Part I

1) Danny and Marion Klein were injured when an aerial shell at a public fireworks exhibit went astray and exploded near them. They sued Pyrodyne Corp., the pyrotechnic company that was hired to set up and discharged the fireworks, alleging, among other things, that the company should be strictly liable for damages caused by the fireworks display. Will the court agree with the Kleins?
a. Yes, because any time a person ignites aerial shells with the intention of sending them aloft to explode in the presence of large crowds knows that injuries can occur.
b. Yes, because no matter how much care pyro technicians exercise they cannot eliminate the high risk inherent in setting off powerful explosives such as fireworks near crowds.
c. No, because anyone who attends a fireworks display assumes the risk for the potential of injury that may occur.
d. No, because all six of the factors needed to prove strict liability was not present.

2) Blue Cross and Blue Shield insurance companies (the Blues) provide 68 million Americans with health-care financing. The Blues have paid billions of dollars for care attributable to illnesses related to tobacco use. In an attempt to recover some of this amount, the Blues filed a suit in federal district court against tobacco companies and others, alleging fraudulent misrepresentation, and negligence among other things. The Blues claimed that beginning in 1953, the defendants conspired to addict millions of Americans, including members of Blue Cross Plans, to cigarettes and other tobacco products. The conspiracy involved misrepresentation about the safety of nicotine and its addictive properties, marketing efforts targeting children, and agreements not to produce or market safer cigarettes. The defendants’ success caused lung, throat, and other cancers, as well as heart disease, stroke, emphysema, and other illnesses. The defendants asked the court to dismiss the case on the grounds that the plaintiffs did not have the standing to sue. Do the Blues have standing to sue?
a. No, because the any injury to the plaintiffs was indirect and too remote to permit them to recover.
b. No, because Blue’s injuries would be derivative of the smokers personal injuries and thus be impossible to separate from the smokers injuries.
c. Yes, because the injuries and damages asked for from Blue were different than those suffered by smokers, in that they are asking to recover for monies expended in medical claims, and thus could be the basis of a case for the court to determine.
d. Yes, because Blues argue that the cigarette industry involved them in a conspiracy to addict smokers and thus there injuries were foreseeable and directly related attributable to the defendants behavior.

3) The First Amendment protects Marco and others from
a. Dissemination of obscene materials and speech that harms their good reputations or violates state criminal laws.
b. Dissemination of obscene materials only.
c. Speech that harms their good reputations or violates state criminal laws only.
d. Neither dissemination of obscene materials nor speech that harms their good reputations or violates state criminal laws.

4) You see a spot in the market for a video game outlet. You open “GameBox” to profit from local sales, rentals, and exchanges. Hott Games Company promises to ship you a certain assortment of games and gear for your grand opening. Despite the contract, Hott does not ship as agreed, and your opener is a bust, costing you a lot of money. Which remedies are available to you?
a. Money damages
b. Specific performance
c. Cancellation of the contract
d. All of the above

5) Three –year- old Randy Welch climbed up to a shelf and picked up a disposable butane cigarette lighter. Randy then used the lighter to ignite a flame, which set fire to his pajama top. Welch and his parents brought a negligence suit against the lighter’s manufacturer claiming that the defendants had a duty to put child safety features on the lighter. Scripto-Tokai Co., the defendant raised the defense that the risks attending the lighter were sufficiently “open and obvious” that the manufacturer did not need to warn of those risks. If you were the judge, how would you decide this issue?
a. In favor of Scripto because the open and obvious danger rule says a manufacturer is liable only for defects which are hidden and not normally observable.
b. In favor of Scripto because everyone knows that lighters are dangerous and should be kept out of the hands of children.
c. Welch because he put the lighter out the reach of his child in an effort to protect him from potential danger and he was hurt anyway.
d. Welch because under strict liability the lighter company knew that the lighter was inherently dangerous and should be held responsible.

6) Red Owl Stores, Inc. induced the Hoffman’s to give up their current successful business to run a Red Owl Franchise. Although no contract was ever signed, the Hoffman’s incurred numerous expenses in excess of $5,000 based on Red Owl’s representations. When the deal ultimately fell through because of Red Owl’s failure to keep its promise concerning the operation of the franchise agency store, the Hoffman’s brought suit to recover their losses from the business they left behind and their out of pocket expenses on the Red Owl project. Will the Hoffman’s recover any or all of their money?
a. No, the Hoffman’s cannot recover anything because the Statute of Frauds should apply.
b. No, because the business they left behind was not part of the contract with Red Owl.
c. Yes, the can recover everything under the doctrine of promissory estoppel.
d. Yes, they can recover their out of pocket expenses on the Red Owl project because they relied to their detriment on Red Owl.

7) Owens, a federal prisoner, was transferred from federal prison to the Nassau County Jail pursuant to a contract between the U.S. Bureau of Prisons and the county. The contract included a policy statement that required the receiving prison to provide for the safekeeping and protection of the transferred federal prisoners. While in the Nassau County Jail, Owens was beaten severely by prison guards and suffered lacerations, bruises, and a lasting impairment that caused blackouts. Can Owens, as a third party beneficiary, sue the county for breach of its agreement with the U.S. Bureau of Prisons?
a. Yes, because the intention to benefit a third party may be gleaned from the contract as a whole.
b. No, because while the contract implies the intention to benefit a third party it does not specifically identify which party.
c. Yes, because the contract was made to benefit third parties and it is not necessary to identify the third party.
d. No, because Owen was a mere incidental beneficiary to the contract.

8) Patricia Aiken suffered a heart attack and was hospitalized at Phoenix Baptist Hospital and Medical Center, Inc. Later she passed away. At the time of her admission, the Aiken’s told the hospital that they did not have the money to pay for medical care. At the same time, Patricia’s husband, Thomas, signed an agreement to pay her medical expenses. He did not read what he signed, no one explained the agreement and he later claimed that he was so upset that he couldn’t remember signing anything. When the bills were not paid, the hospital filed suit. Will the Aiken’s have to pay the hospital?
a. Yes, because the hospital relied on the signed agreement and performed.
b. No, because while there was a written agreement the performance resulted in Mrs. Aiken’s demise.
c. Yes, because even though the hospital was aware of the Aiken’s lack of funds, Mr. Aiken should have known when he took his wife to the hospital that they did not give care for free.
d. No, because the agreement was an adhesion contract obtained under circumstances that made it unenforceable and it was not explained to him at the time by the hospital.

9) Steven Lanci was involved in an automobile accident with an uninsured motorist. Lanci was insured with Metropolitan Insurance Co., although he did not have a copy of the insurance policy. Lanci told Metropolitan that he did not have a copy of the policy and entered into negotiations with them in the meantime. Ultimately Lanci settled for $15,000, noting in a letter to Metropolitan that this was the “sum you represented to be the…policy limits applicable to the claim.” After signing a release, Lanci learned that the policy limits were actually $250,000 and he refused to accept the settlement proceeds. Lanci argued that the release had been signed as a result of a mistake and therefore is unenforceable. Should the court enforce the contract?
a. Yes, because Lanci as a reasonable person should have known what the policy limits were.
b. Yes, because Lanci entered into the negotiations knowing that he did not have a copy of the policy and he assumed the risk of being unprepared.
c. No, because ethically Metropolitan should have given him another copy before the negotiations.
d. No, because Metropolitan knew the policy limits, knew that Lanci thought them to be $15,000 and that he entered into the contract because of that mistake of a material fact.

10) Southard was stranded in Hawaii as a result of an airline strike. He had purchased a round trip ticket before leaving his home in Denver. He sued the union for tortuous interference with his contract with airline and sought to recover the additional expense he incurred on another airline. Was the union liable to Mr. Southward?
a. The union was liable because they were the proximate cause of Mr. Southward's need to spend additional monies to return home.
b. The union was liable because they intentionally tried to prevent Mr. Southward from returning home.
c. The union is not liable because the strike was legal and therefore one of the permitted interferences with a contractual or business relationship.
d. Both A and B

11) Glen Grove brought a 1936 Pontiac from Bernard Stanfield. Stanfield signed the certificate of title, which stated that the car was sold for $1,000. No other terms of sale were mentioned in the certificate, and none were incorporated by reference. Three years later, Stanfield filed suit against Grove in a Missouri State Court, claiming that Grove still owed $9,000 for the price of the car. At trial, Stanfield testified that he and Grove had an oral agreement by which Grove was to pay $1,000 for the “title document” and $9,000 for the actual car. The court entered a judgment for Stanfield. What will happen on appeal?
a. The court will uphold the entrance of the parole evidence and keep the verdict for Stanfield intact.
b. The court will uphold the verdict for Stanfield because the writing was not sufficient enough to constitute a written contract so oral evidence can be heard to explain the terms of the agreement.
c. The court will overturn the verdict of the lower court because the title is a legally sufficient document to form a contract. Oral evidence should not be allowed to amend the terms of the contract.
d. The court will overturn the verdict because any reasonable person would have not turned the title over to someone else without getting all his money. Giving more money to Stanfield would unjustly enrich him.

12) John Agosta and his brother Salvatore had formed a corporation, but disagreements between the two brothers caused John to petition for voluntary dissolution of the corporation. According to the dissolution agreement, the total assets of the corporation, which included a warehouse and inventory, would be split between the two brothers by Salvatore’s selling his stock to John for $500,000. The agreement was approved, but shortly before payment was made, a fire destroyed the warehouse and inventory which were the major assets of the corporation. John refused to pay Salvatore the $500,000, and Salvatore brought suit against him for breach of contract. Will John win?
a. Yes, because the value of the stock he is purchasing is not worth $500,000 anymore due to the fire.
b. Yes, because the court cannot require him to specifically perform to Salvatore’s unjust enrichment.
c. No, because the agreement was for the sale of stock not a functional business.
d. No, the subject matter of the agreement, the shares of stock was not destroyed in the fire. The doctrine of impossibility of performance does not apply and John cannot avoid his contract.

13) Southeast Shipping Company challenges an Alabama statute, claiming that it unlawfully interferes with interstate commerce. A court will likely
a. balance Alabama's interest in regulating against the burden on interstate commerce.
b. balance the burden on Alabama against the merit and purpose of interstate commerce
c. strike the statute.
d. uphold the statute.

14) Owen hires Paula under a contract that reserves to Owen the right to cancel the contract on thirty days’ notice at any time after Paula begins work. This promise is
a. enforceable.
b. and accord and satisfaction.
c. an unenforceable contract.
d. a release.

15) Nu Produx Inc. (NPI) agrees to sell 100 cell phones to MYTALK Cell Service. NPI identifies the goods by marking the crate with red stripes. Before the crate is shipped, an insurable interest exists in
a. not NPI or MyTalk.
b. NPI and My Talk.
c. NPI only.
d. My Talk only.

16) Jay is seeking to avoid performing a promise to pay Karen $150. Jay is claiming a lack of consideration on Karen’s part. Jay will win if he shows that
a. before Jay’s promise, Karen had already performed the requested act.
b. Karen’s only claim of consideration was the relinquishment of a legal act.
c. Karen’s asserted consideration is only worth $50.
d. the consideration to be performed by Karen will be performed by a third party.

17) Eagle Products, Inc, assures Fine Retail Corporation that its offer to sell its products at a certain price will remain open. This is a firm offer only if
a. Fine (the offeree) gives consideration for the offer.
b. Fine (the offeree) is a merchant.
c. the offer is made by Eagle (a merchant) in a signed writing.
d. the offer states the time period during which it will remain open.

18) Ron orally engages Dian to act as agent. During the agency, Ron knows that Dian deals with Mary. Ron also knows that Pete and Brad are aware of the agency but have not dealt with Dian. Ron decides to terminate the agency. Regarding the agency notification of termination
a. Dian need not be notified in writing.
b. Dian’s actual authority terminates without notice to her of Ron’s decision.
c. Dian’s apparent authority terminates without notice to Mary.
d. Pete and Brad must be directly notified.

19) Dana assigns to Evon a contract to buy a used car from Francine. To be valid, the assignment must:
a. be in writing and be signed by Dana.
b. be supported by adequate consideration from Evon.
c. not be revocable by Dana.
d. not materially increase Francine’s risk or duty.

20) Donna the owner of Eagle Sales, a sole proprietorship, wants to increase the business’s capital without sacrificing control. This can be done most successfully by
a. borrowing funds.
b. bringing in partners.
c. issuing stock.
d. selling the business.

21) Metal Fasteners Company (MFC) is a corporation. MFC has the implied power to
a. amend the corporate charter.
b. declare dividends.
c. file a derivative suit.
d. perform all acts reasonably appropriate and necessary to accomplish its corporate purposes.

22) NY Cupcakes, Inc. (NYC), tells Milena, whose business is purchasing for others, to select and buy $2,000 worth of fresh fruit and ship it to NYC’s bakery. Milena buys the goods from Fresh Express and ships the fruit as directed, keeping an account for the expense in NYC’s name. NYC and Milena
a. do not have an agency relationship, because Milena’s business is buying for others.
b. do not have an agency relationship, because Milena did not indicate that she was acting for NYC.
c. do not have an agency relationship, because their agreement is not in writing.
d. have an agency relationship.

23) Bobbi owns Bobbi’s Salon, which owes back rent to Capital Properties, a landlord. Bobbi agrees to pay a percentage of her profit each month until the debt is paid. Capital Properties is
a. Bobbi’s creditor and partner.
b. Bobbi’s creditor only.
c. Bobbi’s partner only.
d. neither Bobbi’s creditor nor partner.

24) Medical Supplies Company issues common stock for sale to the public. If Nero buys ten shares of the stock, he had a proportionate interest with regard to
a. control, earnings, and net assets.
b. control only.
c. earnings and net assets only.
d. none of the above.

25) Dre is starting Eden Garden, a salon and spa for select clients. Dre can avoid all business related legal requirements if he organizes the business as
a. company.
b. a partnership
c. a sole proprietorship
d. none of the above.

Part I 1) Danny and Marion Klein were injured when an aerial she...