Assume you are the creditor in each of the following situations. Identify the kind of
security agreement that is involved in each transaction and explain how you would
perfect that agreement.
a. You are the creditor (Evergromby Bank), and you lend Brisco Baines $5,000 for a
sound system.
b. National Bank loans Donna $5,000 to purchase a computer for use in her store office.
c. Garth needs cash for gambling debts. He brings in his gold ring to secure a $500
loan.
Which of the following is a warranty of the transferor?
a. Transferor has no knowledge of any insolvency proceedings.
b. Transferor warrants that all signatures are authentic and authorized.
c. Transferor warrants that he is entitled to enforce the instrument.
d. All of the above are warranties of the transferor.
The 2010 guidelines regarding horizontal mergers:
a. use a single methodology for merger analysis.
b. are intended to identify harmful mergers while avoiding unnecessary interference
with mergers that will not be likely to affect competition.
c. explain that market definition is a necessary starting point of merger analysis.
d. reject use of the Herfindahl-Hirschman Index in quantifying market concentration.
e. All of the above.
Les, a teenager, has the permission of Harold to walk across his yard on the way to
school. If Les brings twenty of his friends across the yard, and they stop to play ball:
a. Les is not guilty of trespass to real property, because he had Harold’s permission to
cross the yard.
b. Les’s friends are not guilty of trespass to real property, because they were with Les.
c. Les is guilty of trespass to real property, because he walked across the yard.
d. Les and his friends are guilty of trespass to real property, because they played ball in
Harold’s yard.
Which of the following is true with respect to a defective formation of a limited
partnership?
a. The formation is defective if the certificate filed does not substantially meet statutory
requirements.
b. It jeopardizes the limited liability of a limited partner.
c. The 1985 RULPA reduces the risk of a limited partner for defective formation.
d. All of the above are correct.
Ratification:
a. can only occur after the third person withdraws from the transaction and gives notice
of such withdrawal.
b. can be effected by a disclosed or an undisclosed principal according to the Second
Restatement.
c. relieves the agent of any liability she may have to the third party by reason of her
having induced the third party to enter the contract without the principal’s authority.
d. Both (a) and (b) are correct.
SEC rules concerning fraud in securities transactions apply to:
a. the issuance or sale of all securities, even those exempted by the 1933 Act.
b. only securities registered under the 1934 Act.
c. only securities registered under the 1933 Act.
d. only publicly traded securities.
Busby contracts to build a house for Connell. Busby finishes approximately half of the
house and quits. Connell files suit against Busby. Which remedy is not available to her?
a. Compensatory damages
b. Specific performance
c. Special damages
d. Incidental damages
Which of the following is NOT essential to a valid deed?
a. Grantor
b. Grantee
c. Delivery
d. Recording
For how long is a written stop payment order valid?
a. One month
b. Six weeks
c. Six months
d. One year
Lee has been declared incompetent by the court and is under the care of his sister.
Without his sister’s knowledge, Lee rents the 30,000-seat civic center for his birthday
party. Lee’s contract to rent the civic center is best described as a:
a. valid contract.
b. voidable contract.
c. void contract.
d. quasi contract.
The Securities Act of 1933 has two basic objectives, one of which is to:
a. extend protection to investors trading in securities that are already issued and
outstanding.
b. grant the SEC power to impose administrative, civil penalties up to $500,000.
c. regulate disclosure requirements on publicly held corporations.
d. prohibit misrepresentation, deceit, and other fraudulent acts and practices in the sale
of securities generally, whether or not they are required to be registered.
Which of the following is not true of promoters of a corporation?
a. They arrange for capital and financing to start a corporation.
b. They assemble the necessary assets to start a corporation.
c. They attend to the actual legal formation of a corporation.
d. They continue to solicit capital whenever needed after incorporation.
Under the UCC statute of frauds, which of the following terms must be included in a
writing in order to satisfy the writing requirement?
a. The price of the goods
b. The quantity of the goods
c. The signatures and names of the buyer and the seller
d. The time and place for delivery
The Public Company Accounting Oversight Board can impose sanctions in its
disciplinary proceedings, including:
a. revocation of an accounting firm’s registration, only on a temporary basis.
b. a permanent ban on a person’s associating with any registered firm.
c. monetary penalties of $1 million for natural persons.
d. monetary penalties of no more than $10 million for an accounting firm.
e. All of the above.
Edna orders a set of china from Northwestern Catalog. Northwestern sends the dishes
by UPS. The contract does not specify when payment is to be made. Edna must pay
when:
a. she orders the goods from Northwestern.
b. she gets the goods from UPS.
c. Northwestern takes the goods to UPS.
d. she receives notification that the goods have been shipped..
Which of the following is correct regarding the characteristics of a corporation?
a. A corporation is considered a person within the meaning of the Fourteenth
Amendment’s equal protection clause.
b. The Fifth Amendment provisions against self-incrimination protect a corporation.
c. A corporation is protected by the Fourth Amendment’s provision against unreasonable
searches and seizures.
d. Both (a) and (c)
An indorsement that is not in the chain of title is assumed to be a(n):
a. anomalous indorsement.
b. blank indorsement.
c. special indorsement.
d. indorsement in trust.
Juan, a partner in the Bell Partnership, in violation of a specific term in the partnership
agreement restricting the extension of credit of more than $5,000 without the written
consent of all the partners, extends credit of $6,500 to Brittany. Juan has violated the
duty of:
a. obedience, and he can be held personally liable to his partners for any unpaid portion
of the $6,500.
b. obedience, but he cannot be held personally liable for the unpaid portion of the debt.
c. care because he owed the partnership a duty to act in good faith.
d. loyalty, and he is therefore personally liable to the partnership for $6,500.
Maureen agrees to sell her interest in the farm to Joe. Maureen and her husband, Bill,
hold the property as tenants by the entireties. What consequence?
a. There is no sale.
b. The sale severs the tenancy and creates a tenancy in common.
c. The sale transfers one-half interest in land.
d. The sale results in a partition of the land.
Juan and Barbara form a limited liability company to conduct a particular business
activity for profit. Which of the following is not true?
a. The articles of organization must be filed in a designated state office.
b. No particular form of organization is required.
c. The company name must include the words “limited liability company” or “limited
company” or the abbreviation “LLC” or “LC.”
d. The contribution of a member may be a promissory note.
In a state that adopts the lien theory regarding mortgages, the borrower would have the
right to:
a. burn down the barn.
b. live on the land after default.
c. possess the land after foreclosure.
d. refuse to discharge a prior lien.
The duty of ____ requires the agent to act in the principal’s affairs only as authorized by
the principal and to obey all reasonable instructions and directions given by the
principal.
a. accounting
b. obedience
c. fiduciary
d. diligence
Which of the following is unconditionally liable on a draft or check as issued?
a. A drawer
b. A drawee
c. An indorser
d. No one
Taylor agrees to sell Pedro goods for $2,000. The value of the goods accepted is $1,500.
If the goods had been as warranted, their value would have been $2,600. What are the
buyer’s damages for breach of warranty?
a. $500
b. $600
c. $1,100
d. Damages cannot be determined in this case because they are not calculable with
mathematical precision.
Which of the following statements is true?
a. The International Court of Justice renders binding decisions and advisory opinions to
the many nations that submit their disputes to it.
b. The International Court of Justice is the judiciary branch of the United Nations, and
its judges are elected by a majority of both the U.N. General Assembly and the U.N.
Security Council.
c. The International Court of Justice was formed as the judiciary branch of the EC.
d. The International Court of Justice is very useful, in part because nations as well as
private individuals and corporations may be parties to an action before the court.
The court’s holding in Ultramares Corporation v. Touche:
a. emancipates accountants from the consequences of fraud.
b. relieves accountants from liability for reckless misstatement.
c. establishes that an accountant’s liability for negligence is limited to cases in which
there is privity of contract.
d. shows no concern for exposure of accountants to liability in an indeterminate amount
for an indeterminate time to an indeterminate class.
Which of the following is a special unqualified indorsement?
a. Pay to the order of John Doe, without recourse
b. For deposit only, John Jones
c. Without recourse, Sandra Adams
d. Pay to the order of April Smith
How is ‘sovereign immunity” interpreted under U.S. law today?
a. It gives absolute immunity to a foreign nation from all U.S. laws.
b. It gives immunity to foreign governments for commercial activity carried on in the
U.S. by the foreign government.
c. It exempts the public acts of a foreign government, such as those involving
diplomatic activity, from all U.S. laws.
d. All of the above.
Lynn, a tailor, agrees to sew a pair of drapes for Zach’s living room. Zach promises to
pay Lynn $300. Lynn completes the drapes using material selected by Zach, but Zach is
not satisfied and refuses to pay for them. In this case:
a. whether Zach will have to pay for the drapes depends upon whether as a reasonable
man he ought to be satisfied.
b. the standard applied here is a subjective standard of satisfaction.
c. the doctrine of frustration of purpose applies.
d. the condition of satisfaction is an express condition.
Which of the following could give rise to an accountant’s criminal liability?
a. Falsely completing a tax return
b. Tampering with accounting records
c. Advising a client to falsely complete his own tax return
d. All of the above could subject an accountant to criminal liability
A ____ bond is provided on behalf of a party to a proceeding to cover losses caused by
delay or deprivation of the use of property resulting from the institution of the action.
a. judicial
b. fidelity
c. performance
d. bail
Dale falsely tells Glenna that he is a partner in Huntsman Appraisers. Glenna casually
repeats this information to Kash, who sells office equipment on credit to Huntsman in
reliance on the statement. Kash cannot hold Dale liable because he was not justified in
relying on the representation made privately by Dale to Glenna, which Dale did not
consent to have repeated.
An intended donee beneficiary may enforce the contract only against the promisor.
If Carrie, age 14, contracted to buy a fur coat by mail, the coat manufacturer would not
have to send it since the contract was void.
A limited liability company (LLC) provides limited liability to all of its owners and
permits all of its owners to participate in management.
Once a corporation becomes publicly held, it cannot return to being private.
Replevin is an action at law to recover specific goods in the possession of the defendant
which are being unlawfully withheld from the plaintiff.
An offer is an indefinite proposal made by one person to another.
Computer crimes are so commonplace that an estimated two out of every three copies
of software are illegally obtained.
The UCC “risk of loss” rules depend on transfer of title.
A security agreement may include only presently owned inventory, accounts, or
equipment of the debtor, not property that is subsequently acquired.
An illusory promise has the form of a promise but imposes no real obligation.
A partial assignment is a transfer of a portion of the contractual rights to one or more
assignees.
The process of liquidation of a partnership is also known as “winding up.”
Even if a party has the power to avoid a contract for lack of capacity, duress, or undue
influence, the party will lose that power by affirming the contract.
If negligence of the plaintiff and negligence of the defendant proximately caused the
injury and damage sustained by the plaintiff, the plaintiff can recover some damages in
those states where contributory negligence is still recognized.
If an offeror makes an offer to an offeree by letter and it is lost in the mail, no legally
sufficient offer has been made.
An accommodation maker is not liable on a note since he only agreed to sign as a favor
to the maker.
Privacy protection for employees is limited to remedies available in tort law.