Business Law 241
Winter 2003
Final Examination
Name____________________
Open Book Open Note Exam
Choose only one of the four alternate answers for each question.
1.
Paul Punk, a 16-year-old, leaves his parents' home and rents
an apartment. He needs a car for his job and buys a used
auto from Honest Howard, paying fair market value. After an
accident, while still 16 years old, he returns the wrecked
vehicle and demands a refund of the purchase price. Does
Howard have to refund the entire purchase price?
a.
Punk, a minor, can disaffirm a sale and Howard's must
refund the entire purchase price.
b.
Howard can refuse to refund the money until Punk is 21,
giving him an opportunity to affirm the sale.
c.
Punk cannot obtain a refund of the entire purchase
price because the car is a necessity.
d.
Howard must refund the entire purchase price but can
sue Punk after he reaches the age of majority.
2.
Frank Feeble suffers from mental problems. A court
determines that Feeble is insane and appoints Carl Competent
as his guardian. Feeble buys a Suicide Sports car from
Kervorkian Motors after the court has appointed Carl as
guardian. Carl discovers the purchase. Can Carl obtain a
refund for Feeble?
a.
Carl can obtain a refund if he can prove that Feeble
was incompetent at the time of the sale.
b.
Carl can obtain a refund because he did not approve the
sale.
c.
Carl cannot obtain a refund because Feeble ratified the
purchase.
d.
None of the above are correct.
3.
Slick takes Sam Subdivider to dinner, buys him several
drinks. Sam develops a blood alcohol level of .15. Sam,
knowing that he is signing a contract, agrees to sell a lot
to Slick at a 33% discount because Slick is a good guy. One
week later, Slick and Sam have an argument and Sam decides
to rescind the contract. May he do so?
a.
Yes, he was drunk.
b.
No, he knew what he was doing when he signed the
agreement.
c.
Yes, because the doctrine of ratification does not
apply to sales to intoxicated persons.
d.
No, because the doctrine of contributory negligence
bars recovery of the purchase price.
4.
Salesperson knows that he is selling a stolen TV set to
Innocent Ike but says nothing. Ike doesn't know that it was
stolen and would not have purchased it if he had known. Ike
a.
can win a lawsuit against Salesperson for fraud.
b.
cannot win a lawsuit for fraud because Sam did not say
that he owned the set.
c.
cannot win a lawsuit for fraud because he could not
justifiably rely on Ike's silence.
d.
Both (b) and (c) are correct.
5.
An attorney advises a client to file a lawsuit that the
attorney knows is groundless. The client does not know that
the lawsuit is groundless. Can the client refuse to pay his
attorney's bill if he loses?
a.
No, because he was negligent for failing to get a
second opinion.
b.
Yes, because he was a victim of undue influence.
c.
Yes, on grounds of duress.
d.
No, he must pay the bill.
6.
Heifer Haye hires I.M. Trickee to defend her on charges of
possessing an assault rifle knowing that Trickee is a recent
law school graduate who has not passed the bar exam.
A
jury acquits Heifer. Must Heifer pay Trickee?
a.
Heifer must pay because Trickee obtained a good result
for her despite his unlicensed status.
b.
Heifer must pay because the object of the agreement was
the performance of legal services and the statute is a
mere revenue raising device.
c.
Heifer has no duty to pay because this was a contract
that violated a statute designed to protect the public.
d.
Heifer has no duty to pay because licensing statutes do
not protect the public and only serve to limit
competition.
7.
Bovine Byproducts leases an office building from Sam
Slumlord. The lease states: " This lease ends October 1,
1998). This clause contains\
a.
a condition precedent.
b.
a concurrent condition.
c.
a condition subsequent.
d.
no condition.
8.
Monsoon Car Wash is washing vans for Clern Jean's Janitorial
Service under a contract with the following clause: "Monsoon
will wash C.J.'s vans for $5 each unless the minimum wage
increases." This clause contains
a.
a condition precedent.
b.
a condition concurrent.
c.
a condition subsequent.
d.
no condition.
9.
A contract between Clean Jean's Janitorial Service and
Monsoon Car Wash has a clause which read "C.J. will pay
Monsoon's invoice on the 15th of the month provided that
Monsoon's invoice is received no later than the 5th of the
month." This clause contains
a.
a condition precedent.
b.
a condition concurrent.
c.
a condition subsequent.
d.
no condition.
10.
Necrosoft hires Lucy's Landscaping Service to water the lawn
and shrubs at its headquarters on a weekly basis.
One of
Lucy's employees fails to water a shrub. The shrub is not
harmed and is watered the following week. Lucy
a.
substantially performed and committed a minor breach of
contract.
b.
performed in an inferior manner and committed a major
breach of contract.
c.
can only collect the reasonable value of its services
from Necrosoft.
d.
Both (b) and (c) are correct.
11.
You hire a contractor to build a house, delivery to occur on
September 1.
On September 1, the contractor gives you the
keys, says that he is done, and you inspect the house. You
discover that one of the recessed lights in the kitchen lacks
a light bulb. You must pay the contractor
a.
the contract price.
b.
the contract price less your damages.
c.
the reasonable value of his work.
d.
nothing;
a breach of contract excuses the nonbreaching party from paying any sum to the breaching
party.
12.
You order 10 bottles of champagne for delivery on March 1 to
celebrate the anticipated victory of your basketball team
"The Stallions" in the intramural championship game.
The
Stallions lose to their opponents, "The Crappers."
The
champagne is not delivered on March 2. This is
a.
a violation of the perfect tender rule and a breach of
contract.
b.
substantial performance.
c.
inferior performance.
d.
an example of discharge by frustration of purpose.
13.
You order a case of champagne for delivery no later than
11:00 p.m. on March 1 to celebrate the anticipated victory of
your basketball team "The Stallions" in the intramural
championship game. The Stallions lose to the “Crappers” and
the champagne is delivered at 11:30 p.m. You
a.
can keep the champagne and refuse to pay for it
b.
must pay for the champagne.
c.
must pay the reasonable value of the champagne.
d.
can keep the champagne and pay the contract price minus
any damages caused by the late delivery.
14.
Necrosoft hires Lucy's Landscaping Service to maintain the
grounds of the corporate headquarters.
One of Lucy's
employees fails to water the lawn and the grass turns dies,
which is below industry standards. Lucy
a.
substantially
performed
and
did
not
breach
the
contract.
b.
performed in an inferior manner and committed a major
breach of contract.
c.
can only collect the reasonable value of its services
from Necrosoft.
d.
Both (b) and (c) are correct.
15.
Elmer Entrepreneur sells his business to Bob Beginner. Bob
agrees to pay Elmer $1000 per month for 20 years.
Elmer
sells his right to receive contract payments to Irwin
Investor. Elmer
a.
assigned his interest to Investor.
b.
delegated his interest to Investor.
c.
neither assigned nor delegated his interest because he
did not notify Bob of the sale.
d.
created a novation.
16.
Mutton has a contractual right to have Ace paint her house in
Ellensburg. She sells her right to Barracuda Bank, which is
located in Miami, Florida. Ace
a.
can refuse to paint Barracuda Bank because the
assignment materially increases Ace's burdens and
costs.
b.
must paint Barracuda Bank unless his contract with Ace
contained an anti-assignment clause.
c.
can refuse to paint Barracuda Bank unless Mutton
delegates her duty to pay Ace to the Bank.
d.
must paint Barracuda Bank even though he has no
contract with the bank.
17.
Loanshark Bank loans money to Porker so Porker can buy a new
car. Loanshark then sells its right to receive payments from
Porker to Usury Inc.
Porker is unaware of the transaction
and pays Loanshark. Which statement is correct?
a.
b.
c.
d.
Porker will not have to pay Usury.
Usury has a right to recover Porker's payments from
Loanshark.
Porker will have to pay Usury but can recover the sums
he paid Loanshark.
Both (a) and (b) are correct.
18.
Stu Dent contracts for intramural uniforms from Pro
Enterprises.
Pro hires Veteran Inc, an equally qualified
manufacturer to produce the uniforms for it. Pro
a.
assigned its duty to Veteran.
b.
delegated its duty to Veteran.
c.
engaged in a novation.
d.
engaged in an assignment and a novation.
19.
If Far Out contracts with Art Ave for a jet engine overhaul,
Ave hires Mike Mechanic, a licensed jet engine mechanic, to
perform the overhaul, and the overhaul is not done, Far Out
can recover damages from
a.
Ave only.
b.
Mechanic only.
c.
both Ave and Mechanic.
d.
no one.
20.
Slick agrees to paint your house. He delegates his duty to
Latex, an experienced painter.
When Latex appears at your
house,
a.
you can refuse to let him fulfill Slick's contract.
b.
you must let him paint the house and have to pay
Slick's bill.
c.
you must let him paint your house but do not have to
pay Slick's bill.
d.
you can sue Slick for breach of contract.
21.
Homeowner hires Papel to hang wall paper.
Papel retires.
Homeowner, Papel, and Colgador agree that Colgador will do
the work and that Papel has no further responsibilities to
Homeowner.
The agreement discharging Papel from his duty
constitutes
a.
an assignment.
b.
a delegation.
c.
a novation.
d.
none of the above.
22.
As a birthday gift to his son Punk, Harold Homeowner hires
Larry Landscaper to mow and water his son Punk's lawn. Punk
a.
is an intended donee beneficiary of the Harold-Larry
contract.
b.
is an incidental beneficiary of the Harold-Larry
contract.
c.
is a creditor beneficiary of the Harold-Larry contract.
d.
is not a beneficiary of the Harold-Larry contract.
23.
Habitat for Humanity, as an act of charity, contracts with
Buff Building Materials for lumber that they will use to
build a house for Paula Pobre, a homeless person.
The
loggers who cut the timber that is milled into the lumber are
a.
intended donee beneficiaries.
b.
intended creditor beneficiaries.
c.
intended beneficiaries.
d.
incidental beneficiaries.
24.
Freako Bray builds its only corn chip factory in a flood
plain.
A flood shuts down the factory.
Purchasing
substitute chips to satisfy its obligations would bankrupt
Freako. Freako's obligations
a.
are discharged by impossibility of performance.
b.
are discharged by commercial impracticality.
c.
are discharged by frustration of purpose.
d.
are not discharged.
25.
If the owner of Grappo vineyards dies after promising to
personally appear in television commercials advertising Loca
Mula wines, the owner's estate has
a.
a duty to hire a replacement to appear in the
commercials.
b.
no duty to provide because the duty of Grappo's
deceased owner is discharged by impossibility of
performance.
c.
no duty to hire a replacement because the owner's death
means that it is impractical to make the commercials,
creating
a
discharge
on
grounds
of
commercial
impracticality.
d.
Both (b) and (c) are correct.
26.
Airbust Corporation and Crash Airways agree that Crash will
purchase an Airbust model 30 jet aircraft for $50 million.
Crash breaches the contract and Airbust is forced to sell the
jet for $45 million because of a downturn in the industry.
Airbust's compensatory damages are
a.
$50 million.
b.
$95 million
c.
$5 million.
d.
$45 million.
27.
George Grappo has a contract to deliver 10,000 tons of grapes
to Loca Perra Winery for $100 per ton. Loca fails to tell
Grappo that a breach of the contract will cost Loca a
$1,000,000 penalty for failing to meet a delivery timetable.
Grappo breaches and Loca pays the penalty. Grappo owes Loca
a.
the difference between the price of substitute grapes
and $100 per ton.
b.
$1,000,000.
c.
(a) plus (b).
d.
punitive damages.
28.
Necrosoft and Bowling agree that damages for late delivery of
software will be $10,000 per day. If this sum was reasonably
related to actual damages, the sum of $10,000 would be
a.
compensatory damages.
b.
reasonable damages.
c.
liquidated damages.
d.
consequential damages.
29.
If Bowling sues Necrosoft and proves a breach of contract but
fails to prove damages, the court should award
a.
nominal damages.
b.
specific performance.
c.
recision and restitution.
d.
reformation.
30.
Necrosoft and Bowling Corp. contract for inventory control
software. The sales price is 2.5 million dollars. Necrosoft
fails to provide the software and Bowling buys comparable
substitute software for $3 million. Punitive damages
a.
are not available for breach of contract and therefore
cannot be recovered.
b.
of $5.5 million are recoverable.
c.
of $3.5 million are recoverable.
d.
of $500,000 are recoverable.
31.
Specific performance would be an appropriate remedy if
a.
a buyer of real property refuses to pay the promised
sales price to the seller.
b.
a professor refused to honor his contract to teach at a
university.
c.
the parties to the sale of a business knowingly
negotiate an invalid covenant not to compete.
d.
a seller refused to honor his contract to sell the pen
that Joseph Stalin used to sign the Treaty of Yalta.
32.
An injunction would be an appropriate remedy if
a.
Necrosoft's Director of Marketing breached his contract
with the company by leaving his employment before the
contract expired.
b.
Necrosoft's Director of Marketing induced the company
to hire him by lying on his resume.
c.
Packard Hell breaches its contract to deliver computers
to Jurassic Bank.
d.
Necrosoft refuses to allow its Director of Marketing to
exercise his option to purchase company stock.
33.
Necrosoft and Smart & Trickey & Corte (a law firm) contract
for development of billing software for the sum of $3000. A
typographical error causes the sum to read $30,000 and
neither party notices it when it is signed. If Necrosoft
insists on the $30,000 price and litigation results,
a.
Smart & Trickey & Corte can obtain reformation.
b.
Necrosoft can obtain specific performance.
c.
Necrosoft can obtain compensatory damages of $30,000.
d.
Necrosoft can obtain punitive damages.
34.
Slick sells a vacant building lot to Ron Rube. Rube pays for
the lot with a check containing the notation "lot purchase."
Slick endorses the check, deposits it, and sends Rube a note
stating, "Thank you for your check."
Can Rube enforce his
contract with Slick?
a.
The Statute of Frauds prevents Rube from enforcing this
contract.
b.
The canceled check constitutes a writing that satisfies
the Statute of Frauds.
c.
The canceled check and Slick's letter constitute a
writing that satisfies the Statute of Frauds.
d.
The doctrine of partial performance makes the contract
enforceable despite non-compliance with the Statute of
Frauds.
35.
Slick orally orders 10,000 sweatshirts at a price of $1 per
sweatshirt. The sweatshirts contain his company's logo and
motto, "Slickest operator in town." The manufacturer makes
the sweatshirts.
Does the Statute of Frauds prevent
enforcement of the agreement?
a.
No. This agreement is not within the Statute of Frauds
because no individual sweatshirt has a value in excess
of $500.
b.
No.
This agreement can be enforced because the items
are specially manufactured and cannot be easily resold.
c.
No. The bill that the manufacturer will mail Slick is
enough of a writing to make the agreement enforceable.
d.
Yes.
This contract cannot be enforced because its
value exceeds $500.
36.
Slumlord telephones Apollo Pumps and orders a $600 pump for
the swimming pool at his apartment complex.
Slumlord will
install the pump. Apollo agrees to deliver it but does not
do so, raising the Statute of Frauds as a defense.
Can
Slumlord enforce the contract?
a.
Slumlord can enforce the contract because this type of
contract does not have to be in writing to be
enforceable.
b.
Whether Slumlord can enforce the contract depends on
whether both he and Apollo are merchants.
c.
Slumlord can't enforce the contract because he did not
send a confirming memorandum within 10 days.
d.
Slumlord can't enforce the contract because contracts
for this amount of tangible personal property must be
in writing to be enforceable and none of the exceptions
apply.
37.
On April 1, 1994, Slumlord orally agrees to a pool
maintenance contract with Cleanser Inc. whereby Cleanser
agreed to maintain the pool for the for a six month period
beginning on May 1, 1994. If Cleanser does not perform the
agreement,
a.
the Statute of Frauds will prevent Slumlord from
recovering his damages.
b.
Slumlord will be able to recover his damages despite
the Statute of Frauds because the period of required
performance does not exceed one year from the date of
the formation of the contract.
c.
whether Slumlord can recover depends on whether the
value of the contract exceeds $500.
d.
Slumlord can recover because this is a services
contract to which the Statute of Frauds does not apply.
38.
Dutiful Daughter decides to open a law office. She arranges
a $50,000 line of credit at Good Old Boys Bank. The bank is
reluctant to extend her credit but does so after Good Old
Dad, a valued customer, writes the bank and promises to pay
if Daughter doesn't. If Daughter doesn't repay, the bank
a.
can enforce Dad's promise because he is a surety.
b.
can enforce Dad's promise because the bank has
partially performed.
c.
can enforce Dad's promise because
it is a guarantee
and in writing.
d.
cannot enforce Dad's promise because the line of credit
exceeds $500.
39.
Professor N. Adaze backs his car out of his parking space
behind the Student Union without checking his rear-view
mirror, striking Arnold Swartzenbegger who is walking
through the lot. Adaze could have seen Arnold if he had
looked. What tort, if any, has Professor Adaze committed?
a.
none
b.
battery
c.
assault and battery
d.
negligence
40.
Professor N. Adaze backs his car out of his parking space
behind the Student Union without checking his rear-view
mirror, striking Arnold Schwartzenbegger. Scwartzenbegger
tries to hit Adaze with his fist. Adaze jumps backwards in
fear and Scwartzenbegger misses. Scwartzenbegger committed
a
no tort.
b
assault.
c
battery.
d
negligence
Answer Key, Winter 2003, Second Exam
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
c
b
b
a
b
c
d
c
a
a
b
a
d
d
a
a
d
b
c
b
c
a
d
d
b
c
a
c
a
a
31
32
33
34
35
36
37
38
39
40
d
a
a
a
b
d
b
c
d
a