him to go to college, so in June he enrolls at State University. He also quits his job and tells his mother his plans to continue taking classes. His mother says, "I'm so happy that you are going to college that I want to pay for your books." Jason then sends her a bill for $485. Which of the following is true regarding his mother's promise?

A bank robbery has occurred, and the banker's association has offered a $1,000 reward for information leading to the arrest and conviction of the robber. Several people are claiming to be entitled to the money. Which of them is eligible?

Andrew agrees to paint Betty's house for $500. Two days after he starts the job, he decides that $500 isn't enough money. He refuses to finish the job unless Betty agrees to pay him $100 more. What law applies to this fact situation?

William agrees to drill a well up to 200 feet deep for John's rural cabin. The contract price is $3,000. After drilling 100 feet, William strikes solid granite rock. He talks to John and explains that this is highly unusual for the area and could not have been anticipated at the time of entering into the contract. He offers to get a special drill, but says it will cost him more money, so that he will be unable to complete the project for the agreed price. Because John is anxious to have the well, he agrees to pay William an additional $1,000 to complete the job. However, once the well is finished, he changes his mind and now says he will pay only the originally agreed-upon amount.

Barbara, a wealthy widow, promises the pastor of her church that she will donate $10,000 to the church to help pay off its mortgage if the stewardship committee can obtain enough pledges for the balance of the $30,000 mortgage. Other pledges are obtained to pay off the mortgage, but now Barbara has changed her mind and plans to take an around-the-world cruise instead.

Doug obtains an exclusive franchise to sell widgets for the Acme Widget Company. The exclusive franchise covers the entire State of Wisconsin for a period of three years.

Tyler contracts to build a garage for Wilbur for a price of $6,000. Because of an increase in the cost of labor and materials, Tyler refuses to perform. Wilbur wants the garage, so he agrees to pay an additional $500.

Nell gives Al $50 in return for Al's promise to defame Sara. Nell hopes to ruin Sara's chances at a promotion. Nell finds out that Al did not hold up his end of the agreement. Which of the following statements are true?

Claudia sells her highly successful hair salon to Carl. In the sales contract, Claudia agrees never to open a hair salon in the state. Which of the following best describes this contract clause?

Don has an employment contract with Dunkirk Ice Cream. He sells ice cream and novelty ice cream products. He has nine children and doesn't make enough money, so he decides to see if Sealtest will hire him, too. "After all," he reasons, "most stores carry four or five different brands." His employment contract prohibits him from competing. If Don sells for Sealtest too, will he be in trouble under his contract?

William recently sold his successful business to Janice. The contract for the sale contained an unreasonable restriction that did not allow William to open a similar business for fifteen years. The courts would, in this instance,

Divided Parcel Service includes the following on its mailing receipts: "We are not responsible for any damages to packages whether or not through the fault or negligence of our employees. Send packages at your own risk." Mary reads this clause but sends her watch back to Bulova Co. to be repaired anyway. The watch is destroyed when the DPS driver uses the package for a ball and tosses it to his buddy. Mary is:

Glen, acting as real estate agent for James, sold one thousand acres of land to a buyer in New Orleans. Two hundred acres of the land are in Texas and eight hundred acres are in Louisiana. Glen's commission on the transaction is $15,000. If Glen is licensed as a real estate agent in Texas, but not Louisiana, he is:

John operates a small repair business and is in desperate need of a certain type of building material. He obtains the material from a large corporation, but is charged a grossly unreasonable price and is forced to buy other material he does not need. In view of the buyer's unequal bargaining power and unreasonable terms of the contract, this may be a case of:

Andrew owns a store in Polk County. His trade extends throughout River City, but not beyond the county limits. He sells his store to Betty and, as part of the transaction, agrees not to engage in the same business anywhere within the state for a period of three years.

Andrew owns a store in Polk County. His trade extends throughout River City, but not beyond the county limits. He sells his store to Betty and, as part of the transaction, agrees not to engage in the same business anywhere in River City for a period of five years.

Sarah is working hard on the mayoral campaign of Timothy. She thinks that just a few more votes could win the election, so she promises to pay her friend Violet $50 to register and vote. Violet does so, but Timothy loses the election, and Sarah now refuses to pay.

Patrick agrees to sell two different goods to his friend Ron, a retailer. One item is legal, and one item is illegal. The contract price is $2,000.

A major distributor of popular sportswear offers a franchise agreement to retail stores. The contract is prepared on a standard form and offers terms on a take-it-or-leave-it basis. Such a contract is called:

Elmer promises to pay Fred $100 if Fred will register and vote in the next election as a Republican.

ABC, Inc. entered into a contract with Scott, an agent, under the terms of which Scott would receive $20,000 if he stole trade secrets from the leading competitor of ABC. Scott performed his end of the agreement by delivering the trade secrets. ABC now refuses to pay Scott for his services.

Bill bets his friend $100 that the Vikings will win the next Super Bowl.

Carl and Rob are both engaged in road construction work. They know that several jobs are going to be up for public bids, and agree between themselves that Carl will bid on one job and Rob will bid on the other, so that they both have work for the summer. When the bids are opened, Carl realizes that Rob has bid on both jobs. Rob is awarded both contracts. Carl now wants to sue Rob for breach of contract.

Al has a tax service and accounting business in Redwood City. He decides to move to Center City, which is 150 miles away and sells his accounting practice to Able and Baker, a CPA firm. In the sales contract, he agrees that he will refrain from practicing accounting anywhere within a 20-mile radius of Redwood City for a period of five years. However, on weekends he returns to his house in Redwood City, and when clients call him, he meets with them in his home.

Theresa is a travel agent at the Fly Away Travel Agency. She has signed an agreement with her employer which prohibits her from working in any similar business in any town within a 100-mile radius of where she works. If she wants to quit her job and go to work for another travel agency, it is likely that:

Anna is 88 years old and under the legal guardianship of her daughter. One day Anna receives a telephone call from a health insurance salesman and purchases a $400 a month Medigap insurance policy.

Fay, age 17, ordered a pair of skis on the installment plan. She paid $20 every month until she turned 18, the age of majority. The next day, she sold them to Sharon and disaffirmed the contract. What result?

Ann, a minor, disaffirmed her agreement to buy $127 worth of cosmetics from Facial Glo Company. She had used up all the eye shadows, lipsticks, and powders. The general rule is that:

Mary, age 17, sold Mark, age 22, the briefcase she got for graduation. Mark's father liked it and bought it from him. If Mary decides to disaffirm the contract, will Mark's father have to return the briefcase to her?

Chris, a 17-year-old college freshman, signed the agreement that he would be responsible for damages to the athletic equipment caused by his negligence. If he slams a tennis racket into the ground and breaks it, will Chris be liable for his negligence?

Tim, who is a minor, enters into a contract with Violet, who is an adult. Which of the following is correct?

Don, a minor, contracts to sell a car to Jerry, who is also a minor. Don reaches the age of 21, as does Jerry. Don takes no action to avoid the contract, but continues to use the car. Which of the following most accurately describes the status?

Steve purchases a four-wheel drive truck from Belk Ford. Steve is only 17 years of age. He wrecks the vehicle and attempts to disaffirm the contract and have Belk Ford repay him all that he has paid. In the majority of jurisdictions, what would happen?

Randy, a minor, buys a new four-wheel drive truck from Jones Ford. Randy sells this truck to his cousin, Steve, who is an adult. Steve conveys this vehicle to Arthur Smith. Arthur does not personally know Steve or Randy. Which of the following expresses the status of this situation?

Robert Briscoe is 17 years old. He lies to Belk Ford in order to induce it to sell him a new pickup. Belk falls for this lie and sells him the pickup. In most jurisdictions, which of the following is correct?

Percy, age 17, purchased a used mobile home from a mobile home dealer for $20,000. This price, however, was twice the reasonable value of the mobile home. One month later, Percy wishes to disaffirm the contract. If the mobile home is considered a necessity, then:

Cheryl, age 16, ordered a new dress to wear to the school prom. She has contracted to pay $500 when the dress arrives. Before the dress arrives, Cheryl decides that the dress is too expensive and now wishes to cancel the order.

Wanda at age 17 purchased an expensive stereo system from Stereo Sales. If Wanda wishes to ratify this contract, Wanda:

Donald, a minor, makes a contract with Albert, an adult, to buy a computer. One week later, Donald has his eighteenth birthday and shortly thereafter tells Albert he will pick up the computer next week.

When a minor falsely advises the other party that he is of the age of majority and based upon that misrepresentation, the other party in good faith enters into a contract with the minor: