At her neighbor’s garage sale, Constance buys a vanity dressing table from her
neighbor, Carlos, for $160. Constance purchased the vanity table for her own personal
use, without any knowledge that Carlos had signed a security agreement giving All
Purpose Furniture, Inc. a security interest in the vanity table. All Purpose Furniture did
not file a financing statement. Constance does not know that Carlos is still paying off
the purchase money security interest and owes All Purpose Furniture, Inc. $400. Under
these circumstances
a. Constance takes the vanity table subject to All Purpose’s security interest because All
Purpose’s security interest automatically perfected. A perfected security interest takes
priority.
b. Constance takes the vanity table free of All Purpose’s security interest because she is
a buyer of consumer goods.
c. Constance takes the vanity table free of All Purpose’s security interest because she is
a buyer in the ordinary course of business.
d. Constance must pay All Purpose $400 or the table must be resold, and she and All
Purpose will proportionately share the proceeds from the sale of the table.
Unlike a tenant, a licensee
a. is not entitled to the exclusive possession of the property.
b. is entitled to the exclusive possession of the property.
c. has control of the property.
d. has only a month-to-month right to use the property.
Charles and Becky are partners. If they have a disagreement, the Uniform Partnership
Act will govern their respective rights with each other
a. despite any written partnership agreement they may have signed.
b. only if they do not have a written partnership agreement that addresses the issue of
dispute.
c. only if they agree to be bound by the UPA.
d. only if their written partnership agreement states that they will be bound by the terms
of the UPA.
Bert had his driver’s license suspended by the state department of transportation. He
believes his constitutional due process rights were violated by the administrative
agency. Can he immediately file a court action to have agency’s actions reviewed?
a. Yes. A court has the jurisdiction to immediately review an agency’s alleged
unconstitutional action.
b. Yes. Bert must specifically allege his constitutional rights have been violated and file
a court action in federal court – not a state court.
c. No. Bert must first exhaust all possible appeals within the agency itself before he
seeks judicial review by a court.
d. No. A court of law does not have jurisdiction to review an administrative agency’s
actions.
In a comparative negligence state, if the plaintiff in a negligence lawsuit is found to be
30 percent negligent, the plaintiff would recover
a. 70 percent of the damages.
b. all of the damages.
c. none of the damages.
d. 30 percent of the damages.
The remedy of reformation
a. applies only when money damages are inadequate.
b. can be used to correct mistakes in the original contract.
c. is available only if fraud is involved.
d. is a commonly used remedy.
The Supreme Courts approach during the period from the 1950s through the 1970s in
deciding cases on constitutional grounds is described as
a. judicial restraint.
b. judicial activism.
c. judicial review.
d. the dormant aspect of its judicial power.
An express contract
a. must be in writing.
b. may be inferred by the conduct of the parties involved.
c. has both parties setting forth their intentions.
d. is not valid in many states.
To “undo” a contract and put the parties where they were before they made the
agreement is called
a. restitution.
b. rescission.
c. reliance.
d. remediation.
Contract prohibitions against assignments are invalid as a matter of public policy.
a. True
b. False
Under the merchants’ exception rule of the UCC, within a reasonable time ofmaking an
oral contract, if a merchant sends a written confirmation to another, and if
theconfirmation is definite enough to bind the sender herself, then the merchant who
receivesthe confirmation will also be bound by it unless he objects in writing within
a. 3 days.
b. 5 days.
c. 10 days.
d. 30 days.
Although RICO was passed to prevent gangsters from taking money they earned
illegally and investing it in legitimate businesses, it is now often used against
businessmen who break the law.
a. True
b. False
If the principal and agent agree in advance how long their relationship will last, their
agreement is called
a. an agency at will.
b. an agency of purpose.
c. an express agreement.
d. a term agreement.
Henry David Thoreau felt that war was unjust and therefore refused to pay his taxes
when the United States declared war on Mexico. Thoreau felt that there was a higher
law than the law of the land. Which theory of jurisprudence was he applying?
a. Legal positivism
b. Natural law
c. Legal realism
d. Common law
Daniel, his parents, and three brothers own all the stock of their family farm corporation
and each person takes an active role in managing the enterprise. This corporation,
which is taxed as a corporation, is most likely
a. an S corporation.
b. a professional corporation.
c. a close corporation.
d. a proprietorship.
Rick prepared financial statements for MegaCorp knowing that it was going to use his
statements to apply for a loan with Big Bank. When Big Bank turned MegaCorp down,
it applied to Fourth Bank for a loan. MegaCorp presented the statements prepared by
Rick to Fourth Bank which gave the company a loan. It was discovered that Rick was
negligent in preparing the statements, and Fourth Bank sued Rick. Under which of the
following tests is Rick liable?
a. Ultramares doctrine
b. Foreseeable doctrine
c. Restatement doctrine
d. Both the foreseeable doctrine and the Restatement doctrine
Smalltown, located in a border state, seemed to favor Caucasians over Latinos in its
hiring practices. The courts will review the practice using
a. minimal scrutiny.
b. intermediate scrutiny.
c. strict scrutiny.
d. Supremacy Clause scrutiny.
The Bankruptcy Code uses the term “debtor to refer to a person who cannot pay his
debts.
a. True
b. False
The “takings clause” prevents the government from taking private property for any
reason.
a. True
b. False
Check kiting is defined as
a. indorsing a check while knowing that the check is a stolen check.
b. carelessly paying an unauthorized instrument.
c. a scheme of overdrawing account “A” by depositing a check in account “B,” then
overdrawing account “B” to cover the insufficient funds in account “A.”
d. issuing an instrument to an impostor who negotiates the instrument to a bank that is
unaware of the fraud.
The workers at Thom Trucking went on strike over wages. Thom Trucking may hire
permanent replacement workers.
a. True
b. False
Newt, a gun dealer, offers to sell a rare civil war musket to Rush, another dealer, for
“$15,000, insurance and shipping paid by buyer.” Rush responds, “I accept. Insurance
and shipping costs divided equally between seller and buyer.” The parties
a. do not have a contract since the acceptance violated the mirror image rule.
b. do not have a contract since Rush’s response was a counteroffer.
c. have a contact and, in the majority of states, the terms of the offeree control.
d. have a contract and, in the majority of states, the different terms will cancel each
other out.
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.
The Administrative Procedure Act imposes controls on agencies by requiring basic
fairness in areas not regulated by the enabling legislation. This method of reining in
powerful agencies is a form of
a. informational control.
b. political control.
c. judicial review.
d. statutory control.
Robert hired James, a CPA, to prepare his tax returns. James was too busy and
delegated the work to Sara, also a CPA. This delegation is
a. enforceable, as Sara is also a CPA.
b. enforceable, as there was no expectation James would do the work.
c. not enforceable, as Robert hired James to perform personal services.
d. not enforceable, as this violates public policy.
In terms of collateral, which of the following would be categorized as “equipment”?
a. a mowing tractor used to mow personal property
b. crops produced by a farming operation
c. goods held by someone for sale or lease
d. a computer system used in a retail store
Mark was refused employment at a Christian bookstore because he was not a
“born-again Christian.” If Mark brings a Title VII action against the bookstore, the
bookstore’s best defense would be
a. it did not discriminate against a protected category.
b. Title VII doesn’t apply to private businesses.
c. being a “born-again Christian” is a bona fide occupational qualification.
d. it could not reasonably accommodate Mark.
As a general rule, an agent is liable on contracts entered into on behalf of a fully
disclosed principal.
a. True
b. False
Specific performance may be available for the breach of a contract to sell
a. an original painting.
b. 20 shares of WalMart stock.
c. a Nintendo WII video game system.
d. a 2007 Mustang in mint condition.
Which of the following events occurs first with respect to the ending of a partnership?
a. Termination
b. Winding up
c. Dissolution
d. Distribution of proceeds
Trisha loaned Brian $600 evidenced by a promissory note. When Brian paid off the
loan, he did not ask Trisha for the note. She sold it to Carin, a holder in due course.
Brian does not have to pay Carin since he already paid Trisha the full $600.
a. True
b. False
Bertha, from Chicago, traveled to San Francisco to attend a conference. Her sister,
Martha, lives in San Francisco and consequently, Bertha made arrangements to spend a
couple of days with her sister. The next morning sitting at the breakfast table, Bertha
realizes that she packed a mismatched pair of shoes (one is black and the other is blue).
Luckily, Martha wears the same size of shoes and lends Bertha a pair of black leather
pumps. During the day, the shoes are damaged while Bertha is wearing the shoes.
Bertha’s duty of care would be a duty of
a. extraordinary care, because this is a bailment for the sole benefit of the bailee.
b. ordinary care, because this is a bailment with both parties receiving mutual benefits.
c. only slight care, because this is a bailment for the sole benefit of the bailor.
d. none, as the sisters would share without condition.
Valley Mart told its employees that they would be fired if they actively supported a
unionizing effort. Valley Mart has committed an unfair labor practice.
a. True
b. False