--- a/tests/test-update-branches.t	Mon Oct 15 09:43:34 2012 -0700
+++ b/tests/test-update-branches.t	Tue Oct 16 11:43:15 2012 -0700
@@ -12,6 +12,8 @@
 # |/
 # o  0:b608b9236435
 
+  $ mkdir b1
+  $ cd b1
   $ hg init
   $ echo foo > foo
   $ echo zero > a
@@ -47,6 +49,14 @@
   o  0:60829823a42a
   
 
+Make sure update doesn't assume b1 is a repository if invoked from outside:
+
+  $ cd ..
+  $ hg update b1
+  abort: no repository found in '$TESTTMP' (.hg not found)!
+  [255]
+  $ cd b1
+
 Test helper functions:
 
   $ revtest () {