Business Law 201
Mid-Term Exam Summer 2005
Professor Steven L. Isler
There are 45 questions on this exam and if I were you I would do number one last. You are to
select the best choice given. The exam is not intended to be tricky! You have sixty minutes to
complete it. Good luck!
(1.) Lady Duff Gordon, a British aristocrat, styled herself a creator of fashion. She wanted to
turn this vogue into money so she went to New York and entered into a bargain with a little
man named Otis Wood. The two entered into a formal written agreement by which Lady Duff
made Mr. Wood her exclusive agent for a period of one year to market her apparel in North
America. By the terms of the written agreement Otis promised the following three things:
1. He promised to split any profit that he made fifty-fifty;
2. Second, he promised to account to her once a quarter for any profits; and
3. Third, he promised to protect the integrity of her apparel with copyrights, patents or
trademarks as necessary.
Lady Duff signed this written agreement in New York and then boarded a train bound for Los
Angeles during a period where Rodeo Drive was just a glimmer in a retailer’s eye. Two days
after arriving in Los Angeles, Lady Duff viciously, and premeditatively, breached the
agreement with Otis Wood when she sold her clothing line directly to the public and kept all of
the profits. When Otis found out about it he was mad and filed suit against Lady Duff in New
York which was the jurisdiction where the alleged contract was formed. Mr. Wood sought an
accounting for the profits and requested monetary damages.
Lady Duff Gordon made a personal appearance at the trial and announced that if the trial court
carefully looked at the alleged contract they would see that Otis Wood had not promised her
anything. She said that this was a purely illusory undertaking because:
1. First, Mr. Wood promised to split the profits fifty-fifty but he never promised that
there would be any profits;
2. Second, he promised to account for the profits quarterly, but if he didn’t make any
profits there would be no obligation to account; and
3. He promised to protect her fashions with copyrights and trademarks registrations but
if he did not sell anything it would never be necessary.
Lady Duff then asserted that there was not consideration to the vexatious action brought by Mr.
Wood, a petty colonial. The next day Lady Duff boarded the Lusitania and set sail for the
United Kingdom. Five days later a German U-Boat which was lurking off the coast of Ireland
hit the Lusitania with a torpedo and sunk it. Two years later, Lady Duff shows up in English
case law under completely different set of circumstances as she was the defendant in an
admiralty case. It seems that Lady Duff’s traveling companion, Sir Cosmo, took a lifeboat that
was intended to hold sixty people, and by bribing six members of the crew, Sir Cosmo, Lady
Duff and the six members who accepted the bribe got into the lifeboat along with Lady Duff’s
maid and rowed to safety as fourteen hundred and eighty-three people on the Lusitania sunk to
their deaths.
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Later at Lady Duff’s trial, Lady Duff’s maid testified that as the Lusitania sank Lady Duff
exclaimed “Oh look, there goes my smashing collection of apparel.”
While Lady Duff survived her encounter with the Lusitania, she was not so lucky in the New
York Court because the court accepted Lady Duff’s challenge to review the contract and held
that it was not illusory because the court said “It is implied that both parties would use best
efforts or good faith to achieve a legitimate business objective so there was indeed
consideration.”
With respect to the Court’s decision:
[A] The Court was correct to imply good faith thus there was consideration and Otis can collect
a remedy at law
[B] The court was incorrect as the promises were not illusory and the contract valid
[C] The court was correct under the doctrine of quasi contract and Otis can collect using
equitable principals
[D] The court was incorrect because the promises were clearly illusory
2. To create a legally binding contract, both parties to the agreement must be
[A] able to read and write.
[B] financially responsible people.
[C] of sound mind.
[D] able to speak and understand English.
3. Four essential elements are necessary to create a valid contract. Which of the following is not
one of these elements?
[A] Something of value must be given by each party.
[B] The parties must be competent.
[C] The offeror and offeree must reach agreement.
[D] The agreement must be in writing.
4. Martin promised Bellis $50 if Bellis found and returned Martin’s cocker spaniel. This contract
is
[A] bilateral.
[B] unenforceable.
[C] executed.
[D] unilateral.
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5. Orange orally promises Apple that Orange will pay Apple $10,000 if and when Apple’s
husband “Banana” dies. Banana does not die until four years after the promise.
The above promise is:
[A] enforceable, because viewed as of the moment the promise was made, it was possible that it
could be completed within one year.
[B] unenforceable because it was oral.
[C] enforceable because of the “Main Purpose Rule.”
[D] Unenforceable solely as a matter of public policy
6. Grimes promised to give Marks, his niece, $500 if she (Marks) promised to give up smoking
for six months. Marks did promise to do so. At the end of six months, since Marks did not
smoke, she received the $500 from Grimes. This is an example of an
[A] express, bilateral, executed contract.
[B] express, bilateral, executory contract.
[C] express, unilateral, executed contract.
[D] express, bilateral, quasi contract.
7. Joy promised to pay Toth $150 if he repaired Joy’s computer. Toth repaired the computer but
has not yet been paid. At this point, this contract is
[A] valid, unilateral, and executory.
[B] valid, bilateral, and executory.
[C] valid, bilateral, and executed.
[D] valid, unilateral, and executed.
8. Young offered to sell his boat to Alvarez for $2,000 without knowing that the boat had just
been destroyed. This agreement is
[A] voidable.
[B] unenforceable.
[C] void.
[D] valid.
9. When a client accepts the services of his or her attorney without an agreement concerning
fees to be paid, the agreement to pay the attorney’s bill is
[A] implied in fact.
[B] implied in law.
[C] a voidable contract.
[D] no contract at all.
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10. An executory contract is one that
[A] has been prepared in written form.
[B] will not be enforced by a court of law.
[C] is missing some requirement of the law.
[D] has not been completely performed by all parties.
11. Eve who was eighteen years old looked at Lil Kim who was seven and said “Kim, without
question, the greatest invention in the history of mankind is beer. Oh, I grant you that the wheel
was also a fine invention, but the wheel doesn’t go nearly as well with pizza.”
Kim responded “Eve, when I read about the evils of drinking, I gave up reading.”
Eve had finished five beers by now and looked at Lil Kim and said “Your face could be the
perfect commercial for beer. The commercial would say- “Beer: helping ugly people have sex
since 3000 b.c.” Lil Kim was not amused and immediately shot Eve dead in the head. The
prosecutor was thinking about filing murder charges but decided not to when his legal assistant
said that you can’t hold Lil Kim liable for murder. The Prosecutor has now asked you for a
second opinion, what should you tell him?
[A] The legal assistant is incorrect because Lil Kim can form mens rea
[B] The legal assistant is correct since Lil Kim cannot form mens rea which is a required element
of murder
[C] The legal assistant is incorrect since Lil Kim can form actus reus and mens rea which are
required elements of murder
[D] The legal assistant is correct since Lil Kim cannot form actus reus which is a required
element of murder
12. Of the following acts, the one that is not a crime is
[A] shoplifting.
[B] arson.
[C] embezzlement.
[D] slander.
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13. McKay, aged 55, was walking into a plaza when he was attacked by a young man in his
early twenties. The man hit McKay with metal knuckles, knocked him down, and took his
wallet containing $500. McKay was seriously injured. The young man, identified as Frank Mix,
was apprehended by police about 20 minutes later, legally arrested, and charged with certain
crimes. Mix is most likely to be charged with
[A] robbery.
[B] burglary and robbery.
[C] robbery and blackmail.
[D] assault and burglary.
14. Dr. Dre, who was referred to as "Chronic" by his friends was to operate on a boy who had
injured his hand. Dr. Dre had a farm and on his farm he had some pigs. Also, Dr. Dre worked
for the Easter Illinois Energy Independence Organization called EIEIO for short. Anyway, the
palm of the boys hand was significantly scared and Dr. Dre was going to try a new operation
that consisted in the removal of a considerable quantity of scar tissue from the palm of the
plaintiff's right hand and the grafting of skin taken from the plaintiff's chest in place thereof.
Before the operation was performed the boy and his father went to the Dr. Dre's office, and that
Dr. Dre, in answer to the question, "How long will the boy be in the hospital?" Dr. Dre replied,
“Don’t worry, it ain’t nothing but a G-thang baby, I’m a low down doctor going crazy, Death
Row is the label that pays me and I’m unfadeable so please don’t try to fade me.” “I figure three
or four days, not over four; then the boy can go home and it will be just a few days when he will
go back to work with a good hand."
After Dr. Dre operated on the boy's hand the palm of the boy's hand began to grow the same
kind of hair that the boy grew on his chest. In fact, the hand grew so much hair, the boy had to
rub deodorant on it. Sometimes the boy had dread locks hanging from his hand.
The boy's father was not amused and sued the doctor stating that the procedure that the doctor
used was unreasonably dangerous.
If the boy's father brings a lawsuit against Dr. Dre based on strict liability what is the likely
result?
[A] The boy’s father will lose
[B] The boy’s father will win
[C] The boy’s father will win as long as he can demonstrate that there was no other safer way to
perform the surgery
[D] The Boy’s father will prevail if the father sues on a theory of strict liability because the
surgery was unreasonably dangerous.
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15. Changing the amount on a check is an example of the crime of
[A] extortion.
[B] embezzlement.
[C] forgery.
[D] none of these.
16. One example of a defense that could be used in a criminal action is
[A] justification.
[B] entrapment.
[C] insanity.
[D] all of these.
17. A police officer’s legal right to conduct a reasonable search of a person who has been
arrested is provided for in the
[A] First Amendment.
[B] Fifth Amendment.
[C] Fourth Amendment.
[D] Sixth Amendment.
18. One way for a retail merchant to avoid liability in a false arrest suit by a customer suspected
of shoplifting is to prove that
[A] the alleged shoplifter was detained for a reasonable time in a reasonable manner.
[B] the customer really didn’t shoplift.
[C] the store manager was new.
[D] no security guard was on duty.
19. A person bringing a lawsuit for negligence must prove, among other things, that
[A] a person’s act or failure to act was the proximate cause of the victim’s loss.
[B] the negligent act was deliberate.
[C] the crime of assault also occurred.
[D] the victim was a public official.
20. Phil Collins allegedly wrote a song entitled “In The Air Tonight” that deals with one of the
elements of negligence. Which element does the song deal with?
[A] Damages
[B] Causation
[C] Duty
[D] Breach
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21. Consideration may be
[A] money.
[B] a promise not to do something you have the legal right to do.
[C] property.
[D] all of these.
22. To be legally enforceable as a contract, the courts require that each party to an agreement
give up something of value called
[A] a written document.
[B] witnesses.
[C] consideration.
[D] none of these.
23. Benson orally promised to give his 19-year-old son a car as a birthday gift. Benson was not
legally bound to his promise because
[A] the promise was made orally.
[B] a promise to make a gift is unenforceable.
[C] an executed gift requires consideration.
[D] the promise was a past consideration.
24. Which agreement is unenforceable because of lack of valid consideration?
[A] Boyd agreed to sell his used motorboat to Yates for $300. Yates tendered the $300.
[B] Johnson agreed to donate $1,000 to the United Hospital Building Fund. Based upon this and
similar promises, construction was started.
[C] Davis promised to give his neighbor’s young son $50 if the boy would refrain from
trespassing on his property. Because of Davis’s promise, the boy complied.
[D] Philips promised his nephew $5,000 if the boy would refrain from smoking until he reached
21 years of age. Because of this promise, the nephew complied.
25. A contract imposed by the court to prevent unjust enrichment is called:
[A] A contract of non-benefit
[B] A quasi Contract
[C] A sumi Contract
[D] None of the above
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26. Martin sold his used car to Nixon for $2,000. Later Martin discovered that the car was worth
$3,000. Martin then claimed that Nixon owed him an additional $1,000. If Martin attempted to
take legal action to collect the additional $1,000, he would be entitled to
[A] nothing.
[B] $1,000 plus legal fees.
[C] $3,000 minus $1,000.
[D] $1,000 only.
27. Snoop Dogg had a contract with Lil Kim of the East Harlem Building Company or “EHBC”)
to put a room addition on his (Snoop’s) home for $190,000. Lil Kim stopped construction
halfway through the project and informed Snoop that she was moving on to build a mansion for
Professor I, otherwise known as “OGP,” which is short for Old Gangsta Professor. In reality Lil
Kim was trying to get to know OGP better because she had heard of OGP’s Kool-Aid and
wanted to check out OGP’s flavor. OGP who lived in Long Beach, California (called LBC for
short) was waiting on Kim because he felt he had a pre-existing duty to please her bootie and he
was going to make sure Lil Kim received quantum meruit. (This means OGP liked Lil Kim). In
short, OGP waited in the LBC for EHBC.
Anyway, Snoop informed Lil Kim that it was imperative that she finish the job before the rain
starts and if she did not he would have to sue her for breach of contract. Lil Kim said I am sorry
but there is not enough cheese (money) in it for her. Snoop tells Kim that if it is more money
she wants he will be happy to pay a couple thousand more to get the job completed. Lil Kim
says if that is the case, she will finish the job for an extra $3,000. Snoop agrees saying he would
have paid the extra $3,000 in the first place.
Lil Kim finished the job and Snoop refused to pay the additional $3,000.
If Lil Kim sues Snoop what is Snoop’s best defense?
[A] Preexisting duty
[B] Impossibility
[C] Unforeseen difficulty
[D] Mathematical Error
28. When a debtor and a creditor are in agreement about how much money is owed, the debt is
said to be
[A] pre-existing.
[B] adequate.
[C] unliquidated.
[D] liquidated.
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29. In general, advertisements are treated as:
[A] offers
[B] revocable offers
[C] options
[D] invitations to negotiate
30. Laura is about to lease an apartment. As she is signing the lease, she asks the landlord
whether cats are allowed in the building. The landlord says that they are and that Laura can
keep her cat in the apartment. The lease that Laura actually signs, however, contains a provision
prohibiting pets. Later a dispute arises between Laura and the landlord over whether the
landlord agreed that Laura could have a pet in the apartment. Laura sues as requests and
receives a jury trial.
At trial:
[A] Laura will be held to the lease as it was written because she signed it, did not contest it and
the judge would have to assess the lease based on the plain meaning of the contents
[B] Laura will be able to introduce evidence at trial to show that, at the time the written contract
was formed, the landlord orally agreed that she could have a cat
[C] Laura will be able to keep the cat and the landlord will be estopped from asserting any
equitable defenses
[D] None of the above
31. Courts sometimes apply the doctrine of promissory estoppel to enforce a promise. This
doctrine
[A] is a popular legal remedy.
[B] sometimes allows enforcement of a promise even when an offeree gives no consideration for
an offeror’s promise.
[C] requires consideration to be applicable.
[D] is grossly unfair.
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32. Two students who are taking Professor Isler’s Summer Business Law class which meets on
Tuesdays and Thursdays from 6:00 pm until 10:00 p.m. and runs for three more weeks
approached Professor Isler last Tuesday and said “Professor, we would like to offer you $100 to
come to class on the day of the midterm five minutes early and give another scintillating
lecture.” Professor Isler always urges such offers and accepted. On the day of the midterm
Professor Isler came to class one hour early but the students failed to pay the $100 and Professor
Isler sued. Should the students be ordered to pay?
[A] No. I do not know why but my answer is no and I am sticking with it!
[B] Yes, because a bilateral contract was formed when Professor Isler promised to show up early
[C] Yes, because Professor Isler completed the act necessary to form a unilateral contract
[D] No, because Professor Isler was already under a duty to teach
33. David and his family owned a dog named spot. Spot has always been well-behaved, eventempered and good with children. Spot is also well-trained because David and his children took
the dog to a series of obedience classes sponsored by the local park and recreation department.
David's family lives in an area of the country where houses in residential neighborhoods do not
have fenced backyards. David's house is no exception. David has owned spot for five years and
spot has never ventured beyond the boundaries of David's yard without permission. No
ordinance requires domestic animals to be fenced in a confined area or chained in their owner's
yard. One Sunday while David and his family are at the high school watching a high school
baseball game, Spot suddenly takes off after Pam, who is rollerblading past the yard on the
sidewalk. Pam is on her way to Professor Isler's house for individualized personal legal advice.
Pam is so fine that the city counsel has considered banning her from rollerblading because she
has caused numerous traffic accidents. Believe me when I tell you, Pam is fine! Anyway, Spot
sinks his teeth into Pam's pant leg, causing her to fall and break her arm. What would be the
best thing for Pam to do?
[A] Sue David under a theory of strict liability if David knew or had reason to know of Spot's
propensity for chasing rollerbladers
[B] Not sue David since Spot is a domestic animal
[C] Sue David for negligence
[D] Not sue David because no ordinance required that Spot be chained or confined
34. By orally repeating a rumor that he knew to be false, Ralston caused injury to Hicks’
reputation. Ralston was guilty of
[A] slander.
[B] libel.
[C] trespass.
[D] fraud.
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35. In an auction with reserve:
[A] there is an obligation to sell, the seller may not refuse the highest bid and the offeror is the
bidder.
[B] there is no obligation to sell, the seller may refuse the highest bid and the offeror is the
bidder.
[C] there is an obligation to sell, the seller may not refuse the highest bid and the offeree is the
bidder.
[D] there is no obligation to sell, the seller may not refuse the highest bid and the offeror is the
person who drops the hammer.
36. After a minor reaches the legal age of majority, he or she may disaffirm an executed contract
for a luxury made while a minor only if he or she
[A] returns the luxury item in new or unused condition.
[B] accurately represented his or her age when the item was purchased.
[C] disaffirms in writing.
[D] acts within a reasonable length of time.
37. After Michaels, a minor aged 16, purchased a compact disc player from Rollins Electronics,
he decided to return it. Before he got a chance to do so, his little brother smashed it with a
hammer. In order to disaffirm the contract under the majority view, he
[A] must pay for any damage and pay for the use of the compact disc player.
[B] need only return the damaged compact disc player.
[C] must pay for any depreciation to the compact disc player.
[D] must pay for any damage to the compact disc player.
38. Betty Braswell contracts with Custom Manufacturing Company to have some machines
custom made for Braswell’s factory. She orally promises Newform Materials Supply Company,
Custom Manufacturing’s supplier, that if Newsome continues to deliver the materials to
Custom Manufacturing for the manufacturer of the custom-made machines, she will guarantee
payment. Two months later Custom Manufacturing fails to pay Newform and sues Betty
Braswell when Betty refuses to pay.
At trial what is true about the above set of facts?
[A] Newform will win if they are able to show detrimental reliance.
[B] If Betty claims the Statute of Frauds prevents the enforcement of the contract her claim will
be denied
[C] If Betty claims the Statute of Frauds prevents the enforcement of the contract her claim will
be upheld and Betty will win in court
[D] Newform will be able to introduce parol evidence that shows Betty was a guarantor and
Betty will be forced to pay Newform
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39. If a mentally ill person is determined by a court to be insane, a subsequent agreement by this
insane person to purchase a TV set from the TV Home Center would be
[A] enforceable.
[B] voidable.
[C] void.
[D] illegal.
40. Martinson used his van to deliver illegal drugs to users throughout a particular city. Because
the van was old, he decided to trade it in for a new van. The contract that Martinson makes with
the car agency to purchase a new van is
[A] illegal; therefore, Martinson would not have to pay for the van when it is delivered to him,
but when Martinson receives the van he must return it to the car agency.
[B] legal; therefore, Martinson would have to pay for the van when it is delivered to him.
[C] illegal; therefore, when Martinson receives the van, he must return it to the car agency.
[D] illegal; therefore, Martinson would not have to pay for the van when it is delivered to him.
41. Elsie, a real estate agent, does her friend Judy a favor by selling Judy’s house and not
charging any commission. Later, Judy says to Elsie, “in return for your generous act, I will pay
you $3,000.” This promise is
[A] Enforceable as a matter of public policy.
[B] Enforceable as long as the statute of limitations has not run.
[C] Unenforceable as Elsie’s performance has already taken place.
[D] Unenforceable due to the preexisting duty rule.
42. Covenants not to compete are generally upheld in court if
[A] the agreements interfere with the proper administration of justice.
[B] a minor is not part of the business transaction.
[C] goodwill is present.
[D] the territory and time restrictions are reasonable.
43. Who sang “Night Time Is The Right Time?”
[A] Marvin Gaye
[B] Snoop Dogg
[C] Ray Charles
[D] Eric Clapton
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44. Which Grammy-winning rapper was recently sentenced to a year and a day in prison and
fined $50,000 for lying to a federal grand jury to protect friends involved in a 2001 shootout
outside a Manhattan radio station?
[A] Devon the Dude
[B] Mack 10
[C] Dr. Dre
[D] Lil Kim
45. According to Professor Isler “lagniappe:”
[A] Is a food consisting of sausage that is served on the streets of Harlem.
[B] Is a belt used for beating a misbehaving child’s ass!
[C] Is a southern term used in Louisiana that means “for extra.”
[D] Is French for “she is a Hottie.”
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[1] [A]
[2] [C]
[3] [D]
[4] [D]
[5] [A]
[6] [A]
[7] [A]
[8] [C]
[9] [A]
[10] [D]
[11] [B]
[12] [D]
[13] [A]
[14] [A]
[15] [C]
[16] [D]
[17] [C]
[18] [A]
[19] [A]
[20] [C]
[21] [D]
[22] [C]
[23] [B]
[24] [C]
[25] [B]
[26] [A]
[27] [A]
[28] [D]
[29] [D]
[30] [D]
[31] [B]
[32] [C]
[33] [C]
[34] [A]
[35] [B]
[36] [D]
[37] [B]
[38] [B]
[39] [C]
[40] [B]
[41] [C]
[42] [D]
[43] [C]
[44] [D]
[45] [C]
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