Questions and Answers of The Legal Environment

Marbury Surety, Inc., agreed to act as a guarantor of collection of Madison’s trade accounts for one year beginning on April 30, 1980, and was compensated for same. Madison’s trade debtors are in
Queen paid Pax and Co. to become the surety on a loan that Queen obtained from Squire. The loan is due, and Pax wishes to compel Queen to pay Squire.Pax has not made any payments to Squire in its
Which of the following defenses by a surety will be effective to avoid liability?a. Lack of consideration to support the surety undertakingb. Insolvency in the bankruptcy sense of the debtorc.
For each of the numbered words or phrases, select the one best phrase from the list a through j. Each response may be used only once.(1) Indemnity contract(2) Suretyship contract(3) Surety(4)
Sharolyn Charles wrote a check for $17.93 to a Poncho’s Restaurant on July 4, 1996, as payment for a meal she had there. The check was returned for insufficient funds. Poncho’s forwarded the
Thomas was sent a credit card through the mail by a company that had taken his name and address from the telephone book. Because he never requested the card, Thomas left the card lying on his desk. A
Lutz Appellate Services received unsolicited faxed messages from Curry &Taylor. The first of these messages read as follows:CURRY & TAYLOR IS NOW HIRING ALL POSITIONS CALL TODAY 1-800-222-8738 The
Stevens purchased a pair of softball shoes manufactured by Hyde Athletic Industries. Because of a defect in the shoes, she fell and broke an ankle. She sued Hyde under the state consumer protection
List three areas in consumer credit cards affected by the CARD Act.AppendixLO1
Charles Lakin, who did business as Sun Country Citrus, owned a citrus-packing plant in Yuma, Arizona. In 1985, the packing plant was leased to Sunco Partners. Under the terms of the lease, Sunco had
When Johnson Hardware Shop borrowed $20,000 from First Bank, it used its inventory as collateral for the loan. First Bank perfected its security interest by filing a financing statement. The
Consider the following cases and determine whether the financing statements as filed would be valid under Article 9. Be sure to consider the standard of“seriously misleading” under Revised
Rawlings purchased a typewriter from Kroll Typewriter Co. for $600. At the time of the purchase, he made an initial payment of $75 and agreed to pay the balance in monthly installments. A security
Kim purchased on credit a $1,000 freezer from Silas Household Appliance Store. After she had paid approximately $700, Kim missed the next monthly installment payment. Silas repossessed the freezer
Benson purchased a new Ford Thunderbird automobile. She traded in her old car and used the Magnavox Employees Credit Union to finance the balance.The credit union took a security interest in the
Lockovich borrowed money from a bank to purchase a motorboat. The bank took a security interest in it but never filed a financing statement. A subsequent default on the loan occurred, and the debtor
On April 18, 2000, Philip Purkett parked his car, on which he owed $213 in payments, in his garage and locked the garage. Later that night, TWAS, Inc., a vehicle repossession company, broke into the
A borrowed money from B and orally agreed that B had a security interest in equipment that was standing in A’s yard. Nothing was in writing, and no filing of any kind was made. Nine days later, B
Muska borrowed money from the Bank of California and secured the loan by giving the bank a security interest in equipment and machinery at his place of business. To perfect the interest, the bank
Kimbrell’s Furniture Co. sold a new television set and tape player to Charlie O’Neil and his wife. Each purchase was on credit, and in each instance, a security agreement was executed. Later on
On March 1, Green went to Easy Car Sales to buy a car. Green spoke to a salesperson and agreed to buy a car that Easy had in its showroom. On March 5, Green made a $500 down payment and signed a
Carr Corp. sells VCRs and videotapes to the public. Carr sold and delivered a VCR to Sutter on credit. Sutter executed and delivered to Carr a promissory note for the purchase price and a security
On July 8, Ace, a refrigerator wholesaler, purchased 50 refrigerators. This comprised Ace’s entire inventory and was financed under an agreement with Rome Bank that gave Rome a security interest in
Fogel purchased a television set for $900 from Hamilton Appliance. Hamilton took a promissory note signed by Fogel and a security interest for the $800 balance due on the set. It was Hamilton’s
Orso, who had declared bankruptcy, received a structured tort settlement in a personal injury claim he had pending. The settlement would pay him an annuity each year for 30 years because the claim
Okamoto owed money to Hornblower & Weeks-Hemphill, Noyes (a law firm and hereafter Hornblower). Hornblower filed an involuntary bankruptcy petition against Okamoto, who moved to dismiss the petition
Kentile sold goods over an extended period of time to Winham. The credit relationship began without Winham’s being required to furnish a financial 816 Part 5 Debtor-Creditor Relationships
Essex is in serious financial difficulty and is unable to meet current unsecured obligations of $40,000 to some 20 creditors, who are demanding immediate payment. Essex owes Stevens $5,000, and
Sonia, a retailer, has the following assets: a factory worth $1 million; accounts receivable amounting to $750,000, which fall due in four to six months; and$20,000 cash in the bank. Sonia’s sole
Samson Industries ceased doing business and is in bankruptcy proceedings.Among the creditors are five employees seeking unpaid wages. Three of the employees are owed $3,500 each, and two are owed
Carol Cott, doing business as Carol Cott Fashions, is worried about an involuntary bankruptcy proceeding being filed by her creditors. Her net worth, using a balance sheet approach, is $8,000
On July 1, Roger Walsh, a sole proprietor operating a grocery, was involuntarily petitioned into bankruptcy by his creditors. At that time, and for at least 90 days prior to that time, Walsh was
Steven and Teresa Hornsby are married and have three young children. On May 25, 1993, the Hornsbys filed a voluntary Chapter 7 petition. They had by that date accumulated more than $30,000 in debt,
Place the following in order for a bankruptcy proceeding:a. Order of reliefb. Collection of bankrupt’s estatec. List of creditors 818 Part 5 Debtor-Creditor Relationshipsd. Petitione. Evaluation of
Three general unsecured creditors are owed $45,000 as follows: A, $15,000; B,$5,000; and C, $25,000. After all other creditors were paid, the amount left for distribution to general unsecured
Which of the following statements is correct concerning the voluntary filing of a petition of bankruptcy?a. If the debtor has 12 or more creditors, the unsecured claims must total at least $13,475.b.
On February 28, Master, Inc., had total assets with a fair market value of$1,200,000 and total liabilities of $990,000. On January 15, Master made a monthly installment note payment to Acme
A voluntary petition filed under the liquidation provisions of Chapter 7 of the federal Bankruptcy Code:a. Is not available to a corporation unless it has previously filed a petition under the
Which following conditions, if any, must a debtor meet to file a voluntary bankruptcy petition under Chapter 7 of the federal Bankruptcy Code?Insolvency Three or More Creditorsa. Yes Yesb. Yes Noc.
On July 15, 1988, White, a sole proprietor, was involuntarily petitioned into bankruptcy under the liquidation provisions of the Bankruptcy Code. White’s nonexempt property has been converted to
On May 1, 1997, two months after becoming insolvent, Quick Corp., an appliance wholesaler, filed a voluntary petition for bankruptcy under the provisions of Chapter 7 of the federal Bankruptcy Code.
Martin Carls, a San Francisco teacher and counselor, applied for disability insurance from Standard Insurance Co. on April 4, 1996. On the application and supplement, Carls ticked “no” in
From the United Insurance Co., Rebecca Foster obtained a policy insuring the life of Lucille McClurkin and naming herself as beneficiary. McClurkin did not live with Foster, and Foster did not inform
Dr. George Allard and his brother-in-law, Tom Rowland, did not get along after family land that was once used solely by Rowland was partitioned among family members after the death of Rowland’s
Baurer purchased a White Freightliner tractor and agreed that his son-in-law, Britton, could use it in the trucking business. In return, Britton agreed to haul Baurer’s hay and cattle, thus saving
Marshall Produce Co. had insured its milk- and egg-processing plant against fire. When smoke from a fire near its plant permeated the environment and was absorbed into the company’s egg powder
Amador Pena, who had three insurance policies on his life, wrote a will in which he specified that the proceeds from the insurance policies should go to his children instead of to Leticia Pena
Spector owned a small automobile repair garage in rural Kansas that was valued at $40,000. He purchased fire insurance coverage against loss to the extent of$24,000. The policy contained an 80
Carman Tool & Abrasives, Inc., purchased two milling machines, FOB Taiwan, from the Dah Lih Machinery Co. Carman obtained ocean marine cargo insurance on the machines from St. Paul Fire and Marine
When Jorge de Guerrero applied for a $200,000 life insurance policy with John Hancock Mutual Life Insurance Co., he stated on the insurance application that he had not seen a physician within the
Beal occupies an office building as a tenant under a 25-year lease. Beal also has a mortgagee’s (lender’s) interest in an office building owned by Hill Corp. In which capacity does Beal have an
With respect to property insurance, the insurable interest requirementa. Need only be satisfied at the time the policy is issuedb. Must be satisfied both at the time the policy is issued and at the
Lawfo Corp. maintains a $200,000 standard fire insurance policy on one of its warehouses. The policy includes an 80 percent coinsurance clause. At the time the warehouse was originally insured, its
In 1992, King bought a building for $250,000. At that time, King took out a$200,000 fire insurance policy with Omni Insurance Co. and a $50,000 fire insurance policy with Safe Insurance Corp. Each
How does an agent differ from an independent contractor?AppendixLO1
Compare authorization of an agent by (a) appointment and (b) ratification.AppendixLO1
Ernest A. Kotsch executed a durable power of attorney when he was 85 years old, giving his son, Ernie, the power to manage and sell his real estate and personal property “and to do all acts
Record owned a farm that was managed by his agent, Berry, who lived on the farm. Berry hired Wagner to bale the hay and told him to bill Record for this work. Wagner did so and was paid by Record. By
Gilbert Church owned Church Farms, Inc., in Manteno, Illinois. Church advertised its well-bred stallion Imperial Guard for breeding rights at $50,000, directing all inquiries to “Herb Bagley,
Lew owns a store on Canal Street in New Orleans. He paid a person named Mike and other individuals commissions for customers brought into the store.Lew testified that he had known Mike for less than
Barbara Fox was the agent of Burt Hollander, a well-known athlete. She discovered that Tom Lanceford owned a 1957 Chevrolet convertible, which had been stored in a garage for the past 15 years. After
Generally, an agency relationship is terminated by operation of law in all of the following situations except the:a. Principal’s deathb. Principal’s incapacityc. Agent’s renunciation of the
Able, on behalf of Pix Corp., entered into a contract with Sky Corp., by which Sky agreed to sell computer equipment to Pix. Able disclosed to Sky that she was acting on behalf of Pix. However, Able
Which of the following actions requires an agent for a corporation to have a written agency agreement?a. Purchasing office supplies for the principal’s businessb. Purchasing an interest in
Simmons, an agent for Jensen, has the express authority to sell Jensen’s goods.Simmons also has the express authority to grant discounts of up to 5 percent of list price. Simmons sold Hemple a 10
Ogden Corp. hired Thorp as a sales representative for nine months at a salary of$3,000 permonth plus 4 percent of sales.Which of the following statements is correct?a. Thorp is obligated to act
Frost’s accountant and business manager has the authority to:a. Mortgage Frost’s business propertyb. Obtain bank loans for Frostc. Insure Frost’s property against fire lossd. Sell Frost’s
Richard Pawlus was an owner of Dutch City Wood Products, Inc., which did business as “Dutch City Marketing.” Pawlus purchased merchandise from Rothschild Sunsystems from April 24 to June 24 using
Myles Murphy was appointed by Cy Sinden, a famous developer, to purchase land for a shopping center near the intersection of I-95 and Route 1. Mary Mason, the property owner, contracted with Murphy
What is the justification for the doctrine of respondeat superior?AppendixLO1
Leo Bongers died intestate. Alfred Bongers and Delores Kuhl, Leo’s nephew and niece, were appointed personal representatives of his estate. Leo left more than 120 antique cars, trucks, and
Moritz, a guest at Pines Hotel, was sitting in the lobby when Brown, a hotel employee, dropped a heavy vacuum cleaner on her knee. When Moritz complained, the employee insulted her and hit her with
Steve Diezel, an employee of Island City Flying Service in Key West, Florida, stole a General Electric Credit Corp. (GECC) aircraft and crashed the plane while attempting to take off. GECC brought
Brazilian & Colombian Co. (B&C), a food broker, ordered 40 barrels of olives from Mawer-Gulden-Annis (MGA). MGA’s shipping clerk was later told to make out the bill of lading to B&C’s customer
Frey entered into a contract with Cara Corp. to purchase televisions on behalf of Lux, Inc. Lux authorized Frey to enter into the contract in Frey’s name without disclosing that Frey was acting on
A principal will not be liable to a third party for a tort committed by an agent:a. Unless the principal instructed the agent to commit the tortb. Unless the tort was committed within the scope of
Cox engaged Datz as her agent. It was mutually agreed that Datz would not disclose that he was acting as Cox’s agent. Instead, he was to deal with prospective customers as if he were a principal
Which of the following statements is (are) correct regarding the relationship between an agent and a nondisclosed principal?I. The principal is required to indemnify the agent for any contract
What remedies does an employee who has been wrongfully discharged have against an employer?AppendixLO1
Michael Hauck claimed that he was discharged by his employer, Sabine Pilot Service, because he refused its direction to perform the illegal act of pumping the bilges of the employer’s vessel into
Jeanne Eenkhoorn worked as a supervisor at a business office for the New York Telephone Co. While at work, she invented a process for terminating the telephone services of delinquent subscribers. The
David Stark submitted an application to the maintenance department of Wyman-Gordon Co. Stark was a journeyman millwright with nine years’experience at a neighboring company at the time of his
Jane Richards was employed as the sole crane operator of Gale Corp. and held the part-time union position of shop steward for the plant. On May 15, Richards complained to OSHA concerning what she
Virgil Deemer and Thomas Cornwell, employees at a Whirlpool Corporation plant, refused to comply with a supervisor’s order that they perform maintenance work on certain mesh screens located some 20
Buffo was employed by the Baltimore & Ohio Railroad. Along with a number of other workers, he was removing old brakes from railroad cars and replacing them with new brakes. In the course of the work,
Mark Phipps was employed as a cashier at a Clark gas station. A customer drove into the station and asked him to pump leaded gasoline into her 1976 Chevrolet, an automobile equipped to receive only
What remedies does an employee who has been wrongfully discharged have against an employer?AppendixLO1
Michael Hauck claimed that he was discharged by his employer, Sabine Pilot Service, because he refused its direction to perform the illegal act of pumping the bilges of the employer’s vessel into
Jeanne Eenkhoorn worked as a supervisor at a business office for the New York Telephone Co. While at work, she invented a process for terminating the telephone services of delinquent subscribers. The
David Stark submitted an application to the maintenance department of Wyman-Gordon Co. Stark was a journeyman millwright with nine years’experience at a neighboring company at the time of his
Jane Richards was employed as the sole crane operator of Gale Corp. and held the part-time union position of shop steward for the plant. On May 15, Richards complained to OSHA concerning what she
Virgil Deemer and Thomas Cornwell, employees at a Whirlpool Corporation plant, refused to comply with a supervisor’s order that they perform maintenance work on certain mesh screens located some 20
Buffo was employed by the Baltimore & Ohio Railroad. Along with a number of other workers, he was removing old brakes from railroad cars and replacing them with new brakes. In the course of the work,
Mark Phipps was employed as a cashier at a Clark gas station. A customer drove into the station and asked him to pump leaded gasoline into her 1976 Chevrolet, an automobile equipped to receive only
When is a franchisor held liable to a third person dealing with or affected by the franchisee?AppendixLO1
Jerome, Sheila, Gary, and Ella agreed to purchase a tract of land and make it available for use as a free playground for neighborhood children. They called the enterprise Meadowbrook Playground.
Morris Friedman was president of Tiny Doubles International, Inc. He sold business opportunities for Tiny Doubles Studios, which made small photographic statues of people for customers. Friedman was
Wolf, King, and others sold business “opportunities” in vending machines by taking out ads in newspapers throughout the country. When individuals responded, telemarketers called “fronters”
For a five-year period, Laurie Henry worked for James Doull, the owner of four Taco Bell franchises. During that time, she had an affair with Doull. He was the father of her two illegitimate
Goodward, a newly hired newspaper reporter for the Cape Cod News, learned that the local cranberry growers had made an agreement under which they pooled their cranberry crops each year and sold them

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