MGMT 597 MGMT597 Week 8 Final Exam Answers
(TCO A, C) Jim worked for AAA Job Shop, Inc. for over 30 years.
Two months before Jim retired, the head of human resources told
Jim that the company would pay for health insurance for Jim and his
wife for the remainder of his life, and for his wife’s life if she were to
survive him, and handed Jim a letter from the company describing
this. Jim had always known that the company provided this benefit
to a few of its select employees. Jim didn’t really expect that he
would receive it, although he had secretly hoped so for some time.
Four years after retirement, Jim contracted cancer and incurred
substantial medical bills under his insurance plan. Jim then received
a letter from his former employer saying that the employer was
discontinuing its payment of health insurance for those retirees who
were receiving this benefit. Jim is considering suing the company to
force it to live up to its agreement. Discuss the issues and likely
resolution of Jim’s case.
(TCO B, D) At Super Car Outlet, Joan was negotiating with Marge
for the purchase of a used car. Marge told Joan that she would fix
any problems with the drivetrain that arose in the first 1,000 miles.
After further negotiation, they signed a written agreement that
provided that the sale was made “as is, without any warranties.”
After driving the car for 400 miles, the antilock brake system failed.
Marge denied having made the repair promise. But she said she
would cover $200 of the repair costs. Joan then took the car to be
repaired at a cost of $487. Joan now wants to recover the full repair
costs from Marge. Marge refuses to pay any amount. Discuss the
issues that would arise in this case.
(TCO E, H) Determine whether the following instrument is a
negotiable instrument, addressing all the requirements of
negotiability in your response.
I, James Wyatt, promise to pay $12,000 to Buck’s Bikes in
four equal installments of principal, beginning on January 1, 2011,
and on the same day in each of the next three years. Each payment
will consist of $3,000 in principal, plus interest accrued since the
date of this note, in the case of the first payment, or since the prior
payment in the case of all other payments. Interest shall accrue at
the rate of 4% per annum, or in the event of default, at the maximum
rate allowed by law until the default is cured. This note is secured by
collateral consisting of various machines. This note may be paid in
whole or in part prior to the due dates, and the interest accrued will
be reduced accordingly. The due date for any payment under this
note may be extended by mutual agreement of the parties up to six
months from the due date as stated herein. The proceeds of this
Is this case a contract agreement or not?
(TCO F, G) Fred had been away at college getting his master’s
degree for 12 years and recently returned to his hometown. Some
friends of his parents had a carriage house above their garage that
they sometimes rented out. When Fred graduated, this carriage
house was vacant and the owner told Fred that he could stay there
until he found another place that he wanted. The owner initially did
not want Fred to pay anything, but Fred started paying $100 a week.
Fred then sent a note at the beginning of August saying, “Here is
$500 for the month of August. I know I hadn’t planned to be here
this long, but I hope this is acceptable.” The owner cashed the
check, but the topic was never discussed. Fred sent $500 at the
beginning of September and October, but on October 15 the owner
came to Fred with $100 and said, “Enough is enough. Here’s some
of the money you gave for October. You are lucky to get that back.
You have an hour to get all your stuff out of here.” Fred says he paid
for October and is not leaving. He also said that he is entitled to at
least a month’s notice. Discuss the type of tenancy created, if any,
and the rights of the parties in these circumstances.
(TCO C, D, G) Fred is a director of the ALLSTAR Corporation, which
is engaged in the business of creating and marketing toys and
games. A proposal is made to the board to manufacture and market
a toy bird that really flies. Market surveys have been done to
indicate that the toy would be a good seller, and engineering studies
have been done testing the feasibility of such a product. Fred
reviews this information and votes in favor of producing this new toy.
The vote was 7 to 4 in favor. ALLSTAR produces and markets this
new toy bird, but sales are very slow. After several years of losing
money, ALLSTAR discontinues this toy. Tina, a shareholder of
ALLSTAR, thinks the toy bird venture was a waste of time and
money. In fact, she thinks the idea was so bad that she sues Fred
for breach of his fiduciary duty of due care in making the decision to
proceed with the bird. Discuss the general standards of due care of
a director of a corporation, and determine whether Fred is liable in
(TCO D, H) Jennifer has recently developed a software program
tailored for the upscale coffee shop industry. Jennifer has begun
marketing her program and has had some success selling to small
independent stores. She is now ready to begin marketing to
franchisees of the national chains with the hope that a franchisor
might make the software part of its required franchisee package.
Jennifer wants to keep the business separate from her personal
affairs, so she has set up separate checking accounts, separate
phone lines, and has set up a fictitious business name that does not
use her name. She has filed a fictitious business name statement in
the appropriate state office. She has written a will in which she has
declared that in the event of her death, her business and personal
assets and liabilities are to be kept separate, just as they were
during her life. Her personal checks say, “Jennifer Lones, personal
account only.” Discuss the extent to which Jennifer has insulated
her personal assets from any business losses.