The Foreign Sovereign Immunities Act (FSIA) provides that American courts generally
cannot hear suits against foreign governments. Describe the three possible exceptions to
this rule.
Jolene hired Lacy to find a buyer for her house. Adam was interested in buying the
house. If both Jolene and Adam agree, Lacy, a real estate agent, may represent both
parties.
a. True
b. False
Ethical behavior always pays off financially for businesses.
a. True
b. False
The Equal Credit Opportunity Act makes it illegal for a lender to discriminate against a
potential borrower because of race, national origin, religion, or sex, but it is permissible
to treat a borrower differently if he or she is on welfare.
a. True
b. False
To win expectation damages, the injured party must prove the breach of contract caused
damages that can be quantified with reasonable certainty.
a. True
b. False
Linda agrees to buy Missy’s Greyhound race dog for $2,000. Linda is to deliver the
money and take possession of the dog the next morning. That night, running his best
race ever, the dog runs away from Missy, never to be seen again. What will be the
outcome in this case?
a. Linda must give $2000 for the dog, but only if the dog was insured.
b. Linda must give $2000 for the dog, but only if Missy can find a replacement dog
within a reasonable time.
c. Missy must find another dog for Linda or pay her $2000.
d. Linda does not have to pay for the dog; the contract duties are discharged.
Link negligently ran his car into John, causing $50,000 in injuries. Link was intoxicated
at the time of the accident. Can Link discharge this debt in bankruptcy?
a. Yes, claims based on negligence are dischargeable.
b. Yes, as long as he didn’t intend to hit John’s car.
c. No, such claims are not dischargeable in bankruptcy.
d. No, because Link breached a fiduciary duty.
Denzil was one of 50,000 people defrauded of $40 in an advertising scam. His best
course of action to recover his money is to
a. mediate the claim with the advertiser.
b. bring an individual lawsuit against the advertiser in a state appellate court.
c. bring an individual lawsuit in a U.S. District Court.
d. become part of a class action lawsuit, which might include plaintiffs who are
unaware of the lawsuit or are even unaware they were harmed.
An agent may not engage in inappropriate behavior that reflects badly on the principal.
This rule applies to conduct
a. during working hours.
b. during off-duty time.
c. during both working hours and off-duty time.
d. only by public officials.
A bank that draws a check on itself has issued
a. a special indorsement.
b. a claim in recoupment.
c. a certificate of depsosit.
d. a cashier’s check.
In strict liability, if a company sells a beverage in a can that has sharp edges and injures
several consumers, it will be held liable even if it didn’t know about the problem.
a. True
b. False
A party to a contract has a duty to investigate the other party’s factual statements.
a. True
b. False
Tom indorsed a check made payable to the order of Tom Jones as follows:
Pay Raymond Berry
/s/ Tom Jones
Raymond negotiated the check to his landlord for his rent. Raymond indorsed the check
as follows:
Without Recourse
/s/ Raymond Berry
With regard to Tom’s indorsement, which statement is correct?
a. Tom has secondary contractual liability on the check as an indorser.
b. Tom has no contractual liability on the check because he is the payee.
c. Tom has primary contractual liability on the check as payee.
d. Tom eliminated his liability as an indorser by the type of indorsement he used.
An instrument ordering someone else to pay money is called
a. an accommodation.
b. a tansfer warranty.
c. a discharge.
d. a draft.
In order for a plaintiff to win a case involving intentional infliction of emotional
distress, she must prove the defendant acted in an extreme and outrageous manner.
a. True
b. False
What element of a contract refers to the parties involved being “adults of sound mind”?
a. Consideration
b. Capacity
c. Consent
d. Legality
In breach of the partnership agreement, Trimble, a partner in the partnership of Morris,
Newt, and Oppie, Ltd. quits the partnership and goes to work for a competitor. The
former partners may ask the court for
a. specific performance requiring Trimble to return to work for Morris, Newt, and
Oppie, Ltd.
b. an injunction to prevent Trimble from working in competition with the former
partners.
c. special damages under the rule of Hadley v. Baxendale.
d. liquidated damages as compensation for the breach.
Debra wanted to form a partnership with Lawrence. He agreed and they became
co-owners in an equal partnership. This year, after expenses, the partnership had a profit
of $200,000. How will the taxation of this profit be handled?
a. Since the partnership was Debra’s idea, she will pay income tax on the profit on her
personal tax return.
b. The business will pay half of the tax liability and Debra and Lawrence will pay the
other half.
c. Debra and Lawrence must both pay tax on the business’s profit.
d. The business itself will pay the taxes on the businesss profit.
Because of the concept of stare decisis, the U. S. Supreme Court, in interpreting a
statute in 2009, must interpret certain statutory language in the same way as the U. S.
Supreme Court interpreted the same statutory language in 1971.
a. True
b. False
The First Amendment guarantee of freedom of speech is an absolute right.
a. True
b. False
Which of the following statements is NOT TRUE regarding the buyer’s right to cover?
a. The buyer must cover.
b. The measure of damages in a cover is the difference between the cover price and the
contract price.
c. Cover must be done by reasonably obtaining substitute goods.
d. Consequential damages can be recovered in addition to the cover damages.
The evening news was full of stories about how Levine sold fraudulent negotiable
instruments to investors around the country. Two days later, Brighty, who did not hear
the news reports, bought some of the fraudulent negotiable instruments from a swindled
investor. Can Brighty claim the position of a holder in due course considering the
publicity of the scam?
a. Brighty is presumed to have knowledge of the scam and therefore did not purchase
the instruments in good faith.
b. Although Brighty passes the subjective test of good faith, he fails the objective test
and therefore cannot claim to have purchased the instruments in good faith.
c. Brighty can claim to have purchased the instruments in good faith if he subjectively
believed the instruments were valid and if objectively his purchase of the instruments
was commercially reasonable.
d. Brightly cannot be a holder in due course because once an action of fraud is
discovered, no additional claims against that party can be sought.
Hensley and Boyer have been negotiating for several months over issues related to the
purchase and sale of some real estate. They draft a letter of intent that
a. protects both parties by ensuring the other side is serious and creates a binding
agreement on the issues on which the parties have agreed thus far.
b. may or may not be an offer, depending on the exact language and whether the
document indicates that the parties have reached an agreement.
c. has a legal binding effect concerning the issues outlined in the letter.
d. courts will consider to be a valid offer which the other party must accept if offered in
good faith.
Gary and Herman are partners in a lawn mower repair business in Ohio. While Gary is
on vacation, visiting his sister in Georgia, his sisters neighbor has trouble with her
mower and Gary fixes it for her. She insists on paying him. Gary
a. may keep the payment since he did the work while he was on vacation.
b. must turn the money over to the partnership because he earned it doing the kind of
work that the partnership does.
c. may not accept the money because it would create a conflict of interest.
d. may not accept the money because it would mean he was taking a business
opportunity away from the partnership.
A treaty is said to be _____ when those who have drafted it agree that it is in final form.
a. bound
b. entered into force
c. ratified
d. adopted
As a general rule, employers have a legal obligation to disclose information about
former employees to potential future employers.
a. True
b. False
A union declares it will be engaging in a partial strike whereby its employees will
alternate between working for a period of time and then walking off the job for an
indefinite time. Thus, employees may work for a few days or only a few hours before
walking off the job again. The employer claims the union does not have the legal right
to engage in a partial strike. Which statement is correct?
a. The employer is correct. The union must either strike or workit cannot alternate
between working and striking.
b. The employer is correct only if the union does not state the specific hours or days
workers will be off the job. The law requires the union to provide the employer with at
least seven days’ notice of when workers will be off the job.
c. The employer is not correct since the NLRA expressly states workers have a right to
engage in a partial strike.
d. Whether the employer is correct depends on state law.
Under the Model Act, who has the right to call a special meeting of the shareholders to
vote on an emergency issue that cannot wait until the next annual meeting?
a. The board of directors and shareholders who own at least 10 percent of a company’s
stock
b. Any group of shareholders that is at least 25 in number and holds 25 percent of a
company’s stock
c. The board of directors and the CEO
d. Only the board of directors
Family Time Restaurant has a contract with Prime Meats for Prime to deliver 100
pounds of ground sirloin twice a week for the next three months. If, on one delivery,
Prime brings 95 pounds of ground chuck instead of 100 pounds of ground sirloin
a. Family Time may unquestionably reject the non-conforming goods because they vary
in both quantity and quality.
b. Family Time may reject the non-conforming installment only if it substantially
impairs the value of that installment and cannot be cured.
c. Prime has no right to cure.
d. the perfect tender rule applies.
Management’s duty to have a rational business purpose, avoid illegal behavior, and
make informed decisions refers to its
a. duty of care.
b. duty of loyalty.
c. duty of openness.
d. duty of fairness.
Griffith Manufacturing ships 40 crates of goods by Trusty Shipping, a common carrier.
Trusty offers Griffith a shipping rate of $725 for a limited liability of $5,000 or a rate of
$975 for full liability for any harm to the goods. Griffith chooses the $725 rate. In
transit, Trustys driver has an accident during an ice storm and all of Griffiths goods are
destroyed, causing a loss of $12,000. If Griffith sues Trusty,
a. Trusty will be liable for only $5,000 because a common carrier is allowed to limit its
liability by contract.
b. Trusty will be liable for the full $12,000 because common carriers have strict
liability.
c. Trusty will automatically be liable for the full $12,000 under the Carmack
Amendment.
d. Trusty is subject to normal bailment rules and can escape liability for any damage to
the goods by proving that it exercised due care of the property and that the loss was
caused by an act of God.
To be a close corporation, the business must be small, with no more than 20 owners and
no more than $500,000 in gross annual income.
a. True
b. False
If the title of an appellate court case appears as Jones v. Smith,
a. then it is correct to say thatJones is the plaintiff and Smith is the defendant.
b. it means that Smith won the trial court decision.
c. you cannot determine which party is the plaintiff, because when a defendant loses a
trial and files an appeal, some courts (but not all) reverse the names of the parties.
d. the trial judge was Jones and the appellate judge is Smith.
The doctrine of stare decisis is fundamental to
a. civil law.
b. common law.
c. Islamic law.
d. customary international law.
Matson agrees to purchase 500 wooden chairs from Woodcarvers, Inc. After
Woodcarvers sets the chairs aside in its warehouse, but before the risk of loss passes to
Matson, the chairs are destroyed in a fire, which was not the fault of Woodcarvers. The
contract between Matson and Woodcarvers is void.
a. True
b. False