Ronald is an independent accountant. He is hired by Procious, Inc. to audit its financial
statements. He fails to uncover that Procious, Inc. has been involved in embezzlement.
A corporation makes a tender offer for the shares of Procious, Inc. and discovers the
embezzlement. According to which of the following standards is Ronald liable for
negligence?
A) the Ultramares doctrine
B) Section 552 of the Restatement (Second) of Torts
C) the foreseeability standard
D) implied warranty of fitness for a particular purpose
________ is a promise to refrain from doing an unlawful act and therefore is a promise
that will not support a contract.
A) Preexisting duty
B) Illusory promise
C) Illegal consideration
D) Gift promise
Lenny stays in a resort during his vacation. While checking out, he mistakenly leaves
his cellphone in the suite he stayed in. A resort employee takes the cellphone to the
manager who takes possession of it. Which of the following is true regarding the rights
over the cellphone?
A) The resort manager has superior rights over Lenny for the possession of the
cellphone.
B) The resort manager has no obligation to return the cellphone to Lenny even if he
comes back to reclaim it.
C) The title of the cellphone’s ownership is now changed to the resort manager.
D) The resort manager should return the cellphone to Lenny if he comes back to
reclaim it.
A corporation has 10 outstanding shares. Andy owns 6 shares (60%), while Bill owns 4
(40%) shares of the company. Together they are to elect one director for the company
from 10 candidates. Andy casts 6 votes for one candidate, while Bill casts 4 votes for
another candidate. The candidate voted for by Andy wins by simple majority of votes
and is elected director. This is an example of ________.
A) straight voting
B) cumulative voting
C) supramajority voting requirement
D) supermajority voting requirement
A(n) ________ arises when a perpetrator aims to deceive an innocent party by
knowingly resorting to false misrepresentation.
A) inadvertent tort
B) unintentional tort
C) scienter
D) negligent action
In a tender offer situation, the party that is proposed to be acquired is referred to as the
________.
A) target corporation
B) tender offeror
C) white knight
D) black knight
Which of the following is true of a strategic alliance?
A) Strategic alliances cannot have more than two entities involved.
B) Strategic alliances cannot be formed between fellow competitors.
C) Strategic alliances are usually formed to accomplish multiple business ventures.
D) Strategic alliances do not provide the same protection and stability as mergers.
When an assignor makes an assignment of a right under a contract, the assignee is
under a duty to ________.
A) notify the obligor that the performance must be rendered to the assignee
B) discharge the original contract between the assignor and the obligor
C) assign the right to a subsequent assignee
D) render the obligor’s performance to the assignor
The ________ is an amendment to the Securities Exchange Act of 1934 that specifically
regulates tender offers.
A) Gramm-Leach-Bliley Act
B) Financial Services Modernization Act
C) Williams Act
D) Exon-Florio Foreign Investment Provision
A 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 when there has been a
________.
A) mutual mistake of a material fact
B) mutual mistake of value
C) mistake by the plaintiff
D) mistake by the defendant
________ is the act of a minor to rescind a contract under the infancy doctrine, either
orally, in writing, or by the minor’s conduct.
A) Ratification
B) Disaffirmance
C) Sanctioning
D) Adherence
A(n) ________ refers to a document that an issuer of securities files with the SEC that
contains required information about the issuer, the securities to be issued, and other
relevant information.
A) organization statement
B) operating statement
C) registration statement
D) certificate of interest
Damages that are generally equal to the difference between the value of the goods as
warranted and the actual value of the goods accepted at the time and place of
acceptance is known as ________ damages.
A) punitive
B) liquidated
C) compensatory
D) exemplary
The ________ is a federal statute, enacted by the Congress in 2010, which reorganizes
federal government supervision of the banking system, regulates previous unregulated
financial products and institutions, and adds a new consumer protection agency to
protect consumers from abusive lending and banking practices.
A) Dodd-Frank Wall Street Reform and Consumer Protection Act
B) Depository Institutions Deregulation and Monetary Control Act
C) Financial Institutions Reform, Recovery, and Enforcement Act
D) Riegle-Neal Interstate Banking and Branching Efficiency Act
Under Title I of the ADA, ________.
A) employers are not obligated to provide accommodations that would impose an
undue hardship
B) pregnancy is considered a disability
C) current users of illegal drugs are covered
D) preemployment medical examinations before a job offer are permissible
Damien, a first-year law student, offers his services to Mr. Jenkins to help draft his will.
Mr. Jenkins agrees to Damien’s offer, and promises to pay him $400 for his services.
Damien completes the draft of the will. But when Damien goes to collect his payment,
Mr. Jenkins refuses payment. Damien knew that he had no legal recourse to enforce the
contract. What statute had Damien violated in his contract with Mr. Jenkins?
A) revenue-raising statute
B) regulatory licensing statute
C) usury statute
D) ratification statute
Which of the following is true of covenants and conditions?
A) A covenant is a conditional promise to perform.
B) A condition becomes a covenant if the condition is met.
C) A contract cannot contain conditions to excuse performance.
D) A party cannot sue over breach of a covenant by the other party.
Melissa Harrison, a realtor, sells a house to the Smiths. Before the sale is finalized, Mr.
Smith asks Melissa for details of repairs the house has undergone over the years.
Melissa gives him details of minor repairs but hides all documents regarding a major
plumbing defect that was repaired last year. Three months after the Smiths moved in,
the defect reappeared that caused the first floor to flood, damaging their expensive
carpet and furniture. Melissa is liable for which of the following frauds?
A) fraud in the inception
B) fraud in the inducement
C) fraud by concealment
D) fraud in the factum
Parris Boutique and the New Line Clothes Company decide to lease a new property of
Green Floor Builders for their joint venture. To finance the acquisition, they go to a
local bank. The bank purchases the property from Green Floor and leases it to the firms.
In this case, ________ is the supplier of the lease.
A) Green Floor Builders
B) the New Line Clothes Company
C) Parris Boutique
D) the bank
Dean Campenella is a detective with the California state police. During the
investigation of a missing child, Campenella found new clues that led to the capture of
a serial killer involved in another case. Since Campenella was not involved in the serial
killer case and found the clues while investigating another case, Campenella demanded
a special reward from the state police department for helping catch the killer. But his
demand was declined citing lack of consideration. Campenella’s demand lacks
consideration under ________.
A) preexisting duty
B) illegal consideration
C) gift promise
D) illusory promise
A ________ is a distinct form of draft drawn on a financial institution and payable on
demand.
A) promissory note
B) check
C) deed
D) letter of credit
Lisa buys a used car from Kelly. She pays 10 percent down of the cost and signs a
negotiable promissory note, promising to pay Kelly the remainder of the purchase price,
with interest, in 12 equal monthly installments. At the time of sale, Kelly materially
misrepresented the mileage of the automobile. Later, Kelly negotiates the note to
Frances, who has no notice of the misrepresentation. Frances, an HDC, negotiates the
note to Zoe, who is not an HDC. Which of the following is Zoe in regards to the
indorsement?
A) a holder in due course
B) a holder
C) an assignee
D) an assignor
Which of the following acts establishes minimum wage and overtime pay requirements
for workers in the U.S.A.?
A) FLSA
B) OSHA
C) FMLA
D) COBRA
A(n) ________ makes negotiable instruments transferable to a third party.
A) insurance
B) indorsement
C) accommodation
D) trade acceptance
What is considered as the ‘supreme law of the land” in the United States?
A) Judicial decisions issued by the state courts.
B) The Constitution of the United States of America.
C) The federal statutes passed by the United States Congress.
D) Executive orders passed by the President.
Which of the following is true of impairments under the Americans with Disabilities
Act (ADA)?
A) It permits employers to ask job applicants about the existence, nature, or severity of
a disability.
B) It allows for preemployment medical examinations before a job offer.
C) The employer must not accommodate an individual’s disability.
D) Injuries resulting from pregnancy are considered as disabilities under the ADA.
The ________ exemption applies to employees who are compensated on a salary or fee
basis, whose primary duty is the performance of office or nonmanual work and whose
work includes the exercise of discretion and independent judgment with respect to
matters of significance.
A) executive
B) administrative employee
C) computer employee
D) learned professional
When goods are under the possession of a bailee, the risk of loss passes to the buyer
when ________.
A) the buyer receives a negotiable document of title covering the goods
B) the bailee does not acknowledge the buyer’s right to possession of the goods
C) the buyer does not present a document of title to the bailee
D) the bailee refuses to honor the document or direction
In which of the following cases is separate property considered marital property?
A) if the separate property was owned by the spouse prior to the terminated marriage
B) if the separate property was an inheritance
C) if the owner transferred title to the separate property to a spouse’s name
D) if the separate property was a gift received during marriage
In the course of swerving to avoid another vehicle, Eugene accidentally rammed his car
into a tree. While the initial blow did not injure him, he was involved in a ‘second
collision.” which resulted from Eugene banging his head against the dashboard. Eugene
sued the manufacturer of his car for strict liability. Which of the following doctrines
does the court adopt with regard to Eugene’s lawsuit?
A) transferred intent doctrine
B) fair use doctrine
C) crashworthiness doctrine
D) attractive nuisance doctrine
Which of the following statements is true of battery?
A) It is considered an unintentional tort that the law considers to be trivial in nature.
B) It is a legally sanctioned use of force on a particular individual.
C) It is considered an act of negligence on the part of the perpetrator.
D) It entails harmful and unauthorized contact between victim and perpetrator.
The ________ is a federal administrative agency that is primarily responsible for
regulating the safety of meat, poultry, and other food products.
A) U.S. Department of Agriculture
B) Consumer Product Safety Commission
C) Food and Drug Administration
D) Federal Trade Commission
A shareholder resolution is best defined as a resolution submitted by ________.
A) a shareholder for a vote of the board of directors
B) the board of directors requiring the reorganization of shares held by shareholders
C) a shareholder for a vote of other shareholders
D) the board of directors requiring the forced liquidation of shares held by shareholders
Which of the following data must a franchisor disclose if the franchisor makes sales or
earnings projections for a potential franchise location that are based on the actual sales,
income, or profit figures of an existing franchise?
A) Contract details of the franchisor and the existing franchises.
B) Management methods that have been adopted by the existing franchises.
C) The number and percentage of its actual franchises that have obtained such results.
D) Any sales or marketing strategy employed by the franchisor in acquiring such
results.
An act by a corporation that is beyond its express or implied powers is called a(n)
________.
A) Subchapter Revision S Act
B) novation
C) cooperate code act
D) ultra vires act