Q&A Hero

Q: Peanut Allergy. Kitty, who had a love of baking, decided to open her own bakery. She decided that she did not need and did not want to pay for a lawyer to advise her on different forms of ownership. Unfortunately, Kitty had not paid attention in business law class. She proceeded, with little thought, to simply open her business called Kitty's Baking. Bobby came in to order some cookies for his girlfriend, Bitsy, who was allergic to peanuts. Bobby told Kitty that he needed some cookies for Bitsy but that Bitsy had allergies to peanuts. Kitty told him not to worry because she would make up a special batch just for him. Kitty had hired some assistants because she was so busy. She told an assistant, Cathy, to make up several batches of cookies for different customers including Bobby and to leave out the peanuts in Bobby's order. Cathy, however, forgot the instruction and proceeded to make Bobby's cookies with crushed peanuts. Bobby picked up the cookies and gave one to Bitsy in the car while they were on the way to the movie in Bobby's new car. Bitsy became violently ill, vomited in Bobby's car, and had to have her stomach pumped. Bobby and Bitsy sought recovery from Kitty who told them that Bitsy's doctor bill and Bobby's car cleaning bill were business debts, that the business was new and not making any money at the moment, and that she had no personal liability. Following the incident involving Bobby and Bitsy, Kitty discussed with her parents her problems with the bakery. Kitty's parents would like to invest in her business and share in any profits, but they do not want to share in the management responsibilities. Which of the following is true regarding Kitty's statement that she had no personal liability? A. She was correct. B. She was correct only if she can establish that she has paid all her business taxes on time. C. She was correct only if she can establish that she has at least 5 employees. D. She was incorrect. E. She was incorrect unless she signed an agreement with a financial institution in order to get a loan for the business and agreed in the document that she would not accept personal liability for any losses.

Q: Peanut Allergy. Kitty, who had a love of baking, decided to open her own bakery. She decided that she did not need and did not want to pay for a lawyer to advise her on different forms of ownership. Unfortunately, Kitty had not paid attention in business law class. She proceeded, with little thought, to simply open her business called Kitty's Baking. Bobby came in to order some cookies for his girlfriend, Bitsy, who was allergic to peanuts. Bobby told Kitty that he needed some cookies for Bitsy but that Bitsy had allergies to peanuts. Kitty told him not to worry because she would make up a special batch just for him. Kitty had hired some assistants because she was so busy. She told an assistant, Cathy, to make up several batches of cookies for different customers including Bobby and to leave out the peanuts in Bobby's order. Cathy, however, forgot the instruction and proceeded to make Bobby's cookies with crushed peanuts. Bobby picked up the cookies and gave one to Bitsy in the car while they were on the way to the movie in Bobby's new car. Bitsy became violently ill, vomited in Bobby's car, and had to have her stomach pumped. Bobby and Bitsy sought recovery from Kitty who told them that Bitsy's doctor bill and Bobby's car cleaning bill were business debts, that the business was new and not making any money at the moment, and that she had no personal liability. Following the incident involving Bobby and Bitsy, Kitty discussed with her parents her problems with the bakery. Kitty's parents would like to invest in her business and share in any profits, but they do not want to share in the management responsibilities. Which of the following would be a form of business organization for Kitty and her parents such that her parents could invest but not participate in management? A. General partnership B. Limited partnership C. Managed partnership D. Combined partnership E. Family-based partnership

Q: Which of the following was the result on appeal in Mary Kay Inc., a/k/a Mary Kay Cosmetics Inc., v. Janet Isbell, the case in the text in which it was claimed that Mary Kay, Inc. wrongfully terminated Isbell's franchise in violation of the Arkansas Franchise Practices Act on the basis that Isbell used retail store space to sell products as opposed to only conducting sales in customers' homes? A. That the Arkansas Franchise Practices Act was inapplicable because it applied only to businesses with a fixed geographical location, and the plaintiff's claim of wrongful termination was dismissed. B. That the Arkansas Franchise Practices Act was inapplicable because insufficient sales were involved, and the plaintiff's claim of wrongful termination was dismissed. C. That the Arkansas Franchise Practices Act was applicable but that it allowed the franchisor to terminate the agreement. D. That the Arkansas Franchise Practices Act was applicable and rendered void the contract at issue. E. That the Arkansas Franchise Practices Act was applicable and rendered voidable the contract at issue based upon the choice of the franchisee.

Q: Which of the following was the result in Cousins Subs Systems Inc. v. Michael R. McKinney, the case in the text in which defendant McKinney asserted in a counterclaim that he was entitled to terminate an agreement requiring that he operate submarine sandwich shops because Cousins Subs Systems, Inc. failed to meet promises it verbally made to him? A. That based on principles of equity McKinney could rely on oral statements in contradiction of the written agreement involved. B. That the oral agreements could be relied upon by McKinney because they supplemented, rather than contradicted, the written agreement. C. That the alleged oral agreements contradicted the written agreement signed by McKinney and would not, therefore, be considered. D. The alleged oral statements should supplement that the court would allow the jury to determine the written contract. E. That the written agreement failed to set forth fair principles but that the alleged oral agreements would be disregarded in favor of a form contract contained in the state's franchise law.

Q: Peanut Allergy. Kitty, who had a love of baking, decided to open her own bakery. She decided that she did not need and did not want to pay for a lawyer to advise her on different forms of ownership. Unfortunately, Kitty had not paid attention in business law class. She proceeded, with little thought, to simply open her business called Kitty's Baking. Bobby came in to order some cookies for his girlfriend, Bitsy, who was allergic to peanuts. Bobby told Kitty that he needed some cookies for Bitsy but that Bitsy had allergies to peanuts. Kitty told him not to worry because she would make up a special batch just for him. Kitty had hired some assistants because she was so busy. She told an assistant, Cathy, to make up several batches of cookies for different customers including Bobby and to leave out the peanuts in Bobby's order. Cathy, however, forgot the instruction and proceeded to make Bobby's cookies with crushed peanuts. Bobby picked up the cookies and gave one to Bitsy in the car while they were on the way to the movie in Bobby's new car. Bitsy became violently ill, vomited in Bobby's car, and had to have her stomach pumped. Bobby and Bitsy sought recovery from Kitty who told them that Bitsy's doctor bill and Bobby's car cleaning bill were business debts, that the business was new and not making any money at the moment, and that she had no personal liability. Following the incident involving Bobby and Bitsy, Kitty discussed with her parents her problems with the bakery. Kitty's parents would like to invest in her business and share in any profits, but they do not want to share in the management responsibilities. What type of business did Kitty initially set up? A. A limited liability company B. A sole proprietorship C. An individual proprietorship D. A general company E. An S corporation

Q: In a limited partnership which of the following have no part in the management of the business? A. General partners B. Limited partners C. Special partners D. General partners, limited partners, and special partners E. General and special partners, but not limited partners

Q: Which of the following is true of a joint stock company? A. It is a mixture of a corporation and a partnership. B. It is a mixture of a corporation and a joint venture. C. It is a mixture of a partnership and a sole proprietorship. D. It is a mixture of a limited liability company and a sole proprietorship. E. It is a mixture of a limited liability company and a joint venture.

Q: Which of the following was the result on appeal in Colette Bohatch v. Butler & Binion, the case in the text in which the plaintiff, the partner in a law firm, sued after she was expelled from the partnership following her complaint that one of the other partners was overbilling a client? A. That as a matter of public policy, the law firm was liable to her for damages. B. That under federal law, the law firm was liable to her for damages because she was given insufficient notice of her expulsion. C. That under state law, the law firm was liable to her for damages because she was given insufficient notice of her expulsion. D. That she was properly expelled because the partner about whom she complained was senior to her in seniority. E. That the law firm had a right to expel her regardless of her status as a whistleblower.

Q: Under the Uniform Limited Liability Company Act, an LLC will dissolve after the passage of ______ consecutive days during which the company has no members. A. 30 B. 60 C. 90 D. 121 E. 180

Q: A limited partnership is an agreement between at least _____ general partner(s) and ______ limited partner(s). A. 1; 2 B. 2; 1 C. 1; 1 D. 2; 2 E. 10; 10

Q: In a limited partnership which of the following assume unlimited personal liability for the debts of the partnership? A. General partners B. Limited partners C. Special partners D. General partners, limited partners, and special partners E. General and special partners, but not limited partners

Q: In a limited partnership, which of the following assume no liability for the partnership beyond the capital they have invested? A. General partners B. Limited partners C. Special partners D. General partners, limited partners, and special partners E. General and special partners, but not limited partners

Q: How is a limited liability company formed? A. By filing Articles of Statement with the Internal Revenue Service. B. By filing a Limited Liability Company form with the Securities and Exchange Commission. C. By filing a Certificate of Authority with the county in which the LLC is established. D. By filing Articles of Organization in the state in which the LLC is established. E. By filing a Statement of Operation in the state in which the LLC is established.

Q: For purposes of federal jurisdiction, a limited liability company is considered a citizen in ______. A. its place of organization only B. the location of its principal place of business only C. the location of either its place of organization or its principal place of business only D. every state in which its members reside E. every state in which a member resides, the location of its principal place of business, or the location of its organization

Q: Under the Uniform Limited Liability Company Act, unless the operating agreement specifies otherwise, LLCs are ______ managed. A. member B. manager C. operationally D. provisionally E. administratively

Q: Which of the following is false regarding cooperatives? A. Unincorporated cooperatives are treated like partnerships. B. In unincorporated cooperatives, members share joint liability for the cooperative's actions. C. Members of incorporated cooperatives enjoy limited liability just as do the shareholders of a corporation. D. Cooperatives are usually formed as syndicates. E. A cooperative is usually formed to market products.

Q: The ________________ establishes how a franchise agreement will be terminated. A. franchise agreement B. Franchise Termination Act C. Franchisor-Franchisee Protection Act D. Franchisee Protection Act E. Franchise Wrap-Up Act

Q: Farmers who want to pool certain crops together to ensure that they get a high market price for their crops should form a ______________. A. business trust B. syndicate C. joint venture D. joint stock company E. cooperative

Q: _____ is a franchise in which the franchisor manufactures a product and licenses a dealer to sell the product in an exclusive territory. A. Distributorship B. Manufacturing arrangement C. Chain-style business operation D. Approved business franchise E. Acknowledged standards operation

Q: In a(n) _____ franchisor provides the franchisee with the formula or necessary ingredient to manufacture a product. A. distributorship B. manufacturing arrangement C. chain-style business operation D. approved business franchise E. acknowledged standards operation

Q: Which of the following is false regarding franchises? A. The franchisee often receives help from the franchisor in starting the franchise. B. The franchisor has the legal authority to ensure that the franchisee maintains the quality of goods and services associated with the franchise. C. The franchisor is not liable for torts of the franchisee's employees regardless of the amount of control exerted by the franchisor. D. A franchise is a contractual relationship between the franchisor and the franchisee. E. The Federal Trade Commission has a franchise rule requiring franchisors to present prospective franchisees with material facts necessary for the franchisee to make an informed decision about entering a franchise relationship.

Q: Which of the following is a group that comes together for the explicit purpose of financing a specific large project? A. A business trust B. A joint venture C. A syndicate D. A franchise E. An enterprise

Q: Which of the following is true regarding joint ventures? A. Generally, joint ventures are taxed like corporations. B. If one of the members of a joint venture dies, the joint venture is automatically terminated. C. Members of a joint venture are agents of the other members. D. A joint venture may be formed without drawing up a formal agreement. E. Courts frequently apply sole proprietorship law to joint ventures.

Q: ______________________ is a business that exists because of an arrangement between the owner of a trade name or trademark and a person who sells goods or services under the trade name or trademark. A. Joint venture B. Franchise C. Joint partnership D. Consensual seller E. Approved arrangement

Q: In which of the following does the franchise operate under the franchisor's business name and act subject to the franchisor's standards and methods of business operation? A. Distributorship B. Manufacturing arrangement C. Chain-style business operation D. Approved business franchise E. Acknowledged standards operation

Q: Which form of business organization generally provides unlimited transferability of ownership interests? A. Corporations B. General partnerships C. Limited partnerships D. Sole proprietorships E. Limited liability companies

Q: ______________________ is a partnership agreement in which company members hold transferable shares while all the goods of the company are held in the names of the partners. A. A joint stock company B. A joint corporation C. A joint partnership D. A collusive partnership E. A collusive corporation

Q: _______________ is a business organization governed by a group of trustees who operate the trust for the beneficiaries. A. A joint enterprise B. A syndicate C. A business trust D. An S corporation E. An E corporation

Q: Which of the following is false regarding limited liability companies? A. The limited liability company was first recognized in Wyoming. B. Limited liability companies have the limited liability of partnerships yet are taxed like corporations. C. Limited liability companies must file a form with a state agency. D. The company name must include "Limited Liability Company" or an abbreviation of those words. E. Owners of an LLC are referred to as members.

Q: What is the process called which allows limited liability companies to do business in states other than the state in which they were formed? A. Cooperation B. Qualification C. Venturing D. Syndication E. Distribution

Q: _____ is an organization formed by individuals to market products. A. A cooperative B. A consortium C. A corporation D. A universe E. An enterprise

Q: S corporations _____. A. are considered partnerships yet taxed like corporations as long as they follow regulations B. cannot have more than 80 shareholders C. shareholders do not report profit on their personal income tax forms D. are formed under federal law E. income is not taxed when it is distributed to shareholders

Q: ______________ are responsible for running the day-to-day business of a corporation. A. Investors B. Shareholders C. Officers D. Administrators E. Members of the board of directors

Q: Which of the following is true regarding corporations other than S corporations? A. A corporation is not a separate legal entity. B. A corporation may not be sued. C. A corporation is created according to federal law. D. Shareholders may typically be held liable for debts of the corporation. E. The corporation must pay taxes on profits, and shareholders must pay taxes on dividends they receive from the corporation.

Q: Which of the following is a way that a corporation can avoid double taxation? A. By forming a C corporation B. By forming a D corporation C. By forming an S corporation D. By forming an F corporation E. None of these because there is no double taxation problem with corporations

Q: A legal entity formed by issuing stock to investors is a _____. A. cooperative B. corporation C. limited partnership D. limited liability partnership E. general partnership

Q: _____ are investor-owners of a corporation. A. Profit owners B. Profit and loss owners C. Approved investors D. Limited partners E. Shareholders

Q: _____ are responsible for managing the business of a corporation. A. Investors B. Shareholders C. Officers D. Administrators E. Members of the board of directors

Q: A partnership in which the partners divide profits and management responsibilities and, share unlimited personal liability for the partnership debts is a ___________. A. limited partnerships B. general partnerships C. limited liability partnerships D. corporation E. limited liability company

Q: In a _____ all the partners' liability for professional malpractice is limited to the partnership. A. general partnership B. limited partnership C. professional partnership D. limited liability partnership E. loss limiting partnership

Q: Which of the following is false regarding a limited liability partnership? A. A limited liability partnership is considered a separate legal entity. B. Limited liability partnerships are fairly new. C. The business name must include "Limited Liability Partnership" or an abbreviation in the name. D. The parties must file a form with the secretary of the state to create a limited liability partnership. E. Each partner pays taxes on his or her share of the income of the business.

Q: Which of the following is false regarding a partnership? A. It is easy to create. B. Income of the business is personal income. C. Business losses can be deducted from taxes. D. Each partner is considered an agent of the partnership. E. In most cases partners do not have personal liability for losses.

Q: What usually happens when a partner of a partnership dies? A. The partnership automatically becomes a sole proprietorship B. The partnership dissolves C. The partnership becomes a corporation D. The partnership stays status quo E. The partnership turns into a limited liability partnership

Q: A partnership in which the partners divide profits and management responsibilities and, share unlimited personal liability for the partnership's debt is called a _______. A. general partnership B. limited partnership C. limited liability partnership D. corporation E. limited liability company

Q: Which of the following is false regarding a sole proprietorship? A. A sole proprietorship requires few legal formalities. B. A sole proprietor has complete control of the management of the business. C. The sole proprietor keeps all the profits from the business. D. Profits are taxed as the personal income of the sole proprietor. E. A sole proprietor is not personally liable for obligations of the business.

Q: Which of the following is the most popular form of business ownership in the U.S.? A. Sole proprietorship B. Limited partnership C. Limited liability partnership D. Corporation E. Limited liability company

Q: A voluntary association between two or more persons who co-own a business for a profit is a ___________________. A. co-owned business B. partnership C. joint proprietorship D. joint corporation E. joint entity

Q: Which law governs partnerships in many states in the absence of an express agreement? A. The Joint Partnership Act B. The Uniform Joint Agreement Act C. The Uniform Partnership Act D. The Associated Partnership Act E. The Joint Agreement Act

Q: Melinda, who works in a jewelry store owned by Cindy, was picking up some gemstones for use in the store. On the way back to the jewelry store, she went through a drive-through fast food restaurant to get a soda. While in line, she negligently bumped the vehicle in front of her that was owned by Ralph. Melinda did not have insurance. Ralph asked Cindy to pay for the damage to his bumper. Cindy refused on the basis that she never gave Melinda authority to stop for a soda. Should Cindy be held liable, and why or why not?

Q: In a chain-style business operation, the franchisor provides the franchisee with the formula or necessary ingredient to manufacture a product.

Q: When a person decides to go into business on his or her own and is solely responsible for management and profits a(n) __________________ is formed. A. individual entity B. sole proprietorship C. single entity D. sole entrepreneurship E. single entrepreneurship

Q: What is the duty of accounting an agent owes to a principal, and how would an agent satisfy that duty? Specify what actions an agent must take in regards to accounts of a principal.

Q: Set forth the two key exceptions to the equal dignity rule.

Q: Set forth the rationale behind the doctrine of respondeat superior and discuss whether ethically you believe is an appropriate doctrine for our society.

Q: Roofing Issues. Sally agrees to roof a house for Bob. After doing his research, Bob chooses Sally based on her great reputation for being conscientious and doing good work. Bob knows little about roofing and stays away from all the noise involved. Sally provides her own tools for herself and other workers, sets her own schedule, and charges a flat rate of $10,000 to be paid when the job is completed. Sally hires Trudy, Glen, and Fred to help with the roofing. She pays them an hourly rate, supervises their work, provides them with tools and materials, and sets their schedules. Curious about what is going on there, Bob's friend Spencer walks by the house while the roofing is being done. Glen absent-mindedly throws some old shingles off the roof and hits Spencer in the head resulting in him going to the local emergency room and receiving a couple of stitches in his scalp. Spencer decides to sue all the roofers and also Bob and Sally for his hospital expenses and for pain and suffering. Assuming Glen was negligent, which of the following is the most likely result in a lawsuit against Trudy and Fred brought by Spencer? A. Spencer will win because Trudy and Fred were coworkers with Glen. B. Spencer will win because Trudy and Fred were independent contractors on the same job as Glen. C. Spencer will win only if it can be established that both Sally and Bob are insolvent and unable to pay any judgment. D. Spencer will lose because Trudy and Fred were not negligent and were not employees of Spencer. E. Spencer, Trudy, and Fred must all bear 1/3 of any judgment because they are employees of the same rank.

Q: Discuss why agency is especially important for modern firms doing business in foreign countries.

Q: Set forth the requirements for a finding of agency by ratification and also the requirements needed for ratification to be effective.

Q: Roofing Issues. Sally agrees to roof a house for Bob. After doing his research, Bob chooses Sally based on her great reputation for being conscientious and doing good work. Bob knows little about roofing and stays away from all the noise involved. Sally provides her own tools for herself and other workers, sets her own schedule, and charges a flat rate of $10,000 to be paid when the job is completed. Sally hires Trudy, Glen, and Fred to help with the roofing. She pays them an hourly rate, supervises their work, provides them with tools and materials, and sets their schedules. Curious about what is going on there, Bob's friend Spencer walks by the house while the roofing is being done. Glen absent-mindedly throws some old shingles off the roof and hits Spencer in the head resulting in him going to the local emergency room and receiving a couple of stitches in his scalp. Spencer decides to sue all the roofers and also Bob and Sally for his hospital expenses and for pain and suffering. Which of the following is the most likely characterization of Sally in relation to Bob? A. She is both an employee and an independent contractor. B. She is an employee. C. She is an independent contractor. D. She is an undisclosed principal. E. She is both an employee and a disclosed principal.

Q: Roofing Issues. Sally agrees to roof a house for Bob. After doing his research, Bob chooses Sally based on her great reputation for being conscientious and doing good work. Bob knows little about roofing and stays away from all the noise involved. Sally provides her own tools for herself and other workers, sets her own schedule, and charges a flat rate of $10,000 to be paid when the job is completed. Sally hires Trudy, Glen, and Fred to help with the roofing. She pays them an hourly rate, supervises their work, provides them with tools and materials, and sets their schedules. Curious about what is going on there, Bob's friend Spencer walks by the house while the roofing is being done. Glen absent-mindedly throws some old shingles off the roof and hits Spencer in the head resulting in him going to the local emergency room and receiving a couple of stitches in his scalp. Spencer decides to sue all the roofers and also Bob and Sally for his hospital expenses and for pain and suffering. Which of the following is the most likely characterization of Trudy, Glen, and Fred in relation to Sally? A. They are both employees and independent contractors. B. They are employees. C. They are independent contractors. D. They are undisclosed principals. E. They are both employees and disclosed principals.

Q: Roofing Issues. Sally agrees to roof a house for Bob. After doing his research, Bob chooses Sally based on her great reputation for being conscientious and doing good work. Bob knows little about roofing and stays away from all the noise involved. Sally provides her own tools for herself and other workers, sets her own schedule, and charges a flat rate of $10,000 to be paid when the job is completed. Sally hires Trudy, Glen, and Fred to help with the roofing. She pays them an hourly rate, supervises their work, provides them with tools and materials, and sets their schedules. Curious about what is going on there, Bob's friend Spencer walks by the house while the roofing is being done. Glen absent-mindedly throws some old shingles off the roof and hits Spencer in the head resulting in him going to the local emergency room and receiving a couple of stitches in his scalp. Spencer decides to sue all the roofers and also Bob and Sally for his hospital expenses and for pain and suffering. Assuming Glen was negligent, which of the following is the most likely result in a lawsuit against Sally brought by Spencer? A. Spencer will win because Glen was acting within the scope of his employment; and Sally is, therefore, liable for his negligence. B. Spencer will lose because Glen was not acting within the scope of his employment; and Sally is not, therefore, liable for his negligence. C. Spencer will win because regardless of whether Glen was acting within the scope of his employment, Sally is liable for his negligence. D. Spencer will lose because regardless of whether Glen was acting within the scope of his employment, Sally has no liability. E. Spencer and Sally will split costs on a 50-50 basis.

Q: Roofing Issues. Sally agrees to roof a house for Bob. After doing his research, Bob chooses Sally based on her great reputation for being conscientious and doing good work. Bob knows little about roofing and stays away from all the noise involved. Sally provides her own tools for herself and other workers, sets her own schedule, and charges a flat rate of $10,000 to be paid when the job is completed. Sally hires Trudy, Glen, and Fred to help with the roofing. She pays them an hourly rate, supervises their work, provides them with tools and materials, and sets their schedules. Curious about what is going on there, Bob's friend Spencer walks by the house while the roofing is being done. Glen absent-mindedly throws some old shingles off the roof and hits Spencer in the head resulting in him going to the local emergency room and receiving a couple of stitches in his scalp. Spencer decides to sue all the roofers and also Bob and Sally for his hospital expenses and for pain and suffering. Assuming Glen was negligent, which of the following is the most likely result in a lawsuit against Bob brought by Spencer? A. Spencer will win because as the property owner, Bob is liable for any negligence occurring there. B. Spencer will win because Sally is Bob's employee and Sally, therefore, is liable for the negligent acts of anyone working for her. C. Spencer will win because Sally is an independent contractor for Bob and Sally, therefore, is liable for the negligent acts of anyone working for her. D. Spencer will lose because Glen is an employee of Sally who is an independent contractor for Bob. E. Spencer will win only if it can be established that both Glen and Sally are insolvent and unable to pay any judgment.

Q: The Big Sale. Christy, the owner of ABC department store, needed to hire a number of employees in a hurry because of a planned big summer sale. Bob was hired by Christy to run a cash register and to assist customers with taking large purchases to their cars. Bob encountered a particularly annoying customer, Frank. Frank started complaining the minute he saw Bob. Frank complained about having to wait for Bob to assist him with carrying his television purchase to his car, about the merchandise in the store, and about the quality of the store's employees. Bob tried to control himself while he carted Frank's television to the car. The final straw, however, came when Frank told Bob that he should get the earring out of his ear, cut his hair, and act professionally. Bob threw the television to the ground and punched Frank in the nose. Frank did investigation and discovered that Bob has just been fired from his last three jobs for violent actions against customers. Two of his former employers are willing to testify that if Christy had called them, they would have disclosed Bob's tendencies to her. Bob listed the former employers on his application, but because she was in a hurry to hire employees, Christy did not take the time to check with the former employers. Another problem confronting Christy during the big sale is that Susie, a long-time employee of Christy who had never caused any problem before, negligently dropped a box on the foot of Greg, a customer. Greg had to have an X-ray and is threatening to sue both Christy and Susie. Which of the following is a theory under which Christy may be held directly liable for her own tortuous conduct in regards to Frank's injury? A. Negligent hiring B. Strict liability C. Breach of customer warranty D. Negligent hiring, strict liability, and also breach of customer warranty E. There is no theory under which Christy may be held liable

Q: The Big Sale. Christy, the owner of ABC department store, needed to hire a number of employees in a hurry because of a planned big summer sale. Bob was hired by Christy to run a cash register and to assist customers with taking large purchases to their cars. Bob encountered a particularly annoying customer, Frank. Frank started complaining the minute he saw Bob. Frank complained about having to wait for Bob to assist him with carrying his television purchase to his car, about the merchandise in the store, and about the quality of the store's employees. Bob tried to control himself while he carted Frank's television to the car. The final straw, however, came when Frank told Bob that he should get the earring out of his ear, cut his hair, and act professionally. Bob threw the television to the ground and punched Frank in the nose. Frank did investigation and discovered that Bob has just been fired from his last three jobs for violent actions against customers. Two of his former employers are willing to testify that if Christy had called them, they would have disclosed Bob's tendencies to her. Bob listed the former employers on his application, but because she was in a hurry to hire employees, Christy did not take the time to check with the former employers. Another problem confronting Christy during the big sale is that Susie, a long-time employee of Christy who had never caused any problem before, negligently dropped a box on the foot of Greg, a customer. Greg had to have an X-ray and is threatening to sue both Christy and Susie. Which of the following is true regarding whether Greg has any right of recovery against Susie for his injured foot? A. Greg has no right of recovery against Susie because of her status as an employee. B. Greg has no right of recovery against Susie because she did not intentionally harm him. C. Greg has no right of recovery against Susie because of her status as an employee and also because she did not intentionally harm him. D. Greg has a right of recovery against Susie only if Christy is bankrupt. E. Greg has a right of recovery against Susie.

Q: The Big Sale. Christy, the owner of ABC department store, needed to hire a number of employees in a hurry because of a planned big summer sale. Bob was hired by Christy to run a cash register and to assist customers with taking large purchases to their cars. Bob encountered a particularly annoying customer, Frank. Frank started complaining the minute he saw Bob. Frank complained about having to wait for Bob to assist him with carrying his television purchase to his car, about the merchandise in the store, and about the quality of the store's employees. Bob tried to control himself while he carted Frank's television to the car. The final straw, however, came when Frank told Bob that he should get the earring out of his ear, cut his hair, and act professionally. Bob threw the television to the ground and punched Frank in the nose. Frank did investigation and discovered that Bob has just been fired from his last three jobs for violent actions against customers. Two of his former employers are willing to testify that if Christy had called them, they would have disclosed Bob's tendencies to her. Bob listed the former employers on his application, but because she was in a hurry to hire employees, Christy did not take the time to check with the former employers. Another problem confronting Christy during the big sale is that Susie, a long-time employee of Christy who had never caused any problem before, negligently dropped a box on the foot of Greg, a customer. Greg had to have an X-ray and is threatening to sue both Christy and Susie. Which of the following is true regarding whether Greg has any right of recovery against Christy for his injured foot? A. Greg has no right of recovery against Christy because Susie had not dropped any boxes before, and Christy had no reason to suspect she would injure Greg. B. Greg has a right of recovery against Christy only if Susie is insolvent. C. Greg has a right of recovery against Christy, but only for 50% of his damages. D. Greg has no right of recovery against Christy because he will not be able to establish any wrongdoing on her part in hiring Susie. E. Greg has a right of recovery against Christy.

Q: Nasty Break-Up. Harold wants to purchase a lot next door to Sarah's home that is owned by Sarah. Harold knows Sarah will not sell the lot to him because they dated in the past and had a nasty break-up. Harold agrees with Alice that Alice will purchase the lot from Sarah for him. Alice and Sarah reach an agreement and enter into a contract whereby Sarah is to sell the lot to Alice for a price within the scope of Alice's authority. Alice tells Sarah nothing about her plan to later transfer the lot to Harold. Before title to the lot is transferred to Alice, Harold tells Alice that he no longer wants the lot. Alice tells Sarah about Harold. Sarah tells Alice that as far as she is concerned, Alice has bought the lot. Sarah says that she plans to move anyway and really does not care whether Alice or Harold ends up with the lot. She just wants her money. What type of principal is Harold? A. Disclosed B. Undisclosed C. Partially disclosed D. Unidentified E. Legally nonexistent

Q: Nasty Break-Up. Harold wants to purchase a lot next door to Sarah's home that is owned by Sarah. Harold knows Sarah will not sell the lot to him because they dated in the past and had a nasty break-up. Harold agrees with Alice that Alice will purchase the lot from Sarah for him. Alice and Sarah reach an agreement and enter into a contract whereby Sarah is to sell the lot to Alice for a price within the scope of Alice's authority. Alice tells Sarah nothing about her plan to later transfer the lot to Harold. Before title to the lot is transferred to Alice, Harold tells Alice that he no longer wants the lot. Alice tells Sarah about Harold. Sarah tells Alice that as far as she is concerned, Alice has bought the lot. Sarah says that she plans to move anyway and really does not care whether Alice or Harold ends up with the lot. She just wants her money. Which of the following is true regarding whether Alice is personally bound on the contract with Sarah? A. Alice is not personally bound because she was acting on behalf of Harold. B. Alice is personally bound unless she can establish that Sarah would not have sold her the lot if she had known that Harold was involved. C. Alice is personally bound unless she can establish that Harold has the funds with which to pay Sarah. D. Alice is not personally bound unless Harold has legally filed for bankruptcy. E. Alice is personally bound.

Q: Nasty Break-Up. Harold wants to purchase a lot next door to Sarah's home that is owned by Sarah. Harold knows Sarah will not sell the lot to him because they dated in the past and had a nasty break-up. Harold agrees with Alice that Alice will purchase the lot from Sarah for him. Alice and Sarah reach an agreement and enter into a contract whereby Sarah is to sell the lot to Alice for a price within the scope of Alice's authority. Alice tells Sarah nothing about her plan to later transfer the lot to Harold. Before title to the lot is transferred to Alice, Harold tells Alice that he no longer wants the lot. Alice tells Sarah about Harold. Sarah tells Alice that as far as she is concerned, Alice has bought the lot. Sarah says that she plans to move anyway and really does not care whether Alice or Harold ends up with the lot. She just wants her money. Which of the following is true regarding whether Harold is liable to Alice for the cost of the lot if Alice pays Sarah the purchase price? A. Harold is liable to Alice for the cost of the lot. B. Harold is liable to Alice for the cost of the lot only if the contract between Harold and Alice expressly stated that he would reimburse her for the cost of the lot. C. Harold is liable to Alice only if she resells the lot and is unable to recover as much as she paid for it. D. Harold is not liable to Alice for the cost of the lot. E. Harold can avoid liability to Alice only if he can establish that unexpected circumstances caused him to refuse to purchase the lot from her.

Q: 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 Ronnie confidential information about her finances and debts. Ronnie decided that he needed help and paid Rick $300 to look for property for Sue. Bruce 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 that amount. 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 that he thought were excessive. 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 only if he can establish that he had express permission from Sue to assign the duties. C. Ronnie will win only if he can establish that he had either express or implied permission from Sue to assign the duties. D. Ronnie will win only if he can establish that he had express, implied, or assumed permission from Sue to assign the duties. E. Ronnie will lose only if Sue can establish that Rick is incompetent to deal in real estate.

Q: 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 Ronnie confidential information about her finances and debts. Ronnie decided that he needed help and paid Rick $300 to look for property for Sue. Bruce 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 that amount. 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 that he thought were excessive. 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 suffer economic loss or to seek psychological counseling. E. Sue will win.

Q: 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 Ronnie confidential information about her finances and debts. Ronnie decided that he needed help and paid Rick $300 to look for property for Sue. Bruce 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 that amount. 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 that he thought were excessive. What remedy 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

Q: 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 on credit 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 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. 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 who is neither an employee nor an independent contractor. D. He was an express contractor. E. He was an implied contractor.

Q: 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 on credit 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 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. Did Jason have any legal liability to ABC Computers? A. Yes, because he purchased the computers. 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. No, because he was an independent contractor. E. No, because he was an employee.

Q: 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 on credit 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 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. 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 Jason before paying ABC Computers. B. Jason is only due 50% of whatever he paid because he did not get permission from Jason 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.

Q: 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 Ronnie confidential information about her finances and debts. Ronnie decided that he needed help and paid Rick $300 to look for property for Sue. Bruce 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 that amount. 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 that he thought were excessive. Which of the following is the most likely result if Sue sues Ronnie for purchasing the property from Bruce? 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.

Q: 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. In fact, Paul had told Jane not to buy anything at the store. The wholesale 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 reminded 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. 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.

Q: 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. In fact, Paul had told Jane not to buy anything at the store. The wholesale 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 reminded 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. Which of the following is the most likely result if Pam, the wholesale 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.

Q: 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. In fact, Paul had told Jane not to buy anything at the store. The wholesale 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 reminded 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. 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. Paul will win on an implied agency theory.

Q: An agency agreement created for the agent's benefit, not for the principal's is an _______________. A. agency interest principle B. agency coupled with an interest C. agency benefit interest D. agency compensation principle E. agency entitlement principle

Q: Which of the following results in termination of agency by operation of law? A. Death of either the principal or the agent. B. Adjudicated insanity of the principal or agent. C. Insolvency. D. Death of either the principal or the agent, adjudicated insanity of the principal or agent, and insolvency. E. Death or adjudicated insanity of either the principal or agent, but not insolvency.

Q: Which of the following is false regarding termination of agency based on operation of law? A. Impossibility of performance terminates the agency relationship. B. An agency agreement is terminated whenever the agent, unknown to the principal, acquires an interest against the principal's interest. C. The agency agreement is terminated if the agent breaches the duty of loyalty he or she has to the principal. D. A change in law passed subsequent to the formation of an agency agreement may not terminate the agency agreement. E. If there is an unusual change in circumstances that leads the agent to believe that the principal's instructions do not apply, the agency relationship terminates.