UNIVERSITY OF MARYLAND UNIVERSITY COLLEGE Business Law I, BMGT 380 Midterm Examination This midterm examination is open book, open notes, but you are on the honor system not to seek assistance from anyone to complete this exam. There are 25 multiple choice questions worth 2 points each and 10 essay questions worth 5 points each, for a total of 100 points. Answer all the questions because for the essays partial credit is given where appropriate. Just submit the question number and your answer.
Please do not submit the entire exam with questions and your answers because it will take up too much memory and it will take too much time to grade the exams. So delete everything but the question number and your answer (i. e. “1. c”) and submit to the Assignments section of WT no later than 9pm March 17. 5 point penalty for each day late. Good luck. Mike Nye, Instructor 1. Sandy had applied for a permit with a federal administrative agency to operate a business within the boundaries of a popular national forest. The agency grants a limited number of these permits that allow operation of the business during the busy tourist season.
The agency has turned down Sandy’s application even though she received a permit in the prior year, paid the related fees on time, and violated none of the permit’s conditions. The agency granted a permit to a different applicant who had never run this type of business previously. If Sandy appeals the decision to a court, what standard of review will they most likely use? a. The arbitrary and capricious abuse of process test. b. The substantial evidence test. c. The unwarranted by the facts test. d. The unfair result test. 2. The two general elements required in a crime area: a. Criminal act and damages. . Criminal act and criminal intent. c. Criminal act and at least one impartial. d. Criminal act and resultant harm. 3. Where one party takes advantage of a confidential relationship when entering into a contract, the remedy would be based on: a. Duress. b. Unconscionability. c. Undue influence. d. Unilateral mistake. e. Fraud in the execution. 4. Karen offered to pay Kim $25 if Kim would cut Karen’s grass. Kim got her lawn mower and started to mow the lawn. After Kim was about 80% completed, Karen came out and told Kim that she had changed her mind, did not want the yard mowed, and would not pay Kim.
Kim finished the job and sues Karen for the $25. What would be the probable result? a. Kim wins; this is a bilateral contract, which Kim accepted by promising to mow the lawn; Karen is bound by it. b. Karen wins; this is a unilateral contract, which Karen can revoke at any time prior to the completion of the act. c. Kim wins; this is a unilateral contract and Karen cannot revoke her offer once Amy has made a substantial beginning to her performance. d. Karen wins; this is an offer for a bilateral contract and because Kim never promised to mow the lawn, there is no contract. . Undue influence is characterized by one party being put at a disadvantage in a contract due to: a. A party taking advantage of superior knowledge about the subject matter in a contract. b. A party taking advantage of economic advantage in a transaction. c. A party taking advantage of it being less urgent for that party to reach an agreement. d. A party taking advantage of a fiduciary relationship. e. A party taking advantage of the other party’s legal circumstances. 6. Paragrunt Studios hires Harry Ford to play Indiana Bones in one of its new movies.
Harry decides that he cannot fulfill this contract so he assigns his rights and delegates his duties under the contract to Tom Smellnik, another famous actor and friend of Harry. Which of the following best describes this situation? a. Paragrunt Studios must accept Smellnik, so long as he is an equally capable actor. b. Paragrunt Studios must accept Smellnik whether he is a good actor or not. c. Ford may not delegate his duty under this contract. d. Smellnik must accept this job because it was assigned to him. e. A and D. 7. Patti is shopping at a sporting goods store two days after she purchased a new pair of running shoes.
She is wearing the new shoes, which still look brand new. As she leaves the store, she is stopped by a security guard and told to come back into the store. They take her to an investigation room and tell her that they suspect her of stealing the shoes. She immediately tells the security guard that she purchased the shoes a couple of days earlier, and that the clerk she purchased them from is working at one of the cash registers. The security guard promptly leaves and returns with the clerk about ten minutes later and the clerk verifies Patti’s story that is then released.
Assuming that there is a merchant protection statute in effect, is the store liable to Patti for false imprisonment? a. No, because they would have to falsely charge her causing her to actually be put into prison in order to be liable for false imprisonment. b. No, because stores cannot be liable for false imprisonment if there is a merchant protection statute. c. No, because the store’s investigation and procedures were reasonable. d. Yes, because they had her in a separate room. e. Yes, because they detained her before they determined whether or not she actually took the shoes. . An unconditional promise to perform is known as a(n): a. Irrevocable offer. b. Firm offer. c. Covenant. d. Estopped promise. 9. In an auction when the highest bid has been made and no higher bids are forthcoming, the highest bid is treated as an acceptance in: a. Auctions with reserve, but not in auctions without reserve. b. Auctions without reserve, but not in auctions with reserve. c. In both of these kinds of auctions. d. In neither of these kinds of auctions. 10. A promise to make a gift a. Is just as enforceable as any other promise. b. Is not enforceable. c.
Is not enforceable, and a court can order a gift to be returned. d. May be enforceable if the recipient is a child. 11. Cheryl hired Golden Construction Co. to build a house for her. The plans for the house were complex, and expert workmanship was required. After the house was completed, Cheryl liked it so much that she promised to pay Golden a $4,000 bonus. Later, Golden demanded the money, but Cheryl refused to pay it. Golden sues. What is the most probable result? a. Golden wins; the promise was used to entice Golden to do an outstanding job, which is adequate consideration. b.
Cheryl wins; the promise is based on past consideration. c. Golden wins; the promise is based on past consideration, which is legally sufficient. d. Golden wins; the promise is based on changed circumstances, which makes it enforceable. 12. Sid is a 15-year old sophomore at East High School. He purchases a computer at a local store for a computer class, but wants to return it after using it for a couple of weeks because his classmates have nicer computers than his and he wants to get one of the better models. Sid can: a. Not return the computer because he ratified the contract by using the computer. b.
Not return the computer but only be liable for its fair value if the computer is considered to be a necessary. c. Not return the computer because Sid should not have entered a contract as a minor, and because he did, he will be treated as an adult. d. Be required to return the computer whether he wants to or not because minors cannot enter into contracts. 13. Gerald was a subcontractor, bidding on a contract for XYZ Corp. , the general contractor. When adding up the total of materials and labor, Gerald’s secretary made a clerical error with a total of $45,000 instead of $450,000. Gerald then submitted his bid for $45,000.
XYZ accepted Gerald’s bid of $45,000, mostly because all the other bids were over $400,000. When Gerald learns of his mistake, he tells XYZ that he cannot perform the contract. If XYZ sues to enforce this contract, what is the most likely result? a. The contract is fully enforceable since there was a valid offer and acceptance. b. This is a bilateral mistake, so either party can rescind the contract. c. This is a unilateral mistake, which can usually be rescinded by the mistaking party. d. Because XYZ should have known that this was an error, Gerald will be allowed to rescind the contract. e.
This is a case of economic duress and Gerald will be allowed to rescind the contract. 14. Juan owns a house in a poor area of a large city. A salesman visits his home, selling aluminum siding. Juan buys and signs a contract, which calls for a price of $25,000 to be paid in monthly installments of $500 for 20 years. Juan only earns $700 per month. In addition, Juan’s home is only worth about $35,000. The aluminum siding put on is worth no more than $1,500. Juan speaks and reads very little English and Juan thought he was signing a receipt for a free gift. Which of the following best describes this contract? . The contract is fully enforceable as written. b. The contract is unenforceable because it is unconscionable. c. The contract is unenforceable because it is illusory. d. The contract is unenforceable because it is exculpatory. 15. An offer lapses upon the following except: a. Counteroffer. b. Rejection. c. Detrimental reliance. d. Expiration of reasonable time. e. Death of offeror. 16. On Monday, Cindy says to Ruth, “I will sell you my car for $10,000. You have until Friday to decide. ” As of Wednesday, Ruth has paid nothing to Cindy and has not indicated if she is interested in buying the car.
At this point, which is true? a. Cindy can revoke the offer on Wednesday. b. Ruth must reject Cindy’s offer by Friday, or else she has bought the car. c. Cindy cannot revoke the offer on Wednesday. d. Ruth could send $250 to Cindy which would make the offer irrevocable. d. The bank can repossess the car, but cannot collect money from anyone. 17. Which of the following activities by an administrative agency requires public notice and participation? a. Substantive rule making only. b. Substantive rule making and interpretive rule making only. c. Substantive rule making and statements of policy only. d.
Statements of policy only. e. Substantive rule making, interpretive rule making and statements of policy. 18. Julie buys an auto from John when she is 17. When she turns 21, Julie decides that she does not want the automobile. The age of majority in Julie’s state is 18. Can Julie disaffirm this contract? a. Yes; all contracts made while a minor may be disaffirmed. b. Yes; Julie has a “reasonable time” after reaching majority to disaffirm this contract, and she acted within a “reasonable time. ” c. No; Julie had a “reasonable time” within which to disaffirm the contract, but a “reasonable time” has passed. d.
No; to disaffirm the contract, Julie must have acted before she turned 18. Now it is too late. 19. f a contract is not enforced on the basis of the Statute of Frauds, the court has based its decision on the presence of which type of fraud: a. Fraud in the inducement. b. Fraud in the inception. c. Fraud by concealment. d. The decision could have been based on the presence of any of these three types of fraud. e. The decision could not have been based on the presence of any of these three types of fraud. 20. Which of the following is not true about international law? a. There are multiple sources of international law. b.
The International Court of Justice has the final authority in all international disputes. c. There is no international executive branch to enforce international law. d. In many instances, nations are not obligated to follow the international law as set out by international organizations. 21. Identity fraud typically occurs when: a. Someone uses a fictitious name in place of her real name. b. Someone steals a ticket with a name associated with it, such as an airline ticket, and uses it in place of the original owner. c. Someone uses the name and other identifying information of another person to engage in fraudulent activity. . Someone operates under two or more different names, at least some of which are fictitious. 22. Bob sells Frank some cocaine, but Frank thinks he received baking soda. In this case: a. This contract is voidable by either party because it is illegal. b. The court in this suit could impose a criminal penalty against either party. c. Frank will win the suit because he is a victim of fraud. d. The court won’t order either party to pay the other, regardless of whether Frank has already paid Bob. 23. Generally speaking, the contract of a minor: a. Must be in writing. b. Is not enforceable by the minor. c.
Is void. d. Is voidable at the minor’s option. 24. Henry has applied to the Liquor Control Board for a retail liquor license in his state. In his state there are no set quotas on the number of liquor licenses granted, but applicants must pass a character and background check. Henry is 45 years old, and has no criminal record except for a couple of vandalism offenses when he was a juvenile. Henry’s application for a liquor license was turned down. Henry knows of one holder of a liquor license who was granted the license despite a domestic violence conviction four years before applying for the license.
Henry wants to contest the denial of his application. Which of the following best describes Henry’s situation? a. The decisions of agencies in granting licenses are generally not appealable. b. Henry will be entitled to the license if he can show that the domestic violence charge is a more serious crime than his vandalism charges. c. Henry can appeal the decision, but only within the agency. d. Henry can appeal the decision to a court, and the court will likely order a license to be granted. e. Henry can appeal the decision to a court, but courts are generally reluctant to reverse agencies’ decisions on these matters. 5. An equal protection challenge to a statute that treats adults of different ages differently would be decided under: a. Intermediate scrutiny. b. Majority scrutiny. c. Strict scrutiny. d. Rational basis. e. Limited scrutiny. Essay questions: 26. Under the Social Security laws in effect through 1999, retirees up through age 69 lost a portion of their Social Security benefits based on amounts of any earned income. Retirees aged 70 and over had no reduction in benefits regardless of the amount of earned income. Assume that a 65-year-old retiree brought an equal protection challenge to this statute.
Discuss the reasoning and probable outcome of such a case. There are three tests. Which test mostly likely applies and explain why the two tests you did not apply weren’t applicable in this case. 27. The city of Greenhills is an old city of approximately 60,000 residents, which has recently become very popular as a retirement city. Many of the city residents are concerned about the increased crowding caused by the large numbers of persons moving into the city. Residents are worried as well about speculation in the local residential real estate market.
In response, the city passes the following ordinance: a. All newly constructed homes will pay a property tax rate twice the regular tax rate for the first five tax years that the residence is subject to property tax. b. In addition, all persons who first become a resident of Greenhills after January 1, 2000, will pay property tax at twice the regular rate for the first two years that such resident owns property in Greenhills. c. In the event that a new resident purchases a new home in Greenhills, that person will pay property tax at twice, not four times, the regular rate.
Thus if either the residence is new, or the person is new, the tax rate is double, but under no circumstances will the rate be four times, even if both reasons for a double tax rate are met. A nonresident who owns a vacant lot on which she plans to build a home has challenged this ordinance as being unconstitutional violation of the equal protection statute. There are three tests. Which test mostly likely applies to each situation and why and explain why the two tests you did not apply weren’t applicable in each situation. 28. Dan had the brakes on his car repaired at Bob’s Brake Service.
One of the wheels was improperly reattached at Bob’s Brake Service. The next day Dan was driving at about 40 miles an hour when an oncoming car driven by David made a sudden left turn just in front of Dan. Dan attempted to avoid hitting David’s car, but hit the car anyway. In the accident, the improperly attached wheel flew off and struck Penny who was on the sidewalk. Penny was carrying a box with a family heirloom crystal dish to an appraiser. When the tire struck Penny it knocked the box out of her hand and destroyed the dish. In addition, the dress Penny was wearing was destroyed and she incurred medical expenses.
Penny sues both David and Bob to recover the following: Medical Expenses $1,000 Value of Dress 500 Value of Dish 3,000 Emotional Distress 5,000 (Due loss of family Heirloom dish) Assuming that the accident was solely David’s fault, discuss Penny’s two cases against the defendants. What could she collect or not collect and from whom and why? Must discuss using the theories of negligence. 29. Bob is at the Boston Biceps Bodybuilding Club riding an exercise bike. Bob wants to change the channel on the television that is mounted high on a nearby wall.
He reaches for the remote control device and finds that another member has accidentally taken the remote control and left behind a cellular phone. Bob drags the exercise bike over to the television. He stands on the seat of the exercise bike in order to reach the television, but the seat post breaks and Bob falls to the floor. Bob is injured and cannot control his temper. He puts his entire 170 pounds into destroying the bike and throws it across the room against the wall, breaking off several pieces, with the handlebars landing on the running track.
Half an hour later, another patron, Randy, trips over the handlebars as he is running on the track and is injured. Randy and Bob both sue the manufacturer and the health club under products liability for their injuries. Discuss their cases using the theories of negligence. 30. One night after drinking a couple of beers at a brewpub, Mo says to Curly, “We should get into the cocaine business at the Chicago Cubs games next year. ” Curly replies that it sounds like it might be a good thing to do and that they should look into it during the winter.
A police officer at the next table over hears the conversation and arrests MO and Curly for criminal conspiracy. Are they guilty of conspiracy? Why or why not? 31. Big Green company is considering introducing a new product to replace an existing product. The new product would result in increased revenues, but slightly lower overall profits because the product will cause injury to a few users and Big Green will compensate persons who are injured. Which theory of social responsibility did the Big Green company make its decision to introduce its new product? Explain why you picked the particular theory ver the theories you did not pick. 32. A club in England, dedicated to the proposition that a man should be able to fly without artificial power, offered $10,000 to the first person who could devise a manned vehicle, which could fly 500 yards using only power from the pilot’s muscles. John has been working for 10 years on this project and has finally invented an airplane that would win the prize. The vehicles are tested each May 1 to see if they qualify. John has publicly boasted that he has developed the winning vehicle. In April, before John can prove that his aircraft meets the qualifications, the club revokes the offer.
John sues. Assuming that England uses the same law as the U. S. , discuss John’s chances of success. 33. Cody offered to sell certain land to Daniel for $50,000, by a letter, which was signed by Cody. The letter specified that the deal was to be closed by Nov. 1, 2001, and that the entire payment was to be in cash. Daniel sent a letter saying that he accepted the offer, but his letter also stated that payment was to be made one-half at closing and one-half thirty days later. As of March 2002, Cody had not responded. Discuss in detail whether there is a valid contract between Cody and Daniel. 35.
What is a gratuitous promise? Why does the law generally not enforce gratuitous promises? Are there some gratuitous promises, which the courts should enforce? What doctrine could be used to enforce gratuitous promises and why? 35. Bob is 16 years old and recently purchased a car from Subaru Motors. His father cosigned on the vehicle purchase agreement. In May, Bob started a lawn care business and purchased 2 lawn mowers from Store A (his father did not cosign on this contract). Bob used both the lawn mowers for several months without any problems. Then he began having trouble with the mower he bought from Store A.
The store made repairs and the mower seems to be working properly, although he was without that mower for two weeks. Although he has had no more troubles with the mower from Store A, he recently learned that the price of $800 that he paid was $200 more than the mowers were worth. It is now October (moving season has ended) and Bob has decided that he wants to disaffirm both of the lawn mower contract and the contract for the purchase of the car, since he no longer will be making any money to make the car payments. Discuss the rights that Bob has, the rights that Subaru Motors has and the rights that Store A has. The End!!!!!!!!!!