DSST Business Law II Practice Questions Answer Key
. C: An LLC, or a limited liability company, protects someone from liability by shielding their personal assets from company assets as long as they do not co mingle personal and business accounts and meet other related legal requirements. This is the best structure for Alexander because he will be protected but does not have to appoint a board of directors or pay annual dues associated with a corporation.
2. D: When a contract is created, both sides must give consideration in order for the contract to be binding. Ms. Smith gave consideration in the form of the promise to pay the $200. However, her son did not make a promise or offer any consideration for the contract. Therefore, the contract cannot be enforced against Ms. Smith because she received no consideration of any sort, either in the form of a promise from her son or otherwise, for her promise.
4. C: An agency law doctrine known as respondeat superior stipulates that the master (in this case, the employer) can be held responsible if the employee’s actions are performed in the course of routine work duties. Because Clark was a delivery person, he was acting in the scope of employment when he was delivering the package. Therefore, the employer can be held liable because Clark was acting as their agent. Although choice D may be one reason why Mary would want to sue the company (instead of or in addition to Clark), it is not the legal reason why Mary is allowed to sue.
5. A: The implied warranty of merchantability found in Article II of the Uniform Commercial Code (UCC) stipulates that a product must conform to reasonable expectations. Buyers purchasing a toaster likely have a reasonable expectation that the toaster will in fact toast their bread. Because the toasters did not serve this purpose, they breached the implied warranty of merchantability. The implied warranty of fitness refers to an item being suitable for a particular purpose and is usually applied when a seller selects goods for a buyer, and the implied warranty of title relates to the sellers’ rights to sell the goods in the first place.
6. B: When two people own property as joint tenants with right of survivorship, the property automatically passes to the second person when the first person dies. A whole undivided interest passes to the second person. Therefore, when Kelly died, the property passed to Kara without going through probate, and Kelly’s provision in her will leaving the estate to Jim was rendered invalid. Because Kara owned the property as a fee simple absolute after Kelly died, she was then entitled to will it to whomever she wanted. She willed it to Matt, so Matt has a full ownership interest in the property.
7. C: The statute of frauds requires contracts to be in writing if they will take longer than two years to complete. Because this contract was a contract for three years of sandwich delivery, it is not a valid and enforceable oral contract. As long as Jesse’s Cafe doesn’t stipulate to the contract in depositions or legal documents and they raise a statute of frauds defense in a timely manner, Jesse’s Cafe will be unable to sue. There was consideration for the contract, however, because both sides made a promise (the cafe to deliver the sandwiches and the deli to pay for them).
8. C: In order to own property as joint tenants with right of survivorship, there must be unity of time, title, interest, and possession. This means that each party must acquire their interest in the property at the same time, they must have the same title, they must have the same interest, and they must have equal rights to possession. These conditions are not met here. When these conditions are not met, the ownership structure becomes tenancy in common by default, regardless of the language that Becky used in an attempt to create a joint tenancy.
9. D: Because the partnership was not a limited liability partnership (LLP), the partners and the company are viewed as one-in-the-same. Each partner is liable for his or her own actions, as well as for the actions of the other partners. Because Tim and Tina were partners, Tim is responsible for Tina’s theft. He can be held jointly liable with Tina and sued. He can also be sued individually for Tina’s actions. It doesn’t matter whether Tina can be found or not. If Tina is found, Tim can sue Tina for damages he incurred, but he will still have to pay if he himself is sued by the victimized customers.
10. A: The contract stated that Marissa would sell both the boat and towing hitch. Susan gave consideration when she agreed to and made the $600 payment. The fact that Marissa did not read the contract was irrelevant, as contract law imposes a duty to read. Under the duty to read, if a person signs a contract, that person is bound to its terms (except in certain very limited situations in which especially egregious or disadvantageous terms are written in an incomprehensible manner).