A usurious contract involves the purchase and sale of usable goods.
To commit an intentional tort, one person must intend to harm a certain other person.
If a buyer breaches a contract while the seller is still in possession of the goods, the
seller can resell the goods and hold the buyer liable for any loss.
To qualify as a commercially reasonable sale, a secured party’s sale of collateral, after
default and repossession, must be public.
Ethics is concerned with the fairness or justness of an action.
In most states, a director cannot be removed from a corporate board without cause.
To be legally sufficient, consideration must include something of economic value.
In contracts involving a carrier, a seller can complete performance only through a
shipment contract.
A foreign citizen can bring a civil suit in a U.S. court for a violation of a treaty of the
United States.
A creditor’s composition agreement is usually held to be unenforceable.
The Bill of Rights confers absolute rights, not subject to interpretation by the United
States Supreme Court.
A remedy is the relief provided to an innocent contracting party when the other party
breaches the contract.
An independent contractor can be an agent for his or her employer.
Unless a contract provides otherwise, it is assumed to be a destination contract.
A preemptive right is a preference over other shareholders to cast the determining vote
on fundamental changes affecting the corporation.
A profit is the right to make limited use of another person’s real property without taking
anything from the property.
If no heirs are found, the property of a decedent is transferred to a charitable
organization.
Ethics is the branch of philosophy that focuses on what constitutes right and wrong
behavior.
A seller must provide a written warranty for consumer goods.
Each state permits a debtor to retain the family home, in its entirety or in part, free from
the claims of unsecured creditors.
The completion of an originally incomplete instrument in an unauthorized manner is a
defense against payment on the instrument to an HDC.
A certification mark distinguishes products approved, or “certified,” by the government.
Unauthorized access to an electronic fund transfer system is a federal felony.
Stealing software is not a crime.
The terms “procedural due process” and “substantive due process” mean the same thing.
A security interest cannot be perfected without the filing of a financing statement.
Criminal liability depends on the performance of a prohibited act.
A trade name cannot be registered with the federal government if it is also a trademark.
To support the imposition of strict product liability, a product must be substantially
changed from the time it is sold to the time an injury occurs.
A court may depart from a precedent if the court decides that the precedent should no
longer be followed.
When a member dissociates from a limited liability company, the member’s duty of
loyalty continues.
An exculpatory clause in an employment contract is not enforceable if the clause is
against public policy.
Ethical standards based on religious teachings tend to be absolute.
An agreement is evidenced by a single event: an acceptance.
A loss sustained between the time of application and the delivery of an insurance policy
may not be covered.
Disparagement of property is another term for slander of quality.
Financial institutions that exchange digital images of checks do not have to exchange
the original paper checks.
Carol files a suit against Downwind Boat Corporation. Downwind responds that it
appears from the pleadings the parties do not dispute the facts and the only question is
how the law applies to those facts. Downwind supports this response with witnesses’
sworn statements. This is
A.a counterclaim.
B.a motion for judgment on the pleadings.
C.a motion for summary judgment.
D.a motion to dismiss.
Michael, a citizen of Ireland, and Nina, a citizen of the United States, enter into a
contract. When Nina breaches the contract, Michael obtains an award of damages in an
Irish court. He asks a U.S. court to enforce the award. The U.S. court defers to and
enforces the Irish court’s decree. This is
A.a travesty of justice.
B.the act of state doctrine.
C.the doctrine of sovereign immunity.
D.the principle of comity.
Socrates Software Corporation wants to hire Tomas, a noncitizen. To hire Tomas,
Socrates must petition
A.Citizenship and Immigration Services.
B.the U.S. Department of State.
C.Immigration and Customs Enforcement.
D.the National Labor Relations Board.
A clause in a contract between Timber Corporation, a U.S. business, and Wang, Ltd., a
Japanese business, specifies that disputes over the contract will be adjudicated in the
United States. This is
A.a choice-of-forum clause.
B.a choice-of-law clause.
C.a force majeure clause.
D.an arbitration clause.
Bild-It-Rite Corporation is a public company that is preparing to issue securities that do
not qualify for an exemption from registration. This means that Bild-It-Rite must
A.file a registration statement with the SEC.
B.issue the securities through an online registration site.
C.refrain from issuing the securities to unregistered investors.
D.register the securities with a national stock exchange.
Clear Day Company, which is based in Delaware, agrees to sell fifty windows,
currently stored in Florida, to Great Vu, Inc., which is based in Hawaii. Absent an
agreement to the contrary, the place of delivery is in
A.California.
B.Delaware.
C.Florida.
D.Hawaii.
Lewis is a state court judge. Like other judges, Lewis often refers to secondary sources
of law for guidance. These sources include
A.official comments to statutes.
B.other states’ statutes.
C.state constitutions.
D.the U.S. Constitution.
Pep Paints agrees to sell to Quality Painters Grade A-1 latex outdoor paint to be
delivered May 8. On May 7, Pep tenders Grade B-2 paint. Quality rejects the Grade B-2
paint. Two days later, Pep tenders Grade C-3 paint with an offer of a price allowance.
Pep has
A.additional, unlimited time to cure.
B.a reasonable, additional time to cure.
C.one more day to cure.
D.no more time to cure.
Riley, a State Bank employee, deposits into his account checks that are given to him by
bank customers to deposit into their accounts. This is
A.embezzlement.
B.larceny.
C.money laundering.
D.no crime.
Utility Power Company has the right to run its power lines across Velma’s land. This is
A.a license.
B.an easement.
C.a profit.
D.a tenancy at sufferance.
Fact Pattern 10-4
Kelly and Lucas sign a written contract for the sale of Kelly’s Koffee Kiosk to Lucas.
The parties intend their written contract to be a final statement of the terms of their
agreement.
Refer to Fact Pattern 10-4. Lucas later disputes some of the provisions of the deal with
Kelly. If the dispute results in litigation, a court will most likely exclude evidence that
A.buttresses the written terms.
B.contradicts the written terms.
C.duplicates the written terms.
D.reinforces the written terms.
Ginny obtains a health-insurance policy for her family from Hope Insurance Company.
The policy includes an incontestability clause. Under such a clause, after a policy has
been in force for a specified period or time, such as two or three years
A.Ginny cannot contest Hope’s insurable interest.
B.Ginny cannot contest Hope’s refusal to pay a claim under the policy.
C.Hope cannot contest Ginny’s eligibility for continued coverage.
D.Hope cannot contest Ginny’s statements in the application.
Elsa, the owner of Fertile Farm, sells Gina a right to camp on Fertile land overnight.
Gina’s right is
A.a leasehold estate.
B.a license.
C.an easement.
D.a profit.
Benny dies without a will, with no surviving spouse or child. Benny’s survivors include
his granddaughter Callie, his nephew Duncan, and his cousin Earl. In most states, his
estate would pass to
A.Callie.
B.Duncan.
C.Earl.
D.the state.
Posing as Platinum Bank, Oswald e-mails Nadia, asking her to update her personal
banking information through a link in the e-mail. She clicks on the link and types in the
data, which Oswald promptly sells to Moe. This is
A.no crime.
B.employment fraud.
C.phishing.
D.vishing.
Grant offers to sell his Honda Civic for $10,000 to Ivy. Referring to the prices for
similar Hondas, Ivy says, “I’ll pay no more than $5,000.” Grant says, “Forget it.” Grant’s
offer was terminated by
A.Grant.
B.Honda.
C.Ivy.
D.no one-Grant’s offer is still open.
Coast-to-Coast Distribution, Inc., is a direct-mail distribution company. Like most
corporations, Coast-to-Coast’s employees include its
A.board of directors.
B.incorporators.
C.officers.
D.shareholders.
Opal signs a promissory note payable to the order of Payday Loan Company. The note
states that it is payable “with interest at the legal rate.” This note is
A.negotiable.
B.nonnegotiable, because it does not specify a rate of interest.
C.nonnegotiable, because it is a promissory note.
D.nonnegotiable, because it is payable only with interest.
Elegant Carpets, Inc., and Fantastic Floors Stores enter into a contract for a sale of
carpeting. Under a shipment contract, the seller must
A.allow the buyer to reject the goods for any reason.
B.deliver the goods to a particular destination.
C.inspect the goods before shipping them.
D.place the goods into the hands of a carrier.
Fact Pattern 26-1
Fresh Goods, Inc., wants to make an initial public offering of securities. Fresh believes
that it qualifies for an exemption under Regulation A from the full registration
requirement of the federal Securities Act of 1933.
Refer to Fact Pattern 26-1. Fresh decides to sell its new securities via the Internet. This
offering
A.will avoid the payment of commissions to brokers or underwriters.
B.is an investment scam.
C.is a Ponzi scheme.
D.constitutes insider trading.
Cathy assures Don that she will deliver his products as he directs. An assertion that one
will do something in the future is part of the definition of
A.a declaration.
B.a moral obligation.
C.an ethical principle.
D.a promise.
Kerin obtains a property insurance policy for her art collection from Lawton Insurance
Company. Kerin can cancel the policy
A.at any time.
B.only at the end of a period for which a premium has been paid.
C.only if Kerin no longer has an insurable interest in the property.
D.only on advance written notice.
In selling software to Payroll Services Corporation, Ray tells Payroll’s purchasing agent
that the software is “almost human.” This is
A.fraud.
B.duress.
C.puffery.
D.undue influence.
Rick manages an illegal gambling operation in his Sushi Bar & Grill. Rick reports the
profits of the gambling operation as income from Sushi’s legitimate activities on its tax
returns. This is
A.embezzlement.
B.larceny.
C.money laundering.
D.no crime.
Optima Medico Corporation, a U.S. firm, signs a contract with Pharma Beneficial, Ltd.,
a Canadian firm, to give Pharma the right to sell Optima’s products in Canada. This is
A.a distribution agreement.
B.a joint venture.
C.direct exporting.
D.licensing.
Isabel obtains a fire insurance policy on her home from Justice Insurance Company.
The home is lost in a fire, but the parties dispute the amount of Justice’s liability under
an ambiguous clause in the policy. A court would most likely
A.interpret the clause against Isabel.
B.interpret the clause against Justice.
C.rewrite the clause and apply it as rewritten.
D.strike the clause from the policy.
Fact Pattern 31-1
First State Bank issues a letter of credit in favor of Oboe Company, an American firm,
to facilitate an international sales contract to buy resources from Lapland Mining, Ltd.,
a Finnish company.
Refer to Fact Pattern 31-1. First State Bank must pay Lapland when Lapland
A.enters into the contract with Oboe.
B.verifies that Oboe has the money to pay for the purchase.
C.complies with the terms and conditions of the letter of credit.
D.none of these choices.
Jim files a suit against Kay. Before going to trial, the parties meet, with their attorneys
to represent them, to present their dispute to a third party who is not a judge but who
renders a legally binding decision. This is
A.arbitration.
B.litigation.
C.mediation.
D.negotiation.
Modern Clothing, Inc., and National Denim Corporation use the mark “Made by
Members of the U.S. Textile Workers Union” on the tags of their products to indicate
the participation of the union in the manufacture. Modern and National are not in
business together and do not own this mark. This mark is
A.a certification mark.
B.a collective mark.
C.a service mark.
D.trade dress.
Kris transfers a note, on which Liu is the maker, to Mia, who takes it for value and in
good faith. Mia knows that Kris breached the contract underlying the note, giving Liu a
defense against payment. With respect to this note, Mia is
A.a knowledgeable holder in due course.
B.an ordinary holder.
C.an ordinary holder in due course.
D.an ordinary note taker.
Kennedy Capital Corporation provides other firms with funds to expand operations. If
Kenney strictly complies with existing laws, the firm will
A.fulfill all business ethics obligations.
B.fulfill no business ethics obligations.
C.fulfill some business ethics obligations.
D.not need to fulfill any business ethics obligations.
Garth dies without a will. The distribution of Garth’s property, including his eleven
forested acres near Hope, Arkansas, is prescribed by
A.a court-appointed executor.
B.federal probate statutes.
C.state intestacy laws.
D.Garth’s relatives.
Fact Pattern 26-3
Dhani, an accountant for Eureka, Inc., learns of undisclosed company plans to market a
new laptop. Dhani buys 1,000 shares of Eureka stock. He reveals the company plans to
Fay, who buys 500 shares. Fay tells Geoff, who tells Hu. Both Geoff and Hu buy 100
shares. They know that Fay got her information from Dhani. When Eureka publicly
announces its new laptop, Dhani, Fay, Geoff, and Hu sell their stock for a profit.
Refer to Fact Pattern 26-3. Under the Securities Exchange Act of 1934, Hu is most
likely
A.liable for insider trading.
B.not liable because Hu is only a tippee, not a tipper.
C.not liable because Hu is too far down the chain of disclosure.
D.not liable because Hu traded on the basis of a TRUE fact.