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The requirement that each party to a contract must intentionally exchange something of
value as an inducement to the other party to make a return exchange is known as:
a. mutual assent.
b. consideration.
c. legality of object.
d. contractual capacity.
Al, an accountant, has a tax service and accounting business in Redwood City. He
decides to move to Center City, which is 150 miles away and sells his accounting
practice to Able and Baker, a CPA firm. In the sale contract, he agrees that he will
refrain from practicing accounting anywhere within a 60-mile radius of Redwood City
for a period of two years. However, on weekends he returns to his house in Redwood
City, and when clients call him, he meets with them in his home. In this case:
a. Al is in violation of the sale agreement, which contained restrictions that would
probably be held to be valid.
b. the agreement is invalid, because it is an illegal restraint on trade.
c. the agreement is illegal, because it is a violation of public policy.
d. the two-year provision is likely to be held invalid, because it is too long a period of
time.
Which of the following is NOT covered by the Fair Labor Standards Act?
a. Minimum wages.
b. Hours of employment.
c. Child labor.
d. Defined benefit plans.
Which of the following is correct regarding the Clayton Act?
a. It deals with price discrimination, tying contracts, and mergers.
b. It added criminal sanctions to the Sherman Act.
c. It repealed the Robinson-Patman Act.
d. It included labor organizations in its coverage.
An indorsement "Pay to Jones Construction Company upon completion of the job at
No. 10 Park Place" is ineffective under Revised Article 3; the indorsee can enforce the
instrument.
a. True
b. False
Diane, who is seventeen years old, purchased an auto from Elvira on credit. Florence
agreed to act as surety and signed a written surety agreement. At the time of purchase,
Diane specifically asked Elvira about the condition of the car's motor and was told that
it had just been replaced with a new one and was in fine condition. This was blatantly
untrue, because Elvira knew it was in terrible shape and would only last a short time.
The auto has now stopped running and Diane refuses to make any more payments.
Elvira is now proceeding against Diane and Florence. What defenses, if any, are
available to (a) Diane and (b) Florence?
Which of the following is a defense that a defendant could raise in an action based on
strict liability?
a. The plaintiff negligently failed to observe a sign on a highway warning of blasting
operations and was injured from the operations.
b. The owner of a car knowingly and voluntarily parked his vehicle in a blasting zone as
a result of which the car was damaged.
c. A child played with a neighbor's pet raccoon which had escaped from its cage. The
child teased the pet and was bitten.
d. All of these are valid defenses which would be successful if raised by the defendant.
In some states, a lender who charges a usurious rate forfeits both the principal and
interest on the loan.
a. True
b. False
If Megan intends to offer and believes she is offering for sale to Alexis her RL1500
space heater and Alexis reasonably believes Megan is offering her RL1900 heater and
accepts on that belief, a contract has not been formed because there was no agreement
as to the subject matter.
a. True
b. False
The Uniform Commercial Code applies only to sales of goods by manufacturing firms
who ship goods to buyers interstate.
a. True
b. False
Article 9 of the UCC governs financing transactions involving security interests in real
property.
a. True
b. False
A contract for the sale of a copyright is governed by Article 2 of the Uniform
Commercial Code.
a. True
b. False
Pointing an unloaded gun at someone who believes it is loaded and threatening to shoot
constitutes an assault.
a. True
b. False
A system for electronic funds transfers (EFT) in which machines are located in a
merchant's store and are activated by the consumer's identification card and code is:
a. POS.
b. RAM.
c. EFTA.
d. DOS.
The appointment of an agent by a minor or an incompetent not under guardianship and
any resulting contracts are voidable.
a. True
b. False
Which of the following may influence a promoter to choose to incorporate in a
particular state?
a. Corporate laws.
b. State government that is business-friendly, efficient, and accessible.
c. The state court system.
d. All of these.
The transfer of a negotiable instrument in such a manner that the transferee becomes a
holder is known as:
a. assignment.
b. negotiation.
c. indorsement.
d. accommodation.
Alice makes a material misrepresentation of fact to Betty, and based upon the
misrepresentation, Betty enters into a contract. Betty now realizes she was deceived and
wants to get out of the contract. This contract is voidable at Betty's option.
a. True
b. False
Article 9 of the UCC applies to a security interest without consent that arises by
operation of law, such as a mechanic's lien.
a. True
b. False
Respondeat superior has no application to situations where a partner commits a tort,
because only the partner and not the partnership is liable.
a. True
b. False
If the seller has the right to cancel, he may recover damages for breach without having
to tender any further performance.
a. True
b. False
The Uniform Commercial Code provides that a court may scrutinize every contract for
the sale of goods to determine whether, in its commercial setting, purpose, and effect,
the contract is:
a. exculpatory.
b. unconscionable.
c. usurious.
d. None of these.
Legal detriment means the obtaining by the promisor of that which he had no prior legal
right to obtain.
a. True
b. False
Notification to one partner of any matter relating to partnership affairs is effective
immediately as notice to the partnership.
a. True
b. False
One type of fraudulent transfer consists of the:
a. distribution of the debtor's property among creditors.
b. debtor's transferring property with actual intent to hinder her creditors.
c. avoidance of statutory liens when debtor becomes insolvent.
d. discharge of debts of unsecured tardy creditors.
An incidental beneficiary has no right to enforce a contract.
a. True
b. False
Subrogation includes:
a. creditor's rights against the principal debtor, but not including the creditor's priorities
in a bankruptcy proceeding.
b. no rights against cosureties.
c. no rights against co-makers.
d. creditor's rights in security of the principal debtor.
In order to lease substantially all of a corporations assets not in the usual course of
business:
a. shareholder approval is necessary.
b. shareholder approval is required if so determined by a subjective test under the 1999
amendments to the Revised Act.
c. approval of the board and the majority of the corporations outstanding shares is
required; dissenting shareholders do not usually have an appraisal remedy.
d. shareholder approval is unnecessary, unlike for the sale of assets.
Hank's tractor is collateral for a loan and Hank moves to the next county. In most states,
the security instrument must be re-filed in the proper county or it will render the
security interest ineffective.
a. True
b. False
A second will automatically revokes an earlier will if it is wholly inconsistent.
a. True
b. False
An administrative agency must always use formal procedures to resolve matters.
a. True
b. False
Which of the following is correct regarding the fiduciary duties in a limited
partnership?
a. The general partner has a fiduciary relationship to the limited partners, but not to any
other general partners.
b. Judicial authority seems to suggest that the limited partner has no fiduciary duty to
the partnership.
c. The fiduciary duty of the general partner has little effect upon the interests of the
limited partners, because they have no ability to manage or control the partnership.
d. All of these are correct.
In 1996 the ALI approved development of the Restatement Third, Torts: Liability for
Physical and Emotional Harm, which applies mostly to nonintentional torts. As of 2011,
neither of this Restatements two volumes had yet been published in final form.
a. True
b. False
