An indorsement is “a signature, other than that of a signer as”:
a. maker.
b. drawer.
c. acceptor.
d. All of the above.
The exercise of the power to avoid a contract is known as:
a. ratification.
b. disaffirmance.
c. ab initio.
d. restitution.
Promises made by the landlord and tenant to each other in the lease to do or not to do
certain acts are known as:
a. automatic leases provisions.
b. recordation clauses.
c. covenants.
d. reversionary clauses.
Gary, a partner in G & R Enterprises, went to a trade show and discussed with a
manufacturer’s representative of Foods 4 U, Inc. the purchase of three dozen food
processors. A week after the trade show Gary received a signed letter from the
representative thanking Gary for visiting his booth and saying Gary’s order for three
dozen Style 418B food processors at $90 each would be shipped to his business address
within 30 days. Can Gary be contractually bound to accept and pay for the food
processors?
a. If, after he returns from the trade show, Gary decides he only wants to purchase
twelve food processors, he would not have to pay for three dozen if they are shipped to
him as long as he notifies Foods 4 U of the change in quantity before it ships the goods.
b. Gary did not sign an order form, and an order this large would have to be in writing
and signed by Gary to be enforceable.
c. If Gary does not object in writing within ten days after receiving the letter, he can be
bound to accept and pay for the three dozen food processors.
d. The letter is not sufficient to bind either Gary or Foods 4 U, Inc. to the purchase and
sale of the food processors.
A trustee has a duty to make proper allocation of income items. Which of the following
statements is true concerning this allocation?
a. Ordinary income is allocated to the remainderman.
b. Ordinary expenses are chargeable to the income beneficiary.
c. Rents and royalties to the remainderman.
d. Extraordinary repairs to the income beneficiary.
On March 1, Sara, a student, received a telephone call from ComputerChip, Inc.
offering her a job for one year beginning on June 15, after completion of the school
year. According to the personnel manager, she will have to move to California and be
ready to start work at 8:00 a.m. on June 15. Should Sara ask for a letter confirming the
telephone conversation if she accepts the offer immediately?
a. Yes, because the job offer is a collateral promise
b. Yes, because the job offer is covered by the parol evidence rule
c. Yes, because the job offer is for longer than one year from March 1
d. No, because the job offer is for one year from June 15
Which of the following is not an agent of the business?
a. An officer of a corporation
b. An assembly-line worker in a factory
c. A member of a limited liability company
d. A person hired by a sole proprietor to make purchases of business supplies and
materials
e. All of the above are agents of the businesses.
“Insider trading” rules pertain to:
a. employees.
b. officers.
c. directors.
d. All of the above.
AB Corporation consolidates with ZX Corporation to form A-Z Corporation. The debts
of AB Corporation are:
a. assumed by the stockholders of AB Corporation.
b. discharged by the process of consolidation.
c. assumed by the new corporation.
d. discharged by the issuance of new stock in A-Z Corporation.
Marilyn read an ad in the school newspaper offering a thousand dollar 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 and is
sure she can make it all the way. The advertiser:
a. may revoke the offer since there has not yet been an acceptance.
b. may not revoke the offer since Marilyn has already accepted it.
c. must permit Marilyn the opportunity to finish her attempt to swim the 500 laps, or
pay damages if he interferes with the completion of the laps.
d. must pay Marilyn $920, because she has performed 92% of the offer.
A contract was made for 125 bales of cotton to arrive on a ship named “Peerless” from
Bombay. Unbeknownst to either party to the contract, there were two ships named
“Peerless,” both of which were sailing from Bombay. One sailed in October and the
other in December. The buyer had in mind the ship sailing in October, but the seller had
in mind the ship sailing in December. Each party held his belief in good faith. The
goods failed to arrive on time. If the buyer sues for breach of contract:
a. the seller must pay damages because the seller breached.
b. the seller is guilty of fraud in the inducement for failing to disclose to the buyer
which ship would contain the goods.
c. no contract exists due to mutual mistake of fact as to the existence or identity of the
subject matter of the contract.
d. Two of the above, (a) and (b).
Ann sells to Bob property, which has a $50,000 mortgage in favor of First Bank. Bob
purchases the property subject to the mortgage. The value of the property declines and
there is a default on the mortgage. When First Bank forecloses, the property sells for
only $30,000.
a. Can First Bank recover the $20,000 balance from Bob? Explain.
b. Can First Bank recover the $20,000 from Ann? Explain.
c. What rights does Bob have during and after the foreclosure?
Which of the following is true about the CISG?
a. The full title is The United States Convention on Contracts for the International Sale
of Goods.
b. It does not apply to contracts in which the primary obligation of the party furnishing
the goods consists of supplying labor or services.
c. The CISG governs the formation of the contract, the rights and obligations of the
seller and buyer arising from such contract, and the validity of the contract provisions.
d. All of the above.
Under the UPA, dissolution by operation of law occurs:
a. if a partner has been adjudicated mentally incompetent.
b. upon the bankruptcy of a partner.
c. when a partner has engaged in conduct prejudicial to the business.
d. when the business can be carried on only at a loss.
In states that have adopted it, the UETA:
a. encourages and gives full effect to electronic contracts.
b. gives full effect to emergency transactions.
c. supplements and covers all of the UCC.
d. covers wills, codicils, and testamentary trusts.
Tommy’s parents died in a plane crash and he went to live with his guardian, Aunt Rose.
Rose had a very small house and did not have a separate bedroom and bath for
12-year-old Tommy. She and Tommy decided to use some of his inheritance to pay for
an addition to the house. He had some shares of stock transferred into Rose’s name so
that she could sell them when the money was due to be paid. The stock transfers are:
a. presumed voidable unless Rose can show no unfair advantage was taken.
b. presumed valid unless it can be proven that Tommy was taken advantage of.
c. null and void because of undue influence.
d. presumed void because of duress.
Which of the following is NOT true concerning the requirements for an effective
assignment?
a. The assignment must be voluntary.
b. Consideration is required.
c. There must be an intention to make the assignee the owner of the right.
d. The assignment may be either written or oral.
Discuss whether the principal is liable in each of the following situations. Explain your
answer.
a. Andrew hires Patricia, an attorney, to negotiate a contract to purchase some property.
He agrees to pay her $75 an hour for her services, and she agrees to use her own office
and secretarial staff to negotiate and draft the agreement. One day, Patricia is driving
her own automobile to a meeting with Edward to discuss the purchase of the land that
he owns. Patricia drives too fast for conditions and has a minor traffic accident that
results in $600 damage to the other vehicle.
b. George owns a retail store. He hires Carolina to work for him as a salesclerk in the
small appliance department. George instructs Carolina to make certain representations
to customers regarding a microwave oven, which Carolina sells. George knows these
misrepresentations are false, but Carolina does not. Henrietta buys a microwave in
reliance on the misrepresentations.
c. George owns a retail store. He hires Carolina to work for him as a salesclerk. George
doesn’t specifically tell Carolina to make misrepresentations, but he gives ambiguous
instructions to her that led her to believe she should make such misrepresentations.
Henrietta buys a microwave based upon the mistaken information conveyed to her by
Carolina.
d. Megaborne Corporation hires Ed as an outside salesman and instructs him to call on
customers in a specified territory and to solicit orders for their products. One day Ed is
driving the company car to call on a client. He accidentally drives the wrong way on a
one-way street and has an accident with another vehicle that results in $6,000 in
property damage and $30,000 in medical expenses.
e. The Advanced Business Machines Company (ABMC) hires John as an outside
salesman for its computers. It sets high sales quotas for him and instructs him to beat up
salesmen from competing firms in order to keep them away from ABMC customers. In
order to meet his monthly sales quota, John roughs up Ralph, who is a salesman for a
competing firm and then tells Ralph to find his own customers and to stay away from
John’s territory.
William recently sold his successful business to Janice. The contract for the sale
contained an unreasonable restriction that did not allow William to open a similar
business for fifteen years. The courts would, in this instance:
a. reform the contract to make it reasonable and enforceable.
b. require the parties to draft a new contract.
c. enforce the contract as it is written.
d. refuse to enforce the unreasonable restriction.
e. Either (a) or (d).
Jack was fired by Larry but decided to try to win back his job as agent by getting a big
new contract. He approached Sharon, a new client, and made a pitch to sell Larry’s
product. Sharon agreed to buy 100. Jack tells Larry. What are the legal consequences?
a. Larry has to hire Jack again and then make the deal.
b. Larry would have to ratify the deal to get the benefit of the contract.
c. Larry would have to negotiate the deal with Sharon himself.
d. Jack would forfeit his commission if Larry ratified the contract.
Phil, a tax accountant, promises to do Marge’s individual federal, state, local, and gift
taxes for the year. He completes all but the gift taxes. Under the substantial
performance doctrine, Marge will:
a. not have to pay Phil.
b. not have to accept the work.
c. have to pay Phil for all but the gift taxes.
d. have to pay Phil the contract price.
A design patent:
a. has a duration of 14 years.
b. protects the ornamental designs for manufactured products.
c. requires a showing of novelty, ornamentality, and nonobviousness.
d. All of the above.
A bill of lading serves as:
a. a receipt for storage of goods.
b. a document of title.
c. a warehouser’s lien.
d. evidence of insurance on the goods covered by the document.
Charles Bonney, the sole stockholder of Kid Corporation, wrongfully used the
corporation to avoid a personal liability. A court’s disregard of the corporate entity to
hold Bonney personally liable is called:
a. limited liability.
b. ultra vires.
c. diversity of interest.
d. piercing the corporate veil.
Notice of an assignment:
a. cuts off any defenses based on subsequent agreements between the obligor and
assignor.
b. does not prevent subsequent setoffs of the obligor that arise out of separate matters.
c. does not bar subsequent counterclaims of the obligor that arise out of separate
matters.
d. has no effect on defenses based on subsequent agreements between the obligor and
assignor or on subsequent setoffs and counterclaims of the obligor that arise out of
separate matters.
Boycotts that are in violation of the Sherman Act include:
a. a seller’s refusal to deal with any particular buyer.
b. a manufacturer who refuses to sell to a retailer who persists in selling below the
manufacturer’s suggested retail price.
c. when two or more firms that have market power agree not to deal with a third party,
thereby eliminating competition.
d. cooperative agreements designed to increase economic efficiency and render markets
more competitive.
Which of the following requires consideration in order to be binding upon the parties?
a. A written promise by a merchant to keep an offer to buy goods open for 14 days
b. Material modification of a sale of goods contract under Article 2 of the UCC
c. Material alteration of a personal service contract
d. Settlement of a disputed debt
Allen owns 500 of the 5,000 shares outstanding of General Myopics. GM plans to issue
600 new shares. If Allen has preemptive rights, he may buy:
a. all 600 shares before anyone else.
b. 600 shares at the same price he paid for the other stock.
c. 6 shares at a discount of 10%.
d. None of the above.
The Sherman Act:
a. protects U.S. exports from privately imposed restrictions seeking to exclude U.S.
competitors from foreign markets.
b. would not apply to an act committed in the United States by a foreign corporation.
c. would not apply to an act overseas by a 100 percent-owned foreign subsidiary of an
U.S. corporation.
d. never applies to acts committed outside the U.S.
Z, a seller in Miami, enters into a contract which states that goods are to be delivered to
X, a buyer, in New York. Title is to remain with Z until delivery to X. This is:
a. a shipment contract.
b. an FOB Miami contract.
c. a destination contract.
d. a contract voidable by the buyer until delivery.
Tim and Steve are roughhousing in Tim’s parents’ front yard when Steve intentionally
pushes Tim onto the neighbor’s property. In this case:
a. Tim is a trespasser.
b. Steve is a trespasser.
c. Tim and Steve are both trespassers.
d. None of the above.
If an offer asks for acceptance by mail and the offeree faxes acceptance:
a. there is no contract.
b. there is a contract if the acceptance is actually received within the time the authorized
means would have arrived.
c. under the Restatement, if the acceptance is received within the time the authorized
means would have arrived, the acceptance is effective when sent.
d. Both (b) and (c) are correct.
Rules for the distribution of property in a situation involving intestate succession:
a. do not apply to property held in joint tenancy.
b. apply where the testator has failed to name an administrator.
c. prevent property from escheating to the state.
d. have no application to real estate owned by the decedent.
Defenses to intentional torts include:
a. self-defense and consent.
b. defense of others and consent.
c. self-defense and defense of property.
d. All of the above are valid defenses.
The EPA, to view an entire plant as one source to evaluate emissions, uses the “bubble
concept.”
If First Bank receives a check for collection on Friday at 4 p.m., it must present the
check to the payor bank by midnight Saturday.
Future goods can be the subject of a present sale.
An extension of a voting trust for an additional term binds only those shareholders that
consent to the extension.
Barry buys a car from a dealer, which is sold to him “as is.” If the next day, the engine
blows up, Barry can sue the dealer for breach of the implied warranty for fitness.
All independent contractors are agents, but not all agents are independent contractors.
It is per se illegal under the Sherman Act to set a maximum price, but not a minimum
price.
Milly owns a car rental business that nets over $2 million. How is Milly contributing to
the CERCLA trust fund?
An heir of a person who dies receives title to the property of the decedent by reason of a
gift.
Consumer leases are treated no differently than business leases under the UCC.
Hurst’s Used Tires could not be held liable on a theory of strict liability in tort.
Presentment for payment is one step necessary to charge an indorser with the obligation
to pay.
The Wall Street Reform and Consumer Protection Act of 2010 extends the
extraterritorial reach of the antifraud provisions of the 1933 and 1934 securities acts
with respect to actions brought by the United States and the SEC.
Revocation following an acceptance of the goods gives the buyer fewer rights than he
would have had if he had at first rejected the goods.
The Tennessee Valley Authority is an example of a private corporation.
A covenant not to compete is a type of restraint of trade that courts today will enforce
under certain circumstances.
Define fiduciary and discuss its effect on a contract.
Under the common law, in order to be enforceable, a modification of an existing
contract must be supported by mutual consideration.
Abuse of process applies even when there is probable cause or when the plaintiff or
prosecution succeeds in the litigation.
An uncommon but possible way to obtain title to property is by adverse possession.