Hayden owes Luther $5000. Hayden will only be able to pay this debt if he is able to
sell his one-year-old Harley motorcycle, valued at $20,000. Hayden writes a check to
Luther that reads, “Payable to the order of Luther the sum of $5000 as soon as my
Harley motorcycle sells for a reasonable amount.” This check is:
a. negotiable, assuming Luther accepts delivery of the check.
b. negotiable if Hayden also includes a date that he expects the motorcycle to sell.
c. non-negotiable because it does not state a definite amount of money.
d. non-negotiable because the check is conditional.
Which of the following statements, if made by a seller who knows the statement to be
untruthful, would not be misrepresentation of material fact resulting in a cause of action
for fraud?
a. “This horse is only six years old.”
b. “There is no better car in the world.”
c. “The tires have less than 5,000 miles on them.”
d. “This car gets 28 miles per gallon. “
The advantage of a corporation over a partnership is:
a. shares are easily transferable to another person.
b. perpetual existence.
c. it is easier to raise funds.
d. All the above.
The proceeds, if any, of a derivative lawsuit go to:
a. the shareholders of the corporation.
b. the shareholders who actually filed the lawsuit.
c. the board of directors.
d. the corporation.
A gun manufacturer in Helena, Montana agrees to sell guns and ammunition to the ATF
in Washington, D.C. The terms of the contract specify that the goods are to be shipped
“FOB, Chicago.” When does the buyer acquire title and risk of loss?
a. When the goods reach Chicago.
b. When the goods are delivered to the carrier in Montana.
c. When the goods are tendered in Washington D.C. by the carrier.
d. When the goods reach Washington D.C.
Sophie issues a promissory note made “payable to the order of Molly.” Molly indorses
the note by signing her name and gives the note to Dana. Which of the following is
correct?
a. Sophie issued a bearer instrument and Molly kept it in bearer form.
b. Sophie issued an order instrument, but Molly changed it to bearer form.
c. Sophie issued an order instrument and Molly kept it in order form.
d. Sophie issued a bearer instrument and Molly changed it to bearer form.
Daniel, his parents, and three brothers own all the stock of their family farm
corporation. This corporation, which is taxed as a corporation, is probably:
a. an S corporation.
b. a C corporation.
c. a closely held corporation.
d. an LLC.
Zebra Toy Company, located in Chicago, sells $500,000 worth of toys to a London,
England, wholesaler. This contract could be governed by:
a. Illinois’s Uniform Commercial Code.
b. English law.
c. the CISG.
d. All the above are correct.
The section of the UCC that governs negotiable instruments is:
a. Article 3.
b. Article 2.
c. Article 6.
d. Article 9.
Which of the following contracts requires a writing under the UCC, Article 2?
a. Jeremy, a full-time student, sold his snow blower to a friend for $450.
b. Jeremy, a full-time student, purchased a used computer from Office Plus for $300.
c. A toy manufacturer contracted to sell dolls valued at $10,000 to a department store.
d. Tobias Department Store contracted to sell Jenny a $400 doll.
The U.S. Attorney General brought a Sherman Act lawsuit against competitors in the
widget market. The Attorney General alleged that these companies agreed to charge $20
for widgets. Which of the following defenses may apply?
a. That the $20 price was fair.
b. That the $20 price was lower than the price before the agreement.
c. That the businesses did not agree to charge $20 for widgets.
d. That the competitors would have gone out of business without the agreement.
Randi, a resident of Oregon, was involved in a auto accident while in Idaho. The other
party lives in Wyoming. Randi wishes to recover the $28,000 cost to repair her car. The
most appropriate court for her to file her lawsuit is in a:
a. federal court in Idaho.
b. state court in Idaho.
c. federal court in Wyoming.
d. federal court in Oregon.
Approximately how much merchandise is stolen from United States retail stores every
year?
a. $10 million
b. $50 million
c. $10 billion
d. $25 billion
MagNet is a U.S. company based in Utah. It is negotiating to sell $4 million worth of
computer goods to a French company, L’la. L’la is insisting that the contract be
governed by the CISG. What are some of the primary differences between the UCC and
the CISG?
Under the Uniform Anatomical Gift Act:
a. an individual may indicate the desire to be an organ donor by putting a provision in
his will. The provision will take effect after probate of the will.
b. the willingness to be an organ donor may be indicated by signing an organ donation
card in the presence of one disinterested witness.
c. family members of a decedent have no right to make a gift of the decedents organs if
the decedent did not make an affirmative indication of the desire to be a donor during
her lifetime.
d. an effective donation may be made by an individual in a will or on a witnessed
organ-donation card or by family members after the persons death as long as the person
did not indicate a desire not to be a donor.
Deborah purchased a boat from Sun N Surf Marine. She later learned that the salesman
had made misrepresentations to induce her to make the purchase. Under UCC Section
2-721, Deborah can rescind the contract:
a. only if the misrepresentation was fraudulent.
b. and sue for damages whether the misrepresentation was fraudulent or innocent.
c. but cannot sue for damages if the misrepresentation was innocent.
d. but must forego all other remedies.
John purchased $600 worth of clothes from Clothing Mart. He paid for the clothes with
a credit card. When he received his statement, he sent the credit card company a check
for $600. The credit card company mistakenly recorded his payment as $60. When John
received his next statement, he noticed the $540 error and contacted the credit card
company.
A few days later when he attempted to use his card to buy gasoline, he was told by the
cashier that the card had been canceled and she was instructed to take his card. John
was shocked, embarrassed, and angry. When he contacted the credit card company, it
pointed out a provision in his initial contract for the card that stated the company could
revoke his card privileges at any time with or without cause.
Such a provision within the credit card contract is:
a. unconscionable.
b. an illegal contract of adhesion.
c. not binding, as a person cannot waive the statutory rights granted to him by federal
credit card legislation.
d. valid unless state legislation prohibits such clauses.
Lacy sets her textbook under her chair in her business law class and then forgets to take
it with her when she leaves the classroom. A janitor later discovers the textbook and
gives it to the Dean of the Business College. In this situation:
a. the college is a constructive bailee, obligated to return the textbook to Lacy, and until
it does, it is liable for harm to the property.
b. the college is a bailee by agreement because holding items in a lost and found box is
generally part of the college-student agreement when the student enrolls for classes.
c. the college is responsible for the discovered textbook because in this situation, the
college is subject to implied warranties unless the college has disclaimed such
warranties in the student handbook.
d. this is a bailment for the sole benefit of the bailee.
What is meant by the term “piercing the corporate veil”?
a. Corporate directors and/or officers may be held personally liable to a person damaged
by an act of the corporation.
b. Corporate shareholders may be held personally liable to a person damaged by an act
of the corporation.
c. Both of the above.
d. None of the above.
The most accurate statement regarding economic duress is:
a. it is never grounds for rescission.
b. it is always grounds for rescission.
c. it is a UCC concept only.
d. it may be grounds for rescission.
David has worked as a CPA for Accountants R Us for about eight months. When his
wife had a baby, he requested to take some time off. He believes he is allowed to do so
pursuant to the Family and Medical Leave Act.
Which of the following statements is correct?
a. It is much easier for a government employer to test an employee for drugs or alcohol
than it is for a private employer.
b. Generally speaking, in most states, it is easier for a private employer than the
government to test an employee for drugs or alcohol.
c. Neither may test for drugs or alcohol.
d. Both may test for drugs or alcohol without restriction.
Check kiting is defined as:
a. indorsing a check while knowing that the check is a stolen check.
b. carelessly paying an unauthorized instrument.
c. a scheme of overdrawing account A by depositing a check in account B, then
overdrawing account B to cover the insufficient funds in account A.
d. issuing an instrument to an impostor who negotiates the instrument to a bank that is
unaware of the fraud.
An agency will be terminated in all but which one of the following situations?
a. The principal and agent agree on an agency relationship to sell a boat, and the boat is
sold.
b. A travel agent files for individual bankruptcy under Chapter 13.
c. The agent violates his duty of loyalty.
d. An electrician, an agent of a contractor, has her license revoked.
Jeff was a subcontractor, bidding on a contract for ACE Corp., the general contractor.
When adding up the total of materials and labor, Jeff’s secretary mistakenly moved the
decimal point one place, ending up with a bid of $3500 rather than $35,000. ACE Corp.
accepted Jeff’s bid, mostly because all the other bids were over $30,000. When Jeff
learned of the mistake, he tells ACE Corp. that he cannot do the job for $3500. If ACE
Corp. sues to enforce this contract, what is the most likely result?
a. The contract is enforceable, since there was an offer, acceptance, and consideration.
b. This is a bilateral mistake, so the contract can be rescinded by either party.
c. This is a unilateral mistake, so the contract cannot be rescinded by Jeff.
d. This is a unilateral mistake, but one where ACE Corp. knew that a mistake had been
made. Jeff should be able to rescind the contract.
What is a major difference between a United States lawsuit versus a French lawsuit?
a. In a French civil lawsuit, there is usually no right to a jury trial.
b. The French legal system does not engage in extensive discovery procedures
commonly used in the United States.
c. In a French lawsuit, the rules of evidence are more flexible.
d. All of the above are correct.
Bugs R Us, an organic gardening merchant, sells and delivers 100 units of live lady
bugs to eat the bad bugs on the buyer’s award-winning vegetables. The buyer ordered
the lady bugs without consultation with Bugs R Us for suggestions. Although the buyer
correctly knew that lady bugs were the appropriate bugs for eating bad bugs on
vegetables, when the lady bugs were delivered, they refused to eat the bad bugs. The
merchant has breached which warranty?
a. Implied breach of fitness for a particular purpose.
b. Implied breach of merchantability.
c. No warranty, as you cant control the behavior of insects.
d. Implied warranty against infringement.
Thompson raised 80 acres of corn, most of which he used to feed his own cattle. He
locally sold what he did not use. Based on the Supreme Courts ruling in Wickard v.
Filburn:
a. Congress has no authority over Thompsons activity based on the negative aspect of
the Commerce Clause.
b. Congress may regulate Thompsons farming activity because it has a substantial
economic effect on interstate commerce.
c. only Thompsons local government can regulate his farming activity.
d. only Thompsons state and local governments can regulate his farming activity.
Which of the following would not be personally liable for the debts of the business?
a. A sole proprietor.
b. A partner in a general partnership.
c. A general partner in a limited liability limited partnership.
d. A general partner in a limited partnership.
Great State Bank took a security interest in Gresham, Inc.’s meat processing equipment.
Gresham defaulted on the loan. Which statement is correct?
a. Great State Bank may take possession of the collateral.
b. Great State Bank may ignore its rights in the collateral and sue Gresham for the
money owed.
c. Both a and b are courses of action that Great State Bank may follow.
d. Neither a nor b are courses of action that Great State Bank may follow.
AVCO used a famous registered trademark of BNC, Inc. in a manner that reduced its
value. This is a violation of the:
a. Federal Fair Use Act.
b. Federal Trademark Dilution Act.
c. Federal Trade Protection Act.
d. Cleveland/Myer Act.
Derek and Abyan were discussing business over lunch when they agreed on the sale of
a five-acre parcel of land. Since neither of them had any paper with them, Derek wrote
the following on a napkin: “Abyan agrees to purchase from Derek a 5-acre parcel
located at the local address of 123 105th Street, St. Joseph, Minnesota, U.S.A. for the
price of $4,500 per acre. Transfer of title, payment, and possession to take place on May
1, 2011.” Abyan signed the napkin. On May 1, 2011, Derek was ready to close the deal
and transfer title but Abyan refused to pay the purchase price. If Derek sues Abyan for
the price of the land, the most likely result will be:
a. Abyan will win because the writing is not sufficient under the statute of frauds.
b. Derek will win because the writing is sufficient under the statute of frauds.
c. Abyan will win because Derek did not sign the writing.
d. Derek will win because the statute of frauds does not apply to this situation.
M & E sold a lathe “AS IS” to Brenna. M & E has disclaimed:
a. strict liability.
b. liability for negligence.
c. all implied warranties.
d. all of the above.
An indorser who writes “without recourse” above her signature on a negotiable
instrument is not liable for payment.
McCann Construction purchased a poured concrete form from Advance Concrete
Forms, Inc. McCann purchased the concrete form by placing a phone call to Advance in
Madison, Wisconsin. Advance delivered the concrete form with an invoice stating the
terms of the sale required payment within 30 days and a 1 1/2 % interest per month
finance charge would be charged on accounts over 30 days. When McCann failed to
pay the invoice on time, interest was charged according to this rate. Later, McCann
refused to pay the accumulated interest charge, claiming there was not a meeting of the
minds regarding the finance charge in any conversation prior to the sale. The trial court
concluded that the finance charge was in fact an additional term added by Advance
when it accepted McCann’s purchase order. Discuss Uniform Commercial Code Section
2-207 in general and with regard to this situation. Does McCann owe the interest
accrued?
If a minor can cancel a contract, it can be done at any time during minority or within a
reasonable time after reaching majority.
Courts are sympathetic to managers acting in the best interests of the corporation, even
when the acts are illegal.
In Anglo-Saxon society, men were put into groups of ten, known as a “tithing and were
individually held responsible for any injury caused by any member of the group. This is
the forerunner of the idea of business partnerships.
Crops are considered identified when they are planted.
Tom rented an apartment from Margaret on a month-to-month basis, with rent due on
the first of the month. This type of tenancy is known as a “tenancy at will.”
Contract rescission can sometimes be based upon a unilateral mistake.
To verify transactions, accountants use two mirror-image processes: vouching and
tracing. Tracing is a process where the accountant begins with an item of original data
and checks out all the activity that has occurred from beginning to end to make sure it
has been properly recorded throughout the bookkeeping process.
Brad was having financial difficulties and thought bankruptcy might be in his future. He
transferred his sports car to his brother with the agreement that if he didnt file for
bankruptcy within the next 18 months, his brother would return the car to him. Brad did
file for bankruptcy in ten months. The bankruptcy trustee can bring the car back into
Brads estate for the purpose of providing assets for Brads creditors.
Franchise fees can be costly, but they are usually payable over a number of years, after
profits are generated from the business.
Corporate responses to takeover attempts are largely governed by federal law.
The UCC has abolished the common law requirement of consideration in all contracts
involving the sale of goods.
The cost-benefit trade-off is particularly complex in environmental issues because those
who pay the cost often are not the ones who receive the benefit.
A rule that establishes maximum length of work shifts for air traffic controllers is an
example of an administrative regulation.
Lauren and Hayden own residential houses side by side. Between the houses, is one
driveway which provides mutual access to both back yards. Lauren actually owns the
property where the driveway sits. However, Hayden has the right to use the driveway to
access his back yard. What type of easement does this situation describe, an easement
appurtenant or an easement in gross? What are the differences between the two types of
easements?
Cooperatives may be either incorporated or unincorporated businesses.
Rudolph overhears Macy’s plans to go skydiving over spring break. Not really knowing
Macy, but figuring it’s worth a chance, Rudolph rushes out and buys an insurance policy
for $100,000 on Macy’s life. Macy does in fact meet her demise jumping out of the
airplane. Rudolph can collect the $100,000.
Banner enters into a contract with Sylvia to buy her house for $150,000. Sylvia decides
later not to sell because she is so emotionally attached to the house. Banner insists that
he is entitled to the house. Banner can successfully sue for specific performance.