An individual who desires to make provisions that will be effective only on his or her
death is said to have:
a. probationary intent.
b. a prejudicial interest.
c. testamentary intent.
d. attestation intent.
Federal regulation of the sale of securities is based on the:
a. Securities Act of 1933 and the Securities Exchange Act of 1934.
b. Securities Act of 1933 and the Federal Trade Act of 1936.
c. Federal Trade Act of 1936 and the Blue Sky Act of 1933.
d. Fair Stock Act of 1932 and the Investment Securities Act of 1934.
Isidro issued a negotiable promissory note to his attorney in return for the attorney’s
promise to perform legal services. The attorney never rendered the legal services but
quickly negotiated the note to Anna, a holder in due course. Anna and Mark were
involved in business negotiations and Anna offered to purchase a car from Mark. She
offered as part payment for the car the note issued by Isidro. By coincidence, Mark
knew both Isidro and the attorney and the facts concerning the note and the
unperformed legal services. Despite this, Mark accepted a negotiation of the note from
Anna. Isidro refused to pay the note and Mark eventually sued Isidro to collect. What is
the probable outcome?
If a seller elects to resell the goods remaining in the seller’s possession after the buyer
breaks the contract, the seller need not give:
a. any notice of the sale.
b. notice to the original buyer.
c. notice to the breaching buyer.
d. notice to the original buyer if the goods are perishable.
The FTC franchise disclosure statement must contain:
a. the business experience of the franchisor and its brokers.
b. any current and past litigation against the franchisor.
c. the grounds for termination of the franchise.
d. all of the above.
Anyone promoting the sale of a real estate development that is divided into fifty (50) or
more parcels of less than five (5) acres each must file a(n) __________ statement with
the secretary of Housing and Urban Development.
a. developmental impact
b. development
c. environmental impact
d. destructive impact
A __________ is a condition that must occur before a party to a contract has an
obligation to perform under a contract.
a. condition precedent
b. condition subsequent
c. concurrent condition
d. none of the above
Which of the following is beyond the enforcement power of an agency?
a. requiring proof of compliance with agency regulations
b. issuing a cease-and-desist order
c. convicting of criminal violations
d. imposing civil penalties
Substantive law:
a. specifies the steps to follow to enforce legal rights.
b. concerns equitable relief only.
c. creates, defines, and regulates rights and duties.
d. draws solely on English legal principles.
Which of the following is not a universal defense available against all holders?
a. fraud as to the nature or essential terms of the instrument
b. forgery or lack of authority
c. fraud in the inducement
d. duress depriving control
All of the following statements about express warranties are true except:
a. It is immaterial whether the express warranty is made at the time of the sale or after
the sale.
b. Separate consideration is required to legitimize a warranty made at the time of the
sale.
c. A warranty made after a sale may be considered a modification of the sales contract.
d. If a warranty made after a sale is a modification of the sales contract, no additional
consideration is required.
In general, a mortgagor is under a duty to:
a. make improvements to the mortgaged property.
b. insure the property.
c. pay taxes and assessments on the property.
d. reimburse the mortgagee for expenditures made by the mortgagee for valuable and
lasting improvements.
The right to privacy applies to protect you from unreasonable searches:
a. to you personally.
b. to your home.
c. to your business.
d. all of the above.
If an involuntary bankruptcy petition is dismissed other than by consent of all
petitioning creditors and the debtor, the court may award which of the following to the
debtor?
a. costs
b. reasonable attorney fees
c. damages
d. all of the above
Law consists of:
a. principles that govern conduct.
b. mere guidelines.
c. arbitrary rules.
d. none of the above.
Intellectual property rights, even in cyberspace, are protected for the sake of:
a. government regulation.
b. the integrity of contract law.
c. the wealthy.
d. innovation.
The spread of limited liability corporation statutes resulted from:
a. a United States Supreme Court decision.
b. an Internal Revenue Service ruling.
c. a Wyoming Supreme Court decision.
d. a Securities and Exchange Commission ruling.
Which of the following represents a duty owed by a landowner to a trespasser?
a. the duty to refrain from causing intentional harm once the presence of the trespasser
is known
b. the duty to warn the trespasser of dangers existing on the premises
c. the duty to make the premises safe to protect the trespasser from harm
d. none of the above, since a landowner has no legal duty to a trespasser
Which of the following agreements represent(s) an unreasonable restraint of trade?
a. a combination to create a monopoly
b. an agreement to obtain a “corner” on a market
c. an association of merchants to increase prices
d. all of the above
In a guaranty contract, the obligor is called a:
a. surety.
b. principal.
c. guarantor.
d. creditor.
An instrument may be negotiated even though:
a. it has been dishonored.
b. it is overdue.
c. it is demand paper that has been outstanding for more than a reasonable period of
time.
d. all of the above.
Under recent statutes, the articles of incorporation must contain all of the following
except the:
a. name of the corporation.
b. name and address of each incorporator.
c. purpose for which the corporation is organized.
d. number of shares the corporation is authorized to issue.
Which of the following is an incorrect statement concerning trusts?
a. The trustee has legal title to the corpus.
b. The beneficiary has equitable title to or beneficial interest in the corpus.
c. Generally, a beneficiary may not transfer his or her interest in the trust.
d. A trustee cannot delegate the performance of personal duties.
If a contract is ambiguous regarding whether the agent has signed in a representative or
an individual capacity:
a. there is a presumption that the agent signed in a representative capacity.
b. there is a presumption that the agent signed in an individual capacity.
c. the agent and the principal will both be liable on the contract.
d. parol evidence is admissible to establish the character in which the agent was acting.
Concerning administrative investigations:
a. agencies are severely limited by the constitutional protection against unreasonable
searches and seizures.
b. a search warrant is always required to search premises.
c. papers and records generally may be subpoenaed by an agency.
d. a person does not have constitutional protection against unreasonable searches and
seizures.
An express promise by a landlord to not disturb the tenant’s possession of the land is
known as the covenant of:
a. domesticity.
b. tranquil possession.
c. quiet enjoyment.
d. unfettered use.
Congress can regulate which of the following activities under the concept of interstate
commerce?
a. manufacturing
b. the stock exchanges
c. mining
d. all of the above
In order to protect themselves from disclosure of proprietary or confidential
information, businesses may:
a. implement security measures to prevent access by outsiders.
b. enforce contractual nondisclosure agreements against departing employees.
c. limit disclosure of such information to those with a need to know.
d. all of the above.
A negotiable promissory note was issued by Gold. It was properly issued in all ways.
Nevertheless, the payee managed to alter the note and raise the amount from $500 to
$5,000. A holder in due course presented the note for payment to Gold who discovered
the alteration. In this case:
a. Gold is liable for $500 only.
b. Gold is liable for the full $5,000.
c. Gold has no liability on the altered note.
d. Gold is liable for $2,500.
A sale of goods or services for $25 or more made to a buyer at home may be set aside
within __________ days.
a. three (3) business
b. three (3) calendar
c. five (5) business
d. five (5) calendar
Limited liability companies are formed without filing formal articles of organization
with the secretary of state; in this sense, limited liability companies are easier to create
than corporations.
If a plaintiff’s loss involves damaged property, it is described as liquidated damages.
The coverage of the Personal Auto Policy (PAP) is limited to claims arising from the
“use and operation” of an automobile.
Once a mark is registered in accordance with federal law, the holder of the mark has the
exclusive right to use the mark in perpetuity.
If an instrument is negotiable, it is governed by Article 2 of the UCC.
“Preemption” means that the federal regulatory scheme is controlling.
King Electronics, a retailer of video equipment, sold two DVRs to Larson, a
psychologist, for use in her professional practice, which was located in her home. The
sale to Larson was made on credit. King retained a security interest in the DVRs sold
but did not file a financing statement. Mills, another creditor of Larson, has asserted
that his lien on the two DVRs is superior to King’s security interest. Is he right? As you
decide, remember to classify the DVRs as collateral in the hands of King and Larson.
In a contract for FOB place of shipment, the risk of loss passes to the buyer at the same
time as title does: when the goods are delivered to the carrier, that is, at the time and
place of shipment.
Under the “known-user” rule, it is sufficient if a user is a member of a known class,
even if the identity of the particular user is not known to the accountant.
Art and Mary were good friends who went through high school and college together.
Art eventually became a college philosophy professor and Mary went into the business
world. Mary became a senior vice-president of a management firm and learned many of
the company’s trade secrets. Both Art and Mary signed one-year contracts with their
respective employers. The contracts contained clauses that provided that they would not
compete against their former employers for a period of one year after leaving their jobs.
The area covered by the restrictions for both Art and Mary was a radius of 500 miles
from the place of employment.
Both Art and Mary resigned and within two months took other jobs. Art went to work
for another college 50 miles away, teaching philosophy. Mary took a job 75 miles from
her former employment. Her new position was similar to her former job. The former
employers sued to enforce the anticompetitive covenants in the original contracts.
Discuss the probable outcome of the lawsuits.
A limited partner may receive a share of the profits.
You plan to enter the export market with a new product that you have just developed.
You feel that the product has great promise, but you are confused over whether you are
required to obtain an export license. Further, your brother-in-law says that he knows
someone in the Japanese government who could greatly assist you in your endeavors
for a very modest fee. Discuss this situation.
Sid worked as the agent of Rosemary. Rosemary was in the business of buying antique
clocks and selling them to the public. She became so successful at this that people
began to become reluctant to sell to her, feeling that if she was buying the clock, it
probably could be sold for more. Rosemary instructed Sid to purchase several clocks
but not to reveal that the purchases were being made on her behalf. Sid contracted to
buy several clocks and gave his own check as down payment to keep Rosemary’s
identity concealed. Although Rosemary had authorized the contracts, she reneged on the
contracts. Sid thereupon told the seller what had happened and stopped payment on the
down payment check. The seller of the clocks sued Rosemary on the bounced check
and for breach of contract. Sid was sued on the same causes of action. Decide all cases.
A landlord is ordinarily not liable to third persons injured because of the condition (not
existing at the time the lease was created) of any part of the rented premises that is in
the possession of a tenant by virtue of a lease.
A provision giving a corporation the right to purchase a shareholder’s shares on the
death of the shareholder is invalid.