BMGT 380 Business Law Final Examination

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BMGT 380 Business Law Final Examination

 

  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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.”
  8. 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.
  9. 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.
  10. 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.
  11. 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.

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. e) All of the above
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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.
  11. 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.
  12. 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.
  13. 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.
  14. Mediation might be more reasonable and appropriate than a trial in which of
    the following situations?
  15. 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.

  1. 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.
  2. 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.
  3. 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.

  1. 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)
  2. 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.

  1. 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.

  1. 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.
  2. 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

 

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