Buyers in the ordinary course of business who purchases goods from a merchant take
the goods free from any perfected or unperfected security interest in the merchant’s
inventory, even if the buyer knows of the existence of the security interest.
Sometimes a party will register a domain name of another domain name of another
party’s trademarked name or famous person’s name. This is called cyberspotting.
Although much of the law is based on ethical standards, not all ethical standards have
been enacted as law.
Generally, a successful plaintiff in a trade secret action can recover the profits made by
the offender from the use of the trade secret, recover for damages, and obtain an
injunction prohibiting the offender from divulging or using the trade secret.
Corporate officers are liable on an unauthorized contract if the corporation does not
ratify it.
Integration may be by an express reference in one document that refers to and
incorporates another document within it. This procedure is called ratification by
reference.
An acceleration clause does not affect negotiability however an extension clause will
render an instrument nonnegotiable.
Under the UCC, a seller is required to notify the buyer of shipping information so that
the buyer knows when and where the goods will be delivered.
Persons convicted of money laundering can be fined up to $500,000 or twice the value
of the property involved in the crime.
Revocation may be made by the offeror’s express statement, or an act of the offeror that
is inconsistent with the offer.
The Food and Drug Administration may remove from commerce any cosmetics that
contain unsubstantiated claims of preserving youth.
Under the Electronic Communications Privacy Act, an employer cannot access any
stored e-mail of an employee without that employee’s consent.
Negotiable instruments are special forms of contracts recognized by the Uniform
Commercial Code.
The general rule is that owners of a limited liability company are not personally liable
to third parties for the debts, obligations, and liabilities of a limited liability company
beyond their capital contribution.
If Carol, a heart surgeon, is sued for negligently driving her car, she will be held to a
reasonable heart surgeon standard when establishing the duty of care owed.
Promissory notes that are secured by real estate are called collateral notes, and notes
that are secured by personal property are called mortgage notes.
Licensing occurs when one business or party that owns intellectual property, the
licensee, contracts to permit another business or party, the licensor, to use its
intellectual property in the distribution of goods, services, software, and digital
information.
Recovery can be sought for stolen trade secrets only if they were patented or
copyrighted.
Limited partners can lose their limited liability protection if they actively participate in
management of the partnership.
Although the common law of contracts permits several writings to be integrated to form
a single written contract, the Uniform Commercial Code (UCC) does not.
If a majority of the U.S. Supreme Court justices agree as to the outcome of a case but
not as to the reasoning for reaching the outcome of it, it is a concurring decision.
Discovery serves several functions, including preventing surprises, allowing parties to
thoroughly prepare for trial, preserving evidence, saving court time, and promoting the
settlement of cases.
An actual contract may be express, but not implied-in-fact.
The Sherman Act applies to unlawful conduct by one (1.) or more parties.
Rescission is not available where there has been a material breach of contract.
A qualified opinion states that the company’s financial statements are fairly represented
except for, or subject to, a departure from GAAPs, a change in accounting principles, or
a material uncertainty.
A non-compete agreement will not be found to violate public policy so long as it meets
the required tests for reasonableness.
The WTO dispute settlement body is required to adopt the WTO panel report unless the
body, by consensus, agrees not to adopt it.
Commercial speech and offensive speech both receive only limited protection under the
U.S. Constitution.
Contract liability is another term used to refer to signature liability.
Which of the following is not true regarding the seller’s or lessor’s right to cancel the
contract?
A) The seller or lessor may cancel a sales contract if the buyer or lessee breaches the
contract by rejecting or revoking acceptance of the goods.
B) The seller or lessor may cancel a sales contract if the buyer or lessee breaches the
contract by failing to pay for the goods, or by repudiating all or any part of the contract.
C) The cancellation may refer only to the affected goods if the breach is material.
D) The seller or lessor who rightfully cancels a sales or lease contract by notifying the
buyer or lessee is discharged of any further obligations under the contract.
E) When cancellation occurs, the buyer’s or lessee’s duties are not discharged.
Which method of voting would give minority shareholders the best chance to elect
someone to the board of directors of a corporation?
A) cumulative
B) noncumulative
C) proxy
D) supermajority
E) preemptive
Which of the following is correct about contracts entered into by insane persons?
A) Contracts entered into by all insane persons are void.
B) Contracts entered into by all insane persons are voidable.
C) Contracts entered into by persons adjudicated insane are void, and those entered into
by nonadjudicated insane persons are voidable.
D) Contracts entered into by persons adjudicated insane are voidable, and those entered
into by nonadjudicated insane persons are void.
E) Contracts entered into by insane persons are void, but only if there is no medication
that they could have taken to make them competent.
Where a seller has breached a warranty, what is the buyer’s normal measure of
damages?
A) the difference between the contract price and the value of the good as it actually is
B) The difference between the contract price and the value of the good as it was
warranted
C) the difference between the contract price and the amount the buyer could receive by
reselling the good
D) the difference between the value of the good as warranted and the value of the good
as it actually is
E) the difference between the value of the good before it was purchased and the value in
the buyer’s hands after purchase
Tom purchases $300 worth of goods from Nancy. Nancy lives in on a small remote
island that is part of the Bahamas. The goods will first travel by boat from the Bahamas
to Florida and then by air to Tom. The contract states that the shipping terms are F.A.S.
(Illinois) port of shipment. Nancy takes the goods down to the dock and places them on
the dock next to a ship called Illinois. Nancy does not insure the goods. Nancy does not
make sure the goods are placed on the ship. The goods are lost. Tom sues Nancy for his
$300 back, who wins?
A) Tom wins because Nancy did not make sure the goods were placed on the ship.
B) Tom wins because Nancy held the risk of loss until the goods were delivered to Tom.
C) Tom wins because Nancy has a duty to send Tom a replacement order or refund his
money.
D) Tom wins because Nancy was under an obligation to insure the goods and she didn’t.
E) Nancy wins because Tom bears the risk of loss once the goods are placed on the
dock of the Illinois ship.
Which of the following are needed for an offer to be effective?
A) The offeror must objectively intend to be bound by the offer.
B) The terms of the offer must be definite or reasonably certain.
C) The offer must be communicated to the offeree.
D) The offeror must objectively intend to be bound by the offer, and the terms of the
offer must be definite or reasonably certain.
E) The offeror must objectively intend to be bound by the offer, the terms of the offer
must be definite or reasonably certain, and the offer must be communicated to the
offeree.
A merger that integrates a supplier and a customer would be categorized as a:
A) horizontal merger.
B) vertical merger.
C) market extension merger.
D) product market extension merger.
E) conglomerate merger.
________ crimes are not inherently evil but are prohibited by society.
A) Mala in se
B) Mala prohibita
C) Mala forma
D) Prohibita in se
E) Forma prohibita
In the case of Greenstein, Logan & Company v. Burgess Marketing, Inc., the court
evaluated Greenstein, Logan & Company’s liability for inaccurate audits and said:
A) because Burgess’s controller had under-accrued and underpaid the company’s federal
excise taxes, Burgess was responsible for the losses suffered.
B) because Greenstein, Logan had failed to comply with generally accepted accounting
principles, they were deemed negligent and therefore liable for the losses.
C) because Greenstein, Logan had failed to comply with generally accepted auditing
services, they were deemed negligent and therefore liable for the losses.
D) because Burgess’s controller had erred and Greenstein, Logan had failed to discover
the error, both were ordered to share liability for the losses.
E) only practicing certified public accountants may testify as expert witnesses against
other certified public accountants, so the university professors who testified were not
persuasive expert witnesses.
Under Article 2 of the UCC, in which of the following sales contracts, does the risk of
loss shift to the buyer upon the buyer taking possession of the goods?
A) sale on approval
B) sale or return
C) consignment and ‘sale or return”
D) consignment, ‘sale or return” and ‘sale on approval”
E) ‘sale or return” and ‘sale on approval”
The ________ posting rule allows banks to fix an afternoon hour of 2:00 p.m. or later
as a cutoff hour for the purpose of processing checks and deposits.
A) deferential
B) deferred
C) post-date
D) dilatory
E) referred
A freehold estate is an estate in which the owner has a ________ interest in the real
property.
A) conditional
B) qualified
C) fractional
D) present possessory
E) future possessory
Revocation of acceptance is not effective until:
A) one (1.) business day after delivery.
B) three (3.) business days after delivery.
C) one (1.) calendar day after delivery.
D) three (3.) calendar days after delivery.
E) the seller or lessor is so notified.
A male driver for a company is paid $1 per hour less than a female driver. Which of the
following is least likely to be a valid reason under the Equal Pay Act?
A) The female driver has worked longer for the company.
B) The female driver has a better safety record than the male driver does.
C) The female driver drives a larger truck that is more difficult to operate.
D) Generally, females are known to be safer drivers.
E) The female driver has completed more training classes than has the male driver.
In 1968, the United States Congress enacted the ________ Act as an amendment to the
________. This act specifically regulates all tender offers, whether they are made with
Securities, cash, or other combinations, and it establishes certain disclosure
requirements and antifraud provisions.
A) Smith; Securities Exchange Act of 1933
B) Smith; Securities Exchange Act of 1934
C) Williams; Securities Exchange Act of 1933
D) Williams; Securities Exchange Act of 1934
E) Smith; Williams
The Bankruptcy Code’s federal homestead exemption is ________.
A) $20,000
B) $21,625
C) $40,000
D) $41,625
E) $60,000
Intermediate appellate courts are also called ________ courts.
A) trial
B) equity
C) inferior
D) superior
E) appellate
________ is a form of negotiation in which a neutral third party assists the disputing
parties in reaching a settlement of their dispute.
A) Arbitration
B) Mediation
C) Conciliation
D) Absolution
E) Capitulation
What is the defining characteristic of a creditor third-party beneficiary?
A) The benefit received by the third-party beneficiary is a gift.
B) The third-party beneficiary has also been delegated a duty.
C) The third-party beneficiary was not intended to receive a benefit.
D) The third-party beneficiary has preexisting obligations related to the contract.
E) The third-party beneficiary status arose out of the assumption of a loan agreement.
In general, an appellate court might typically reverse which of the following?
A) the trial court’s findings of fact
B) the trial court’s conclusions of law
C) exclusion of hearsay evidence by the trial court judge
D) the trial court judge’s acknowledgement of a witness’ privilege against
self-incrimination
E) the jury’s findings of fact
To succeed in a malicious prosecution lawsuit, the courts require the plaintiff to prove
all but which of the following?
A) The defendant in the original lawsuit (now the plaintiff) instituted or was responsible
for instituting the original lawsuit.
B) There was no probable cause for the first lawsuit (i.e., it was a frivolous lawsuit).
C) The original lawsuit was terminated in favor of the original defendant (now the
plaintiff).
D) The current plaintiff suffered injury as a result of the original lawsuit.
E) The plaintiff in the original action brought it with malice.
Which of the following is one of the most commonly used top-level extensions for
domain names?
A) .avia
B) .aero
C) .flite
D) .arwys
E) .flght
What is true about the consideration required for modifications made to a sales or lease
contract?
A) Under the UCC, no additional consideration is required for modifications made to a
contract.
B) Under common law, no additional consideration is required for modifications made
to a contract.
C) Under the UCC, additional consideration is required for modifications made to a
contract.
D) Under common law, additional consideration is required for modifications, only if,
the modifications materially change the terms of the contract.
E) Under both the UCC and common law, additional consideration is only required if
the parties agree in the original contract to provide such additional consideration for
modifications.
What is the legal effect of an obligor not being given notice of an assignment of rights
under a contract?
A) There is no effect, because there is not duty to notify the obligor.
B) The obligor must perform the same duty for both the assignor and the assignee.
C) Performance by the obligor to the assignor will discharge the duty as to the assignee.
D) The obligor is discharged from having to perform the duty to either the assignor or
the assignee.
E) The obligor may sue the assignor for damages.
The Miranda decision requires that a criminal suspect be notified of all of the following
except:
A) the right to a trial by jury.
B) the right to have a lawyer present during interrogation.
C) the fact that anything the suspect says may be used against the suspect.
D) the right of the suspect to remain silent.
E) the right to have an attorney appointed if the suspect cannot afford one.
The ________ was enacted to prevent fraud in the subsequent trading of securities. This
act has been applied to prohibit insider trading and other frauds in the purchase and sale
of securities in the after-markets, such as trading on securities exchanges.
A) Securities Act of 1933
B) Securities Act of 1934
C) Securities Exchange Act of 1933
D) Securities Exchange Act of 1934
E) Securities Exchange Act of 1935
Which is the correct priority, from first to last, of the three types of evidence under the
UCC that a court will consider as an exception to the parol evidence rule when trying to
clear up an ambiguity in a contract?
A) course of dealing, course of performance, usage of trade
B) usage of trade, course of performance, course of dealing
C) course of performance, course of dealing, usage of trade
D) course of dealing, usage of trade, course of performance
E) course of performance, usage of trade, course of dealing
Which of the following is false regarding the North American Free Trade Agreement?
A) It eliminates or reduces most of the duties, tariffs, quotas, and other trade barriers
between the countries that signed the agreement.
B) A country that signed the agreement may reinstitute tariffs if an import increase from
one of the other nations to the agreement hurts its economy or workers.
C) It allows countries that signed the agreement to discriminate against outside nations
and to negotiate deals among themselves.
D) Environmentalists support the pact, since it mandates a large reduction of pollution
in Mexico.
E) It has special protection for some favored industries.
Which of the following statements best describes the government’s regulation of
franchisor activities in seeking franchisees?
A) There is very little regulation and oversight of these activities.
B) There are very few regulations directed specifically at franchisors, because other
regulations address potential problems in this area.
C) These activities are heavily regulated, with laws at both the state and federal levels.
D) These activities are heavily regulated, but only at the state level, because most
franchising activities cross state lines.
E) These activities are heavily regulated, but only at the federal level, because of
concerns with uniformity.
Whitney’s beloved horse recently died. Whitney has entered into an agreement with a
well-known sculptor to sculpt a life-size sculpture of the horse. This contract provides
that Whitney is “not obligated to pay for the sculpture unless she is personally satisfied
with the sculpture.” In this situation:
A) Whitney can use her personal preferences in determining whether she is satisfied.
B) Whitney must pay for the sculpture if a reasonable person would be satisfied with
the result.
C) The sculptor can neither delegate the duty to sculpt the horse nor assign the right to
payment.
D) This would be considered a “time is of the essence” contract, even without specific
language to that effect.
E) Whitney must check monthly on the sculptor’s progress and voice any complaints in
order to refuse payment if she is dissatisfied.