In most states, __________ provides that a security interest in a non-inventory motor
vehicle must be noted on the vehicle title registration.
a. a non-Code statute
b. UCC Article 2
c. UCC Article 9
d. judicial precedent
The Fair Credit Reporting Act applies to:
a. consumer credit.
b. commercial credit.
c. business credit.
d. all of the above.
Parol evidence may be admissible to:
a. contradict a complete written contract.
b. prove the modification or termination of a contract.
c. replace the statute of frauds.
d. create a contract.
__________ goods are goods that, when mixed together, are indistinguishable.
a. Tangible
b. Intangible
c. Heterogeneous
d. Fungible
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.
When a buyer demonstrates in some way that the goods conform to the contract, the
buyer has made a(n):
a. acceptance of the goods.
b. assignment of the goods.
c. substitution of the goods.
d. avoidance of the contract.
The person to whom the order in a draft is addressed is known as the:
a. payee.
b. drawee.
c. drawer.
d. maker.
Dealing honestly, reasonably, and in good faith:
a. is implied in every contract for services.
b. is implied in every contract for the sale of goods.
c. is an expressed obligation in every contract.
d. both a and b.
A discharge does not release a person from a consumer debt to a single creditor totaling
more than $5,775 for luxury goods or services if the debt was incurred within how
many days of the order for relief?
a. 90
b. 120
c. 180
d. 365
Warren brought his television in for repairs. After Warren left the store, gunmen came in
to rob the proprietor. As they ran out, Warren’s television was knocked over and
destroyed. Warren demanded that the proprietor of the store compensate him for the fair
market value of the television. The bailee:
a. is liable, since the goods were not returned to Warren in proper condition.
b. is liable, since the bailee did not prevent the gunmen from damaging the television.
c. is not liable, since this was a mutual-benefit bailment.
d. is not liable, since the damage was caused by the act of a third party.
A stockholder-approved amendment to the certificate of incorporation may indemnify
directors who:
a. acted in bad faith.
b. acted negligently.
c. breached their duty of loyalty.
d. gained an improper personal benefit.
When a bailor sues the bailee for damages to the bailed property, who has the burden of
proving fault and that such fault was the proximate cause of the bailor’s loss?
a. the person in possession of the property
b. the bailor
c. the bailee
d. the jury
When performance is impeded due to the occurrence of an event whose nonoccurrence
was a basic assumption of the contract, the contract may be discharged on the grounds
of:
a. commercial impracticability.
b. commercial impossibility.
c. economic frustration.
d. economic stability.
In addition to the corporation itself, which of the following parties are ordinarily
responsible for corporate debts?
a. directors
b. officers
c. directors and officers
d. none of the above
Which of the following is not a classification of ordinary bailments?
a. for the sole benefit of the bailor
b. for the sole benefit of the bailee
c. for the sole benefit of the third party beneficiary
d. for the mutual benefit of the bailor and the bailee
The transferring of an instrument in such a way as to make the transferee the holder of
the paper is termed:
a. an assignment.
b. a conversion.
c. a sale.
d. a negotiation.
The perfection obtained by filing a financing statement lasts for __________.
a. five (5) years, and is renewable.
b. five (5) years, and is non-renewable.
c. ten (10) years, and is renewable.
d. ten (10) years, and is non-renewable.
For property insurance, an insurable interest must exist:
a. at the time the policy is purchased.
b. at the time of the loss.
c. both at the time the policy is purchased and at the time the loss is sustained.
d. for at least thirty (30) days before the loss is sustained.
Which of the following must be proven by a plaintiff to recover for strict liability in
tort?
a. negligence of the seller or manufacturer
b. recklessness of the seller or manufacturer
c. unreasonably dangerous defects in goods that cause harm
d. privity of contract between the manufacturer and the buyer
What is not part of the presumptions of the business judgment rule concerning
directors?
a. that the decision they reached was profitable to the corporation
b. that they acted on an informed basis
c. that they acted in good faith
d. that they acted in the honest belief that the action taken was in the best interest of the
corporation
When a seller sells on credit and is given a security interest in the goods, that interest is
called:
a. a purchase money security interest.
b. a future transaction.
c. a floating lien.
d. none of the above.
A law to declare war:
a. can be enacted by both state and federal governments.
b. can be enacted only by the national government.
c. can be enacted only by state governments.
ddd. is prohibited by the U.S. Constitution.
Which of the following debts is not dischargeable in bankruptcy?
a. judgments based on negligence
b. judgments based on breach of contract
c. judgments for willful and malicious injuries
d. judgments in which the creditors would receive no distribution
When a lease covers rooms or an apartment in a building, a destruction of the leased
premises:
a. temporarily suspends the tenant’s obligation to pay rent.
b. terminates the lease.
c. requires the landlord to repair or restore the property.
d. has no effect on the obligations of the tenant or the landlord.
Which is not a correct statement concerning the remedy of specific performance?
a. The subject matter of the contract must generally be unique.
b. An award of monetary damages would be an inadequate remedy.
c. The granting of specific performance is discretionary with the court.
d. It is generally available in all breach of contract cases.
Article 2 of the Uniform Commercial Code applies to the sale of:
a. corporate stocks.
b. U.S. Treasury bonds.
c. goods.
d. insurance policies.
If an agency causes a substantial loss to a business by enforcement of its laws, that
business:
a. always can hold the agency liable for damages.
b. never can hold the agency liable for damages.
c. may seek damages if the agency acted in bad faith.
d. may seek damages if the agency complied with its own guidelines.
A summarized report of title to property is called:
a. title protection insurance.
b. title assessment insurance.
c. an abstract of title.
d. an instrument of title.
A blank indorsement turns a(n) __________instrument into a(n) __________
instrument.
a. negotiable; non-negotiable
b. non-negotiable; negotiable
c. bearer; order
d. order; bearer
A third person to whom a joint tenant’s interest is transferred becomes a:
a. joint tenant.
b. cotenant.
c. tenant in common.
d. tenant by the entirety.
Employers are required to maintain records of certain occupational illnesses and
injuries by:
a. ECHO.
b. ESCHA.
c. OSHA.
d. ECOT.
A deposition:
a. is the testimony of a witness taken under oath.
b. is conducted outside of the courtroom.
c. can be used to impeach a witness.
d. all of the above.
A bank will not be liable for payment of a check on which the drawer’s signature has
been forged if:
a. the bank could not have detected the forgery through a reasonable investigation.
b. there are more than two prior indorsers of the check.
c. the bank gives a cashier’s check in payment of the depositor’s check.
d. the drawer’s negligence contributed substantially to the forging of the signature.
Laws that prohibit mislabeling of food, speeding, and sale of alcohol to minors exist
primarily:
a. for protection of the person.
b. for protection of public health, safety, and morals.
c. for protection of property.
d. for protection of the state.
Sally Gomez is interested in starting a new business. Although Gomez has developed
her business plan and is ready to implement her ideas, she lacks the necessary finances
to begin her new business. Along with a lack of finances, Gomez worries about the
potential liability involved with starting a new business. Gomez would hate to lose all
that she has personally accumulated to date in the event of a successful lawsuit against
her. She is considering a sole proprietorship, a partnership, or a corporation as the
organizing structure of her new venture. Which type of business would best serve
Gomez’s needs at this given time?
John was driving his car in a careless way, failing to drive as a reasonably prudent
person would under the driving conditions. Ramona was crossing the street in a careless
way, failing to cross as a reasonably prudent person would. John struck and injured
Ramona with the car John was driving. At trial, it was determined that John was 80
percent at fault and that Ramona was 20 percent at fault. The injuries sustained
amounted to $100,000. Explain how much, if any, recovery Ramona would receive in a
state that applies the contributory negligence rule. Do the same thing for a state that
applies the comparative negligence rule.
An offer to buy or sell goods may be accepted in any manner that is reasonable under
the circumstances.
Courts are quick to invalidate contracts on the ground that they are contrary to public
policy because such contracts are so offensive to society.
The head of the Department of Transportation reviewed a film that demonstrated the
effectiveness of air bags in automobiles. He then passed a rule that Ford Motor
Company must retrofit, without charge to the automobile owner, all of its 1985 models
as an experiment on the safety of the air bag. Ford refused to do so. The DOT held a
hearing and decided to fine Ford $1 million for violating its regulation. A notification of
this decision was mailed to Ford. What constitutional issues does this case raise?
Differences among businesses preclude the development of any universal categories of
ethical behavior.
When a municipality contracts with a contractor to pave a street, homeowners on that
block are third-party beneficiaries of the contract.
Labels on packages are regulated to provide information about the contents and
warnings about the dangers involved in the use of the product.
When persons enter into an agreement, it is presumed that they intent the agreement to
have some effect.
A reservation of rights is an assertion by a party to a contract that even though a
tendered performance is accepted, the right to damages for the nonconformity to the
contract is reserved.
Each of the states and the federal government have statutes and regulations that prohibit
unfair methods of competition.
Criminal penalties are possible under the Sherman Act.
The defense that a signature was forged or signed without authority cannot be raised
against any holder if the person whose name was signed has ratified it.
The formation of a contract of insurance is governed by the general principles
applicable to contracts.
Ordinarily the maker’s lack of capacity may be raised as a defense against a holder in
due course.
A sublease and an assignment of a lease accomplish the same results.
If the tenant uses the property for any purpose other than the one specified in the lease,
the landlord has the option to declare the lease terminated.