In which of the following situations has conversion NOT occurred?
a. When a drawee bank pays an instrument containing a forged indorsement
b. When a drawee to whom a draft is delivered for acceptance properly returns it upon
request
c. When a bank pays an instrument containing only one of two required indorsements
d. When a thief transfers possession of an instrument to someone who knows of the
theft
The Revised Model Business Corporation Act would permit the directors to avoid a
shareholder vote for which of the following amendments to the articles of
incorporation?
a. Changing the name from Oskcamp Brown Corporation to McDuddy Corporation
b. A change from duration of 99 years to perpetual life
c. Authorizing a new class of stock
d. Adding to the number of directors
Beth recently purchased a stereo system for her apartment and a new sailboat. She
financed the purchases with XYX Finance Co. Under the Code, these items are
classified as:
a. consumer goods.
b. equipment.
c. inventory.
d. real property.
Under the exemptions found in the federal Bankruptcy Code, which of the following
items may the debtor keep?
a. A homestead of any value
b. A piano worth $450 used by the family
c. $10,000 per month in payments from a pension plan
d. All of the above are exempt under the federal exemptions.
e. Two of the above, (b) and (c)
What Article of the UCC governs sales of goods?
a. 1
b. 2
c. 3
d. None of the above.
Equitable remedies will not be granted where:
a. the terms of the contract are fair.
b. the consideration is adequate.
c. the terms of the contract are sufficiently certain.
d. the contract is tainted with fraud, duress, undue influence, mistake, or unfair
practices.
An accountant’s legal responsibility under state law may be based upon:
a. contract law.
b. tort law.
c. criminal law.
d. all of the above.
e. (a) and (c), but not (b).
Under the ____, a buyer may reject goods for even the slightest defect.
a. revocation of acceptance rule
b. perfect tender rule
c. rules for inspection
d. excuses for nonperformance
The finder of lost property is considered to be the owner as against everyone except the
true owner by reason of:
a. confusion.
b. accession.
c. possession.
d. gift.
With regard to uncertainty in a contract that falls within the scope of Article 2, which of
the following is true?
a. Uncertainty will usually make the contract unenforceable.
b. Missing terms cannot be supplied at a later date.
c. Uncertainty as to incidental matters will seldom be fatal as long as the parties intend
to form a contract.
d. Both (a) and (b).
Which of the following would not be considered “money” within the meaning of the
Code?
a. Diamonds
b. Mexican pesos
c. German marks
d. Nigerian naira
Mark carefully plots a course of action to embezzle $100,000 from his employer, Sue.
He is fired before he ever gets a chance to put the plan in action. In cleaning out his
desk, Sue finds his plans. Mark is:
a. guilty of a crime because he intended to carry it out.
b. guilty of a crime because he had mens rea.
c. not guilty because he did not act on his plan.
d. not guilty because he is no longer employed by Sue.
Contracts are governed primarily by:
a. state common law.
b. federal common law.
c. statutory law.
d. federal case law.
Which of the following would lack the capacity to become a partner?
a. A business trust
b. A retired person over 74
c. A corporation
d. None of the above
Meg has contracted to paint a portrait of Julio, but dies before completing the portrait.
Which of the following is correct?
a. Meg’s executor must find a capable artist to complete the work to Julio’s satisfaction.
b. Meg’s contractual duty is discharged due to objective impossibility.
c. A novation must be entered between Julio and a third person in order to discharge
Meg’s duty under the contract.
d. Meg’s contractual duty is discharged due to subjective impossibility.
Anna is 88 years old and under the legal guardianship of her daughter. One day Anna
receives a telephone call from a health insurance salesman and purchases a
$400-a-month Medigap insurance policy. This contract is:
a. valid.
b. voidable.
c. void.
d. voidable only at the option of Anna.
A union’s ‘secondary activity” is a:
a. boycott or strike of an employer with whom a union has no labor dispute to persuade
the employer to cease doing business with the company that is the target of the labor
dispute.
b. union’s picketing, in addition to a strike, of a company that is the target of the labor
dispute.
c. recognized union’s request for an injunction against an employer who refuses to
bargain in good faith.
d. refusal to represent one of its members in a grievance against the employer because
the member did not engage in a strike called by the union the previous year.
Colleen is admitted to the partnership of Elmore & Monticello and makes an initial
capital contribution of $10,000. Two years later, when liabilities of the partnership
exceed its assets by $20,000, the firm is dissolved. Paul had loaned the firm $5,000 six
months before Colleen was admitted; Scott had loaned the firm $8,000 three months
after Colleen was admitted. Colleen has:
a. no liability to Paul.
b. liability to Paul to the extent of her capital contribution and is personally liable to
Scott.
c. no liability to Scott.
d. liability to Paul and Scott only to the extent of her capital contribution.
Baxsen, Inc. wanted to acquire the common stock of the Acme Corporation and hired
Clark to audit the financial statements of Acme. Clark failed to discover a large
embezzlement by Acme’s chief financial officer. In a common law action by Baxsen
against Clark, Baxsen must at a minimum prove:
a. ordinary negligence on Clark’s part.
b. gross negligence on Clark’s part.
c. fraud on Clark’s part.
d. scienter on Clark’s part.
Which of the following would NOT be considered a breach of the warranty of
merchantability in some jurisdictions?
a. A piece of glass in a bottle of cola
b. A stone in a can of vegetable soup
c. A cherry pit in a can of cherry pie filling
d. A leaking plastic bottle containing bleach
The Fair Debt Collection Practices Act requires a debt collector to provide the
consumer with a written notice. What information must be contained in this notice?
a. The amount of the debt, with interest and penalties clearly delineated
b. The name of the current creditor and former creditor
c. A statement informing the consumer that he can request verification of the alleged
debt
d. A copy of the original credit contract with the original creditor
A seller’s incidental damages for a buyer’s breach would include all but the cost to:
a. store the widgets in buyer’s city
b. ship widgets back to seller
c. initially ship the widgets to buyer
d. reload widgets onto seller’s truck at buyer’s city
Which of the following would be the most convincing evidence of a partnership?
a. An agreement to share in the management of a business
b. Agreements to share gross returns
c. An agreement to share losses
d. An agreement to pay a firm manager a percentage of the profits for his salary
The Revised Act states that “all corporate powers shall be exercised by or under the
authority of, and the business and affairs of the corporation managed under the direction
of “:
a. the shareholders of the corporation.
b. the chief executive officer of the corporation.
c. the officers of the corporation.
d. the board of directors of the corporation.
In which of the following situations would the buyer not qualify as “buyer in the
ordinary course of business”?
a. Susie buys her classmate Jill’s car from her.
b. Caroline buys a refrigerator from Sears.
c. James buys eggs from the supermarket.
d. Todd buys a bicycle at his friend Joe’s shop.
Bill recently borrowed $50 from Ricardo for a couple of weeks. Bill, still short of cash,
tells Ricardo, “I will wash and wax your car in exchange for the $50 I owe you.”
Ricardo tells Bill, “OK, that’s great!” Ricardo’s performance of his new duty will be
a(n):
a. accord.
b. novation.
c. rescission.
d. satisfaction.
Business torts consist of:
a. interference with contractual relations.
b. disparagement.
c. fraudulent misrepresentation.
d. All of the above
Identify each of the following corporations by type.
a. Dr. Smith and Dr. Jones are medical doctors who practice together. They incorporate
their medical practice so that they can offer themselves and their employees better
employment benefits.
b. A group of concerned citizens obtains a corporate charter from the state to form a
local Water Planning and Management Corporation that is authorized to do water
planning on a local level, to grant permits for such purposes as the installation of
ditches, and to encourage good water usage practices in their jurisdictional area.
c. Agatha and Betty, who are sisters, form a corporation in which they are the sole
shareholders. They plan to operate a large retail store that sells collectibles. Agatha is
the president and Betty is the chairperson of the board of directors.
d. Shelby and Trent form a corporation to prevent spouse and child abuse. The
corporation operates a shelter for battered women and homeless children.
e. Zebron Corporation is incorporated in the State of West Virginia. It decides to expand
its business to Kentucky. What type of corporation is it in West Virginia? What type of
corporation is it in Kentucky?
Under the Fair Credit Billing Act, if a consumer makes a complaint about the amount
on his charge account bill, the store can:
a. immediately bar the customer from any further credit purchases.
b. report the unpaid amount to a credit-reporting agency as delinquent.
c. refer the matter to a collection agency for immediate collection.
d. None of the above.
Pat bought a cotton sweater at Ivey’s Fashion Store. Sue, the salesperson, told her the
sweater was guaranteed not to shrink if washed in cold water by hand. Pat washes the
sweater as directed and it shrinks. Which of the following is correct?
a. Pat has no recourse against the store, because it was only the salesclerk who
misrepresented the sweater.
b. Sue has apparent authority to make warranties such as the one that she made.
Therefore, the store is bound.
c. If Sue is only a part-time employee, Ivey has no responsibility for misrepresentations
she makes.
d. Salesclerks are usually independent contractors. Thus, there is no liability on the part
of Ivey.
If 100 shares of $50 par value stock were issued at $75 per share, how much would
constitute capital surplus?
a. $750
b. $7,500
c. $2,500
d. $5,000
A principal may be held liable for the torts of an independent contractor:
a. whenever the contractor is performing work or rendering services for the principal.
b. if the principal fails to exercise reasonable care in selecting the contractor.
c. if the contractor negligently performs an inherently dangerous activity.
d. All of the above.
e. Both (b) and (c).
A corporation may accomplish acquiring all or substantially all assets of another
corporation by:
a. purchase or lease of the other corporations’ assets.
b. purchase of a controlling stock interest in other corporations.
c. merger with other corporations.
d. consolidation with other corporations
e. All of the above.
Under the RUPA, a partner who does not have actual authority from all of the partners
may still bind the partnership by:
a. executing a contract of suretyship in the partnership name.
b. selling partnership property which is not held for sale in the usual course of business.
c. paying an individual partner’s debts out of partnership assets.
d. All of the above.
e. None of the above.
The failure by an accountant to use the care of a reasonably competent accountant is:
a. negligence.
b. material breach.
c. substantial performance.
d. fraud.
A secured bond is enforceable by a lien upon specific property rather than against the
general assets of the corporation.
The states initially had primary responsibility for controlling air pollution.
Under the Model Act, the bylaws may contain any provision for managing the business
and regulating the affairs of the corporation as long as it is not contrary to or
inconsistent with the law or articles of incorporation.
What is a formal contract? How does a formal contract differ from an informal
contract?
Claraine obtained a necklace by criminal fraud punishable as larceny. If she sells the
necklace to Sherry, who is a good faith purchaser for value, Sherry obtains valid title.
Even if a U.S. company does not export goods, it is influenced by international business
through competition from other countries.
In a Chapter 13 proceeding, the bankruptcy estate of an individual includes wages
earned after commencement of the proceeding.
A check is a draft payable on demand.
Define legal detriment.
In a lease of personal property, title does not pass.
A number of states have included social guests in the invitee category, although they
have traditionally been labeled as licensees.
A shareholder of one-third of all the stock in a corporation would be entitled to
one-third of all corporate assets of an ongoing company.
Under the Statutory Close Corporation Supplement to the MBCA, a close corporation
may operate without a board of directors.
Some states still recognize common law crimes.
One creditor of a debtor may file a bankruptcy petition as long as the debtor owes him
more than $5,000 in unsecured claims.
If a contract is not clearly unilateral or bilateral, the courts presume that the parties
intended a unilateral contract.
Revised Article 3 repeals application of the comparative negligence standard to the
impostor and fictitious payee rules.
Some states have statutes which prohibit an employee from assigning his future wages.
Most courts allow an accountant to raise the defense of the plaintiff’s contributory or
comparative negligence.
A beneficiary ordinarily has no right to sell his interest in trust assets before he is
entitled to receive the corpus.