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Ownership interests in manager-operated LLCs are not considered to be securities. Recording of a deed is necessary to pass title from the grantor to the grantee. Answer: F Duress is a valid defense to larceny, but not to murder. Answer: […]

Which of the following are remedies for violation of the American’s with Disabilities Act (ADA)? a. Injunctive relief b. Reinstatement c. Back pay d. Compensatory and punitive damages e. All of the above Social Security benefits are funded by: a. […]

A number of states have enacted statutes exempting the following types of lenders from their usury laws: a. eligible lenders of installment loans. b. lenders for large consumer loans. c. Both (a) and (b). d. None of the above. Only […]

Under the common law, a landlord is under an obligation to provide or maintain the premises in a livable condition. Lydia makes a contract to purchase a used car on her seventeenth birthday. Six months later, her ratification of the […]

In which of the following situations has conversion NOT occurred? a. When a drawee bank pays an instrument containing a forged indorsement b. When a drawee to whom a draft is delivered for acceptance properly returns it upon request c. […]

“Attachment” occurs when a secured party has given value, the debtor acquires rights in the collateral, and the: a. debtor has completed his obligation to pay. b. collateral is delivered to the borrower. c. debtor and secured party have an […]

Title VII applies only to employers with 15 or more employees. Banks like electronic funds transfers because they eliminate the float time that a drawer enjoys on a checking account and the paperwork involved in processing checks. Answer: T Charles […]

An indorsement is “a signature, other than that of a signer as”: a. maker. b. drawer. c. acceptor. d. All of the above. The exercise of the power to avoid a contract is known as: a. ratification. b. disaffirmance. c. […]

Regarding the termination of an agency, the Third Restatement: a. distinguishes between terminations based on death of a principal and terminations based on incapacity of the principal. b. applies the same rule to all causes of termination; it applies a […]

In international business transactions, a documentary letter of credit: a. is a method of payment of goods that reduces the seller’s risk from the possibility that the goods will be shipped, but not paid for. b. is a type of […]

Which of the following statements about wills is correct? a. A will must be written on one piece of paper. b. Another writing may be incorporated by reference in a will. c. The testator must sign his or her full […]

In order to violate the FTC rules on advertising, a product would have to be affirmatively mislabeled. Azurapi Corporation plans to start marketing products worldwide. What forms of multinational business enterprise are available? What factors should influence the decision on […]

A survival clause refers to: a. a remainder in a life estate. b. a possibility of reverter. c. a provision in a lease contract providing that the tenant’s eviction for non-payment of rent will not relieve her of liability for […]

Intellectual property consists of which of the following? a. Trade secrets b. Patents c. Trade symbols d. All of the above are considered intellectual property. Cheryl, age 16, ordered a new dress to wear to the school prom. She has […]

The RMBCA has adopted a net assets test for the issuance of dividends. The anthropology department of Towers University is doing an excavation on property that belongs to Farmer Brown. If in the process of excavation the university finds some […]

An indorsement limiting payment to a particular person is effective. The Code does not excuse performance based upon commercial impracticability. Answer: F Any debtors may seek relief under Chapter 7 of the Bankruptcy Code. Answer: F Most courts consider a […]

Clara types a letter to David setting forth the terms of their contract that falls within the statute of frauds. At the end of the letter, she types her name but does not sign her signature to it. If David […]

A bailment may be made of either real or personal property. If one major U.S. car manufacturer acquired another, the Clayton Act would require close scrutiny of the transaction. Answer: T The Fair Credit Reporting Act applies to consumer reporting […]

A payee may be a holder in due course under the Code. Cheryl is a 17-year-old high school student who was elected homecoming queen and does part-time modeling to earn money for college. She has an important interview with a […]

The Sarbanes-Oxley Act: a. establishes new criminal offenses as well as substantially increasing penalties for existing crimes. b. imposes fines and/or imprisonment of up to 20 years for knowingly altering, destroying, or falsifying any document with the intent of impeding […]

Tim and his friend are playing catch in the back yard when Tim intentionally throws the ball over the fence into the neighbor’s yard. This is trespass to real property, even if Tim himself does not go onto the property […]

A check is dishonored if: a. it is presented for payment directly to the payor/drawee bank for immediate payment, which is refused. b. a payor bank makes timely return of the check. c. the payor bank becomes accountable for the […]

The bankruptcy and the equity definitions of insolvency are the same. In a Chapter 13 proceeding, only the debtor may submit a plan of reorganization. Answer: T Although, in general, internal affairs of foreign corporations are not regulated by the […]

The UCC treats merchants more leniently than others in transactions involving goods. The failure to appoint a trustee will destroy a trust. Answer: F About half of all bankruptcy petitions are involuntary petitions. Answer: F Under the Code, a contract […]

Generally, rights under an option contract are not assignable. Federal regulation prohibits a credit seller or lender from obtaining a nonpossessory security interest in household goods if the interest is not a purchase money security interest. Answer: T The Foreign […]

Mary’s car was parked just outside the east door of the Civic Center. When she tried to exit, three ominous-looking gang members were blocking that door. She called the police who arrested the three for loitering. If Mary brings suit […]

What are the requisite elements of fraud? Al owns a farm that he believes is worth $150,000. Betty knows that there is oil under the farm and offers Al $160,000 for it. Al is suspicious and asks her why she […]

The newly formed Bright Partnership cannot commence business until it meets its state’s required minimum amount of capitalization. RICO does not apply to businesses that are engaged in organized crime. Answer: F In many instances the same facts will give […]

An auctioneer is free to withdraw the goods from sale if the sale is advertised or announced in explicit terms to be without reserve. Under the statutes in most states, if Marilyn and George form a corporation with Marilyn as […]

The Uniform Electronic Transactions Act, in effect in all of the states, covers contracts not governed by Articles 2 and 2A. A limited partner’s financial obligation to the partnership may be increased if the: a. limited partner acts as agent […]

A person may employ deadly force to protect his property. “Discharge” has to do with the termination of contractual duties. Answer: T Under all LLC statutes, a unanimous vote of the members must be obtained to approve a merger. Answer: […]

Answer the following: Baker goes into bankruptcy owing $5,000 as wages to his employees. There is enough in his estate to pay all costs of administration and enough to pay his employees, but if the employees are paid, there will […]

Assume you are the creditor in each of the following situations. Identify the kind of security agreement that is involved in each transaction and explain how you would perfect that agreement. a. You are the creditor (Evergromby Bank), and you […]

A debtor has the option of using either federal or state exemptions; however, the 2005 Act imposes limits on the use of a state homestead exemption to the extent that the homestead was obtained through fraudulent conversion of nonexempt assets […]

The International Monetary Fund was established in 1945 to promote international monetary cooperation and now has approximately 50 member countries. Legal detriment means the obtaining by the promisor of that which he had no prior legal right to obtain. Answer: […]

If Kathy indorses a check “without recourse”: a. Kathy is not contractually liable if the check is not paid. b. negotiability is destroyed. c. the check cannot be transferred. d. Kathy cannot transfer good title to the check. If no […]

Participating stock will: a. share with common stock any additional dividends after preferred and common stockholders receive their normal dividends. b. accumulate dividends that will be paid later. c. participate in earnings only to the extent that all other classes […]

Match the following: a. Conclusively presumed unreasonable and therefore illegal. b. Acquisition by one company of a competing company. c. Established environmental protection as a goal of federal policy; created the Council on Environmental Quality and requires an EIS in […]

The common law traditionally favored competition. An accountant has no liability to third parties other than the client. Answer: F Courts treat contracts of incompetents and intoxicated persons essentially the same, except they are stricter with intoxicated persons because of […]

Philip has been in training for several months and now plans to run in the school-sponsored, ten-mile, fun run mini-marathon. He completes and signs an entry blank which contains the statement, “I hereby agree to hold the sponsors harmless for […]

One of the most appealing features of a limited partnership is the limited personal liability it offers to limited partners. Sandy’s private secretary promises to keep the contents of a letter she typed secret if Sandy will give her the […]

The law assumes that respective performances under a contract are concurrent conditions, unless there is an agreement to the contrary. The operation of agency involves at least three persons. Answer: T The general law of contracts is displaced by the […]

A possibility of reverter is the complementary estate to a: a. fee simple. b. qualified fee. c. life estate. d. reversion. Code Section Matching a. Statute of frauds. f. Good faith. b. Warranty of title. g. The “battle of the […]

On June 1, Edward visited a bicycle sales and service center. Edward spotted a used bike he liked and was told by the dealer that he could have the bike for $100 cash. Since Edward needed a few days to […]

The Magnuson-Moss Warranty Act was enacted to protect purchasers of consumer goods. Dual purposes of remedies for breach of a contract for the sale of goods under the Code are compensation and deterrence of wrongdoing; therefore, compensatory and punitive damages […]

If an agent exceeds his actual and apparent authority, the principal is not bound, which makes the agent a party to the contract. A friendly fire is one that is contained in its intended place such as a fireplace, stove, […]

In an assignment or delegation, the third parties’ rights or duties arise after the contract is made. The basic remedy for misrepresentation is restitution. Answer: F If the partnership is bound by a contract, then each general partner has unlimited […]

Notice of dishonor of an instrument: a. may be given orally. b. must be given by returning the unpaid instrument with an attached stamp, ticket, or memorandum stating that the item was not paid. c. must meet formal requirements to […]

A draft is payable “to the order of Joe Jones or to bearer.” Sally finds it and demands payment. Should the drawer pay Sally? a. No, unless Joe Jones’ name is crossed off b. No, unless “bearer” is handwritten c. […]

While employed and even after termination of employment, an employee cannot divulge trade secrets to a competitor. Insiders may refrain from trading on inside information rather than disclose it to avoid liability under Rule 10b-5. Answer: T An employer may […]

All fifty states have enacted similar statutes regulating tender offers. Negligenceper se is a defense in a negligence case. Answer: F In most states, a contract under seal is binding without consideration. Answer: F A person who purports to act […]

A contract in which both parties exchange promises is a: a. voidable contract. b. bilateral contract. c. unilateral contract. d. quasi contract. Stan has agreed to sell a warehouse to Ed for $150,000. The contract says that Stan will convey […]

Under Revised Article 3, a promise to pay only out of a particular fund will destroy the negotiability of an instrument. Presenters’ warranties are exactly the same as transferors’ warranties. Answer: F The distinction between horizontal and vertical restraints often […]

Under the Magnuson-Moss Warranty Act, a seller who makes a written warranty cannot disclaim any implied warranty. The liability of partners for a tort or breach of trust committed by any partner is unlimited, personal liability. Answer: T An employee’s […]

Security interests in goods are governed by the common law rather than the UCC. Conscious parallelism is sufficient in itself to suggest a conspiracy in violation of Section 1 of the Sherman Act. Answer: F A federally protected trademark cannot […]

Monetary damages are the most frequently granted remedy for breach of contract. To sustain a case of fraud in the inducement, the injured party must prove that he actually relied upon the false representation. Answer: T What is the purpose […]

An agent is not normally liable on a contract he makes with a third party on behalf of a(n) ____ principal. a. undisclosed b. disclosed c. partially disclosed d. All of the above are correct. In a “closed shop,” an […]

Discuss the three types of privileges that are defenses to defamation. How do they differ? In what context are they used? Why do these defenses exist? A limited partnership agreement may not provide that limited partners have the right to […]

Criminal sanctions for accountants are limited to punitive fines. A promisor and a promisee may provide that the benefits under a contract will never vest in a third person. Answer: T Julie writes a letter to Mitchell authorizing him to […]

A crime that is punishable by a fine or imprisonment in a local jail is a: a. felony. b. white-collar crime. c. misdemeanor. d. mala prohibita crime only. A demand note is dishonored if the maker does not pay it: […]

Although he knows the ring is really valuable, Alex tells Mona her ring contains artificial gems, but he would be willing to buy it for $50. Mona agrees. Alex quickly takes the ring to Hanna’s Antique Jewelry Shop and sells […]

An employer’s interference with the employee’s right to bargain collectively is not an unfair labor practice. Define a substituted contract and describe how it affects an agreement. Answer: A substituted contract results when the parties to a contract mutually agree […]

If Sheree, a county commissioner, threatened Brent that unless she received a 15 percent interest in his proposed development she would use her influence to prevent approval of the development, she has committed criminal extortion. Glenn indorsed his paycheck by […]

An automatic stay ends: a. upon dismissal of the bankruptcy case. b. when the debtor receives a discharge. c. only by court order. d. Both (a) and (b). Lostowne was economically depressed until Sally’s Firecracker Corp. moved their factory there. […]

Upon the lessor’s breach, the lessee may protect himself by leasing substitute goods. A proxy is revocable to the same extent as an agency. Answer: T When the power of eminent domain is exercised, the owners must be given the […]

A newspaper article hints that a certain corporation is a front for illegal activity. The corporation: a. will lose a defamation suit because only natural persons can successfully bring defamation suits. b. will likely win a defamation suit if the […]

Which of the following is not a reason for the use of negotiable instruments? a. Reduction of the chance of forgery or material alteration b. Convenience c. Elimination of the risk of loss or theft of cash d. Reduction of […]

Henry prepared a registration for the first issuance of stock of the Winzell Corporation. Henry took the assignment very seriously and spent a great deal of time preparing the statement. Two years after the statement was filed, the SEC began […]

Elmer wrote a letter to his friend Fred offering to sell Fred an 80-acre farm for $200,000. After mailing the letter, Elmer learns that the farm is actually worth $300,000 and changes his mind about selling. Elmer: a. has made […]

Sexual harassment is covered by Title VII. Only the intentional destruction of personal property and not the use of the property in an unauthorized manner can give rise to a cause of action for conversion. Answer: F The Code and […]

Susan bought Green Acre subject to a $500,000 mortgage granted by Joe to First Bank. If Joe leaves for Bolivia and does not pay the mortgage, which of the following is true? a. Susan will not have to pay the […]

Scienter is not a requirement for an accountant to be civilly liable under Rule 10b-5. All interests in property that can be conveyed carry the right to immediate possession. Answer: F An indorsement that says, “Pay to the Order of […]

Belinda has a household insurance policy, which requires that she notify the insurance company within thirty days of any loss before she is eligible to receive payment for her loss. The notification requirement is a condition precedent to the insurance […]

Thomas borrowed $100,000 from First Bank, which asked that he both put up collateral and provide a surety. Consequently, Thomas provided the bank with a security interest in his antique car collection and asked Victor to act as a surety. […]

The payor bank and the drawee bank are two separate banks. A drawee bank “accepts” a check by certification. Answer: T If a will was burned in an electrical fire that destroyed the testator’s home, it will be presumed to […]

What six elements must be present for the crime of larceny to exist? The validity of zoning is based on the police power reserved to the states. Answer: T Incellmed Corporation is in the business of developing genetically engineered pharmaceutical […]

If a contract is not clearly a destination or a shipment contract, the law assumes that it is a shipment contract. Tender can be made any time of the day or night when the seller feels like delivering the goods. […]

Price fixing is the primary example of a per se violation of the Sherman Act. An “X” or a thumbprint could constitute a signature under the Code. Answer: T A devise is a gift by will of personal property. Answer: […]

Which of the following would most likely be a merchant with respect to the goods in question under the UCC definition? a. Amy is an authorized IBM computer dealer. b. Brian employs two salesmen to sell his homemade furniture. c. […]

The notice requirement of the Federal Trade Commission rule for consumer credit contracts has the effect of: a. limiting the types of defenses to payment available to a consumer. b. eliminating the real defenses to payment. c. placing a holder […]

When a severe weather warning has been declared, a delay in notice is excused to the holder who was prevented from giving the notice until after the severe weather passed. First Bank loaned $100,000 to Marlin’s Store to purchase computers […]

a. What are the two types of duress and what is the effect of each on the contract involved? b. Give an example of each type of duress. c. Who does the law intend to protect by reason of the […]

Mark, a college student, agreed to sell his horse to Henry for $1,000. The contract required Mark to take the horse on that same day to Idlewild Stables where Henry was going to board the horse. Henry paid Mark the […]

The EEOC allows discrimination in employment because of differences in bona fide occupational qualifications. The computation of time for the one-year provision of the statute of frauds starts when the agreement is made, not when the performance is to begin. […]

Andrew owns a store in Polk County. His trade extends throughout River City, but not beyond the county limits. He sells his store to Betty and, as part of the transaction, agrees not to engage in the same business anywhere […]

Divided Parcel (DP) includes the following on its mailing receipts: “We are not responsible for any damages to packages whether or not through the fault or negligence of our employees. Send packages at your own risk.” Mary reads this clause […]

Mom and Carolyn own a farm as joint tenants. When Mom dies, her share will pass to: a. Carolyn. b. her heirs. c. her beneficiaries. d. Carolyn’s heirs. Millie, a tenant, abandons her apartment after 6 months, even though there […]

Which of the following is not a function of a bill of lading? a. It serves as a receipt for goods. b. It serves as evidence that the goods specified in the bill of lading are stored in the insured […]

In interpreting a contract, terms which have been separately negotiated are given priority over standardized, pre-printed terms. Watkins Manufacturing has furniture, some of which it has sold to Home Interiors, stored in Central Warehouse. It is to be delivered without […]

Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, and the Age Discrimination in Employment Act do not apply to U.S. citizens employed abroad by U.S. employers or by foreign companies controlled by U.S. employers. […]

Which of the following is correct with respect to the buyer’s obligation of payment? a. In the absence of agreement, payment is due at the time and place the buyer is to receive the goods. b. Payment by check is […]

If untrue, which of the following would probably be considered a misrepresentation of a material fact? a. “This is the one that I think is the best buy.” b. “This is the best computer on the market.” c. “This car […]

The State may appeal a verdict of “not guilty” if there is an error in the trial. Acceptance of any part of a commercial unit is acceptance of the entire unit. Answer: T The shelter rule applies even if the […]

The World Bank established the ____ to encourage increased investment in developing nations. a. Overseas Private Investment Corporation b. World Trade Organization c. Multilateral Investment Guarantee Agency d. Commission on International Trade What is another name for the main purpose […]

Gary mails an offer to Brian on June 15. Brian receives the offer on June Gary mails a revocation of the offer on June 17. Brian mails a letter of acceptance on June 18 and Gary receives the acceptance on […]

Disaffirmance may be express, but it may not be implied. The 1933 Act imposes only civil, not criminal, sanctions for violation of its provisions. Answer: F In most statutes granting an accountant-client privilege, it belongs to the client and not […]

The Fair Housing Act prohibits discrimination based on race and color only. Petrol Corp. owns several drilling operations in the Gulf of Mexico, refineries, service stations, and tanker trucks for transporting their products. Petrol Corp. hires an environmental manager to […]

Bill bets his friend $100 that the Patriots will win the next Super Bowl. This is an: a. unconscionable contract and therefore illegal. b. illegal wagering agreement. c. agreement to obstruct justice and therefore illegal. d. illegal restraint of trade. […]

The Code section which sets forth the requirements that must be met for an instrument to be negotiable is: a. 2-209. b. 3-104. c. 4-405. d. 3-250. Which of the following would be considered consequential damages? a. Commissions paid to […]

If a company owns 90 percent or more of the outstanding shares of each class of a subsidiary company’s stock, a merger may be effected with approval of the parent’s board of directors alone, without resort to shareholders. This is […]

Closely held corporations sometimes impose supermajority or unanimous quorum requirements even though this creates the possibility of deadlock at the director level. Hugo wishes to raise money for his restaurant. He offers to sell stock to his brothers, sisters, aunts, […]

If United Widgets lowers its price to all buyers of 10 or more widgets, it is not a violation of the Robinson-Patman Act. The difference between an express contract and an implied in fact contract is the manner in which […]

Notes and certificates of deposit are orders to pay money to a third person. The business corporation is a key institution not only in the American economy but also in the world power structure. Answer: T A testator with capacity […]

When contract terms prohibiting the assignment of rights exist, most courts will: a. strictly construe them. b. interpret a general term prohibiting assignments as rendering any assignment ineffective. c. award the obligor no right to damages for breach of a […]

An express trust may be found if the intent of the grantor to create a trust is unmistakable. A person who knows that an instrument is overdue or has been dishonored cannot become a holder in due course. Answer: T […]

Which of the following is not a remedy available to an unpaid seller against the buyer? a. Recovery of the price b. Cover and suit for damages c. Recovery of incidental damages d. Cancellation of the contract Which of the […]

Sarah offers to pay Allison $150 if Allison will paint her apartment while she is out of town on vacation for two weeks. Allison makes no promise but tells Sarah that she will think about it. While Sarah is out […]

If the buyer is insolvent and has not paid for goods received, the seller may reclaim the goods. The contract liability of the principal may depend upon whether the principal is disclosed, partially disclosed, or undisclosed. Answer: T The board […]

If a shareholder dissents to a proposed business combination, he is entitled to receive the fair value of his shares. In order to do so, the shareholder must do which of the following? a. Attack the validity of the corporate […]