BMGT 380 Final Exam
Section I. Multiple Choice:
1. Kevin is the sole proprietor of Triathletics, an athletic shoe business. Taxes for Triathletics’s business income are paid by whom?
A. Kevin as the sole owner.
B. If Kevin acquired a Small Business Administration loan to start his business, the business taxes are deferred for 5 years.
C. No one; sole proprietorships have no business taxes.
D. The business entity of Triathletics, not Kevin personally.
2. Bob’s Bait Shop sells bait and other fishing goods in the state of Delaware. Recently, Delaware passed a law prohibiting, until further notice, all businesses in Delaware from selling rockfish for bait. Delaware claims this law is necessary because it was discovered that rockfish in several surrounding states are infected with bacteria. Is this law constitutional?
A. Yes, it is constitutional under Delaware’s police power and authority to protect the health and safety of citizens.
B. Yes, it is constitutional as the sale of rockfish affects intrastate commerce and Delaware can regulate intrastate commerce for any reason.
C. No, it is unconstitutional as it violates the constitutional rights of private businesses to be free of state regulation and restrictions.
D. No, it is unconstitutional as the law imposes an undue burden on interstate commerce.
3. Larry and Jane orally agreed that Larry would sell Jane a house for $600,000. Jane paid Larry $600,000; Larry gave the deed to the house to Jane. Jane moved into the house. About 6 weeks later, Larry tried to retake possession of the house claiming the contract for the sale was invalid because it was oral, not written. Larry sued Jane to invalidate the contract and retake the house.
The sales contract between Larry and Jane is:
A. Valid and enforceable; the contract was fully executed so Larry cannot rescind the contract.
B. Valid and enforceable; the contract should have been written as it was a sale of real estate, but because Jane paid full price for the house, Larry cannot reclaim the house.
C. Invalid; all real estate sales contracts must be written according to the Statute of Frauds.
D. None of the above.
4. Cindy and Joel, a married couple who are residents of Utah, were hiking in Nevada when a dog being walked by its owner, Walter, bit Cindy causing injury to her leg. Joel wants to sue Walter, a resident of Colorado. Which of the following best describes Joel’s legal right to sue in this case.
A. Joel has standing to sue Walter, but only in federal court since Colorado, Nevada and Utah state courts all meet the minimum contacts test for jurisdiction.
B. Joel has standing to sue Walter, but only in Nevada because neither Colorado nor Utah meet the minimum contacts test for jurisdiction.
C. Joel does not have standing to sue Walter because Walter is not a resident of Nevada where the injury occurred.
D. Joel does not have standing to sue Walter in Utah, Nevada, or Colorado.
5. Josie hired Zoe, who is 15 years old, to buy 5 grand pianos on Josie’s behalf.
What is the legal relationship between Josie and Zoe?
A. This is a valid agency relationship; although Zoe is a minor Josie has the option of disaffirming any contracts Zoe enters on Josie’s behalf.
B. This is a valid agency relationship; although Zoe is a minor Josie is bound by authorized contracts Zoe enters on Josie’s behalf.
C. This is a valid agency relationship; although Zoe is a minor, Zoe cannot receive any payment from Josie under the terms of the agency because Zoe is a minor.
D. This is an invalid agency relationship because Zoe is a minor.
6. Coyle Construction Company blasted a hole for a new building’s foundation. The blasting went according to plan, and no problems or damage to the surrounding area occurred as a result. However, about an hour after the blasting for the foundation, an extra box of dynamite, sitting on the construction site, spontaneously exploded and damaged a house next to the construction site.
If the owner of the house sues Coyle, what will be the likely result?
A. Not liable under strict liability because Coyle did not actually ignite the dynamite.
B. Not liable under any legal doctrine as it was not foreseeable that the dynamite would spontaneously explode.
C. Liable under strict liability because dynamite is abnormally dangerous.
D. Liable under negligence because Coyle was careless in leaving the dynamite on the construction site and it is foreseeable that dynamite could spontaneously explode.
7. June 1, Sonya offered to sell her bike to Sandy for $100. Sandy replied, “I’m interested. I’ll think it over and let you know by June 5 if I want to buy the bike.” On June 3, Sonya offered to sell her bike to Jackson for $100. Jackson immediately agreed and stated: “I will buy your bike for $100, and pay you June 4 in cash when I pick up the bike.
On June 3, what best describes Sonya’s contract agreement(s)?
A. Sonya has not formed an enforceable contract with Jackson because the agreement was oral and Jackson has not yet paid for the bike.
B. By forming an agreement with Jackson, Sonya breached her contract with Sandy because she did not effectively revoke her offer to Sandy.
C. Sonya has formed contracts with both Jackson and Sandy because Sonya did not effectively revoke her offer to Sandy and created an enforceable agreement with Jackson.
D. Sonya and Jackson have formed a valid, enforceable contract.
8. Martha took her laundry to a laundry mat that washes and dries laundry for customers for a fee. Customers drop off their laundry and are expected to pay when they pick up the laundry after washing and drying. Prices for the service are posted on a sign in the laundry mat. Martha returned to pick up her laundry but refused to pay for the service. A court would most likely conclude that:
A. Martha’s actions implied that she intended to pay for the service; she is legally bound to pay.
B. Martha’s actions implied that she intended to pay for the service, but she is not legally bound to pay as there was no written agreement with the laundry mat.
C. Martha is not bound to pay for the service because the she was not told the specific price for the service.
D. If there was no clearly communicated offer and acceptance, there was no enforceable contract, so Martha is not bound to pay for the service.
9. All employees of Reinhart Construction Company sign a contract that contains a clause stating that if a dispute arises, employees must submit to binding arbitration to resolve the dispute. Rachel had been working for Reinhart for 3 years when a dispute arose regarding her promotion and salary. Rather than submit to arbitration, Rachel filed a lawsuit against Reinhart. Most likely the court will:
A. Hear the lawsuit because Rachel cannot be compelled to submit to arbitration; she is constitutionally entitled to a jury trial if she requests a trial.
B. Conduct a bench trial, then order a remedy without compelling Rachel to submit to arbitration or to a jury trial.
C. Hear the lawsuit in a trial, then compel Rachel to submit to arbitration, if Rachel is not satisfied with the trial decision.
D. Compel Rachel to submit to arbitration to resolve the dispute.
10. James signed a 3-year contract to play basketball for the Missiles for $200,000 per game. During the second year of his contract, and just before a big game, James demanded that the team owner pay him an additional $10,000 per game under his 3-year contract, starting with the current game. The owner reluctantly agreed to the new contract terms because James was the team’s leading scorer. At the end of the season, James demanded the additional $10,000 per game; the owner refused to pay. What best describes the new contract between James and the owner?
A. It is unenforceable because both parties did not give new legal consideration for the new contract.
B. It is unenforceable because the owner agreed to James’ contract terms under economic duress.
C. It is enforceable because both parties gave legal consideration for the new contract.
D. It is enforceable because under the UCC rules, all contract modifications for contracts over $500 are valid if the parties consent.
11. While driving through Montana on her way to her home in Nebraska, Marnie accidentally lost control of her car and drove it through a window into a store owned by Carl. Carl sued Marnie in a Montana court for damages to his store.
Will the Montana court likely be able to exercise jurisdiction over Marnie?
A. no, because Montana has no personal jurisdiction over Marnie and cannot exercise its long arm statute in cases involving automobile accidents.
B. yes, because Montana can assert personal jurisdiction over Marnie under the minimum contacts test.
C. no, because Montana has no personal jurisdiction over Marnie and cannot justify minimum contacts in this case.
D. yes, Montana can exercise personal jurisdiction in this case because state courts have personal jurisdiction over the parties in every diversity of citizenship case.
12. Which of the following statements made by a salesperson represents an express warranty?
A. “The gas mileage on this car is excellent; it should get about 28 miles per gallon on the highway.”
B. “In my opinion, this car is in flawless mechanical condition.”
C. “This car should run for at least 250,000 miles.”
D. “This car is brand new, not pre-owned.”
13. Li bought a new electric hand hair dryer. While standing the shower, she grabbed the hair dryer and started to dry her hair. The hair dryer began throwing sparks and Li received burns on her scalp, hands and arms from electric shock. Li was aware of the warning on the dryer to not use it in water. Nevertheless, Li believed the warnings should be more conspicuous on the dryer and wants to sue the dryer manufacturer. What is the likely result?
A. Li will win a product liability lawsuit as it is foreseeable that consumers will ignore warnings and use hair dryers while standing in water.
B. Li will win a product liability lawsuit for defective design as the dryer should not operate while the user is standing in water.
C. Li will lose a product liability lawsuit as Li was aware of the warning on the dryer but chose to use it in water at her own risk.
D. Li will lose a product liability lawsuit unless she can prove the retailer was negligent in selling a hair dryer that can cause electric shock when the user is standing in water.
14. Finnegan’s Drugstore sent a written offer to buy 1,000 bottles of shampoo for a total of $1,000 from Fabulous Hair Company. Both parties are merchants. Fabulous can accept the offer by:
A. Promising to ship the shampoo.
B. Promptly shipping the shampoo.
C. Accepting the offer on Fabulous’s own written standard form contract.
E. All the above could be valid acceptance.
15. Uncle Dan promised to buy his niece, Julie, a new car so Julie sold her old car. Uncle Dan now refuses to buy Julie the car. Julie has a job that requires her to have a car to get to work. If Julie sues Uncle Dan to enforce the promise, the likely result is that the promise will:
A. Not be enforced as Julie was not unjustly enriched simply because she did not receive the car.
B. Not be enforced as Uncle Dan’s promise was merely a gift to Julie.
C. Be enforced because the car is a necessity for Julie and all contracts for necessities are binding and enforceable for all parties even if contract formation is flawed.
D. Be enforced under promissory estoppel because Julie reasonably relied on Uncle Dan’s promise, to her detriment.
16. Which of the following activities constitute a sales contract?
A. Purchasing a car from a car dealership.
B. Ordering groceries to be delivered to your home.
C. Purchasing insurance policies from an insurance agent.
D. Selling books to customers in a bookstore.
E. All the above.
17. There are many street vendors in the city of Washburn who park their carts on sidewalks or near the curb in the streets. These vendors are popular with shoppers and often cause pedestrian and street traffic congestion. Washburn enacted a local law requiring street vendors to operate only within certain commercial areas of the city, only on sidewalks, and only within 25 feet of any bricks and mortar business entrance.
The street vendors sued Washburn claiming the restrictions were a violation of their equal protection rights as other businesses in the city are not subject to the same restrictions.
How would you classify the law?
A. Unconstitutional as privately-owned vendors, unlike public businesses, have a constitutional right to conduct business in any public area of their choice.
B. Unconstitutional as the law unjustifiably discriminates against street vendors as compared to other business owners and thus, violates the vendors’ equal protection rights.
C. Constitutional as the city can justify enacting the law to protect citizens.
D. Constitutional as street vendors are private businesses, and thus, not protected by the equal protection clause of the 14th Amendment.
18. Jonathan became a partner in International Consulting Associates, an existing general partnership in May 2016. In October 2016, a partnership debt incurred in October 2015 came due. Jonathan is:
A. Only liable for the debt up to the amount of his capital contribution to the partnership.
B. Only liable for the debt up to 50% of the total debt.
C. Personally liable for the full extent of the debt if the other partners do not pay.
D. Not liable for the debt because the debt was incurred prior to his joining the partnership.
19. Mediation might be more reasonable and appropriate than a trial in which of the following situations?
A. A lawsuit challenging the constitutionality of a local ordinance.
B. A dispute between neighbors over a property boundary.
C. An alleged theft of patio furniture from the patio of a house.
D. None of the above are appropriate for mediation.
20. Baldwin and Madison agreed that Baldwin would sell Madison his pharmacy, including the land on which the business was situated, for $850,000. Both parties knew at the time the contract was formed that the pharmacy and land together were worth $1,200,000. Is this a valid, enforceable contract?
A. No, because $850,000 is not valid consideration for a business and land worth $1,200,000.
B. Yes, provided the contract was in writing, in accordance with the Statute of Frauds and the parties freely consented.
C. No, because Baldwin has no pre-existing legal duty to sell his business.
D. Yes, provided the contract was in accordance with state statutory law that permits businesses and real estate sales below market value.
Section II. Essay: 6 questions/60 points total
Use the answer sheet at the end of the exam. Number each answer. DO NOT recopy questions.
Answer each question in complete paragraphs; do not list or answer in phrases (points will be deducted for doing so). None of these questions can be adequately/comprehensively answered in just a paragraph, so be comprehensive, in depth in your answers, but be careful to not include irrelevant information.
Points will be deducted for answers that are not well justified, not sufficiently comprehensive.
Use APA in text citations, as appropriate but please do not use direct quotes. Use only classroom notes/comment and assigned reading or watching materials as resources, which is all you need to complete the exam.
DO NOT use any outside, internet resources as they are often inaccurate.
Answer all parts of each question. Be sure to directly answer the question(s) asked.
1. Compare and contrast the differences between a LLC and a sole proprietorship.
2. Helena, Adam and Rusty formed a partnership to operate a computer store. One of Adam’s jobs is to make deliveries of computers using the partnership truck. In one such delivery, Adam negligently ran a stop sign, striking a car driven by Pauline causing damage to the car and injury to Pauline.
A. Discuss the personal liability of Helena, Adam, and Rusty for the accident and injury to Pauline.
B. Discuss the liability of the partnership entity for the accident and injury to Pauline.
3. Joann was on vacation in Vermont. She had reservations for herself and her car on an auto ferry crossing Lake Vermont. Because she had an electric scooter mounted upright on a roof rack on her car, she had to use a special lane on the ferry that was reserved for motor homes, vans and other high height vehicles.
Upon loading the ferry, these high height vehicles were parked in Lane C, one of six parallel lanes on the auto deck of the ferry. When the drivers returned to their vehicles upon crossing the lake, they were directed to drive off the ferry by ferry employees. The driver of a pickup parked immediately in front of Joann’s car on the ferry had not returned by the time all the cars from other lanes had exited. Joann was left waiting for the pickup to be moved so she could drive her car and scooter off the ferry.
When the pickup owner had not returned after 15 minutes, a ferry employee motioned Joann to turn left into an adjacent lane to exit the ferry rather than continue to wait for the pickup to be moved. Joann followed the employee’s hand signals and moved her car out of Lane C and into the adjacent left lane. Unfortunately, her scooter on top of her car struck a low clearance pipe in the adjacent lane and was damaged beyond repair.
Joann wants to sue the ferry company. Discuss the legal claim(s) for which she could sue the ferry company, and the likely outcome of such a lawsuit. Explain reasoning in detail.
4. Following a heavy rain storm, Beth’s Bakery was flooded with 2 inches of water. Employees mopped and dried the floor of the bakery as much as possible, but there were still water spots throughout the bakery, and a 1 inch deep pool of water located about 2 feet inside the entrance.
Beth wanted to open the bakery on time, so she posted a sign outside the bakery warning customers of wet floors inside the entrance. Marvin entered the bakery, slipped on the water inside the entrance and broke both wrists.
Discuss whether Beth’s Bakery is liable to Marvin for his injuries and why or why not.
If Marvin sues Beth’s Bakery for his injuries, will he likely win the lawsuit?
5. Paul was participating in a charity bicycle marathon, sponsored by Volunteers in Action, a local philanthropic organization. During the race, Paul crashed his bicycle into another biker, fell and broke his arm. The other biker was not injured.
Would Paul have a valid legal claim to sue Volunteers in Action to recover for his injury? If yes, what would be the legal claim for which he could sue?
If no, discuss why Paul would not have a valid legal claim against Volunteers in Action.
6. Jeff is a new member of Wellness Fitness Center, Inc. (Wellness). He signed a contract for the membership. The contract stated, among other things, an exculpatory clause that Wellness…
“shall not be liable for any claim, demand, cause of action of any kind whatsoever for, or because death, personal injury, property damage or loss of any kind resulting from or related to Member’s use of facilities or participation in any sport, exercise or activity within the club premises…”
While working out at Wellness, Jeff was walking slowly on a stair climber machine that suddenly and spontaneously started moving at top speed. Jeff was thrown from the stair climber and broke his leg. Jeff had been using the stair climber properly and according to instructions for use posted on the stair climber.
A. Is the exculpatory clause in the contract valid or invalid in Jeff’s case? Why or why not?
B. Possible product liability claim(s) for which Jeff could sue Wellness, and why product liability claims might be applicable to this case.
C. Possible ordinary (non-product liability) negligence claims for which Jeff could sue Wellness and why a negligence claim might be applicable to this case.
1-2 paragraphs each part