If Kay, a partner in an auction business, has a personal creditor who is aggressive about
collecting the debt:
a. Kay can sell her share in the partnership to repay the debt, regardless of what her
partners want her to do.
b. the creditor cannot attach the partnership property to pay off the debt.
c. the creditor can attach partnership profits by obtaining a charging order.
d. Kay cannot meet her obligation to repay her personal creditor through her partnership
assets. Her personal obligations will have to be paid through her personal funds or she
will have to dissociate from the partnership and force the partnership to buy her share.
In which case is the offer still valid at the time the acceptance is made?
a. Hal offered to sell a book to Sid. Hal died, and Sid sent an acceptance two days later.
b. By-Waste Co. telephones XXX Co. offering to dispose of XXX Co.’s chemical waste
by a particular method. XXX says it has another way to dispose of the waste. Then
XXX finds out the method it planned to use violates environmental protection statutes,
so it sends a letter of acceptance to By-Waste.
c. Ray offers to sell his AT&T stock for a particular price by May 1. On May 2, Kathy
agrees to buy the stock.
d. In a face-to-face transaction, Pat offers to sell Mike his stereo and Mike accepts.
e. All of the above.
Rhonda is a server in a restaurant. One day she finds a purse while clearing a table. The
purse is most likely:
a. lost property.
b. mislaid property.
c. treasure trove.
d. abandoned property.
The Children’s Online Privacy Protection Act prohibits Internet operators from
collecting information from children under what age without parental permission?
a. 18.
b. 16.
c. 13.
d. 10.
Deontological ethics bases it value of what when evaluating the right decision
a. Results of doing something
b. Happiness in doing something
c. Reason for doing something
d. The rules
Hanna intends to give her granddaughter, Melodee, her antique hat pin. This heirloom
has been kept under lock and key in the wall vault in the library of Hannas house in
Virginia. The hat pin is currently the only item in the vault. When Hanna is visiting
Melodee in Connecticut, Hanna gives Melodee the only key to the vault. Melodee is
grateful for the present and excitedly accepts. In this situation has there been a
completed gift?
a. No. There has been no physical delivery of the hat pin.
b. Yes. There has been physical delivery of the hat pin.
c. No. There has only been constructive delivery of the hat pin.
d. Yes. There has been constructive delivery of the hat pin.
If a contract does not provide for a time for inspection, the UCC allows inspection:
a. in a reasonable time.
b. the same day as delivery.
c. within 3 days of delivery.
d. within 10 days of delivery.
Which of the following is not guaranteed under an implied warranty?
a. The goods are free of hidden security interests or liens.
b. The goods are not subject to a rightful claim by a third party.
c. The goods are merchantable.
d. The goods may be returned for a refund or replaced in the event of any defect.
MegaCorp occasionally sells products in Michigan. It does not have an office in that
state and does not advertise in Michigan. The company’s marketing representatives are
based in New York but do travel to Michigan once a year to attend a trade show. Which
statement is correct?
a. MegaCorp must register in Michigan because its sales representatives attend a trade
show in Michigan.
b. MegaCorp is not required to register in Michigan because it does not have an
ongoing presence in Michigan.
c. MegaCorp must register in Michigan because its actions qualify as doing business.
d. Whether MegaCorp has to register in Michigan depends on where its shareholders
reside.
Mabel is a single 40-year-old who has borrowed money on numerous occasions. Her
payment record has been good, except she has been delinquent in paying a few bills.
Which of the following is true regarding credit information gathered on Mabel?
a. Since Mabel has been delinquent, she waives her right to see the credit files.
b. If Mabel is rejected for a loan because of the consumer report, the lender must tell
her the source of the report.
c. Mabel has a right to have the information regarding her delinquency in paying a few
loans stricken from her credit record because her record has generally been good.
d. Mabel’s only legal remedy, if there is erroneous information in her credit file, is to
report the problem to the FTC for enforcement.
Which of the following is a rightful dissociation?
a. A partner in a partnership at will serves notice that he intends to withdraw.
b. A partner in a term partnership withdraws before the end of the term.
c. A partner in a term partnership becomes bankrupt.
d. A partner violates the partnership agreement.
What federal agency requires that the seller of a franchise give the potential buyer an
offering circular and audited financial statements?
a. The Securities and Exchange Commission (SEC).
b. The Interstate Commerce Commission (ICC).
c. The Federal Trade Commission (FTC).
d. The Franchise Sales Commission (FSC).
Which of the following may be a legitimate, nondiscriminatory criterion for selection of
an employee?
a. Age.
b. Race.
c. Color.
d. Educational level.
Curtis filed a lawsuit against Ulhoff for failure to repay $1,000 according to the terms
of a promissory note. The trial ended before it began, with the trial judge granting a
motion for summary judgment in favor of Curtis. Ulhoff has appealed, and the Supreme
Court of Iowa has remanded the case. This means:
a. Curtis automatically wins because he won in the lower court.
b. Ulhoff automatically wins because he lost in the lower court.
c. Neither party wins because the case is being thrown out.
d. We don’t know who wins yet because the case is being returned to the trial court for
additional steps.
Crytrin Manufacturing, Inc. contracted with Molfrey, Inc. to manufacture three large
pieces of equipment. The contract contained a clause stating that Crytrin agreed to
repair or replace any defective equipment, but that was the only remedy Molfry would
have. This clause:
a. is an effective disclaimer.
b. will not keep Molfry from obtaining consequential damages since, under the UCC,
consequential damages cannot be excluded.
c. is a limitation of remedy clause, which limits or excludes normal remedies permitted
under the Code.
d. limits any express warranties made by Crytrin.
Mulcare Corp. started a compliance program to prevent and detect criminal conduct
within the company and had specific, high-level officers in charge of overseeing the
program. The company effectively communicated the program to its employees and
monitored those employees who were in a position to cheat. It promptly disciplined
anyone who broke the law. One effect of having this program is:
a. federal investigators would no longer investigate the company since Mulcare could
take care of any problems internally.
b. federal investigators might be convinced to limit any prosecution to those directly
involved rather than attempting to get a conviction against high-ranking officers or
against the company itself.
c. the Federal Sentencing Guidelines no longer apply.
d. any cases would be prosecuted in state, rather than federal, court.
A spouse who is named the beneficiary of a life insurance policy would ordinarily be:
a. a creditor beneficiary.
b. an incidental beneficiary.
c. a donee beneficiary.
d. a debtor beneficiary.
Sonny has a negotiable instrument which he gives to Cheryl as a birthday present.
Sonny is a holder in due course on the instrument. As it turns out, Cheryl can only
collect on the instrument if she has holder in due course status. If Cheryl sues to collect
this instrument, what will be the result?
a. Cheryl is not a holder in due course, so she is subject to personal and real defenses of
the issuer.
b. If Cheryl took the instrument in good faith and without knowledge of any claims
against the instrument, she is a holder in due course even though Sonny gave her the
instrument for her birthday.
c. Cheryl must pass the instrument on to someone else for money. That is the only way
she can realize payment of the instrument.
d. Although Cheryl does not qualify as a holder in due course, she can claim the holder
in due course status through Sonny and collect the instrument.
A rock group assigns its payment under a performance contract to the Costume Shop, a
business that has supplied the group with outrageous stage outfits, and to which the
group owes a great sum of money. Under this arrangement the rock group is the:
a. assignor.
b. assignee.
c. delegator.
d. delegatee.
Hardhat Machine Company sold goods to Irish Eyes Company of Northern Ireland. Big
Bank issued a letter of credit on behalf of Irish Eyes and the letter was given to
Hardhat. The documents required by the letter of credit are presented to the bank for
payment while the goods are still in transit. Is Hardhat entitled to be paid?
a. No, payment is not due until the goods are delivered.
b. No, payment is not due until 30 days after delivery.
c. No, payment is not due until the buyer has had a reasonable time to inspect the
goods.
d. Yes, the letter of credit is a promise by the bank to pay when certain documents are
presented.
The primary source of federal power to regulate business is the:
a. Supremacy Clause.
b. Commerce Clause.
c. Contract Clause.
d. Privilege and Immunities Clause.
The U.S. Supreme Courts holding in Wards Cove Packing v. Atonio:
a. differed from the holding in Griggs v. Duke Power Co. partly because the Court was
more conservative at the time Wards Cove was decided.
b. upheld the ruling in Griggs v. Duke Power Co.
c. found that overt racial discrimination existed.
d. set forth a “business necessity requirement for employment hiring practices.
Acid rain is caused primarily by:
a. sulfur emissions from coal-burning utility plants.
b. automobile emissions, especially from large cities.
c. pesticides.
d. large-scale farming operations that raise livestock.
Which of the following describes the duty of loyalty?
a. It requires managers to make decisions they reasonably believe to be in the best
interest of the corporation.
b. It prohibits making a decision that benefits the decision-maker at the expense of the
corporation.
c. It requires consideration of the interests of the surrounding community.
d. It requires using care that an ordinarily prudent person would take in a similar
situation.
The basic distinction between a bilateral contract and a unilateral contract is that:
a. only one promise is involved in a bilateral contract.
b. only one promise is involved in a unilateral contract.
c. the Statute of Frauds applies to one and not the other.
d. one is enforceable, the other is not.
Armand Industries is producing a foul-smelling odor as a by-product of its factorys
operations. However, the emission is not harmful to the health of those exposed to it.
Armand would be subject to a primary national ambient air quality standard established
by the EPA.
Don was standing in a cafeteria line holding a plate. Tim was upset with Don. Tim
turned Don around and grabbed the plate out of Don’s hand. Tim then held the plate up
and threatened to break it over Don’s head. Tim has committed:
a. a battery, but not an assault.
b. an assault, but not a battery.
c. both an assault and a battery.
d. neither an assault nor a battery.
An agreement to pay a lesser amount to settle an unliquidated debt is:
a. enforceable, as there is consideration.
b. unenforceable, as there is no consideration.
c. enforceable in only some states.
d. unenforceable as a violation of public policy.
Express authority can be created by:
a. words spoken directly to the agent.
b. conduct.
c. written words given to one person to give to another person, the agent.
d. All the above.
A United States district court is:
a. the primary federal trial court.
b. an appellate court.
c. a small claims court only.
d. none of the above.
To prevail under Section 11 of the 1933 Securities Act, the plaintiff must prove:
a. the registration statement contained a material misstatement or omission; and the
plaintiff lost money.
b. the registration statement contained a material misstatement or omission; the auditor
acted knowingly or recklessly; and the plaintiff lost money.
c. the registration statement contained a material misstatement or omission; the auditor
intended to deceive; and the plaintiff lost money.
d. the registration statement contained a material misstatement or omission; the auditor
acted with scienter; and the plaintiff lost money.
Techno is planning a security offering under Regulation D, Rule 506. Under this rule,
Techno can:
a. offer up to $5 million in securities over 12 months.
b. offer up to $1 million in securities over 12 months.
c. can offer an unlimited amount of securities.
d. can only offer an amount equal to twice its initial capitalization.
“Course of dealing” refers to prior commercial transactions between the same parties.
Mary was suspicious of her neighbor, whom she thought was involved in selling illegal
drugs. One day Mary arrived at her apartment and saw a large paper sack tied up with
string in front of her neighbor’s door. She took the bundle into her apartment, opened it,
and discovered it was full of cocaine. She called the police and the neighbor was
arrested. The neighbor’s lawyer claimed the evidence had been illegally obtained since
no probable cause existed to justify opening up the paper bundle.
In the case of Panavision Int’l v. Toeppen, the Ninth Circuit Court of Appeals affirmed
the district court’s decision. This means that the Ninth Circuit approved the district
court’s decision and upheld the outcome in the case.
To be valid, an agreement not to compete must be ancillary to a legitimate bargain.
A “hot cargo clause, prohibiting an employer from doing business with a specified
company in order to increase bargaining pressure, is legal.
Stephen wants to give his niece, Dawn, a piece of jewelry as a gift. Stephen gives Tracy,
his agent, the bracelet to take to Dawn. The delivery element of making a gift has been
completed.
Under the statute of frauds, the writing must: be signed by the defendant; and must state
with reasonable certainty the name of each party, the subject matter of the agreement,
and all of the essential terms and promises.
Hanson Corporation is concerned that its employees are spending too much work time
talking on the telephone, sending e-mails, and using the Internet for personal uses.
Discuss what steps Hanson may legally pursue to protect its interests in productivity.
Maria, who lives in the United States, gains unauthorized access to a bank’s computer
system and steals financial information about customers. Of what is Maria guilty, and
under what statute(s) could she be prosecuted?
Kenneth was exposed to radiation on his job in an environmental cleanup. In a lawsuit
against his employer, the court must decide the full extent of both present and future
damages rather than allowing Kenneth to return to court years later if medical problems
develop at that time.
Ethics is the study of how people should act.
A salesclerk at Braybon’s Department Store observed a customer remove a ring from a
display case and put it in her purse. In most states, Braybon’s will be able to detain the
customer for suspicion of shoplifting.
Landlord-tenant relationships are governed by a mixture of property law, contract law,
and negligence law.
Trent was the production manager at HGB, Inc. Under his supervision, HGB emitted
into the air three times the amount of toxins it is allowed under the Clean Air Act. Has
Trent violated the law? What penalties might he face?
Carlos conveys his property “to Noah for life, then to Maxie.” Noah has a life estate and
Maxie has a remainder interest.
In Chapter 11 only the debtor may propose plans of reorganization.
Auditors cannot protect themselves from liability to third parties by issuing a qualified
or an adverse opinion.