Q&A Hero

Q: A requirement that a greater than majority of shares constitutes a quorum of the vote of the shareholders is known as the ________ requirement.

Q: A release does not require consideration to be legally binding.

Q: An accord and satisfaction requires that the amount of a debt be certain.

Q: A system in which a shareholder can accumulate all of his or her votes and vote them all for one candidate or split them among several candidates is known as ________.

Q: An illusory promise is a promise that is enforceable without consideration.

Q: A shareholder's authorization of another person to vote the shareholder's shares at the shareholders' meetings in the event of the shareholder's absence is called a(n) ________.

Q: A promise to pay for an act that has already occurred is enforceable because the event is certain.

Q: The duty of care requires corporate directors and officers to use care and diligence when acting on behalf of the corporation.

Q: A director or an officer who breaches the duty of care is personally liable to the corporation and its shareholders for any damages caused by the breach.

Q: Fiduciary duties of directors and officers of a corporation include the duty of loyalty and the duty of care.

Q: Rescission is the substitution of one party to a contract for a third party, who agrees to assume the contractual duties.

Q: Unforeseen difficulties that justify a demand for additional compensa­tion in­clude risks ordinarily assumed in business.

Q: Usurping a corporate opportunity is a breach of the duty of loyalty that can only be committed by a shareholder.

Q: A promise to do something that one has a prior legal duty to do is not consideration.

Q: In pursuing a joint venture, many joint venturers form a corporation to operate the joint venture. This is called a(n) ________.

Q: Normally, a court of law will not question the adequacy of consideration.

Q: If a joint venture is operated as a partnership, then each joint venturer is considered a partner of the joint venture.

Q: Inadequate consideration may indicate undue influence.

Q: Joint venturers do not have equal rights to manage a joint venture.

Q: A ________ is an arrangement in which two or more business entities combine their resources to pursue a single project or transaction. A) joint venture B) general partnership C) sole proprietorship D) franchise

Q: A bargained-for exchange is one of the elements of consideration.

Q: To be legally sufficient, consideration must include something of economic value.

Q: A franchise is an example of a license.

Q: Omega, Inc., sells business application softwareaccounting and book­keeping programs, blank business forms, inventory control functions, and so onin different combinations, in different packages, at different prices. Each package includes a shrink-wrap agreement that limits warranties and remedies. Precision Engineering Associates (PEA) buys an Omega package and uses the product. Later, PEA files a suit against Omega, claiming that the software is flawed and that the flaws caused PEA to suffer business losses. PEA asks for relief that exceeds the limits in the shrink-wrap agreement. What are shrink-wrap agreements? Are these agreements al­ways enforced? Under what circumstances is a court likely to enforce this agree­ment?

Q: Creative Solutions Corporation (CSC) agrees to sell software to Drew from CSC's Web site. To complete the deal, Drew clicks on a button that, with reference to certain terms, states, "I agree." What is this sort of agreement called? Do the parties have a binding, enforceable contract that includes the terms? Explain.

Q: Licensing refers to a business arrangement that occurs when the owner of intellectual property contracts to permit another party to use the intellectual property.

Q: Myra owns a house, which she advertises for sale for $400,000. On May 1, Nico offers Myra $380,000 for the house. On May 5, Myra has delivered to Nico at his office a form that includes additional terms but does not state a price. At 9 a.m. on May 6, Nico signs the form and gives it to Odell, his administrative assistant, with instructions to mail it. At 10 a.m., Myra calls to tell Nico that the deal is off. The next day, Odell mails the signed form to Myra. When she refuses to sell the house to Nico, he files a suit against her, alleging breach of contract. Myra claims that there was no contract. What are arguments supporting each party's position? What is the court likely to rule? Explain.

Q: Intrepid Creations is a product design institute that provides educational courses in package design. It manages to acquire the right to use simulation software from Marco Software for a payment of $2,000 a year. There is no clause of expiration on this arrangement and the right to access the software is renewed annually. Which of the following business arrangements does the aforementioned scenario indicate? A) a licensing arrangement B) a general partnership C) a limited partnership D) a franchise

Q: YouKnow Inc. is a corporation that creates educational resources. It grants Middlewest Public School the right to use its online encyclopedias for three years in return for a fee. In this arrangement, YouKnow Inc. is the ________. A) donor B) trustee C) grantor D) licensor

Q: On May 1, Brand Name Industries, Inc. (BNI), sent Carol a letter, via overnight delivery, offering to employ her to audit BNI's financial state­ments for the current year for $1,000. In the letter, BNI stated that Carol had ten days to accept. On May 5, Carol sent BNI a fax that stated, "The price for the audit seems too low. Would you consider paying $1,200?" BNI received the fax. The next day, Dan offered to conduct the audit for $800. On learning of Dan's offer, Carol immediately e-mailed BNI, agree­ing to do the work for $1,000. BNI received this e-mail on May 7. Explain why BNI and Carol do, or do not, have a contract.

Q: The party to whom a license is granted is known as the ________. A) licensee B) licensor C) grantee D) grantor

Q: Office Application Corporation (OAC) sends an e-record to Precision Design, Inc. Under the UETA, the record will be considered received when a. it enters Precision's processing system in a readable form. b. a Precision representative is aware of its receipt. c. it is midway between the parties' processing systems. d. passes out of OAC's control even if it is not in a readable form.

Q: The party who grants a license is known as the ________. A) licensee B) licensor C) grantee D) grantor

Q: Beyond-the-Sea Corporation and Homeport Company make a deal for Homeport's products, via e-records. Under the UETA, an e-record is considered sent when it a. is signed and encrypted, and will be sent without changes. b. is stored in the sender's back-up system. c. is composed on the sender's computer. d. leaves the sender's control.

Q: ________ is a business arrangement that occurs when the owner of intellectual property contracts to permit another party to use the intellectual property. A) A general partnership B) Leasing C) Licensing D) A joint venture

Q: Somethin"-in-the-Oven Corporation and Cookin" Good, Inc., transact a deal under the UETA. Other state law applies to a dispute between the parties relating to a. attributing a party's e-signature. b. the formation of the parties' contract. c. the sending and receiving of e-records. d. the legal effect of the parties' e-signatures and e-records.

Q: Explain the extent of liability of a franchisor and a franchisee with an example.

Q: On behalf of Bay Oyster Company, Celia types her name at the bottom of an e-mail purchase order and submits the order to Deepwater Parts Company. Under the UETA, Celia's typed name qualifies as a. her "signature." b. a cybernotary. c. a partnering agreement. d. nothing.

Q: What are the steps a prospective franchisee must take in order to acquire a franchise? What properties are generally licensed by franchisors?

Q: Shelby offers to make digital copies of Relay Company's business conference videotapes, CDs, DVDs, and other media for $500. Under the mailbox rule and the Uniform Electronic Transactions Act (UETA), Relay's acceptance by e-mail will be considered effective when a. received. b. sent. c. followed up by a confirmation letter sent by regular mail. d. composed on a Relay computer.

Q: Explain the four basic types of franchises.

Q: Global Shipping Corporation enters into contracts with distributors and other buyers in e-commerce and in traditional commerce. The UETA applies, if at all, only to those transactions in which the parties agree to use a. electronic means. b. paper documents. c. updates and cross-checks to orally verify any e-terms. d. notarized documents.

Q: A franchisee acquires a(n) ________ from a franchisor that allows the franchisee to use the franchisor's trademarks, service marks, trade names, and other intellectual property in the distribution of goods, services, software, and digital information.

Q: Michelle gives out a business card with an e-mail address on it. According to the comments that accompany the UETA, it may be reasonable to infer that Michelle has consented to a. transact business electronically. b. submit to the jurisdiction of any selected forum. c. accept and respond to any correspondence sent to that address. d. nothing.

Q: Howie enters into a contract with Ida over the Internet to buy soybeans as a hedge against falling prices in corn. Neither party prints out a hard copy. Under the Electronic Signatures in Global and National Commerce Act (E-SIGN Act), this contract can a. be "denied legal effect" if it falls under the UCC's Statute of Frauds. b. be "denied legal effect" unless a hard copy is printed. c. be "denied legal effect" until it is executed. d. not be "denied legal effect" because it is only in electronic form.

Q: In an area franchise, the franchisor authorizes the franchisee to negotiate and sell franchises on behalf of the franchisor. The area franchisee is called a(n) ________.

Q: Lightspeed Inc. makes computers, each of which is packaged with a shrink-wrap agreement. Milo buys a Lightspeed laptop. The terms of the shrink-wrap agreement are most likely enforceable if a. Milo buys the computer directly from Lightspeed. b. Milo uses the computer after reading the terms. c. Milo pays for the computer before reading the terms. d. the terms concern warranties.

Q: A type of franchising where the franchisor licenses the franchisee to make and sell its products or services to the public from a retail outlet serving an exclusive geographical territory is known as a(n)________ franchise.

Q: In a(n) ________ franchise, the franchisor provides a secret formula or the like to the franchisee. The franchisee then manufactures the product at its own location and distributes it to retail dealers.

Q: Mica buys "Nature," a movie, through Open View, an online entertainment vendor. Before completing the purchase and downloading "Nature," Mica is asked to review a warning not to make and sell a copy of it but is not required to click "I agree." This warning is a. a browse-wrap term. b. a click-on agreement. c. a shrink-wrap agreement. d. none of the choices.

Q: Ford Motor Company manufactures automobiles and franchises independently owned automobile dealers (franchisees) to sell them to the public. This is an example of a(n) ________ franchise.

Q: Deb buys a song through eSongs, an online music vendor. Before completing the purchase and downloading the song, Deb must agree to a provision not to make and sell copies of the song. This provision is a. a browse-wrap term. b. a click-on agreement. c. a shrink-wrap agreement. d. a choice-of-law clause.

Q: Unless otherwise stated, the franchisor is liable for the torts of its franchisee.

Q: Flem, a user of GameCenter.com's Web site, can download gaming software for free if he first clicks on "I accept" after viewing certain terms. This is a. a contract that does not include the terms. b. a contract that includes the terms. c. not a contract but the terms are enforceable. d. unenforceable.

Q: A franchisor deals with the franchisee as an independent contractor.

Q: Magic Math Corporation makes business accounting software, which is packaged with a shrink-wrap agreement. National Distribution Company distributes the software to retailers, including an Office Stuff store, where Peg buys a package of it. The parties to the shrink-wrap agreement are a. Magic Math and National Distribution only. b. Magic Math and Peg only. c. Magic Math, National Distribution, Office Stuff, and Peg. d. Office Stuff and Peg only.

Q: If a franchise is properly organized and operated, the franchisor and franchisee are separate legal entities.

Q: Deepwater Mining Corporation offers to sell East China Refining, Inc., a certain quantity of unrefined oil. If East China sends an acceptance via Deepwater's authorized mode of communication, it will be effective when it is a. in transit. b. received. c. sent. d. written.

Q: A distributorship franchisee is called a subfranchisor.

Q: Retail Investment Company offers to sell a certain mall to Shopping Stores, Inc., if it accepts before 10 a.m. Monday. A contract is formed if Shopping Stores' acceptance is received a. any time on Monday. b. before 10 a.m. Monday. c. before 11 a.m. Monday. d. within twenty-four hours of 10 a.m. Monday.

Q: In an area franchise, the franchisor authorizes the franchisee to negotiate and sell franchises on behalf of the franchisor.

Q: Eve tells Finlay that she will pay him $50 if he unloads her truck. Finlay's acceptance is complete a. as soon as Finlay says he will unload the truck. b. once Finlay starts to unload the truck. c. only after Finlay unloads the truck. d. when Finlay hears Eve's offer.

Q: In a processing plant franchise, the franchisor licenses the franchisee to make and sell its products or services to the public from a retail outlet serving an exclusive geographical territory.

Q: A franchisee is established when parties of a general partnership conduct business outside the state of their incorporation.

Q: State Bank offers to lend money to Rodeo Promotions, Inc., at 15 percent interest. Before Rodeo accepts, a statute is enacted prohibiting loans at interest rates greater than 12 percent. Rodeo and the bank have a. have a contract for a loan at 15 percent interest. b. have a contract for a loan at 12 percent interest. c. have a contract for a loan at 0 percent interest. d. no contract for a loan.

Q: Quik Fix-It, Inc., offers Pam a job as a plumber. No time for acceptance is specified in the offer. The offer will terminate a. after a reasonable period of time. b. after a typical work week (five business days). c. after a usual month (thirty calendar days). d. never.

Q: Ubiquitous Enterprises is a franchisee of the HotPan chain of restaurants. One afternoon Linda, an employee of Ubiquitous Enterprises, is mopping the floor. Gary, a customer who enters the restaurant, is talking on his cell phone and does not notice Linda mopping the floor. He slips on the wet floor while walking to the counter and is injured. Which of the following statements is accurate regarding liability for Gary's injury? A) HotPan is liable for not providing a "Caution: Wet Floor!" sign. B) Ubiquitous Enterprises is liable for not having its own "Caution" sign. C) Both HotPan and Ubiquitous Enterprises are jointly and severally liable. D) Neither HotPan nor Ubiquitous Enterprises is liable.

Q: Bill offers to sell his Consumer Service Center business to Dina for $100,000. Dina replies, "The price is too high. I will buy it for $90,000." Dina has a. accepted the offer. b. made a counteroffer without rejecting the offer. c. rejected the offer and made a counteroffer. d. rejected the offer without making a counteroffer.

Q: Which of the following is true of the liabilities of a franchisor and a franchisee? A) The franchisor is not liable for any tort arising out of the franchise. B) Both franchisee and franchisor are jointly liable for torts committed by either. C) Franchisees are only liable on their own contracts. D) Franchisors are always liable for the torts of the franchisees.

Q: Interstate Coffee Brokers, Inc. (ICBI), offers to sell Java Roasters, Inc., fifty bags of coffee beans. Java rejects the offer. The offer is a. terminated. b. valid for a reasonable time to give Java a "second chance." c. valid for the period of time prescribed by a state statute. d. valid until ICBI revokes the offer.

Q: Which of the following documents sets forth the terms and conditions of a franchise? A) the FTC disclosure document B) the franchise agreement C) the articles of incorporation D) the articles of organization

Q: Sunshine Cell Phone Company offers to buy a laser printer, with a case of paper and an extra car­tridge, from Office Products, Inc. (OPI), for $200. Paul, OPI's representative, says, "Okay, but no paper and no extra car­tridge." Paul has a. accepted the offer. b. made a counteroffer without rejecting the offer. c. rejected the offer and made a counteroffer. d. rejected the offer without making a counteroffer.

Q: Which of the following is an instance of an area franchise? A) McDonald's franchises an independently owned restaurant to make and sell its products in Pennsylvania. B) Pepsi Co. ships Pepsi in the form of a drink concentrate that is prepared and bottled locally in Canada. C) Nokia licenses a retail dealer to retail its products in Jacksonville. D) Burger King wants to start operating in Mexico and hires a Mexican subfranchisor to sell the franchise on behalf of Burger King.

Q: Business Properties, Inc. (BPI), offers to sell a warehouse to Corporate Investments. Corporate says that it will pay BPI $100 to hold the offer open for three business days. This a. creates an illegal contract by adding a clause to BPI's offer. b. makes the offer irrevocable for three days if BPI accepts. c. negates BPI's offer by changing the price term. d. voids BPI's offer by extending the time term.

Q: The area franchisee is also called a ________. A) joint venturer B) limited partner C) subfranchisor D) strategic partner

Q: Quick Transport, Inc., offers to sell a truckload of palettes to Rapid Delivery Company. Before accepting the offer, Rapid learns that the palettes have been sold to Speedy Trucking Corporation. Quick is a. liable to Rapid for breach of contract. b. liable to Speedy for breach of contract. c. not liable, because the sale revoked the offer to Rapid. d. not liable, if Quick offers substitute goods to Rapid.

Q: In a(n) ________ franchise, the franchisor authorizes the franchisee to negotiate and sell franchises on behalf of the franchisor. A) chain-style B) area C) distributorship D) processing plant

Q: Brick Products, Inc., files a suit against City Trucking Service for breach of contract, based on what Brick claims was City's offer. For a court to de­termine if a contract has been breached, under the common law, the offer must include terms that are a. exactly precise. b. reasonably definite. c. unequivocally approximate. d. vague or uncertain.

Q: Rio-Werner Corporation owns Rio's Sandwiches, a fast-food restaurant in New Jersey. It wants to operate in five cities on the west coast by means of franchisees that make and sell all menu items from Rio's Sandwiches. Which of the following franchises would best suit the Rio-Werner Corporation's franchise plan? A) processing plant B) area C) distributorship D) chain-style

Q: Elmo advertises a reward for the return of his lost dog. Floyd, who does not know of the reward, finds and returns the dog. Floyd cannot recover the re­ward because he a. did not confer a benefit on Elmo by returning the dog. b. did not know of the reward when he found and returned the dog. c. does not need the money. d. returned the dog.