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Sylvia Jurgen operates a florist shop. During a particularly busy day, she allowed one of her employees, Terry Lioni, to use her (Jurgen’s) personal car to assist with deliveries. Lioni had just obtained his driver’s license. Lioni was involved in […]

A restrictive indorsement specifies the purpose of the indorsement or the use to be made of the paper. Sam Wilson often goes to the horse races, participates in his state€s lottery, and invests heavily in the stock of major U.S. […]

If a maintenance employee at a hotel finds a pocketbook with $500 in cash while cleaning an empty guest room, the employee: a. is entitled to keep the property, because the employee has the legal status of a “finder.” b. […]

The most recent addition to the American governmental structure is the: a. executive branch. b. administrative agency. c. judicial branch. d. legislative branch. Public policy: a. can be precisely defined b. is frequently used by the courts as a reason […]

Licensees are on the premises with the permission of the landowner. An auto dealer who does not actually know of a roll-back can use lack of knowledge as a defense against odometer fraud, regardless of the condition of the car. […]

Labels on packages are regulated to provide information about the contents and warnings about the dangers involved in the use of the product. Sales law includes special rules that apply to merchants. Answer: T An owner ordinarily is not liable […]

When a credit application is refused, it is sufficient that the lender give the applicant a written statement saying: “application refused.” Transfer or possession and use of bailed property without compensation is a gratuitous bailment. Answer: T In some states […]

Those who are liable for violations of consumer protection situations are persons or enterprises that regularly enter into the type of transaction in which the injured consumer was involved. A person who is prevented from enforcing a contract because of […]

Contract terms may not be implied from conduct. A surety may not raise the defense of mistake. Answer: F The U.S. dollar is considered the international currency. Answer: F The category of protected consumers for many statutes has been expanded […]

In interpreting an ambiguous contract, one part of the contract: a. must be viewed in isolation. b. must be viewed as a condition. c. must be viewed in connection with the rest of the contract. d. must be viewed as […]

Title to land may be acquired by adverse possession. Due process includes the right to be heard, question witnesses, and present evidence. Answer: T At common law, a tenancy by entirety or a tenancy by the entireties is created when […]

A merger is subject to antitrust law, while a consolidation is not. Despite consumer protection legislation, for most consumers pursing their rights in court is not cost beneficial. Answer: F In a merger or consolidation, the surviving corporation generally succeeds […]

An agreement cannot be enforced if it does not set forth every contractual detail. The FTC requires that only descriptive and non-ambiguous terms such as jumbo, giant, or full be used in product labeling. Answer: F A landlord is ordinarily […]

A holder of a negotiable instrument cannot be a holder in due course when the holder learns of a defense to payment after the acquisition of the instrument. A bank is not required to pay a check presented more than […]

The first action generally attempted by the EEOC is: a. litigation. b. conciliation. c. mediation. d. arbitration. An employer may be liable on the theory of negligent hiring: a. when it is shown the employer knew the employee would create […]

Governments may regulate prices but not credit terms. Contract provisions that limit the remedies of the parties are generally unenforceable. Answer: F The statement, “I doubt that I can perform the contract,” is a repudiation of the contract. Answer: F […]

Stockbrokers are eligible to file Chapter 11 bankruptcy. In most states contracts of guaranty do not have to be in writing to be enforceable. Answer: F If a state or local Equal Employment Opportunity agency (EEO) exists, a party charging […]

To satisfy the statute of frauds, the writing must be signed and must include the price of the goods. When property is transferred to a trust, the trustee has legal title and the beneficiary has equitable title. Answer: T An […]

Arbitration procedures occur in a court of law. Corporate Integrity Agreements are the equivalent of putting a corporation on probation. Answer: T The Constitution may be amended, but it always has been interpreted in the same way. Answer: F The […]

Supply chain management refers to the management issues of risk and title as goods flow through commerce. Plaintiffs suing for damages caused by a defective product are limited to taking action only against the manufacturer(s) of such goods. Answer: F […]

When the name of the payee is spelled incorrectly, the payee: a. must indorse the instrument with the incorrect spelling of the payee€s name. b. must indorse the instrument with the correct spelling of the payee€s name . c. may […]

Under the act-of-state doctrine, the courts of one country will not sit in judgment of the acts of the government of another country conducted within its own territory. A shareholder can give a proxy to vote shares only to another […]

The UCC permits a court to refuse to enforce a sales contract that it finds to be unconscionable. The scope of warranties remains the same regardless of whether the seller is a merchant or a casual seller. Answer: F Under […]

Hal was a merchant who deposited 2,000 barrels of olive oil in a public warehouse operated by Welcome Warehouse. Hal was issued a warehouse receipt for the 2,000 barrels that by its terms was deliverable “to bearer.” Hal had engaged […]

In a lease agreement, the person who owns the real property and permits the occupation of the premises is known as the __________, and the person who occupies the property is known as the __________. a. lessor; lessee b. lessee; […]

Mark Hubbard has been very successful in the cattle business over a number of years. Hubbard has decided to establish a cattle program as an investment tool. He will purchase cattle with investors’ money and then provide medical care, feed, […]

Differences among businesses preclude the development of any universal categories of ethical behavior. The intent to make a gift requires an intent to transfer title at that time. Answer: T Barnes agrees with Morgan to enter into the management of […]

A partnership involves partners’ contributions of capital, services, or a combination of these. A bailment is a special form of sale in which possession is transferred to a bailee. Answer: F A condominium and a cooperative are essentially the same. […]

When a bank certifies a check, the amount involved in the certification will be retained in the depositor’s account until payment of the certified check. Coppersmith executed and delivered negotiable notes to the payee, Charlene. The payee indorsed the notes […]

The term “cyberlaw” refers to laws and precedent applicable to Internet transactions and communications. Customs and trade usage can override the express provisions of a contract. Answer: F Shareholders ordinarily cannot be sued for corporate liabilities. Answer: T A third […]

The right of an employee to pension benefits paid into a pension plan in the employee’s name by the employer is referred to by the term: a. venue. b. accrual. c. vesting. d. investing. An incontestability clause ordinarily bars contest […]

A contract for the sale of shares must be evidenced in writing. The sale of corporate assets outside the regular course of a corporation’s business is an example of an extraordinary matter. Answer: T Sue is an employee at an […]

If a provision in an insurance policy is ambiguous: a. it is interpreted in favor of the insurer because the insured could have rejected the policy. b. it is interpreted against the insurer. c. parol evidence is admitted to show […]

The rule of mitigation of damages requires that a party injured by a breach of contract must: a. take any and all steps possible to reduce the damages that will be sustained because of the breach. b. discharge the contract […]

A holder can recover from any of the parties who are liable on the instrument, regardless of the order of the signatures on the instrument. A disparate impact exists when an employer’s facially neutral employment practices have a significantly adverse […]

Partners have the implied authority to bind the partnership by contracts of surety for any and all purposes. A crime consists of three elements: the mental state, the intent, and the act. Answer: F Generally, a promise is legally enforceable […]

Compensatory damages: a. compensate consumers for their actual loss. b. are imposed to punish the defendant for wrongdoing. c. both a. and b. d. none of the above. A successor enterprise is not subject to the contract obligations of the […]

Collective bargaining agreements generally are subject to a ratification vote by the employees. If either the offeror or offeree dies or becomes mentally incompetent before the offer is accepted, the offer is automatically terminated. Answer: T A buyer returning to […]

Unclaimed property is often transferred to the government under the concept of escheat. A party who in good faith has provided substandard performance of a contract may sue to recover the payment specified in the contract. Answer: F Corporations are […]

An agent’s duties must be expressly stated in the agency agreement and may not be implied from the principal’s words or conduct. The steps in terminating a financing transaction upon full payment by the debtor include the preparation of a […]

One of the main goals of the Organization of Petroleum Exporting Countries (OPEC) was to reduce taxes from crude oil production. In order to be valid, an accountant€s disclaimer of liability must be (1) clear and unambiguous and (2) non-conspicuous. […]

Some states have rejected the requirement of privity but not adopted any set rule. Instead, these states function under the __________ rule. a. known user b. contact c. flexible d. foreseeable user An individual who desires to make provisions that […]

__________ refers to laws and precedent applicable to Internet transactions and communications. a. Cyberlaw b. Cyborglaw c. Silicalaw d. Simlaw Agreements that are illegal are: a. enforceable if one party acted in good faith. b. voidable by one of the […]

The Robinson-Patman Act guarantees a seller the right to refuse to deal with anyone for any reason or purpose. Creditors receive an automatic 30-day temporary perfection in negotiable instruments taken as collateral. Answer: F The “necessaries” of minors are precisely […]

A buyer always has a right to examine the goods to determine if, in fact, the goods conform to the contract. In a simple contract made by an authorized agent on behalf of a disclosed principal, the third person may […]

The formation of contracts in cyberspace is always governed by the law of the United States. If a plaintiff’s loss involves damaged property, it is described as liquidated damages. Answer: F If a leased building is destroyed, the lease is […]

A qualified indorsement qualifies the effect of a blank or special indorsement by disclaiming certain liabilities of the indorser to a maker or drawee. A liquidated damages clause is a contractual provision stipulating the amount of damages to be paid […]

When it is claimed that a contract is too indefinite to be enforced, a court will do its best to find the intent of the parties and thereby reach the conclusion that the contract is not too indefinite. Bob Corporation […]

An incidental beneficiary of a contract: a. can sue to enforce the contract. b. cannot sue to enforce the contract. c. is a beneficiary specifically named in the contract. d. is an assignee of the direct beneficiary. A letter of […]

Which of the following is a defense to an action against an agent for breach of the implied warranty of authority? a. The agent acted in good faith. b. The agent misunderstood the scope of authority. c. The third person […]

Under no-fault insurance, an insurer is obligated to pay an injured person without regard to whose fault caused the harm. A trustee can delegate the performance of personal duties. Answer: F In the United States today, we generally have one […]

The validity of a contract is not affected by: a. the effect of the contract on the community. b. unconscionability. c. the absence of good faith. d. the fact that the contract turned out to be a bad bargain for […]

A seller’s insurable interest in goods always terminates with the passage of the title to the buyer. A special agent is authorized by the principal to transact all affairs in connection with a particular type of business or trade or […]

A seller’s duty to deliver goods requires the seller to transport the goods to the place designated by the buyer. A tender occurs when the holder of a check or other consumer transaction authorization demands payment. Answer: F Unless justified […]

The warranty liability of a qualified indorser is the same as that of an unqualified indorser. When an accountant makes a contract to perform services, there is a duty to exercise the skill and care that are common for the […]

What is an employer defense to a disparate impact charge? a. The employer did not intend to discriminate. b. The employment practice is job-related and consistent with business practice. c. The disparate impact was not the result of extreme recklessness […]

Herman Corporation is engaged in preparing a marketing campaign consisting of electronic and print images. Drawings and photographs for the campaign are coming from a variety of sources, including popular magazines, international newspapers, and web sources. The marketing vice president […]

The states may coin money as long as it is backed by gold. The measure of monetary damages when there has been a breach of contract is the sum of money that will place the injured party in the same […]

A contract is interpreted to give effect to: a. the intent of the parties. b. what the court believes is a fair contract. c. what the defendant thought the contract meant. d. what will be best for the economic life […]

A corporation or group of investors may seek to acquire control of another corporation by offering cash for all of its shares made available for sale by a certain date. This action is called a(n): a. cash tender offer. b. […]

A person may be held criminally liable for acts committed by another. In a limited partnership, general partners are not responsible for the debts of the firm. Answer: F In order for delivery to occur, a gift must actually be […]

Punitive damages are generally recoverable in contract actions. An issuer has an obligation to honor drafts under a letter of credit if the conditions specified in the letter have been satisfied. This obligation includes the bank’s obligation to assure that […]

An automatic stay: a. arises only upon the filing of a voluntary petition. b. prevents any further interest from accruing on a debtor’s outstanding debts. c. prevents creditors from taking action outside of the bankruptcy proceeding against a debtor. d. […]

When a term of an acceptance conflicts with a term of an offer but it is clear that the parties intended to be bound by a contract, the UCC still recognizes the formation of a contract, and the conflicting terms […]

A ‘short-swing” profit is realized by a corporate insider from selling corporate securities less than one (1) year after purchase. A negotiable warehouse receipt that provides for delivery of the goods to the order of Jill Jones may be negotiated […]

A contractual provision which states that a waiver of rights will not constitute a modification to the contract is: a. not enforceable as being in bad faith. b. not enforceable as a violation of law. c. enforceable by one party […]

Manis owns 100 shares of stock of the Linquist Corporation. She sells her stock to Sosnik and delivers to him: (1) her stock certificate for 100 shares and (2) a written, signed assignment of the 100 shares to Sosnik. The […]

When a defendant asserts that even if everything the plaintiff said is true there is no right to recovery, the defendant is making a: a. counterclaim. b. motion to dismiss. c. motion for summary judgment. d. deposition. A person becomes […]

Offers, acceptances of offers, and revocations of offers are all effective when mailed in a properly-addressed envelope bearing the proper amount of postage. When the federal government deregulates an industry, the states automatically have the power to regulate the same […]

If a shareholder borrows money and delivers stock as collateral security, the creditor has a perfected security interest in the stock without any filing by the creditor. Fees charged by a lender for the reasonable expense of making a loan, […]

A delivery is sufficient if it is made in accordance with the terms of the contract to sell. To successfully pursue a Title VII lawsuit, the plaintiff generally must belong to a protected class. Answer: T A common carrier transporting […]

Which of the following is an incorrect statement about directors? a. Their eligibility requirements may be found in the bylaws. b. Bylaws may require that directors be shareholders in the corporation. c. The board of directors has authority to manage […]

A subpoena to testify or to produce records: a. is prohibited by the constitutional guarantee against unreasonable searches and seizures. b. is an illegal attempt to gain information by compulsion. c. cannot be opposed on the grounds that such a […]

An instrument is conditional if: a. it contains an order for the payment of money out of a particular fund. b. it is to be paid from the assets of an existing trust. c. it is to be paid from […]

Collective bargaining contracts govern the rights of employers and employees only in public sectors of employment. Changes to the Constitution have been brought about by interpretation, amendment, and practice. Answer: T Securities covered by the securities acts includes only investment […]

Newlog, which had developed a new process for making artificial logs, entered into an oral contract with Specialty Manufacturing. The contract provided that Specialty would manufacture a special part that Newlog needed to make its artificial log machinery. The contract […]

Fungible goods are always homogeneous. The trustee may void any fraudulent transfer made by the debtor within two (2) years of bankruptcy when the debtor€s actual intent was to hinder, delay, or defraud creditors by engaging in the transfer. Answer: […]

In the absence of a liquidated damages clause and in the absence of proof of greater damages, the seller€s damages are computed as a. 25% of the purchase price or $500, whichever is less. b. 25% of the purchase price […]

Most courts consider an engagement ring to be a conditional gift. Unincorporated associations are generally formed to further a common purpose. Answer: T The assumption of risk defense has been abolished in several states. Answer: T The United States Supreme […]

A right can exist: a. by itself. b. only if created by a court. c. only if there is a corresponding duty. d. only under local law. Consideration is not required in: a. contracts for the sale of goods. b. […]

As a general rule, the nondisclosure of information that is not asked for does not impose fraud liability or impair the validity of a contract. The shares of a close corporation are always held by a single individual. Answer: F […]

When a building contractor has substantially performed a contract to construct a building, the contractor is entitled to recover the full contract price. In a composition of creditors, the various creditors of a single debtor mutually agree to accept a […]

The RMBCA provides that, absent a conflicting provision in the articles of incorporation, directors may be removed: a. with or without cause by a majority vote of the shareholders. b. with cause by a majority vote of the shareholders, and […]

An employment contract always will state a time or duration for the contract’s applicability. An acceptance must be absolute and unconditional. Answer: T In a non-shipment contract risk of loss passes to the buyer when the merchant seller makes the […]

In a large corporation, the shareholders are often the managers of the corporation. A waiver of a breach may be either express or implied. Answer: T A warehouse receipt is not considered a document of title. Answer: F A provision […]

A contract based on a mutual mistake in judgment is: a. voidable by the adversely affected party. b. not voidable by the adversely affected party. c. void ab initio. d. none of the above. When an offer has been accepted: […]

Limited liability partnership statues are designed to permit the conversion of existing general partnerships into limited liability partnerships. The media enjoy a qualified privilege for stories that turn out to be false. Answer: T An estate in fee simple grants […]

After a proper demand has been made, for assurance of performance to be adequate, it must: a. include consideration. b. allow for the additional examination of the goods. c. be sufficient to assure a reasonable person that the contract will […]

Only the parties to a sales contract could sue each other under the traditional concept of: a. exclusivity of contract. b. privity of contract. c. privacy of contract. d. priority of contract. A limited liability partnership: a. is taxed like […]

Arnold Properties, Inc. entered into a lease agreement with Janet for a residential house. Janet made four (4) subsequent monthly payments. At the end of the four (4) months, Janet learned that she was to be transferred to a new […]

If there are twelve (12) or more creditors, at least __________ of those creditors whose unsecured and undisputed claims total __________ or more must sign the involuntary petition. a. one (1); $14,425 b. three (3); $14,425 c. one (1); $15,575 […]

Instruments are negotiable when they contain the terms required by contract law. The standard for determining commercial impracticability is objective, not subjective. Answer: T Restrictions on the transfer of stock are valid if they are not unreasonable. Answer: T A […]

The General Agreement on Tariffs and Trade (GATT): a. is a multilateral treaty b. is subscribed to by the United States c. has as its goal the liberalization of world trade d. all of the above A tenant in possession […]

John Harrington operates a business that almost always hires skilled workers who are college graduates; currently, however, his business does have a part-time opening for an unskilled worker. Harrington is considering hiring an uneducated welfare recipient instead of a student […]

The storage of goods in a warehouse and the shipment of goods by a common carrier are examples of special bailments. A seller does not have the right to stop shipment if the buyer has received goods on credit and […]

What type of damages is recoverable when the defendant€s tortious conduct is accompanied by fraud, malice, or willful or wanton conduct? a. compensatory b. consequential c. nominal d. punitive A valid meeting of the voting shareholders of a corporation requires […]

Cyril made two contracts. The first was to have his house painted one month from the date of the written contract. The second was for his neighbor’s 1957 Ford Thunderbird. Each contract was definite and clear in all respects. As […]

Making improvements is a duty that falls on the tenant. The finder of lost property is usually entitled to a judicially-determined reward for finding and caring for the property until the rightful owner reclaims it. Answer: F A copyright owner […]

Details of performance of a contract not expressly stated in a contract will often be implied by the court. The names of limited partners and investors must be included on the certificate of limited partnership. Answer: F The EPA has […]

In states that follow the community property tradition, property acquired after the marriage belongs solely to the party who acquired it. A written authorization of agency is called a power of attorney. Answer: T Preferred stock cannot have priority over […]

Courts look at each case at a given point in time and are not concerned with former cases and rulings when making current decisions. The Age Discrimination in Employment Act forbids discrimination by employers against persons over 30 years of […]

In an employment contract, agreements not to compete are: a. illegal b. uniformly held to be in the public interest and therefore legal c. valid only if the restriction protects the employee d. valid, if the restriction is reasonable and […]

Consideration is not required to establish or modify a letter of credit. The criminal law of all states is the same because all states have adopted a uniform criminal code. Answer: F In every contract there exists an expressed covenant […]

In order to protect themselves from disclosure of proprietary or confidential information, businesses may: a. implement security measures to prevent access by outsiders. b. enforce contractual nondisclosure agreements against departing employees. c. limit disclosure of such information to those with […]

A house-painting contract is discharged if continual rain makes it impossible to complete the painting by the time specified in the contract. A victim of a tort may sue and recover money damages. Answer: T When the dissolution of a […]

The Securities Act of 1933 requires a seller to provide a prospectus to each potential purchaser of an original issue of securities. Consumer protection law often requires those dealing with consumers to make certain mandated disclosures. Answer: T Personal property […]

A party who speaks with a reckless disregard for the truth not knowing of the falsity of his or her words cannot be liable for fraud. When improper collection methods are used, it is no defense to the creditor that […]

An altered instrument can be enforced according to its original terms. No writing is required for a contract by which a broker agrees with a customer to buy or sell securities for the customer. Answer: T The death of a […]

The person to whom the order in a draft is addressed is known as the: a. payee. b. drawee. c. drawer. d. maker. A term of a lease required that the landlord provide exterminating services monthly to control rats and […]

Miriam issued two checks. The first check was made payable to her neighbor for a used car that the neighbor sold to Miriam. The second check was a rent payment to Miriam’s landlord for the current month’s rent.The car was […]

Goods physically existing and owned by a seller at the time of a transaction are called existing goods. At least 30 days must elapse from the date of a company’s filing a registration statement with the SEC to the date […]

In a disparate impact case, proof that the employer did not intend to discriminate is a complete defense. The Constitution prohibits state governments from denying any person the equal protection of the law. Answer: T A tenancy in common is […]

An offer gives the offeror the power to bind the offeree by contract. “Without reserve” auctions give the auctioneer the right to withdraw the goods from the sale process if the bids are not high enough. Answer: F An express […]

Consumers have the responsibility to examine periodic statements provided by their financial institutions. If a loss would not have occurred but for the failure of a consumer to report within __________ of the transmittal of the statement any unauthorized transfer, […]

The World Trade Organization (WTO) provides a Dispute Settlement Body (DSB) to enable member countries to resolve trade disputes rather than engage in unilateral trade sanctions or a trade war. Employers are accountable when employee use e-mails to defame competitors. […]

Article 3 of the UCC establishes a four year statute of limitations for most actions involving negotiable instruments. A manufacturer with distributors in New York City may give its newer distributors free advertising and other services to help them compete […]

An unincorporated association: a. cannot sue in its own name. b. cannot be sued in its own name. c. does not have any legal existence apart from the members who compose it. d. all of the above. Generally, what would […]

As an owner of the corporation, a shareholder always has the right to inspect the books of the corporation for any purpose, regardless of whether the inspection is related to the shareholder’s interest as a shareholder. Commercial paper facilitates the […]

Moral relativists believe that ethical decisions will differ based on circumstances. The Securities Act of 1933 imposes civil liability for making false or misleading statements in a registration statement. Answer: T The Federal Trade Commission suspects Billy Williams of unlawful […]

To avoid litigation over impossibility and impracticability issues, modern contracting parties often contract around the doctrine of impossibility, specifying the failures that will excuse performance in their contracts. The clauses in which they do this are called __________ clauses, and […]

The Americans With Disabilities Act applies to private employers when: a. they have federal contracts. b. they have demonstrated past practices of discrimination. c. they have fifteen (15) or more employees. d. they have state contracts. A written stop payment […]

An agent who commits a crime is: a. always liable. b. only liable if acting in self-interest. c. only liable if the act is done to advance the interest of the principal. d. never liable when acting in the role […]

In a Chapter 7 bankruptcy, the debtor’s nonexempt assets are liquidated to pay debts. A partner admitted as a partner into an existing partnership has unlimited liability for all obligations of the partnership arising before such admission. Answer: F If […]

If a debtor with multiple debts specifies the debt to which a payment is to be applied and the creditor accepts the money, the creditor is bound to apply the money as specified. A contract of insurance ordinarily is stated […]

In antidumping cases: a. The International Trade Administration determines whether foreign goods are being sold in the United States at less than fair value (LTFV). b. The International Trade Commission determines if there is an injury to a U.S. industry […]

Religious societies may not grant hiring preferences to members of their religion. The group of time-honored rules that courts have used to solve similar problems for decades is called stare decisis. Answer: T All partners must contribute money to be […]

The fact that payment on a check has been stopped does not affect its negotiable character. In the case of either a check or a draft, the drawer may be held civilly liable if the instrument is dishonored. Answer: T […]

Courts can create law. The right of privacy does not apply to intrusions into our privacy by means of new technology. Answer: F Consumer goods are classified into different categories based on the debtor’s intended use, not the physical characteristics […]

Contractual intention is determined by objective standards. Criteria used to make employment decisions that have a disparate impact on women, such as height requirements, must be job-related. Answer: T Extortion and blackmail are exactly the same. Answer: F A contract […]

When two corporations merge: a. their separate existences cease, and a new corporation is formed. b. one of the corporations absorbs the other. c. each corporation’s stockholders keep their original shares of stock d. a new charter is needed. Testing […]

Eligibility for membership on a board of directors is determined by all of the following except: a. statute. b. certificates of filing. c. articles of incorporation. d. bylaws. Action taken by one on behalf of another is: a. agency. b. […]

Exoneration is an agreement that a party shall not be liable for loss. A payee is not liable on an instrument until the payee transfers the instrument to someone else. Answer: T Generally, the tenant has the right to the […]

When a minor avoids contracts, the minor always must return the other contracting parties to their original financial positions. A buyer may reject the goods or revoke the acceptance for any defects in the goods. Answer: F If an order […]

Morris rented an apartment in a relatively safe neighborhood of a major city. The door to Morris’ apartment had two locks, and one of these was of the deadbolt variety designed to prevent burglaries. Morris left for work and engaged […]

The formation of contracts in cyberspace is governed today largely by: a. international contract law principles. b. traditional contract law principles. c. federal contract law principles. d. uniform state laws. The right to privacy applies to protect you from unreasonable […]

How do the warranty provisions under the CISG compare to the provisions of the UCC? a. In most instances, the standards are the same. b. In all instances, the standards are the same. c. The CISG standards are stricter when […]

An action for breach of warranty generally must be brought within three (3) years of the breach. Proof of an employer’s discriminatory motive is immaterial in a disparate treatment case. Answer: F Unless otherwise agreed, every merchant seller warrants that […]

The coverage of the Personal Auto Policy (PAP) is limited to claims arising from the €use and operation€ of an automobile. If words and numbers contradict each other in a contract, the rule of construction favors the words. Answer: T […]

A computer crime generally requires that: a. the criminal possess a computer. b. the victim possess a computer. c. the criminal have some knowledge of computers. d. the victim have some knowledge of computers. An application for insurance: a. may […]

A trade fixture is a fixture that is traded in by the owner when purchasing new fixtures. If a contract appears to be legal on its face, it will be enforceable even if it was entered into for an illegal […]

Any modification of a sales contract must be supported by some form of consideration. Gerwin’s daughter Mary was seeking a position as an associate attorney with Baker, Charles & Dixon, a large metropolitan law firm. The firm, after several meetings […]

Which of the following implied warranties is created when the buyer relies on the seller to pick out the goods that the buyer requires to meet a stated need? a. conformity to description b. Merchantability c. fitness for a particular […]

In which of the following scenarios is the agent exposed to the greatest risk of liability? a. disclosed principal and authorized contract b. undisclosed principal and authorized contract c. partially disclosed principal and authorized contract d. authorized receipt of money […]

A bailee’s __________ gives the bailee the right to maintain possession of the bailed property until reasonable storage and/or repair charges are paid. a. reversionary interest b. Lien c. remainder interest d. Mortgage Unless otherwise agreed, the proper place for […]

The use of letters of credit arose in international trade. The provisions of Article 6 concerning bulk transfers are designed to protect creditors. Answer: T An oral agreement to supply a line of credit for two (2) years cannot be […]

Generally, the right to make a will is limited to persons 18 or older. The UCC statute of limitations applies to actions brought for remedies on the breach of a sales contract. Answer: T Predatory lending is a practice on […]

A partner may withdraw from the partnership without liability: a. unless the withdrawal violates the partnership agreement. b. when the partnership is not for a definite purpose. c. when the partnership is not for a definite time. d. all of […]

When performance is impeded due to the occurrence of an event whose nonoccurrence was a basic assumption of the contract, the contract may be discharged on the grounds of: a. commercial impracticability. b. commercial impossibility. c. economic frustration. d. economic […]

An agent’s liability as a party to a contract with a third person is not affected by the degree of disclosure. A bailee can pass good title to a good-faith purchaser, even when the sale was not authorized by the […]

Corrective advertising required by the FTC also is called retroactive advertising. The employer of an independent contractor does not have control over the performance of the work by the independent contractor. Answer: T Funds from the Superfund are used to […]

An agent is distinguished from an ordinary employee in that employees are hired to represent the employer in dealings with third persons. Unless a contract so provides, time is ordinarily not of the essence, and performance within a reasonable time […]

Which of the following is an example of limited or special jurisdiction court? a. Probate court b. Juvenile court c. Domestic Relations court d. All of the above. Contractual capacity is the ability to: a. read and write. b. sign […]

Which of the following parties has the power to bind an organization to a contract? a. A soliciting agent for the organization. b. A contracting agent for the organization. c. A sales agent for the organization. d. None of the […]

A(n) __________ contract is a contract to buy all requirements of the buyer from the seller. a. output b. essentials c. necessaries d. requirements Which of the following is an example of a legal restriction that may be imposed on […]

The Internet Tax Freedom Act (ITFA) prohibits companies from charging sales tax on Internet transactions. Criminal laws: a. define wrongs against society. b. define the rights of one person against another. c. carry damage remedies against the wronged individual. d. […]

Testate distribution describes the distribution that is made when the decedent leaves an invalid will. Modern administrators cannot make laws, but they can argue persuasively before Congress for the passage of needed legislation. Answer: F All federal courts are expressly […]

In addition to issues of social responsibility, business values and ethics play an important role in the success or failure of a business. The Toy Corporation issued 200 shares of stock with no par value. The articles of incorporation provided […]

A person who attends a banquet given at a hotel is considered a guest for purposes of determining the liability of the hotelkeeper. A civil nuisance may be terminated by abatement or closure by government authority, while a criminal nuisance […]

In most states, promises made to another based on moral obligation lack consideration and are not enforceable. Over half of all Fortune 500 firms train their employees to recognize and deal with particular types of behavior that breach their ethical […]

The defendant in a civil case is the party who is suing. A living will, now legal in most states, provides that if the testator becomes unable to express his or her wishes and is in an irreversible, incurable medical […]

An assignee of a contract can bring suit on the contract only in the name of the assignor. A “best efforts” clause is always deemed too indefinite to be enforceable. Answer: F When a negotiable instrument is transferred by negotiation, […]

Herman hires Juanita as his accountant. Juanita commits negligence in preparing financial statements for a business Herman owns. Several investors rely on the financial statements and purchase shares of stock in the business. In a state that has adopted the […]

Title to goods can be transferred without the actual delivery of the goods involved. If a bank improperly refuses to make payment of checks for which its customer has sufficient funds on deposit, it is liable to the drawer for […]

A corporation may be convicted of a criminal offense if it is shown beyond a reasonable doubt that the offense was committed by its agent acting within the scope of the agent’s authority. The maker is the person who writes […]

The means by which stockholders may seek to protect themselves against corporate actions to which they object include all of the following except: a. voting in new directors. b. bringing legal action. c. voiding the charter. d. calling a special […]

A limited liability company is treated like a partnership under federal tax law and has the limited liability feature of corporations. A security agreement must be backed by a written record even if the creditor has possession of the collateral. […]

United States antitrust laws can protect United States exports. In order to satisfy the statute of frauds, all partnership agreements must be in writing. Answer: F Preferred stock is ordinarily nonvoting stock. Answer: T Under the United States Supreme Court€s […]

An agreement between Jim and his 18-year-old daughter, Betty, provides that he will give her $25,000 if she does not marry until after her 22nd birthday. One month after reaching the age of 22, Betty, still unmarried, claims the $25,000.Jim […]

A promise to make a gift is enforceable. Subject to constitutional limitations, corporations may be regulated by statutes. Answer: T If one party to a contract breaks the contract, the other party generally is under a duty to stop any […]

The willingness of an offeror to enter into a contractual agreement regarding a particular subject is expressed by a(n): a. offer. b. acceptance. c. contract. d. agreement. The goal of the North American Free Trade Agreement (NAFTA) is to eliminate […]

A partner’s authority to act for the partnership is similar to the authority of a(n): a. agent to act for a principal. b. independent contractor to act for an employer. c. shareholder to act for a corporation. d. employee to […]

For violation of the Sherman Act, the maximum fine that may be imposed on a natural person is: a. $1 million. b. $500,000. c. $0. d. $100 million. An insurer who wrongfully refuses to defend the insured is liable for: […]

Legislation commonly requires that an installment-sale contract specify the cash price, down payment, finance charges, and insurance costs. Debts of a corporation are not the debts of the persons running the corporation or owning shares of stock in it. Answer: […]

A federal agency planning to adopt a new regulation must give public notice of such intent and then hold a hearing at which members of the public may express their views and make suggestions. The Bill of Rights provides protection […]

Conduct that unreasonably interferes with the enjoyment of land is a nuisance. For ratification to occur, the agent must have purported to act on behalf of, or as agent for, the identified principal. Answer: T According to the RMBCA, shareholders […]

A disclaimer that protects an accountant from liability for inaccurate reporting of certain specified financial information will be held valid if the accountant had no means of examining the information. Parol evidence is not admissible to show fraud, duress or […]

In order for a bailment to be valid, the bailor must be the owner of the subject property. If a share certificate is lost, destroyed, or stolen, the ownership of the shareholder is destroyed. Answer: F A general partner within […]

Isidro issued a negotiable promissory note to his attorney in return for the attorney’s promise to perform legal services. The attorney never rendered the legal services but quickly negotiated the note to Anna, a holder in due course. Anna and […]

A third person who deals with a person claiming to be an agent has the right to rely on the statements made by the agent concerning the extent of the agent’s authority. Parol evidence is allowed to show whether an […]

A bank always is liable for making payments on a postdated check. Franchising is a form of licensing that now is very common in international business. Answer: T In a federal system, a central government is given power to act […]

Thomas, the holder of a check, presents it to the drawee bank for payment. If Thomas indorses the check, Thomas warrants that the account of the drawer in the drawee bank contains funds sufficient to cover the check. The contributory […]

A document of title is not sufficient for a creditor to take an interest in goods. Franchisors may be found liable for the wrongful conduct of their franchisees on an apparent authority theory when the conduct of the franchisor creates […]

A new state law mandates that all employers must prohibit smoking on employer premises. The law further provides that any employer who allows an employee or a client/ customer to smoke on its premises is subject to a court order […]

In older cases, the employer-employee relationship was referred to as the master-servant relationship. A will may only be revoked by operation of law; it may not be revoked by act of the testator. Answer: F The Sarbanes-Oxley Act (SOX) made […]

The Foreign Corrupt Practices Act applies to businesses with their principal offices located in the United States. A fixture is personal property that has been attached to the earth or placed in a building in such a way or under […]

The Clayton Act prohibits price discrimination between different buyers of like commodities when the effect may be to substantially lessen competition. Equal employment opportunity laws provide protection for minorities and women, but the disabled are not within the protection of […]

It is probable that a zoning variance would be granted: a. even though many of the neighboring property owners object. b. on the grounds of hardship, regardless of who created the hardship. c. to an outside advertiser to build a […]

Automobile lemon laws protect only persons buying automobiles for personal, family, or household use. The FTC requires advertisers to maintain records of the data used as support for statements made in the ads that deal with the safety, performance, efficacy, […]

Under Regulation D, Rule 506, sales may be made to: a. an unlimited number of accredited investors b. an unlimited number of unaccredited investors c. no more than 500 accredited investors d. no more than 35 unaccredited investors The situation […]

The owners of a limited liability company are known as: a. members. b. partners. c. contributors. d. electors. Ordinarily, a temporary impossibility __________ the duty to perform. a. suspends b. excuses c. discharges d. none of the above Answer: A […]

When a seller sells on credit and is given a security interest in the goods, that interest is called: a. a purchase money security interest. b. a future transaction. c. a floating lien. d. none of the above. When a […]

Computer programs are subject to protection in the U.S. under: a. copyright laws. b. patent laws. c. trade secret laws. d. all of the above. A tenancy for an indefinite time period that may be terminated at any time by […]

To be patentable, an invention must be new and not obvious to a person of ordinary knowledge and skill in the art or technology to which the invention is related. Private citizens lack the authority to have polluting activities halted […]

A buyer seeking damages because of a breach of the sales contract must give the seller notice of the breach within a reasonable time after the buyer discovers or should have discovered it. In addition to state legislatures and the […]

The term dumping refers to the sale of damaged goods in a foreign market to cut the losses that would otherwise be caused by the damage. Under a freehold estate, a person owns property only for a specified number of […]

The time for performance is typically essential in a contract for the sale of perishable property. Ulysses bought Whiteacre from Gordon but never recorded the deed. Gordon stayed on the property as a tenant for three (3) years. Near the […]

A transferee of a nonnegotiable warehouse receipt acquires only the title and rights that the transferor had actual authority to transfer. Most states provide that if a dishonored check is not made good within a stated period of time, it […]

Consumer leases: a. must always be evidenced by a writing. b. are always three- party transactions. c. require the lessor to make all usual warranties made by a seller in a sale of goods.. d. all of the above. __________ […]

When money is loaned at a greater rate of interest than is allowed by law, __________ is committed. a. Usury b. credit misfeasance c. petty theft d. credit malfeasance An apparently voluntary agreement may in fact not be voluntary if: […]

What is the purpose of a financing statement? a. to meet UCC accounting requirements under Article 9 b. to create a security interest c. to amend a security agreement d. to alert third persons that a creditor has a security […]

The United States constitution places the most significant limitations on administrative investigation in the area of: a. search and seizure of the person. b. aerial inspection. c. search and seizure of papers and records. d. guarantee against self-incrimination. A person […]

The general view is that the owner of land owns the space above the land, subject to the rights of flying aircraft, even if the aircraft interferes with the use of the land and represent a danger to persons or […]

A gift causa mortis is revoked if: a. the donor does not die. b. the donor revokes the gift before dying c. the donee dies before the donor. d. all of the above. A sole proprietorship is taxed: a. only […]

If an instrument bears a restrictive indorsement, any further transfer or negotiation is effectively barred. Mary offered to sell Mike several pieces of rare Chinese art at a very good price because they were duplicates in her own collection. Mike […]

The statute of limitations for breach of a sales contract: a. may be reduced between merchants to one year. b. may be expanded by the buyer and the seller to six years. c. begins to run from the signing of […]

“Permissive” subjects of bargaining include seniority provisions, promotions, layoff and recall provisions, no-strike no-lockout clauses, and grievance procedures. The standard for rejection requires that any defect in the good be material. Answer: F An after-acquired property clause in a consumer […]

An employer cannot be held liable for the sexual harassment of an employee by a supervisor. A second promise to pay a contractor a higher amount on the original contract may be enforceable. Answer: T The Americans With Disabilities Act […]

Any adversely affected person may challenge the validity of an Occupational Safety and Health Administration (OSHA) standard in a U.S. Court of Appeals. A person who becomes a party to an instrument to add strength to the instrument for the […]

Each of the states and the federal government have statutes and regulations that prohibit unfair methods of competition. A probate court is an example of a general trial court. Answer: F Horseco, a new business, purchased ten thoroughbred horses for […]

The doctrine of promissory estoppel is also known as the doctrine of beneficial reliance. Generally, contracts are discharged by the performance of the terms of the contract. Answer: T The business judgment rule is applied by the courts as a […]

A debtor may redeem collateral at any time prior to the time that the secured party has disposed of the collateral or entered into a binding contract for resale by tendering the entire obligation that is owed plus any legal […]

It is necessary to the creation of an express warranty that the seller use formal words such as €warrant€ or €guarantee.€ The rights and duties of warehousers are regulated by the UCC. Answer: T All shares must have a par […]

Administrative regulations are a type of law. When an accountant fails to complete a contract, the accountant is still entitled to the accountant’s fee. Answer: F The object of zoning is to ensure an orderly physical development of the geographic […]

Persons who are not partners under appropriate circumstances may be held liable to third persons as though they were partners. The UCC statute of limitations applies when a party is seeking recovery on strict tort liability, fraud or negligence. Answer: […]

A bank that fails to carry out a payment order is usually liable for: a. interest loss and expenses. b. loss sustained by the originator. c. consequential damages because the payment was not made. d. all of the above. The […]