According to the terms of Diego’s will, specific gifts are made, and taxes and other es-
tate expenses and debts are paid. The assets of Diego’s estate that remain are most likely
to be distributed
a. by codicil.
b. holographically.
c. per capita.
d. through a residuary clause.
Commercial Credit & Finance is a limited partnership. Derry, Eleni, and Frey are the
general partners. Derry dies. The partnership can
a. continue only after a distribution of its assets.
b. continue only as a general partnership.
c. continue only if Eleni and Frey consent.
d. not continue because Derry’s death dissolves the firm.
Sybil agrees with Tyrone and other professional athletes to sign contracts with
promoters and others on the athletes’ behalf. Sybil is
a. an agent.
b. an employee.
c. an employer.
d. a principal.
George borrows funds from Hometown Credit Union (HCU) to buy real property.
George signs a written instrument that gives HCU an interest in the property as security
for the debt’s payment. This is
a. a mortgage.
b. an artisan’s lien.
c. a workout agreement.
d. a suretyship arrangement.
Ethel obtains a life insurance policy from Fidelity Insurance Company, naming her
spouse Grover as the beneficiary. Ethel and Grover are divorced. There is no provision
in the policy about divorce. On Ethel’s death, Fidelity must pay
a. no one because Ethel and Grover are divorced.
b. Ethel’s estate and Grover jointly.
c. Grover.
d. Ethel’s estate.
Commerce Bank files a suit against Drake, its former accountant, alleging constructive
fraud. Drake may be held liable
a. if Commerce Bank cannot prove actual fraud.
b. if Drake was grossly negligent in the performance of his duties.
c. only if Drake acted with fraudulent intent.
d. only if Drake impersonated someone who could be liable for fraud.
The Fish House, a seafood restaurant, obtains from Guaranty Insurance Company a
policy that provides if a dispute arises between the parties concerning the settlement of
a claim, the dispute must be submitted to an impartial third party, not a court, for
resolution. This is
a. an antilapse clause.
b. an arbitration clause.
c. an appraisal clause.
d. an incontestability clause.
Erin and Dooley, a married couple, borrow $120,000 from Capital & Credit Bank to
buy a home. When Erin and Dooley divorce, they are unable to make payments on the
mortgage. The market value of the home has declined to less than the balance of the
loan. Capital & Credit agrees to a sale of the property for this amount. This is
a. a prepayment penalty.
b. forbearance.
c. foreclosure.
d. a short sale.
Fact Pattern 15-2B
Belle draws a check on her account in Capital Credit Bank in New York, payable to
Distribution Marketing, Inc., in San Francisco. Distribution Marketing deposits the
check in its account at Equity Bank. Equity Bank deposits the check in the Federal
Reserve Bank of San Francisco, which transfers it to the Federal Reserve Bank of New
York. That Federal Reserve Bank sends the check to Capital Credit.Refer to Fact
Pattern 15-2B. When Equity Bank received the check, it was required to pass it on
a. before midnight of the next banking day.
b. before midnight of the next day, whether or not it was a “banking” day.
c. before noon of the next banking day.
d. within five business days.
Aviators Source Corporation makes and sells aircraft parts. In most states, the minimum
number of directors that must be present before Aviators Source’s board could transact
its business is
a. all of the directors authorized in the articles or bylaws.
b. a majority of the number authorized in the articles or bylaws.
c. any odd number.
d. one.
In reviewing the actions of the U.S. Bureau of Land Management and other federal
agencies, the courts
a. are usually reluctant to review questions of fact.
b. rarely defer to the technical expertise of administrative agencies.
c. often rule on the merits of policy determinations.
d. never defer to an agency’s interpretation of law.
Fact Pattern 12-1B
Thalia signs an instrument unconditionally promising to pay to “Union Bank” $7500
with interest in installments with the final payment due June 1, 2017.
Refer to Fact Pattern 12-1B. With respect to this instrument, Union Bank is
a. the drawee.
b. the indorser.
c. the maker.
d. the payee.
Smart Tablets, Inc., requires all distributors of its products to sell them at a specified
minimum price. This is a violation of antitrust law
a. if the anticompetitive effects outweigh the competitive benefits.
b. if the competitive benefits outweigh the anticompetitive effects.
c. under any circumstances.
d. under no circumstances.
FreezE Yogurt Corporation provides its prospective franchisees with projected earnings
figures based on actual data. FreezE Yogurt must also disclose
a. the number and percentage of franchisees that achieved the figures.
b. hypothetical examples of potential earnings.
c. an answer to the entrepreneur’s question, “How much will I make?”
d. none of the choices.
Lieko wants to put some money in trust for her daughter Mari, but she does not want to
lose full control over the funds in case she may need them in the future. One trust suited
to Lieko’s needs is
a. a constructive trust.
b. a resulting trust.
c. a spendthrift trust.
d. a Totten trust.
Therapeutic Pharmaceutical Company is subject to regulations issued by the Food and
Drug Administration, which is a federal agency. These regulations are part of the body
of
a. administrative law.
b. legislative law.
c. executive law.
d. statutory law.
Meryl’s daughter Nixie dies before Meryl, leaving Nixie’s son Orman. On Meryl’s
death, it is learned that her will gives “to my daughter Nixie my farm near Pratt,
Kansas.” Most likely, the gift of the farm
a. abates.
b. will not lapse.
c. lapses in full.
d. lapses in part.
The payment of Fritz’s debt to Gianini is guaranteed by Fritz’s personal property.
Gianini is
a. a debtor.
b. a secured party.
c. a secured transaction.
d. a security interest.
Band Instruments, Inc., sells seventy-six trombones to Community & School Band
Source, Inc. To avoid liability for most implied warranties, Band Instruments should
state in writing that the trombones are sold
a. as is.
b. by a merchant.
c. in perfect condition.
d. with no known defects.
Holly lends her textbook to Iggy to study over a long weekend. While in the Iggy’s
possession, the textbook is lost. Iggy is most likely liable for the loss because this was a
bailment for
a. both parties’ mutual benefit.
b. Holly’s sole benefit.
c. Iggy’s sole benefit.
d. neither party’s benefit.
A-One Loans, Inc., holds a security interest in kitchen and restaurant equipment owned
by Brunch n” Lunch Bistro. A-One assigns its interest in the equipment to Commercial
Investments Corporation. Commercial Investments becomes the secured party of record
a. automatically.
b. if A-One advises Brunch n” Lunch of the assignment.
c. if Commercial Investments advises Brunch n” Lunch of the assignment.
d. if Commercial Investments files a uniform amendment form.
When processing a check, Superior Bank encodes information, such as the amount of
the check, on the item. Superior thereby warrants to any subsequent bank or payor
a. the item has been returned to the drawer.
b. nothing.
c. the check has been processed manually.
d. the encoded information is correct.
Stubbs buys a Tred-brand bicycle from his brother, Uriah. Uriah agrees to keep the bike
at his house until Stubbs picks it up. During a storm, a tree falls from Victor’s yard onto
Uriah’s garage and destroys the bike. The loss of the bike is suffered by
a. Stubbs.
b. Uriah.
c. Tred.
d. Victor.
Vidal is an employee of Wild Thing Ranch. Vidal learns that Wild Thing is illegally
importing endangered animals to sell as pets. He reports his employer’s illegal activities
but is laid off shortly thereafter and successfully sues Wild Thing for retaliatory
discharge. With respect to the employment-at-will doctrine, this is
a. an example of the doctrine.
b. an exception based on contract theory.
c. an exception based on public policy.
d. an exception based on tort theory.
Everett is an accountant whose clients include Finance & Capital, Inc. Under the
Ultramares rule, if Everett is negligent in his work for Finance & Capital, he could be
liable to Finance & Capital and
a. any third party.
b. no third party.
c. third parties who are foreseen users of the work.
d. third parties who are reasonably foreseeable users of the work.
Nature’s Food Market sells groceries. Metro Snacks & Drug Store sells groceries and
fills prescriptions. The party with the chief responsibility to prevent unsafe food and
drugs from being sold is
a. Nature’s Food Market and Metro Snacks & Drug Store.
b. Metro Snacks & Drug Store only.
c. the Federal Trade Commission.
d. the Food and Drug Administration.
MotorCo, Inc., makes and sells auto parts to retail repair services, vehicle sales outlets,
and consumer parts stores. On one MotorCo box is a label that reads “Contains one
gross (144) sparkplugs, assorted sizes.” This statement is
a. an implied warranty of fitness for a particular purpose.
b. an implied warranty of merchantability.
c. an express warranty.
d. none of the choices.
On an automated teller machine (ATM) belonging to USA Bank, Sven placed a
card-skimming device to pull information from the magnetic strips of users’ debit cards.
The device then transmitted the stolen data to thieves who used it to gain access to, and
empty, the bank accounts of the users, including Megan. Megan learned of the theft the
next day and promptly notified USA. Is Megan entitled to a recredit of her account for
the most of the loss due to the theft? Explain.
Alf rents an apartment. The lease does not specify how long it will last, but it does
specify that Alf must pay rent every month. Alf’s tenancy is
a. a fixed-term tenancy.
b. a periodic tenancy.
c. a tenancy at will.
d. not a tenancy.
On May 1, Garage Prefabricators, Inc., agrees to sell four portable garages to Hiway
Truck Service Center. Five days later, Hiway refuses delivery and cancels the contract.
Garage Prefabricators is entitled to
a. force Hiway to accept the garage.
b. recover any damages from Hiway but not resell the garage.
c. resell the garage and recover any damages from Hiway.
d. resell the garage but not recover any damages from Hiway.
Fact Pattern 6-1B
DIY Fasteners Company decides to consolidate its operations with Evergrip Studs, Inc.,
to form Fit-Rite Bolts & Screws Inc.
Refer to Fact Pattern 6-1B. Evergrip had rights in certain property. After the
consolidation, Fit-Rite acquires the rights
a. automatically.
b. only after completing certain additional statutory procedures.
c. only if Evergrip’s former shareholders expressly approve.
d. only if the acquisition is a specified result of the consolidation.
Most states apply to a foreign limited liability company (an LLC formed in another
state) the law of the state where the LLC was formed.
The homestead exemption interacts with other areas of the law and can sometimes
operate to cancel out a portion of a lien on a debtor’s real property.
The Clean Water Act permits the filling or dredging of wetlands without a permit.
Confusion of fungible goods results in the owners’ loss of their rights in the property.
A corporation’s creditors want to be notified when the firm is dissolved so that they can
make a tender offer.
Shareholders have the power to vote to elect or remove members of the board of
directors.
If the circumstances indicate bad faith, a court can dismiss a debtors’ Chapter 13
petition.
The term fiduciary is at the heart of agency law.
Rush’s Pasta & Pizza employs Sigfried as a delivery driver. Rush’s guarantees that an
order will be delivered within thirty minutes or there is no charge, and insists that its
drivers meet the limit. One night, while making a delivery, Sigfried is caught in a traffic
jam. To deliver the order within the thirty-minute time limit, Sigfried drives onto a
sidewalk and hits Tanya, a pedestrian. Is Rush’s liable to Tanya for her injuries? Is
Sigfried liable to Tanya? Why or why not?
Goods associated with real estate often fall within the scope of Article 2.
On drafts and checks, a drawer’s secondary liability does not arise until the drawer fails
to pay or to accept the instrument.
A guaranty contract between the guarantor and the creditor need not be in writing or
electronically recorded to be enforceable unless the main purpose exception applies.
Most employers with fifty or more employees are required to offer health-insurance
benefits.
An agency agreement can be implied by conduct.
In putting together a repayment plan under Chapter 13, a debtor must apply the means
test to identify the amount of disposable income that will be available to repay
creditors.
A majority of the states treat a partnership as an entity for most purposes.
A signature on a negotiable instrument cannot be made by a device, such as a rubber
stamp or a thumbprint.
The possession of monopoly power is the only element needed to establish the offense
of monopolization.
A horizontal merger occurs when a company at one stage of production acquires a
company at a higher or lower stage of production.