Sample Chapter

INSTANT DOWNLOAD COMPLETE TEST BANK WITH ANSWERS

 

Test bank For Dynamic Business Law 3rd Edition by Nancy Kubasek , M. Neil Brown, Linda Barkacs
SAMPLE QUESTIONS

 

Chapter 03

The U.S. Legal System

 

True / False Questions

1. Juries decide questions of law.

True    False

 

2. Usually the issue of ripeness arises when one party claims that a case is moot.

True    False

 

3. The word “jurisdiction” comes from the Latin terms juris, meaning “law,” and diction, meaning “to speak.”

True    False

 

4. In rem jurisdiction references jurisdiction over a person.

True    False

 

5. Under federal statutory law, Internet transactions cannot be the basis for a finding of in personam jurisdiction.

True    False

 

6. Subject-matter jurisdiction is a court’s power to hear certain kinds of cases.

True    False

 

7. State courts have the power to hear all cases not within the exclusive jurisdiction of the federal court system.

True    False

 

8. Concurrent federal jurisdiction means that both state and federal courts have jurisdiction over a case.

True    False

 

9. Once a case is in the proper court system, venue determines which trial court in the system will hear the case.

True    False

 

10. In some cases, the U.S. Supreme Court functions as a trial court of limited jurisdiction.

True    False

 

11. A person who has the legal right to bring an action in court has standing.

True    False

 

12. Intermediate courts of appeal in the state court system exist in all states.

True    False

 

13. Under our system of justice, courts may issue advisory opinions.

True    False

 

14. The defendant responds to a complaint with an answer.

True    False

 

15. Because of its complicated nature, any complaint should be at least three pages long.

True    False

 

16. A defendant who believes that he or she has a claim against the plaintiff would include a counterclaim with the answer.

True    False

 

17. A reply is an answer to a counterclaim.

True    False

 

18. A party only has a limited number of challenges for cause in jury selection.

True    False

 

19. Peremptory challenges in jury selection may not be racially based.

True    False

 

20. In most civil cases, a plaintiff must prove her case beyond a reasonable doubt.

True    False

 

21. Only one party may appeal from a final judgment.

True    False

 

22. If an appellate judge agrees with the majority’s decision, but for different reasons, the judge may write a “concurring” opinion.

True    False

 

23. On average, the U.S. Supreme Court hears 300 cases a year.

True    False

 

 

Multiple Choice Questions

24. Mike, a resident of Georgia, sues Company A in state court in Georgia for negligence alleging personal injury and property damage of $100,000 after a truck driven by an employee of Company A strikes his pick-up truck in the rear. Company A is incorporated in Delaware, has its headquarters in New York, but does a substantial amount of business in Georgia. Company A seeks removal to federal district court, but Mike opposes the motion. Which of the following is true regarding whether the case may be properly removed to federal district court?

A. The amount in controversy satisfies diversity requirements; and if Company A’s nerve center is in a state other than Georgia, then the case may be properly removed to federal court.

 

B. The amount in controversy satisfies diversity requirements; and because Company A is incorporated and has its headquarters in a state other than Georgia, the case may be properly removed to federal court.

 

C. Because the amount in controversy satisfies diversity requirements and Company A is incorporated in a state other than Georgia, the case may be properly removed to federal court regardless of where Company A’s headquarters, nerve center, or principal place of business is located.

 

D. Because the amount in controversy satisfies diversity requirements and Company A is headquartered in a state other than Georgia, the case may be properly removed to federal court regardless of where Company A is incorporated and regardless of the location of its nerve center.

 

E. Because the amount in controversy fails to satisfy jurisdictional requirements, regardless of the location of Company A, the case may not be removed to federal court.

 

25. In what state is XYZ Bank, a federally chartered bank, considered a citizen?

A. The bank is considered a citizen of any state in which it is located, meaning any state in which the bank has branches.

 

B. The bank is considered a citizen of the state in which it is located, meaning the state in which its main office as specified in its articles of incorporation is located.

 

C. The bank is considered a citizen only of Washington D.C.

 

D. The bank is considered a citizen only of the state in which it does its largest volume of business.

 

E. The bank is considered a citizen of Washington D.C. and also of the state in which it does its largest volume of business.

 

26. Which of the following is true regarding the use of peremptory challenges based on gender?

A. Peremptory challenges may not be based on gender unless a sexually based crime, such as rape, is involved.

 

B. Only one peremptory challenge per party may be based on gender.

 

C. Peremptory challenges may be based on gender only so long as lawyers for all parties agree.

 

D. Peremptory challenges may be based on gender.

 

E. Peremptory challenges may not be based on gender.

 

27. Ann, a Massachusetts resident, breached a contract entered into in Florida with Bruce. Bruce successfully obtains a judgment against Ann for $150,000 in a Florida state court. Ann lives in a nice apartment in Massachusetts, and her only substantial asset is a vacation beach house in North Carolina. Which of the following is true regarding Bruce’s ability to obtain funds from a sale of the beach house?

A. Bruce is only entitled to obtain funds from property located in Florida, the location of the lawsuit, and cannot benefit from the property in North Carolina.

 

B. Bruce is only entitled to obtain funds from property located in Florida, the location of the lawsuit, or from Massachusetts, Ann’s domicile, and cannot benefit from the property in North Carolina.

 

C. Bruce will be able to sell the beach house in North Carolina through attachment jurisdiction, and he is entitled to keep any funds obtained in excess of amounts owed.

 

D. Bruce will be able to sell the beach house in North Carolina through attachment jurisdiction, but he must return to Ann any funds obtained in excess of amounts owed.

 

E. Under federal law, Bruce will only be able to sell the beach house through attachment jurisdiction if after two years Ann has failed to satisfy the judgment, and any sums received in excess of amounts owed to Bruce go the Federal Housing Administration.

 

28. Doctor Sally was sued for malpractice based on allegedly removing the wrong body part. Following discovery, it becomes clear that the plaintiff has no credible evidence against Doctor Sally and that no reasonable jury could rule in the plaintiff’s favor. How should Sally’s lawyer proceed?

A. The lawyer should make a motion for summary judgment.

 

B. The lawyer should make a motion for additional discovery.

 

C. The lawyer should make a motion to amend the answer in order to make a motion to dismiss.

 

D. The lawyer should file a motion for judgment on the pleadings.

 

E. The lawyer should proceed to trial.

 

29. Which of the following do appellate courts primarily handle?

A. Questions of law

 

B. Questions of fact

 

C. Questions of law and fact

 

D. Cases when they initially enter the legal system

 

E. Questions of law and fact, and also cases when they initially enter the legal system

 

30. Which of the following is a question of fact?

A. Did the vehicle run the traffic light?

 

B. Is premeditation necessary for a first degree murder conviction?

 

C. Is speech protected by the First Amendment?

 

D. What is necessary for service of process?

 

E. What elements should an answer contain?

 

31. Laws which enable the court to serve a defendant outside the state as long as the defendant has sufficient minimum contacts within the state and it seems fair to assert jurisdiction are called ______.

A. Minimum contact statutes

 

B. Significant contact statutes

 

C. Long-arm statutes

 

D. In rem statutes

 

E. Quasi in rem statutes

 

32. Which of the following is the same as attachment jurisdiction?

A. In rem jurisdiction

 

B. Personal jurisdiction

 

C. Subject-matter jurisdiction

 

D. Equitable jurisdiction

 

E. Quasi in rem jurisdiction

 

33. Paul lives in Florida but owns property in Tennessee for which he has not paid property tax in several years. Assuming the state meets procedural requirements, which of the following is true?

A. The court can exert in personam jurisdiction over the property itself and sell it to satisfy the tax debt.

 

B. The court can exert in rem jurisdiction over the property and sell it to satisfy the tax debt.

 

C. The court can exert both in personam jurisdiction and in rem jurisdiction over Paul but must wait until his return to the state in order to sell the property to satisfy the tax debt.

 

D. The court can exert both in personam jurisdiction and in rem jurisdiction over the property itself and may take control of the property, but the court must wait until Paul’s return to the state in order to sell the property to satisfy the tax debt.

 

E. The court has no right to sell the property to satisfy the tax debt because no jurisdiction is present.

 

34. Will a plaintiff be allowed to assert jurisdiction over a defendant in the plaintiff’s state for a cause of action arising out of the defendant’s website?

A. It depends on the nature and quality of commercial activity that an entity conducts over the Internet.

 

B. Yes, for any type of action.

 

C. Yes, but only if the defendant consented to jurisdiction in the plaintiff’s home state.

 

D. Yes, but only if the defendant has actually physically been in the plaintiff’s home state within the 180 days prior to the filing of the complaint.

 

E. No, not under any circumstances.

 

35. Which of the following is true regarding state and federal court jurisdiction?

A. State courts begin with exclusive jurisdiction until a federal court intervenes.

 

B. In all cases, state courts have concurrent jurisdiction with the federal courts.

 

C. Federal courts begin with exclusive jurisdiction until a state court intervenes.

 

D. In all cases, state courts have exclusive jurisdiction unless the state’s Supreme Court grants jurisdiction to a federal court in the state.

 

E. In some cases, state courts have exclusive jurisdiction; in some cases, state courts have concurrent jurisdiction with the federal courts; and state courts also have the power to hear all cases not within the exclusive jurisdiction of the federal court system.

 

36. Which of the following is true regarding federal jurisdiction?

A. There is no exclusive federal jurisdiction in civil matters.

 

B. If a case falls within the federal jurisdiction, it may not fall within state jurisdiction.

 

C. Some cases fall within both federal jurisdiction and state jurisdiction, but there is no exclusive federal court jurisdiction.

 

D. Some cases fall within both federal jurisdiction and state jurisdiction, but that only occurs in criminal matters.

 

E. Some cases fall within both federal jurisdiction and state jurisdiction, but the federal court system has exclusive jurisdiction over some cases.

 

37. Over which of the following does the federal court system have exclusive jurisdiction?

A. Admiralty cases only

 

B. Bankruptcy cases only

 

C. Federal copyright cases only

 

D. Admiralty, bankruptcy, and federal copyright cases

 

E. The federal court system has no exclusive jurisdiction

 

38. Which of the following is a court’s power to hear certain kinds of cases?

A. Subject-matter jurisdiction

 

B. In kind jurisdiction

 

C. In personam jurisdiction

 

D. In loco jurisdiction

 

E. In area jurisdiction

 

39. Which of the following is needed for diversity-of-citizenship?

A. Only that the plaintiff not reside in the same state as the defendant.

 

B. Only that the plaintiff reside in the same state as the defendant.

 

C. Only that the controversy concern an amount in excess of $75,000.

 

D. Only that the controversy concern an amount in excess of $100,000.

 

E. That the plaintiff and the defendant reside in different states and that the controversy concerns an amount in excess of $75,000.

 

40. For purposes of diversity-of-citizenship, where does a corporation reside?

A. The state of incorporation only.

 

B. Only the state in which the corporation has its principal place of business.

 

C. The state in which the corporation has its principal place of business and the state of incorporation.

 

D. Any state in which the corporation does business.

 

E. Any state in which the corporation has done business within the last five years.

 

41. Assume a plaintiff files a case in state court that could also have been filed in federal court. Does the defendant have any choice in the matter?

A. The defendant has a right to move the case to federal court.

 

B. The defendant can have the case moved to federal court only if federal jurisdiction question is involved.

 

C. The defendant can have the case moved to federal court only if the state trial court judge grants permission in his or her discretion.

 

D. The defendant can have the case moved to federal court only if the plaintiff’s filing expenses in state court are paid by the defendant.

 

E. The defendant has no choice, and the case will stay in state court.

 

42. Which of the following is typically an appropriate venue in a lawsuit?

A. Only the trial court where the defendant resides.

 

B. Only the trial court where the plaintiff resides.

 

C. Only the location where the dispute occurred if the lawsuit focuses on a particular incident.

 

D. Both the trial court where the defendant resides and the trial court where the plaintiff resides.

 

E. The trial court where the defendant resides and also the location where the dispute occurred if the lawsuit focuses on a particular incident.

 

43. Billy knows that he can bring his case against Bob in a state court in Tennessee. He is unsure, however, of which county in which to proceed. Which of the following address the proper county?

A. In personam jurisdiction

 

B. Venue

 

C. Subject-matter jurisdiction

 

D. Diversity jurisdiction

 

E. Long-arm jurisdiction

 

44. What are the trial courts in the federal court system called?

A. U.S. district courts

 

B. U.S. circuit courts

 

C. Federal circuit courts

 

D. Federal jurisdictional courts

 

E. Preemptory courts

 

45. How many circuits does the U.S. Court of Appeals have?

A. 6

 

B. 50

 

C. 12

 

D. 10

 

E. 13

 

46. Assuming there are no vacancies, how many U.S. Supreme Court justices are there?

A. 9

 

B. 5

 

C. 15

 

D. 8

 

E. 7

 

47. Which of the following is true regarding the court system in the Republic of China (Taiwan)?

A. It is identical to the court system in the U.S.

 

B. For civil and criminal cases, and for cases interpreting the country’s constitution, the Supreme Court is the court of last resort.

 

C. All cases go directly from the trial court to the Supreme Court, and there is no intermediate appellate court system.

 

D. While constitutional issues are heard by the country’s Supreme Court, regular civil and criminal cases are heard by the Court of the Judicial Yuan.

 

E. Responsibility for interpreting the country’s constitution falls to the Constitutional Court of the Judicial Yuan.

 

48. Which of the following is true regarding trials in Japan?

A. The Japanese trial system has juries that function similar to juries in America.

 

B. The discovery process in the Japanese court system is much simpler than that in America.

 

C. Trial involves a series of discrete meetings between the parties and the judge.

 

D. Known evidence must be automatically exchanged without request or order of the court.

 

E. Only civil penalties may be imposed in civil cases for parties violating judicial orders.

 

“Appellate Court.” Jim, who is a bit eccentric, says that he is fed up with the way a certain employer in his town treats employees and that he is going to sue on behalf of all those employees. Jim also says that he is going to start his case at the appellate court level, skipping over all those “lesser” judges. Jim says that those justices will surely hear him out and that he will also seek a jury.

 

49. Will an appellate court hear Jim’s case?

A. Yes, so long as a state trial court judge approves and certifies the case for the appellate court without holding a trial first.

 

B. Yes, but only if Jim can prove that he would have had to wait at least a year for a trial at the trial court level.

 

C. Yes, but only if Jim files his case in state court as opposed to federal court.

 

D. Yes, but Jim is not entitled to a jury.

 

E. No, because Jim is required to first file the case in the appropriate trial court.

 

50. Regardless of what court is involved, can Jim act as plaintiff for the employees?

A. Yes, so long as he gets permission slips from all of them.

 

B. Yes, so long as no employee files an objection.

 

C. Yes, so long as he gives any money he receives to them.

 

D. No, because he lacks standing.

 

E. No, because venue is lacking.

 

51. Assuming Jim ends up initially, or at some later point, at the appellate level, is he entitled to a jury at the appellate level?

A. No, jurors are not used at the appellate court level.

 

B. Yes, but only if he had a jury first at the trial court level.

 

C. Yes, if he satisfies the requirements to initially bring the case in appellate court, he is entitled to a jury.

 

D. Yes, but only if the employer agrees to a jury.

 

E. Yes, because appellate courts decide questions of fact while questions of law are decided at the trial court level.

 

52. Yolanda found a better job and quit Robert’s employment. Yolanda, however, wants to sue Robert because she believes that he may have terminated her employment in the future based on age discrimination. At this point, which of the following would be Robert’s best defense to a lawsuit filed by Yolanda in the state in which she worked?

A. That Yolanda lacks standing.

 

B. That the court lacks in personam jurisdiction.

 

C. That the state’s long-arm statute does not apply.

 

D. That a default judgment is appropriate.

 

E. That the case is moot.

 

53. Which of the following is true regarding state courts of appeal?

A. States only have an intermediate court of appeal if there is no state Supreme Court.

 

B. In states that do not have an intermediate court of appeal, appeals go to the federal court of appeals.

 

C. In states that do not have an intermediate court of appeal, there is no right of appeal to any court.

 

D. All states in this country have intermediate courts of appeal.

 

E. Not all states have intermediate courts of appeal; in those states, appeals go to the state court of last resort.

 

“Revenge.” Jane, a first year law student, while walking to school in inclement weather, accidentally slipped on ice knocking down Greg, another first year law student, breaking his glasses. He was very angry with Jane and let the air out of one of her car tires. Greg also decided to sue Jane for negligence claiming as damages $300 for his broken glasses. He decided that he already knew all about the law and did not need a lawyer. Greg sued Jane in state court. Jane, in the same lawsuit, brought an action against Greg for letting the air out of her tire. At the trial in state court, Jane told the judge that a friend, Susie, told her that she saw Greg let the air out of Jane’s tire. The judge disallowed Jane’s testimony on that issue. Susie, however, who was in the courtroom also came and testified to that effect. The state court judge ruled in favor of Jane. Greg said that he was not giving up and that he would seek double damages on appeal in federal court. Jane and Greg live in different states when not attending school. After the trial, Jane reported Greg’s action of letting the air out of her tire to the police who said that they would proceed with a criminal action against Greg. Greg goes to see Alex, a recent graduate who had just passed the bar, and asked Alex to represent him in a federal court appeal.

 

54. What advice should Alex give to Greg regarding an appeal filed in federal court?

A. He should tell Greg that a federal appeal looks promising and that he will be glad to represent Greg for an hourly rate of $400.

 

B. He should tell Greg that the federal appeal looks good only if Greg can get Jane to admit she was negligent.

 

C. He should tell Greg that the federal appeal looks good only if Susie does not come to testify in person.

 

D. He should tell Greg that the federal appeal is not possible unless Greg first gets the trial court judge to certify the case to federal court.

 

E. He should tell Greg to forget about a federal court appeal because an appeal from a state trial court would not be to federal court.

 

55. Jane’s action against Greg for the tire is called a ______.

A. Counterclaim

 

B. Cross-Claim

 

C. Third-party claim

 

D. Discovery claim

 

E. Service claim

 

56. Was the judge correct in disallowing Jane’s testimony regarding what Susie told her about the tire?

A. No, the judge was wrong and should have considered that testimony.

 

B. Yes, the judge was correct to disallow the testimony because it involved a possible criminal action.

 

C. Yes, the judge was correct to disallow the testimony because it was hearsay.

 

D. Yes, the judge was correct to disallow the testimony but only because Susie was in the courtroom and could testify herself; otherwise, it should have been allowed.

 

E. Yes, the judge was correct to disallow the testimony but only because it purportedly came from an admitted friend of the defendant, not an independent witness; otherwise, it should have been allowed.

 

57. What standard of proof would the trial judge have applied when ruling on the case?

A. A preponderance of the evidence standard

 

B. A standard of proof beyond a reasonable doubt

 

C. A standard of proof by a margin

 

D. A standard of certainty in proof

 

E. A standard of proof beyond a reasonable question

 

58. What standard of proof would the judge apply in a criminal action against Greg?

A. A preponderance of the evidence standard

 

B. A standard of proof beyond a reasonable doubt

 

C. A standard of proof by a margin

 

D. A standard of certainty in proof

 

E. A standard of proof beyond a reasonable question

 

59. The ______ requirement ensures that courts do not render advisory opinions.

A. Attachment

 

B. Subject-matter jurisdiction

 

C. Case or controversy

 

D. In rem

 

E. In personam

 

60. Bob sued Jane over a motor vehicle accident. Bob and Jane settled the case prior to the trial for $1,000. The lawsuit is now ______.

A. Ripe

 

B. Moot

 

C. Cased

 

D. Standard

 

E. Remanded

 

61. A[n] ______ is a judgment in favor of the plaintiff that occurs when the defendant fails to answer the complaint, and the plaintiff’s complaint alleges facts that would support such a judgment.

A. Default judgment

 

B. Automatic judgment

 

C. Delineated response judgment

 

D. Dismissal

 

E. Pleading judgment

 

62. A defendant uses a[n] ______ when her or his answer admits that the facts contained in the complaint are accurate but also includes additional facts that justify the defendant’s actions and provide a legally sound reason to deny relief to the plaintiff.

A. Secondary answer

 

B. Pleading defense

 

C. Affirmative defense

 

D. Formal answer

 

E. Personam answer

 

63. The plaintiff must provide the defendant in a lawsuit with a copy of the complaint. That process is called ______.

A. Summons issuance

 

B. Service of process

 

C. Service delivery

 

D. Subpoena delivery

 

E. In personam service

 

64. Which of the following is a document that notifies the defendant of the lawsuit and explains that if the defendant does not respond to the lawsuit within a certain period of time, a default judgment will be entered?

A. Complaint

 

B. Answer

 

C. Summons

 

D. Instructional guide

 

E. Transactional analysis

 

65. The court may grant a ______ if after reviewing the pleadings, the judge determines that the only reasonable decision is in favor of the moving party.

A. Motion for judgment on the pleadings

 

B. Motion for summary judgment

 

C. Motion for sanctions

 

D. Motion for discovery

 

E. Motion for production

 

66. The court may grant a ______ if after reviewing the evidence in the case, there is no factual dispute and one party is entitled to judgment prior to trial.

A. Motion for judgment on the pleadings

 

B. Motion for summary judgment

 

C. Motion for sanctions

 

D. Motion for discovery

 

E. Motion for production

 

67. Which of the following is true regarding tools of discovery?

A. The only tool of discovery is interrogatories.

 

B. Depositions are the only tool of discovery available to plaintiffs, but defendants may use both interrogatories and depositions.

 

C. Summary motions, interrogatories, and depositions, are tools of discovery available to all parties.

 

D. Interrogatories and depositions are tools of discovery available to all parties, but summary motions and requests to produce documents are not tools of discovery.

 

E. Interrogatories, depositions, and requests to produce documents are all tools of discovery available to all parties.

 

68. Which of the following are written questions that one party sends to another to answer under oath?

A. Interrogatories

 

B. Depositions

 

C. Inquiries

 

D. Subpoenas

 

E. Sworn assertions

 

69. At a[n] ______, attorneys examine a witness under oath with a court reporter present.

A. Deposition

 

B. Interrogatory

 

C. Inquiry

 

D. Pre-trial conference

 

E. Pre-trial mediation

 

70. Billy, a witness to a motor vehicle accident, is gravely ill with cancer. Pat, who was injured in the accident, would like to preserve his testimony for trial in case he dies before the trial date. What should Pat do?

A. Send interrogatories to Billy.

 

B. Take Billy’s deposition.

 

C. Send a request to admit to Billy that the accident was the defendant’s fault.

 

D. Have a conference with the judge and Billy.

 

E. There is nothing she can do.

 

“Puppy Woes.” Sam promised to sell Linda a Welsh Corgi puppy for $700 but backed out of the deal. Linda sued Sam in state court for breach of contract and asked for a jury to hear the case. During jury selection, one juror, Ann, said that she did not think she could be fair to Linda because Linda did not appear to be a dog lover. Linda’s lawyer asked that Ann not hear the case on the basis that she could not be fair, and the judge excused Ann. Linda also decided that another juror, Sandy, looked at her in a grumpy manner so, without a reason given, Linda’s lawyer asked the judge to excuse that juror from serving. The judge did so. After the jury was chosen, Linda’s lawyer made a statement to the jury as did Sam’s lawyer. Linda’s lawyer then called to the witness stand Brenda, a friend of Linda, who heard the discussion held between Linda and Sam regarding the purchase of the puppy. Brenda testified under questioning by Linda’s lawyer that she heard Linda say that she would pay $700 for the puppy and that she also heard Sam say that he would sell the dog for that amount. Unfortunately for Linda, Brenda also testified in response to questioning by Sam’s lawyer that Sam distinctly told Linda that he would only sell the puppy to her if Linda came with cash for the puppy within seven days. Linda did not show up with the money for ten days and Sam had already sold the dog to someone else. The judge ruled in favor of Sam.

 

71. In choosing the jury, the lawyers were engaged in ______.

A. Voir dire

 

B. Jury analysis

 

C. Jury review

 

D. Ven dere

 

E. Shadowing

 

72. The challenge to the juror who said that they could not be fair is referred to as a[n] ________.

A. Peremptory challenge

 

B. Challenge for cause

 

C. Stipulated challenge

 

D. Fairness challenge

 

E. Approved challenge

 

73. The challenge to the juror who seemed grumpy is referred to as a[n] _______.

A. Peremptory challenge

 

B. Challenge for cause

 

C. Stipulated challenge

 

D. Fairness challenge

 

E. Approved challenge

 

74. The statements made to the jury by the lawyers immediately after the jury was chosen are referred to as ______.

A. Direct statements

 

B. Closing selection statements

 

C. Jury statements

 

D. Influential statements

 

E. Opening statements

 

75. The questioning of Brenda by Linda’s lawyer is called ______, and the questioning of Brenda by Sam’s lawyer is called ______.

A. Absolute examination; counter-examination

 

B. True examination; analysis examination

 

C. True examination; trickster examination

 

D. Direct examination; interrogating examination

 

E. Direct examination; cross-examination

 

 

Essay Questions

76. Marilyn, a resident of Ohio, suffered personal injury while operating her tractor in Ohio. She filed suit in state court against the manufacturer, Company A, incorporated in Delaware with its principal place of business in Illinois, and also against the seller, Company B, incorporated in Ohio with its principal place of business in Ohio. Marilyn and Company B informally agreed to settle out of court, but the agreement was subject to the agreement of Company B’s insurer. Before a final agreement was reached in regard to settlement with Company B, Company A filed a motion in state court to remove the case to federal court. Although Marilyn opposed removal, the state court granted Company A’s motion. After the case was removed to federal court, Marilyn and Company B finalized their settlement agreement and Company B was dismissed from the lawsuit. The federal district court proceeded to hear the case and ruled in favor of Company A. Marilyn appealed on the basis that because diversity between the parties was lacking, the federal district court had no jurisdiction over the case. She claims that the case should be remanded to state court for a new trial. What should the appellate court rule regarding whether the state trial court properly granted the petition for removal and what will be the likely outcome on appeal?

 

 

 

 

77. Define the term “in personam” jurisdiction and discuss where corporations and individuals are generally subject to that type of jurisdiction. Include in your answer a discussion of long-arm jurisdiction.

 

 

 

 

78. Alice, a resident of Michigan, claims that Pet Food Company Inc., put out some dog food that made her dog, Champ, sick. Champ is a prize winning poodle. He survived the pet food fiasco but only after traveling to a veterinarian in Florida specializing in poodles and having two very expensive surgeries. Additionally, his ability to sire has been impaired, and Alice will have no more breeding fees from Champ. Her damages are $80,000. Pet Food Company Inc., is incorporated in Delaware, with its principal place of business in Michigan. Alice asks you whether she can sue in federal court. What would you tell her and why?

 

 

 

 

79. Discuss the items that should appear in a complaint.

 

 

 

 

80. Cindy ran her car over Hank in her company parking lot breaking his leg. That happened because, without warning, Cindy’s car brakes failed. Hank sues Cindy. Cindy decides to do nothing because she sees no way that she can win the lawsuit because she did indeed strike Hank. Is she right? Why or why not? What would you suggest that she do in the civil litigation? Why is it important that Cindy proceed correctly and immediately at this point in the litigation?

 

 

 

 

81. Cindy who was riding her new bicycle accidentally ran over jogger Bruce’s foot. He sues. Cindy is suspicious that he is not hurt as badly as he claims. What would Cindy want to know for trial, and how could she and her lawyer find out? Fully discuss your answer and methods by which Cindy could obtain information.

 

 

 

 

Chapter 03 The U.S. Legal System Answer Key

True / False Questions

1.
(p. 39)
Juries decide questions of law.

FALSE

Only judges can decide questions of law.

 

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Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-01 What are the different types of jurisdiction a court must have before it can render a binding decision in a case?
Topic: Original versus Appellate Jurisdiction
 

 

2.
(p. 51)
Usually the issue of ripeness arises when one party claims that a case is moot.

TRUE

Usually the issue of ripeness arises when one party claims that the case is moot, meaning that there is no point in the court’s hearing the case because no judgment can affect the situation between the parties.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-04 What are the threshold requirements that must be met before a court will hear a case?
Topic: Ripeness
 

 

3.
(p. 39)
The word “jurisdiction” comes from the Latin terms juris, meaning “law,” and diction, meaning “to speak.”

TRUE

The word jurisdiction, referring to the courts’ power to hear cases, comes from the Latin terms juris, meaning “law,” and diction, meaning “to speak.”

 

AACSB: Communication
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 03-01 What are the different types of jurisdiction a court must have before it can render a binding decision in a case?
Topic: Jurisdiction
 

 

4.
(p. 41)
In rem jurisdiction references jurisdiction over a person.

FALSE

In rem jurisdiction (Latin for “jurisdiction over the thing”) references jurisdiction over property.

 

AACSB: Communication
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-01 What are the different types of jurisdiction a court must have before it can render a binding decision in a case?
Topic: Jurisdiction over Persons and Property
 

 

5.
(p. 42)
Under federal statutory law, Internet transactions cannot be the basis for a finding of in personam jurisdiction.

FALSE

A federal district court established a “sliding-scale” standard in the 1997 case Zippo Mfg. Co. v. Zippo Dot Com Inc., for determining whether a business that has Internet contact with a plaintiff in a different state satisfies the minimum-contacts standard.

 

AACSB: Technology
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-01 What are the different types of jurisdiction a court must have before it can render a binding decision in a case?
Topic: Jurisdiction over Persons and Property
 

 

6.
(p. 42)
Subject-matter jurisdiction is a court’s power to hear certain kinds of cases.

TRUE

Subject-matter jurisdiction is a court’s power to hear certain kinds of cases and determines which court system may hear a particular case.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-01 What are the different types of jurisdiction a court must have before it can render a binding decision in a case?
Topic: Subject-Matter Jurisdiction
 

 

7.
(p. 43)
State courts have the power to hear all cases not within the exclusive jurisdiction of the federal court system.

TRUE

The state court system has a broad range of jurisdiction, and state courts have the power to hear all cases not within the exclusive jurisdiction of the federal court system.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-01 What are the different types of jurisdiction a court must have before it can render a binding decision in a case?
Topic: Subject-Matter Jurisdiction
 

 

8.
(p. 43)
Concurrent federal jurisdiction means that both state and federal courts have jurisdiction over a case.

TRUE

Concurrent federal jurisdiction means that both state and federal courts have jurisdiction over a case and covers both federal-question and diversity-of-citizenship cases.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-01 What are the different types of jurisdiction a court must have before it can render a binding decision in a case?
Topic: Subject-Matter Jurisdiction
 

 

9.
(p. 46)
Once a case is in the proper court system, venue determines which trial court in the system will hear the case.

TRUE

Once a case is in the proper court system, venue, a matter of geographic location, determines which trial court in the system will hear the case.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-02 What is venue?
Topic: Venue
 

 

10.
(p. 47)
In some cases, the U.S. Supreme Court functions as a trial court of limited jurisdiction.

TRUE

In an extremely limited number of cases, the U.S. Supreme Court functions as a trial court of limited jurisdiction.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-03 How is our dual court system structured?
Topic: The Federal Court System
 

 

11.
(p. 51)
A person who has the legal right to bring an action in court has standing.

TRUE

As a threshold requirement, a person who has the legal right to bring an action in court has standing (or standing to sue).

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-04 What are the threshold requirements that must be met before a court will hear a case?
Topic: Standing
 

 

12.
(p. 50)
Intermediate courts of appeal in the state court system exist in all states.

FALSE

Intermediate courts of appeal, analogous to federal circuit courts of appeal, exist in approximately half the states.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-03 How is our dual court system structured?
Topic: State Court Systems
 

 

13.
(p. 51)
Under our system of justice, courts may issue advisory opinions.

FALSE

The case or controversy (or justiciable controversy) requirement ensures that courts do not render advisory opinions.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-04 What are the threshold requirements that must be met before a court will hear a case?
Topic: Case or Controversy
 

 

14.
(p. 53)
The defendant responds to a complaint with an answer.

TRUE

The defendant responds to a complaint with an answer in which the defendant denies, affirms, or claims no knowledge of the accuracy of the plaintiff’s allegations.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Pretrial Stage
 

 

15.
(p. 53)
Because of its complicated nature, any complaint should be at least three pages long.

FALSE

Exhibit 3-5; “Typical Complaint” illustrates a short one page complaint.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Pretrial Stage
 

 

16.
(p. 54)
A defendant who believes that he or she has a claim against the plaintiff would include a counterclaim with the answer.

TRUE

A defendant who believes that he or she has a claim against the plaintiff would include a counterclaim, which is identical to the form of a complaint, with the answer.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Pretrial Stage
 

 

17.
(p. 55)
A reply is an answer to a counterclaim.

TRUE

A reply is an answer to a counterclaim which is generally filed by the plaintiff in litigation.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Pretrial Stage
 

 

18.
(p. 57)
A party only has a limited number of challenges for cause in jury selection.

FALSE

If a potential juror’s response to a question indicates that she or he may be biased, either attorney may challenge, or ask the court to remove, that potential juror “for cause.”

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Trial
 

 

19.
(p. 57)
Peremptory challenges in jury selection may not be racially based.

TRUE

The U.S. Supreme Court ruled that race-based peremptory challenges violate the U.S. Constitution.

 

AACSB: Ethics
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Trial
 

 

20.
(p. 60)
In most civil cases, a plaintiff must prove her case beyond a reasonable doubt.

FALSE

In most civil cases, a plaintiff must prove her case by a preponderance of the evidence.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Trial
 

 

21.
(p. 61)
Only one party may appeal from a final judgment.

FALSE

Either party may appeal the judge’s decision on posttrial motions or on her or his final judgment.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: Appellate Procedure
 

 

22.
(p. 61)
If an appellate judge agrees with the majority’s decision, but for different reasons, the judge may write a “concurring” opinion.

TRUE

If a judge agrees with the majority’s decision, but for different reasons, the judge may write a concurring opinion, stating the reasons used to reach the majority’s conclusion.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: Appellate Procedure
 

 

23.
(p. 62)
On average, the U.S. Supreme Court hears 300 cases a year.

FALSE

The Supreme Court hears, on average, only 80 to 90 cases each year.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: Appellate Procedure
 

 

Multiple Choice Questions

24.
(p. 44-45)
Mike, a resident of Georgia, sues Company A in state court in Georgia for negligence alleging personal injury and property damage of $100,000 after a truck driven by an employee of Company A strikes his pick-up truck in the rear. Company A is incorporated in Delaware, has its headquarters in New York, but does a substantial amount of business in Georgia. Company A seeks removal to federal district court, but Mike opposes the motion. Which of the following is true regarding whether the case may be properly removed to federal district court?

A. The amount in controversy satisfies diversity requirements; and if Company A’s nerve center is in a state other than Georgia, then the case may be properly removed to federal court.

 

B. The amount in controversy satisfies diversity requirements; and because Company A is incorporated and has its headquarters in a state other than Georgia, the case may be properly removed to federal court.

 

C. Because the amount in controversy satisfies diversity requirements and Company A is incorporated in a state other than Georgia, the case may be properly removed to federal court regardless of where Company A’s headquarters, nerve center, or principal place of business is located.

 

D. Because the amount in controversy satisfies diversity requirements and Company A is headquartered in a state other than Georgia, the case may be properly removed to federal court regardless of where Company A is incorporated and regardless of the location of its nerve center.

 

E. Because the amount in controversy fails to satisfy jurisdictional requirements, regardless of the location of Company A, the case may not be removed to federal court.

In determining the location of a corporation’s principal place of business, the Supreme Court in Hertz Corp. v. Friend ruled that the nerve center test is relatively easy to apply and does not require courts to weigh corporate functions, assets or revenues.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-01 What are the different types of jurisdiction a court must have before it can render a binding decision in a case?
Topic: Subject-Matter Jurisdiction
 

 

25.
(p. 46)
In what state is XYZ Bank, a federally chartered bank, considered a citizen?

A. The bank is considered a citizen of any state in which it is located, meaning any state in which the bank has branches.

 

B. The bank is considered a citizen of the state in which it is located, meaning the state in which its main office as specified in its articles of incorporation is located.

 

C. The bank is considered a citizen only of Washington D.C.

 

D. The bank is considered a citizen only of the state in which it does its largest volume of business.

 

E. The bank is considered a citizen of Washington D.C. and also of the state in which it does its largest volume of business.

According to the Supreme Court in Wachovia Bank N.A. v. Schmidt, a federally chartered bank is located in and is a citizen only in the state in which its main office, as specified in its articles of incorporation, is located.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-01 What are the different types of jurisdiction a court must have before it can render a binding decision in a case?
Topic: Subject-Matter Jurisdiction
 

 

26.
(p. 58)
Which of the following is true regarding the use of peremptory challenges based on gender?

A. Peremptory challenges may not be based on gender unless a sexually based crime, such as rape, is involved.

 

B. Only one peremptory challenge per party may be based on gender.

 

C. Peremptory challenges may be based on gender only so long as lawyers for all parties agree.

 

D. Peremptory challenges may be based on gender.

 

E. Peremptory challenges may not be based on gender.

According to the Supreme Court in J.E.B. v. Alabama, “When persons are excluded from participation in our democratic processes solely because of race or gender, this promise of equality dims, and the integrity of our judicial system is jeopardized.”

 

AACSB: Diversity
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Trial
 

 

27.
(p. 41-42)
Ann, a Massachusetts resident, breached a contract entered into in Florida with Bruce. Bruce successfully obtains a judgment against Ann for $150,000 in a Florida state court. Ann lives in a nice apartment in Massachusetts, and her only substantial asset is a vacation beach house in North Carolina. Which of the following is true regarding Bruce’s ability to obtain funds from a sale of the beach house?

A. Bruce is only entitled to obtain funds from property located in Florida, the location of the lawsuit, and cannot benefit from the property in North Carolina.

 

B. Bruce is only entitled to obtain funds from property located in Florida, the location of the lawsuit, or from Massachusetts, Ann’s domicile, and cannot benefit from the property in North Carolina.

 

C. Bruce will be able to sell the beach house in North Carolina through attachment jurisdiction, and he is entitled to keep any funds obtained in excess of amounts owed.

 

D. Bruce will be able to sell the beach house in North Carolina through attachment jurisdiction, but he must return to Ann any funds obtained in excess of amounts owed.

 

E. Under federal law, Bruce will only be able to sell the beach house through attachment jurisdiction if after two years Ann has failed to satisfy the judgment, and any sums received in excess of amounts owed to Bruce go the Federal Housing Administration.

Courts can also gain quasi in rem jurisdiction, or attachment jurisdiction, over a defendant’s property unrelated to the plaintiff’s claim; but any amounts obtained in excess of amounts owed must be returned to the defendant.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-01 What are the different types of jurisdiction a court must have before it can render a binding decision in a case?
Topic: Jurisdiction over Persons and Property
 

 

28.
(p. 55)
Doctor Sally was sued for malpractice based on allegedly removing the wrong body part. Following discovery, it becomes clear that the plaintiff has no credible evidence against Doctor Sally and that no reasonable jury could rule in the plaintiff’s favor. How should Sally’s lawyer proceed?

A. The lawyer should make a motion for summary judgment.

 

B. The lawyer should make a motion for additional discovery.

 

C. The lawyer should make a motion to amend the answer in order to make a motion to dismiss.

 

D. The lawyer should file a motion for judgment on the pleadings.

 

E. The lawyer should proceed to trial.

A motion for summary judgment is filed after the discovery process asserting that no factual disputes exist and that if the judge applied the law to the undisputed facts, her only reasonable decision would be in favor of the moving party.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Pretrial Stage
 

 

29.
(p. 39)
Which of the following do appellate courts primarily handle?

A. Questions of law

 

B. Questions of fact

 

C. Questions of law and fact

 

D. Cases when they initially enter the legal system

 

E. Questions of law and fact, and also cases when they initially enter the legal system

Appellate courts primarily handle questions of law, not questions of fact.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-01 What are the different types of jurisdiction a court must have before it can render a binding decision in a case?
Topic: Original versus Appellate Jurisdiction
 

 

30.
(p. 39)
Which of the following is a question of fact?

A. Did the vehicle run the traffic light?

 

B. Is premeditation necessary for a first degree murder conviction?

 

C. Is speech protected by the First Amendment?

 

D. What is necessary for service of process?

 

E. What elements should an answer contain?

A question of fact is a question about an event or characteristic in a case.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 03-01 What are the different types of jurisdiction a court must have before it can render a binding decision in a case?
Topic: Original versus Appellate Jurisdiction
 

 

31.
(p. 41)
Laws which enable the court to serve a defendant outside the state as long as the defendant has sufficient minimum contacts within the state and it seems fair to assert jurisdiction are called ______.

A. Minimum contact statutes

 

B. Significant contact statutes

 

C. Long-arm statutes

 

D. In rem statutes

 

E. Quasi in rem statutes

Long-arm statutes, passed by most states, enable the court to serve defendants outside the state as long as the defendant has sufficient minimum contacts within the state and it seems fair to assert long-arm jurisdiction over him or her.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-01 What are the different types of jurisdiction a court must have before it can render a binding decision in a case?
Topic: Jurisdiction over Persons and Property
 

 

32.
(p. 41)
Which of the following is the same as attachment jurisdiction?

A. In rem jurisdiction

 

B. Personal jurisdiction

 

C. Subject-matter jurisdiction

 

D. Equitable jurisdiction

 

E. Quasi in rem jurisdiction

Courts can gain quasi in rem jurisdiction, or attachment jurisdiction, over a defendant’s property unrelated to the plaintiff’s claim.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-01 What are the different types of jurisdiction a court must have before it can render a binding decision in a case?
Topic: Jurisdiction over Persons and Property
 

 

33.
(p. 41)
Paul lives in Florida but owns property in Tennessee for which he has not paid property tax in several years. Assuming the state meets procedural requirements, which of the following is true?

A. The court can exert in personam jurisdiction over the property itself and sell it to satisfy the tax debt.

 

B. The court can exert in rem jurisdiction over the property and sell it to satisfy the tax debt.

 

C. The court can exert both in personam jurisdiction and in rem jurisdiction over Paul but must wait until his return to the state in order to sell the property to satisfy the tax debt.

 

D. The court can exert both in personam jurisdiction and in rem jurisdiction over the property itself and may take control of the property, but the court must wait until Paul’s return to the state in order to sell the property to satisfy the tax debt.

 

E. The court has no right to sell the property to satisfy the tax debt because no jurisdiction is present.

If a defendant has property in a state, a plaintiff may file suit against the defendant’s property instead of the owner through in rem jurisdiction over the property.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 03-01 What are the different types of jurisdiction a court must have before it can render a binding decision in a case?
Topic: Jurisdiction over Persons and Property
 

 

34.
(p. 42)
Will a plaintiff be allowed to assert jurisdiction over a defendant in the plaintiff’s state for a cause of action arising out of the defendant’s website?

A. It depends on the nature and quality of commercial activity that an entity conducts over the Internet.

 

B. Yes, for any type of action.

 

C. Yes, but only if the defendant consented to jurisdiction in the plaintiff’s home state.

 

D. Yes, but only if the defendant has actually physically been in the plaintiff’s home state within the 180 days prior to the filing of the complaint.

 

E. No, not under any circumstances.

The likelihood that personal jurisdiction can be constitutionally exercised is directly proportionate to the nature and quality of commercial activity that an entity conducts over the Internet.

 

AACSB: Technology
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 03-01 What are the different types of jurisdiction a court must have before it can render a binding decision in a case?
Topic: Jurisdiction over Persons and Property
 

 

35.
(p. 43)
Which of the following is true regarding state and federal court jurisdiction?

A. State courts begin with exclusive jurisdiction until a federal court intervenes.

 

B. In all cases, state courts have concurrent jurisdiction with the federal courts.

 

C. Federal courts begin with exclusive jurisdiction until a state court intervenes.

 

D. In all cases, state courts have exclusive jurisdiction unless the state’s Supreme Court grants jurisdiction to a federal court in the state.

 

E. In some cases, state courts have exclusive jurisdiction; in some cases, state courts have concurrent jurisdiction with the federal courts; and state courts also have the power to hear all cases not within the exclusive jurisdiction of the federal court system.

State courts have the power to hear all cases not within the exclusive jurisdiction of the federal court system; state courts also have exclusive jurisdiction over certain cases; and state courts at times have concurrent federal jurisdiction meaning that both state and federal courts have jurisdiction over a case.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 03-01 What are the different types of jurisdiction a court must have before it can render a binding decision in a case?
Topic: Subject-Matter Jurisdiction
 

 

36.
(p. 43)
Which of the following is true regarding federal jurisdiction?

A. There is no exclusive federal jurisdiction in civil matters.

 

B. If a case falls within the federal jurisdiction, it may not fall within state jurisdiction.

 

C. Some cases fall within both federal jurisdiction and state jurisdiction, but there is no exclusive federal court jurisdiction.

 

D. Some cases fall within both federal jurisdiction and state jurisdiction, but that only occurs in criminal matters.

 

E. Some cases fall within both federal jurisdiction and state jurisdiction, but the federal court system has exclusive jurisdiction over some cases.

Federal courts have exclusive jurisdiction over claims arising under federal statutes that specify exclusive federal jurisdiction, including some civil matters, and federal courts at times have concurrent federal jurisdiction meaning that both state and federal courts have jurisdiction over a case.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 03-01 What are the different types of jurisdiction a court must have before it can render a binding decision in a case?
Topic: Subject-Matter Jurisdiction
 

 

37.
(p. 43)
Over which of the following does the federal court system have exclusive jurisdiction?

A. Admiralty cases only

 

B. Bankruptcy cases only

 

C. Federal copyright cases only

 

D. Admiralty, bankruptcy, and federal copyright cases

 

E. The federal court system has no exclusive jurisdiction

The federal court system has exclusive jurisdiction over very few cases: admiralty cases, bankruptcy cases, federal criminal prosecutions, lawsuits in which one state sues another state, claims against the United States, and cases involving federal copyrights, patents, or trademarks.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-01 What are the different types of jurisdiction a court must have before it can render a binding decision in a case?
Topic: Subject-Matter Jurisdiction
 

 

38.
(p. 42)
Which of the following is a court’s power to hear certain kinds of cases?

A. Subject-matter jurisdiction

 

B. In kind jurisdiction

 

C. In personam jurisdiction

 

D. In loco jurisdiction

 

E. In area jurisdiction

Subject-matter jurisdiction is a court’s power to hear certain kinds of cases.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-01 What are the different types of jurisdiction a court must have before it can render a binding decision in a case?
Topic: Subject-Matter Jurisdiction
 

 

39.
(p. 43)
Which of the following is needed for diversity-of-citizenship?

A. Only that the plaintiff not reside in the same state as the defendant.

 

B. Only that the plaintiff reside in the same state as the defendant.

 

C. Only that the controversy concern an amount in excess of $75,000.

 

D. Only that the controversy concern an amount in excess of $100,000.

 

E. That the plaintiff and the defendant reside in different states and that the controversy concerns an amount in excess of $75,000.

A diversity-of-citizenship case must satisfy two conditions: (1) The plaintiff(s) does(do) not reside in the same state as the defendant(s), and (2) the controversy concerns an amount in excess of $75,000.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 03-01 What are the different types of jurisdiction a court must have before it can render a binding decision in a case?
Topic: Subject-Matter Jurisdiction
 

 

40.
(p. 43)
For purposes of diversity-of-citizenship, where does a corporation reside?

A. The state of incorporation only.

 

B. Only the state in which the corporation has its principal place of business.

 

C. The state in which the corporation has its principal place of business and the state of incorporation.

 

D. Any state in which the corporation does business.

 

E. Any state in which the corporation has done business within the last five years.

A business may reside in two states: the state of its incorporation and the state of its principal place of business.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 03-01 What are the different types of jurisdiction a court must have before it can render a binding decision in a case?
Topic: Subject-Matter Jurisdiction
 

 

41.
(p. 44)
Assume a plaintiff files a case in state court that could also have been filed in federal court. Does the defendant have any choice in the matter?

A. The defendant has a right to move the case to federal court.

 

B. The defendant can have the case moved to federal court only if federal jurisdiction question is involved.

 

C. The defendant can have the case moved to federal court only if the state trial court judge grants permission in his or her discretion.

 

D. The defendant can have the case moved to federal court only if the plaintiff’s filing expenses in state court are paid by the defendant.

 

E. The defendant has no choice, and the case will stay in state court.

When a case falls under concurrent jurisdiction, the defendant can transfer the case to federal court by exercising her right of removal if the case is initially filed in state court.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-01 What are the different types of jurisdiction a court must have before it can render a binding decision in a case?
Topic: Subject-Matter Jurisdiction
 

 

42.
(p. 47)
Which of the following is typically an appropriate venue in a lawsuit?

A. Only the trial court where the defendant resides.

 

B. Only the trial court where the plaintiff resides.

 

C. Only the location where the dispute occurred if the lawsuit focuses on a particular incident.

 

D. Both the trial court where the defendant resides and the trial court where the plaintiff resides.

 

E. The trial court where the defendant resides and also the location where the dispute occurred if the lawsuit focuses on a particular incident.

Usually, the trial court where the defendant resides is the appropriate venue; if the focus of the case is a particular incident, the trial court where the dispute occurred is an appropriate venue.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-02 What is venue?
Topic: Venue
 

 

43.
(p. 46)
Billy knows that he can bring his case against Bob in a state court in Tennessee. He is unsure, however, of which county in which to proceed. Which of the following address the proper county?

A. In personam jurisdiction

 

B. Venue

 

C. Subject-matter jurisdiction

 

D. Diversity jurisdiction

 

E. Long-arm jurisdiction

Once a court is in the proper court system, venue determines which trial court in the system will hear the case.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 2 Medium
Learning Objective: 03-02 What is venue?
Topic: Venue
 

 

44.
(p. 47)
What are the trial courts in the federal court system called?

A. U.S. district courts

 

B. U.S. circuit courts

 

C. Federal circuit courts

 

D. Federal jurisdictional courts

 

E. Preemptory courts

In the federal court system, the trial courts, or courts of original jurisdiction, are U.S. district courts.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-03 How is our dual court system structured?
Topic: The Federal Court System
 

 

45.
(p. 48)
How many circuits does the U.S. Court of Appeals have?

A. 6

 

B. 50

 

C. 12

 

D. 10

 

E. 13

The United States has 12 circuits, including a circuit for the District of Columbia.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-03 How is our dual court system structured?
Topic: The Federal Court System
 

 

46.
(p. 49)
Assuming there are no vacancies, how many U.S. Supreme Court justices are there?

A. 9

 

B. 5

 

C. 15

 

D. 8

 

E. 7

Nine justices, who have lifetime appointments, make up the high court.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-03 How is our dual court system structured?
Topic: The Federal Court System
 

 

47.
(p. 50)
Which of the following is true regarding the court system in the Republic of China (Taiwan)?

A. It is identical to the court system in the U.S.

 

B. For civil and criminal cases, and for cases interpreting the country’s constitution, the Supreme Court is the court of last resort.

 

C. All cases go directly from the trial court to the Supreme Court, and there is no intermediate appellate court system.

 

D. While constitutional issues are heard by the country’s Supreme Court, regular civil and criminal cases are heard by the Court of the Judicial Yuan.

 

E. Responsibility for interpreting the country’s constitution falls to the Constitutional Court of the Judicial Yuan.

While Taiwan’s Supreme Court is the court of last resort for civil and criminal cases, responsibility for interpreting the country’s constitution falls to the Constitutional Court of the Judicial Yuan.

 

AACSB: Diversity
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-03 How is our dual court system structured?
Topic: The Structure of the Court System
 

 

48.
(p. 60)
Which of the following is true regarding trials in Japan?

A. The Japanese trial system has juries that function similar to juries in America.

 

B. The discovery process in the Japanese court system is much simpler than that in America.

 

C. Trial involves a series of discrete meetings between the parties and the judge.

 

D. Known evidence must be automatically exchanged without request or order of the court.

 

E. Only civil penalties may be imposed in civil cases for parties violating judicial orders.

The Japanese legal system has no juries, the discovery process is not as simple as it is in the U.S., and trial is a series of discrete meetings between the parties and the judge.

 

AACSB: Diversity
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: Steps in Civil Litigation
 

 

“Appellate Court.” Jim, who is a bit eccentric, says that he is fed up with the way a certain employer in his town treats employees and that he is going to sue on behalf of all those employees. Jim also says that he is going to start his case at the appellate court level, skipping over all those “lesser” judges. Jim says that those justices will surely hear him out and that he will also seek a jury.

 

49.
(p. 49)
Will an appellate court hear Jim’s case?

A. Yes, so long as a state trial court judge approves and certifies the case for the appellate court without holding a trial first.

 

B. Yes, but only if Jim can prove that he would have had to wait at least a year for a trial at the trial court level.

 

C. Yes, but only if Jim files his case in state court as opposed to federal court.

 

D. Yes, but Jim is not entitled to a jury.

 

E. No, because Jim is required to first file the case in the appropriate trial court.

In state court systems, most cases begin in a trial court of general jurisdiction.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-03 How is our dual court system structured?
Topic: State Court Systems
 

 

50.
(p. 51)
Regardless of what court is involved, can Jim act as plaintiff for the employees?

A. Yes, so long as he gets permission slips from all of them.

 

B. Yes, so long as no employee files an objection.

 

C. Yes, so long as he gives any money he receives to them.

 

D. No, because he lacks standing.

 

E. No, because venue is lacking.

For a person to have standing, the outcome of a case must personally affect him or her.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-04 What are the threshold requirements that must be met before a court will hear a case?
Topic: Standing
 

 

51.
(p. 61)
Assuming Jim ends up initially, or at some later point, at the appellate level, is he entitled to a jury at the appellate level?

A. No, jurors are not used at the appellate court level.

 

B. Yes, but only if he had a jury first at the trial court level.

 

C. Yes, if he satisfies the requirements to initially bring the case in appellate court, he is entitled to a jury.

 

D. Yes, but only if the employer agrees to a jury.

 

E. Yes, because appellate courts decide questions of fact while questions of law are decided at the trial court level.

Appellate courts do not have juries; rather, the judges decide the case by majority vote.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: Appellate Procedure
 

 

52.
(p. 51)
Yolanda found a better job and quit Robert’s employment. Yolanda, however, wants to sue Robert because she believes that he may have terminated her employment in the future based on age discrimination. At this point, which of the following would be Robert’s best defense to a lawsuit filed by Yolanda in the state in which she worked?

A. That Yolanda lacks standing.

 

B. That the court lacks in personam jurisdiction.

 

C. That the state’s long-arm statute does not apply.

 

D. That a default judgment is appropriate.

 

E. That the case is moot.

A case is moot when there is no point in the court’s hearing the case because no judgment can affect the situation between the parties.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 03-04 What are the threshold requirements that must be met before a court will hear a case?
Topic: Ripeness
 

 

53.
(p. 50)
Which of the following is true regarding state courts of appeal?

A. States only have an intermediate court of appeal if there is no state Supreme Court.

 

B. In states that do not have an intermediate court of appeal, appeals go to the federal court of appeals.

 

C. In states that do not have an intermediate court of appeal, there is no right of appeal to any court.

 

D. All states in this country have intermediate courts of appeal.

 

E. Not all states have intermediate courts of appeal; in those states, appeals go to the state court of last resort.

Because approximately half the states lack intermediate courts of appeal, appeals from trial courts in these states go directly to the state court of last resort.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-03 How is our dual court system structured?
Topic: State Court Systems
 

 

“Revenge.” Jane, a first year law student, while walking to school in inclement weather, accidentally slipped on ice knocking down Greg, another first year law student, breaking his glasses. He was very angry with Jane and let the air out of one of her car tires. Greg also decided to sue Jane for negligence claiming as damages $300 for his broken glasses. He decided that he already knew all about the law and did not need a lawyer. Greg sued Jane in state court. Jane, in the same lawsuit, brought an action against Greg for letting the air out of her tire. At the trial in state court, Jane told the judge that a friend, Susie, told her that she saw Greg let the air out of Jane’s tire. The judge disallowed Jane’s testimony on that issue. Susie, however, who was in the courtroom also came and testified to that effect. The state court judge ruled in favor of Jane. Greg said that he was not giving up and that he would seek double damages on appeal in federal court. Jane and Greg live in different states when not attending school. After the trial, Jane reported Greg’s action of letting the air out of her tire to the police who said that they would proceed with a criminal action against Greg. Greg goes to see Alex, a recent graduate who had just passed the bar, and asked Alex to represent him in a federal court appeal.

 

54.
(p. 47)
What advice should Alex give to Greg regarding an appeal filed in federal court?

A. He should tell Greg that a federal appeal looks promising and that he will be glad to represent Greg for an hourly rate of $400.

 

B. He should tell Greg that the federal appeal looks good only if Greg can get Jane to admit she was negligent.

 

C. He should tell Greg that the federal appeal looks good only if Susie does not come to testify in person.

 

D. He should tell Greg that the federal appeal is not possible unless Greg first gets the trial court judge to certify the case to federal court.

 

E. He should tell Greg to forget about a federal court appeal because an appeal from a state trial court would not be to federal court.

The U.S. legal system has two parallel court structures, a federal system and a state system; and once a plaintiff tries a case in one of the systems, the case remains in that system throughout the appeals process.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-03 How is our dual court system structured?
Topic: The Structure of the Court System
 

 

55.
(p. 54)
Jane’s action against Greg for the tire is called a ______.

A. Counterclaim

 

B. Cross-Claim

 

C. Third-party claim

 

D. Discovery claim

 

E. Service claim

If the defendant believes he has a claim against the plaintiff, he includes this counterclaim with the answer.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Pretrial Stage
 

 

56.
(p. 59)
Was the judge correct in disallowing Jane’s testimony regarding what Susie told her about the tire?

A. No, the judge was wrong and should have considered that testimony.

 

B. Yes, the judge was correct to disallow the testimony because it involved a possible criminal action.

 

C. Yes, the judge was correct to disallow the testimony because it was hearsay.

 

D. Yes, the judge was correct to disallow the testimony but only because Susie was in the courtroom and could testify herself; otherwise, it should have been allowed.

 

E. Yes, the judge was correct to disallow the testimony but only because it purportedly came from an admitted friend of the defendant, not an independent witness; otherwise, it should have been allowed.

Hearsay is impermissible because the opposing attorney cannot question the person who made the original statement to determine the statement’s veracity.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Trial
 

 

57.
(p. 60)
What standard of proof would the trial judge have applied when ruling on the case?

A. A preponderance of the evidence standard

 

B. A standard of proof beyond a reasonable doubt

 

C. A standard of proof by a margin

 

D. A standard of certainty in proof

 

E. A standard of proof beyond a reasonable question

In most civil cases, the plaintiff must prove the case by a preponderance of the evidence; in other words, the plaintiff must show that the claim is more likely to be true than the defendant’s claim.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Trial
 

 

58.
(p. 60)
What standard of proof would the judge apply in a criminal action against Greg?

A. A preponderance of the evidence standard

 

B. A standard of proof beyond a reasonable doubt

 

C. A standard of proof by a margin

 

D. A standard of certainty in proof

 

E. A standard of proof beyond a reasonable question

Criminal cases have a higher burden of proof than civil cases: The prosecution must prove its case beyond a reasonable doubt.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Trial
 

 

59.
(p. 51)
The ______ requirement ensures that courts do not render advisory opinions.

A. Attachment

 

B. Subject-matter jurisdiction

 

C. Case or controversy

 

D. In rem

 

E. In personam

The case or controversy (or justiciable controversy) requirement ensures that courts do not render advisory opinions.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-04 What are the threshold requirements that must be met before a court will hear a case?
Topic: Case or Controversy
 

 

60.
(p. 51)
Bob sued Jane over a motor vehicle accident. Bob and Jane settled the case prior to the trial for $1,000. The lawsuit is now ______.

A. Ripe

 

B. Moot

 

C. Cased

 

D. Standard

 

E. Remanded

Usually the issue of ripeness arises when one party claims that the case is moot—in other words, there is no point in the court hearing the case because no judgment can affect the situation between the parties.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-04 What are the threshold requirements that must be met before a court will hear a case?
Topic: Ripeness
 

 

61.
(p. 53)
A[n] ______ is a judgment in favor of the plaintiff that occurs when the defendant fails to answer the complaint, and the plaintiff’s complaint alleges facts that would support such a judgment.

A. Default judgment

 

B. Automatic judgment

 

C. Delineated response judgment

 

D. Dismissal

 

E. Pleading judgment

A default judgment is a judgment in favor of the plaintiff that occurs when the defendant fails to answer the complaint and the plaintiff’s complaint alleges facts that would support such a judgment.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Pretrial Stage
 

 

62.
(p. 53)
A defendant uses a[n] ______ when her or his answer admits that the facts contained in the complaint are accurate but also includes additional facts that justify the defendant’s actions and provide a legally sound reason to deny relief to the plaintiff.

A. Secondary answer

 

B. Pleading defense

 

C. Affirmative defense

 

D. Formal answer

 

E. Personam answer

A defendant uses an affirmative defense when her or his answer admits that the facts contained in the complaint are accurate but also includes additional facts that justify the defendant’s actions and provide a legally sound reason to deny relief to the plaintiff.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Pretrial Stage
 

 

63.
(p. 52)
The plaintiff must provide the defendant in a lawsuit with a copy of the complaint. That process is called ______.

A. Summons issuance

 

B. Service of process

 

C. Service delivery

 

D. Subpoena delivery

 

E. In personam service

Service of process occurs when the party’s attorney serves (delivers) a copy of the complaint and a summons to the opposing counsel.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Pretrial Stage
 

 

64.
(p. 53)
Which of the following is a document that notifies the defendant of the lawsuit and explains that if the defendant does not respond to the lawsuit within a certain period of time, a default judgment will be entered?

A. Complaint

 

B. Answer

 

C. Summons

 

D. Instructional guide

 

E. Transactional analysis

The summons tells the defendant that if he or she does not respond to the lawsuit within a certain period of time, the plaintiff will receive a default judgment.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Pretrial Stage
 

 

65.
(p. 56)
The court may grant a ______ if after reviewing the pleadings, the judge determines that the only reasonable decision is in favor of the moving party.

A. Motion for judgment on the pleadings

 

B. Motion for summary judgment

 

C. Motion for sanctions

 

D. Motion for discovery

 

E. Motion for production

A motion for judgment on the pleadings is a request for the court to consider that all the facts in the pleadings are true and to apply the law to those facts. The court grants the motion if, after this process, it finds that the only reasonable decision is in favor of the moving party.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Pretrial Stage
 

 

66.
(p. 55)
The court may grant a ______ if after reviewing the evidence in the case, there is no factual dispute and one party is entitled to judgment prior to trial.

A. Motion for judgment on the pleadings

 

B. Motion for summary judgment

 

C. Motion for sanctions

 

D. Motion for discovery

 

E. Motion for production

The judge grants a motion for summary judgment if, after examining the evidence, no factual disputes are found.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Pretrial Stage
 

 

67.
(p. 55)
Which of the following is true regarding tools of discovery?

A. The only tool of discovery is interrogatories.

 

B. Depositions are the only tool of discovery available to plaintiffs, but defendants may use both interrogatories and depositions.

 

C. Summary motions, interrogatories, and depositions, are tools of discovery available to all parties.

 

D. Interrogatories and depositions are tools of discovery available to all parties, but summary motions and requests to produce documents are not tools of discovery.

 

E. Interrogatories, depositions, and requests to produce documents are all tools of discovery available to all parties.

Common discovery tools are interrogatories, requests to produce documents, and depositions.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Pretrial Stage
 

 

68.
(p. 55)
Which of the following are written questions that one party sends to another to answer under oath?

A. Interrogatories

 

B. Depositions

 

C. Inquiries

 

D. Subpoenas

 

E. Sworn assertions

Interrogatories are written questions that one party sends to the other to answer under oath.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Pretrial Stage
 

 

69.
(p. 55)
At a[n] ______, attorneys examine a witness under oath with a court reporter present.

A. Deposition

 

B. Interrogatory

 

C. Inquiry

 

D. Pre-trial conference

 

E. Pre-trial mediation

At a deposition, attorneys examine a witness under oath, and a court reporter (stenographer) records every word the witnesses and attorneys speak.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Pretrial Stage
 

 

70.
(p. 56)
Billy, a witness to a motor vehicle accident, is gravely ill with cancer. Pat, who was injured in the accident, would like to preserve his testimony for trial in case he dies before the trial date. What should Pat do?

A. Send interrogatories to Billy.

 

B. Take Billy’s deposition.

 

C. Send a request to admit to Billy that the accident was the defendant’s fault.

 

D. Have a conference with the judge and Billy.

 

E. There is nothing she can do.

The parties may use depositions when a witness is elderly, moving, or ill such that he may be unavailable at the time of the trial.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Pretrial Stage
 

 

“Puppy Woes.” Sam promised to sell Linda a Welsh Corgi puppy for $700 but backed out of the deal. Linda sued Sam in state court for breach of contract and asked for a jury to hear the case. During jury selection, one juror, Ann, said that she did not think she could be fair to Linda because Linda did not appear to be a dog lover. Linda’s lawyer asked that Ann not hear the case on the basis that she could not be fair, and the judge excused Ann. Linda also decided that another juror, Sandy, looked at her in a grumpy manner so, without a reason given, Linda’s lawyer asked the judge to excuse that juror from serving. The judge did so. After the jury was chosen, Linda’s lawyer made a statement to the jury as did Sam’s lawyer. Linda’s lawyer then called to the witness stand Brenda, a friend of Linda, who heard the discussion held between Linda and Sam regarding the purchase of the puppy. Brenda testified under questioning by Linda’s lawyer that she heard Linda say that she would pay $700 for the puppy and that she also heard Sam say that he would sell the dog for that amount. Unfortunately for Linda, Brenda also testified in response to questioning by Sam’s lawyer that Sam distinctly told Linda that he would only sell the puppy to her if Linda came with cash for the puppy within seven days. Linda did not show up with the money for ten days and Sam had already sold the dog to someone else. The judge ruled in favor of Sam.

 

71.
(p. 57)
In choosing the jury, the lawyers were engaged in ______.

A. Voir dire

 

B. Jury analysis

 

C. Jury review

 

D. Ven dere

 

E. Shadowing

Once the potential jurors have reported for jury duty, the voir dire, or jury selection, process begins.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Trial
 

 

72.
(p. 57)
The challenge to the juror who said that they could not be fair is referred to as a[n] ________.

A. Peremptory challenge

 

B. Challenge for cause

 

C. Stipulated challenge

 

D. Fairness challenge

 

E. Approved challenge

If a potential juror’s response to a question indicates that she or he may be biased, either attorney may challenge, or ask the court to remove that potential juror “for cause.”

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Trial
 

 

73.
(p. 58)
The challenge to the juror who seemed grumpy is referred to as a[n] _______.

A. Peremptory challenge

 

B. Challenge for cause

 

C. Stipulated challenge

 

D. Fairness challenge

 

E. Approved challenge

In most states, each party has a certain number of peremptory challenges allowing a party to challenge a certain number of potential jurors without giving a reason.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Trial
 

 

74.
(p. 59)
The statements made to the jury by the lawyers immediately after the jury was chosen are referred to as ______.

A. Direct statements

 

B. Closing selection statements

 

C. Jury statements

 

D. Influential statements

 

E. Opening statements

Once the attorneys have impaneled, or selected, a jury, the case begins with opening statements.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Trial
 

 

75.
(p. 59)
The questioning of Brenda by Linda’s lawyer is called ______, and the questioning of Brenda by Sam’s lawyer is called ______.

A. Absolute examination; counter-examination

 

B. True examination; analysis examination

 

C. True examination; trickster examination

 

D. Direct examination; interrogating examination

 

E. Direct examination; cross-examination

The plaintiff’s attorney questions the witness in direct examination; and after direct examination, opposing counsel may cross-examine the witness.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Trial
 

 

Essay Questions

76.
(p. 43)
Marilyn, a resident of Ohio, suffered personal injury while operating her tractor in Ohio. She filed suit in state court against the manufacturer, Company A, incorporated in Delaware with its principal place of business in Illinois, and also against the seller, Company B, incorporated in Ohio with its principal place of business in Ohio. Marilyn and Company B informally agreed to settle out of court, but the agreement was subject to the agreement of Company B’s insurer. Before a final agreement was reached in regard to settlement with Company B, Company A filed a motion in state court to remove the case to federal court. Although Marilyn opposed removal, the state court granted Company A’s motion. After the case was removed to federal court, Marilyn and Company B finalized their settlement agreement and Company B was dismissed from the lawsuit. The federal district court proceeded to hear the case and ruled in favor of Company A. Marilyn appealed on the basis that because diversity between the parties was lacking, the federal district court had no jurisdiction over the case. She claims that the case should be remanded to state court for a new trial. What should the appellate court rule regarding whether the state trial court properly granted the petition for removal and what will be the likely outcome on appeal?

Following the Caterpillar case discussed in the text, the appellate court will likely rule that the state court should not have granted Company A’s initial motion to remove the case because the settlement was not complete, Company B was still in the case, and there was no diversity of citizenship. The ruling in favor of Company A, however, should be upheld because the settlement agreement was later approved, Company B was dismissed, and the case satisfied jurisdictional requirements by the time the federal district court issued its decision. Requiring the federal district court to send the case back to the state system would be an undue waste of judicial resources.

 

AACSB: Analytic
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-01 What are the different types of jurisdiction a court must have before it can render a binding decision in a case?
Topic: Subject-Matter Jurisdiction
 

 

77.
(p. 40)
Define the term “in personam” jurisdiction and discuss where corporations and individuals are generally subject to that type of jurisdiction. Include in your answer a discussion of long-arm jurisdiction.

In personam jurisdiction references a court’s power to render a decision affecting the rights of the persons or businesses before the court. Corporations are subject to in personam jurisdiction in three locations: the state of their incorporation, the location of their main offices, and the geographic areas in which they conduct business. Courts have in personam jurisdiction only over persons within a specific geographic region. Most states have enacted long-arm statutes which enable the court to serve defendants outside the state as long as the defendant has sufficient minimum contacts within the state and it seems fair to assert long-arm jurisdiction over the defendant.

 

AACSB: Analytic
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 03-01 What are the different types of jurisdiction a court must have before it can render a binding decision in a case?
Topic: Jurisdiction over Persons and Property
 

 

78.
(p. 43)
Alice, a resident of Michigan, claims that Pet Food Company Inc., put out some dog food that made her dog, Champ, sick. Champ is a prize winning poodle. He survived the pet food fiasco but only after traveling to a veterinarian in Florida specializing in poodles and having two very expensive surgeries. Additionally, his ability to sire has been impaired, and Alice will have no more breeding fees from Champ. Her damages are $80,000. Pet Food Company Inc., is incorporated in Delaware, with its principal place of business in Michigan. Alice asks you whether she can sue in federal court. What would you tell her and why?

Alice cannot sue in federal court because Pet Food Company Inc.’s, principal place of business is in Michigan, the same state in which she lives.

 

AACSB: Reflective Thinking
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-01 What are the different types of jurisdiction a court must have before it can render a binding decision in a case?
Topic: Subject-Matter Jurisdiction
 

 

79.
(p. 52)
Discuss the items that should appear in a complaint.

The complaint states the names of the parties to the action, the basis for the court’s subject-matter jurisdiction, the facts on which the plaintiff bases the claim, and the relief sought.

 

AACSB: Communication
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Pretrial Stage
 

 

80.
(p. 53)
Cindy ran her car over Hank in her company parking lot breaking his leg. That happened because, without warning, Cindy’s car brakes failed. Hank sues Cindy. Cindy decides to do nothing because she sees no way that she can win the lawsuit because she did indeed strike Hank. Is she right? Why or why not? What would you suggest that she do in the civil litigation? Why is it important that Cindy proceed correctly and immediately at this point in the litigation?

Cindy is not correct in her thinking. She should file an answer for the lawsuit raising the brake failure as an affirmative defense. If she does not raise that affirmative defense in the answer, the judge may refuse to allow her to raise it later. Cindy should also answer the complaint so that a default judgment is not entered against. A default judgment is a judgment in favor of the plaintiff that occurs when the defendant fails to answer the complaint and the plaintiff’s complaint alleges facts that would support such a judgment.

 

AACSB: Reflective Thinking
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Pretrial Stage
 

 

81.
(p. 55)
Cindy who was riding her new bicycle accidentally ran over jogger Bruce’s foot. He sues. Cindy is suspicious that he is not hurt as badly as he claims. What would Cindy want to know for trial, and how could she and her lawyer find out? Fully discuss your answer and methods by which Cindy could obtain information.

Cindy would want to know Bruce’s condition, his medical bills, any permanent injury, lost wages, etc. She could find out through the discovery process. That would include interrogatories, a request for production for medical records and other information, and depositions.

 

AACSB: Reflective Thinking
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-05 What are the steps in civil litigation?
Topic: The Pretrial Stage
 

 

Chapter 13

Introduction to Contracts

 

True / False Questions

1. The term “consideration” in relation to contracts involves parties acting in an ethical manner.

True    False

 

2. The Restatement (Second) of the Law of Contracts is not actually the law itself.

True    False

 

3. Whether a contract is bilateral or unilateral depends upon what response the offeror expects from the offeree.

True    False

 

4. Today, courts hold that once an offeree begins performance on a unilateral contract, the offeror must hold the offer open for a reasonable time to allow the offeree to complete the performance.

True    False

 

5. Quasi-contracts are actual contracts.

True    False

 

6. If a quasi-contract is imposed, the amount of damages for a breach is based upon the fair market value of any service provided to the defendant.

True    False

 

7. In order to recover under quasi-contract, there is no requirement that enrichment be unjust.

True    False

 

8. If a contract is valid, then it is enforceable.

True    False

 

9. Any contract that is not a formal contract is an informal contract, also called a simple contract.

True    False

 

10. In the employer/employee context, the purpose of a covenant not to compete is to restrict what an employee may do after leaving a company.

True    False

 

11. Congress passed the Uniform Electronic Transactions Act (UETA).

True    False

 

12. A person who is intoxicated when signing a contract may not avoid the contract based on being intoxicated because being intoxicated is a voluntary condition.

True    False

 

 

Multiple Choice Questions

13. Which of the following is true regarding the type of marriage contract discussed in the text called the muta’a?

A. It is a type of premarital contract typical to the U.S. in which the parties agree ahead of time how property and assets should be divided in the event of divorce.

 

B. It is a contract by which the female agrees to a divorce if there are no children from the marriage within five years.

 

C. It is a contract by which the female agrees to a divorce if there are no children from the marriage within three years.

 

D. It is a temporary type of arrangement called a “responsibility marriage” in which the female is paid to care for the male’s elderly parents.

 

E. It is a temporary type of arrangement called a “pleasure marriage” in which the female is paid for sexual intimacy.

 

14. Which of the following was the result on appeal in Reisenfeld & Co. v. The Network Group Inc.; Builders Square Inc.; Kmart Corp., the case in the text involving whether the plaintiff could recover from BSI in the situation in which BSI contracted with Network Group to lease property, and Network Group contracted with the plaintiff agreeing to pay a certain commission for his work but then defaulted on the contract?

A. The court ruled that because it was a third-party beneficiary, BSI was required to pay the plaintiff the full amount of the commissions claimed.

 

B. The court ruled that because it was a third-party beneficiary, BSI was required to pay the plaintiff the reasonable value of the services rendered, not necessarily the contractual amount promised for commissions.

 

C. The court ruled that because a quasi-contract was involved, BSI was required to pay the plaintiff the full amount of the commissions claimed.

 

D. The court ruled that because a quasi-contract was involved, BSI was required to pay the plaintiff the reasonable value of the services rendered, not necessarily the contractual amount promised for commissions.

 

E. The court ruled that because the plaintiff did not have a contract with BSI, the plaintiff was entitled to no recovery from BSI.

 

15. Which of the following was the result in the Case Opener in which Hallmark claimed that an arbitration ruling against a former employee should be upheld?

A. The former employee was barred from proceeding in court because of the binding arbitration clause.

 

B. The former employee was barred from proceeding in court based on the statute of limitations which expired while she was pursuing her remedies in arbitration.

 

C. The former employee was allowed to proceed in court because she had exhausted her remedies in the arbitration arena.

 

D. The former employee could proceed with an action in court because there was no consideration for the arbitration agreement and, therefore, no valid agreement.

 

E. The former employee could proceed with an action in court because, as a matter of law, arbitration agreements are barred in the arbitration context.

 

16. A[n] ___________ is a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes a duty.

A. Contract

 

B. Offer

 

C. Consideration

 

D. Acceptance

 

E. Legal object

 

17. Which of the following consists of an offer by one party and an acceptance of the terms by another party?

A. Legal object

 

B. Agreement

 

C. Coherence

 

D. Alliance

 

E. Concurrence

 

18. The person who makes an offer is called a[n] ___________.

A. Offeree

 

B. Offeror

 

C. Agreeor

 

D. Agree

 

E. Inquirer

 

19. The person who agrees to the terms of an offer made by the other party is called the _________.

A. Offeree

 

B. Offeror

 

C. Agreeor

 

D. Agree

 

E. Inquirer

 

20. Which of the following is a definition for consideration?

A. Being cordial in the negotiation of contracts.

 

B. Refraining from unethical behavior in the negotiation of contracts.

 

C. Being cordial and refraining from unethical behavior in the negotiation of contracts.

 

D. The bargained-for exchange.

 

E. A contract negotiated in person as opposed to by telephone or e-mail.

 

21. Which of the following represents the legal ability to enter into a binding agreement?

A. Majority

 

B. Emancipation

 

C. Contractual knowledge

 

D. Contractual capacity

 

E. Informed consent

 

22. Which of the following references the requirement that a contract not be either illegal or against public policy?

A. Consideration

 

B. Capacity

 

C. Legal object

 

D. Illegal prohibition

 

E. Ethical requirement

 

23. Which of the following may represent a lack of genuine assent?

A. Acceptance secured through fraud, duress, or misrepresentation, but not acceptance through undue influence.

 

B. Acceptance secured through undue influence, misrepresentation, or duress, but not through fraud.

 

C. Acceptance secured through fraud or duress, but not through misrepresentation or undue influence.

 

D. Acceptance secured through fraud, dress, or undue influence, but not through misrepresentation.

 

E. Acceptance secured through fraud, duress, undue influence, or misrepresentation.

 

24. An attorney who says that a contract lacks “the proper form” is typically referencing which of the following?

A. The agreement lacked a proper offer.

 

B. The contract lacked a proper acceptance.

 

C. The contract lacked consideration.

 

D. The contract lacked a writing.

 

E. The contract lacked both an appropriate offer and an appropriate acceptance.

 

25. Contract law is said to be based on a[n] ___________ theory, meaning that the existence and interpretation of the contract is based on the outward manifestations of intent by the parties.

A. Subjective

 

B. Objective

 

C. Interpretive

 

D. Appearing

 

E. Unilateral

 

26. As a general rule, the ________ intent of the parties is not relevant when determining whether a contract exists; rather, what is relevant is how they represented their intent through their actions and words.

A. Objective

 

B. Subjective

 

C. Unilateral

 

D. Comprehensive

 

E. Considered

 

27. If a[n] _____________ misunderstanding between the parties exists, and as a result of that misunderstanding the parties do not really come to a meeting of the minds, there is no contract.

A. Mutual

 

B. Unilateral

 

C. Comprehensive

 

D. Subjective

 

E. Reasonable

 

28. In the U.S., which of the following are the two most important sources of contract law?

A. Case law and the Restatement of Law, Contracts.

 

B. Case law and the Uniform Commercial Code.

 

C. The Uniform Commercial Code and the Convention on Contracts for International Sales of Goods.

 

D. Case law and the Convention on Contracts for International Sales of Goods.

 

E. The Convention on Contracts for International Sales of Goods and the Restatement of the Law, Contracts.

 

29. Today’s law of contracts originated from judicial decisions in ______.

A. France

 

B. Italy

 

C. Spain

 

D. England

 

E. Switzerland

 

30. The law of contracts is primarily _______________ law.

A. Comprehensive

 

B. Statutory

 

C. Common

 

D. Restated

 

E. Modified

 

31. Which of the following was propounded by prominent legal scholars, recruited by the American Law Institute?

A. The Restatement of the Law Second, Contracts.

 

B. The Convention on Contracts for the National Sales of Goods.

 

C. Common law.

 

D. Common law and the Convention on Contracts for International Sales of Goods.

 

E. The Convention on Contracts for the National Sales of Goods and the Restatement of the Law Second, Contracts.

 

32. Which of the following is the reason the Uniform Commercial Code was drafted?

A. Different states had different laws governing contracts which did not result in a smooth flow of interstate commerce.

 

B. Some states had no law governing contracts.

 

C. Federal law governing contracts was difficult to apply.

 

D. The Uniform State Act on laws was not working.

 

E. The Restatement of the Law Second, Contracts was not being evenly and fairly applied.

 

33. Which of the following is the part of the Uniform Commercial code governing contracts for the sale of goods?

A. Article 2

 

B. Article 3

 

C. Article 4

 

D. Article 5

 

E. Article 7

 

34. All contracts can be categorized as either ___________ or __________.

A. Unilateral; complete

 

B. Unilateral; trilateral

 

C. Bilateral; trilateral

 

D. Unilateral; bilateral

 

E. Bilateral; complete

 

35. A[n] ______________ contract is commonly defined as a promise in exchange for a promise.

A. Unilateral

 

B. Trilateral

 

C. Complete

 

D. Bilateral

 

E. Classified

 

36. Harry and Frank are in agreement that Harry will pay Frank $2,000 for a used car. At what point is there a binding contract?

A. When the agreement is made.

 

B. When the money is paid.

 

C. When the car is delivered.

 

D. Ten days after the car is delivered and approved.

 

E. Twenty days after the car is delivered and approved.

 

37. In a[n] _____________ contract, the offeror wants a performance to form the contract.

A. Trilateral

 

B. Bilateral

 

C. Unilateral

 

D. Complete

 

E. Anticipatory

 

38. In which of the following does a contract arise not from words but from the conduct of the parties?

A. Implied contracts

 

B. Express contracts

 

C. Liquidated contracts

 

D. Bilateral contracts

 

E. Unilateral contracts

 

39. Which of the following is sometimes referred to as an implied-in-law contract?

A. Quasi-contracts

 

B. Express contracts

 

C. Implied-in-fact contracts

 

D. Express contracts and implied-in-fact contracts

 

E. Express contracts and quasi-contracts

 

40. Which of the following is the most likely measure of recovery when a quasi-contract is involved?

A. The amount set forth in the contract.

 

B. The fair market value of the matter involved.

 

C. The wholesale price of any good involved.

 

D. The amount sought by the plaintiff in the Complaint.

 

E. Damages will be computed the same way as they are computed for any other contract.

 

41. A[n] _____________ contract is one that contains all the legal elements of a contract.

A. Voidable

 

B. Executed

 

C. Formal

 

D. Valid

 

E. Approved

 

42. A valid contract may be valid but _____________ when there is some law that prohibits the courts from enforcing it.

A. Executed

 

B. Executory

 

C. Unenforceable

 

D. Novated

 

E. Condoned

 

43. Which of the following is in effect not a contract at all?

A. A voidable contract

 

B. An executory contract

 

C. An implied contract

 

D. An executed contract

 

E. A void contract

 

44. A contract is ______________ if one or both of the parties, without breaching the contract, have the ability to either withdraw from the contract or enforce it.

A. Voidable

 

B. Executory

 

C. Implied

 

D. Executed

 

E. Void

 

45. Which of the following contracts are usually voidable?

A. Contracts entered into as a result of fraud, but not duress or undue influence.

 

B. Contracts entered into as a result of duress or undue influence, but not fraud.

 

C. Contracts entered into as a result of undue influence or fraud, but not duress.

 

D. Contracts entered into as a result of fraud or duress, but not undue influence.

 

E. Contracts entered into as a result of fraud, duress, or undue influence.

 

46. Once all the terms of the contract have been fully performed, the contract is said to be ___________.

A. Executory

 

B. Executed

 

C. Anticipatory

 

D. Ended

 

E. Stopped

 

47. As long as some of the duties under a contract have not yet been performed, the contract is considered ________________.

A. Executory

 

B. Executed

 

C. Anticipatory

 

D. Ended

 

E. Stopped

 

48. Which of the following is an example of a formal contract?

A. Contracts under seal but not executed contracts or letters of credit.

 

B. Executed contracts but not contracts under sale or letters of credit.

 

C. Letters of credit and contracts under seal, but not executed contracts.

 

D. Contracts under seal letters of credit, but not executory contracts.

 

E. Contracts under seal, letters of credit, and also executed contracts.

 

49. The reference to __________________ comes from the days when the contract was literally sealed by a piece of soft wax into which an impression was made.

A. Implied-in-fact contracts

 

B. Implied-in-law contracts

 

C. Contracts under wax

 

D. Contracts under seal

 

E. Contracts under pressure

 

50. How many states still allow a contract without consideration to be enforced if it is under seal?

A. Five

 

B. Eight

 

C. Ten

 

D. Twenty

 

E. Thirty

 

51. A[n] _______________ arises when a person acknowledges in court that he or she will perform some specified act or will pay a price upon failure to do so.

A. Contract under seal

 

B. Voidable contract

 

C. Recognizance

 

D. Implied-in-fact

 

E. Informal contract

 

52. A ________________ is an agreement by the person who issues a letter to pay a sum of money on receipt of an invoice and other documents.

A. Letter of agreement

 

B. Letter of credit

 

C. Letter of acknowledgement

 

D. Negotiated credit instrument letter

 

E. Letter of simple contract

 

53. Which of the following are written documents signed by a party that makes an unconditional promise to pay a specific sum of money on demand or at a certain time to the holder of the instrument?

A. Negotiable instruments

 

B. Informal contracts

 

C. Simple contracts

 

D. Recognizances

 

E. Formal contracts

 

54. Which of the following states that if a writing, or term in question, appears to be plain and unambiguous on its face, its meaning must be determined from the four corners of the instrument without resort to outside evidence, with the words being given their ordinary meaning?

A. The Interpretation Rule

 

B. The Simple Rule

 

C. The Understandable Rule

 

D. The Plain Meaning Rule

 

E. The Comprehensive Rule

 

55. Which of the following was the result in In Re Zappos.com Inc., v. Customer Data Security Breach Litigation, the case in the text in which customers of Zappos claimed that they were not bound to an arbitration agreement contained in a contract with Zappos?

A. The court ruled for the plaintiffs for the following two reasons: (1) there was no contract because plaintiffs did not assent to it, and (2) even if a contract existed, the contract was illusory and unenforceable because Zappos could avoid promises at any time.

 

B. The court ruled for the plaintiffs only because of its finding that no contract existed based on the plaintiffs lack of assent.

 

C. The court ruled for the plaintiffs only because of its finding that the contract was illusory and unenforceable because Zappos could avoid promises at any time.

 

D. The court ruled in favor of Zappos on the basis that even though some provisions of the contract were unenforceable, because of the federal policy favoring arbitration agreements, the arbitration clause itself was enforceable.

 

E. The court ruled in favor of Zappos on the basis that the contract was properly entered into and was fully enforceable.

 

“Book Sale.” Beverly offered to sell Rick a used business law book for $50. She told him that he could use it in his upcoming business law class the next semester. In fact, there was a problem with the book; it was several editions old. Rick was not aware of that fact, and neither was Beverly. When Rick took the book to class and realized the problem, he went back to Beverly requesting a refund. Beverly refused to return his money. She claimed that subjectively she thought that the book was correct, that she did not commit fraud, and that a binding contract existed. The book, however, is outdated and cannot be appropriately used in the class.

 

56. Which of the following would describe Beverly’s role in the transaction?

A. She was the offeror.

 

B. She was the offeree.

 

C. She was the assentor.

 

D. She was the assentee.

 

E. She was the offeree and the assentee.

 

57. Which of the following describes Rick’s role in the transaction?

A. He was the offeror.

 

B. He was the offeree.

 

C. He was the assentor.

 

D. He was the assentee.

 

E. He was the offeree and the assentee.

 

58. Which of the following is the term representing the $50 to be provided by Rick and the book to be provided by Beverly?

A. Encouragement

 

B. Material

 

C. Consideration

 

D. Inducement

 

E. Provisions

 

59. Which of the following is true regarding Beverly’s claim that she subjectively believed the book was an appropriate edition and that an enforceable contract, therefore, existed?

A. She is correct because contract law is based upon a subjective theory of contracts.

 

B. She is correct because her genuinely held belief establishes that she did not commit fraud.

 

C. She is correct because agreements for the sale of goods are based on a subjective theory.

 

D. She is incorrect because her subjective belief would not be the basis for a determination of whether the contract would be enforced in this case and also because fraud is not necessary in order to find a breach of contract.

 

E. She is correct but only if Rick subjectively believed the same as she did.

 

60. Which of the following would be the correct analysis of the effect of the discovery that Rick has a book that is not appropriate for the class?

A. Rick is stuck with the book because he objectively agreed to purchase it.

 

B. Rick is stuck with the book because Beverly did not commit fraud.

 

C. Rick is stuck with the book because Beverly subjectively thought it was the correct book, and Rick did not openly disagree before the contract was executed.

 

D. Because the parties had a mutual misunderstanding, the parties did not come to a meeting of the minds, and there is no contract.

 

E. Because both parties were mistaken, at Rick’s option he may return the book; but only half of the purchase price would be required as a refund from Beverly because she is not guilty of fraud.

 

“Refusal to Pay.” Business law teacher Debby needed some yard work done. She told her class that she would give $50 to the first person who mowed her yard. She also entered into an agreement with Betty who agreed to trim some shrubbery for $40. Max went to mow Debby’s yard. Unfortunately, just as he finished mowing, a neighborhood dog bit him, and he had to go to the emergency room for a couple of stitches. Debby refused to pay Max because she said that he had angered the neighbors and their dog, and that he was more trouble than he was worth. Secretly, Debby was glad about the dog bite because she felt it gave her an excuse not to pay. Max refused to pay the emergency room because he said that they did not have a binding, bilateral contract. Betty refused to trim the shrubbery because she got a better offer and claimed that she was not bound on the contract until she started to perform.

 

61. Which of the following is correct regarding Betty’s statement that there was no contract?

A. Betty is correct. There was no contract because she had not started working.

 

B. Betty is incorrect because there was a bilateral, express agreement.

 

C. Betty is incorrect because there was a bilateral, implied agreement.

 

D. Betty is incorrect because there was a unilateral, express agreement.

 

E. Betty is incorrect because there was a unilateral, implied agreement.

 

62. Which of the following is an appropriate characterization of the agreement between Debby and Max?

A. They had a bilateral, express agreement.

 

B. They had a bilateral, implied agreement.

 

C. They had a bilateral and unilateral agreement.

 

D. They had a unilateral, express agreement.

 

E. They had a unilateral, implied agreement.

 

63. Which of the following is true regarding Max’s statement that he did not have to pay the emergency room charges?

A. He is correct.

 

B. He is incorrect because there was a bilateral, express contract.

 

C. He is incorrect because there was a unilateral, express contract.

 

D. He is partially correct in that because a quasi-contract existed, he would have to pay; but he would only have to pay fair market value, not what the hospital requested.

 

E. He is incorrect because there was a binding implied contract.

 

“Wrong Deck.” Penny hires Jackson to paint her back deck. She agrees to pay him $200 for the job, and he accepts sight unseen. They enter into the agreement on Tuesday, and he is to paint the deck on Saturday. When Jackson arrives, neither Penny nor her neighbor is at home. He mistakenly paints the neighbor’s deck. Penny calls him the next day and asks him why he did not paint her deck. He informs her that he did paint the deck. It is then discovered that he mistakenly painted the neighbor’s deck. Penny tells him not to worry because the neighbor will be required to pay him. Jackson says that if the neighbor does not pay, then he expects all of his funds from Penny, because the contract is executed.

 

64. What was the status of the agreement between Jackson and Penny as of Tuesday when they agreed upon the price for the job?

A. The contract was executory.

 

B. The contract was executed.

 

C. The contract was novated.

 

D. The contract was formal.

 

E. The contract was a recognizance contract.

 

65. Which of the following is correct regarding Penny’s assertion that the neighbor will be required to pay Jackson?

A. She is correct. The neighbor will be required to pay Jackson under a theory of quasi-contract.

 

B. She is correct. The neighbor will be required to pay Jackson based upon an implied-in-fact contract.

 

C. She is correct. The neighbor will be required to pay Jackson based upon an implied-in-law contract.

 

D. She is correct. The neighbor will be required to pay Jackson based upon an express contract.

 

E. She is incorrect. The neighbor will not be required to pay Jackson.

 

66. Which of the following is true regarding Jackson’s assertion that Penny must pay him at this point if the neighbor fails to do so?

A. He is correct because an express contract existed, and he made an honest mistake for which Penny must accept the risk.

 

B. He is correct because an implied contract existed, and he made an honest mistake for which Penny must accept the risk.

 

C. He is correct because an implied-in-law contract existed.

 

D. He is correct because a valid contract existed; and, after his performance, it is considered executed.

 

E. He is incorrect unless he can somehow establish that Penny gave him poor directions or was otherwise at fault in informing him which deck to paint, and the contract remains executory.

 

 

Essay Questions

67. Identify and describe the four elements that are necessary for a contract to exist.

 

 

 

 

68. Define a bilateral contract and a unilateral contract, and give an example of each.

 

 

 

 

69. Define an express contract and an implied contract; set forth the three conditions that generally must be met for the courts to find an implied contract, and give an example of an express and implied contract.

 

 

 

 

70. Millie mows her own yard to save money. Her neighbor Paul, however, hires a lawn service to mow his yard. One day Millie is looking out of the window and sees Paul’s lawn service drive up. Surprisingly, they begin to mow her yard, not Paul’s yard. Millie thinks that is great and keeps her mouth shut while they mow the yard. Later, she gets a bill. She calls the owner of the lawn service and says that she does not have to pay because there was no contract where she agreed to have her yard mowed. The lawn service says that she is liable for the full amount of its contract. Discuss whether the lawn service is entitled to any recovery and why or why not.

 

 

 

 

71. Discuss the meaning of a void contract and a voidable contract, and the effect of a determination that a contract is either void or voidable.

 

 

 

 

Chapter 13 Introduction to Contracts Answer Key

True / False Questions

1.
(p. 306)
The term “consideration” in relation to contracts involves parties acting in an ethical manner.

FALSE

Consideration is the bargained-for exchange or what each party gets in exchange for his or her promise under the contract.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

2.
(p. 310)
The Restatement (Second) of the Law of Contracts is not actually the law itself.

TRUE

The Restatement (Second) is not actually the law itself, although judges frequently cite it because it is an authoritative statement of what the law is.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 13-02 What are the sources of contract law?
Topic: Sources of Contract Law
 

 

3.
(p. 311)
Whether a contract is bilateral or unilateral depends upon what response the offeror expects from the offeree.

TRUE

If the offeror wants a promise from the offeree to form a binding contract, the contract is a bilateral contract, commonly defined as a promise in exchange for a promise. In a unilateral contract, the offeror wants the offeree to do something, not to promise to do something.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

4.
(p. 312)
Today, courts hold that once an offeree begins performance on a unilateral contract, the offeror must hold the offer open for a reasonable time to allow the offeree to complete the performance.

TRUE

Today, the courts hold that once an offeree begins performance, the offeror must hold the offer open for a reasonable time to allow the offeree to complete it.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

5.
(p. 314)
Quasi-contracts are actual contracts.

FALSE

Quasi-contracts are sometimes called implied-in-law contracts, but they are not actually contracts.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

6.
(p. 314)
If a quasi-contract is imposed, the amount of damages for a breach is based upon the fair market value of any service provided to the defendant.

TRUE

When the court imposes a quasi-contract, the defendant is required to pay the fair market value of the benefit bestowed.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

7.
(p. 314)
In order to recover under quasi-contract, there is no requirement that enrichment be unjust.

FALSE

There are limits to the quasi contract doctrine; specifically, the enrichment must be unjust.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

8.
(p. 316)
If a contract is valid, then it is enforceable.

FALSE

Sometimes a contract may be valid yet unenforceable when a law prohibits the courts from enforcing it.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

9.
(p. 317)
Any contract that is not a formal contract is an informal contract, also called a simple contract.

TRUE

Any contract that is not a formal contract is an informal contract, also called a simple contract. Informal contracts may in fact be quite complex, but they are called “simple” because no formalities are required in making them.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

10.
(p. 306)
In the employer/employee context, the purpose of a covenant not to compete is to restrict what an employee may do after leaving a company.

TRUE

Covenants not to compete restrict what an employee may do after leaving a company.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

11.
(p. 308)
Congress passed the Uniform Electronic Transactions Act (UETA).

FALSE

Congress did not write or pass the Uniform Electronic Transactions Act (UETA). The National Conference of Commissioners on Uniform State Laws proposed this piece of legislation, which almost every state has adopted.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

12.
(p. 308)
A person who is intoxicated when signing a contract may not avoid the contract based on being intoxicated because being intoxicated is a voluntary condition.

FALSE

Intoxicated persons lack the capacity to enter into contracts.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

Multiple Choice Questions

13.
(p. 317)
Which of the following is true regarding the type of marriage contract discussed in the text called the muta’a?

A. It is a type of premarital contract typical to the U.S. in which the parties agree ahead of time how property and assets should be divided in the event of divorce.

 

B. It is a contract by which the female agrees to a divorce if there are no children from the marriage within five years.

 

C. It is a contract by which the female agrees to a divorce if there are no children from the marriage within three years.

 

D. It is a temporary type of arrangement called a “responsibility marriage” in which the female is paid to care for the male’s elderly parents.

 

E. It is a temporary type of arrangement called a “pleasure marriage” in which the female is paid for sexual intimacy.

In Iraq under the muta’a (“contract for a pleasure marriage”), a marriage can last anywhere from an hour to 10 years and is renewable. Under the contract, the male typically receives sexual intimacy, in exchange for which the woman receives money.

 

AACSB: Diversity
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

14.
(p. 315)
Which of the following was the result on appeal in Reisenfeld & Co. v. The Network Group Inc.; Builders Square Inc.; Kmart Corp., the case in the text involving whether the plaintiff could recover from BSI in the situation in which BSI contracted with Network Group to lease property, and Network Group contracted with the plaintiff agreeing to pay a certain commission for his work but then defaulted on the contract?

A. The court ruled that because it was a third-party beneficiary, BSI was required to pay the plaintiff the full amount of the commissions claimed.

 

B. The court ruled that because it was a third-party beneficiary, BSI was required to pay the plaintiff the reasonable value of the services rendered, not necessarily the contractual amount promised for commissions.

 

C. The court ruled that because a quasi-contract was involved, BSI was required to pay the plaintiff the full amount of the commissions claimed.

 

D. The court ruled that because a quasi-contract was involved, BSI was required to pay the plaintiff the reasonable value of the services rendered, not necessarily the contractual amount promised for commissions.

 

E. The court ruled that because the plaintiff did not have a contract with BSI, the plaintiff was entitled to no recovery from BSI.

The court ruled that the plaintiff could hold BSI accountable on a theory of quasi-contract for the benefits it provided to BSI, but that liability under quasi-contract is measured by the reasonable value of services Reisenfeld provided to BSI.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

15.
(p. 321)
Which of the following was the result in the Case Opener in which Hallmark claimed that an arbitration ruling against a former employee should be upheld?

A. The former employee was barred from proceeding in court because of the binding arbitration clause.

 

B. The former employee was barred from proceeding in court based on the statute of limitations which expired while she was pursuing her remedies in arbitration.

 

C. The former employee was allowed to proceed in court because she had exhausted her remedies in the arbitration arena.

 

D. The former employee could proceed with an action in court because there was no consideration for the arbitration agreement and, therefore, no valid agreement.

 

E. The former employee could proceed with an action in court because, as a matter of law, arbitration agreements are barred in the arbitration context.

According to the court, “because there was no consideration from Hallmark, there was no binding contract to submit disputes to arbitration.”

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-04 What are the rules that guide the interpretation of contracts?
Topic: Interpretation of Contracts
 

 

16.
(p. 306)
A[n] ___________ is a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes a duty.

A. Contract

 

B. Offer

 

C. Consideration

 

D. Acceptance

 

E. Legal object

The Restatement (Second) of Contracts defines a contract as “a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes a duty.”

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

17.
(p. 306)
Which of the following consists of an offer by one party and an acceptance of the terms by another party?

A. Legal object

 

B. Agreement

 

C. Coherence

 

D. Alliance

 

E. Concurrence

The agreement consists of an offer by one party, called the offeror, to enter into a contract, and an acceptance of the terms of the offer by the other party, called the offeree.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

18.
(p. 306)
The person who makes an offer is called a[n] ___________.

A. Offeree

 

B. Offeror

 

C. Agreeor

 

D. Agree

 

E. Inquirer

The agreement consists of an offer by one party, called the offeror, to enter into a contract and an acceptance of the terms of the offer by the other party, called the offeree.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

19.
(p. 306)
The person who agrees to the terms of an offer made by the other party is called the _________.

A. Offeree

 

B. Offeror

 

C. Agreeor

 

D. Agree

 

E. Inquirer

The agreement consists of an offer by one party, called the offeror, to enter into a contract and an acceptance of the terms of the offer by the other party, called the offeree.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

20.
(p. 306)
Which of the following is a definition for consideration?

A. Being cordial in the negotiation of contracts.

 

B. Refraining from unethical behavior in the negotiation of contracts.

 

C. Being cordial and refraining from unethical behavior in the negotiation of contracts.

 

D. The bargained-for exchange.

 

E. A contract negotiated in person as opposed to by telephone or e-mail.

Consideration is the bargained-for exchange or what each party gets in exchange for his or her promise under the contract.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

21.
(p. 308)
Which of the following represents the legal ability to enter into a binding agreement?

A. Majority

 

B. Emancipation

 

C. Contractual knowledge

 

D. Contractual capacity

 

E. Informed consent

Contractual capacity is the legal ability to enter into a binding agreement.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

22.
(p. 308)
Which of the following references the requirement that a contract not be either illegal or against public policy?

A. Consideration

 

B. Capacity

 

C. Legal object

 

D. Illegal prohibition

 

E. Ethical requirement

The term “legal object” means that to be enforceable, the contract cannot be either illegal or against public policy.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

23.
(p. 308)
Which of the following may represent a lack of genuine assent?

A. Acceptance secured through fraud, duress, or misrepresentation, but not acceptance through undue influence.

 

B. Acceptance secured through undue influence, misrepresentation, or duress, but not through fraud.

 

C. Acceptance secured through fraud or duress, but not through misrepresentation or undue influence.

 

D. Acceptance secured through fraud, dress, or undue influence, but not through misrepresentation.

 

E. Acceptance secured through fraud, duress, undue influence, or misrepresentation.

Sometimes the offeror (the party proposing the contract) secures acceptance of the agreement through improper means such as fraud, duress, undue influence, or misrepresentation. In these situations, there is no genuine assent to the contract, and the offeree (the person who agreed to or accepted the contract) may be able to raise that lack of genuine assent as a defense to enforcement of the agreement.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

24.
(p. 309)
An attorney who says that a contract lacks “the proper form” is typically referencing which of the following?

A. The agreement lacked a proper offer.

 

B. The contract lacked a proper acceptance.

 

C. The contract lacked consideration.

 

D. The contract lacked a writing.

 

E. The contract lacked both an appropriate offer and an appropriate acceptance.

The defense that a contract lacks the proper form typically means it lacks a writing.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

25.
(p. 309)
Contract law is said to be based on a[n] ___________ theory, meaning that the existence and interpretation of the contract is based on the outward manifestations of intent by the parties.

A. Subjective

 

B. Objective

 

C. Interpretive

 

D. Appearing

 

E. Unilateral

Contract law is based on an objective theory of contracts, which means we base the existence of a contract on the parties’ outward manifestations of intent and we base its interpretation on how a reasonable person would interpret it.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

26.
(p. 309)
As a general rule, the ________ intent of the parties is not relevant when determining whether a contract exists; rather, what is relevant is how they represented their intent through their actions and words.

A. Objective

 

B. Subjective

 

C. Unilateral

 

D. Comprehensive

 

E. Considered

The subjective intent of the parties is not usually relevant; what matters is how they represented their intent through their actions and words.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

27.
(p. 309)
If a[n] _____________ misunderstanding between the parties exists, and as a result of that misunderstanding the parties do not really come to a meeting of the minds, there is no contract.

A. Mutual

 

B. Unilateral

 

C. Comprehensive

 

D. Subjective

 

E. Reasonable

If a mutual misunderstanding between the parties exists, and if as a result they did not come to a meeting of the minds, there is no contract.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

28.
(p. 309)
In the U.S., which of the following are the two most important sources of contract law?

A. Case law and the Restatement of Law, Contracts.

 

B. Case law and the Uniform Commercial Code.

 

C. The Uniform Commercial Code and the Convention on Contracts for International Sales of Goods.

 

D. Case law and the Convention on Contracts for International Sales of Goods.

 

E. The Convention on Contracts for International Sales of Goods and the Restatement of the Law, Contracts.

The two most important sources of contract law are case law and the Uniform Commercial Code (UCC).

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-02 What are the sources of contract law?
Topic: Sources of Contract Law
 

 

29.
(p. 309)
Today’s law of contracts originated from judicial decisions in ______.

A. France

 

B. Italy

 

C. Spain

 

D. England

 

E. Switzerland

Today’s law of contracts actually originated in judicial decisions in England, later modified by early courts in the United States.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-02 What are the sources of contract law?
Topic: Sources of Contract Law
 

 

30.
(p. 309)
The law of contracts is primarily _______________ law.

A. Comprehensive

 

B. Statutory

 

C. Common

 

D. Restated

 

E. Modified

The law of contracts is primarily common law.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-02 What are the sources of contract law?
Topic: Sources of Contract Law
 

 

31.
(p. 310)
Which of the following was propounded by prominent legal scholars, recruited by the American Law Institute?

A. The Restatement of the Law Second, Contracts.

 

B. The Convention on Contracts for the National Sales of Goods.

 

C. Common law.

 

D. Common law and the Convention on Contracts for International Sales of Goods.

 

E. The Convention on Contracts for the National Sales of Goods and the Restatement of the Law Second, Contracts.

Prominent legal scholars, recruited by the American Law Institute, organized the principles of the common law of contracts into the original Restatement of the Law, Contracts. The compilation has been revised and published as Restatement of the Law Second, Contracts.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-02 What are the sources of contract law?
Topic: Sources of Contract Law
 

 

32.
(p. 310)
Which of the following is the reason the Uniform Commercial Code was drafted?

A. Different states had different laws governing contracts which did not result in a smooth flow of interstate commerce.

 

B. Some states had no law governing contracts.

 

C. Federal law governing contracts was difficult to apply.

 

D. The Uniform State Act on laws was not working.

 

E. The Restatement of the Law Second, Contracts was not being evenly and fairly applied.

To remedy some of the difficulties created by a patchwork of different laws governing commercial transactions, the National Conference of Commissioners on Uniform State Laws and the American Law Institute drafted a set of commercial laws, called the Uniform Commercial Code, that could be applicable to all states.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-02 What are the sources of contract law?
Topic: Sources of Contract Law
 

 

33.
(p. 310)
Which of the following is the part of the Uniform Commercial code governing contracts for the sale of goods?

A. Article 2

 

B. Article 3

 

C. Article 4

 

D. Article 5

 

E. Article 7

A part of the Uniform Commercial Code relevant to contracts is Article 2, which governs contracts for the sale (exchange for a price) of goods (tangible, movable objects).

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-02 What are the sources of contract law?
Topic: Sources of Contract Law
 

 

34.
(p. 310)
All contracts can be categorized as either ___________ or __________.

A. Unilateral; complete

 

B. Unilateral; trilateral

 

C. Bilateral; trilateral

 

D. Unilateral; bilateral

 

E. Bilateral; complete

All contracts are either unilateral or bilateral.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

35.
(p. 311)
A[n] ______________ contract is commonly defined as a promise in exchange for a promise.

A. Unilateral

 

B. Trilateral

 

C. Complete

 

D. Bilateral

 

E. Classified

A bilateral contract is commonly defined as a promise in exchange for a promise.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

36.
(p. 311)
Harry and Frank are in agreement that Harry will pay Frank $2,000 for a used car. At what point is there a binding contract?

A. When the agreement is made.

 

B. When the money is paid.

 

C. When the car is delivered.

 

D. Ten days after the car is delivered and approved.

 

E. Twenty days after the car is delivered and approved.

As soon as the promises are exchanged, a contract is formed, and the parties’ legal obligations arise.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

37.
(p. 312)
In a[n] _____________ contract, the offeror wants a performance to form the contract.

A. Trilateral

 

B. Bilateral

 

C. Unilateral

 

D. Complete

 

E. Anticipatory

In a unilateral contract, the offeror wants the offeree to do something, not to promise to do something.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

38.
(p. 313)
In which of the following does a contract arise not from words but from the conduct of the parties?

A. Implied contracts

 

B. Express contracts

 

C. Liquidated contracts

 

D. Bilateral contracts

 

E. Unilateral contracts

Implied contracts arise not from words but from the conduct of the parties.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

39.
(p. 314)
Which of the following is sometimes referred to as an implied-in-law contract?

A. Quasi-contracts

 

B. Express contracts

 

C. Implied-in-fact contracts

 

D. Express contracts and implied-in-fact contracts

 

E. Express contracts and quasi-contracts

Quasi-contracts are sometimes called implied-in-law contracts, but they are not actually contracts.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

40.
(p. 314)
Which of the following is the most likely measure of recovery when a quasi-contract is involved?

A. The amount set forth in the contract.

 

B. The fair market value of the matter involved.

 

C. The wholesale price of any good involved.

 

D. The amount sought by the plaintiff in the Complaint.

 

E. Damages will be computed the same way as they are computed for any other contract.

In situations in which the court imposes a quasi-contract, the amount awarded will probably be based on fair market value.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

41.
(p. 316)
A[n] _____________ contract is one that contains all the legal elements of a contract.

A. Voidable

 

B. Executed

 

C. Formal

 

D. Valid

 

E. Approved

A valid contract is one that contains all the legal elements of a contract.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

42.
(p. 316)
A valid contract may be valid but _____________ when there is some law that prohibits the courts from enforcing it.

A. Executed

 

B. Executory

 

C. Unenforceable

 

D. Novated

 

E. Condoned

Sometimes a contract may be valid yet unenforceable when a law prohibits the courts from enforcing it.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

43.
(p. 316)
Which of the following is in effect not a contract at all?

A. A voidable contract

 

B. An executory contract

 

C. An implied contract

 

D. An executed contract

 

E. A void contract

A void contract is in effect not a contract at all.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

44.
(p. 316)
A contract is ______________ if one or both of the parties, without breaching the contract, have the ability to either withdraw from the contract or enforce it.

A. Voidable

 

B. Executory

 

C. Implied

 

D. Executed

 

E. Void

A contract is voidable if one or both parties have the ability to either withdraw from the contract or enforce it.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

45.
(p. 316)
Which of the following contracts are usually voidable?

A. Contracts entered into as a result of fraud, but not duress or undue influence.

 

B. Contracts entered into as a result of duress or undue influence, but not fraud.

 

C. Contracts entered into as a result of undue influence or fraud, but not duress.

 

D. Contracts entered into as a result of fraud or duress, but not undue influence.

 

E. Contracts entered into as a result of fraud, duress, or undue influence.

Contracts entered into as a result of fraud, duress, or undue influence may be voided by the innocent party.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

46.
(p. 316)
Once all the terms of the contract have been fully performed, the contract is said to be ___________.

A. Executory

 

B. Executed

 

C. Anticipatory

 

D. Ended

 

E. Stopped

Once all the terms of the contract have been fully performed, the contract has been executed.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

47.
(p. 316)
As long as some of the duties under a contract have not yet been performed, the contract is considered ________________.

A. Executory

 

B. Executed

 

C. Anticipatory

 

D. Ended

 

E. Stopped

As long as some of the terms have not yet been performed, a contract is executory.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

48.
(p. 317)
Which of the following is an example of a formal contract?

A. Contracts under seal but not executed contracts or letters of credit.

 

B. Executed contracts but not contracts under sale or letters of credit.

 

C. Letters of credit and contracts under seal, but not executed contracts.

 

D. Contracts under seal letters of credit, but not executory contracts.

 

E. Contracts under seal, letters of credit, and also executed contracts.

The Restatement (Second) of Contracts identifies the following four types of formal contracts: (1) contracts under seal, (2) recognizances, (3) letters of credit, and (4) negotiable instruments.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

49.
(p. 317)
The reference to __________________ comes from the days when the contract was literally sealed by a piece of soft wax into which an impression was made.

A. Implied-in-fact contracts

 

B. Implied-in-law contracts

 

C. Contracts under wax

 

D. Contracts under seal

 

E. Contracts under pressure

When people hear the term formal contract, what often comes to mind is a contract under seal, named in the days when contracts were sealed with a piece of soft wax into which an impression was made.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

50.
(p. 317)
How many states still allow a contract without consideration to be enforced if it is under seal?

A. Five

 

B. Eight

 

C. Ten

 

D. Twenty

 

E. Thirty

Ten states still allow a contract without consideration to be enforced if it is under seal.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

51.
(p. 317)
A[n] _______________ arises when a person acknowledges in court that he or she will perform some specified act or will pay a price upon failure to do so.

A. Contract under seal

 

B. Voidable contract

 

C. Recognizance

 

D. Implied-in-fact

 

E. Informal contract

A recognizance arises when a person acknowledges in court that he or she will perform some specified act or pay a price upon failure to do so.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

52.
(p. 317)
A ________________ is an agreement by the person who issues a letter to pay a sum of money on receipt of an invoice and other documents.

A. Letter of agreement

 

B. Letter of credit

 

C. Letter of acknowledgement

 

D. Negotiated credit instrument letter

 

E. Letter of simple contract

A letter of credit is an agreement by the issuer to pay another party a sum of money on receipt of an invoice and other documents.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

53.
(p. 317)
Which of the following are written documents signed by a party that makes an unconditional promise to pay a specific sum of money on demand or at a certain time to the holder of the instrument?

A. Negotiable instruments

 

B. Informal contracts

 

C. Simple contracts

 

D. Recognizances

 

E. Formal contracts

Negotiable instruments are unconditional written promises to pay the holder a specific sum of money on demand or at a certain time.

 

AACSB: Communication
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

54.
(p. 318)
Which of the following states that if a writing, or term in question, appears to be plain and unambiguous on its face, its meaning must be determined from the four corners of the instrument without resort to outside evidence, with the words being given their ordinary meaning?

A. The Interpretation Rule

 

B. The Simple Rule

 

C. The Understandable Rule

 

D. The Plain Meaning Rule

 

E. The Comprehensive Rule

The plain-meaning rule states that if a writing, or a term in question, appears to be plain and unambiguous on its face, we must determine its meaning from just “the four corners” of the document, without resorting to outside evidence, and give the words their ordinary meaning.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 13-04 What are the rules that guide the interpretation of contracts?
Topic: Interpretation of Contracts
 

 

55.
(p. 312)
Which of the following was the result in In Re Zappos.com Inc., v. Customer Data Security Breach Litigation, the case in the text in which customers of Zappos claimed that they were not bound to an arbitration agreement contained in a contract with Zappos?

A. The court ruled for the plaintiffs for the following two reasons: (1) there was no contract because plaintiffs did not assent to it, and (2) even if a contract existed, the contract was illusory and unenforceable because Zappos could avoid promises at any time.

 

B. The court ruled for the plaintiffs only because of its finding that no contract existed based on the plaintiffs lack of assent.

 

C. The court ruled for the plaintiffs only because of its finding that the contract was illusory and unenforceable because Zappos could avoid promises at any time.

 

D. The court ruled in favor of Zappos on the basis that even though some provisions of the contract were unenforceable, because of the federal policy favoring arbitration agreements, the arbitration clause itself was enforceable.

 

E. The court ruled in favor of Zappos on the basis that the contract was properly entered into and was fully enforceable.

According to the court, “We therefore decline to enforce the arbitration provision on two grounds: there is no contract, and even if there was, it would be illusory and therefore unenforceable.”

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

“Book Sale.” Beverly offered to sell Rick a used business law book for $50. She told him that he could use it in his upcoming business law class the next semester. In fact, there was a problem with the book; it was several editions old. Rick was not aware of that fact, and neither was Beverly. When Rick took the book to class and realized the problem, he went back to Beverly requesting a refund. Beverly refused to return his money. She claimed that subjectively she thought that the book was correct, that she did not commit fraud, and that a binding contract existed. The book, however, is outdated and cannot be appropriately used in the class.

 

56.
(p. 306)
Which of the following would describe Beverly’s role in the transaction?

A. She was the offeror.

 

B. She was the offeree.

 

C. She was the assentor.

 

D. She was the assentee.

 

E. She was the offeree and the assentee.

The agreement consists of an offer by one party, called the offeror, to enter into a contract and an acceptance of the terms of the offer by the other party, called the offeree.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

57.
(p. 306)
Which of the following describes Rick’s role in the transaction?

A. He was the offeror.

 

B. He was the offeree.

 

C. He was the assentor.

 

D. He was the assentee.

 

E. He was the offeree and the assentee.

The agreement consists of an offer by one party, to enter into a contract and an acceptance of the terms of the offer by the other party, called the offeree.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

58.
(p. 306)
Which of the following is the term representing the $50 to be provided by Rick and the book to be provided by Beverly?

A. Encouragement

 

B. Material

 

C. Consideration

 

D. Inducement

 

E. Provisions

Consideration is the bargained-for exchange or what each party gets in exchange for his or her promise under the contract.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

59.
(p. 309)
Which of the following is true regarding Beverly’s claim that she subjectively believed the book was an appropriate edition and that an enforceable contract, therefore, existed?

A. She is correct because contract law is based upon a subjective theory of contracts.

 

B. She is correct because her genuinely held belief establishes that she did not commit fraud.

 

C. She is correct because agreements for the sale of goods are based on a subjective theory.

 

D. She is incorrect because her subjective belief would not be the basis for a determination of whether the contract would be enforced in this case and also because fraud is not necessary in order to find a breach of contract.

 

E. She is correct but only if Rick subjectively believed the same as she did.

Contract law is based on an objective theory of contracts, which means we base the existence of a contract on the parties’ outward manifestations of intent and we base its interpretation on how a reasonable person would interpret it.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

60.
(p. 309)
Which of the following would be the correct analysis of the effect of the discovery that Rick has a book that is not appropriate for the class?

A. Rick is stuck with the book because he objectively agreed to purchase it.

 

B. Rick is stuck with the book because Beverly did not commit fraud.

 

C. Rick is stuck with the book because Beverly subjectively thought it was the correct book, and Rick did not openly disagree before the contract was executed.

 

D. Because the parties had a mutual misunderstanding, the parties did not come to a meeting of the minds, and there is no contract.

 

E. Because both parties were mistaken, at Rick’s option he may return the book; but only half of the purchase price would be required as a refund from Beverly because she is not guilty of fraud.

If a mutual misunderstanding between the parties exists, and if as a result they did not really come to a meeting of the minds, there is no contract.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

“Refusal to Pay.” Business law teacher Debby needed some yard work done. She told her class that she would give $50 to the first person who mowed her yard. She also entered into an agreement with Betty who agreed to trim some shrubbery for $40. Max went to mow Debby’s yard. Unfortunately, just as he finished mowing, a neighborhood dog bit him, and he had to go to the emergency room for a couple of stitches. Debby refused to pay Max because she said that he had angered the neighbors and their dog, and that he was more trouble than he was worth. Secretly, Debby was glad about the dog bite because she felt it gave her an excuse not to pay. Max refused to pay the emergency room because he said that they did not have a binding, bilateral contract. Betty refused to trim the shrubbery because she got a better offer and claimed that she was not bound on the contract until she started to perform.

 

61.
(p. 311-313)
Which of the following is correct regarding Betty’s statement that there was no contract?

A. Betty is correct. There was no contract because she had not started working.

 

B. Betty is incorrect because there was a bilateral, express agreement.

 

C. Betty is incorrect because there was a bilateral, implied agreement.

 

D. Betty is incorrect because there was a unilateral, express agreement.

 

E. Betty is incorrect because there was a unilateral, implied agreement.

If the offeror wants a promise from the offeree to form a binding contract, the contract is a bilateral contract, commonly defined as a promise in exchange for a promise. The terms of express contracts are all clearly set forth in either written or spoken words.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

62.
(p. 311-313)
Which of the following is an appropriate characterization of the agreement between Debby and Max?

A. They had a bilateral, express agreement.

 

B. They had a bilateral, implied agreement.

 

C. They had a bilateral and unilateral agreement.

 

D. They had a unilateral, express agreement.

 

E. They had a unilateral, implied agreement.

In a unilateral contract, the offeror wants the offeree to do something, not to promise to do something. The terms of express contracts are all clearly set forth in either written or spoken words.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

63.
(p. 313)
Which of the following is true regarding Max’s statement that he did not have to pay the emergency room charges?

A. He is correct.

 

B. He is incorrect because there was a bilateral, express contract.

 

C. He is incorrect because there was a unilateral, express contract.

 

D. He is partially correct in that because a quasi-contract existed, he would have to pay; but he would only have to pay fair market value, not what the hospital requested.

 

E. He is incorrect because there was a binding implied contract.

Implied contracts arise not from words but from the conduct of the parties.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

“Wrong Deck.” Penny hires Jackson to paint her back deck. She agrees to pay him $200 for the job, and he accepts sight unseen. They enter into the agreement on Tuesday, and he is to paint the deck on Saturday. When Jackson arrives, neither Penny nor her neighbor is at home. He mistakenly paints the neighbor’s deck. Penny calls him the next day and asks him why he did not paint her deck. He informs her that he did paint the deck. It is then discovered that he mistakenly painted the neighbor’s deck. Penny tells him not to worry because the neighbor will be required to pay him. Jackson says that if the neighbor does not pay, then he expects all of his funds from Penny, because the contract is executed.

 

64.
(p. 316)
What was the status of the agreement between Jackson and Penny as of Tuesday when they agreed upon the price for the job?

A. The contract was executory.

 

B. The contract was executed.

 

C. The contract was novated.

 

D. The contract was formal.

 

E. The contract was a recognizance contract.

As long as some of the terms of a contract have not yet been performed, the contract is executory.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

65.
(p. 314)
Which of the following is correct regarding Penny’s assertion that the neighbor will be required to pay Jackson?

A. She is correct. The neighbor will be required to pay Jackson under a theory of quasi-contract.

 

B. She is correct. The neighbor will be required to pay Jackson based upon an implied-in-fact contract.

 

C. She is correct. The neighbor will be required to pay Jackson based upon an implied-in-law contract.

 

D. She is correct. The neighbor will be required to pay Jackson based upon an express contract.

 

E. She is incorrect. The neighbor will not be required to pay Jackson.

There are limits to the doctrine quasi-contract; specifically, the enrichment must be unjust. Sometimes a benefit may be conferred on a party simply because of a mistake by the other party. In such a case the party that is enriched by the mistake of the other party need not make payments for the benefit received.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

66.
(p. 316)
Which of the following is true regarding Jackson’s assertion that Penny must pay him at this point if the neighbor fails to do so?

A. He is correct because an express contract existed, and he made an honest mistake for which Penny must accept the risk.

 

B. He is correct because an implied contract existed, and he made an honest mistake for which Penny must accept the risk.

 

C. He is correct because an implied-in-law contract existed.

 

D. He is correct because a valid contract existed; and, after his performance, it is considered executed.

 

E. He is incorrect unless he can somehow establish that Penny gave him poor directions or was otherwise at fault in informing him which deck to paint, and the contract remains executory.

Once all the terms of the contract have been fully performed, the contract has been executed. As long as some of the terms have not yet been performed, the contract is executory.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

Essay Questions

67.
(p. 306-308)
Identify and describe the four elements that are necessary for a contract to exist.

The four elements necessary for a contract are agreement, consideration, contractual capacity, and a legal object. The agreement consists of an offer by one party and an acceptance by another. Consideration is defined as a bargain-for exchange. Capacity is the legal ability to enter into a binding contract. Regarding the requirement of a legal object, the contract cannot be either illegal or against public policy.

 

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 13-01 What is a contract?
Topic: The Definition of a Contract
 

 

68.
(p. 311-312)
Define a bilateral contract and a unilateral contract, and give an example of each.

A bilateral contract is commonly defined as a promise in exchange for a promise. In a unilateral contract, the offeror wants a performance to form the contract. Student responses will vary on examples. One example students may use on a unilateral contract is the reward example referenced in the text. An example on a bilateral contract would be a promise to pay a certain amount for an automobile or other article.

 

AACSB: Analytic
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

69.
(p. 313)
Define an express contract and an implied contract; set forth the three conditions that generally must be met for the courts to find an implied contract, and give an example of an express and implied contract.

Express contracts have all their terms clearly set forth in either written or spoken words. Implied contracts arise not from words, but from the conduct of the parties. For an implied contract to be found, first the plaintiff needs to have provided some property or service to the defendant. Second, the plaintiff should have expected to be paid for such property or service, and a reasonable person in the position of the defendant would have expected to pay for it. Third, the defendant should have had an opportunity to reject the property or service, but did not. An example of an express contract is when terms are clearly laid out and parties enter into an agreement such as to buy a vehicle. An example of an implied contract is going to the dentist’s office in an emergency. Although discussions are not held prior to treatment, payment is implied.

 

AACSB: Analytic
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

70.
(p. 314-316)
Millie mows her own yard to save money. Her neighbor Paul, however, hires a lawn service to mow his yard. One day Millie is looking out of the window and sees Paul’s lawn service drive up. Surprisingly, they begin to mow her yard, not Paul’s yard. Millie thinks that is great and keeps her mouth shut while they mow the yard. Later, she gets a bill. She calls the owner of the lawn service and says that she does not have to pay because there was no contract where she agreed to have her yard mowed. The lawn service says that she is liable for the full amount of its contract. Discuss whether the lawn service is entitled to any recovery and why or why not.

The lawn service will be entitled to recover under a theory of quasi-contract based upon Millie being unjustly enriched at the expense of the lawn service. The lawn service will be able to recover the reasonable value of its service, which might not be the amount of its contract with Paul.

 

AACSB: Reflective Thinking
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

71.
(p. 316)
Discuss the meaning of a void contract and a voidable contract, and the effect of a determination that a contract is either void or voidable.

A void contract is in effect not a contract at all. Either its object is illegal or it has some defect that is so serious that it is not a contract. A contract is voidable if one or both of the parties has the ability to either withdraw from the contract or enforce it. If the parties discover that the contract is voidable after one or both have partially performed, and one party chooses to have the contract terminated, both parties must return anything they have already exchanged under the agreement so that they will be returned to the condition they were in at the time that they entered into the agreement.

 

AACSB: Analytic
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 13-03 How can we classify contracts?
Topic: Classification of Contracts
 

 

Chapter 33

Agency Formation and Duties

 

True / False Questions

1. Agency law is primarily federal law.

True    False

 

2. An agency relationship may be created only for a lawful purpose.

True    False

 

3. An individual who lacks contractual capacity may hire an agent to make contracts on his or her behalf.

True    False

 

4. A durable power of attorney is legally binding after the principal becomes incapacitated.

True    False

 

5. A gratuitous agent is one who acts without consideration.

True    False

 

6. All employees are agents of their employers, and all agents are employees.

True    False

 

7. While an agent owes duties to a principal, the principal owes no duties to an agent.

True    False

 

8. If an agent breaches duties owed to the principal, the principal can sue the agent; and the principal may be entitled to a variety of contract and tort remedies beyond those stated in the contract between the principal and agent.

True    False

 

9. The law assumes that the principal is only aware of information actually provided to the principal by the agent.

True    False

 

10. Agents may have contract remedies available against a principal, but not tort remedies.

True    False

 

11. Agents in Australia are obligated to act personally on behalf of the principal.

True    False

 

 

Multiple Choice Questions

12. Which of the following was the result in Ackerman v. Sobol Family Partnership, LLP the case in the text involving whether the plaintiffs were bound by representations of their attorney regarding settlement that they had not approved?

A. That the agreement entered into by plaintiffs’ attorney would not be enforced because the plaintiffs had not lead the opposing defense attorneys reasonably to believe that the plaintiffs’ attorney had full and final authority to settle the litigation.

 

B. That the agreement entered into by plaintiffs’ attorney would not be enforced because the plaintiffs had not signed it.

 

C. That the agreement entered into by plaintiffs’ attorney would not be enforced because the plaintiffs had not given the attorney express authority to enter into the agreement.

 

D. That the agreement would be enforced because the plaintiffs’ attorney had express authority to enter into the agreement.

 

E. That the agreement would be enforced because the plaintiffs’ attorney had apparent authority to enter into the agreement.

 

13. Which of the following was the result in Ralph T. Leonard v. Jerry D. McMorris, the case in the text involving whether under the Colorado Wage Claim Act, company executives of a bankrupt company were liable to employees for unpaid wages and benefits?

A. That company executives are liable for wages, but not for benefits, and only if the company is bankrupt.

 

B. That company executives are liable for benefits, but not for wages, and only if the company is bankrupt.

 

C. That only if the company is bankrupt, company executives are liable for wages and benefits in an amount up to $5,000 per employee.

 

D. That only if the company is bankrupt, company executives are liable for wages and benefits in an amount up to $50,000 per executive to be allocated equally among employees.

 

E. That company executives are not individually liable for unpaid wages or benefits.

 

14. Which of the following is a person who has a duty to act primarily for another person’s benefit?

A. Principal

 

B. Employer

 

C. Fiduciary

 

D. Trustor

 

E. Benefitor

 

15. Which of the following is true regarding the form of authority upon which an agency relationship may be created?

A. Agency relationships can be created through expressed agency, but not through implied authority, apparent agency, or through ratification.

 

B. Agency relationships can be created through expressed agency or through implied authority, but not through apparent agency or through ratification.

 

C. Agency relationships can be created through ratification, but not through implied authority, apparent agency, or expressed authority.

 

D. Agency relationships can be created through ratification or expressed agency, but not through implied authority or apparent agency.

 

E. Agency relationships can be created through expressed agency, implied authority, apparent agency, and ratification.

 

16. When parties form an agency relationship by making a written or oral agreement, the agency is known as a[n] ____.

A. Expressed agency

 

B. Implied agency

 

C. Apparent agency

 

D. Ratification

 

E. Endorsement

 

17. Which of the following is the most common form of agency?

A. Expressed agency

 

B. Implied agency

 

C. Apparent agency

 

D. Ratification

 

E. Endorsement

 

18. If a principal agrees to hire no other agent for a period of time or until a particular job is done, the principal and agent have entered into a[n] ______ agency contract.

A. Encompassing

 

B. Specific

 

C. Exact

 

D. Identified

 

E. Exclusive

 

19. Which of the following is a document that gives an agent authority to sign legal documents on behalf of the principal?

A. Order of authority

 

B. Power of order

 

C. Legal empowerment

 

D. Power of attorney

 

E. Respondeat superior

 

20. Under which of the following does a principal give an agent broad authority to sign legal documents on behalf of the principal?

A. A general power of attorney

 

B. A specific order of authority

 

C. A localized legal empowerment

 

D. A broad power of responeat superior

 

E. A recognized power of order

 

21. Under which of the following does a principal give authority to an agent only for the specific areas or purposes listed in the agency agreement?

A. A specific power of attorney

 

B. An exact order of authority

 

C. An exact legal empowerment

 

D. A limited power of responeat superior

 

E. A specific power of order

 

22. A ______ is a written document, created by a principal, expressing his or her wishes for an agent’s authority not to be affected by the principal’s subsequent incapacity.

A. General purpose order of authority

 

B. Living legal empowerment

 

C. Notarized order

 

D. Durable power of attorney

 

E. Lasting power of authority

 

23. Which of the following types of agency occurs when a principal leads a third party to believe another individual serves as his or her agent, but the principal has actually made no agreement with the so-called agent?

A. Expressed agency

 

B. Implied agency

 

C. Apparent agency

 

D. Ratification

 

E. Endorsement

 

24. Which of the following is another name for apparent agency?

A. Simplified agency

 

B. Equitable agency

 

C. Agency by law

 

D. Agency by estoppel

 

E. Approved agency

 

25. Which of the following is true regarding the result in the Case Opener, the case involving whether FedEx illegally refused to collectively bargain with single-route drivers on the basis that they were independent contractors, not employees?

A. To determine whether the FedEx drivers should be classified as employees or independent contractors, the court applied federal statutory law.

 

B. The court found that FedEx did not exercise the degree of control necessary for the relationship to be considered employer-employee.

 

C. The court found that at times the drivers acted as employees and that other times they acted as independent contractors and that they would, therefore, be classified as independent contractors.

 

D. The court found that at times the drivers acted as employees and that other times they acted as independent contractors and that they would, therefore, be classified as employees.

 

E. The court found that all the rights and duties of employees as agents applied to their relationship with FedEx.

 

26. Which of the following is false regarding civil law and a power of attorney in Luxembourg?

A. In civil law countries, a power of attorney authorizes the agent only to conduct a series of transactions under instruction from the principal.

 

B. In Luxembourg, the person on whose behalf the power of attorney is created is called a donor, instead of a principal.

 

C. One type of power of attorney in Luxembourg is a power of attorney that is valid until death.

 

D. One type of power of attorney in Luxembourg is a power of attorney that has unlimited validity even after death.

 

E. The law in Luxembourg requires that the power of attorney be authenticated by a public authority or a public notary.

 

27. As set forth in the text, which of the following is false regarding agency law in relation to sports agents?

A. Over half of the states have enacted statutes governing the behavior of sports agents.

 

B. Efforts are underway to develop a uniform act addressing regulation of sports agents because none exists at the present time.

 

C. Players associations’ model contracts describe the nature of the services agents can perform on behalf of their principals and the duties the parties owe to one another.

 

D. Some states have established criminal penalties for athletes who violate the state law addressing regulation of sports agents, but most states focus on criminalizing the activity of sports agents.

 

E. The Major League Baseball Players Association’s Regulations Governing Player Agents expressly state that agents act in a fiduciary capacity vis-à-vis their athlete clients.

 

28. Which of the following is false regarding the employer-employee relationship?

A. The employee is subject to the control of the employer.

 

B. Generally, all employees are considered to be agents of the employer.

 

C. Employees who are not legally authorized to enter into contracts binding their employer are nevertheless generally considered agents of the employer.

 

D. In an employer-employee relationship, the employee is subject to the employer’s control.

 

E. Independent contractors fall under the employer-employee relationship.

 

29. Which of the following is false regarding intellectual property rights?

A. The classification as an employee or independent contractor is also important in determining who owns the output of a work project.

 

B. When an employee completes work at the request of the employer, the product is considered a “work for hire.”

 

C. The employer owns the copyright to a work for hire completed by an employee.

 

D. Federal law does not address the issue of when a work is a “work for hire” because such issues are left to state legislatures.

 

E. Only by an agreement of both parties that a specific work is a work for hire may an employer gain copyright ownership of the work of an independent contractor.

 

30. Which of the following is a term for a person who contracts with another to do something for the other person, but is not controlled by the other nor subject to the other’s right to control with respect to his physical conduct in the performance of the undertaking?

A. An employee

 

B. An independent contractor

 

C. An authorized contractor

 

D. A task-specific contractor

 

E. A partial contractor

 

31. Which of the following is not a type of independent contractor?

A. Building contractor

 

B. Stockbroker

 

C. Elementary school teacher

 

D. Lawyer

 

E. Doctor

 

32. Which of the following is not one of the criteria listed in the text as indicative of whether a worker is an employee or an independent contractor?

A. Whether the worker is engaged in a distinct occupation or an independently established business.

 

B. The employer supplying the tools.

 

C. How the worker is paid.

 

D. The amount of time the worker has been involved in the trade or area at issue.

 

E. The length of time for which the worker is employed.

 

33. Which of the following is false regarding implied agency and apparent agency?

A. An implied agency as well as an apparent agency may be created by conduct.

 

B. Circumstances may determine the extent of implied agency.

 

C. Implied agency may conflict with express authority.

 

D. Apparent agency is also known as agency by estoppel.

 

E. If a principal in an alleged apparent agency situation denies that an agency existed, the third party alleging agency must demonstrate that he or she reasonably believed, based on the principal’s conduct, that an agency relationship existed.

 

34. Which of the following is true regarding criteria needed for creation of the agency relationship?

A. The agency must be created for a lawful purpose, and the person hiring an agent must have contractual capacity.

 

B. The agency must be created for an equitable as well as a lawful purpose, and the person hiring an agent must have contractual capacity.

 

C. The agency must be created for a business and lawful purpose, and the person hiring an agent must have contractual capacity.

 

D. The agency must be created for a lawful purpose; and, although there is no requirement that the person hiring an agent have capacity, the person acting as an agent must have contractual capacity.

 

E. The agency must be created for an equitable as well as a lawful purpose; and, although there is no requirement that the person hiring an agent have capacity, the person acting as an agent must have contractual capacity.

 

35. Which of the following is true regarding the liability in tort of employers for the actions of employees and independent contractors?

A. Employers are generally liable in tort for the actions of their employees, while they are generally not liable for the actions of independent contractors.

 

B. Employers are generally liable in tort for the actions of independent contractors, while they are generally not liable for the actions of employees.

 

C. Employers are not generally liable in tort for the actions of independent contractors or the actions of employees.

 

D. Employers are generally liable in tort for the actions of independent contractors and for the actions of employees.

 

E. Employers are generally liable in tort for the actions of independent contractors and for the actions of employees, but only if the employer has agreed to be liable in a written contract with the employee or independent contractor.

 

36. Which of the following was the result in Penny Garrison et al. v. The Superior Court of Los Angeles, the case in the text in which the plaintiffs sought to sue a residential care facility and avoid the effect of a durable power of attorney by which the decedent’s daughter signed agreements to arbitrate disputes involving the facility?

A. That the durable power of attorney was ineffective because it did not grant the holder authority to enter into arbitration agreements and that the arbitration agreements, therefore, were unenforceable.

 

B. That the durable power of attorney was ineffective because it did not specifically give the daughter authority to enter into agreements involving health care and that the arbitration agreements, therefore, were unenforceable.

 

C. That the durable power of attorney was ineffective because it was revoked after the decedent became ill and that the arbitration agreements, therefore, were unenforceable.

 

D. That the durable power of attorney was effective but that the arbitration agreements were void as against public policy.

 

E. That the durable power of attorney was effective and that the agreements to arbitrate would be upheld.

 

37. Which of the following is false regarding a principal’s duties to an agent?

A. An agent can sue the principal if the principal does not fulfill duties owed to the agent.

 

B. An agent may be entitled to contract remedies but not tort remedies.

 

C. If the principal has failed to meet duties owed to the agent, the agent can refuse to act on behalf of the principal until the failure is remedied.

 

D. The principal has a duty to compensate an agent for services provided unless the parties have agreed that the agent will act gratuitously.

 

E. The principal has a duty of reimbursement and indemnification to the agent for authorized expenditures.

 

38. Which of the following is true if there is no agreement between a principal and an agent regarding the amount for which the principal will compensate the agent?

A. It will be assumed that the agent agreed to work for free on a gratuitous basis.

 

B. The agent will be allowed to set the price which will be enforced unless it is unconscionable.

 

C. The principal will be allowed to set the price which will be enforced unless it is unconscionable.

 

D. The court will appoint a magistrate to set the price.

 

E. Compensation will be calculated according to the customary fee in the situation.

 

39. Which of the following is false regarding the duties a principal owes to an agent?

A. The principal owes a duty of cooperation to the agent.

 

B. The principal must assist the agent in the performance of his or her duties.

 

C. The principal can do nothing to interfere with the reasonable conduct of an agent.

 

D. The principal has a duty to provide safe working conditions for an agent.

 

E. The duty of reimbursement applies to employees only, not to independent contractors.

 

40. Which of the following is true regarding the status of an agent as a fiduciary?

A. Although the principal is a fiduciary, an agent is not a fiduciary.

 

B. An agent is a fiduciary only if the principal and agent agreed by written contract that the agent is a fiduciary.

 

C. An agent is a fiduciary only if the principal and agent agreed by written or oral contract that the agent is a fiduciary.

 

D. An agent is only a fiduciary to the principal only if a transaction in excess of $10,000 is involved.

 

E. An agent is a fiduciary to the principal.

 

41. Which of the following was the result on appeal in the case in the text, Cynthia Walker v. John A. Lahoski involving whether the plaintiff was an employee entitled to workers’ compensation benefits from the defendants?

A. That the plaintiff was an independent contractor because she signed an agreement to the effect that she was an independent contractor.

 

B. That the plaintiff was an employee because she was not a professional employee.

 

C. That the plaintiff was an employee because she worked set hours.

 

D. That the plaintiff was an employee because she worked at one location.

 

E. That a question existed as to whether the plaintiff was an employee and that the trial court erred in granting summary judgment to the defendants.

 

42. An agent cannot represent both the principal and a third party in an agreement because there could be a ______.

A. Consortium

 

B. Disagreement

 

C. Conflict of interest

 

D. Delineation of interest

 

E. Absolution

 

43. Which of the following is a term used to describe the duty of an agent to communicate any information to the principal that the agent thinks could be important to the principal?

A. Duty of notification

 

B. Duty of information

 

C. Requirement of conveyance

 

D. Constructive notification

 

E. Constructive information

 

44. Which of the following is the term used to describe the duty and responsibilities of the agent as specified in the agency agreement?

A. Duty of action

 

B. Duty of contract

 

C. Express duty of action

 

D. Duty of performance

 

E. Duty of obedience

 

45. Which of the following is the term used to identify the duty of an agent to perform specified duties with reasonable skill and care?

A. Duty of action

 

B. Duty of contract

 

C. Express duty of action

 

D. Duty of performance

 

E. Duty of obedience

 

46. Which of the following is the term used to describe the duty an agent has to follow the lawful instruction and direction of the principal?

A. Duty of action

 

B. Duty of contract

 

C. Express duty of action

 

D. Duty of performance

 

E. Duty of obedience

 

47. A ______ trust is an equitable trust imposed on one who wrongfully obtains or holds legal right to property he or she should not possess.

A. Resolute

 

B. Actual

 

C. Constructive

 

D. Defined

 

E. Absolute

 

48. Which of the following refers to the right of a principal to sue an agent to recover any amount assessed against the principal for a breach of contract caused by the agent’s negligence?

A. Reformation

 

B. Indemnification

 

C. Reimbursement

 

D. Contribution

 

E. Recoupment

 

49. Which of the following may an agent demand if the agent believes that he or she is not being properly compensated?

A. Specific performance

 

B. Accounting performance

 

C. An accounting

 

D. A contractual documentation

 

E. A contractual audit

 

50. When a contract exists and a principal agrees to certain conditions, but fails to perform, which of the following would an agent seek in order to attempt to force the principal to perform the contract as stipulated?

A. Specific performance

 

B. Specific recoupment

 

C. Adequate performance

 

D. Reformation

 

E. Recognition

 

51. In non-contractual relationships, which of the following may the agent seek in order to force the principal to perform the contract?

A. Specific performance

 

B. Specific recoupment

 

C. Adequate performance

 

D. Reformation

 

E. None of these

 

“High Maintenance.” Paul, who runs a retail jewelry store, went with Jane, to whom he was engaged to be married, to a wholesale jewelry store. Paul had no express, written agreement with Jane by which she was his agent. The wholesaler jeweler, Pam, asked Paul if Jane was buying for him. Paul did not want to embarrass Jane so he nodded in agreement. A few minutes later Paul whispered to Jane, outside the hearing of the wholesaler, that she should not make any purchases. Paul and Jane had a big disagreement over money that evening, and Jane broke off their engagement. The next day Jane went back to the wholesale jeweler and purchased a string of pearls for $2,000. Jane also purchased a fur jacket for $3,000 from a store, owned by Harry, that was next door to the jewelry store. She told Harry that Paul wanted a fur jacket for a model in his store and that Paul would be glad to pay Harry for the jacket.

 

52. What type of agency, if any, did Jane have to act on behalf of Paul as far as Pam is concerned?

A. No type of agency was in effect because no written agreement was in place by which Jane was Paul’s agent.

 

B. No type of agency was in effect because, in fact, Jane was not Paul’s agent.

 

C. An express agency.

 

D. An implied agency.

 

E. An apparent agency.

 

53. Which of the following is the most likely result if Pam, the wholesaler jeweler, sues Paul for the price of the pearls?

A. Pam will win assuming that she can prove that she reasonably believed, based on Paul’s conduct, that Jane was acting as his agent.

 

B. Pam will lose because it was her responsibility to ask Paul for written documentation that Jane was his agent.

 

C. Pam will lose unless it can be established that Jane at some time in the past had actual authority to act as Paul’s agent.

 

D. Pam will win only if she can show that through reasonable investigative efforts on her part Jane cannot be located.

 

E. Pam will win only if she can show that Jane has no assets with which to pay for the necklace.

 

54. Which of the following is the most likely result if Harry sues Paul for the price of the jacket?

A. Paul will win because he did nothing to cause Harry to believe that he would pay for the jacket.

 

B. Harry will win because Jane indicated that she had apparent authority to buy the jacket for Paul.

 

C. Harry will win only if he can show that through reasonable investigative efforts on his part Jane cannot be located.

 

D. Harry will win only if he can show that Jane has no assets with which to pay for the necklace.

 

E. Harry will win on an implied agency theory.

 

“Cheap Principal.” Jason, who is very knowledgeable regarding computers, agrees to purchase computers for Nick’s business. Jason is retained for that purpose only, he is paid a set rate for the job, and Nick exercised no control over the manner in which Jason did his work. Jason purchased computers from ABC Computers without any mention of Nick. The computers worked well and were not defective in any way. Unfortunately, Nick did not pay ABC Computers on a timely basis. Jason, therefore, paid ABC Computers out of his own pocket because he wanted to be able to do business with ABC Computers in the future and also because his name was on the invoice. Jason asked Nick for reimbursement, but Nick refused. Nick claimed that if Jason had only waited, ABC Computers might have agreed to take less.

 

55. Which of the following likely represents Jason’s status in regards to his employment with Nick?

A. He was an independent contractor.

 

B. He was an employee.

 

C. He had a special status called employee-contractor, a term used to represent a contractor with some responsibilities indicating status as an employee and some responsibilities indicating otherwise.

 

D. He was an express contractor.

 

E. He was an implied contractor.

 

56. Did Jason have any legal liability to ABC Computers?

A. Yes, because he made the purchase from ABC Computers without mention of Nick.

 

B. Yes, but only because office equipment is involved.

 

C. No, because his status was as an agent regardless of whether ABC Computers was aware of that fact.

 

D. Yes, but only if Nick refused to pay.

 

E. Yes, but only if Nick were declared judicially insolvent.

 

57. Which of the following is true regarding any right of reimbursement Jason is due from Nick?

A. Jason is not due any reimbursement because he did not get permission from Nick before paying ABC Computers.

 

B. Jason is only due 50% of whatever he paid because he did not get permission from Nick before paying ABC Computers.

 

C. Jason is not due any reimbursement from Nick unless he can establish that Nick signed a written contract authorizing him to personally pay debts incurred.

 

D. Jason is not due any reimbursement from Nick unless Jason can establish by a preponderance of the evidence that ABC Computers would not have agreed to take a lesser amount.

 

E. Jason is entitled to reimbursement from Nick.

 

“Lakeside Property.” Ronnie agreed to act as the agent of Sue in finding a piece of lakeside property for her at a good price and also in obtaining a loan for her with which to purchase the property. She agreed to pay him $500 for doing so. To assist Ronnie in his duties, Sue disclosed to him confidential information about her finances and debts. Ronnie decided that he needed help and paid Rick $300 to look for property for Sue. Rick told Ronnie about a great deal on a piece of lakeside property that Bruce had for sale. In fact, the deal was so good that Ronnie purchased the property for himself. When Sue found out about the property Ronnie bought for himself, she complained to Ronnie. He defended himself on the basis that he was not actually working for Sue when he found out about the deal. At the time, he was playing golf with Bruce. He also told Sue that he had hired Rick for $300 to assist him and that he could not be held liable because he had turned the job over to Rick. He asked Sue for reimbursement of the amount he paid Rick. Sue fired Ronnie threatening to sue him. Ronnie told Sue that he would counterclaim for the $300 owed to Rick. Only after he was fired, Ronnie disclosed to a number of parties information regarding Sue’s spending habits which he thought were excessive.

 

58. Which of the following is the most likely result if Sue sues Ronnie for purchasing the property from Bruce instead of offering it to her?

A. Sue will lose because Ronnie had the right to act in his own best interest.

 

B. Sue will lose but only because Ronnie was not involved in work duties when he heard about the property.

 

C. Sue will lose because Ronnie had validly assigned all duties to Rick.

 

D. Sue will win.

 

E. Sue will win only if she can establish that she expressly told Ronnie that he could not assign the contractual duties under the contract.

 

59. Which of the following is the most likely result if Ronnie sues Sue for the $300 paid to Rick?

A. Ronnie will lose.

 

B. Ronnie will win because an agent has an implied right to obtain help.

 

C. Ronnie will win only if he can establish by a preponderance of the evidence that he acted reasonably.

 

D. Ronnie will win unless Sue can establish beyond a reasonable doubt that he acted unreasonably.

 

E. Ronnie will lose only if Sue can establish that Rick is incompetent to deal in real estate.

 

60. Which of the following is the most likely result if Sue sues Ronnie for revealing confidential information?

A. Sue will lose because Ronnie was no longer her agent when he revealed the information.

 

B. Sue will lose because regardless of whether he was working for her or not, he had no legal duty to keep any information confidential.

 

C. Sue will lose unless she can establish that revealing the information caused her to suffer economic loss.

 

D. Sue will lose unless she can establish that revealing the information caused her to seek psychological counseling.

 

E. Sue will win.

 

61. What should Sue seek if she wants possession of the lakeside lot Ronnie purchased?

A. A resolute trust

 

B. An actual trust

 

C. A constructive trust

 

D. A defined trust

 

E. An absolute trust

 

 

Essay Questions

62. Discuss why agency is especially important for modern firms doing business in foreign countries.

 

 

 

 

63. When must agency agreements be in writing?

 

 

 

 

64. Set forth the requirements for a finding of agency by ratification and also the requirements needed for ratification to be effective.

 

 

 

 

65. Rita, a lawyer, hired Sam to do general clerical work for her. She maintained control over his work, gave him day-to-day instructions regarding his duties, paid him on an hourly basis, and furnished all equipment he needed. Rita for tax purposes claimed Sam as an independent contractor. She was audited by the IRS who took the position that Sam was an employee. Is Sam an independent contractor, why or why not, and what is the effect of a finding of employee or independent contractor as far as the IRS is concerned?

 

 

 

 

66. According to the text, what is required by the duty of accounting an agent owes to a principal?

 

 

 

 

Chapter 33 Agency Formation and Duties Answer Key

True / False Questions

1.
(p. 728)
Agency law is primarily federal law.

FALSE

Agency law is primarily state law.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-01 What is agency law?
Topic: Introduction to Agency Law
 

 

2.
(p. 728)
An agency relationship may be created only for a lawful purpose.

TRUE

Agencies can be created only for a lawful purpose.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 33-02 How is an agency relationship created?
Topic: Creation of the Agency Relationship
 

 

3.
(p. 728)
An individual who lacks contractual capacity may hire an agent to make contracts on his or her behalf.

FALSE

An individual who does not have contractual capacity, such as a minor, cannot hire an agent to make contracts on his or her behalf.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-02 How is an agency relationship created?
Topic: Creation of the Agency Relationship
 

 

4.
(p. 730)
A durable power of attorney is legally binding after the principal becomes incapacitated.

TRUE

A principal may preemptively enact a durable power of attorney, a written document expressing his or her wishes for an agent’s authority not to be affected by the principal’s subsequent incapacity. Alternatively, a durable power of attorney might become active only after a principal becomes incapacitated in any matter.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-03 What are the different types of agency?
Topic: Types of Agency
 

 

5.
(p. 729)
A gratuitous agent is one who acts without consideration.

TRUE

A gratuitous agent is one who acts without consideration.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 33-02 How is an agency relationship created?
Topic: Creation of the Agency Relationship
 

 

6.
(p. 734)
All employees are agents of their employers, and all agents are employees.

FALSE

Generally, all employees are considered agents of the employer, even those not legally authorized to enter into contracts binding their employer or to interact with third parties. However, not all agents are employees.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 33-04 What are the different types of agency relationships?
Topic: Agency Relationships
 

 

7.
(p. 738)
While an agent owes duties to a principal, the principal owes no duties to an agent.

FALSE

The principal owes certain duties to the agent.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-05 What are the duties of the agent and principal?
Topic: Duties of the Agent and the Principal
 

 

8.
(p. 740)
If an agent breaches duties owed to the principal, the principal can sue the agent; and the principal may be entitled to a variety of contract and tort remedies beyond those stated in the contract between the principal and agent.

TRUE

If the agent breaches his or her duties, the principal can sue the agent and may be entitled to a variety of contract and tort remedies beyond those stated in the contract.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 33-05 What are the duties of the agent and principal?
Topic: Duties of the Agent and the Principal
 

 

9.
(p. 740)
The law assumes that the principal is only aware of information actually provided to the principal by the agent.

FALSE

The law typically assumes that the principal is aware of all information revealed to the agent, regardless of whether the agent shares it with the principal.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-05 What are the duties of the agent and principal?
Topic: Duties of the Agent and the Principal
 

 

10.
(p. 738)
Agents may have contract remedies available against a principal, but not tort remedies.

FALSE

The principal owes specific duties to the agent. Failure to fulfill these rights provides the basis for a tort or contract action against the principal.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-05 What are the duties of the agent and principal?
Topic: Duties of the Agent and the Principal
 

 

11.
(p. 742)
Agents in Australia are obligated to act personally on behalf of the principal.

TRUE

Agents in Australia have a unique duty, they are obligated to “act personally” on behalf of the principal.

 

AACSB: Diversity
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-06 What are the rights and remedies of the agent and principal?
Topic: Rights and Remedies
 

 

Multiple Choice Questions

12.
(p. 733)
Which of the following was the result in Ackerman v. Sobol Family Partnership, LLP the case in the text involving whether the plaintiffs were bound by representations of their attorney regarding settlement that they had not approved?

A. That the agreement entered into by plaintiffs’ attorney would not be enforced because the plaintiffs had not lead the opposing defense attorneys reasonably to believe that the plaintiffs’ attorney had full and final authority to settle the litigation.

 

B. That the agreement entered into by plaintiffs’ attorney would not be enforced because the plaintiffs had not signed it.

 

C. That the agreement entered into by plaintiffs’ attorney would not be enforced because the plaintiffs had not given the attorney express authority to enter into the agreement.

 

D. That the agreement would be enforced because the plaintiffs’ attorney had express authority to enter into the agreement.

 

E. That the agreement would be enforced because the plaintiffs’ attorney had apparent authority to enter into the agreement.

The court found that the plaintiffs’ attorney had apparent authority from his clients, that the defendants’ counsel reasonably believed that plaintiffs’ counsel was authorized by the plaintiffs to make the settlement offer at issue, and that defendants’ counsel acted in good faith.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-03 What are the different types of agency?
Topic: Types of Agency
 

 

13.
(p. 739)
Which of the following was the result in Ralph T. Leonard v. Jerry D. McMorris, the case in the text involving whether under the Colorado Wage Claim Act, company executives of a bankrupt company were liable to employees for unpaid wages and benefits?

A. That company executives are liable for wages, but not for benefits, and only if the company is bankrupt.

 

B. That company executives are liable for benefits, but not for wages, and only if the company is bankrupt.

 

C. That only if the company is bankrupt, company executives are liable for wages and benefits in an amount up to $5,000 per employee.

 

D. That only if the company is bankrupt, company executives are liable for wages and benefits in an amount up to $50,000 per executive to be allocated equally among employees.

 

E. That company executives are not individually liable for unpaid wages or benefits.

According to the court, “[T]he officers and agents of a corporation are not jointly and severally liable for payment of employee wages and other compensation the corporation owes to its employees under the employment contract and the Colorado Wage Claim Act.”

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-05 What are the duties of the agent and principal?
Topic: Duties of the Agent and the Principal
 

 

14.
(p. 728)
Which of the following is a person who has a duty to act primarily for another person’s benefit?

A. Principal

 

B. Employer

 

C. Fiduciary

 

D. Trustor

 

E. Benefitor

A fiduciary is a person who has a duty to act primarily for another person’s benefit.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 33-01 What is agency law?
Topic: Introduction to Agency Law
 

 

15.
(p. 729)
Which of the following is true regarding the form of authority upon which an agency relationship may be created?

A. Agency relationships can be created through expressed agency, but not through implied authority, apparent agency, or through ratification.

 

B. Agency relationships can be created through expressed agency or through implied authority, but not through apparent agency or through ratification.

 

C. Agency relationships can be created through ratification, but not through implied authority, apparent agency, or expressed authority.

 

D. Agency relationships can be created through ratification or expressed agency, but not through implied authority or apparent agency.

 

E. Agency relationships can be created through expressed agency, implied authority, apparent agency, and ratification.

Agency relationships can be created on the basis of any of the following four forms of authority:

1. By expressed agency or agency by agreement.
2. By implied authority.
3. By apparent agency, or agency by estoppel.
4. By ratification.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 33-02 How is an agency relationship created?
Topic: Creation of the Agency Relationship
 

 

16.
(p. 729)
When parties form an agency relationship by making a written or oral agreement, the agency is known as a[n] ____.

A. Expressed agency

 

B. Implied agency

 

C. Apparent agency

 

D. Ratification

 

E. Endorsement

When parties form an agency relationship by making a written or oral agreement, the agency is known as an expressed agency, or agency by agreement.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 33-03 What are the different types of agency?
Topic: Types of Agency
 

 

17.
(p. 729)
Which of the following is the most common form of agency?

A. Expressed agency

 

B. Implied agency

 

C. Apparent agency

 

D. Ratification

 

E. Endorsement

Expressed agency is the most common type of agency.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 33-03 What are the different types of agency?
Topic: Types of Agency
 

 

18.
(p. 729)
If a principal agrees to hire no other agent for a period of time or until a particular job is done, the principal and agent have entered into a[n] ______ agency contract.

A. Encompassing

 

B. Specific

 

C. Exact

 

D. Identified

 

E. Exclusive

If the principal agrees to hire no other agent for a period of time or until a particular job is done, the principal and agent have entered into an exclusive agency contract.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 33-03 What are the different types of agency?
Topic: Types of Agency
 

 

19.
(p. 729)
Which of the following is a document that gives an agent authority to sign legal documents on behalf of the principal?

A. Order of authority

 

B. Power of order

 

C. Legal empowerment

 

D. Power of attorney

 

E. Respondeat superior

A power of attorney establishes an agency by agreement that gives an agent authority to sign legal documents on behalf of the principal.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 33-03 What are the different types of agency?
Topic: Types of Agency
 

 

20.
(p. 729)
Under which of the following does a principal give an agent broad authority to sign legal documents on behalf of the principal?

A. A general power of attorney

 

B. A specific order of authority

 

C. A localized legal empowerment

 

D. A broad power of responeat superior

 

E. A recognized power of order

A general power of attorney grants broad authority.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 33-03 What are the different types of agency?
Topic: Types of Agency
 

 

21.
(p. 729)
Under which of the following does a principal give authority to an agent only for the specific areas or purposes listed in the agency agreement?

A. A specific power of attorney

 

B. An exact order of authority

 

C. An exact legal empowerment

 

D. A limited power of responeat superior

 

E. A specific power of order

A specific power of attorney gives authority only for the specific areas or purposes listed in the agreement.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 33-03 What are the different types of agency?
Topic: Types of Agency
 

 

22.
(p. 730)
A ______ is a written document, created by a principal, expressing his or her wishes for an agent’s authority not to be affected by the principal’s subsequent incapacity.

A. General purpose order of authority

 

B. Living legal empowerment

 

C. Notarized order

 

D. Durable power of attorney

 

E. Lasting power of authority

A principal may preemptively enact a durable power of attorney, a written document expressing his or her wishes for an agent’s authority not to be affected by the principal’s subsequent incapacity.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-03 What are the different types of agency?
Topic: Types of Agency
 

 

23.
(p. 731)
Which of the following types of agency occurs when a principal leads a third party to believe another individual serves as his or her agent, but the principal has actually made no agreement with the so-called agent?

A. Expressed agency

 

B. Implied agency

 

C. Apparent agency

 

D. Ratification

 

E. Endorsement

Suppose a principal falsely leads a third party to believe another individual serves as his or her agent. By his or her conduct, the principal has created apparent agency.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-03 What are the different types of agency?
Topic: Types of Agency
 

 

24.
(p. 731)
Which of the following is another name for apparent agency?

A. Simplified agency

 

B. Equitable agency

 

C. Agency by law

 

D. Agency by estoppel

 

E. Approved agency

Suppose a principal falsely leads a third party to believe another individual serves as his or her agent. By his or her conduct, the principal has created apparent agency or agency by estoppel.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 33-03 What are the different types of agency?
Topic: Types of Agency
 

 

25.
(p. 744)
Which of the following is true regarding the result in the Case Opener, the case involving whether FedEx illegally refused to collectively bargain with single-route drivers on the basis that they were independent contractors, not employees?

A. To determine whether the FedEx drivers should be classified as employees or independent contractors, the court applied federal statutory law.

 

B. The court found that FedEx did not exercise the degree of control necessary for the relationship to be considered employer-employee.

 

C. The court found that at times the drivers acted as employees and that other times they acted as independent contractors and that they would, therefore, be classified as independent contractors.

 

D. The court found that at times the drivers acted as employees and that other times they acted as independent contractors and that they would, therefore, be classified as employees.

 

E. The court found that all the rights and duties of employees as agents applied to their relationship with FedEx.

In determining that FedEx did not exercise the degree of control necessary for the relationship to be considered employer-employee, the court found that the route drivers were independent contractors having “significant entrepreneurial opportunity for gain or loss.”

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-04 What are the different types of agency relationships?
Topic: Rights and Remedies
 

 

26.
(p. 731)
Which of the following is false regarding civil law and a power of attorney in Luxembourg?

A. In civil law countries, a power of attorney authorizes the agent only to conduct a series of transactions under instruction from the principal.

 

B. In Luxembourg, the person on whose behalf the power of attorney is created is called a donor, instead of a principal.

 

C. One type of power of attorney in Luxembourg is a power of attorney that is valid until death.

 

D. One type of power of attorney in Luxembourg is a power of attorney that has unlimited validity even after death.

 

E. The law in Luxembourg requires that the power of attorney be authenticated by a public authority or a public notary.

In the United States and other common law jurisdictions, a power of attorney authorizes the agent only to “conduct a series of transactions” under instruction from the principal. This limitation makes the power of attorney in common law distinctly different from that provided by civil law, which authorizes the agent to do “everything and anything which the principal himself could do.”

 

AACSB: Diversity
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-03 What are the different types of agency?
Topic: Types of Agency
 

 

27.
(p. 728)
As set forth in the text, which of the following is false regarding agency law in relation to sports agents?

A. Over half of the states have enacted statutes governing the behavior of sports agents.

 

B. Efforts are underway to develop a uniform act addressing regulation of sports agents because none exists at the present time.

 

C. Players associations’ model contracts describe the nature of the services agents can perform on behalf of their principals and the duties the parties owe to one another.

 

D. Some states have established criminal penalties for athletes who violate the state law addressing regulation of sports agents, but most states focus on criminalizing the activity of sports agents.

 

E. The Major League Baseball Players Association’s Regulations Governing Player Agents expressly state that agents act in a fiduciary capacity vis-à-vis their athlete clients.

The specific legislation that regulates the conduct of athlete agents in these 40 states is the Uniform Athlete Agents Act (UAAA).

 

AACSB: Diversity
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-01 What is agency law?
Topic: Introduction to Agency Law
 

 

28.
(p. 735)
Which of the following is false regarding the employer-employee relationship?

A. The employee is subject to the control of the employer.

 

B. Generally, all employees are considered to be agents of the employer.

 

C. Employees who are not legally authorized to enter into contracts binding their employer are nevertheless generally considered agents of the employer.

 

D. In an employer-employee relationship, the employee is subject to the employer’s control.

 

E. Independent contractors fall under the employer-employee relationship.

The question of whether a worker is an employee or an independent contractor has important implications because the employer-employee relationship is subject to the workers’ compensation, workplace safety, employment discrimination, and unemployment statutes, while the employer-independent contractor relationship is not.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 33-04 What are the different types of agency relationships?
Topic: Agency Relationships
 

 

29.
(p. 737)
Which of the following is false regarding intellectual property rights?

A. The classification as an employee or independent contractor is also important in determining who owns the output of a work project.

 

B. When an employee completes work at the request of the employer, the product is considered a “work for hire.”

 

C. The employer owns the copyright to a work for hire completed by an employee.

 

D. Federal law does not address the issue of when a work is a “work for hire” because such issues are left to state legislatures.

 

E. Only by an agreement of both parties that a specific work is a work for hire may an employer gain copyright ownership of the work of an independent contractor.

According to the Copyright Act of 1976, 17 U.S.C. §§ 101-810, a federal law, when an employee completes work at the request of the employer, the product is considered a “work for hire” and the employer owns the copyright.

 

AACSB: Diversity
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-04 What are the different types of agency relationships?
Topic: Agency Relationships
 

 

30.
(p. 734)
Which of the following is a term for a person who contracts with another to do something for the other person, but is not controlled by the other nor subject to the other’s right to control with respect to his physical conduct in the performance of the undertaking?

A. An employee

 

B. An independent contractor

 

C. An authorized contractor

 

D. A task-specific contractor

 

E. A partial contractor

The Restatement of Agency defines an independent contractor as “a person who contracts with another to do something for him but who is not controlled by the other nor subject to the other’s right to control with respect to his physical conduct in the performance of the undertaking.”

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 33-04 What are the different types of agency relationships?
Topic: Agency Relationships
 

 

31.
(p. 734-735)
Which of the following is not a type of independent contractor?

A. Building contractor

 

B. Stockbroker

 

C. Elementary school teacher

 

D. Lawyer

 

E. Doctor

The Restatement of Agency defines an independent contractor as “a person who contracts with another to do something for him but who is not controlled by the other nor subject to the other’s right to control with respect to his physical conduct in the performance of the undertaking.” Building contractors, doctors, stockbrokers, and lawyers are types of independent contractors.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-04 What are the different types of agency relationships?
Topic: Agency Relationships
 

 

32.
(p. 735)
Which of the following is not one of the criteria listed in the text as indicative of whether a worker is an employee or an independent contractor?

A. Whether the worker is engaged in a distinct occupation or an independently established business.

 

B. The employer supplying the tools.

 

C. How the worker is paid.

 

D. The amount of time the worker has been involved in the trade or area at issue.

 

E. The length of time for which the worker is employed.

Exhibit 33-4 lists criteria leading to a determination of employee or independent contractor status. The amount of time the worker has been involved in the trade or area at issue is not one of the criteria.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 33-04 What are the different types of agency relationships?
Topic: Agency Relationships
 

 

33.
(p. 731-732)
Which of the following is false regarding implied agency and apparent agency?

A. An implied agency as well as an apparent agency may be created by conduct.

 

B. Circumstances may determine the extent of implied agency.

 

C. Implied agency may conflict with express authority.

 

D. Apparent agency is also known as agency by estoppel.

 

E. If a principal in an alleged apparent agency situation denies that an agency existed, the third party alleging agency must demonstrate that he or she reasonably believed, based on the principal’s conduct, that an agency relationship existed.

Agency by implied authority cannot conflict with any express authority.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 33-03 What are the different types of agency?
Topic: Types of Agency
 

 

34.
(p. 728-729)
Which of the following is true regarding criteria needed for creation of the agency relationship?

A. The agency must be created for a lawful purpose, and the person hiring an agent must have contractual capacity.

 

B. The agency must be created for an equitable as well as a lawful purpose, and the person hiring an agent must have contractual capacity.

 

C. The agency must be created for a business and lawful purpose, and the person hiring an agent must have contractual capacity.

 

D. The agency must be created for a lawful purpose; and, although there is no requirement that the person hiring an agent have capacity, the person acting as an agent must have contractual capacity.

 

E. The agency must be created for an equitable as well as a lawful purpose; and, although there is no requirement that the person hiring an agent have capacity, the person acting as an agent must have contractual capacity.

There are two criteria for the creation of agency relationships. First, like contracts, they can be created only for a lawful purpose; thus, a principal could not hire an agent to kill someone on his or her behalf. Second, almost anyone can act as an agent; however, an individual who does not have contractual capacity, such as a minor, cannot hire an agent to make contracts on his or her behalf.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-02 How is an agency relationship created?
Topic: Creation of the Agency Relationship
 

 

35.
(p. 735)
Which of the following is true regarding the liability in tort of employers for the actions of employees and independent contractors?

A. Employers are generally liable in tort for the actions of their employees, while they are generally not liable for the actions of independent contractors.

 

B. Employers are generally liable in tort for the actions of independent contractors, while they are generally not liable for the actions of employees.

 

C. Employers are not generally liable in tort for the actions of independent contractors or the actions of employees.

 

D. Employers are generally liable in tort for the actions of independent contractors and for the actions of employees.

 

E. Employers are generally liable in tort for the actions of independent contractors and for the actions of employees, but only if the employer has agreed to be liable in a written contract with the employee or independent contractor.

Employers are generally liable in tort for the actions of their employees, while they are generally not liable for the actions of independent contractors.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-04 What are the different types of agency relationships?
Topic: Agency Relationships
 

 

36.
(p. 730)
Which of the following was the result in Penny Garrison et al. v. The Superior Court of Los Angeles, the case in the text in which the plaintiffs sought to sue a residential care facility and avoid the effect of a durable power of attorney by which the decedent’s daughter signed agreements to arbitrate disputes involving the facility?

A. That the durable power of attorney was ineffective because it did not grant the holder authority to enter into arbitration agreements and that the arbitration agreements, therefore, were unenforceable.

 

B. That the durable power of attorney was ineffective because it did not specifically give the daughter authority to enter into agreements involving health care and that the arbitration agreements, therefore, were unenforceable.

 

C. That the durable power of attorney was ineffective because it was revoked after the decedent became ill and that the arbitration agreements, therefore, were unenforceable.

 

D. That the durable power of attorney was effective but that the arbitration agreements were void as against public policy.

 

E. That the durable power of attorney was effective and that the agreements to arbitrate would be upheld.

According to the court, “Because the durable power of attorney was legal and enforceable, Garrison [the daughter] could not cancel the agreements into which she entered.”

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-03 What are the different types of agency?
Topic: Types of Agency
 

 

37.
(p. 738)
Which of the following is false regarding a principal’s duties to an agent?

A. An agent can sue the principal if the principal does not fulfill duties owed to the agent.

 

B. An agent may be entitled to contract remedies but not tort remedies.

 

C. If the principal has failed to meet duties owed to the agent, the agent can refuse to act on behalf of the principal until the failure is remedied.

 

D. The principal has a duty to compensate an agent for services provided unless the parties have agreed that the agent will act gratuitously.

 

E. The principal has a duty of reimbursement and indemnification to the agent for authorized expenditures.

The principal owes certain duties to the agent. If these duties are not fulfilled, the principal has violated the agent’s rights and the agent can sue for contract or tort remedies.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 33-05 What are the duties of the agent and principal?
Topic: Duties of the Agent and the Principal
 

 

38.
(p. 738)
Which of the following is true if there is no agreement between a principal and an agent regarding the amount for which the principal will compensate the agent?

A. It will be assumed that the agent agreed to work for free on a gratuitous basis.

 

B. The agent will be allowed to set the price which will be enforced unless it is unconscionable.

 

C. The principal will be allowed to set the price which will be enforced unless it is unconscionable.

 

D. The court will appoint a magistrate to set the price.

 

E. Compensation will be calculated according to the customary fee in the situation.

If there is no agreement on the amount, the courts suggest compensation should be calculated according to the customary fee in the situation.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 33-05 What are the duties of the agent and principal?
Topic: Duties of the Agent and the Principal
 

 

39.
(p. 739)
Which of the following is false regarding the duties a principal owes to an agent?

A. The principal owes a duty of cooperation to the agent.

 

B. The principal must assist the agent in the performance of his or her duties.

 

C. The principal can do nothing to interfere with the reasonable conduct of an agent.

 

D. The principal has a duty to provide safe working conditions for an agent.

 

E. The duty of reimbursement applies to employees only, not to independent contractors.

The principal has a duty of reimbursement and indemnification to the agent.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 33-05 What are the duties of the agent and principal?
Topic: Duties of the Agent and the Principal
 

 

40.
(p. 739)
Which of the following is true regarding the status of an agent as a fiduciary?

A. Although the principal is a fiduciary, an agent is not a fiduciary.

 

B. An agent is a fiduciary only if the principal and agent agreed by written contract that the agent is a fiduciary.

 

C. An agent is a fiduciary only if the principal and agent agreed by written or oral contract that the agent is a fiduciary.

 

D. An agent is only a fiduciary to the principal only if a transaction in excess of $10,000 is involved.

 

E. An agent is a fiduciary to the principal.

The agent makes agreements on behalf of the principal in a fiduciary relationship of trust and confidence.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 33-05 What are the duties of the agent and principal?
Topic: Duties of the Agent and the Principal
 

 

41.
(p. 737)
Which of the following was the result on appeal in the case in the text, Cynthia Walker v. John A. Lahoski involving whether the plaintiff was an employee entitled to workers’ compensation benefits from the defendants?

A. That the plaintiff was an independent contractor because she signed an agreement to the effect that she was an independent contractor.

 

B. That the plaintiff was an employee because she was not a professional employee.

 

C. That the plaintiff was an employee because she worked set hours.

 

D. That the plaintiff was an employee because she worked at one location.

 

E. That a question existed as to whether the plaintiff was an employee and that the trial court erred in granting summary judgment to the defendants.

According to the court, “The record below contains disputed facts and several indicia of employee status, such as hourly payment, control of hours worked, and control over the manner or means the work was performed. Appellees failed to meet their burden to show there was no genuine issue of material fact and reasonable minds could only decide favorably for the appellees. Thus, the trial court erred in granting summary judgment in favor of the defendants.”

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-04 What are the different types of agency relationships?
Topic: Agency Relationships
 

 

42.
(p. 740)
An agent cannot represent both the principal and a third party in an agreement because there could be a ______.

A. Consortium

 

B. Disagreement

 

C. Conflict of interest

 

D. Delineation of interest

 

E. Absolution

An agent cannot represent both the principal and a third party in an agreement, because there could be a conflict of interest.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-05 What are the duties of the agent and principal?
Topic: Duties of the Agent and the Principal
 

 

43.
(p. 740)
Which of the following is a term used to describe the duty of an agent to communicate any information to the principal that the agent thinks could be important to the principal?

A. Duty of notification

 

B. Duty of information

 

C. Requirement of conveyance

 

D. Constructive notification

 

E. Constructive information

The agent has to communicate not only offers from third parties but also, under the duty of notification, any information he or she thinks could be important to the principal.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 33-05 What are the duties of the agent and principal?
Topic: Duties of the Agent and the Principal
 

 

44.
(p. 741)
Which of the following is the term used to describe the duty and responsibilities of the agent as specified in the agency agreement?

A. Duty of action

 

B. Duty of contract

 

C. Express duty of action

 

D. Duty of performance

 

E. Duty of obedience

The duty of performance includes the requirement that the agent perform the duties as specified in the agency agreement.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 33-05 What are the duties of the agent and principal?
Topic: Duties of the Agent and the Principal
 

 

45.
(p. 741)
Which of the following is the term used to identify the duty of an agent to perform specified duties with reasonable skill and care?

A. Duty of action

 

B. Duty of contract

 

C. Express duty of action

 

D. Duty of performance

 

E. Duty of obedience

The duty of performance includes the requirement that the agent perform specified duties with the same skill, care, and professionalism as a reasonable person in the same situation would provide.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 33-05 What are the duties of the agent and principal?
Topic: Duties of the Agent and the Principal
 

 

46.
(p. 742)
Which of the following is the term used to describe the duty an agent has to follow the lawful instruction and direction of the principal?

A. Duty of action

 

B. Duty of contract

 

C. Express duty of action

 

D. Duty of performance

 

E. Duty of obedience

Under the duty of obedience, the agent must follow the lawful instruction and direction of the principal.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 33-05 What are the duties of the agent and principal?
Topic: Duties of the Agent and the Principal
 

 

47.
(p. 743)
A ______ trust is an equitable trust imposed on one who wrongfully obtains or holds legal right to property he or she should not possess.

A. Resolute

 

B. Actual

 

C. Constructive

 

D. Defined

 

E. Absolute

A constructive trust is an equitable trust imposed on someone who wrongfully obtains or holds legal right to property he or she should not possess.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-06 What are the rights and remedies of the agent and principal?
Topic: Rights and Remedies
 

 

48.
(p. 743)
Which of the following refers to the right of a principal to sue an agent to recover any amount assessed against the principal for a breach of contract caused by the agent’s negligence?

A. Reformation

 

B. Indemnification

 

C. Reimbursement

 

D. Contribution

 

E. Recoupment

The principal has a right to indemnification; that is, when sued by a third party, a principal may sue his agent to recover the amount assessed to the third party for damages caused by the agent’s negligence.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-06 What are the rights and remedies of the agent and principal?
Topic: Rights and Remedies
 

 

49.
(p. 744)
Which of the following may an agent demand if the agent believes that he or she is not being properly compensated?

A. Specific performance

 

B. Accounting performance

 

C. An accounting

 

D. A contractual documentation

 

E. A contractual audit

An agent who feels she is not being properly compensated, especially when working on commission, may demand an accounting.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-06 What are the rights and remedies of the agent and principal?
Topic: Rights and Remedies
 

 

50.
(p. 744)
When a contract exists and a principal agrees to certain conditions, but fails to perform, which of the following would an agent seek in order to attempt to force the principal to perform the contract as stipulated?

A. Specific performance

 

B. Specific recoupment

 

C. Adequate performance

 

D. Reformation

 

E. Recognition

Under a theory of specific performance, when a contract exists and a principal agrees to certain conditions but fails to perform, under contract remedies the agent may seek court assistance in forcing the principal to perform the contract as stipulated.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-06 What are the rights and remedies of the agent and principal?
Topic: Rights and Remedies
 

 

51.
(p. 744)
In non-contractual relationships, which of the following may the agent seek in order to force the principal to perform the contract?

A. Specific performance

 

B. Specific recoupment

 

C. Adequate performance

 

D. Reformation

 

E. None of these

When the agency relationship is not contractual or the contract is for personal services, an agent does not have the right to specific performance. The agent may recover for services rendered and/or future damages but may not force the principal to fulfill the specific contractual agreements or even to continue to employ the agent.

 

AACSB: Analytic
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-06 What are the rights and remedies of the agent and principal?
Topic: Rights and Remedies
 

 

“High Maintenance.” Paul, who runs a retail jewelry store, went with Jane, to whom he was engaged to be married, to a wholesale jewelry store. Paul had no express, written agreement with Jane by which she was his agent. The wholesaler jeweler, Pam, asked Paul if Jane was buying for him. Paul did not want to embarrass Jane so he nodded in agreement. A few minutes later Paul whispered to Jane, outside the hearing of the wholesaler, that she should not make any purchases. Paul and Jane had a big disagreement over money that evening, and Jane broke off their engagement. The next day Jane went back to the wholesale jeweler and purchased a string of pearls for $2,000. Jane also purchased a fur jacket for $3,000 from a store, owned by Harry, that was next door to the jewelry store. She told Harry that Paul wanted a fur jacket for a model in his store and that Paul would be glad to pay Harry for the jacket.

 

52.
(p. 731)
What type of agency, if any, did Jane have to act on behalf of Paul as far as Pam is concerned?

A. No type of agency was in effect because no written agreement was in place by which Jane was Paul’s agent.

 

B. No type of agency was in effect because, in fact, Jane was not Paul’s agent.

 

C. An express agency.

 

D. An implied agency.

 

E. An apparent agency.

When a principal falsely leads a third party to believe another individual serves as his or her agent, the principal has created an apparent agency or agency by estoppel.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 33-03 What are the different types of agency?
Topic: Types of Agency
 

 

53.
(p. 731-732)
Which of the following is the most likely result if Pam, the wholesaler jeweler, sues Paul for the price of the pearls?

A. Pam will win assuming that she can prove that she reasonably believed, based on Paul’s conduct, that Jane was acting as his agent.

 

B. Pam will lose because it was her responsibility to ask Paul for written documentation that Jane was his agent.

 

C. Pam will lose unless it can be established that Jane at some time in the past had actual authority to act as Paul’s agent.

 

D. Pam will win only if she can show that through reasonable investigative efforts on her part Jane cannot be located.

 

E. Pam will win only if she can show that Jane has no assets with which to pay for the necklace.

When a third party relies on the principal’s conduct and makes an agreement with an apparent agent, the principal must uphold any agreements made by the agent.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 33-03 What are the different types of agency?
Topic: Types of Agency
 

 

54.
(p. 731)
Which of the following is the most likely result if Harry sues Paul for the price of the jacket?

A. Paul will win because he did nothing to cause Harry to believe that he would pay for the jacket.

 

B. Harry will win because Jane indicated that she had apparent authority to buy the jacket for Paul.

 

C. Harry will win only if he can show that through reasonable investigative efforts on his part Jane cannot be located.

 

D. Harry will win only if he can show that Jane has no assets with which to pay for the necklace.

 

E. Harry will win on an implied agency theory.

An apparent agency can be created only on the acts of the principal—never on the basis of what the purported agent says or does.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 33-03 What are the different types of agency?
Topic: Types of Agency
 

 

“Cheap Principal.” Jason, who is very knowledgeable regarding computers, agrees to purchase computers for Nick’s business. Jason is retained for that purpose only, he is paid a set rate for the job, and Nick exercised no control over the manner in which Jason did his work. Jason purchased computers from ABC Computers without any mention of Nick. The computers worked well and were not defective in any way. Unfortunately, Nick did not pay ABC Computers on a timely basis. Jason, therefore, paid ABC Computers out of his own pocket because he wanted to be able to do business with ABC Computers in the future and also because his name was on the invoice. Jason asked Nick for reimbursement, but Nick refused. Nick claimed that if Jason had only waited, ABC Computers might have agreed to take less.

 

55.
(p. 735)
Which of the following likely represents Jason’s status in regards to his employment with Nick?

A. He was an independent contractor.

 

B. He was an employee.

 

C. He had a special status called employee-contractor, a term used to represent a contractor with some responsibilities indicating status as an employee and some responsibilities indicating otherwise.

 

D. He was an express contractor.

 

E. He was an implied contractor.

When courts are deciding whether a worker is an employee or an independent contractor, perhaps the most important consideration is employer control. If the employer has the right to substantially control the worker’s day-to-day operations, the worker is generally considered an employee. This points to Jason’s status as an independent contractor. Other considerations also indicate that he is an independent contractor such as his right to work without supervision.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 33-04 What are the different types of agency relationships?
Topic: Agency Relationships
 

 

56.
(p. 739)
Did Jason have any legal liability to ABC Computers?

A. Yes, because he made the purchase from ABC Computers without mention of Nick.

 

B. Yes, but only because office equipment is involved.

 

C. No, because his status was as an agent regardless of whether ABC Computers was aware of that fact.

 

D. Yes, but only if Nick refused to pay.

 

E. Yes, but only if Nick were declared judicially insolvent.

Suppose an agent makes an agreement with a third party on behalf of the principal and the principal fails to uphold the agreement. The third party could sue the agent for damages, but the principal has a duty to indemnify the agent for the losses the third party regains.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 33-05 What are the duties of the agent and principal?
Topic: Duties of the Agent and the Principal
 

 

57.
(p. 739)
Which of the following is true regarding any right of reimbursement Jason is due from Nick?

A. Jason is not due any reimbursement because he did not get permission from Nick before paying ABC Computers.

 

B. Jason is only due 50% of whatever he paid because he did not get permission from Nick before paying ABC Computers.

 

C. Jason is not due any reimbursement from Nick unless he can establish that Nick signed a written contract authorizing him to personally pay debts incurred.

 

D. Jason is not due any reimbursement from Nick unless Jason can establish by a preponderance of the evidence that ABC Computers would not have agreed to take a lesser amount.

 

E. Jason is entitled to reimbursement from Nick.

Suppose an agent makes an agreement with a third party on behalf of the principal and the principal fails to uphold the agreement. The third party could sue the agent for damages, but the principal has a duty to indemnify the agent for the losses the third party regains.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 33-05 What are the duties of the agent and principal?
Topic: Duties of the Agent and the Principal
 

 

“Lakeside Property.” Ronnie agreed to act as the agent of Sue in finding a piece of lakeside property for her at a good price and also in obtaining a loan for her with which to purchase the property. She agreed to pay him $500 for doing so. To assist Ronnie in his duties, Sue disclosed to him confidential information about her finances and debts. Ronnie decided that he needed help and paid Rick $300 to look for property for Sue. Rick told Ronnie about a great deal on a piece of lakeside property that Bruce had for sale. In fact, the deal was so good that Ronnie purchased the property for himself. When Sue found out about the property Ronnie bought for himself, she complained to Ronnie. He defended himself on the basis that he was not actually working for Sue when he found out about the deal. At the time, he was playing golf with Bruce. He also told Sue that he had hired Rick for $300 to assist him and that he could not be held liable because he had turned the job over to Rick. He asked Sue for reimbursement of the amount he paid Rick. Sue fired Ronnie threatening to sue him. Ronnie told Sue that he would counterclaim for the $300 owed to Rick. Only after he was fired, Ronnie disclosed to a number of parties information regarding Sue’s spending habits which he thought were excessive.

 

58.
(p. 740)
Which of the following is the most likely result if Sue sues Ronnie for purchasing the property from Bruce instead of offering it to her?

A. Sue will lose because Ronnie had the right to act in his own best interest.

 

B. Sue will lose but only because Ronnie was not involved in work duties when he heard about the property.

 

C. Sue will lose because Ronnie had validly assigned all duties to Rick.

 

D. Sue will win.

 

E. Sue will win only if she can establish that she expressly told Ronnie that he could not assign the contractual duties under the contract.

The agent has a duty to notify the principal of any offers from third parties.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 33-05 What are the duties of the agent and principal?
Topic: Duties of the Agent and the Principal
 

 

59.
(p. 741)
Which of the following is the most likely result if Ronnie sues Sue for the $300 paid to Rick?

A. Ronnie will lose.

 

B. Ronnie will win because an agent has an implied right to obtain help.

 

C. Ronnie will win only if he can establish by a preponderance of the evidence that he acted reasonably.

 

D. Ronnie will win unless Sue can establish beyond a reasonable doubt that he acted unreasonably.

 

E. Ronnie will lose only if Sue can establish that Rick is incompetent to deal in real estate.

The agent must perform the duties as specified in the agency agreement.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 33-05 What are the duties of the agent and principal?
Topic: Duties of the Agent and the Principal
 

 

60.
(p. 740)
Which of the following is the most likely result if Sue sues Ronnie for revealing confidential information?

A. Sue will lose because Ronnie was no longer her agent when he revealed the information.

 

B. Sue will lose because regardless of whether he was working for her or not, he had no legal duty to keep any information confidential.

 

C. Sue will lose unless she can establish that revealing the information caused her to suffer economic loss.

 

D. Sue will lose unless she can establish that revealing the information caused her to seek psychological counseling.

 

E. Sue will win.

The duty of loyalty also requires that the agent keep confidential any information about the principal, during the course of agency as well as after the agency relationship has been terminated.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 33-05 What are the duties of the agent and principal?
Topic: Duties of the Agent and the Principal
 

 

61.
(p. 743)
What should Sue seek if she wants possession of the lakeside lot Ronnie purchased?

A. A resolute trust

 

B. An actual trust

 

C. A constructive trust

 

D. A defined trust

 

E. An absolute trust

When an agent illegally benefits from the agency relationship, the principal may enact a constructive trust on the profits, goods, or property in question. A constructive trust is an equitable trust imposed on someone who wrongfully obtains or holds legal right to property he or she should not possess. The court then rules that the agent is merely holding the property or goods in trust for the principal, granting the principal legal right or possession.

 

AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 33-06 What are the rights and remedies of the agent and principal?
Topic: Rights and Remedies
 

 

Essay Questions

62.
(p. 728)
Discuss why agency is especially important for modern firms doing business in foreign countries.

While foreign countries offer fresh markets and eager consumers, U.S. companies often run into legal difficulties due to language barriers or lack of knowledge about local laws. To avoid such problems, many companies hire agents familiar with local laws, customs, and customers to help them function smoothly in foreign markets.

 

AACSB: Diversity
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-01 What is agency law?
Topic: Introduction to Agency Law
 

 

63.
(p. 729)
When must agency agreements be in writing?

First, agency agreements need to be in writing whenever an agreement is reached for an agent to enter into a contract that the statute of frauds requires to be in writing. Second, whenever an agent is given power of attorney, the agreement must be in writing.

 

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-02 How is an agency relationship created?
Topic: Creation of the Agency Relationship
 

 

64.
(p. 733-734)
Set forth the requirements for a finding of agency by ratification and also the requirements needed for ratification to be effective.

The requirements for agency by ratification are as follows:

1. An individual must misrepresent himself or herself as an agent for another party.
2. The principal accepts or ratifies the unauthorized act.

For ratification to be effective, the following requirements must be met:

1. The principal must have complete knowledge of all material facts regarding the contract.
2. The principal must ratify the entirety of the agent’s act. The principal cannot accept certain parts of the agent’s act and reject others.

 

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 33-03 What are the different types of agency?
Topic: Types of Agency
 

 

65.
(p. 735-736)
Rita, a lawyer, hired Sam to do general clerical work for her. She maintained control over his work, gave him day-to-day instructions regarding his duties, paid him on an hourly basis, and furnished all equipment he needed. Rita for tax purposes claimed Sam as an independent contractor. She was audited by the IRS who took the position that Sam was an employee. Is Sam an independent contractor, why or why not, and what is the effect of a finding of employee or independent contractor as far as the IRS is concerned?

Sam would be considered an employee primarily because Rita controlled his daily work activities. Other factors indicating his status as an employee are his pay, the furnishing of the equipment, and the fact that he acted in his duties as a regular part of the business of Rita. When the IRS determines an independent contractor is really an employee, the employer becomes liable for all applicable taxes, such as Social Security and unemployment taxes.

 

AACSB: Reflective Thinking
Blooms: Evaluate
Difficulty: 3 Hard
Learning Objective: 33-06 What are the rights and remedies of the agent and principal?
Topic: Agency Relationships
 

 

66.
(p. 742)
According to the text, what is required by the duty of accounting an agent owes to a principal?

Under the duty of accounting, the agent must keep an accurate account of the transactions of money and property made on behalf of the principal. If the principal asks to see this accounting, the agent has a duty to provide it. The agent must also keep separate accounts for the principal’s funds and the agent’s funds and not allow them to mix.

 

AACSB: Reflective Thinking
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 33-05 What are the duties of the agent and principal?
Topic: Duties of the Agent and the Principal