The president of Hi-Glow Cosmetics sends his top chemist to Hi-Glow’s competitor’s
labs to steal its formula for shiny lipstick. The chemist gets caught and is sent to jail.
Can Hi-Glow be found to be criminally liable?
a. Yes, under the doctrine of ultra vires.
b. Yes, since the president authorized the crime.
c. No, because a corporation cannot go to jail.
d. Yes, under the doctrine ofultra vires and alsosince the president authorized the crime.
A general partnership is formed without any formality and no documents need be filed
with the state.
a. True
b. False
Al, a cross-country bus driver, kisses Susie, a passenger, while she sleeps. Al could be
sued for battery.
a. True
b. False
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. True
b. False
The harshness of the contributory negligence doctrine has been mitigated by:
a. the last clear chance rule.
b. comparative negligence.
c. assumption of risk.
d. both comparative negligence and the last clear change rule.
A dissenting shareholder who complies with all applicable requirements is entitled to an
appraisal remedy.
a. True
b. False
A trustee in bankruptcy may avoid which of the following?
a. Fraudulent transfers.
b. Voidable preferences.
c. Automatic stays.
d. Both fraudulent transfers and voidable preferences.
A contract in which a party (the promisor) promises to render a certain performance not
to the other party (the promisee) but to a third person (the beneficiary) is called a
third-party beneficiary contract.
a. True
b. False
Ready Equipment, Inc. authorized and specified in its charter 5,000 shares of stock to
be issued. If it later needs to issue stock in excess of 5,000 shares, the charter will have
to be amended.
a. True
b. False
In international business transactions, a documentary letter of credit:
a. is a method of payment for goods that reduces the seller’s risk from the possibility
that the goods will be shipped, but not paid for.
b. is a type of bill of lading.
c. is a guarantee by the seller’s bank that it will pay the price of the exported goods if
the seller breaches the contract.
d. All of these.
A contract that does not satisfy the writing requirement of the Article 2 statute of frauds,
but which is otherwise valid, is enforceable in which of the following situations?
a. Where the goods have been delivered and accepted.
b. Where payment has been accepted.
c. Where the goods have been specially manufactured and are not suitable for resale in
the ordinary course of business.
d. All of these are situations where the contract would be enforceable.
Because documents affecting ownership of property are recorded, a chronological
record of transactions concerning the property can be obtained by a(n):
a. warranty deed.
b. title search.
c. attorney’s opinion.
d. assumption of a mortgage.
Which of the following would violate the Taft-Hartley Act?
a. Union officials boycotting meetings with Tel Ko Computer Corp. representatives.
b. Union officials meeting on Tel Ko Computer Corporation’s property.
c. Union members striking to gain more fringe benefits.
d. Union members wearing membership badges.
Sue has a Bloomingdale’s credit card. On Monday she charged a $47.90 sweater and
then lost the card. Myra found it Monday and charged a $100 scarf and $400 purse. Sue
missed her card at 8 a.m. Tuesday and called the store. Myra then charged a coat for
$4,000. Sue’s bill was $4,547.90. Sue owes:
a. $47.90.
b. $547.90.
c. $97.90.
d. $4,547.90.
The Robinson-Patman Act adds to the Clayton Act merger provisions.
a. True
b. False
The management of Corporation A forms Corporation B. Corporation B issues bonds to
institutional investors to raise cash, with which it purchases the assets or stock of
Corporation A. The assets of Corporation A are used as security for the bonds issued by
Corporation B. This action by management is best described as a:
a. leveraged buyout.
b. cash-out combination.
c. short-form merger.
d. compulsory share exchange.
The doctrine of subordination of claims might result in two unsecured creditors getting
unequal proportions of their debts paid.
a. True
b. False
Miller and Baker formed a partnership and purchased a cycle shop. The name of the
new business cannot be “Miller Cycle Shop” because the name of the partnership must
include the names of both partners if it includes the name of one partner.
a. True
b. False
Treasury shares are shares that have been authorized but have not yet been issued.
a. True
b. False
Janet is called for jury duty and is selected for possible service on a jury. However,
when the defendant’s attorney sees her, he notices that she is wearing a green dress.
Both the defendant and the defendant’s attorney hate green dresses, so they strike her
name from the jury. This is:
a. a valid challenge for cause.
b. a valid peremptory challenge.
c. not a valid challenge.
d. a valid challenge for cause, but it can be overcome if the plaintiff’s attorney makes an
offer of proof to the judge.
Caverun Co. has two classes of stock. The company may:
a. issue stock warrants, which are short-term options to buy shares.
b. issue stock rights, which are long-term options to buy shares.
c. not use stock options to make one class of stock more attractive than the other.
d. use stock options and warrants, the form and content of which are determined by the
board of directors, to supplement compensation plans for directors, officers, and
employees.
e. Both issue stock warrants, which are short-term options to buy sharesand alsoissue
stock rights, which are long-term options to buy shares.
Foreclosure is an action through which the mortgage holder takes the property from the
mortgagor, ends the mortgagor’s rights in the property, and sells the property to pay the
mortgage debt.
a. True
b. False
Bailed property must be tangible.
a. True
b. False
First Finance Company filed its financing statement for a purchase money security
interest in Donald’s lawn tractor on March 1. Donald purchased the lawn tractor on
February 21. If Donald files for bankruptcy on February 28, the trustee will have
priority because the bankruptcy petition is filed before the creditor perfects.
a. True
b. False
The purpose of pleadings is to give notice and to establish the issues of fact and law that
the parties dispute.
a. True
b. False
Philosophers have found that the most effective way to develop dependable and
universal methods for making ethical judgments is to fashion a priori guidelines.
a. True
b. False
To fully compensate a plaintiff for losses suffered for a breach of contract, punitive
damages are always awarded.
a. True
b. False
All intervening causes of harm are also superseding causes.
a. True
b. False
Carmen needs quick cash, so she thinks of a scheme. She tells Frank she is collecting
for Laotian refugees. Frank writes a check for $100 payable to the order of Carmen.
Carmen indorses the check and delivers it to Pete, who doesnt know of Carmens scam,
for $90 cash. Pete gives the check to Emily as a present. Frank discovers Carmens
deception and refuses to pay Emily. Will he win?
a. No, because Emily is a holder in due course.
b. No, because of the shelter rule.
c. Yes, since Emily did not take the check for value.
d. Yes, since the check was not negotiated to Emily.
What is the reasonable person standard? How is it applied to each of the following
types of people?
a. Children
b. Persons with physical disabilities
c. Persons who are mentally retarded
d. Professional people with advanced degrees and training, such as doctors, lawyers,
and accountants
e. Persons acting in emergency situations
f. Persons who violate statutory duties
A principal has no duty to compensate his or her agent if:
a. the agent breached the duty of obedience.
b. the agent breached the duty of loyalty.
c. it is a gratuitous agency.
d. All these are correct.
Landlords can evict a tenant if:
a. the tenant fails to pay the rent.
b. the lease expires and the tenant refuses to move out.
c. the tenant keeps a pet in violation of the lease and refuses to get rid of it.
d. All of these.
In which of the following situations may a nonjudicial dissolution of a corporation
occur?
a. By shareholders of a close corporation who elect in the articles of incorporation to
have the power to dissolve the corporation.
b. By expiration of the time period provided in the articles of incorporation.
c. By voluntary action on the part of all of the holders of outstanding stock.
d. A nonjudicial dissolution may occur in all of the above ways.
e. A corporation may only be dissolved by judicial action.