Question: There is only one correct answer to each question. These are application-oriented questions; the answers will not be found verbatim in the text.
1. Olivia invented a device to measure and pump air into bicycle tires. The device consists of a tire pressure sensor on the tire, a wireless receiver mounted on the handlebars to give a readout of tire pressure, and a battery-operated device to pump air into tires. The pressure sensor, receiver, and the pump are sold together as a unit. The receiver is likean existing already-patented design, but the device has never been used in this way. The tire air pump is also similar to already-patented devices, but differs in that this one is battery-operated. Will Olivia be able to patent her
invention?
A) Olivia cannot get a patent because the receiver is not a new invention.
B) Olivia cannot get a patent because the tire air pump is not a new invention.
C) Olivia can probably patent her invention, so long as she can prove her invention is using the device in a different way from similar devices.
D) Olivia can probably obtain a patent for her invention, but must first file for a provisional patent before filing for a permanent patent.
2. Downtown Appliances, Inc. (Downtown) operates a retail appliance store. Downtown borrowed $200,000 from State Bank (SB) to purchase new inventory. Downtown gave SB a security interest in all of its current and after-acquired inventory. SB did not file to perfect its security interest. Later, Downtown bought additional inventory from Wholesalers, Inc. and paid for the purchase with a loan from Central Bank (CB), giving CB a security interest in this new inventory. CB perfected its security interest.
Downtown defaulted on both these loans. Assuming any required notice is given in a proper and timely manner, who has priority in this after-acquired inventory?
A) SB has priority because has it was first to attach the inventory.
B) CB has priority because it was first to perfect its interest in the inventory.
C) SB has priority because of the after-acquired inventory clause.
D) CB has priority in the after-acquired inventory because it perfected its security interest and SB did not perfect.
3. Barton took his clothes to Quick-Wash Laundromat and left his laundry to be washed, dried and folded. At the time of drop-off, Barton did not receive a claim ticket to pick up his laundry, and he did not pay in advance for the service. When he returned to pick-up his laundry, it was missing.
Barton claims this was a bailment and expects Quick-Wash to pay for the lost clothing. Will he likely be successful in collecting damages for the lost laundry?
A) This is not a bailment as Barton did not receive a claim ticket or pay for the service in advance.
B) This is not a bailment; Barton voluntarily left this laundry with Quick-Wash, thus, Quick-Wash has no duty to use due care regarding the laundry.
C) This is a bailment as Quick-Wash took possession of the laundry; Barton should be able to collect damages.
D) This is a bailment only if Barton paid in advance for the service.
4. Which of the following is most likely to be considered mislaid property?
A) A purse left on the counter in a department store.
B) A shopping bag containing a recent purchase left on the counter in a department store.
C) The purse and shopping bag couldboth be considered mislaid property.
D) None of the above; all these items are considered lost property.
5. Aunt Myra gave her nephew, Shane, a negotiable instrument as a graduation gift. Aunt Myra is a holder in due course of that instrument. Which of the following best describes this situation?
A) Shane is not a holder in due course because the instrument was a gift; Shane cannot collect on this instrument.
B) Shane qualifies as a holder in due course under the Shelter Principle; Shane can collect on this instrument.
C) Shane does not qualify as a holder in due course, unless Aunt Myra transferred her HDC status to Shane in writing when she gave him the instrument.
D) The Shelter Principle would apply to Shane since he is Aunt Myra's relative, unless the instrument is a gift; Shane cannot collect on this instrument.
6. Determine the most important difference when a business uses Chapter 11 rather than Chapter 7 in a bankruptcy?
A) In Chapter 11, petitions must be voluntary, whereas Chapter 7 petitions can be either voluntary or involuntary.
B) In Chapter 11, the goal is for the business to survive, whereas in Chapter 7 the business does not survive.
C) In Chapter 11, all creditors are assured of receiving some payment, whereas in Chapter 7 all creditors receive full payment.
D) In Chapter 11, there is never a trustee, whereas in Chapter 7 there is always a trustee.
7. Ben and Jerry, friends, own a townhouse as joint tenants. They rent the townhouse and split the proceeds from the rent. Because of unexpected business expenses, Ben must suddenly sell his half of the townhouse to Jack, which he does without telling Jerry. Analyzing the concepts involved, identify the proper ownership of the townhouse after the sale to Jack?
A) Jack and Jerry own the townhouse as joint tenants.
B) Jack and Jerry own the townhouse as tenants in common.
C) Jack is the sole owner of the townhouse.
D) Jerry is the sole owner of the townhouse because Ben did not inform Jerry he was selling his interest in the townhouse.
8. Aunt Maggie called her nephew, Will, and said, "I want you to have my Porsche convertible. I'll bring it by next week." Will says that he would love to have it. Aunt Maggie died unexpectedly a few days later. In her will she left everything to Allison, her niece and Will's cousin. What conclusion would be correct?
A) Will gets the Porsche because there was donative intent on Aunt Maggie's part even though Will had not taken possession of the Porsche.
B) Will gets the Porsche because of the prior agreement with Aunt Maggie.
C) Alison gets the Porsche because Aunt Maggie had not yet delivered the Porsche to Will.
D) Allison and Will now each own a half interest in the Porsche.
9. Which of the following disclosures are required under the Truth-in-Lending Act?
A) All finance charges for consumer credit transactions must be disclosed.
B) The Annual Percentage Rate, or APR, must be disclosed for consumer credit transactions.
C) The schedule of payments must be disclosed for consumer credit transactions.
D) All the above.
10. Manny issued a draft payable to Lorie. Lorie indorsed the draft in blank on the back and gave it to Jerald to satisfy a debt Lorie owed to Jerald. Which of the following statements correctly describes the status of this instrument?
A) The draft started as bearer paper, and it is still bearer paper.
B) The draft started as order paper, and it is still order paper.
C) The draft started out as bearer paper, but Lorie converted it to order paper.
D) The draft started out as order paper, but Lorie converted it to bearer paper.
Section II: Essays - 4 essay questions, 5 points each =20 total points
Write your answers on the answer sheet provided. Follow directions carefully. Answer all parts of each question.Be sure to directly answer the question(s) asked.
1. Charles owns an office equipment store. Recently, he bought $100,000 of new inventory items for his business from Office Suppliers, Inc. (OSI). Charles paid for the entire new inventory purchase from OSI by taking a loan from Easy Business Credit (EBC). Charles signed a promissory note giving EBC a security interest in the office equipment inventory. EBC did not officially file papers to perfect the security interest.
Later, Charles needed cash for working capital for a new business venture, so he borrowed money from Central Bank, giving Central Bank (CB) a security interest in his office supply inventory. CB filed and perfected this security interest immediately.
Charles now cannot pay any of his debts, so both EBC and CB attempt to foreclose on Charles' office inventory.
Analyze and describe who, between EBC and CB, has priority and why?
Discuss your rationale, justification specifically and in detail.
2. Assume you are the sole proprietor of a jewelry store, a small business that opened five years ago and operates from a leased space in a local mall. Within the past two years, business has deteriorated and your jewelry store now has debts totaling $560,000, with business assets (equipment, display cabinets, furniture, etc.) worth only $40,000. Your personal assets (personal property, i.e., car, small condo, etc.) are valued at $160,000. All the creditors for your jewelry business are secured creditors.
You are considering filing for bankruptcy as you do not see a way to pay the current debts.
What are your options for bankruptcy? What would be the likely result if you file for each option?
Discuss your rationale, justification specifically and in detail.
3. Your employee, Rich comes to you to report that his debit card was apparently stolen. On the same day as the theft, the thief used Rich's debit card to make an unauthorized purchase of $1100, and another unauthorized purchase of $420. Rich says he was unaware his card had been stolen and was unaware of the unauthorized purchases until three days later when he contacted his bank about the unauthorized purchases.
Rich knows your debit card was stolen last year, so he asks your advice about what to do.
What would you tell Rich about his legal obligation to pay any or all of the unauthorized purchases? Why?
Discuss your rationale, justification specifically and in detail.
4. Finn Wolfe owned a house and surrounding five acres in fee simple. The property was located within the City of Chicago. Finn died in 2010; in his valid will, he left three acres of the five-acre parcel of land to the City of Chicago in fee simple defeasible so long as the three acres were used as a public playground. If the City of Chicago failed to meet the conditions of ownership, ownership of the three acres would revert in fee simple to Alli, Finn's daughter and sole heir.
In his valid will, Finn conveyed to his nephew, Liam, the house and its surrounding two acres of land with the words, "To Liam for life so long as he personally occupies the property. If Liam ceases to occupy the property, the property conveys to Rob and Kathleen in fee simple absolute as tenants in common." (Rob is also Finn's nephew, Kathleen is his niece.)
In 2015, Rob died leaving everything to his son and only heir, Rashad, through his valid will.
Liam occupied the house and two acres of land until January 2016 when he moved to Arizona.
In 2012, Alli, Finn's daughter died leaving everything to her son and sole heir, Jonah, through her valid will.
In January 2017, the City of Chicago stopped using the three-acre parcel for a public playground and created a public sculpture garden.
Discuss the following:
I. Who has ownership of the house and its surrounding two acres in 2017?
What type of ownership rights exist for the owner(s) in 2017? Why/how?
II. Who has ownership of the three acres in 2017?
What type of ownership rights exist for the owner(s) in 2017? Why/how?
Discuss your rationale, justification specifically and in detail.