UMUC BMGT 380 – Final Exam Business and Professional Programs

| March 13, 2016

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UMUC – The Undergraduate School
Business and Professional Programs
BMGT 380 – Final Exam – Summer 2016
Exam Instructions:
Open book exam: may use textbook, class notes/lectures, class conferences (do not
use the internet as many legal sources are inaccurate; you do not need any material
other than the textbook, class notes/lectures, class conferences to complete the exam).
No time limit on exam.
Submit exam preferably in word doc to assignment folder under “Final Exam”.
The exam is worth a total of 100 points.
Section I. Multiple Choice: 25 questions; each question is worth 2 points
USE THE ANSWER SHEET included at the bottom of this page for answers; copy and
paste it as is, no changes, please. DO NOT COPY Multiple Choice QUESTIONS.
Put letter of correct answer on the answer sheet at the bottom of this page. There
is only one correct answer to each question.
This is an application-oriented exam; you will not find the answer to questions verbatim
in the text. If you believe a question is not covered in any of the assigned materials, you
have missed the issue and need to re-think.

1. Johann and Barton contract for the sale of goods. Later Johann, who is 15
years old, decided to cancel the contract on grounds of incapacity. Which of the
following is true, assuming that neither Johann nor Barton is a merchant?
The common law capacity rules apply, because Article 2 of the UCC has no rules
on the subject in such a case.
The common law capacity rules supersede the UCC rules in all contracts for sale
of goods, even if neither Johann nor Barton is a merchant.
UCC, Article 2, capacity rules apply, because this is a contract for the sale of
goods and UCC rules applies to all contracts for sale of goods.
The Restatement (Second) of Contract rules apply; the UCC does not apply

because neither Johann nor Barton are merchants, and because the Restatement
(Second) supersedes any common law precedent.
2. Contractor and Owner contracted for Contractor to build a house for Owner for
$150,000 to be completed by December 24. Later, without terminating the first
contract, Contractor and Owner agreed to change their agreement by writing and
signing an addendum to the original contract so that Owner will now pay
$175,000 for the house to be built. In return, Contractor promised to build exactly
the same house, but to complete it 2 weeks earlier – by December 10.
Assuming that all other elements of the contract are lawful and present in this
situation, this second addendum contract:

Is not binding because it does not have a liquidated damages clause.
Is not binding because Contractor is merely promising to perform a pre-existing
legal duty to build the house.
Is not binding because Contractor is not giving adequate consideration by merely
promising to complete the house 2 weeks earlier compared to Owner’s paying an
additional $25,000.
Is a validly modified addendum that is a binding contract.

3. Which of the following is most likely to be considered unconscionable, thus
making the contract invalid on the ground of unconscionability?
All terms that are stated in fine print.
Some moderate disparity in bargaining power between the parties.
High pressure sales tactics.
A penalty clause obligating the buyer to pay 5 times the product’s price for failing
to accept the goods when delivered.

4. Office Depot orally agreed with Supplier to buy 475 memo pads at a total price
of $475. Later, Office Depot and Supplier agreed to modify the contract so that
the price of the memo pads would increase to a total of $575. This modification:
Must be in writing and signed by one or both parties.
May be oral because the original contract agreement was oral.
Can be written or oral because the original contract was oral.
Is unenforceable because the terms of the original contract were fully agreed
upon and cannot be modified.

5. Patient went to Clinic to have a chest x-ray. Patient did not sign any written
agreement for the x-ray. Patient and Clinic also did not make an oral agreement
regarding the x-ray. When Clinic billed Patient $325 for the x-ray, Patient refused
to pay. Clinic sued Patient to recover the $325.
Which of the following is true about Clinic’s lawsuit?

Clinic can recover under the quasi-contract theory of promissory estoppel.
Clinic can recover under an implied contract theory.
Clinic cannot recover because there was no express contract.
Clinic cannot recover because Patient did not give consideration for the bargain.

Lena owns and operates a van transportation service. Aunt promised to
buy Lena a new van so Lena sold her old van. Aunt then refused to buy Lena a
new van. Lena cannot work without a van. If Lena sues Aunt to enforce the
promise, the likely result is that the promise will:
Be enforced under promissory estoppel because Lena relied on Aunt’s promise.
Not be enforced as Lena was not unjustly enriched because she did not receive
the van.
Be enforced because the van is a necessity for Lena and all contracts for
necessities are binding and enforceable for all parties.
Not be enforced as Aunt’s promise was merely a gift to Lena.

7. Parker went to a golf practice putting green. He picked up a bucket of golf
balls from the attendant at the entrance to the practice greens. After practicing
for an hour, Parker returned the golf balls and started to leave. A posted sign
stated the cost of each practice session, up to 1 hour, was $15.00. Customers are
expected to pay after completing practice.
Parker refused to pay for the practice time. A court would most likely conclude
Applying the subjective intent test, Parker is not bound to pay for the practice
because there was no verbal agreement about the cost of the practice.
Applying the objective test, there was no clearly communicated offer and
acceptance, thus no enforceable contract; Parker is not bound to pay for the practice.
Parker’s actions implied he intended to pay for the practice; he is legally bound to
pay for the practice.

Parker’s actions implied that he intended to pay for the practice, but he is not
legally bound to pay for the practice because there was no written agreement.
Fruits, Inc. ordered 200 cases of Indian River Orchard navel oranges from
Producer, and requested prompt shipment. Producer promptly shipped to Fruits
200 cases of Clearwater Lake navel oranges. Prior to shipment, Producer did not
notify Fruits that it was shipping nonconforming oranges as an accommodation.
Assuming both Fruits and Producer are merchants, under UCC rules, in this case:
a. There is no valid acceptance by Producer; shipping nonconforming goods acts as a
counteroffer, and thus, cannot constitute an acceptance or create a valid,
enforceable contract.
b. Although Producer shipped nonconforming goods, Fruits is bound to pay the
reasonable value for the 200 cases of nonconforming oranges because Producer’s
shipment constituted a valid acceptance, and a binding contract was formed as soon
as the goods were shipped.
c. Although Producer shipped nonconforming goods, if Fruits accepts and later sells
the Clearwater Lake oranges, Fruits has validly accepted the nonconforming goods
and is bound to pay Producer reasonable value for the non-conforming goods.
d. There is no contract because Producer’s acceptance (by shipping the goods) is not
a mirror image of Fruit’s offer.

9. Someone who recovers damages for breach of contract typically can recover:
a. Only those compensatory damages/losses that can be proven with reasonable
b. For all consequences of the breach, e.g., pain and suffering, whether or not the
damages are foreseeable.
c. Only for foreseeable damages.
d. Punitive damages in addition to punitive damages.

10. Furniture Studio, Inc. offered to sell Homeowner a sofa, 2 chairs, and 4 tables
for the sale price of $2500. The sale furniture was stored in the Furniture Studio
warehouse. Before Homeowner accepted Furniture Studio’s offer to buy the
furniture, a fire in the warehouse destroyed the sofa, 2 chairs, and 4 tables.
a. The destruction of the furniture constitutes an automatic valid revocation of the
b. The fire does not automatically revoke the offer, but because Furniture Studio is a
merchant, the offer was revocable at any time at Furniture Studio’s option.

c. Furniture Studio did not validly communicate a revocation to Homeowner, so
Homeowner still has the option of accepting Furniture Studio’s offer; if Homeowner
accepts the offer, Furniture Studio must obtain similar furniture for Homeowner.
d. Furniture Studio’s offer is automatically revoked by the fire, unless the offer was a
firm offer.
11. Business Owner agreed to sell Buyer his small business and the land on
which the business was situated, for $750,000. Both parties knew at the time the
contract was formed that the business and land were actually worth $1,000,000.
Is this a valid, enforceable contract?

No, because $750,000 is not valid consideration for a business worth $1,000,000.
No, because Business Owner has no pre-existing legal duty to sell his business.
Yes, provided the contract was in writing, in accordance with the Statute of Frauds.
Yes, provided both parties freely consented to the agreement.
Both c. and d. above.

12. Uncle promised to pay Junior $20,000 in exchange for Junior’s promise to
refrain from drinking alcohol until he reaches the legal drinking age of 21. The
agreement is:
a. Not binding because Junior has not given valid consideration to Uncle.
b. Not binding because refraining from drinking alcohol is inadequate consideration
compared to Uncle’s giving $20,000.
c. Not binding because Uncle’s promise is a gift.
d. Binding if all the other elements of a contract are present,

13. Gourmet Goods offered to buy 1000 boxes of cottage cheese from Foods Co.
The offer did not state a specific delivery date. 5 weeks later, Gourmet Goods still
had not heard from Foods, nor had Foods shipped the goods. At this point,
Gourmet Goods:
a. Can do nothing but wait to hear an acceptance or rejection from Foods before
Gourmet Goods can revoke the offer.
b. Can assume that Foods does not intend to accept the contract and is free to buy to
cottage cheese from another supplier.
c. Must accept the goods when they arrive.
d. Must accept the goods when they arrive unless Foods has clearly rejected the offer.

14. On December 13, Scotty gave Zoe, in person, a written offer stating:
sell you my iPad for $250. You may accept via text. Yours truly, Scotty."

"I will

On December 14, Zoe emailed a message of acceptance stating: "I accept your
offer to buy your iPad for $250. Yours truly, Zoe."
Scotty received Zoe’s acceptance on December 15. Is Zoe’s acceptance valid?
a. Yes, because offer and acceptance were written.
b. Yes, because acceptance by text was authorized, but email was a reasonable
means of acceptance under the circumstances.
c. No, because acceptance by text will be considered the only valid means of
d. No, because although acceptance by text was authorized but not required,
acceptance by email was not a reasonable means of acceptance.
15. Widgets, Inc., a merchant, using the company’s standard form printed
contract, made the following written offer to B Company:
“Widgets, Inc., will buy 1000 Model XXX mini-widgets from B Company, to
be delivered by December 1, 2016, via UPS, to our place of business in San Diego,
CA. Yours truly, Salena Hakim, President.”
B Company, a merchant, responded via email as follows:
“B Company will ship, via private B Company truck, 1000 Model XXX miniwidgets to Widgets, Inc. at a price of $100 per widget. Merchandise to be
delivered not later than December 1, 2016. Yours truly, Joan Alverez, B Company
Has a valid, enforceable contract likely been formed?
a. No, because the acceptance is not a mirror image of the offer.
b. No, because the acceptance contains substantially different terms than the original
c. Yes, because the contract is subject to UCC rules regarding formation of a contract.
d. Yes, so long as Widgets, Inc. stated that email acceptance was an acceptable
means of acceptance.

16. Kindle City passed an ordinance that permits souvenir street truck vendors
selling souvenirs for the City’s professional football team on game days to
operate only within 100 feet of the stadium to prevent traffic congestion. The
souvenir street vendors sued the city claiming that the restrictions hindered their
private businesses and were a violation of their equal protection rights as other
businesses and other street vendors are not restricted to operating only in
certain areas within the city.
How would you classify the ordinance?
a. Constitutional; the city has a justifiable purpose for enacting the ordinance and it
does not violate the equal protection rights of street vendors.
b. Constitutional; street vendors are private businesses and thus, not protected by the
equal protection clause of the 14th Amendment.
c. Unconstitutional; the ordinance unduly discriminates against street vendors
compared to other business owners and thus, violates the vendors’ equal protection
d. Unconstitutional; privately owned vendors, unlike public businesses, have a
constitutional right to conduct business in any commercial area of their choice.

17. Bitsy and Buffy, residents of Wyoming, were hiking in Utah when a horse
being ridden on the trail by its owner, Chase, kicked Buffy causing injury. Bitsy
wants Buffy to sue Chase, a resident of Oregon, but Buffy does not want to incur
the cost of a lawsuit.
Identify which of the following best illustrates Bitsy’s legal right to sue on behalf
of Buffy in this case.

a. Bitsy has standing to sue Chase, but only in federal court since this is a diversity
of citizenship case.
b. Bitsy has standing to sue Chase, but only in Utah because neither Wyoming nor
Oregon meet the minimum contacts test for personal jurisdiction.
c. Bitsy does not have standing to sue Chase in Wyoming, Utah or Oregon.
d. Bitsy does not have standing to sue Chase because Bitsy is not a resident of
Utah where the injury to Buffy occurred.

18. Bernard, a drug store owner, and Leonardo, a first aid products supplier,
signed a contract in which Bernard agreed to purchase from Leonardo all the
band aids needed for one year for his drug store. The contract contained a
clause stating that if a dispute arose, the parties agreed to submit to binding
arbitration to resolve the dispute. After 6 months, a dispute arose under the terms
of their contract. Rather than submit to arbitration, Bernard filed a lawsuit
against Leonardo to collect $10,000 in damages. Most likely the court will:
a. Hear the lawsuit because Bernard cannot be compelled to submit to binding
arbitration; he is constitutionally entitled to a jury trial if he requests a trial.
b. Conduct a bench trial, then order a remedy without compelling Bernard to submit to
binding arbitration or to a jury trial.
c. Compel Bernard to submit to binding arbitration to resolve the dispute.
d. Compel Bernard to submit to binding arbitration, but only if binding arbitration is
mandatory in the state for claims of damages for $10,000 or less.

19. Simmons signed a 2-year contract to play basketball for the Pirates for
$125,000 per game. During the second year of his contract, and just before a big
game, Simmons demanded that the team owner pay him an additional $10,000 per
game on his contract, starting with the current game. The owner reluctantly
agreed to the new contract terms because Simmons was one of the team’s
leading scorers. At the end of the season, Simmons demanded the additional
$10,000 per game; the owner refused to pay. What best describes the new
contract between Simmons and the Pirates’ owner?
a. It is unenforceable because the owner agreed to Simmons’s contract terms under
b. It is unenforceable because both parties did not give new legal consideration for the
new contract.
c. It is enforceable because both parties gave legal consideration for the new contract.

d. It is enforceable because under the UCC rules, all contract modifications are valid if
the parties consent.

20. While driving through Ohio to her home in Virginia, Sadie accidentally lost
control of her car and drove it through a fence and into the garage door of a
house owned and lived in by Sam. Sam sued Sadie in an Ohio court for damages
to his property.
Will the Ohio court likely be able to exercise jurisdiction over Sadie?
a. no, because Ohio has no in personam (personal) jurisdiction over Sadie, and cannot
exercise its long arm statute in one-car auto accidents.
b. no, because Ohio has no in personam jurisdiction over Sadie, and cannot justify
minimum contacts in this case.
c. yes, Ohio can exercise in personam jurisdiction in this case because any state court
has personal jurisdiction in every diversity of citizenship case.
d. yes, because Ohio can assert in personam jurisdiction over Sadie under the
minimum contacts test.

21. Assume a car salesperson intentionally made one of the following statements
– knowing that the statement was false – to a customer considering purchasing a
SUV. Which statement could create liability for fraudulent misrepresentation if
the customer made the purchase based on the statement?
a. “In my opinion, this SUV is in flawless mechanical condition.”
b. “This SUV has a V-6 engine and 4-wheel drive.”
c. “This SUV is a real gem.”
d. “This car is the best looking and best performing SUV on the road today.”

22. Errol carelessly parked his pickup truck on a hill, leaving the truck in neutral
and failing to engage the parking brake. The truck rolled down the hill and
knocked down an electric pole and line. The sparks from the broken line ignited a
fire in a trash can on the sidewalk, the trash can fell over and spread to a nearby
store a few feet away. The wood door of the store fell inward inside the store and

injured Roy, a customer in the store. Can Roy likely recover damages from Errol
under ordinary negligence?
a. No, regardless of Errol’s negligence in parking the truck, as Errol’s negligence was
not the proximate cause of the accident and harm that occurred to Roy.
b. No, because of the unforeseeable intervening force doctrine.
c. Yes, because Errol set in motion the chain of events that resulted in injury to Roy,
even though Errol did not have direct contact with Roy.
d. Yes, because Errol was negligent in parking the truck.

23. Janet was admitted as a partner to Clark Associates, an existing general
partnership on January, 2016. Upon entering the partnership, Janet contributed
$50,000 capital. In June, 2016, a partnership debt of $250,000, incurred in
December, 2015, came due. Janet is:
a. Not liable for the debt because the debt was incurred prior to her joining the
b. Only liable for the debt up to $50,000, the amount of her capital contribution to the
c. Personally liable for 50% of the total debt but only if all the other partners do not pay
their share.
d. Personally liable as a general partner for the full extent of the debt if the other
general partners do not pay.

20. Kisha operates River Valley Soccer, an athletic equipment shop as a sole
proprietorship. Taxes on the business’s income are paid by
A. No one; since it is a sole proprietorship there are no business taxes.
B. Kisha as the sole owner.
C. The state or federal government if Kisha holds a Small Business
Administration loan acquired to start her business.
D. The business entity of River Valley Soccer, not Kisha personally.

24. Shortly after the store opened, Winston walked into Ken’s Grocery and
slipped and fell in standing water just inside the entrance. Winston broke his leg
in the fall. There had been a rainstorm the previous night and Ken’s claimed the
water seeped into the store during the storm.
Winston sued Ken’s for negligence to recover damages for his injury. Which of
the following is the truest statement regarding the likely outcome of the lawsuit?
A. Winston will lose as the standing water in Ken’s was an Act of God and no fault of
B. Winston will lose as he assumed the risk by entering the store as it was foreseeable
there could be water in the store entrance after a rainstorm.
C. Winston will not recover damages because he was contributorily negligent for
entering the store because the standing water would have been visible to Winston. r.
D. All of the above are true statements.
E. None of the above are true statements.

25. Refer to the scenario in #24 above and assume the same facts occurred
except add the fact that Ken’s Grocery posted a sign just inside the store warning
about the standing water.
If Winston sues Ken’s for negligence to recover damages for his injury, which of
the following is the truest statement regarding the likely outcome of the lawsuit,
with this additional fact?
A. Winston will lose as he assumed the risk by continuing to enter Ken’s after seeing
the warning sign inside the store.
B. Winston will lose; by posting the warning sign Ken’s did not breach its duty of care to
C. Winston will lose as the water was a superseding intervening event beyond the
control of Ken’s.
D. All of the above are true statements.
E. None of the above are true statement.

Scroll down, please to begin the essay portion of the exam.

Section II. Essay: 7 questions/50 points
Use the answer sheet at the end of the exam. Number each answer. DO NOT recopy
Answer each question in complete paragraphs; do not list or answer in phrases (points
will be deducted for doing so). None of these questions can be
adequately/comprehensively answered in just a paragraph, so be comprehensive, in
depth in your answers, but be careful to not include irrelevant information.
Points will be deducted for answers that are not well justified, not sufficiently
Use APA in text citations, as appropriate but please do not use direct quotes.
Classroom notes/comments and assigned readings or watching materials are all
the resources needed to complete the exam.
DO NOT use any outside, internet resources as they are often inaccurate.
Answer all parts of each question. Be sure to directly answer the question(s) asked.
1. 6 pts
Scenario: For several years, Anne had been agent for Peter for maintaining
Peter’s antique cello collection, including sale and purchase of antique cellos.
Anne also is an antiques dealer handling general types of antiques through her
antiques shop. Ann often sells Peter’s antique cellos on his behalf through her
Anne recently sold one of Peter’s cellos from her shop and kept some of the
money for herself. Soon thereafter, the State notified Anne that she had sold,
within the past year, the maximum allowable number of antique musical
instruments she was permitted to sell without being required to obtain a musical
instruments dealer’s license. Two weeks later, Peter died.
Analyze and describe the legal effect of each of these events on Anne’s and Peter’s
agency-principal relationship:

A. Anne’s keeping for herself the proceeds from the sale of one of Peter’s cellos.
1-2 paragraphs
B. The State requirement that Anne obtain a musical instruments dealer’s
1-2 paragraphs
C. Peter’s death.

1-2 paragraphs

2. 5 pts
Scenario: Ned, a used car dealer, made a verbal offer on Monday to sell a 2014
Toyota to Sandy for $15,000. Sandy told Ned she was very interested in the car
but wanted to think about it and review her finances. Sandy asked Ned to hold
the offer open until Thursday. Ned stated he would hold the offer open until
Thursday and not sell the car until he heard from Sandy.
On Thursday morning, Sandy telephoned Ned and left a voicemail message
stating, “I accept your offer to buy the Toyota for $15,000. I will come to the
dealership tomorrow to complete the sale.”
On Wednesday, Ned had sold the 2014 Toyota to Rusty for $15,200.
Ned informed Sandy he had sold the Toyota to someone else on Wednesday.
Sandy sued Ned for breach of contract.
What would you decide if you were the judge in this case?

3. 5 pts
Scenario: Employer promised to pay Employee a $10,000 annual pension for the
remainder of Employee’s life, beginning with the time of Employee’s retirement.
In return, Employee promised to pay Employer $100 per year for each of the years
he continues to work until retirement.

Employee relied on this promise and took out a mortgage on a retirement house.
Three years later Employee retired; Employer refused to honor his promise to pay
Employee the $10,000 annual pension.
Employee wants to sue Employer for breach of contract.
Analyze the agreement. Does Employee have a valid claim against Employer for a
breach of contract? Why or why not?

4. 15 pts
Scenario: Stewart Trucking Company is a New…

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