Paula is a sales agent for The Rock Insurance Company. Paula accepts a check from a
customer made payable to her in payment for the premium on an insurance policy. Prior
to depositing the check in The Rock’s bank account, Paula indorses the check as
follows: “The Rock Insurance Company, by Paula Beck, agent.” Assuming that Paula
has authority to indorse company checks, if the check is dishonored, then between
Paula, The Rock, and the bank:
a. Paula only will be liable.
b. Paula and The Rock will be liable.
c. The Rock only will be liable.
d. The bank will be stuck with the dishonored check.
Which of the following exculpatory clauses will most likely be enforceable?
a. An exculpatory clause that relieves a riding stable of negligence.
b. An exculpatory clause that relieves a riding stable of gross negligence.
c. An exculpatory clause that relieves a riding stable from intentional torts.
d. A riding stables exculpatory clause that is hidden in an eight-page document that all
riders are required to sign.
Nevada passed a law banning all commercial billboards along state highways to
improve the appearance of the environment. If this law were to be challenged, which of
the following would a court examine to determine if the law is constitutional?
a. It would have to be established that the law furthers an interest of the state of Nevada
to create a more aesthetically pleasing environment.
b. It would have to be shown that the law directly and materially advances the state’s
goal of a more aesthetically pleasing environment.
c. It would have to be shown that the law reaches no further than necessary to promote
the state goal.
d. All of the above.
Grandpa owns a farm. In a signed writing, Grandpa gave Sue the irrevocable right to
use a road on his farm so that Sue could more easily reach her own property. What kind
of interest in land did Grandpa give to Sue?
a. Grant easement.
b. Easement by implication.
c. Reserved easement.
d. Easement by prescription.
Morefield Custom Design sends 30 recliners by rail to Danville Furniture. To show
where the goods will be shipped and who gets them when they arrive, Morefield will
obtain ____, which can be used as collateral in a secured transaction.
a. a warehouse receipt.
b. a bill of lading.
c. chattel paper.
d. a deposit account.
Rachel and Cyndi started a retail business called Zebra Toy Company. The business is
operated as a partnership. Under partnership law:
a. Rachel is personally liable for any business contracts entered into by Cyndi.
b. Rachel is personally liable for any business debts, regardless of whether she or Cyndi
created the obligation.
c. Rachel is personally liable for any negligent act committed by Cyndi in the scope of
the business activity.
d. All the above.
An inmate in a state prison claims his United States constitutional rights prohibiting
cruel and unusual punishment are being violated by the state correctional facility. This
case:
a. may not be decided by a federal court since it involves a state facility.
b. must be decided by the state court where the inmate established residency before
going to prison.
c. is a federal question case over which the federal courts have jurisdiction.
d. cannot be heard, as prisoners lose the right to sue.
After answering a summons and complaint, Mike received a set of written questions
from the plaintiff’s attorney. He was directed to respond to the questions in writing
under oath. This discovery technique is called:
a. a request for admission.
b. a request for the production of documents.
c. a deposition.
d. interrogatories.
If the title of an appellate court case appears as Jones v. Smith:
a. Jones is the plaintiff and Smith is the defendant.
b. Smith won the trial court decision.
c. you cannot determine which party is the plaintiff, because when a defendant loses a
trial and files an appeal, some courts (but not all) reverse the names of the parties.
d. the trial judge was Jones and the appellate judge is Smith.
The SEC creates law in all but which of the following ways?
a. Bringing cease and desist orders.
b. Issuing releases.
c. Promulgating rules.
d. Writing no-action letters.
The Occupational Safety and Health Administration promulgated a rule requiring
warehouse employees to wear hardhats when in the vicinity of an operating forklift. The
purpose of the hardhats is to protect employees from danger of falling objects. This rule
is:
a. an executive order.
b. a statute.
c. common law.
d. administrative law.
Marty, a 16-year-old, contracted with Cream-of-the-Crop Cycles to buy an $8,000
motorcycle. He agreed to make monthly payments until the purchase price plus interest
were paid in full. It is three years later and Marty has not disaffirmed the contract and
has made regular payments on the cycle since turning 18. Which of the following is
correct?
a. The contract is void and Marty has no obligation.
b. The contract is now voidable by Cream-of-the-Crop Cycles.
c. Marty has ratified the contract and is now bound by its terms.
d. Marty has ratified the contract but can still get a return of the payments made while
he was a minor.
The Theft of Honest Services statute:
a. is violated if an employee draws sick leave pay on a day when she is not sick.
b. applies only to government officials.
c. prohibits both public and private employees from taking bribes or kickbacks.
d. was not passed into law due to a presidential veto.
In June, The Seascape Gallery sells an oil painting to Collegiate Systems, Inc.
Collegiate promises to pay for the painting in three months. The gallery prepares a draft
ordering Collegiate Systems to pay $3,000 to First Bank on September 15. Collegiate
Systems signs the draft. The draft is a:
a. sight draft.
b. time draft.
c. trade acceptance.
d. Both b and c.
One reason you may not need a written contract is:
a. you are dealing with a party you do not know well, so you need to remain flexible.
b. you are buying land from a member of your family.
c. the terms of the agreement are simple and the value of the transaction is small.
d. you have negotiated enough that you both know what the other person intends.
When the per se standard applies, the plaintiff:
a. needs only to prove the existence of the conduct.
b. must prove that the activity was an unreasonable restraint of trade.
c. must show that there was an anti-competitive impact.
d. None of the above.
Karen is a strong swimmer. One afternoon she is having a picnic at a lake and sees a
man she does not know drowning. Generally, Karen:
a. has a legal duty to rescue the man.
b. has a legal duty to rescue the man, but only if her efforts will not pose a serious threat
to her own safety.
c. has a legal duty to rescue the man since, as a strong swimmer, she is treated as a
‘special class” of persons who must get involved in such situations.
d. has no legal duty to rescue the man.
Does ethical behavior maximize profitability?
a. Yes, there is concrete evidence that ethical behavior maximizes profitability.
b. No, there is concrete evidence that unethical companies outperform ethical
companies.
c. Although there is no guarantee that ethical behavior pays in the short or long run,
there is evidence that the ethical company is more likely to win financially.
d. There is strong evidence that ethical behavior pays financially in the long run, but not
in the short run.
Under a contract for the sale of land, the statute of frauds:
a. does not apply if the purchase price for the land is less than $500.
b. requires that the entire agreement be in one single document.
c. requires the defendant to sign the agreement.
d. does not apply if the total price of the land is to be paid in less than one year..
Soiya is a holder in due course of a check. Soiya goes to the drawee bank, Last Chance
Bank, to cash the check. What is the liability of Last Chance?
a. Last Chance Bank is primarily liable on the check.
b. Last Chance Bank is not primarily liable on the check until it accepts the check.
c. Last Chance Bank is secondarily liable on the check.
d. Last Chance Bank is not secondarily liable on the check until it accepts the check.
At what stage are the partnership debts paid and the proceeds distributed to the
partners?
a. During dissolution.
b. During winding up.
c. During termination.
d. During dissociation.
Common law refers to:
a. law that is the same or similar in all the states.
b. law made when judges decide cases and then follow those decisions in later cases.
c. law made by legislatures in the form of statutes.
d. the legal systems of France, Germany, and Italy.
Randy, Joan, and Arnie are partners. Their agreement did not address dissociation nor
how long the partnership would last. Randy decided to leave the partnership. When
Randy serves notice he intends to withdraw:
a. the partnership can either buy him out and continue in business or wind up the
business and terminate the partnership.
b. the partnership terminates.
c. the partnership winds down.
d. the partnership estoppes.
All of the following might be in the same collective bargaining unit except:
a. secretarial workers.
b. clerical workers.
c. the executive secretary.
d. the department manager.
e. Both c and d.
An engagement letter is a written contract:
a. between an accountant and client.
b. in anticipation of marriage.
c. between a corporation and the AICPA.
d. intended to create a fiduciary duty of an accountant to his client.
Jake owns an old piece of exercise equipment. He has been using the equipment merely
to hang his clothes on, so Jake decides to get rid of the thing. He takes the unused
exercise machine to the landfill and throws it off the back of the truck. Maggie, a
teenager, is at the landfill rummaging for useful items. Maggie sees the exercise
equipment and decides it is just the thing to give her sister for Christmas, so she decides
to take it home. As she is loading it into the back of her pickup truck, Jake stops and
tries to get it back. The landfill owner sees the commotion and decides he would like to
have the equipment as well. Who has the best rights in the exercise equipment?
a. They are all joint owners.
b. Maggie.
c. Jake.
d. The landfill owner.
The Clayton Act was enacted:
a. because the courts were too strict in their enforcement of the Sherman Act.
b. to clarify the provisions of the Sherman Act.
c. to eliminate price discrimination that reduced competition.
d. All the above.
Grady receives a $12,940 credit card bill in the mail from a company with which he did
not open an account. He fears he is a victim of identity theft. Does he have any
recourse?
a. Yes, under the Fair and Accurate Credit Transactions Act (FACTA), Grady can place
an alert in his credit files using the National Fraud Alert System.
b. Yes, under the Fair Credit Billing Act he may call the credit card company to
complain about the bill, and the credit card company must investigate and correct any
errors.
c. Yes, under the Truth in Lending Act, Grady is liable only for the first $50 in
unauthorized charges.
d. No, he should have been more careful with his personal information so no one could
have applied for credit in his name.
Which of the following is true regarding an open price term?
a. It makes the contract unenforceable.
b. The price may be fixed by the seller.
c. The price is the “reasonable” price at the time of delivery.
d. The price is set by the buyer.
An agency relationship can be created:
a. by the conduct of the parties.
b. only by the meeting of all the standards of contract law.
c. only by a written agreement.
d. all of these answers are true
Barden Corporation was convicted of violating federal RICO laws. Accordingly:
a. the government may file criminal charges against both the company and the
individuals associated with the criminal acts.
b. the government may file a civil lawsuit against the company to obtain injunctions and
other relief.
c. individuals may file civil lawsuits against the company for violating the RICO statute
to recover losses sustained by the criminal act.
d. All the above are correct.
Jacob has been quite ill. When three of his neighbors come to visit one day, he tells
them that he is dying and that he wants them to witness his oral will. In some states, he
can validly dispose of his personal property by his witnessed, oral statements.
Barbara, a skilled welder, was hired at Mainco Enterprises for a welding position. She
was asked to sign noncompete clauses limiting future employment if she left Mainco. A
court would be very likely to enforce the noncompete clause unless the time or
geographic restriction is unreasonable.
Corporations have perpetual existence.
Bry, Inc. and Gangl Co. entered into an oral agreement for the sale of 3,000 sweaters.
Both parties performed as required under the contract. Bry delivered the sweaters and
Gangl accepted and paid for them. Since the contract is fully executed, it makes no
difference that it was oral.
Jimmy stole Daves motorcycle and completely revamped the engine and changed the
body. These accessions were very expensive, but Jimmy was completely satisfied with
the results, intending to sell the motorcycle for a huge profit. If the motorcycle is
recovered from Jimmy, Dave must pay Jimmy for the improvements.
After being served with a summons and a copy of the complaint, a defendant usually
files a pleading known as an answer, briefly replying to each allegation in the
complaint.
The Trimbles apply to Community Savings & Loan for an installment loan of $20,000
to remodel their bathroom. Discuss the disclosures Community is required to make.
Upon the recommendation of a friend, Hope hires Joey to rewire her kitchen and he
completes the work within the time agreed. Then Hope finds out that Joey is not a
licensed electrician, and she refuses to pay him for the work. A court will enforce the
agreement because otherwise Hope would be unjustly enriched.
The Gramm-Leach-Bliley Privacy Act of 1999 requires pretexting to find out private
financial information.
Baker Furniture sold 50 living room sets to King’s Department Store. The parties did
not agree on passage of title, but the delivery term was F.O.B. place of shipment.
Discuss title and risk of loss regarding the furniture.
Discuss how the Sarbanes-Oxley Act affects Haletronne Co., a publicly traded
corporation.
Arco sells to Melvin 1,000 computers that are stored in Arco’s warehouse. Arco gives
Melvin the ownership documents and Melvin will pick up the computers at the
warehouse. Title has passed to Melvin.
The largest source of new law is court decisions.
Bankruptcy is regulated by federal law.
There are three parties on a promise instrument: the maker, the drawee, and the payee.
While shopping at the mall, Everett’s wallet fell out of his pocket. Jon found the wallet.
The wallet is abandoned property and Jon may keep it.