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BADM 412 - BUSINESS LAW
REVIEW QUESTIONS
- A football player overextends his knee, and requires surgery. A rehabilitation specialist later seeks the player's business. He promises the player that he will, after his therapy, have a 100% perfect knee. The player hires him. A year later, the player can walk, but his leg is far from perfect. If the player sues the therapist, what will he receive in damages?
a. his salary for one season b. the value of a perfect knee less the value of his knee as it really is c. the value of a perfect knee d. nothing
b EXPLANATION: Contractual damages try to give the "benefit of the bargain" as much as money can. Therefore, by giving the amount in answer B, the player will have the value of a 100% perfect knee between a semifunctional knee and a cash award. Clarks20 Ch 20 #2 (MC #2)
- Paul is hired to build a fence for $500. Before he starts, the man who hired him tells Paul he doesn't want the fence built after all. Paul is able to find another fence-building job, but it pays only $400. Further, the new job is far away, and it will cost Paul $50 in gas to travel back and forth. This $50 in gas is an example of
a. incidental damages. b. compensatory damages. c. punitive damages. d. both A and B
d EXPLANATION: Incidental damages are a subset of consequential damages, and are amounts
used in finding a comparable job, buyer, or item. Incidental damages usually take the form of phone calls, classified ads, or transportation costs. Clarks20 Ch 20 #4 (MC #4)
- In all of the following cases, the seller breached a contract to sell. The buyer isLEAST likely to receive monetary damages if the contract involved
a. a car. b. a construction contract. c. a piece of land. d. a computer.
c
EXPLANATION: Damages are not given only when they are inadequate. This usually means the subject matter of the contract is rare or unique--if something is unique, money does not allow you to go get something that is comparable. Because the English feudal system based wealth largely on ownership of land, all land has been historically viewed by common law courts as unique. Specific performance is generally ordered in cases involving land contracts. Clarks20 Ch 20 #6 (MC #6)
- Stan breaches his contract with Al. If Al sues under a contract theory only, will he get punitive damages?
a. yes, if Stan acted unreasonably b. yes, if Stan willfully broke the contract c. nes, if Stan maliciously broke the contract d. no
d EXPLANATION: Punitive damages are not awarded in contracts cases, because their purpose of punishment is inconsistent with the goal of contractual remedies. Clarks20 Ch 20 #10 (MC #10)
- Mr. Tallyman orders 100 8-foot bunches of bananas from Chiquita for $2000. They are never delivered. The market price of the bananas falls in the meantime to $1800. What type of damages are available to Mr. Tallyman in a breach of contract action?
a. compensatory damages b. punitive damages c. nominal damages d. both A and C
c EXPLANATION: Since he is better off and can get the bananas cheaper, no compensatory damages will be available. However, since Chiquita was in the wrong, they will have to pay nominal damages if this case goes to trial, probably in the amount of $1. Clarks20 Ch 20 #14 (MC #14)
- Which of the following statements about rescission is accurate?
a. A party may never rescind a contract on his own. b. For rescission to occur, all parties must always agree to the rescission. c. A rescission can sometimes be done unilaterally. d. both A and B
c EXPLANATION: Although a rescission usually requires the consent of both parties, there are exceptions. A contract signed under duress, fraud, or undue influence are examples of contracts that a party may rescind unilaterally.
Clarks20 Ch 20 #22 (MC #22)
- Al is to deliver 100 computers to Ben on March 1. He breaches the contract by arriving late on March 10, and by delivering only 50 computers at that time. Ben, on March 10, signs a waiver. Which of the following is true?
a. Al may rescind the contract. b. Al may not rescind the contract. c. Al may not sue for damages. d. both A and C
b EXPLANATION: A waiver operates to keep a contract going after it has been breached, and the nonbreaching party loses the right to rescind the contract. The nonbreaching party may, however, sue for damages caused by the breach. Clarks20 Ch 20 #24 (MC #24)
- Which of the following people is responsible for the writing of the Uniform Commercial Code?
a. congress b. state legislatures c. the National Conference of Commissioners d. judges
c EXPLANATION: This independent body first drafted the UCC. Until it was adopted by the states, it had no binding power on businesses. Clarks21 Ch 21 #1 (MC #1)
- A UCC provision _______________ if it conflicts with the Constitution, and _______________ if it conflicts with the common law.
a. controls; controls b. controls; fails to control c. fails to control; controls d. fails to control; fails to control
c EXPLANATION: The UCC, like anything else, loses when it contradicts the Constitution. However, it trumps the common law. In essence, common law doctrines only apply to contract law in areas where the UCC is silent. Clarks21 Ch 21 #3 (MC #3)
- Which of the following are governed by Article II of the UCC?
a. the sale of a car b. the rental of a car c. the lease of a car d. all of the above
a EXPLANATION: Only the sale of goods is covered by Article II. Clarks21 Ch 21 #4 (MC #4)
- Which of the following is/are "goods" as defined by the UCC?
a. a barn b. stock in a corporation c. an airplane d. none of the above
c EXPLANATION: Goods must be both tangible and moveable to qualify. This rules out all land and things permanently attached to land, as well as assets like stocks and bonds. Stocks are represented on a tangible piece of paper, but are considered an intangible asset because what they derive value from and represent-ownership-is intangible. Clarks21 Ch 21 #5 (MC #5)
- Some provisions of the UCC apply only to merchants. In which of the following is Al considered a merchant?
a. Al, a sporting goods store owner, sells a football. b. Al, a sporting goods store owner, sells his car. c. Al, a sporting goods store owner, sells his house. d. both A and B
a EXPLANATION: A merchant is one who holds himself out as an expert in a particular field, and sells a good related to that expertise. Al is a sporting goods expert; this is not the case with cars and houses. Any given person can sometimes be a merchant and sometimes not be, depending on what they are selling. Clarks21 Ch 21 #6 (MC #6)
- Computer City signs a one-year requirement with IBM. The number of units to be delivered is not in the contract. They have dealt with IBM in the past, and their past orders have averaged 1,000 computers each. What quantity of computers must be delivered in this order?
a. 0 b. 1, c. the number of computers Computer City can sell in the next year d. a reasonable number of computers
EXPLANATION: The CISG attempts to unify the laws of different nations, just as the UCC does for different states. Clarks21 Ch 21 #21 (MC #21)
- Which of the following clauses may be predetermined in an international contract governed by the CISG?
a. what country any dispute resolution will take place in b. what language any dispute resolution will be conducted in c. what nation's laws will govern any disputes d. all of the above
d EXPLANATION: Much as in American contracts, parties are free to put nearly any provisions into a contract so long as they are not illegal and one side is not at a tremendous disadvantage. Clarks21 Ch 21 #23 (MC #23)
- Before any interest in specific goods can pass from a buyer to a seller, which of the following must be true?
a. The goods must be in existence. b. The goods must be identified as the specific goods designated in the contract. c. Both must apply. d. Neither need apply.
c EXPLANATION: If either element is lacking, the interest cannot pass. Clarks22 Ch 22 #1 (MC #1)
- Once goods have been identified, which of the following may a lessee do?
a. insure the goods b. recover from third parties who damage the goods c. both A and B d. none of the above
c EXPLANATION: Both are possible only after identification. Clarks22 Ch 22 #4 (MC #4)
- Al and Dan have an agreement that says, "Title will pass on July 1." If UCC rules were followed in their contract, title would pass on June 21. When will title pass?
a. July 1 b. June 21 c. June 26
d. after the passage of a reasonable time
a EXPLANATION: Under most all sections of UCC 2-401, an agreement takes priority over the UCC provisions. This section of the UCC sets default rules that are followed only if there is no agreement to the contrary. Clarks22 Ch 22 #5 (MC #5)
- If a shipment contract is formed, the seller has what duty?
a. no duty b. the duty to deliver the goods to a carrier c. the duty to deliver the goods to a buyer's place of business d. the duty to deliver the goods to the buyer himself
b EXPLANATION: In such an arrangement, the seller's duties are finished when the goods are placed in the hands of a carrier. Clarks22 Ch 22 #8 (MC #8)
- Alex buys a computer at Best Buy. The check later bounces. The day after he buys it, Alex resells the computer to Diane. Can Best Buy recover the computer from Diane?
a. yes, always b. yes, if she did not purchase it in good faith c. yes, if the check bounced before Diane bought the computer d. no, never
b EXPLANATION: When a check bounces, a purchaser acquires voidable title to the good. Such a person can pass good title to a good faith purchaser only. Clarks22 Ch 22 #10 (MC #10)
- The risk of loss _______________ passes from seller to buyer at the same time as title passes.
a. always b. sometimes c. never d. none of the above
b EXPLANATION: Under the UCC, risk does not necessarily pass with title. Clarks22 Ch 22 #12 (MC #12)
- A buyer lives in Austin, and a seller lives in St. Louis. If when the goods are shipped they are marked "F.O.B. St. Louis," this indicates that this is a _______________ contract and that the
EXPLANATION: Normally, a buyer can purchase insurance as long as they still hold title to goods. Clarks22 Ch 22 #22 (MC #22)
- Andy is a nonmerchant. Under the UCC's duty of good faith, he _______________ required to observe reasonable commercial standards of fair dealing, and he ___________ required to be honest in fact.
a. is; is b. is; is not c. is not; is d. is not; is not
c
EXPLANATION: Only merchants have to comply with both of these. Merchants have a higher standard of good faith than do nonmerchants. Clarks23 Ch 23 #2 (MC #2)
- Al orders 500 pink shirts. Which of the following are conforming goods?
a. 499 pink shirts b. 500 red shirts c. both A and B d. none of the above
d EXPLANATION: Conforming goods are those that exactly fit the description of the goods in the contract. Clarks23 Ch 23 #4 (MC #4)
- Al owns a bicycle shop, and signs a sales contract that is silent on the place delivery will be made. Where will it take place under the UCC's rules?
a. the seller's residence b. the seller's place of business c. the buyer's residence d. the buyer's place of business
b EXPLANATION: This is the default position, and if the seller does not have a business address, he must make the goods available at the his residence. The UCC rule can, of course, be changed by contract. Clarks23 Ch 23 #6 (MC #6)
- Al orders 500 pink shirts. He is shipped 495 pink shirts and 5 red shirts. Under the common law, he _______________ have rejected the entire shipment, and under the UCC, he
_______________ reject the entire shipment.
a. could; may b. could; may not c. could not; may d. could not; may not
a EXPLANATION: The UCC preserves the perfect tender rule: if the goods fail to conform to the contract in any respect, the buyer may reject part of or all of the shipment. Clarks23 Ch 23 #8 (MC #8)
- A sales contract calls for the delivery of goods by truck. All truckers go on strike just before the goods are to be shipped. May the seller ship the goods by train if it is more expensive?
a. yes, and the seller must pay the extra costs b. yes, and the buyer pays the extra costs c. yes, and they will split the extra costs d. no, because it will breach the contract
a EXPLANATION: This is a reasonable substitute tender, and the seller bears the extra costs. Clarks23 Ch 23 #10 (MC #10)
- Which of the following will make performance of a sales contract commercially impracticable?
a. an increase in costs to the seller b. a tornado that destroys the seller's inventory c. both A and B d. none of the above
b EXPLANATION: In order for the contract to be impracticable, the occurrence that makes performance more difficult must have been unforeseeable. Price fluctuations in the marketplace are certainly foreseeable. Clarks23 Ch 23 #12 (MC #12)
- Lou and Ben have a sales contract. The goods involved have been identified, and are destroyed in a warehouse fire before they can be delivered. What happens now?
a. Lou must acquire identical goods at his expense. b. Lou must acquire identical goods, but Ben will bear the costs. c. The parties are discharged from the contract. d. none of the above
c
