Philip has been in training for several months and now plans to run in the
school-sponsored, ten-mile, fun run mini-marathon. He completes and signs an entry
blank which contains the statement, “I hereby agree to hold the sponsors harmless for
any injury sustained as a result of participation in this event no matter how such injury
may be caused.”
a. What is a fee simple?
b. What is a life estate?
c. If Maurice grants a life estate to his wife, what interest does he retain? Explain.
What is the method by which title to new property is acquired when an article of
personal property that belongs to one person has a natural increase?
a. Gift
b. Will or descent
c. Purchase
d. Accession
Amanda ordered fifty personalized sweatshirts from King Manufacturing Company.
After the shirts were specially imprinted, but before they were mailed, Amanda called
King Manufacturing to disavow the contract. The next day the sweatshirts were stolen.
Who must bear the loss?
a. Amanda must pay the entire purchase price, because she breached the contract.
b. King will have to bear the entire loss, because it had not yet mailed the shirts.
c. Amanda must bear the entire loss, because the shirts were identified to the contract.
d. King must first seek payment from its insurance carrier, and then collect from
Amanda for any amount not covered by insurance.
The registration statement must be signed by:
a. the issuer.
b. the SEC secretary.
c. the chief financial officer.
d. Both (a) and (c).
A consolidation:
a. has precisely the same result as a merger.
b. is the most typical form of business combination used today.
c. is always illegal (in contrast to mergers, which are legal under state law).
d. requires the assent of the board of directors and shareholders of each corporation.
Lynne agrees to buy Harriette’s farm for $100,000 and puts $20,000 down. Then Lynne
learns she is allergic to hay and repudiates the contract. If Harriette can sell the farm
one month later for $90,000, she may:
a. keep Lynne’s $20,000.
b. keep $10,000 of Lynne’s down payment.
c. not keep any of the down payment money.
d. sue for specific performance.
According to the Second Restatement, in which of the following situations would an
agency be terminated by operation of law?
a. An outbreak of war places the principal and agent in the position of alien enemies.
b. The death of the individual principal, only upon the agent’s notice of the death.
c. The agent gives notice to the principal that she is renouncing the authority given to
her.
d. Both (a) and (b), but not (c).
A doctrine allowing a mortgagor who has defaulted to regain her property prior to its
sale by paying the debt in full with interest is known as:
a. rehabilitation.
b. the covenant of quiet title.
c. foreclosure.
d. the right of redemption.
With respect to the board of directors of a corporation, which of the following is NOT
correct?
a. They manage the business and affairs of the corporation.
b. They are the shareholders’ elected representatives.
c. They must always obtain shareholder approval before deciding questions of operating
policy.
d. They have the authority to delegate power to officers and agents.
The remedy of appraisal is allowed to a dissenting shareholder if:
a. the stock price goes down.
b. the shareholder does not vote by proxy.
c. the stock is split.
d. None of the above.
Jill owns and operates a donut shop. Under the Code, the flour, sugar, and other goods
used by Jill to make donuts are classified as:
a. farm products.
b. fixtures.
c. consumer goods.
d. inventory.
Sue has a major store’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. That day, Myra 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.
Akeya sells and delivers goods to Wayne for $10,000. Wayne executes and delivers a
negotiable note to Akeya for $10,000 payable to Akeya’s order in sixty days. A week
later, Akeya duly negotiates the note to Maria. Which of the following is correct?
a. Maria is required to notify Wayne that she has acquired the note from Akeya.
b. If the goods are defective, Wayne’s defense against Akeya is not available against
Maria if Maria acquired the note in good faith and for value and had no knowledge of
Wayne’s defense against Akeya and took the note without reason to question its
authenticity.
c. Maria is not entitled to hold Wayne for the full face amount of the note at maturity if
Wayne has a valid defense against Akeya for defective goods regardless of the
circumstances surrounding the negotiation of the note to Maria.
d. If there is a valid defense against Akeya, Maria cannot become a holder in due course
when the note is transferred to her.
Ralph sold a motel to Steve by stating that he had paid $250,000 for it and that his net
average annual profit from the business has been $40,000. In reality he paid $100,000
for the motel and has earned a net average annual profit of only $30,000. Steve made no
attempt to verify the statements until after the transaction was completed. In this case:
a. Ralph has committed fraudulent misrepresentation.
b. Steve is bound by the contract, because he failed to verify the statements which were
made to him.
c. the contract is voidable at Steve’s option.
d. Both (a) and (c).
Since its inception in 1946, the U.N. Secretariat has registered and published
approximately how many treaties that expressly or indirectly concern international
business?
a. 100
b. 550
c. 30,000
d. 75,000
Registration of a foreign limited partnership is required in order to:
a. go into business in another country.
b. defend the partnership in court.
c. collect contributions from foreign investors.
d. None of the above.
A(n) ____ is an intended beneficiary of a contract who receives the benefits of the
contract as a gift.
a. incidental beneficiary
b. intended beneficiary
c. assignor
d. donee beneficiary
Which of the following is true regarding an insolvent partnership under the UPA?
a. The partners must contribute their respective share to the losses in order to pay
creditors.
b. If one of the partners is out of the jurisdiction and refuses to contribute, the other
parties must contribute the additional amount necessary to pay the firm’s liabilities in
the relative proportions in which they share the profits.
c. Any partner who pays an amount in excess of his proper share of the losses has a
right of contribution against the partners who have not paid their share.
d. All of the above.
Which of the following would ordinarily NOT be considered a security under the
federal securities laws?
a. Bonds
b. Stocks
c. Investments in limited partnerships
d. General partnership interests
A(n) ____ is a non-trespassory invasion of another’s interest in the private use and
enjoyment of land.
a. trespass to real property
b. nuisance
c. interference with contractual relations
d. fraudulent misrepresentation
When a limited partnership dissolves and winding up commences:
a. a certificate of cancellation must be filed.
b. the state automatically cancels the certificate of limited partnership.
c. all general and limited partners can be involved in the winding up process.
d. a court must decree that the partnership is terminated.
The Statutory Close Corporation Supplement to the MBCA and RMBCA and special
legislation in about twenty states accommodate the needs of closely held corporations
by all but which of the following?
a. Permitting operation without a board of directors
b. Authorizing the use of shareholder agreements in place of bylaws
c. Requiring cumulative voting
d. Making annual meetings optional
Which of the following is not true regarding the warranty of habitability?
a. It is an implied warranty.
b. A majority of states hold that a builder-seller impliedly warrants a newly constructed
house to be free of latent defects.
c. In the majority of states, the buyer must inspect the property thoroughly before
completing the sale, as any defect discovered only after the transaction is complete
would not be the seller’s responsibility.
d. Many jurisdictions now require all sellers to disclose hidden defects that materially
affect the property’s value and that would remain undetected following a reasonable
examination.
Probate is the:
a. reading of a will by a lawyer.
b. actual property given away in a will.
c. process of declaring a person dead.
d. process of managing a decedent’s property.
Answer the following:
Sara holds 1,000 shares of stock in B B & B, Inc., which she purchased, based upon the
financial statements that Adam had prepared. She now realizes that the statements were
false and wants to sue Adam for common law fraud. What is Adam’s best defense?
a. Sara lacks privity of contract.
b. Adam gave a broad disclaimer as part of the financial statement.
c. The false statements were immaterial.
d. B B & B contributed to the misstatement.
Tom decides to invest in the stock of Triad Television after he reads Edgar’s audit,
which includes a statement, known by Edgar to be false, as to the value of numerous
worthless securities held as corporate assets. If Tom sues Edgar in a state using the
broadest test for determining an accountant’s liability for negligence to third parties, he
will be entitled to:
a. nothing, since he is an incidental beneficiary of the audit contract.
b. damages if he is a reasonably foreseeable plaintiff.
c. have Edgar complete a new audit.
d. rescission of his purchase contract.
Grandfather conveyed to Erin the right to the family farm after her grandmother dies.
This is called a:
a. possibility of a reverter.
b. reversionary interest.
c. vested remainder.
d. contingent remainder.
A corporation may acquire all of the assets, including goodwill, of another corporation
and combine them with its own through:
a. a purchase of a controlling stock interest in such a corporation.
b. a merger or consolidation with such a corporation.
c. a purchase or lease of such assets.
d. All of the above.
A trust created by will at the death of a testator is called a(n):
a. charitable trust.
b. cy pres trust.
c. inter vivos trust.
d. testamentary trust.
On April 1, Marco bought a sailboat from a local marina. The boat was defective and
did not turn about properly. Marco used the boat extensively all summer and the boat
was no longer in the same condition as when it was bought. By the end of the summer,
Marco had waived his right to revoke acceptance.
Most student loans cannot be discharged under Chapter 13.
A grand jury decision will result in a final judgment as to the guilt or innocence of the
defendant.
An offer is effective as soon as it is dispatched.
The attorney general of the state of incorporation may bring a court action to dissolve a
corporation if the corporation obtained its charter by fraud or if the corporation
continues to exceed or abuse the authority that was conferred on it.
Melissa signs a suretyship agreement that contains both her name and that of her friend
Gayle as intended cosureties. Gayle did not sign the agreement. Melissa is liable since
she signed the agreement.
Mary employs Tony to purchase for her a suitable site for an office complex. Tony owns
a suitable site himself and sells it to Mary for the fair market value without disclosing to
her that he is the owner of the land. Tony has fulfilled his duties to Mary, because he
sold the property for the fair market value, even if he failed to disclose his ownership of
the property.
Darren grants a quitclaim deed to some property to Floyd. Now Floyd has found that
someone else has a life estate in the land. Darren has breached the warranty of title.
In order to induce a car dealer to sell her son a car on credit, Mary promises that she
will pay for the son’s car if the son defaults on his monthly payments to the dealership.
Mary’s promise must be in writing or have a sufficient electronic record.
What is an independent contractor? Can an independent contractor also be an agent?
Explain.
Cailee has a garage sale at which she sells a defective food processor to Dylan. Cailee
will be liable to Dylan in strict tort liability under Section 402A of the Restatement of
Torts if he is injured using the product.
Discuss how the RMBCA defines the term “distribution.”
One risk of investing in foreign states is the risk that the host nation’s government may
take the investment property.
The Check Clearing for the 21st Century Act requires banks to accept checks in
electronic form.
Generally, whether or not the parties deal at arm’s length does not affect whether silence
alone amounts to fraud.
The transfer of personal property involves formalities not required in the transfer of real
property.
Most states would invalidate prepayment penalties.