Against a charge of a violation of the Securities Act of 1933, only an issuer of stock can
assert the due diligence defense.
Procedural due process requires that any taking of a person’s life, liberty, or property by
government must be made fairly.
An executor is a personal representative appointed by a court for a decedent who dies
without a will.
A warranty against infringement is a promise by the seller that the product was
constructed in a workmanlike manner.
Consequential damages are awarded to cover all of the remote consequences of
whatever injury a nonbreaching party suffers.
A sale of “things attached” to realty is always considered a sale of goods.
An oral contract for a sale of land may be enforceable if the contract has been partially
performed.
An employer must modify its job-application process so that those with disabilities can
compete for jobs with those who do not have disabilities.
Only outsiders who would ordinarily be deemed fiduciaries of the corporations in
whose stock they trade can be liable for insider trading.
An accountant is required to discover every impropriety, defalcation, and fraud in a
client’s books.
If, before the time for performance, a buyer communicates an intent not to perform, the
seller can consider the buyer in breach and pursue a remedy.
An obligor is a person to whom a duty is owed.
A suspect cannot be tried twice in the same court for the same crime.
The liability of the members of a limited liability company is limited to the amount of
their investments.
A state court can exercise jurisdiction over any person within the boundaries of the
state.
The Madrid Protocol concerns trademarks.
Corporations’ chief executive officers are directly accountable for the accuracy of
financial statements filed with the Securities and Exchange Commission.
In an ordinary bailment, a bailee has the right to limit his or her liability.
Working papers are the documents through which a court orders an accountant to audit
a public company.
An attorney may be liable in negligence to any third party who the attorney knows will
rely on the attorney’s work.
A defendant may be relieved of liability by showing that a criminal act was necessary to
prevent an even greater harm.
An innocent party may seek damages for a fraudulent contract.
A debtor’s vehicle is never exempt from satisfaction of a judgment debt.
The dishonor of an instrument relieves secondary parties of liability.
Loan flipping occurs when a lender convinces a homeowner to refinance soon after
obtaining a mortgage.
A bankruptcy estate consists of all the debtor’s interests in property currently held,
wherever located.
A purchase-money security interest arises only when a seller provides a buyer with the
“purchase money” to buy goods.
Good intention is a complete defense to conversion.
Whistleblower statutes protect employers who retaliate against their employees for
“blowing the whistle.”
The Foreign Sovereign Immunities Act spells out the particulars of what constitutes a
commercial activity.
If it can be shown that a trespass to personal property was warranted, a complete
defense exists.
Pumping up a company occurs when a single person using multiple aliases on an online
forum creates the illusion of widespread interest in a stock.
Personal property is sometimes referred to as personalty or chattel.
An instrument payable to two persons jointly requires the indorsement of only one of
the payees for negotiation.
Sid files a suit against Tina. Before going to trial, the parties, with their attorneys, meet
to try to resolve their dispute. A third party helps them to reach an agreement. This is
A.arbitration.
B.litigation.
C.mediation.
D.negotiation.
RiteMade Machinery, Inc., designs, makes, and sells a drill press. Steel Equipment
Company copies the design without RiteMade’s permission. Steel’s conduct is
actionable provided
A.consumers are confused.
B.Steel’s conduct is intentional.
C.Steel’s conduct reduces the value of RiteMade’s design.
D.RiteMade’s design is patented.
Lovett County Bank offers to lend money to Kino, the owner of Java Stop, at 15 percent
interest. Before Kino accepts, a state statute is enacted prohibiting loans at rates greater
than 12 percent. Kino and the bank have
A.have a contract for a loan at 15 percent interest.
B.have a contract for a loan at 12 percent interest.
C.have a contract for a loan at 0 percent interest.
D.no contract for a loan.
Orin owns Pilot’s Landing Office Park. His ownership rights include the right to sell or
give away the property without restriction, as well as the right to commit waste, if she
chooses. Orin’s ownership interest is
A.a fee simple absolute.
B.a leasehold estate.
C.a life estate.
D.the power of eminent domain.
GR8 Stores, Inc., hires Haul-Way Company, a common carrier, to transport fifty
large-screen HDTVs from San Diego to Phoenix. En route, a pothole causes the truck to
crash, damaging the goods. Liability for the damage most likely rests with
A.GR8 Stores and Haul-Way.
B.GR8 Stores only.
C.Haul-Way only.
D.neither GR8 Stores nor Haul-Way.
Trey, an agent for Uno Music Corporation, executes an unauthorized contract with
Variety Recording, Inc., that is highly advantageous to Uno. Variety withdraws from the
deal before Uno ratifies the contract. The contract is
A.valid.
B.variable.
C.void.
D.voidable.
Joey reproduces Mina’s copyrighted work without paying royalties. Joey is most likely
excepted from liability for copyright infringement under the “fair use” doctrine if
A.Joey copies the entire work.
B.Joey distributes the copies freely to the public.
C.Joey’s use has no effect on the market for Mina’s work.
D.Joey’s use is for a commercial purpose.
Personnel Staffing Corporation meets all of the requirements to be subject to the federal
employment discrimination laws. Among these, the most important statute prohibiting
discrimination against members of protected classes is
A.the Age Discrimination in Employment Act of 1967.
B.the Americans with Disabilities Act of 1990.
C.the Pregnancy Discrimination Act of 1978.
D.Title VII of the Civil Rights Act of 1964.
Fact Pattern 16-1
Ewa signs an instrument unconditionally promising to pay to “First State Bank” $5,000
with interest in installments with the final payment due June 1, 2012.
Refer to Fact Pattern 16-1. With respect to this instrument, First States Bank is
A.the drawee.
B.the drawer.
C.the maker.
D.the payee.
Iggy hires Joy to act as his agent to purchase Kup-a-Koffee Kompany. Iggy tells Joy to
reveal only that she is buying the firm on behalf of a third party, without telling
Kup-a-Koffee’s seller who that third party is. Iggy is
A.a disclosed principal.
B.an implied principal.
C.an undisclosed principal.
D.a partially disclosed principal.
In a suit against Owen, Phil obtains specific performance. This is
A.an order to do or to refrain from doing a particular act.
B.an order to perform what was promised.
C.a payment of money or property as compensation.
D.the cancellation of a contract.
Trek Transport Company uses a mark associated with its name to distinguish its
services from those of other trucking firms. This mark is
A.a certification mark.
B.a collective mark.
C.a service mark.
D.trade dress.
Lynn files a suit against Karl. Karl denies Lynn’s charges and sets forth his own claim
that Lynn breached their contract and owes Karl money for the breach. This is
A.a counterclaim.
B.a crosclaim.
C.an affirmative defense.
D.an irrelevant response.
Jean sends e-mail to Irwin promising a percentage of the amount in an African bank
account for assistance in transferring the funds to a U.S. bank account. Irwin forwards
his account number, but the funds are never sent. Instead, Jean quickly withdraws the
funds in Irwin’s account. This is
A.online greed but not fraud.
B.an online “fool-me-once, shame on you” occurrence but not fraud.
C.online gambling but not fraud.
D.online fraud.
Esteban and Florian want to form a limited liability company (LLC) to manage their
business, Gordian Nuts. LLC statutes have been adopted in
A.every state.
B.no state.
C.less than one-fifth of the states.
D.only Wyoming.
Lewey’s Bicycle Store contracts to buy fifty bicycles from Mountain Bikes, Inc. Unless
the contract states otherwise, this is
A.a bill of lading.
B.a destination contract.
C.a shipment contract.
D.a warehouse receipt.
Liz trespasses on Mega Corporation’s property. Through the use of reasonable force,
Mega’s security guard Ned detains Liz until the police arrive. Mega is liable for
A.assault and battery.
B.false imprisonment.
C.intentional infliction of emotional distress.
D.none of the choices.
Ping’s debt to Oak Furniture Warehouse is past due. Oak obtains a judgment against
Ping, but Ping refuses to pay it. Oak asks the court for an order that directs the sheriff to
seize and sell any of Ping’s nonexempt real or personal property that is within the
court’s geographic jurisdiction. This is a request for
A.a writ of execution.
B.a composition agreement.
C.an order that would violate most state laws.
D.an order of garnishment.
Sable and Rex agree while talking on the phone to form a partnership to deal in
transfers of real property, which fall under the Statute of Frauds. Their partnership
agreement is legally binding
A.only if a copy of the agreement is filed in the appropriate state office.
B.only if the agreement is reduced to writing.
C.only if an information return is filed with the Internal Revenue Service.
D.without more.
Melanie engages in speech that harms others’ good reputations on her blog at
no.lie.com. The First Amendment gives such speech
A.less protection than obscene speech.
B.more protection than symbolic speech.
C.no protection.
D.the same protection as any noncommercial speech.
Gary threatens physical harm to force Hugh to sell his business, Imported Goods, Inc.,
to Gary for a below-market price. This is
A.duress.
B.fraud.
C.puffery.
D.undue influence.
Lulu, an accountant, conducts an audit of Microstuff Toys, Inc. After the conclusion of
the audit, the working papers created in preparing the audit must be
A.disposed of immediately.
B.kept until the Public Company Accounting Oversight Board’s review.
C.maintained for seven years.
D.retained forever.
Ralph, a van driver for Speedy Delivery Company, causes a multi-vehicle accident on a
city street. Ralph and Speedy are liable to
A.all those who were injured.
B.only those who were uninsured.
C.only those whose injuries could have been reasonably foreseen.
D.only those whose vehicles were closest to Ralph’s van.
Melba and Leon are directors of Fresh Foods, Inc. The right of Melba and Leon to be
notified of special meetings of the board is the right to
A.compensation.
B.indemnification.
C.participation.
D.self-dealing.
The graphics used in “Go!,” a handheld video game featuring racecars, are protected by
A.copyright law.
B.patent law.
C.trademark law.
D.trade secrets law.
Skyler dies after having made a valid will. Skyler has died
A.in escheat.
B.in probate.
C.intestate.
D.testate.
Beyond Gamez, Inc., a video game retailer based in California, does business in all fifty
states exclusively online. According to New York state tax law, an out-of-state online
retailer must collect and remit state taxes to New York if the retailer
A.plans to establish a substantial physical presence in New York.
B.targets a potential marketing base in New York.
C.maintains a Web site accessible in New York.
D.pays a party within New York to solicit business for its products.
In business deals, Felipe, the chief executive officer of Glazed Donuts, Inc., follows
duty-based ethical standards. These are most likely derived from
A.a corporate ethics code.
B.a cost-benefit analysis.
C.philosophical reasoning.
D.the law.
Fact Pattern 19-1
Rico signs a lease on behalf of Start-Up Games, Inc., with Tower Office Suites. As part
of the lease, Rico signs a document titled “GUARANTY,” which states that it is “an
absolute guaranty” of the lease’s performance.
Refer to Fact Pattern 19-1. If Start-Up stops paying the rent, it is most likely that
liability or loss for the unpaid amount will rest with
A.no one.
B.Rico and Start-Up.
C.Tower Office Suites.
D.the other tenants on the same property.
Gretel, an obese individual, files a suit against Hot n’ Tasty, Inc., alleging that its food is
unhealthy because, as is well known, it contains high levels of salt and sugar. Gretel’s
suit is most likely to
A.fail, because salt and sugar are not unhealthy ingredients in food.
B.fail, because the danger is well known to a reasonable consumer.
C.succeed, because consumers are not aware of the danger.
D.succeed, because the food is most likely a cause of Gretel’s obesity.
Building Restoration, Inc. (BRI), enters into a contract to refurbish an old train depot
for Casual Dining, Inc., to open as Eat Up Restaurant. If BRI completes most of the
work promised in the contract, its performance will be
A.absolute.
B.complete.
C.material.
D.substantial.
Even-Flo Hydraulics enters into a contract to repair valves and fittings in Fiesta
Company’s plant. If Even-Flo breaches the contract, Fiesta can
A.do nothing but make a deal with a different service provider.
B.do nothing but temporarily suspend operations and wait.
C.file a criminal complaint against Even-Flo.
D.sue Even-Flo for damages.
Medical Centre enters into a contract with Local Motion Fitness Club for discounted
memberships for the Centre’s employees. If the Club breaches the contract and the
Centre enters into a contract with KO Sports for the same service at a lower price, the
Centre might be awarded nominal damages to
A.establish, as a matter of principle, that the Club acted wrongfully.
B.provide the Centre with funds for a foreseeable loss beyond the contract.
C.provide the Centre with funds for its loss of the bargain.
D.punish the Club and set an example to deter others from similar acts.