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Which of the following would ordinarily NOT be considered a security under the federal securities laws? a. Bonds. b. Stocks. c. Investments in limited partnerships. d. An investment in a nonprofit venture based on one’s own entrepreneurial efforts. Shareholders normally […]

Community property does not include a ring owned by the wife prior to the marriage. a. True b. False Specific lender usury statutes rather than the general usury statute generally apply to real estate mortgages and small consumer loans. a. […]

Which amendment prohibits the government from depriving any person of life, liberty, or property without due process of law? a. First. b. Fifth. c. Fourteenth. d. Both (b) and (c). e. All of these. A voting trust permits a concentration […]

Few obstacles to recovery in warranty cases present serious problems to plaintiffs in strict liability actions brought pursuant to Section 402A because this section was drafted largely to avoid such obstacles. a. True b. False Since 1976, the Food and […]

Dan, an agent for Ramona, sees what he thinks is a good deal for Ramona. Without asking whether he has authority to negotiate the deal, Dan enters into a contract on Ramona’s behalf. Ramona says later that she isn’t interested. […]

An indenture is not a debt agreement. a. True b. False The purpose of Article 2 of the UCC is to modernize, clarify, simplify, and make uniform the law of sales. a. True b. False Answer: True Apparent authority is […]

A defense that can only be asserted by the principal debtor is called a: a. real defense. b. subrogated defense. c. personal defense. d. joint defense. Harvard philosopher, Robert Nozick, stressed liberty, not justice, as the most important obligation that […]

Grandfather conveyed to Erin the right to the family farm after her grandmother dies. This is called: a. a possibility of a reverter. b. a reversionary interest. c. a vested remainder. d. a contingent remainder. Yukon Corporation purchases 1,000 shares […]

The Wal-Mart Stores, Inc. v. Samara Brothers, Inc. case involved which of the following? a. Infringement of unregistered trade dress. b. Infringement of a registered symbol. c. Use of a certification mark. d. Use of a collective mark. Generally, whether […]

Every indorsement is either blank or special. a. True b. False All methods of alternative dispute resolution, such as arbitration, mediation, conciliation, and negotiation, involve a third party to help resolve the dispute. a. True b. False Answer: False Regarding […]

Which of the following is the basic governing document of a corporation? a. A subscription. b. A charter, after filing. c. The set of bylaws. d. A certificate of authority. A patent would be appropriate in all but which one […]

The word “truck” cannot be a trademark for trucks, although it could be a trademark for a new brand of designer jeans. a. True b. False Assume a foreign nation has seized all of the property of an American corporation. […]

Which of the following may be used to redress the ultra vires acts committed by a corporation? a. Proceeding by shareholders for an injunction. b. Suit by the corporation or shareholders derivatively against present or former directors or officers for […]

Bob rented a lawn mower from Scott Rentals. The lawn mower wheel was loose when Bob picked up the mower. When he began to use it, the wheel fell off, causing the mower to tip over onto his foot. Under […]

Which of the following is untrue with regard to the interpretation of contracts? a. Express terms prevail over course of performance, and course of performance prevails over course of dealing. b. Technical terms will always be given technical meaning and […]

The Federal Trade Commission Act allows the FTC to: a. determine what constitutes deceptive advertising practices. b. prohibit all advertising in certain professions. c. require advertisers to contribute to a fund to reimburse injured consumers. d. require the independent testing […]

The UCC defines a debtors “rights in collateral in Article a. True b. False Which of the following is an exception to the suretyship provision requirement under the statute of frauds? a. A collateral promise made to the creditor. b. […]

A contract to sell life insurance is covered by Article 2 of the Uniform Commercial Code. a. True b. False Steven owes Theresa $100 for a used computer which he bought last year at Theresa’s garage sale. The two agree […]

Upon dissolution of a partnership, all authority of a partner to act on behalf of the partnership terminates. a. True b. False In relation to the Takings Clause, public use has been held to be synonymous with public purpose. a. […]

The tort of invasion of privacy actually consists of: a. unreasonable intrusion into the seclusion of another. b. unreasonable public disclosure of private facts. c. unreasonable publicity that places another in a false light. d. All of these. Carolyn, a […]

Which of the following activities is/are regulated by the federal government through its exercise of the commerce power? a. Commercial speech. b. Civil rights in employment. c. Shoplifting. d. All of these. e. None of these. Section 402A provides that […]

To whom does an accountant have potential liability? a. To his client only. b. To an intended third party beneficiary. c. To a foreseen user of the accountant’s work. d. All of these. The remedy for a director’s breach of […]

Carlie contracted to purchase an entertainment center while she was 16. She can ratify the contract the following year. a. True b. False A quorum for the United States Supreme Court consists of any three justices. a. True b. False […]

A __________ is a law establishing a maximum rate of permissible interest for which a lender and borrower of money may contract. a. wager b. usury statute c. Sunday statute d. None of these. The final arbiter as to the […]

Stare decisis has no application in a dual court system. a. True b. False Possession is available as a means of perfecting a security interest in accounts and letter-of-credit rights. a. True b. False Answer: False The validity of zoning […]

An agreement for the purchase of an illegal substance will be enforced by the courts if all other elements of the contract are present. a. True b. False “Goods” for purposes of the Code are essentially defined as tangible, movable, […]

Like domestic law, international law can be easily enforced, because international courts have compulsory jurisdiction. a. True b. False If a person with a mental condition that impairs her ability to act in a reasonable manner enters a contract that […]

Landview Appliances sells a stove to Evan for his home. The contract of sale excludes liability for consequential damages. When Evan turns on the stove, it catches fire, burning Evan severely. Evan cannot recover for his injuries because of the […]

Rorzex, Inc. entered into a contract with Denzil under the terms of which Denzil would receive $20,000 if he stole trade secrets from the leading competitor of Rorzex. Denzil performed his end of the agreement by delivering the trade secrets. […]

Edward is hired to manage Fred’s business. Which of the following is untrue regarding Edward’s authority? a. Edward has authority to sell a used cash register when he buys a new computerized checkout system for the store. b. Edward has […]

The __________ precludes imposing liability on directors and officers for honest mistakes in judgment if they act with due care, in good faith, and in a manner reasonably believed to be in the best interests of the corporation. a. duty […]

Defenses of absolute, conditional, and constitutional privilege apply to defamation and also to publication of any matter that is an invasion of privacy. a. True b. False Federal registration of a mark under the Lanham Act: a. permits the registrant […]

By law, bystanders are always required to help others in peril. a. True b. False In 1992, the SEC issued new rules establishing an integrated registration and reporting system for small business issuers. a. True b. False Answer: True Which […]

The president of Hi-Glow Cosmetics sends his top chemist to Hi-Glow’s competitor’s labs to steal its formula for shiny lipstick. The chemist gets caught and is sent to jail. Can Hi-Glow be found to be criminally liable? a. Yes, under […]

A partner has implied authority to hire and fire employees whose services are necessary to carry on the partnership business. a. True b. False Almost all jurisdictions require that: a. express trusts of real property be in writing. b. trusts […]

The Dodd-Frank Act amends the 1933 and 1934 Acts to require knowledge as the mental state required for the SEC to bring aiding and abetting cases. a. True b. False When delivery is to be made without moving the goods, […]

Which of the following is NOT a duty of a collecting bank in the collection process? a. Duty of care. b. Duty to act in a timely manner. c. Duty to honor a valid stop payment order. d. Duty to […]

Lawsuits based on the commercial activities of a foreign state conducted in the U.S. are subject to the jurisdiction of state or federal courts in the U.S. a. True b. False The Revised Model Act would permit the directors to […]

The requirement that each party to a contract must intentionally exchange something of value as an inducement to the other party to make a return exchange is known as: a. mutual assent. b. consideration. c. legality of object. d. contractual […]

Willton Bros. obtains from Marbowe Manufacturing a line of credit of $100,000, of which Willton initially uses $27,000 for purchase of inventory. Marbowe may only have a security interest in the inventory that covers the initial $27,000 advance. a. True […]

The definition of price-fixing includes agreements that may, among other things: a. depress prices. b. stabilize prices. c. raise prices. d. All of these. A type of insurance in which the insured and the insurer share a risk of loss […]

Whether an agency relationship has been created is determined by using a subjective test. a. True b. False Mark (age 16) appoints Joe (age 21) as his agent to purchase a digital camcorder from Electronic World. The transaction is: a. […]

The 2010 amendments to the Federal Organizational Corporate Sentencing Guidelines restricted the availability of reduced sentencing for corporations having effective compliance and ethics programs and meeting additional requirements. a. True b. False In 1990, Congress enacted the Administrative Dispute Resolution […]

As the result of a seller’s breach, a buyer may ask for incidental damages. Incidental damages include costs incurred in: a. storing goods in a warehouse. b. making calls to obtain replacement goods. c. inspecting the goods. d. All of […]

Garnett, who was driving too fast for conditions, collided with a truck carrying explosives. The truck was unmarked, so Garnett had no way of knowing what it contained. The collision caused an explosion, which shattered glass in a building a […]

Andrew agreed to exchange something clearly without value to enter a contract with Milt. The contract will not fail for lack of consideration because, if the parties agree to the exchange, the courts will not be concerned about whether the […]

Bess, Ray, and Irwin inherited 48 acres of land, which they own as tenants in common. If Bess decides she wants to live on a portion of the land, in order to get clear title to that portion: a. Bess […]

The modern approach follows the common law rule in holding that a corporation cannot commit a criminal act. a. True b. False Which of the following duties would not be delegable? a. John has a contractual duty to pay Isaac […]

NAFTA establishes a free trade area between the United States and Mexico but not with Canada. a. True b. False Section 14(e) of the Securities Act of 1934 makes it unlawful for any person to: a. make any untrue statement […]

The exercise of the power to avoid a contract is known as: a. ratification. b. disaffirmance. c. ab initio. d. restitution. Maximum rates of interest that are permitted under usury statutes are uniform from state to state. a. True b. […]

A long-arm statute allows a state to obtain jurisdiction over a nonresident defendant when the nonresident defendant has sufficient contacts with the state. a. True b. False In order for there to be a violation of Section 2 of the […]

The board of directors of a corporation: a. determines the capital structure and financial policy of the corporation. b. receives no salaries for services, although directors may receive a fee for attending board meetings. c. has the power to bind […]

An agent will not be authorized to act for a principal unless he receives some consideration for the task. a. True b. False Contractual incapacity excuses a minor from an obligation to pay for necessaries. a. True b. False Answer: […]

A depositary bank is any bank handling an item for payment. a. True b. False Lucille bought a new lawn mower on sale at a local discount store. The mower did not come with an instruction book nor did it […]

Testamentary capacity refers to: a. the age of the testator. b. the same capacity as required to contract. c. the ability to understand the nature and extent of one’s property, to appreciate the natural objects of one’s bounty, and the […]

Bart sends Carla an offer by express mail. Carla receives it at 10 a.m. on Tuesday. At 11 a.m. on Tuesday, Carla delivers an acceptance to Speedy Mail-to-You Express, Inc., but due to their error, the letter is not sent […]

Under the general rule of the Third Restatement, death of a principal terminates all authority of an agent, including apparent authority, even though no notice is given to third parties. a. True b. False Brian makes a material misrepresentation of […]

Marilyn read an ad in the school newspaper offering a $1,000 swimming scholarship to anyone who could swim 500 laps in the school pool. Marilyn called the advertiser and began swimming. She has reached lap number 460; she feels great […]

In general, an undisclosed principal and the third party to a contract are contractually bound if the agent acts within the scope of his actual authority in making the contract. a. True b. False Neal is the young, likable, optimistic, […]

Judicial review is the process by which courts review governmental action to determine whether such actions conform to the U.S. Constitution. a. True b. False Death or insanity of either the offeror or the offeree ordinarily terminates the offer. a. […]

Two years of nonuse raises a presumption of abandonment and loss of a federally protected trademark. a. True b. False The Family and Medical Leave Act: a. applies to private employers with 50 or more employees. b. does not apply […]

An act that is not wrongful or unfair may constitute duress. a. True b. False Checks, when accepted, are said to be certified. a. True b. False Answer: True The LMRA prohibits the closed shop, although it permits the existence […]

All but which one of the following would be exempt from bankruptcy under the federal law? a. $500 received in child support. b. A $300 cocktail ring. c. A $200 cashmere sweater. d. A $10,000 truck. In the presence of […]

Recovery of damages under Rule 10b-5 requires proof of: a. reliance on a misstatement or omission. b. materiality. c. scienter. d. connection with the purchase or sale of a security. e. All of these. A constitution: a. restricts powers of […]

Assignments of future wages are subject to statutes that sometimes prohibit them altogether. a. True b. False The doctrine of necessaries applies in the same way to minors and mental incompetents. a. True b. False Answer: True The UPA marshaling […]

In the majority of states, in a case of negligence per se, the plaintiff would only have to prove violation of a statute in order to show negligent conduct. a. True b. False Under the informal rulemaking procedures of the […]

The court in the Schoenberger v. Chicago Transit Authority case held that: a. the actual authority of an agent may be founded on the acts or words of the agent. b. implied authority is such authority as the principal knowingly […]

The City of Chicago would best be described as which of the following? a. A corporation formed pursuant to the Model Business Corporation Act. b. A close corporation. c. A public corporation. d. A domestic corporation. A maker must sign […]

James threatens to hit Kenneth in the head with a baseball bat unless Kenneth signs a contract agreeing to pay James $400 for his saw. Because of the threat, Kenneth signs the contract. a. This contract is voidable at Kenneth’s […]

Revised Article 1 of the UCC states that the “money requirement for a negotiable instrument means the current official currency of the government, not just a medium of exchange authorized or adopted by a sovereign government as part of its […]

A void title may allow good title to pass in special circumstances. a. True b. False Which one of the following assignments would probably be prohibited by a court? a. Mary is in debt. A credit card company calls and […]

Federal trademark protection may be obtained for the symbol of the U.S. flag. a. True b. False A registration statement becomes public immediately on filing with the SEC, but a prospectus only becomes public upon signature of the chief financial […]

Which of the following is NOT true about Social Security? a. The purpose is to provide full retirement to almost all employees. b. Employers and employees share the cost of contributions for the employees benefit. c. Self-employed individuals pay the […]

Which of the following acts protects consumers who have errors in credit card billings? a. Equal Credit Opportunity Act. b. Fair Credit Billing Act. c. Fair Debt Collection Practices Act. d. Truth-in-Lending Act. Under the Fair Credit Reporting Act, a […]

A condominium differs from a cooperative in that a tenant in the latter: a. rents his apartment from the cooperative. b. owns his apartment in cooperation with corporate owner. c. owns all the space except the common areas. d. owns […]

In 2006, the SEC abolished the requirement that a registration statement disclose compensation paid to senior executives and directors. a. True b. False The Weichert Co. Realtors v. Ryan case found that the parties formed an express contract by mutually […]

The right of a shareholder to examine the books and records of the corporation may be denied if the shareholder: a. seeks information to determine the financial condition of the corporation. b. desires to know the value of shares. c. […]

An offer is an indefinite proposal made by one person to another. a. True b. False Discuss whether the principal is liable in each of the following situations. a. Patricia hires Andrew, an attorney, to negotiate a contract to purchase […]

A bank robbery has occurred, and the banker’s association has offered a $1,000 reward for information leading to the arrest and conviction of the robber. Several people are claiming to be entitled to the money. Which of them is eligible? […]

Under the provisions of the Foreign Sovereign Immunities Act: a. all foreign governments are immune from suit by U.S. citizens. b. U.S. citizens in U.S. courts can always sue most foreign governments. c. a car used by a foreign embassy […]

To eliminate minority interests, which of the following are sometimes used to take a publicly held corporation private? a. Conversion. b. Domestication. c. Cash-out combinations. d. All of these. A small breach of contract damage amount fixed without regard to […]

A gratuitous assignment is revocable by the assignor. a. True b. False SEC regulations concerning fraud in securities transactions apply to: a. all securities transactions involving interstate commerce. b. only securities registered under the 1934 Act. c. only securities registered […]

Would a letter written after the execution of a contract and which contained agreements different from those in the written contract be admissible under the parol evidence rule? a. No, because it contradicts the terms of the contract. b. No, […]

Marty Sandidge wrote a check payable to “Charles Saxon when the payees real name was spelled “Charles Saxton. In order to obtain payment, Charles: a. must have Marty void the check and rewrite another check with Charless name spelled correctly. […]

The debtor has an absolute right to have his bankruptcy case dismissed, whether the case is under Chapter 7, 11, or 13. a. True b. False Generally, legislative rules must be promulgated in accordance with the procedural requirements of the […]

Harold purchased 400 pairs of gloves from Isaac at a contract price of $800. Fifty of the gloves were defective and a dispute arose as to the amount due and owing under the contract. Harold refuses to pay the $800, […]

A person who owes a duty under a contract is an obligee. a. True b. False Ed signs a ten-year lease with a survival clause. If Ed is evicted after two years, he will have to pay: a. rent for […]

Interpretative rules of administrative agencies are automatically binding on the private parties the agency regulates. a. True b. False If the act or threat would affect a person of average strength and intelligence, then and only then will the act […]

At the __________, the accused is informed of the charge against him and he enters his plea. a. preliminary hearing b. arraignment c. indictment d. information A “merchant” is defined as a person who: a. is a dealer in a […]

The burden of proof in a criminal case is preponderance of the evidence. a. True b. False In most states, determining what is a reasonable time for disaffirmance depends on circumstances rather than a statutorily prescribed time period. a. True […]

Kelley borrows $3,000 from Paul and orally agrees to repay him in three annual installments. Most courts would hold: a. the oral contract is unenforceable because it cannot be performed within one year. b. Article 2 of the UCC controls […]

The RCRA was enacted by Congress: a. to provide a comprehensive scheme of treatment for hazardous solid waste. b. and established a manifest system to be used by generators. c. and gave states the primary responsibility for hazardous waste. d. […]

A person cannot be guilty of trespass unless he or she intended to violate the other’s rights. a. True b. False Estoppel may create a corporation. a. True b. False Answer: False The right of a surety who has paid […]

Which of the following is correct with respect to the reasonable person standard? a. It makes allowance for mental deficiency. b. It makes allowance for physical disability. c. It applies an individualized test to children that takes into consideration the […]

Pam sells to Rob property which has a $50,000 mortgage in favor of First Bank. Rob purchases the property subject to the mortgage. The value of the property declines and there is a default on the mortgage. When First Bank […]

The U.S. Supreme Court has held that the Takings Clause requires just compensation not only if a governmental taking actually occurs, but also if a governmental regulation reduces the value of the property. a. True b. False Constructive eviction would […]

The right of the buyer to recover from an insolvent seller the goods in which he has a special property interest and for which he has paid, existed at common law before being included in the Code. a. True b. […]

If Terry makes a tender offer to the owners of Pizza Village’s registered stock, he must file a statement with the SEC if he: a. owns 1% of Pizza Village stock. b. will, after the acquisition, own 5% of all […]

The UPA provides that partners are __________ liable on all debts and contract obligations of the partnership. a. jointly b. strictly c. jointly and severally d. partially The powers of a trustee are determined solely by the trust instrument. a. […]

Contracts of a ward may be ratified by his guardian during the period of guardianship. a. True b. False Actual notice requires a written, not oral, communication to the third party. a. True b. False Answer: False A composition would […]

In the case of partial destruction of identified goods before risk of loss passes to the buyer, the buyer has the option to avoid the contract or to accept the goods with due allowance from the contract price for the […]

An important and fundamental part of administrative law is the limits imposed by judicial review upon the activities of administrative agencies. a. True b. False Agency relationships are governed primarily by federal statute. a. True b. False Answer: False Under […]

Jim contracted with Kevin to serve as a guide for Kevin on his three-week fishing trip to Canada. The contract was made on April 1 with the trip to begin on June 1. On May 1, Kevin notified Jim that […]

The RUPA treats a partnership as a legal entity in which one of the following respects? a. Liability of partners for partnership obligations. b. For the purpose of suing or being sued. c. For all purposes. d. Assignment of a […]

An estate in fee simple would have which of the following characteristics? a. It may be inherited. b. It may be sold. c. Judgment creditors may levy upon it. d. All of these. Identify the following parties and relationships. a. […]

Stan doesn’t like having neighborhood teenagers walk across his yard at night. He rigs an animal trap on the path the teenagers usually use to cross his land. One night, Tim and his friends are walking across the yard when […]

Under the RUPA, a partners dissociation in a term partnership is wrongful if before expiration of the term: a. the partner voluntarily withdraws one month after another partner dies. b. the partner dies. c. a court determines the partner became […]

Most incorporation statutes have adopted an intermediate position regarding the revocability of preincorporation subscriptions, making them irrevocable for a stated period without regard to whether they are supported by consideration. a. True b. False Fraud in the execution is a […]

A partnership agreement should include all but which one of the following? a. The duties of the partners. b. The capital contribution of the partners. c. The agreement for dividing tax liability of the partnership. d. The division of profits […]

Paper payable “on demand” fails the test of negotiability in that it does not contain a specific time. a. True b. False The implied warranty of habitability: a. is a warranty that the land is well maintained. b. is a […]

For a misrepresentation to be actionable as fraud in the inducement, it must be a misrepresentation of opinion. a. True b. False Judges who serve in the U.S. Courts of Appeals receive lifetime appointments from the President, subject to confirmation […]

An anomalous indorsement is: a. one that specifically identifies the person to whose order the instrument is payable. b. an indorsement made by a person that is not the holder of the instrument. c. one that makes the signer liable […]

A gratuitous assignment is revocable even after the assignor has made an effective delivery of the assignment to the assignee. a. True b. False Congress appoints and removes the chief administrators of federal executive administrative agencies. a. True b. False […]