Ethics

Question 1
1. In the tort of negligence, the doctrine of proximate cause:
refers to the jury approximating degrees of fault among culpable parties
protects careless defendants from the foreseeable consequences of their actions
refers to the jury approximating the extent of emotional distress damages suffered by an aggrieved party
protects careless defendants from the unforeseeable consequences of their actions.
0.5 points
Question 2
1. Adam and Beth form A&B, LLC, a limited liability company (LLC). One advantage of an LLC is that it may be taxed as
a corporation.
a partnership.
a non-profit entity.
a syndicate.
0.5 points
Question 3
1. Fast Ed, a stock trader, engages in a “pump and dump” scheme whereby he goes into Internet chat stock rooms and “hypes,” praises, and extols certain stocks he owns. He says such things as: “This is the best stock ever.” “This stock is great and will make us a fortune.” “You MUST own this stock in your portfolio.” He does repeatedly and uses several aliases. Then, when Fast Ed has “pumped up” the price of the stock to a certain level, he calls his broker to sell, that is, to “dump,” the stock. He makes a lot of money with this scheme. Fast Ed is likely acting:
Illegally pursuant to the common law tort of deceit since he did not disclose the aliases.
Illegally pursuant to the Securities Act of 1934 for engaging in stock manipulation.
Legally since he was careful not to make any misrepresentations of material fact regarding the stock, and just used “puffing” or sales talk.
Legally since everyone knows not to put any credence behind what people say in chat rooms, especially about stocks, and thus “Let the buyer beware.”
0.5 points
Question 4
1. National Tools and Metals, Inc., a U.S. company, sells various hinges, locks, and locking devices. The company advertises on the packages that these locks are “Made in the USA” as well as that they are “American Made.” However, in reality, many of the parts to these products were not made in the U.S. but rather in China. The Federal Trade Commission (FTC) files a lawsuit against the company for deceptive advertising. Which of the following statements is the most accurate one?
a. The common law legal standard for fraud is easier to prove than the FTC” standard for deceptive advertising.
b. The FTC’s standard for deceptive advertising is easier to prove than the legal standard for common law fraud.
c. National Tools and Metals, Inc. has the burden of proof to demonstrate that it is innocent of any fraudulent wrongdoing.
d. None of the above.
0.5 points
Question 5
1. Carol files a suit against Don. Before going to trial, the parties meet with their attorneys to represent them, to try to resolve the dispute without involving a third party. This is
arbitration.
litigation.
mediation.
negotiation.
0.5 points
Question 6
1. Assume that there is a provision in the Colorado state constitution that conflicts with a federal statute passed by the U.S. Congress and enacted into law. Which is TRUE?
a. The Colorado constitutional provision will prevail since states existed before the national government; and thus the federal law is invalid.
b. The federal statute will control due to the Supremacy Clause in the U.S. Constitution and thus will make the state constitutional law provision invalid.
c. In Colorado, the state constitutional provision will prevail; but the federal statute will apply in the other 49 states.
d. Whichever was passed first will control over the other in Colorado.
0.5 points
Question 7
1. The city of Lancaster, California, was attempting to develop its local economy. Costco, the giant retailer, wanted to expand its store into the next-door space occupied by the 99 Cents Only Store, which leased the premises. Costco informed the city that it would move to another neighboring city if it could not expand. So Lancaster attempted to buy out the lease of the 99 Cents Only Store, but the store refused. Consequently, Lancaster used its eminent domain power to condemn the 99 Cents Only Store property in order to turn the property over to Costco. The city explained that blight might ensue if Costco left. The city also noted that the 99 Cents Only Store had generated only about $40,000 a year in sales taxes, whereas Costco had generated more than $400,000. The city is willing to pay fair market value for the property. Whereupon, the 99 Cents Only Store sued the city to block the taking, arguing that the city was acting unconstitutionally. What is the most accurate statement regarding this lawsuit?
A. The city prevails since preventing blight, enhancing development, and increasing the tax base are legitimate rationales according to the Supreme Court for the government to exercise eminent domain.
B. The city prevails since a city or any government entity can seize private property for any purpose so long as just compensation is paid.
C. The 99 Cents Only Store prevails since eminent domain can only be used by government to seize property for airport construction or expansion.
D. The 99 Cents Only Store prevails since anti-trust law will prevent a large “big-box” retailer from driving out a small business from a community.
0.5 points
Question 8
1. Omega Sales, Inc., promotes employees on the basis of color. Employees with darker skin color are passed over in favor of those with lighter skin color, regardless of their race. This is prohibited by
the Americans with Disabilities Act of 1990.
the Equal Pay Act of 1963.
Title VII of the Civil Rights Act of 1964.
none of the above.
0.5 points
Question 9
1. Lou and Paula enter into a contract. Lou later tells Paula that if she does not perform her part of the deal, he will sue her. Paula can
avoid the contract on the basis of duress.
avoid the contract on the basis of fraudulent misrepresentation.
avoid the contract on the basis undue influence.
not avoid the contract.
0.5 points
Question 10
1. Carla Contractor Company contracts to build a house for Lisa for $500,000. The house is completed on time and is in conformity with contract specifications except that Carla’s workers forgot to put in Kohler plumbing fixtures in the master bathroom and instead mistakenly put in another slightly less expensive and not as prestigious brand. Otherwise the house is fine and is in conformity with the contract, but now Lisa refuses to pay for the construction of the house, saying the performance was defective due to the mistaken fixtures. What is the likely legal result of this dispute?
a. Lisa is discharged from any and all contract responsibility and does not have to pay anything and can successfully sue Carla for breach of contract.
b. Lisa can sue and prevail since under the Uniform Commercial Code Carla’s performance was not perfect.
c. Lisa must pay Carla the agreed upon contract price minus an amount to correct the defect since the “substantial performance” doctrine of the common law prevails.
d. Lisa can sue for “pain and suffering” damages since she was stressed out by the “inferior” plumbing fixtures.
0.5 points
Question 11
1. Lee, a salesperson for Midsize Corporation, causes a car accident while on business. Lee and Midsize are liable to
all those who were injured.
only those who were uninsured.
only those whose injuries could have been reasonably foreseen.
only those with whom Lee was doing business.
0.5 points
Question 12
1. Dan and Eve sign a contract under which Dan agrees to repair Eve’s computer for $150. Later, they agree that Eve will pay the $150 directly to Dan’s creditor, First State Bank. The bank is
a delegatee.
an assignee.
an incidental beneficiary.
an intended beneficiary.
0.5 points
Question 13
1. Duardo promises to pay Joey, a boy in the neighborhood, $100 to mow and to fertilize the lawn to and to trim the shrubs. Joey says nothing but promptly commences work. Just before Joey is finished, Duardo changes his mind and revokes his offer and cancels his promise. Under the traditional common law, what is the likely legal result?
There is no contract since the offer was revoked before acceptance but Joey probably will get quasi-contract relief.
Joey will prevail in a lawsuit for fraud or deceit against Duardo.
Joey will win a breach of contract lawsuit against Duardo and receive the $100 plus emotional distress damages.
The state will prosecute Duardo for attempted embezzlement.
0.5 points
Question 14
1. National Tools and Metals, Inc., a U.S. company, sells various hinges, locks, and locking devices. The company advertises on the packages that these locks are “Made in the USA” as well as that they are “American Made.” However, in reality, many of the parts to these products were not made in the U.S. but rather in China. The Federal Trade Commission (FTC) files a lawsuit against the company for deceptive advertising. Which of the following statements is the most accurate one?
a. The common law legal standard for fraud is easier to prove than the FTC” standard for deceptive advertising.
b. The FTC’s standard for deceptive advertising is easier to prove than the legal standard for common law fraud.
c. National Tools and Metals, Inc. has the burden of proof to demonstrate that it is innocent of any fraudulent wrongdoing.
d. None of the above.
0.5 points
Question 15
1. Donnie makes an offer to Marie to sell his used racing bicycle for $200. Marie responds by saying “I accept at $150.” Donnie refuses and says the price is firm. Marie then says “OK, I accept at the original price.” However, Donnie sells the bike to a third party; whereupon Marie sues Donnie for breach of contract. Who is likely to prevail?
a. Marie since she accepted Donnie’s offer at $200.
b. Marie since her initial response was merely an “invitation to offer.”
c. Donnie since his original offer was terminated by Marie’s counteroffer.
d. Donnie since the court would void the entire contract since $200 for even a used racing bike does not seem like a fair price.
0.5 points
Question 16
1. Bob bets Carl on the outcome of the SuperBowl. Gambling on sports events is illegal in their state. This wagering agreement is
not enforceable unless there is an admission as to its existence
voidable if one party is minor
valid if the bet was a fair one with proper “Las Vegas odds”
void.
0.5 points
Question 17
1. Pat goes to the Cosmic Runners Supply Store in Santa Cruz, California. The sales person shows Pat some running shoes and says, “In a race, these shoes will pick up the cosmic energy from the runners around you and channel it into your legs. This transfer of energy causes everyone with these shoes to run twice as fast as in normal shoes.” Yet in Pat’s next race, she finishes last; and then she sues the store and the sales person for common law fraud. What would be the likely result of such a lawsuit?
a. Pat would win since the statement was not true.
b. Pat would lose since her reliance on the statement was not justified as reasonable.
c. Pat would win if she could prove that the sales person intended to deceive her.
d. Pat would win since a finding of justifiable reliance is not needed under the FTC’s regulatory standard for false and deceptive advertising.
0.5 points
Question 18
1. Paul hires Janice, a college student, as a cash register employee at his sporting goods store. A vendor, Vinnie, comes in to sell Paul some office supplies. Yet Paul is very busy dealing with a unhappy customer. The vendor is insistent, however. So Paul turns to the vendor, and, pointing to Janice, says: “See my agent. She will take care of the order.” Whereupon, Janice deals with Vinnie, and then Janice in a writing commits to buy a large amount of office supplies from Vinnie Vendor for Paul. Paul claims that he is not liable for the order because Janice was not his agent and “just a college kid.” The likely result of any lawsuit between Paul and Vinnie will be:
Paul will prevail since Janice was merely an employee who had no express authority to act as an agent.
Vinnie will prevail if he can convince a jury that Paul granted apparent agency authority to Janice by his words and conduct toward Vinnie and that Vinnie reasonably believed that Janice was Paul’s agent.
Paul will prevail if Janice was a minor.
Paul will prevail if he can convince a jury that Vinnie’s grandfather was once a member of the Gambino Organized Crime Family of NYC.
0.5 points
Question 19
1. Greg enters into a contract with Holly that indirectly benefits Ira, although neither Greg nor Holly intended the result. Ira is
a delegatee.
an assignee.
an incidental beneficiary.
an intended beneficiary.
0.5 points
Question 20
1. Barb owns Barb’s Salon, which owes back rent to Capital Properties, a landlord. Barb agrees to pay a percentage of her profit each month until the debt is paid. Capital Properties is
Barb’s creditor and partner.
Barb’s creditor only.
Barb’s partner only.
neither Barb’s creditor nor partner.

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