A typed or rubber stamped signature is sufficient if it is put on the instrument to validate
it.
Michael and William contracted for Michael to mow William’s lawn once a week for 20
weeks, at a price of $20 per week. Later, without terminating the first contract, the
parties modify the contract as follows: Michael will mow William’s lawn in exactly the
same way for exactly the same time period, in exchange for William’s promise to pay
Michael $22 per week. There is no consideration for William’s promise.
Even if both parties consent to an agreement, if a court finds the agreement illegal then
it will not enforce it.
A fixture is an attached item that is considered to be part of the real property.
In all states, the insured’s breach of warranty automatically relieves the insurer of the
duty to perform, regardless of whether the breached warranty was actually material to
the insurer’s risk.
A promise to refrain from smoking can be legal consideration because refraining from a
legal right, the right to smoke, can be consideration.
The sole proprietor has the right to deduct business losses on his individual tax return.
The substantial performance standard is more lenient than the strict performance
standard of judicial contract legal interpretation.
The defendant must wait until after the pleadings have been completed before making a
motion to dismiss.
An incidental beneficiary of a contract cannot recover under that contract.
If there are conflicting security interests but neither has been perfected then the interest
that attaches to the collateral first will have priority.
Consideration is what distinguishes enforceable agreements from gratuitous promises.
If a state law discriminates against interstate commerce, then the strictest scrutiny will
be applied in the determination of its constitutionality.
The Securities Act of 1933 regulates the sale of securities when they are sold from the
issuer to a public purchaser.
Mr. Blue is a very good accountant at Supermart Inc. Mr. Blue acts with great care and
accuracy. But with changing laws and various inaccurate information provided to him
by other employees, Mr. Blue is responsible for a Supermart Inc. owing the IRS
$50,000. The CEO of Supermart Inc. wants to discharge and sue Mr. Blue for failure to
excise professional care (i.e., professional negligence). Mr. Blue based on facts is liable
for professional negligence and can be discharged and sued for the mistake.
Public figure Pam sues a newspaper for defamation based on statements regarding her
stand on a public issue. Pam must prove the newspaper’s “actual malice” in order to
recover any damage.
Sounds that reverberate across the plaintiff’s land are more likely to be classed as a
nuisance than as a trespass to land.
A valid defense for battery is the free and intelligent consent given.
If no agreement is made regarding the place of delivery, then the goods are to be
delivered at the seller’s place of business.
General shareholders will be paid dividends before Preferred shareholders receive them
from a corporation.
A lease is a contract where the owner of property (called the landlord), conveys title to
the property to a buyer (called a lessee).
The maximum penalty for any person who willfully violates the Securities Act of 1933
or its rules and regulations is a $20,000 fine and 10 years’ imprisonment.
The Robinson-Patman act outlawed secondary and tertiary price discrimination.
The doctrine of standing to sue requires that, in order to be able to mount a civil suit, a
plaintiff must have some direct and considerable stake in the outcome of the suit.
Under the doctrine of purported partners, a third party may hold liable persons who
purport to be partners.
Kevin offered to mow the lawn for his Uncle Jordan’s for $100. To his offer, Uncle
Jordan replied by saying “I know you’re taking advantage of me but I accept.” Uncle
Jordan has indeed accepted the offer made by Kevin.
Undue influence cases often involve a relationship of trust and confidence between the
contracting parties.
Parol evidence can be used to contradict the terms of a partially integrated contract.
The standard of proof in a tort case is the preponderance of the evidence.
Sellers at a public auction are treated as makers of an invitation to offer.
In a contract for Adam to sell Carrie a steam boiler, Carrie’s obligation to pay is
conditioned upon her personal satisfaction with the boiler. Even though the boiler meets
every mechanical test imaginable, Carrie refuses to pay because she just doesn’t like the
boiler for some reason. She is not obligated to pay, because the contract said that he
must be personally satisfied, and a contract is a contract.
Article 2A of the UCC deals exclusively with the leasing of goods.
S agrees to sell B 10,000 widgets at a price of $1.00 per widget. After B breaches the
contract, S resells the widgets for $0.90 per widget. However, this costs S an additional
$100 in sales commissions. S saved $200 in shipping costs as the new customer was
located closer to its factory. What amount can S recover from B?
A. $900
B. $100
C. $1,100
D. $1,000
Which of the following is sufficient condition for courts to allow reformation in a
written insurance policy?
A. The insurer’s misunderstanding about a contract term
B. The insured’s misunderstanding about a contract term
C. A fraud committed by the insurer
D. An increase in the market value of the insured property
What form of statute would authorize an individual to form an LLLP?
A. Federal statute
B. State statute
C. International statute
D. City statute
A limited liability company:
A. is either member-managed or manager-managed.
B. shares its profits equally with shareholders.
C. is not required to pay federal income tax.
D. is owned only by shareholders.
In an employment contract, the noncompetition clause might be the only part of the
contract:
A. that the parties put in writing.
B. that would be valid.
C. that would be unenforceable.
D. that would be illegal.
According to the classical contract law, courts are:
A. contract makers.
B. contract breakers.
C. contract enforcers.
D. contract negotiators.
Brady, a CPA, is hired by Stanlee Inc., to audit its financial statements. Due to his
negligence, Brady fails to discover that Tom, chairman the board of directors of Stanlee,
has embezzled $300,000 of the company funds. Brady finishes the audit and issues an
unqualified opinion. Six months later, Brady reads in the newspapers that Tom has been
caught for embezzling a total of $800,000 of company funds. Tom has resigned and the
company funds have been fully recovered from him. Stanlee sues Brady. How much is
Brady liable for?
A. $300,000
B. $1,100,000
C. $800,000
D. $500,000
Which of the following is order paper?
A. A check made out “to the order of cash.”
B. A note payable to the order of X and indorsed in blank by X.
C. A note made out to Y’s order and indorsed “Pay to Z, Y.”
D. A receipt for a payment made by Z.
A(n) _____ is a contract under which an owner of property, the landlord conveys to the
tenant the exclusive right to possess property for a period of time.
A. estate
B. assignment
C. tenancy
D. lease
Which of the following statements is true of not-for-profit corporations?
A. They provide services to their members.
B. They must distribute all of their surplus revenues to their shareholders.
C. They must distribute all of their excess revenues to charities.
D. They issue stocks only to their owners.
_____ is actual authority that the principal has manifested to the agent using very
specific or detailed language.
A. Implied authority
B. Primary authority
C. Express authority
D. Apparent authority
Debtors have to file a statement of their calculations under the _____ as part of their
schedule of current income and expenditures.
A. limiting test
B. Fizeau test
C. means test
D. Sagnac test
On May 1, Ida makes a written offer to Miranda for the sale of Ida’s car. On May 2, Ida
mails Miranda a letter revoking the offer. On May 3, Ida telephones Miranda to tell him
that he is revoking the offer. On May 4, Miranda learns that Ida has sold the car to
Chris. On May 5, Ida’s letter finally gets to Miranda. Ida’s offer terminated on:
A. May 2.
B. May 3.
C. May 4.
D. May 5.
Which of the following is authorized to conduct periodic inspections of nonprivate
company auditors in order to assess whether they are complying with the requirements
of the Sarbanes-Oxley Act?
A. The Public Company Accounting Oversight Board
B. The Securities Exchange Commission
C. The Federal Trade Commission
D. The Internal Revenue Service
Abby borrows money from Cain Bank and Baker cosigns on the loan contract. Abby
fails to repay this loan and Cain Bank collects the debt from Baker. Baker is entitled to
recover the amount he paid to the bank from Abby. This is known as the:
A. right of subrogation.
B. right of return.
C. right of reimbursement.
D. right of garnishment.
Which of the following convey whatever title the grantor has at the time he executes the
deed but do not contain warranties of title?
A. Grant deeds
B. Quitclaim deeds
C. Special warranty deeds
D. General warranty deeds
The marriage provision in the statute of frauds is inapplicable in agreements that
involve:
A. post-nuptial promises.
B. oral one-sided promises of marriage.
C. mutual promises to marry.
D. pre-nuptial promises.
With regard to a prior perfected security interest in goods for which a financing
statement has been filed, which of the following parties is most likely to have a superior
interest in the same collateral?
A. A buyer in the ordinary course of business who purchased the goods from a
merchant.
B. A subsequent buyer of consumer goods who purchased the goods from another
customer.
C. The trustee in bankruptcy of the debtor.
D. Lien creditors of the debtor.
Where no separate consideration is exchanged for the legal and illegal parts of an
agreement, the agreement is said to be _____.
A. unconscionable
B. rescind
C. indivisible
D. adhesive
One strength of the instrumentalist attitude:
A. is its willingness to adapt the law to further the social good.
B. is that legal validity and moral validity always remain separate.
C. is that the natural law always remains unworkable.
D. is that it views the law as an unchanging rule that deserves obedience.
What is the term for when controlling shareholders pay themselves high salaries while
not employing or not paying out dividends to minority shareholders?
A. Quid pro quo
B. Squeeze-out
C. Collateral
D. Liquidity
Which of the types of wills is completely written and signed in the testator’s
handwriting?
A. Nuncupative wills
B. Holographic wills
C. Notarial wills
D. Self-proved wills
Which of the following is the most essential requirement while making a valid gift?
A. Intention
B. Delivery
C. Consideration
D. Acceptance
Which of the following characteristics is NOT considered by the court to determine the
“reasonableness of the risk”?
A. Magnitude of the foreseeable harm
B. Social utility of the defendant’s conduct
C. Personal characteristics of the defendant
D. The defendant’s subjective mental state
For which of the following sale contracts does title and risk of loss remain with the
seller until the buyer accepts the goods?
A. A sale on approval
B. A sale or return
C. A bulk sale
D. A sale “FAS [point of origin]”
Pam enters into a contract with Jack to sell him 300 bales of hay. The bushels are kept
in her warehouse, which is about 100 miles away from her place of business. The
contract makes no express mention of the place of delivery. The place of delivery in
such cases is:
A. Pam’s place of business.
B. Pam’s house.
C. Pam’s warehouse.
D. Jack’s house.
Sammy entered into an oral contract with Macaulay for sale of goods amounting to
$900. Sammy paid the amount. But Macaulay refused to deliver the goods. Sammy thus
suffered serious losses because of Macaulay’s breach of contract. Sammy sued
Macaulay. At the same time Macaulay took the defense under statute of frauds. Under
which principle is Sammy protected?
A. Tortious liability
B. Vicarious liability
C. Part performance
D. Promissory estoppel
A Chapter 13 debtor must begin making the instalment payments proposed in her plan:
A. within 30 days after the plan is filed.
B. one week after the plan is approved by the creditors.
C. within 60 days after the plan is approved by the court.
D. within one week of the formal submission to the trustee.
Which of the following accurately states the legal effect of the insured’s violation of an
increase of hazard clause in a property insurance policy?
A. An increase of hazard clause provides that the insurer’s liability will be terminated if
the insured takes any action materially increasing the insurer’s risk.
B. The insurer acquires the right of subrogation.
C. The insurer cannot avoid having to pay the insured for a loss unless the loss resulted
from the condition that constituted a violation of the increase of hazard clause.
D. The insured becomes obligated to pay punitive damages to the insurer.
Which of the following is a remedy in the case of an erroneous expression of an
agreement due to an error in drafting?
A. Reformation
B. Rescission
C. Avoidance
D. Tort of deceit
Which of the following is true of leases in general?
A. Provisions of extensions should be drafted separately.
B. Long-term leases need to be carefully drafted.
C. They are the most important in matters of residential property.
D. There are no laws regulating leases, only local housing codes.
At 17, Otto signed a contract to purchase a new Hummer by advancing a payment of
$50,000. However, when Otto turned 20, he wished to disaffirm this contract. Does the
law permit this?
A. Yes, because he was a minor when he signed the contract.
B. Yes, because he is not yet 21 years of age.
C. No, because a car is a “necessary.”
D. No, because Otto implied his ratification.
A(n) _____ is a gift of personal property or money.
A. estate
B. bequest
C. will
D. deed
Don starts a fire that soon consumes Paula’s trailer. Don did not know that the trailer
was occupied and had no reason to know this, but it was. After rushing into the trailer to
save her child, Paula is severely burned. Paula sues Don in negligence. Assuming that
Don has breached a duty, what two arguments might he make in defense? Assume that
the traditional negligence defenses apply. Will these arguments work here?
What happens if the principal is completely insane at the time of the agency’s
formation, and in case the principal is sane at the time of agency formation, but loses
sanity some time later?
Jane and Ridge are partners in a computer animation firm. Jane retires from the firm,
but tells Ridge it is OK to leave his name on the entrance door to the firm and in the
telephone listing. Alex, a new client, visits the firm after telephoning the firm. Alex has
seen Jane’s name listed in the phone book along with Ridge’s and the firm’s names. He
also sees Jane’s name on the entrance door to the firm. Believing Jane is a partner with
Ridge, Alex contracts to have the firm develop animation for his upcoming film. Ridge,
however, never performs the contract. Alex sues Ridge and Jane. Is Jane liable to Alex?
Ralf breaches a contract with Smith for making 1,000 Sport goggles. Smith decided to
resell them to diminish its losses. Luckily, he got a huge market for that and collected a
huge profit. The amount was far more than the contracted price with Ralf. However,
now Ralf is demanding the share from profit. Will Ralf succeed?
Discuss the rules of dissociation and dissolution for mining partnerships.
While auditing the financial statements of Merlyn Company, Arturo Artinez discovers
nonpublic, confidential information that Merlyn’s earnings will be larger than earlier
projected. Arturo informs his sister Selena about this, telling her, “You can make a lot of
money using this information because it isn’t public yet. Be discreet, however, because
I’m not supposed to give you this information.” Selena uses the information to purchase
20,000 shares of Merlyn. Three weeks later when, Merlyn releases the financial
statements showing its actual earnings, the price of its shares rises and Selena earns a
$120,000 profit. Has Selena violated Rule 10b-5 of the Securities Exchange Act?
UCC section 3-604 allows for the liability associated with a negotiable instrument to be
canceled by the person entitled to enforce the instrument.
Discuss a partner’s authority to borrow money during winding up.
Andrew decides to incorporate his sole proprietorship under the name Sampras
Entertainment Corporation. He tells his lawyer to file articles of incorporation, and the
lawyer says that the filing will be done on July 1. On June 25, Andrew makes a contract
with Wimbledon Corporation. Andrew signs the contract in the name of Sampras
Entertainment Corporation only. On July 1, the secretary of state files the articles.
Under the MBCA, is Andrew liable on the contract with Wimbledon?
Jerry and Louise contract for Jerry to sell Louise his farm for $300,000. As part of the
deal, Jerry throws in a pound of marijuana seeds, for which Louise is to pay an extra
$1000. Louise’s plan is to use the seeds to grow a marijuana crop. Is the whole contract
or any part of the contract enforceable?
The Toy Company offers to sell Wal-Mart 10,000 dolls at a certain price. The offer,
which is signed by TTC’s President, is complete and certain as to all material terms. The
offer also states that it will remain open for four months, but does not require any
consideration in support of this promise. TTC revokes the offer 100 days after it was
made. Is this revocation effective? Would your answer change if TTC revoked 80 days
after the offer was made?
Brady is the sole general partner in ABC Limited, a limited partnership. There are five
limited partners. One day, Brady went to the grocery store to purchase groceries for
himself. He forgot his personal checkbook. However, he had the partnership’s
checkbook. Unable to otherwise pay for the groceries, he wrote a check from the
partnership account, thinking that he “owned” part of the money in the account anyway.
Discuss.
What is the justification for the rule that, generally speaking, a minor can disaffirm
contracts for necessaries, if a parent or guardian supplies the minor with such
necessaries?
The Securities and Exchange Commission (SEC) is investigating Bob DeSlob for
possible violations of federal securities laws. If the violations occurred, DeSlob could
be subjected to adverse civil consequences. As part of this investigation, the SEC has
issued a subpoena duces tecum calling for DeSlob to produce copies of his federal
income tax returns for the years 2000 through 2002. Assume that the investigation is of
the sort authorized by law and is being conducted for a proper purpose. Also assume
that it is plausible for the SEC to believe that the tax return copies could contain
information relevant to the investigation. DeSlob wishes to have the subpoena duces
tecum quashed (i.e., invalidated by court order). What would be the strongest argument
for DeSlob to make to the court?
State X has a law requiring that all cars have a functioning muffler. The law’s sole
purpose is to protect all the state’s citizens against noise pollution. Donna violates the
law when her muffler falls off her car while she is driving on a busy freeway. Pete, a
citizen of State X, suffers damage to his car when it is damaged after colliding with the
muffler. Pete sues Donna under negligence per se. Will he recover? Why or why not?
In order to have any chance of being enforced, an illegal agreement must be indivisible.