BMGT 380 Business Law Final Exam Solutions
BMGT 380 Business Law Final Exam Solutions
1. Sam orally agreed to sell Ramie some land for
$500,000. Ramie paid Sam the
$500,000; Sam gave Ramie the deed to the land. Ramie took possession of
the land
and began building a cabin on it. One month later, Sam tried to retake
possession
of the land by arguing that the contract for the sale was invalid
because it was oral,
not written. Sam sued Ramie to invalidate the contract and retake the
land.
The court will likely conclude that Sam will:
a) Win; the sale exceeded $500 so the contract must be written to be valid.
b) Win; all land sales contracts must be written.
c) Lose; because the contract was fully executed Sam cannot rescind the
contract.
d) Lose; because Ramie had begun building a cabin on the property, Sam
cannot rescind the contract.
2. On Tuesday, Sam offered to sell his CD
collection to Sandy for $100. Sandy
replied, "I’m interested. I’ll think it over and let you know
Thursday whether I want
to buy the CDs." On Wednesday, Sam agreed to sell the CDs to
Jason, and Jason
immediately gave Sam a letter that stated:
"Sam, I will buy your CD collection for $100. As we agreed, I
will pay you on
Friday when I pick up the CDs. Yours truly, Jason."
Upon Sam’s receipt of this letter on Wednesday, what best describes
Sam’s
contract agreement(s)?
a) By forming an agreement with Jason, Sam breached his contract with
Sandy.
b) Sam has formed contracts with both Jason and Sandy.
c) Sam and Jason have formed a valid, enforceable contract; Sam did not
form a contract with Sandy.
d) Sam formed a contract with Sandy, but has not formed an enforceable
contract with Jason because Jason has not yet paid for the CD collection.
3. Mac and Rhamad signed a business contract with a
clause that provides that if a
dispute arises they must submit to binding arbitration to resolve the
dispute. After
they had been doing business together for a year, a dispute arose under
the terms of
the contract. Rather than submit to arbitration, Mac filed a lawsuit
against Rhamad.
Most likely the court will:
a) Hear the lawsuit because Mac cannot be compelled to submit to
arbitration; he is constitutionally entitled to a jury trial if he requests a
trial.
b) Conduct a bench trial, then order a remedy without compelling Mac to
submit to arbitration or to a jury trial.
c) Compel Mac to submit to arbitration to resolve the dispute.
d) Hear the lawsuit in a trial, then compel Mac to submit to arbitration, if
Mac is not satisfied with the trial decision.
4. Roxy, while driving through Wyoming to her home
in Montana, accidentally
lost control of her car and drove it through a window into a store
owned by Colt.
Colt sued Roxy in a Wyoming court for damages to his store.
Will the Wyoming court likely be able to exercise jurisdiction over
Roxy?
a) No, because Wyoming has no in personam (personal) jurisdiction over
Roxy, and cannot exercise its long arm statute in cases only involving
automobile accidents.
b) No, because Wyoming has no in personam jurisdiction over Roxy, and
cannot justify minimum contacts in this case.
c) Yes, Wyoming can exercise in personam jurisdiction in this case because
any state court has personal jurisdiction in every diversity of citizenship
case.
d) Yes, because Wyoming can assert in personam jurisdiction over Roxy
under the minimum contacts test.
5. Assume a salesperson intentionally made one of the following
statements knowing that the statement was false – to a customer considering a
purchase.
Which statement could create liability for fraudulent misrepresentation
if the
customer made the purchase?
a) “In my opinion, this car is in flawless mechanical condition.”
b) “This crane will probably lift about 10,000 pounds.”
c) “This car is a real gem.”
d) “This is an original painting by the artist, Pablo Picasso.”
6. Don promised to buy his girlfriend, Sophie, a
new car so Sophie sold her old car.
Don now refuses to buy Sophie the car. Sophie has a job that requires
her to have a
car to get to work. If Sophie sues Don to enforce the promise, the
likely result is
that the promise will:
a) Be enforced under promissory estoppel because Sophie reasonably relied
on Don’s promise, to her detriment.
b) Not be enforced as Sophie was not unjustly enriched simply because she did
not receive the car.
c) Be enforced because the car is a necessity for Sophie and all contracts for
necessities are binding and enforceable for all parties even if contract
formation is flawed.
d) Not be enforced as Don’s promise was a gift to Sophie; Sophie gave
consideration, but Don did not.
7. Reg offered to sell his motorcycle to Thelma for
$8,000. Thelma replied, "Your
price is too high. I will purchase your motorcycle for
$7,000". Reg agreed and
they committed their agreement to writing. This transaction can be
characterized
as:
a) An enforceable contract because Reg’s acceptance of Thelma’s offer was a
clearly communicated acceptance.
b) An enforceable contract because Thelma’s counteroffer was less than Reg’s
original offer.
c) An unenforceable contract because Thelma’s offer was not the mirror
image of Reg’s original offer as is required under common law contract
rules.
d) An unenforceable contract unless either Reg or Thelma is a merchant, as
defined by the UCC, because sale of personal property contracts are valid
only if one of the parties to the contract is a merchant.
8. Mary sued Don for negligence. Mary’s losses total
$100,000. Under a
contributory negligence system, if Mary is found to be contributorily
negligent for
her own injuries, what damages will Mary likely recover from Don?
a) None.
b) $100,000.
c) $100,000 minus the percentage of fault (e.g., 20%, 60%, etc.) for which
Mary was responsible.
d) $100,000 minus the percentage of fault for which Mary was responsible, so
long as Mary was not more than 50% responsible for the injuries.
9. Ram was walking down the sidewalk by a construction project site
in a
downtown area. The project was owned and operated by Modern
Construction,
Inc. and was surrounded by orange plastic fencing typically used for
construction
projects. Ram stopped to watch a metal beam being lifted by a crane on
the
construction site. As the beam swung through the air, Ram thought it
was going to
fall and jumped forward quickly off the sidewalk and into the
construction project
property, falling into and smashing the orange plastic fencing. As Ram
landed
inside the construction project, the beam fell near Ram. The beam did
not hit Ram
but some rocks were thrown onto Ram as the beam fell, cutting his arm
badly so
that it required 35 stitches.
If Ram sues Model Construction for negligence, the likely result will
be that Ram
will:
a) Lose, because he assumed the risk as a trespasser on the construction site
and trespassers can never recover damages.
b) Lose, because pedestrians are always contributorily negligent in such cases
involving trespassing.
c) Win, because it is always foreseeable that a beam could fall on a nearby
pedestrian.
d) Win, if the beam fell because of Model Construction’s negligence.
10. X and Y agreed that X would sell Y his small business, including
the land on
which the business was situated, for $500,000. Both X and Y knew at the
time the
contract was formed that the business was actually worth $800,000. Is
this a valid,
enforceable contract?
a) Yes, provided the contract was in writing, in accordance with the Statute of
Frauds and the parties freely consented.
b) Yes, provided the contract was in accordance with state statutory law that
permits real estate sales for 40% or more below market value.
c) No, because $500,000 is not valid consideration for a business worth
$800,000.
d) No, because X has no pre-existing legal duty to sell his business.
11. Fine Art Corp. sent a written offer to buy 10,000 pencils for a
total of
$10,000 from Faber Pencil Co. Both parties are merchants. Faber can
accept the
offer by:
a) Promising to ship the pencils.
b) Promptly shipping the pencils.
c) Accepting the offer on Faber’s own written standard form contract.
d) All of the above could be valid acceptance.
12. Ralph, a 16-year old minor, is manager for the high school
football team.
Ralph signed a contract to purchase alcoholic beverages from
Liquormart, Inc. for
the team party. This contract is:
a) Void as a matter of law because it is illegal to sell alcohol to minors by
state
law.
b) Void only if Ralph misrepresented his age and told Liquormart he was an
adult.
c) Valid and enforceable, but Ralph has the right to disaffirm because he is a
minor.
d) Valid and enforceable, if Liquormart knew that Ralph was a minor.
13. Which of the following activities may involve the use of a
contract, and/or
constitute a sales contract?
a) Purchasing medications from a pharmacy.
b) Hiring a contractor to make home repairs.
c) Purchasing insurance policies from an insurance agent.
d) Selling books to customers in a bookstore.
e) All of the above
14. Fay was admitted to Global Associates, an existing partnership,
as a limited
partner on January, 2015. In June, 2015, a partnership debt incurred in
October,
2014 came due. Fay is:
a) Not liable for the debt because the debt was incurred prior to her joining
the partnership.
b) Only liable for the debt up to the amount of her capital contribution to the
partnership.
c) Personally liable only for 50% of the total debt if 50% of the other
partners
do not pay.
d) Personally liable for the full extent of the debt if the other partners do
not
pay.
15. Earl, a nonmerchant, offered to sell a chair to Isaac, a
nonmerchant. Earl’s
house caught fire and destroyed the chair before Isaac accepted Earl’s
offer to buy
the chair. As a result:
a) The destruction of the chair constitutes an automatic, valid revocation of
the offer.
b) The fire does not automatically revoke the offer, but because neither Earl
nor Isaac is a merchant, the offer is revocable at any time at Earl’s option.
c) Earl did not validly communicate a revocation to Isaac, so Isaac still has
the option of accepting Earl’s offer; if Isaac accepts the offer, Earl must
obtain a similar chair for Isaac or pay Isaac the equivalent value of the
chair.
d) Earl’s offer is automatically revoked by the fire, unless the offer was a
firm
offer.
16. CC’s Day Spa, LLC, is a member-managed limited liability
company. So long
as it is in accordance with state law, members can agree to apportion
voting rights
according to:
a) Participation in management.
b) Capital contributions.
c) The number of members.
d) Any of the above.
17. Jim and Kiley are architects and general partners of JK Designs.
Jim and Kiley
supervise Luc, an employee of JK Designs. As general partners of JK
Designs, Jim
and Kiley:
a) Are not personally liable for any tort(s) committed by Kiley.
b) May be personally liable for malpractice committed by Luc working within
the scope of his job at JK.
c) Have limited liability for any of Kiley’s acts of malpractice.
d) Have no liability for any torts committed by Luc.
18. Kisha operates River Valley Soccer, an athletic equipment shop
as a sole
proprietorship. Taxes on the business’s income are paid by:
a) No one; since it is a sole proprietorship there are no business taxes.
b) Kisha as the sole owner.
c) The state or federal government if Kisha holds a Small Business
Administration loan acquired to start her business.
d) The business entity of River Valley Soccer, not Kisha personally.
19. Assume that Virginia enacted a law prohibiting, until further
notice, all grocery
stores in Virginia from selling all powdered spices manufactured in, or
shipped
from, Maryland. This law was enacted because it was discovered that the
spices
recently manufactured in Maryland were infected with bacteria.
Determine the
constitutionality of the Virginia statute. The statute is:
a) Unconstitutional; it violates grocery store owners’ substantive and
procedural due process rights under the 5th and 14th Amendments because
they are private businesses.
b) Unconstitutional; the statute imposes an undue burden on interstate
commerce.
c) Constitutional; it is a valid exercise of Virginia’s police power.
d) Constitutional; the statute imposes an undue burden on intrastate and
interstate commerce.
20. Distinguish which of the following is an advantage of limited
liability
companies (LLCs) over corporations.
a) Only one member of a LLC must have unlimited liability as compared
with corporations in which all shareholders have unlimited liability.
b) LLCs can be formed without any specific steps being taken by the owners
as compared with corporations that must file Articles of Incorporation with
the State.
c) In most cases, a LLC can choose whether to be taxed as a partnership or
corporation, as compared with corporations that are subject to double
corporate taxation.
d) LLCs can choose whether to sell shares publically to investors, as
compared to private corporations that must sell shares publically to investors.
21. Pete, who collects antique cars, hired Ann as his agent to find
and purchase a
1965 Ford Mustang on his behalf. Ann found a Mustang like Pete wanted,
but Ann
fell in love with the car and purchased it for herself.
Which of the following illustrates Ann’s liability, if any, in her duty
as agent to
Pete in this situation?
a) Ann has not violated the duty of loyalty to Pete; she can find another
Mustang for him.
b) Ann has not engaged in self-dealing because she did not purchase the
Mustang with Pete’s funds.
c) Ann usurped an opportunity for Pete, but has not violated the duty of
loyalty to Pete by competing with Pete’s interests.
d) Ann violated the duty of loyalty to Pete by competing with Pete’s interests,
and has usurped an opportunity for Pete.
22. Ed hired Frankie, who is 13 years old, to buy a computer on Ed’s
behalf.
Which of the following identifies the legal relationship between Ed and
Frankie?
a) This is a valid agency relationship even though Frankie is a minor, and Ed
would be bound by authorized contracts Frankie enters into on Ed’s behalf.
b) This is a valid agency relationship even though Frankie is a minor, but Ed
would have the option of disaffirming any contracts Frankie enters into on
Ed’s behalf.
c) This is a valid agency relationship even though Frankie is a minor, but
Frankie would not be entitled to any payment under the terms of the agency
because he is a minor.
d) This is an invalid agency relationship because Frankie is a minor.
23. Mediation might be more reasonable and appropriate than a trial
in which of
the following situations?
a) A lawsuit challenging the constitutionality of a new state statute.
b) A dispute between neighbors over a property boundary.
c) An alleged theft of patio furniture from the patio of a house.
d) None of the above are appropriate for mediation.
Answer questions 24-25 regarding the following scenario:
Scenario: Jones, a resident of Arizona, booked reservations for a vacation at
Windell Hotels, Inc. in Cabo Mar, Mexico. Windell Hotels is an international
hotel
chain incorporated in Delaware with hotels in North and South America; Windell
Hotels has no hotels in Arizona but does advertise and book reservations for
all its
hotels over the Internet.
While a guest in the hotel in Cabo Mar, Jones was walking across the hotel
lobby,
and slipped and fell on the wet marble floor that had been just washed by the
maintenance staff. The staff had placed a “wet floor” sign on the lobby floor
on the
side wall of the lobby.
Jones was taken to the nearest Mexican hospital where surgery was necessary to
place a pin in his broken leg. Anxious to return home and see his regular
doctor,
Jones flew out of Mexico shortly after the surgery. He required two plane seats
and
an ambulance to meet him at various airports. His health insurance would not
cover his hospital stay in Mexico as it was located outside the U.S. When back
in
Arizona, Jones was unable to work for 8 weeks and required another surgery to
remove the pin. He also required several weeks of physical therapy.
24. Jones wants to sue Windell Hotels, Inc. in federal court for
$450,000 to recover
all his medical expenses in Mexico and the US; for $50,000 for the cost
of the
plane trip from Mexico to Arizona, the 2 plane seats and ambulance
costs in
various airports; $10,000 for 8 weeks of lost wages; and $50,000 for
pain and
suffering resulting from the injury. Can he sue in federal court?
a) Yes, because Federal Court always has jurisdiction over citizens of
different states.
b) No, because Federal Court does not have jurisdiction in cases that do not
involve federal laws.
c) Yes, because the Federal Court may have jurisdiction over citizens of
different states and the lawsuit involves damages greater than $75,000.
d) No, because the Federal Court has no jurisdiction over an accident that
occurred in Mexico.
25. It would be easier for Jones to bring the lawsuit in Arizona
state court, but he
wonders if the court can get Windell Hotels to come to Arizona. Can the
Arizona
state court impose jurisdiction over Windell Hotels to bring the
company to court
in Arizona?
a) No, because the subject of the lawsuit took place in a foreign country.
b) No, because the corporation does not have sufficient minimum contact with
Arizona to allow the Arizona court to use the long arm statute to establish
jurisdiction in Arizona.
c) Yes, because the Jones is a resident of Arizona and he is the plaintiff in
the
lawsuit.
d) Yes, because Windell Hotels has sufficient minimum contact with Arizona
the state to justify the court’s use of the long arm statute.
Scroll down please to begin the essay portion of the exam.
Section: Section II. Essay: 9 questions/50 points
Questions 1-8 = 5 pts each; question 9 = 10 pts
Use the answer sheet at the end of the exam. Number each answer. DO NOT
recopy questions.
Answer each question in complete paragraphs; do not list or answer in phrases
(points will be deducted for doing so).
None of these questions can be adequately/comprehensively answered in just a
paragraph, so be comprehensive, in depth in your answers, but be careful to not
include irrelevant information.
Points will be deducted for answers that are not well justified, not
sufficiently
comprehensive.
Use APA in text citations, as appropriate but please do not use direct quotes.
Use only classroom notes/comment and assigned reading or watching
materials as resources, which is all you need to complete the exam.
DO NOT use any outside, Internet resources as they are often inaccurate.
Follow directions carefully. Answer all parts of each question.
Be sure to directly answer the question(s) asked.
__________________________________________________________________
Refer to the scenario for Multiple Choice questions 24-25 above to answer the
following essay question #1 only:
1. Jones sued Windell Hotels, Inc. for negligence to recover damages
for his
injuries resulting from the fall in the Cabo Mar hotel.
Will Jones likely be successful in the negligence lawsuit against Windell
Hotels? Explain fully why or why not.
2. Clarkson and Lee did not have a contract, but Clarkson
completed extensive
landscaping in Lee’s yard by mistake while Lee was away on vacation. Clarkson
sent Lee a bill for the landscaping service but Lee refused to pay.
Determine the likely result if Clark sues Lee to recover the costs of the
landscaping.
3. Racer contracted in writing to drive Owner’s one-of-a-kind,
specially designed
championship race car in the Miami 500 Race on July 15 for a fee of $2500. On
July 1, the race car was destroyed in an accidental fire in a storage warehouse
where the race car was being stored prior to the race. Owner owns no other race
cars, so Owner considered the contract discharged. Racer claimed that she is
still
entitled to the $2500 fee because she and Owner had a valid enforceable
contract.
Compare and contrast the rights and obligations of Racer and Owner under
the contract as of July 1.
4. Compare and contrast the rights and possible liabilities
for a merchant selling
goods in “As Is” condition with the rights and possible liabilities for selling
goods
with an express warranty stating, “This product is quality Grade A”.
5. Aaron plans to open Aaron’s Pets, a pet shop selling pets
and pet supplies, and
plans to hire 2 part-time employees. Aaron will invest only his own money in
the
business. He does not expect to make any profit for at least 2 years and to
make
very little profit for the next 3 years after the first 2 years. He does expect
to make
a profit eventually.
Which form of business organization is most appropriate and easiest for
Aaron to use in opening his pet store – and why? (There is only one correct
answer)
6. There are extensive federal regulations governing
airplanes and pilots. Assume
that the state of New York passed a statute containing numerous requirements,
some conflicting with federal regulations, covering operation of airplanes
and
licensing of airplane pilots.
If the New York state statue is challenged as being unconstitutional, what is
the likely result? Describe the applicable law and rationale for your
conclusion.
7. Fran, Joe, and Mike formed a general partnership to
operate a flower shop called
Fresher Flowers. One of Fran’s jobs is to make deliveries using the partnership
truck. In one such delivery, Fran negligently ran a stop sign, striking a car
driven
by Peggy, causing damage to the car and injury to Peggy.
Analyze and describe (1) the personal liability of Fran, Joe, and Mike, (2)
the
liability of the partnership, Fresher Flowers.
8. Mark plans to open a barbeque restaurant. He can either
open the business as a
sole proprietorship or obtain a franchise for “Smokin’ Hot Bar-B-Q”.
Compare and contrast the advantages and disadvantages of opening the
business as a sole proprietorship and a franchise.
9. 10 points
Leon, a bank vice president, joined Fitness Center, Inc. (FC). He signed a
contract
for the membership. The contract stated, among other things, an exculpatory
clause
that FC…
“shall not be liable for any claim, demand, cause of action of any kind
whatsoever for, or on account of death, personal injury, property damage or
loss of any kind resulting from or related to Member’s use of facilities or
participation in any sport, exercise or activity within the club premises…”
While working out at FC, Leon sustained back injuries when a treadmill on
which
he was walking suddenly collapsed at FC. Leon sued FC for his injuries.
Discuss:
a. Is the exculpatory clause in the contract valid or invalid in Leon’s case
and
why?
b. Possible product liability claim(s) for which Leon could sue FC and why
product liability claims might be applicable to this case
c. Possible ordinary (non-product liability) negligence claim for which Leon
could sue FC and why a negligence claim might be applicable to this case
d. The likely outcome if Leon sues FC under product liability
e. The likely outcome if Leon sues FC under ordinary negligence
