Forming a sole proprietorship is easy and does not cost a lot of money.
Special shareholders’ meetings may be called by the board of directors, the holders of at
least ten (10.) percent of the voting shares of the corporation, or any other person
authorized to do so by the articles of incorporation or bylaws.
If there has been a mutual mistake, the contract may be rescinded on the grounds that
no contract has been formed because there has been no “meeting of the minds” between
the parties.
Actions of the board of directors are absolute, and never require shareholder approval.
The board of directors makes policy decisions concerning the operation of a
corporation.
A minority of states follow the “New York rule” of successive assignments.
Federal enumerated powers are also called reserved powers.
The law permits rescission of some contracts made in mistake.
For those states that allow a consumer to rescind a “door-to-door” sales contract, the
typical cancellation period is seven business days.
No special formalities are required for a minor to disaffirm a contract.
To qualify as a holder in due course under the shelter principle, the holder must not
have been a party to a fraud or an illegality affecting the instrument.
The universal rules of Kantian ethics are based on two (2) important principles: 1)
variability; and 2) irreversibility.
Persons who unsuccessfully try to complete a crime can be convicted of a crime even if
they are unsuccessful in carrying out the original crime.
A private plaintiff in an antitrust action must have dealt directly with the alleged
violators in order to have standing to sue, and indirect injury resulting from higher
prices being passed on is insufficient.
One with notice of dishonor of an instrument cannot qualify as a holder in due course.
At a criminal trial, a super-majority of jurors must agree before the accused is found
guilty of the crime charged.
The “pre-filing” period ends when the registration statement is filed.
A signature in the upper-right corner of a promissory note indicates that the signer is the
drawer of the note.
A person who provides services pursuant to a contract without the appropriate license
required by a revenue-raising statute can enforce the contract and recover payment for
services rendered.
The most famous trade secret is the Nike ‘swoosh.”
In the landmark case Greenman v. Yuba Power Products, Inc., the California Supreme
Court adopted the doctrine of negligence as a basis for product liability actions.
A private arrangement in which an adoptive parent agrees to adopt the child of a
biological parent, and pays an intermediate such as an attorney a fee to arrange the
adoption, is considered a violation of public policy.
In an auction with reserve, a contract is formed only when the auctioneer strikes the
gavel down or indicates acceptance by some other means.
A “whistleblower bounty program” allows persons who provide information that leads
to a successful SEC action to recover ten (10.) percent to thirty (30.) percent of the
monetary sanctions over $1 million recovered by the SEC.
A buyer or lessee who rightfully cancels a contract is discharged from any further
obligations on the contract.
Article 2 of the UCC only applies to a mixed sale if the contract for services is a
predominant part of the transaction.
Corporate shareholders have the right to vote on the election of directors, mergers, and
charter amendments.
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 gives the
bankruptcy court the power to void certain fraudulent transfers of a debtor’s property
made by the debtor within five (5.) years prior to filing a petition for bankruptcy.
Suing based on a breach of good faith is not recognized by the courts because good
faith is such an abstract term that it cannot be measured.
Criminal violations and penalties are only found in penal statutes.
Collision insurance is property insurance that covers the insured’s vehicle against risk of
loss or damage when it is struck by another vehicle.
What distinguishes an anticipatory breach from other breaches?
A) It involves a breach by each party to the contract.
B) It entitles the non-breaching party to consequential damages.
C) It occurs in connection with substantial performance.
D) It is a foreseeable breach.
E) It occurs prior to the time that performance is due.
________ is a non-intent crime.
A) First-degree murder
B) Second-degree murder
C) Involuntary manslaughter.
D) Larceny
E) Burglary
What are liquidated damages in connection with a contract?
A) damages that are used to punish the non-breaching party
B) damages that are set at a fixed amount in advance in the contract
C) damages that are used when there are no actual damages
D) damages that require approval in advance from the court
E) damages that result in all assets of the breaching party being paid out as damages
Ajax Corporation borrowed $50,000 from National Bank, giving National a security
interest in its factory equipment. The agreement stated that the equipment would be
security for this $50,000 loan and any future loans that National made to Ajax. National
filed a valid financing statement. Over the next several months, Ajax borrowed another
$100,000 from National. No additional financing statements were filed. Ajax has not
made any payments on its loans from National. Ajax defaults on these loans. National
wants to foreclose on the collateral. Assuming this security agreement is valid and
perfected, how much of National’s debt is secured?
A) none, since this was not a purchase money situation
B) only the first $50,000, because financing statements were not filed on the additional
$100,000
C) only the first $50,000, because “future advances” clauses are not valid
D) The entire $150,000 is secured.
E) Under the UCC, only one-half of the loan is recoverable.
A treaty sponsored by an international organization, such as the United Nations, that is
signed and ratified by two or more nations is called a:
A) multilateral treaty.
B) convention.
C) custom.
D) charter.
E) statute.
Simply signing your name as your indorsement of a negotiable instrument:
A) changes an order instrument into a bearer instrument.
B) changes a bearer instrument into an order instrument.
C) changes a draft into a note.
D) makes the instrument non-negotiable except by a bank.
E) removes all warranties and promises as an indorser.
Judges for federal courts are selected:
A) by nationwide election.
B) by election by the voters within the state where they preside.
C) by the president, subject to confirmation by the Senate.
D) by the U.S. Supreme Court justices.
E) by the sitting federal judges within the same circuit.
Collective bargaining subjects are classified under the labor laws as either:
A) group or individual.
B) pre-existing or new.
C) local, industry or national.
D) permissive, compulsory or illegal.
E) settled, undetermined or optional.
What is the importance of the classification of bailments based on who benefits from
the bailment?
A) Such classification determines if compensation must be paid.
B) Such classification determines the degree of care that the bailee owes in terms of
care for the property.
C) Such classification determines if the bailee is obligated to return the bailed property.
D) Such classification determines who must provide insurance for the bailed property.
E) Such classification determines under what circumstances the bailee is strictly liable
for the property.
For the firm offer rule to apply, who must be a merchant?
A) the offeror
B) the offeree
C) both the offeror and the offeree
D) neither the offeror nor the offeree
E) the offeree only if the offeree is a corporation
One criticism of ethical relativism is that:
A) moral and ethical rules are too rigid and fixed over time.
B) some persons would take actions which they believe to be moral, but which most
persons in society believe to be immoral.
C) decisions require the measurement of qualities which are not subject to precise
measurements.
D) decisions are not allowed to take into account a particular person’s station or place in
society.
E) many persons in society would choose not to maximize the benefit to the least
advantaged persons in society.
The body of the United Nations that includes only fifteen (15.) nations is the:
A) Security Council.
B) Secretariat.
C) General Assembly.
D) World Senate.
E) International Monetary Fund.
Which of the following torts allows a person to recover for emotional distress caused by
the defendant’s negligent conduct?
A) intentional infliction of emotional distress
B) negligent infliction of emotional distress
C) punitive emotional distress
D) unintentional negligence
E) strict infliction of emotional distress
“Vesting,” as used in a pension plan, means:
A) there are adequate funds to pay expected benefits.
B) a beneficiary’s right to receive payments cannot be violated.
C) the plan covers all eligible employees.
D) the plan is adequately-insured.
E) the plan has qualified for all government approvals.
The person empowered by the corporation to receive notice of lawsuits against it is
called the:
A) incorporator.
B) promoter.
C) registered agent.
D) president.
E) director “du jour.”
Generally, if the sale of collateral is insufficient to repay a secured loan plus interest,
the creditor may bring a lawsuit against the debtor to recover a ________ judgment for
the difference.
A) default
B) deficiency
C) directed
D) summary
E) declaratory
Which of the following is true about the law governing negotiable instruments?
A) Somewhat fewer than half the states adopted the original version of Article 3 of the
UCC.
B) Most negotiable instrument law is contained in federal statutes.
C) The most recent version of Article 3 of the UCC was released in 1990.
D) Negotiable instruments law comes primarily from common law.
E) Federal law has exclusive jurisdiction in negotiable instruments law.
Which of the following is true about how plea bargaining usually works?
A) a defendant waives the right to a jury trial and the judge determines guilt or
innocence
B) a defendant who is serving a prison sentence for a crime the defendant was
convicted of can get the sentence reduced for good behavior, community service or
similar reasons
C) a defendant pleads guilty to the charged crime or to a lesser offense in exchange for
receiving a lighter sentence than if the defendant were to be tried and found guilty of
the original charges
D) a defendant waives certain constitutional rights in exchange for a lighter sentence.
E) a defendant signs a settlement agreement with the district attorney, the terms of
which are not disclosed to the public
Which of the following is embezzlement?
A) a self-serve gasoline customer drives away without paying for the gas
B) the cashier at a grocery store takes money from his own cash register
C) a receptionist who works in a bank lobby distracts a teller and takes money from the
teller without the teller’s knowledge
D) a roofing contractor takes a lawnmower from a homeowner while doing a job for the
homeowner
E) an electrician working in a client’s home takes $100 from the homeowner’s desk
drawer
If a party presents a check containing a forged signature to a bank for payment that the
bank pays, from whom can the bank collect, assuming the bank is given appropriate
notice when the drawer discovers the forgery?
A) the forger only
B) the forger or the drawer
C) the forger or the party who presented the check
D) the forger or the party who presented the check, but only if the party presenting the
check had knowledge that the signature was not genuine
E) the forger and any person who has been a holder
Lisa purchases a home theater system from Homeplace Cinema. Lisa signs a $10,000
negotiable promissory note in connection with this purchase. This note requires
monthly payments for five years. After the system is installed, Lisa begins to have
trouble with it. It turns out that there are defective components in both the video and
audio aspects of the system. Meanwhile, Homeplace Cinema has sold Lisa’s promissory
note to Amalgamated Finance, who meets all the requirements of a holder in due
course. Lisa refuses to make any further payments on the notes due to the breach of
contract by Homeplace Cinema. Which of the following is true?
A) Lisa has no further obligation to pay, because the breach of contract is a real defense.
B) Lisa must pay the note to the extent of the fair market value of the home theater
system in its current condition.
C) Lisa does not have to pay, because federal legislation has eliminated holder in due
course protection for negotiable instruments that are part of a consumer credit
transaction.
D) Lisa must pay, because the obligation of a promissory note is always unconditional.
E) Lisa must pay, because she did not file proper written notification to the Federal
Trade Commission.
The duty of ________ requires general partners to adhere to the provisions of the
partnership agreement and the decisions of the partnership.
A) subservience
B) indemnification
C) due care
D) adherence
E) obedience
Which of the following is true regarding the taxation of limited liability companies?
A) A limited liability company is taxed as a partnership.
B) A limited liability company is taxed as a corporation.
C) A limited liability company may decide whether to be taxed as a corporation or a
partnership.
D) A limited liability company is taxed as a partnership on earnings up to $900,000, and
as a corporation for any amount over that limit.
E) A limited liability company is taxed as a corporation on earnings up to $900,000, and
as a partnership for any amount over that limit.
Melinda, Brett, and Phil are the members of a “manager-managed” limited liability
company. Melinda and Brett each contributed $1,000 in capital. Phil contributed
$10,000 in capital. All of the members agreed to hire Betty to manage the company.
Three months after she starts, however, Melinda and Brett have become dissatisfied
with her. Phil wants her to stay. Which of the following is true?
A) The votes of Melinda and Brett would be sufficient to have Betty removed.
B) Regardless of the amount of capital contribution, a vote to remove a manager must
be unanimous.
C) Votes of members are counted on the basis of their capital contribution, and in this
situation, Phil would have to vote in favor of her removal in order for Betty to be
removed.
D) Betty can be removed if even one member votes in favor of her removal.
E) No vote can remove Betty for at least six months after she is appointed.
John bought a television from Jake’s Appliance Center for his personal use. John could
not pay cash for it, so he signed a note and gave Jake’s a security interest in the
television. Jake’s did not file a financing statement. About six months later, John sold
this television to a neighbor, Jane, who did not know about Jake’s security interest in it.
John stopped making payments on the note to Jake’s, and now Jake’s wants to repossess
the television from Jane. Can Jake’s repossess this television from Jane?
A) yes, because the security interest survives the sale to Jane
B) no, because Jane is a buyer in the ordinary course of business, who takes the
television free of any security interest
C) no, because Jane is a buyer of a second-hand consumer good, and she did not have
actual or constructive notice of the security interest
D) no, because Jake’s did not perfect the security interest, so it is not valid against third
parties like Jane
E) no, because Jake’s security interest did not attach, and thus is not valid against
anyone, including Jane
Sandy, an old car enthusiast, has been hired by Pat to find and buy a fully-restored 1955
Ford Thunderbird for Pat. Sandy finds such a car in pristine condition, and she would
actually like to purchase the Thunderbird for herself. She tells Pat about the car, but Pat
declines to purchase the car because it has an automatic transmission. Sandy then buys
this car for herself. What has Sandy done in violation of her duty of loyalty?
A) Sandy has usurped an opportunity.
B) Sandy has not violated her duty of loyalty to Pat.
C) Sandy has engaged in self-dealing
D) Sandy has competed with the principal.
E) Sandy has misused confidential information.
The theory of business social responsibility that holds that a business has a duty to
generally do good for society is:
A) moral minimum.
B) maximizing profits.
C) stakeholder interest.
D) corporate citizenship.
E) moral maximum.
How many parties are there in an ordinary lease contract and a finance lease contract?
A) 2 parties in both an ordinary lease and a finance lease.
B) 3 parties in both an ordinary lease and a finance lease.
C) In both an ordinary lease and finance lease the number of parties depends on the
transaction.
D) There are 2 parties in an ordinary lease and 3 parties in a finance lease.
E) There are 3 parties in an ordinary lease and 2 parties in a finance lease.
Which of the following is not true regarding notification of agency termination?
A) Termination of an agency without appropriate notice to third parties does not
extinguish an agent’s actual authority to act on the principal’s behalf.
B) If proper notification of agency termination is not given to a third party, the agent
still has apparent authority to bind the principal to contracts with third parties.
C) Direct notice of agency termination is often in the form of a letter.
D) Direct notice of agency termination must be given to all persons with whom the
agent dealt.
E) Direct or constructive notice of termination must be given to all third parties who
have knowledge of the agency, but with whom the agent has not dealt.
Which of the following is an example of concurrent jurisdiction shared by federal and
state courts?
A) federal questions
B) bankruptcy
C) patents
D) copyrights
E) trademarks
Under the “due diligence” defense to a Section 11 action under the Securities Act of
1933:
A) only the issuer can assert a due diligence defense.
B) any defendant can assert a due diligence defense.
C) any defendant except the issuer can assert a due diligence defense.
D) the due diligence defense must be either asserted together, by all defendants, or not
asserted at all.
E) assertion of the defense will effectively eliminate the defendant’s criminal liability.
What is the purpose of a force majeure clause in a contract?
A) It sets out the damages to be awarded in the event of a breach.
B) It specifies that the entire agreement of the parties is contained within the written
contract.
C) It identifies certain events, such as natural disasters, that will discharge the parties
from their duties under the contract.
D) It provides for one of the parties to a contract to be replaced by another.
E) It is how the parties to a contract will be coerced to perform their duties.