Q&A Hero

Q: Imperio Caffeine Corporation makes and sells coffee under a variety of brand names. Imperio wants to merge with Java Company, its main competitor. In weighing a challenge to the deal, a court looks at the relevant product market. This most likely includes coffee and a. no other products. b. products that are not identical but are related, such as spin-offs. c. products that are reasonably interchangeable. d. products with identical attributes only.

Q: Curt promises to buy illegal copies of CDs and DVDs from Donna, who promises to deliver on May 1. These promises are most likely a. enforceable. b. valid. c. void. d. voidable.

Q: Antitrust legislation was created because of the belief that competition leads to lower prices.

Q: When Looking Glass Corporation wishes to issue certain securities, it must provide sufficient in­for­mation for Alice, and other unsophisticated investors, to evaluate the fi­nancial risk involved. Specifically, the law imposes liability for making a false statement or omission that is "material." What sort of information would Alice consider material?

Q: Listen Up! Corporation books and promotes concerts and other entertainment events, for which Listen Up! also sells tickets. In weighing a challenge to Listen Up!'s "monopolistic" ticket prices, a court looks at the relevant geographic market. This encompasses a. only areas in which Listen Up! does not have monopoly power. b. only areas in which Listen Up! has monopoly power. c. the area in which Listen Up! and its competitors sell, and their customers buy, the tickets. d. the entire United States in all cases.

Q: Employment Sources, Inc., enters into a contract with Fred. If Fred is a minor, this contract is most likely a. enforceable. b. unenforceable. c. void. d. voidable.

Q: Spa Selectiva Company makes and sells beauty salon supplies. By selling its product at prices substantially below the normal cost of production, Spa Selectiva hopes to drive its competitors from the market. This is a. market power. b. predatory pricing. c. price discrimination. d. price-fixing.

Q: Beth claims that her contract with Carl is voidable. If the contract is avoided a. both parties are released from it. b. neither party is released from it. c. only Beth is released from it. d. only Carl is released from it.

Q: In May 2013, National Biotech Corporation generally advertises that it will make a $4 million offering of stock in June. National makes the offer­ing as advertised and, ten days after the first sale, notifies the Securities and Exchange Commission (SEC). All buyers of the stock are given mate­rial information about the company, its business, and the stock. Before the end of the year, the offering is completely sold out. The buyers include forty unaccredited investors and fifty accredited investors. National does not register the offering. The SEC files a suit against National, seeking civil sanctions on the ground that this offering was not exempt from reg­istration. National argues that the applicable exemption is Rule 505 of Regulation D of the Securities Act of 1933 and that because of this exemp­tion, any resale of the stock is also exempt. Who is correct?

Q: Studious Review Guides, Inc., has the power to control the market for its prod­uct. Antitrust law regulates a. how Studious acquired its power and what it does with it. b. neither how Studious acquired its power nor what it does with it. c. only how Studious acquired its power. d. only what Studious does with its power.

Q: Tom enters a coffee shop in which he has an open account, fills a cup of coffee, holds it so the cashier can see it, acknowledges the cashier's nod, and walks out with the coffee, knowing that he will be billed for it at the end of the month. Tom has formed a. an express contract. b. an implied-in-fact contract. c. an implied-in-law contract. d. a quasi contract.

Q: Catalina promises high returns to Darby and other investors, who then agree to trust their funds to Catalina. She uses these funds to pay previous investors. This is a. a Ponzi scheme. b. a stock option. c. an accredited investor. d. a tombstone ad.

Q: Madison is the chief executive officer of Nitro Medico, Inc., which is required to file certain financial reports with the Securities and Exchange Commission (SEC). Under the Sarbanes-Oxley Act of 2002, Madison must a. certify that the reports are complete and accurate. b. designate a corporate official to assume liability for inaccuracies. c. do nothing. d. read the reports and be prepared to answer questions about them.

Q: Lou claims that he and Mira entered into an implied-in-fact contract. To establish this contract, it is not necessary to show that a. a court imposed a promise in the interest of fairness. b. Lou expected to be paid for providing services or property. c. Lou provided Mira with services or property. d. Mira failed to reject services or property provided by Lou.

Q: Heavy Hauling, Inc., is a public company whose shares are traded in the public securities markets. Under the Sarbanes-Oxley Act of 2002, to ensure that Heavy Hauling's financial results are accurate and timely, the firm's senior officers must set up and maintain a. internal "disclosure controls and procedures." b. external "release and reveal timetables." c. personal "peruse and review liability policies." d. public "information and discussion forums."

Q: Gourmet Foods, Inc., requires all distribu­tors of its products to sell them at a specified minimum price. Under the Sherman Act, this is a violation a. if the anticompetitive effects outweigh the competitive benefits. b. if the competitive benefits outweigh the anticompetitive effects. c. under any circumstances. d. under no circumstances.

Q: Macro Corporation and Micro, Inc., enter into an agreement. To constitute a contract a. all terms must be express. b. all terms must be implied. c. the terms may be express, implied, or a mix of both. d. the terms may be express or implied, but not both.

Q: Maple Products Corporation is a public company, which New Hampshire regulates and in which Orin invests. The Sarbanes-Oxley Act of 2002 introduced direct federal corporate governance requirements to a. public companies. b. private investors. c. state regulators. d. none of these choices.

Q: A contract between Gamma Software Company and Omega Designs, Inc., ends with the initials "L.S." These initials a. emphasize that the parties must sign with "legal signatures." b. remind the parties that they must have "legal status" to contract. c. stand for "locus sigilli" and substitute for a seal. d. underscore that the parties' deal must have "lawful significance."

Q: Hi-Five Aero Corporation is required to register its securities under Section 12 of the Securities Exchange Act of 1934. Section 14(a) of the act regulates a. the declaration of dividends by Hi-Five's board of directors. b. the later re-registration of Hi-Five's securities. c. the short-swing activities of Hi-Five's insiders. d. the solicitation of proxies from Hi-Five's shareholders.

Q: North American Properties, Inc., and its officers, directors, and share­holders, buy and sell securities. Section 16(b) of the Securities Exchange Act of 1934 covers a. all purchases and sales of securities. b. only purchases and sales of securities involving misappropriation. c. only purchases and sales of securities involving short-swing profits. d. only purchases and sales of securities involving tippers and tippees.

Q: Jill makes a promise to Ken. Ken is a. an offeree. b. an officer. c. a promisee. d. a promisor.

Q: Lightning Cycles, Inc., makes Lightning-brand motorcycles and accessories, which are distributed to authorized dealers, including Macho Motors, Inc. Macho operates dealerships in several locations. Lightning imposes territorial restrictions on Macho to insulate other dealers from direct competition. This is a. a horizontal restraint. b. a lateral restraint. c. a vertical restraint. d. not a restraint.

Q: Della, an officer for Energy Petrol Corporation (EPC), buys 100 shares of EPC stock. One week later, EPC announces that it will merge with a competitor, Fuel Oil Company, and the price of EPC stock increases. One month later, Della sells her shares for a profit. Under Section 16(b) of the Securities Exchange Act of 1934, Della would not be liable if, after buying the stock, she had waited a. less than fourteen days to sell it. b. more than six months to sell it. c. ninety days to sell it. d. two months to sell it.

Q: Joy promises to buy Kevin's computer for $400. Joy is a. an offeree. b. an officer. c. a promisee. d. a promisor.

Q: Dee, an accountant, does not work for Emergent Company, but wrong­fully obtains inside information concerning Emergent. Based on the in­forma­tion, Dee buys and sells Emergent stock for personal gain. The Securities and Exchange Commission prose­cutes Dee, arguing that she is liable because she stole in­formation right­fully belonging to another. This argument is a. the blue-sky theory. b. the misappropriation theory. c. the red-herring theory. d. the tipper/tippee theory.

Q: The Association of Software Makers, which does not include all software producers, refuses to deal with any parties who do not carry the products of its members. Under the Sherman Act, this is a. a per se violation if it eliminates competition or prevents entry into a given market. b. a per se violation under all circumstances. c. subject to the rule of reason. d. not a violation.

Q: George agrees to paint Holly's Gift Shop. George does the work, but Holly does not pay. To recover the price, George can collect from Holly on the basis of their a. express contract. b. implied-in-fact contract. c. implied-in-law contract. d. quasi contract.

Q: Allen applies for a police officer's job with Bay City, which responds with a letter setting an appointment for a psychological exam. The letter does not state that it is "a conditional employment offer." Based on the court's reasoning in Case 10.1, Ardito v. City of Providence, this letter is a. a bilateral contract that Allen accepted by applying for the job. b. a quasi contract on which Allen can rely for employment. c. a unilateral contract that Allen can accept by passing the exam. d. no contract.

Q: Edgy Engine Components, Inc., a maker of vehicle parts, refuses to sell to Fidgety Fix-It, Inc., a national vehicle service firm. Edgy Engine convinces Greasy Motor Parts Company, a competitor, to do the same. This is a. a group boycott. b. a market division. c. a joint venture. d. an exclusive-dealing contract.

Q: Riley, an engineer for Shur-2-Gro Seed Corporation, learns that Shur-2-Gro has developed a corn hybrid to triple the output of any farm. Riley buys 20,000 shares of Shur-2-Gro stock. He tells Tess, who buys 15,000 shares. After the new hybrid is announced publicly, the price of Shur-2-Gro stock in­creases. Riley and Tess sell their shares for a profit. Under the Securities Exchange Act of 1934, liability may be imposed on a. none of these parties. b. Riley and Tess only. c. Riley only. d. Riley, Shur-2-Gro, and Tess.

Q: Jane offers to pay Kyle $500 if he jogs across the Golden Gate Bridge. Kyle can accept the offer only by jogging across the bridge. If Kyle jogs across the bridge, he and Jane will have formed a. a bilateral contract. b. a moral obligation. c. a social contract. d. a unilateral contract.

Q: Gulf Air, Inc., is the major wholesale distributor of software in the state of Florida. Its closest competitor is Fluid Systems Company, an­other Florida firm. The two firms agree that Gulf Air will operate in south Florida and Fluid Systems will operate in north Florida. This is a. a group boycott. b. a market division. c. a joint venture. d. an exclusive-dealing contract.

Q: Fact Pattern 31-3Dhani, an accountant for Eureka, Inc., learns of undisclosed com­pany plan­s to market a new laptop. Dhani buys 1,000 shares of Eureka stock. He re­veals the company plans to Fay, who buys 500 shares. Fay tells Geoff, who tells Hu. Both Geoff and Hu buy 100 shares. They know that Fay got her informa­tion from Dhani. When Eureka publicly an­nounces its new laptop, Dhani, Fay, Geoff, and Hu sell their stock for a profit.Refer to Fact Pattern 31-3. Under the Securities Ex­change Act of 1934, Hu is most likelya. liable for insider trading.b. not liable because Hu is only a tippee, not a tipper.c. not liable because Hu is too far down the chain of disclosure.d. not liable because Hu traded on the basis of a true fact.

Q: Stu makes an offer to Tina to enter into a contract. Tina accepts the offer. A valid contract requires a. a valid offer only. b. a valid acceptance only. c. a valid offer and a valid acceptance. d. neither a valid offer nor a valid acceptance.

Q: Thermo Gas, Inc., and Uno Oil Corporation refine and sell gasoline and other petroleum products. To limit the supply of gas on the market and thereby raise prices, Thermo Gas and Uno Oil agree to buy "excess" supplies from dealers and "dispose" of it. This is a. a horizontal restraint. b. a lateral restraint. c. a vertical restraint. d. not a restraint.

Q: Fact Pattern 31-3Dhani, an accountant for Eureka, Inc., learns of undisclosed com­pany plan­s to market a new laptop. Dhani buys 1,000 shares of Eureka stock. He re­veals the company plans to Fay, who buys 500 shares. Fay tells Geoff, who tells Hu. Both Geoff and Hu buy 100 shares. They know that Fay got her informa­tion from Dhani. When Eureka publicly an­nounces its new laptop, Dhani, Fay, Geoff, and Hu sell their stock for a profit.Refer to Fact Pattern 31-3. Under the Securities Ex­change Act of 1934, Geoff is most likelya. liable for insider trading.b. not liable because Geoff did not prevent others from profiting.c. not liable because Geoff did not solicit information from Dhani.d. not liable because Geoff does not work for Eureka.

Q: Fact Pattern 32-1Cardio, Inc., makes and sells Drawdown, the most prescribed name-brand heart medication. Emitate Corporation has the potential to make a generic version of the same drug.Refer to Fact Pattern 32-1. A court would most likely rule that the agree­ment between Cardio and Emitate isa. a deal that neither restrains trade or harms competition.b. a legal restraint of trade.c. a per se violation of the Sherman Act.d. subject to analysis under the rule of reason.

Q: Fact Pattern 31-3Dhani, an accountant for Eureka, Inc., learns of undisclosed com­pany plan­s to market a new laptop. Dhani buys 1,000 shares of Eureka stock. He re­veals the company plans to Fay, who buys 500 shares. Fay tells Geoff, who tells Hu. Both Geoff and Hu buy 100 shares. They know that Fay got her informa­tion from Dhani. When Eureka publicly an­nounces its new laptop, Dhani, Fay, Geoff, and Hu sell their stock for a profit.Refer to Fact Pattern 31-3. Under the Securities Ex­change Act of 1934, Fay is most likelya. liable for insider trading.b. not liable because Fay did not prevent others from profiting.c. not liable because Fay did not solicit information from Dhani.d. not liable because Fay does not work for Eureka.

Q: Don contracts to tutor Ellen in the principles of business law. For the breach of a contractual promise, contract law entitles innocent parties to a. any relief that a court wants to provide. b. any relief that a defendant wants to concede. c. any relief that a plaintiff wants to seek. d. some forms of relief.

Q: Fact Pattern 31-3Dhani, an accountant for Eureka, Inc., learns of undisclosed com­pany plan­s to market a new laptop. Dhani buys 1,000 shares of Eureka stock. He re­veals the company plans to Fay, who buys 500 shares. Fay tells Geoff, who tells Hu. Both Geoff and Hu buy 100 shares. They know that Fay got her informa­tion from Dhani. When Eureka publicly an­nounces its new laptop, Dhani, Fay, Geoff, and Hu sell their stock for a profit.Refer to Fact Pattern 31-3. If Dhani is liable under the Securities Ex­change Act of 1934, it will be because the infor­mation on which he based his purchase of Eureka stock wasa. a forward-looking forecast.b. not material.c. not yet public.d. not yet true.

Q: Fact Pattern 32-1Cardio, Inc., makes and sells Drawdown, the most prescribed name-brand heart medication. Emitate Corporation has the potential to make a generic version of the same drug.Refer to Fact Pattern 32-1. Cardio pays Emitate not to sell its product. This isa. a customer restriction.b. a joint venture.c. an exclusive-dealing contract.d. a price-fixing agreement.

Q: Cathy assures Don that she will deliver his products as he directs. An assurance that one will do something in the future is part of the definition of a. a declaration. b. a moral obligation. c. an ethical principle. d. a promise.

Q: Enterprising Business Corporation may be engaging in conduct that vio­lates the Sherman Act. To bring an action against the firm under this statute requires that its conduct have a sig­nificant impact on a. international commerce. b. Internet commerce. c. interstate commerce. d. intrastate commerce.

Q: Lexy, a salesperson for My-T-Fine Corporation, learns that My-T-Fine will in­crease the dividend it pays to shareholders. Lexy buys 10,000 shares of My-T-Fine stock. When the price increases, Lexy sells the shares for a profit. Lexy would not be liable for insider trading if the information about the dividend was a. material when she sold the stock. b. public after she bought the stock. c. public before she bought the stock. d. speculative when she bought the stock.

Q: A contract's general intent will usually be subordinated to specific clauses contained within the contract.

Q: The existence of an express contract does not bar an action in quasi contract concerning the same transaction.

Q: Helio Company can process hydrogen into an inexpensive fuel for internal combustion engines. As an innovator in its market, Helio currently has the power to affect the price of its product. This is a. market power. b. predatory pricing. c. price discrimination. d. price-fixing.

Q: Fact Pattern 31-2Sid, a director of Tech Software Company, learns that a Tech engineer has developed a new, exciting video game. Sid buys Tech stock and tells his friend Uri, who also buys Tech stock. When the new game is released three weeks later, Sid and Uri sell their stock for a big profit.Refer to Fact Pattern 31-2. Regarding Sid's profits on the purchase and sale of Tech stock, under Section 16(b) of the Securities Exchange Act of 1934 Tech may recapturea. all of Sid's profits.b. half of Sid's profits.c. 10 percent of Sid's profits.d. none of Sid's profits.

Q: Fact Pattern 31-2Sid, a director of Tech Software Company, learns that a Tech engineer has developed a new, exciting video game. Sid buys Tech stock and tells his friend Uri, who also buys Tech stock. When the new game is released three weeks later, Sid and Uri sell their stock for a big profit.Refer to Fact Pattern 31-2. Under SEC Rule l0b-5, Sid would not be li­able if he had waited to buy Tech stock untila. after Sid told Uri of the new game.b. after Uri bought Tech stock.c. after the public release of the game.d. just before the game was released.

Q: Congress enacts a statute to outlaw a specific type of anticompetitive business agreement. Like other laws that regulate economic competition, this law is referred to as a. a federal trade commission act. b. an antitrust law. c. an interstate commerce act. d. a suppressive restraint on trade.

Q: To raise capital to form Plasticity Corporation with Quinn, Rona sells bonds and stock in other companies, and plans to register an initial public of­fer­ing under the Securities Act of 1933. SEC Rule l0b-5 covers a. most forms of securities. b. only bonds. c. only securities registered under the Securities Act of 1933. d. only stock.

Q: A party who confers a benefit on someone else unnecessarily can recover the cost under the principle of quasi contract.

Q: North Mining Company and South Excavation Company agree to abide by the decisions of East Coast Financial Corporation as to their respective levels of production, markets, and prices, effectively reducing competition and increasing profits. This is most likely a. a common, legal, time-honored type of business arrangement. b. an illegal restraint on trade. c. an innovative, legally efficient approach to doing business. d. an outdated, but legal business trust.

Q: Nouveau Riche Corporation's officers, directors, and sharehold­ers buy and sell securities. SEC Rule 10b-5 applies to a. only the purchase or sale of a security by a financial corporation. b. only the purchase or sale of a security involving an officer or director. c. only the purchase or sale of a security involving a shareholder. d. the purchase or sale of any security.

Q: A quasi contract arises from a mutual agreement between two or more parties.

Q: Insurance companies are exempt antitrust laws whenever state regulation exists.

Q: Global Investments Corporation buys and sells securities. Section 10(b) of the Securities Ex­change Act of 1934 applies to a. only the purchase or sale of a security involving an insider. b. only the purchase or sale of a security involving short-swing profits. c. only the purchase or sale of a security involving a tipper and tippee. d. the purchase or sale of any security.

Q: A contract is void if its purpose is illegal.

Q: A contract cannot be void if its purpose it legal.

Q: U.S. firms may be subject to other nations' antitrust laws.

Q: Fresh Seasonal Fruit Company has assets of less than $10 million and fewer than fifty shareholders. Gourmand Pastries, Inc., has assets of more than $50 mil­lion and more than five hundred shareholders. The Securities Exchange Act of 1934 applies to a. Fresh Seasonal Fruit and Gourmand Pastries. b. Fresh Seasonal Fruit only. c. Gourmand Pastries only. d. neither Fresh Seasonal Fruit nor Gourmand Pastries.

Q: An unenforceable contract is one that cannot be enforced because of certain legal defenses against it.

Q: GR8 Stuf Company files a registration statement with the SEC before making an offering to the general public. The registration contains false, immaterial statements of which the investors are unaware. GR8 Stuf is charged with violating the Securities Act of 1933. GR8 Stuf's best defense is a. the investors were not aware of the misrepresentations. b. the issuer reasonably believed the misstatements were true. c. the offering was made available to the general public. d. the untrue statements were not material.

Q: Players Video Game Centers, Inc., wants to issue stock of $1 million in a single offer­ing. Players must provide all investors with material in­forma­tion about itself, its business, and its securities if a. all investors are accredited. b. under any circumstances. c. any investors are accredited. d. any investors are unaccredited.

Q: To be valid, a contract must be enforceable by all of the parties to it.

Q: To raise $12 million to expand operations, Star Corporation makes a stock offering directly to sixty accredited investors and twenty sophisticated, but unaccredited investors. Star plans to notify the SEC of sales. Under the Securities Act of 1933, this issue may qualify as an "exempt" transaction a. as is. b. if all of the investors are also given certain material information. c. if the offering is also made available to the general public. d. under no circumstances.

Q: An executory contract is one that has been fully performed.

Q: An oral contract is an implied-in-fact contract.

Q: Cooperative research by small-business firms is exempt from antitrust law.

Q: Fact Pattern 31-1Fresh Cream, Inc., wants to make an initial public offering of securi­ties. Fresh believes that it qualifies for an exemption under Regulation A from the full registration requirement of the federal Securities Act of 1933.Refer to Fact Pattern 31-1. If Fresh is exempt from the federal registration requirement, Fresh isa. automatically exempt from any state registration requirement.b. not subject to any state securities laws.c. not necessarily exempt under a state registration requirement.d. automatically subject to all state registration requirements.

Q: A contract under seal is a formal contract.

Q: Fact Pattern 31-1Fresh Cream, Inc., wants to make an initial public offering of securi­ties. Fresh believes that it qualifies for an exemption under Regulation A from the full registration requirement of the federal Securities Act of 1933.Refer to Fact Pattern 31-1. Fresh decides to sell its new securities via the Internet. This offeringa. will avoid the payment of commissions to brokers or underwriters.b. is an investment scam.c. is a Ponzi scheme.d. constitutes insider trading.

Q: Persons in foreign nations cannot be subject to U.S. antitrust law.

Q: A promisee is a person who makes a promise.

Q: Kitsch Niche Corporation is a noninvestment company that wants to is­sue $3 million of stock in a twelve-month period. Kitsch Niche, with less than $20 mil­lion in annual sales, qualifies as a small business issuer. Before Kitsch Niche sells the stock, it must provide investors with a. an offering circular. b. a notice of the issue. c. a red herring prospectus. d. a tombstone ad.

Q: U.S. antitrust law may protect foreign consumers and competitors from violations by U.S. firms.

Q: A divestiture is an order to a company to cease, or divest itself of, its an­ticompetitive conduct.

Q: Flo-Thru Corporation is poised to issue securities that, under the Securities Act of 1933, are "exempt." This means that the securities can be sold a. on the basis of a material omission or misrepresentation. b. on the basis of nonpublic information. c. within any six-month period by certain insiders. d. without being registered.

Q: In an express contract, the terms are fully stated in words.