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A letter of credit guarantees to the seller, that the bank will pay for the goods if the buyer fails to do so. The electric and cable companies have an easement in gross allowing them to enter property to install […]

A life estate gives the owner more rights than a fee simple. Under Section 552 of the Restatement (Second) of Torts, an accountant is liable for his or her negligence to any member of a limited class of intended users […]

Forming a sole proprietorship is easy and does not cost a lot of money. Special shareholders’ meetings may be called by the board of directors, the holders of at least ten (10.) percent of the voting shares of the corporation, […]

A banking day is any day that the particular bank is open to the public for carrying on substantially all banking functions. An advertisement is considered an offer if it is so definite or specific that it is apparent that […]

Property is considered mislaid property when its owner involuntarily places the property somewhere and then intentionally forgets it. The right to participate in the management of a business is conclusive evidence for determining the existence of a general partnership. Answer: […]

The legality of non-price vertical restraints of trade under Section 1 of the Sherman Act is examined using the “rule of reason.” A UCC sale occurs when possession of property is transferred from one party to another. Answer: FALSE A […]

Bankruptcy courts are part of the state court system. The primary purpose of the Statute of Frauds is to punish people who perpetrate frauds by using written contracts. Answer: FALSE Even if the right to cure has expired, the seller […]

If a professional athlete dies prior to or during a contract period, his or her contract with the team is discharged. After becoming sober, an intoxicated person can ratify a contract he or she entered into while intoxicated. Answer: TRUE […]

The Establishment Clause of the U.S. Constitution allows the federal government to establish which religions are entitled to protection. Tenancy by the entirety is a form of co-ownership of real property that can be used only by married couples. Answer: […]

ERISA provides for immediate vesting of each employee’s own contributions to a pension plan. In a guaranty arrangement, the guarantor is primarily liable on another person’s debt. Answer: FALSE Adhering to the Bible is a form of ethical fundamentalism. Answer: […]

The rights of freedom of speech, religion, and association, granted by the First Amendment to the United States Constitution, is an example of the “maximizing individual freedom” function of the law. When a seller tenders goods, some of which are […]

If corporate directors or officers steal a corporate opportunity for themselves, this is known as usurping a corporate opportunity. Facilitating planning is a function of the law. Answer: TRUE If goods are already in transit when a buyer fails to […]

Strategic alliances are often used by companies to enter a foreign market. Some states permit a mortgagee to bring a separate legal action to recover a deficiency from the mortgagor. If the mortgagee is successful, the court will award an […]

The public has the right to review an environmental impact statement, although there is no formal process for the public to comment on it. The general standard to obtain an injunction is that the party seeking the injunction would suffer […]

Horizontal price fixing occurs when a manufacturer sets the retail price of the items they produce. To obtain appraisal rights, a dissenting shareholder must deliver written notice of his or her intent to demand payment of his or her shares […]

Unless the partnership agreement authorizes it, partners are not entitled to receive a salary for service rendered on behalf of the partnership. One of the two major functions of the U.S. Constitution is to limit the government’s ability to interfere […]

Promises to make a gift are not enforceable contracts because a valid agreement is not present. If a contract requires the occurrence or nonoccurrence of an event before a party is obligated to perform a contractual duty, this is a […]

The substantive due process category of due process requires that government action, ordinances, regulations, and other laws be clear on their face and not overly broad in scope. “ABC Company” is an acceptable name for a limited liability company. Answer: […]

The Robinson-Patman Act is a federal statute, enacted in 1930, that prohibits price discrimination. A limited liability company can choose whether to be taxed as a partnership or as corporation. Answer: TRUE If sufficient credible witnesses are brought forth, an […]

A “product disparagement” claim may be brought for an untrue statement regarding a product of a business. In terms of the requirements for becoming a holder in due course, notice of a defect is given when the holder has actual […]

If a court finds that a contract or contract clause is unconscionable, it may refuse to enforce the entire contract. The Fourteenth Amendment contains Equal Protection, Due Process, and Privileges and Immunities Clauses. Answer: TRUE In a bailment, the owner […]

To be sufficient under the Statute of Frauds, only original, handwritten signatures in ink are considered acceptable. Any state or local law that “directly and substantially” conflicts with valid federal law is preempted under the Supremacy Clause. Answer: TRUE If […]

A limited liability company may elect to be taxed as a partnership, the owners can manage the business, and the owners have limited liability for debts and obligations of the partnership. Drafts can be negotiated from party to party; however, […]

The UCC statute of limitations provides that an action for breach of any written or oral sales or lease contract must commence within three (3.) years after the cause of action accrues. A contract is unilateral if the offeror’s promise […]

Buyers in the ordinary course of business who purchases goods from a merchant take the goods free from any perfected or unperfected security interest in the merchant’s inventory, even if the buyer knows of the existence of the security interest. […]

It is possible for a seller to deliver goods without moving them. “Ademption” means that if a specific bequest is not owned by the testator at the testator’s death, then the named beneficiary receives nothing in connection with that bequest. […]

Third-party beneficiaries usually exist from the inception of a contract. A treaty is an agreement or a contract between two (2.) or more nations that is formally signed by an authorized representative and ratified by the supreme power of each […]

The proposed “Free Trade Area of the Americas” would amend the North America Free Trade Agreement so that the only participants are the United States and Mexico. In a Chapter 13 bankruptcy proceeding, the debtor’s plan of payment must be […]

Where there is an anticipatory repudiation, the non-breaching party’s obligations under the contract are discharged immediately. Since the World Trade Organization’s international trade rules are capitalist in nature, socialist countries are not eligible to join the organization. Answer: FALSE[/cpmembership] All […]

Prior to the 1920s, the banking system in the United States was subject to strict regulation by the federal government. All group boycotts are per se illegal. Answer: FALSE If a covered member or manager of a limited liability company […]

For a warranty to qualify as a full warranty, the warrantor must guarantee free repair or replacement of the defective product. Following the stock market crash in 1939, Congress enacted a series of statutes designed to regulate securities markets. Answer: […]

When a partner dies, that partner’s share of the partnership assets may be left to his or her heirs or next of kin. Federal courts have limited jurisdiction to hear cases involving a federal question or diversity of citizenship. Answer: […]

A transferor who transfers his or her distributional interest in a limited liability company is not released from liability for the debts, obligations, and liabilities of the LLC. The Food, Drug, and Cosmetic Act gives the Federal Trade Commission the […]

A service mark is used to distinguish the services of the holder from those of its competitors. Obscene speech is protected by the First Amendment to the United States Constitution. Answer: FALSE Voting agreements among shareholders of a corporation are […]

Stock dividends are a distribution of corporate assets. To be liable for consequential damages, the breaching party must know or have reason to know that the breach will cause special damages to the other party. Answer: TRUE The Uniform Computer […]

The WTO is an international organization whose headquarters is located in Geneva, Switzerland. The Critical Legal Studies School postulates that most rape laws make it difficult for women to prove legally that they have been raped because they have mostly […]

Under federal law, new pesticides that are hazardous may be prohibited from sale, but old pesticides that that have already been registered may not be prohibited from sale. Approximately fifty (50.) percent of divorce cases are settled between the parties […]

Domain names may be registered by filing the appropriate form with the domain name registration service and paying the appropriate fee. Criminal prosecutions of violations of federal securities laws are brought by state attorneys general. Answer: FALSE Since nine (9.) […]

Acceptance of goods occurs if the seller sends non-conforming goods and the buyer accepts them. Under the Lilly Ledbetter Fair Pay Act of 2009, if the EEOC chooses not to bring suit against the employer on the complainant’s behalf, it […]

An “umbrella” insurance policy pays when other losses from a covered occurrence exceed the limits of other insurance. The correction of a defect defense generally applies when a product is redesigned. Answer: FALSE Many disparate treatment discrimination cases are brought […]

Once the buyer has accepted goods, whether the goods are conforming or nonconforming, that acceptance may not be revoked. All negotiable instruments must be payable to order or to bearer. Answer: TRUE The Uniform Commercial Code is a source of […]

Under the ULLCA, the articles of organization of a limited liability company need not set forth the name and address of each organizer. A court may resort to the application of equitable principles when an award of money damages “at […]

Enforcing judgments obtained against the debtor are ‘stayed” by the filing of a voluntary or involuntary bankruptcy petition. Which of the three major rules of liability that a third party may use to hold an accountant liable for negligence is […]

The Interstate Commerce Commission (ICC) is empowered to enforce the FTC Act, as well as other federal consumer protection statutes. A warranty deed will protect a grantee regarding a mortgage from one hundred years ago. Answer: TRUE Under modern law, […]

If only one item is defective out of thousands of similar items that were manufactured without defects, this one defective product could not be the basis for a product liability lawsuit. Only the drawer can order a stop-payment order. Answer: […]

Specific performance is the primary remedy used to make a party live up to his or her obligations under a personal services contract. The Articles of Confederation did not grant the federal government the right to levy and collect taxes. […]

For necessary charges and expenses, a carrier has a lien on goods in its possession covered by a bill of lading. Generally, a price term can be implied if there is a market or source from which to determine the […]

Even non-employees can violate insider trading rules. A contract that has not been performed by both sides is called an executed contract. Answer: FALSE Shareholders may agree among themselves as to restrictions on the transfer of shares. Answer: TRUE The […]

State usury laws set a lower limit on the annual interest rate that can be charged on certain types of loans. Since a court reporter is necessary to transcribe deposition testimony, most depositions are taken in court. Answer: FALSE A […]

Most of the major antitrust statutes provide for criminal penalties. Government-owned corporations are also known as “quasi-private” corporations. Answer: FALSE The drawer’s bank is also known as the payer bank. Answer: TRUE According to the modern interpretation of the Commerce […]

After the plaintiff’s attorney has completed his or her questions, the defendant’s attorney can question the witness. This is called direct examination. Providing government subsidies to farmers, but not to those in other occupations, is a violation of the ‘strict […]

The concept of negotiation is unimportant to the law of negotiable instruments. Compensatory damages are intended to compensate a non-breaching party for the loss of the bargain. Answer: TRUE No state recognizes marriage between persons of the same sex. Answer: […]

Criminal cases begin with a complaint and summons served on the defendant. The parol evidence rule allows a party to present outside evidence to support their interpretation of a contract. Answer: FALSE A freehold estate is an estate in which […]

The U.S. Congress enacted the Federal Arbitration Act to promote the arbitration of disputes. A shareholder loses the ability to exercise the appraisal right by voting in favor of the proposed action. Answer: TRUE Both the buyer and seller of […]

The doctrine of caveat emptor means “to the victor go the spoils.” An employee whose employer breaches an employment contract can recover lost wages or salary as compensatory damages. Answer: TRUE The person giving a deposition is called the proponent. […]

Because ignorance of the law is not an excuse, a court will never order a remedy in favor of a party who was unaware that a contract was illegal. A franchise arrangement is typically used in a situation where there […]

The National Strike Board prevents employers and unions from engaging in illegal and unfair labor practices. John Locke and Jean-Jacques Rousseau proposed a ‘social contract” theory of morality. Answer: TRUE Legal scholars following the Historical School of jurisprudence look to […]

The concept of law is narrowly defined, with the same definition applicable in all contexts. The Americans with Disabilities Act does not generally apply to residential housing facilities. Answer: TRUE A franchisee and franchisor are usually established as the same […]

If a contractual duty has not been discharged or excused, the contracting party owes a conditional obligation to perform the duty. An affirmative action program that gives racial minorities a “plus factor” when considered for public university admission is lawful […]

One criticism of the World Trade Organization is that it does not have an appellate process for its decisions. Because they are not shareholders or employees, students at a college or university would not be considered stakeholders in the school […]

When used to enforce the collection of a judgment, a writ of garnishment is used to access property that is in the hands of someone other than the judgment debtor. When a business has only one owner, and that owner […]

With regard to an implied agency, implied authority can be conferred by either industry custom, prior dealing between the parties, the agent’s position and acts deemed necessary to carry out the agent’s duties, or other factors a court deems relevant. […]

The Organization of the Petroleum Exporting Countries consists exclusively of countries from the Middle East. Anti-deficiency statutes usually apply only to non-purchase money mortgages. Answer: FALSE Almost all states have enacted innkeepers’ statutes that limit the liability of innkeepers. Answer: […]

Federal currency reporting laws require financial institutions to report the receipt in a single transaction or a series of related transactions of cash in an amount greater than $5,000. The infancy doctrine protects very young children from contracts entered into […]

In rare occasions, an appellate court will overturn a jury verdict if the appellate court cannot, from the record of the trial court, find sufficient evidence to support the trier of fact’s findings. Under Title VII of the Civil Rights […]

Courts have implied a private right of action for violation of Section 10(b) and Rule 10b-5. The courts presume acceptance of a gift unless there is proof that the gift was refused. Answer: TRUE Non-issuers of securities do not have […]

Small business bankruptcies apply to companies with assets of less than $5 million. Fred and Barney enter into a sales contract for $400. Subsequently, they modify the contract and the modification adds $400 more to the contract. Neither the original […]

Liquidated damages will be invalidated if they are unreasonably large or small. Once a partnership is dissolved, all liability for the actions of the partners ends. Answer: FALSE At the expiration of the term of a “term” limited liability company, […]

Quasi-contracts and implied-in-law contracts are interchangeable terms. A principal can ratify an agent’s act before the agent’s act occurs. Answer: FALSE Under common law, parties to a contract can decide who will bear the risk of loss. Answer: FALSE Distribution […]

Today, approximately forty percent of private-sector wage and salary workers belong to labor unions. A holder in due course takes negotiable instrument free form personal defenses but not real defenses. Answer: TRUE An obligor can assert any defense he or […]

All express contracts must be in writing to be valid. Because of the unfair results and the limited remedy available in the law courts, the Court of Chancery was established. Answer: TRUE A proxy always grants the holder of the […]

Members of the European Union have delegated substantial powers to the European Union Commission, including the authority to enact legislation and to take enforcement actions to ensure member compliance with the European Union treaty. In a “chain-link” franchise, the franchisor […]

The Securities and Exchange Commission permits a company to obtain an audit from either an independent certified public accountant or a certified public accountant who works for the company. The directors and officers of a corporation must act within the […]

A non-merchant seller passes the risk of loss to the buyer when the goods are received. The First Amendment to the United States Constitution contains two (2.) separate religion clauses: 1. the Enlightenment Clause; and 2. the Free Exercise Clause. […]

Merely being regarded as disabled is sufficient to invoke the protections of the Americans with Disabilities Act. Mala prohibita crimes are more serious than mala in se crimes. Answer: FALSE[/cpmembership] A “holographic” will is an oral will, usually made during […]

The Sarbanes-Oxley Act makes it a crime for any person to knowingly alter, destroy, mutilate, conceal, or create any document to impair, impede, influence, or obstruct any federal investigation. A corporation cannot enter into or enforce contracts. Answer: FALSE Discharge […]

The crime of involuntary manslaughter is an intent crime. The lawfulness of government classifications that do not involve suspect or protected classes is examined using an intermediate scrutiny test. Answer: FALSE Adhering to a company’s code of ethics is a […]

The term “GAASs” stands for “generally accepted accounting standards.” According to Kantian ethics, if you rationalized that it is acceptable for you to engage in deceptive practices, it is acceptable for competitors to do so also. Answer: TRUE The Fair […]

Under the North American Free Trade Agreement, a country can re-impose tariffs if an import surge from one of the other nations hurts its economy or workers. Under the ULLCA, the articles of organization of a limited liability company need […]

Hotels are not required to provide guests with a safe. Under the common law, the risk of loss is always on the seller. Answer: FALSE In a limited liability partnership, there is no tax paid at the partnership level, and […]

Under the Federal Trade Commission “franchise rule,” a franchisor may make sales projections for a potential franchisee based on sales of an existing franchise, but not on sales of a hypothetical franchise. A cooperative is a form of co-ownership of […]

The Dodd-Frank Wall Street Reform and Consumer Protection Act reorganizes federal government supervision of the banking system, regulates previously unregulated financial products and institutions, and adds a new consumer protection agency to protect consumers from abusive lending and banking practices. […]

If you rent property for an uninterrupted statutory period of time, you become the owner of the property by adverse possession. In Chapter 11 bankruptcy, the court will appoint a special union trustee to represent union members and preserve union […]

Utilitarianism has been applauded because it is easy to estimate the “good” that will result from different actions. To prove fraud, the following elements must be shown: 1) The wrongdoer made a false representation of a material fact; 2) The […]

The purchaser’s remedy for violation of Section 12 of the Securities Act of 1933 is either to rescind the purchase or to sue for damages. Workers can sue their employers in court to recover damages for employment-related injuries if the […]

If the buyer pays by check, payment is conditional on the check being honored when it is presented to the bank for payment. English common law was law developed by judges issuing opinions when deciding cases. Answer: TRUE The “FTC […]

Burglary is defined as “the breaking and entering of a dwelling at night” and cannot occur during the daytime or at a commercial building. Under the UCC, a negotiable instrument may provide that it is payable in foreign money. Answer: […]

Because a life estate lasts only as long as someone’s life, it cannot be sold to another. From the 1940s through the 1970s, antitrust enforcement was quite stringent. Answer: TRUE The board of directors has the authority to appoint the […]

Article II, Section 4 of the United States Constitution provides “The Congress shall have Power…To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and […]

Two kids mow your lawn by accident while you are at work. They had been called by a neighbor, but the mom who took the call wrote down the wrong address. If you refuse to pay, the kids would succeed […]

The United Nations is governed by the General Assembly, the Security Council, and the Secretariat. The mailbox rule provides that an acceptance sent through the mail is effective only when it reaches the offeror’s mailbox. Answer: FALSE Under the corporate […]

Delaware’s legislature has provided a potent antitakeover statute in its corporation code. The violation of a statute that proximately causes an injury is negligence by proxy. Answer: FALSE[/cpmembership] Information given by the attorneys in their closing statements is evidence the […]

In a product liability action, the plaintiff typically relies on the traditional tort theory of negligence or the modern tort doctrine of strict liability. A certificate of deposit is a special form of note. Answer: TRUE The trial process can […]