Andrew agreed to exchange something clearly without value to enter a contract with
Milt. The contract will not fail for lack of consideration because, if the parties agree to
the exchange, the courts will not be concerned about whether the consideration is
“adequate.
a. True
b. False
Which of the following is true with regard to contractual relations between the principal
and a third party?
a. There is no liability on the part of the principal if the agent acts with implied
authority.
b. An undisclosed principal and the third party are contractually bound if the agent acts
within her actual authority, unless the contract specifies otherwise.
c. A principal cannot be bound if the agent acts without any authority.
d. An unidentified principal is bound only if the agent acts within the scope of actual
authority.
The Securities and Exchange Commission (SEC) is an independent, quasi-judicial
agency consisting of five commissioners.
a. True
b. False
In what situations is the accountant-client privilege recognized?
a. It is only recognized in federal court proceedings.
b. It is recognized by virtue of the common law in most states.
c. It is recognized only in those states that have enacted statutes creating such a
privilege.
d. It is recognized in most states by reason of court decisions.
Under the act of state doctrine, the United States reserves some areas of jurisdiction
over the internal actions of sovereign states.
a. True
b. False
Regional trade communities exist in Europe, North America, Central America, Africa,
and Asia.
a. True
b. False
A promissory note is an instrument that involves three parties in three capacities.
a. True
b. False
By paying the holder on an instrument, a party may be discharged from liability.
a. True
b. False
To sustain a case of fraud in the inducement, the injured party must prove that he
actually relied upon the false representation.
a. True
b. False
An output contract is an agreement of a buyer to purchase a seller’s entire output for a
stated period.
a. True
b. False
The traditional common law rule regarding the sale of property is caveat emptor which
means, “let the seller beware.”
a. True
b. False
For an offer to be valid:
a. the offeree must have knowledge of the offer.
b. the offeree must have first-hand knowledge of the offer.
c. the offer must be stated or communicated by words.
d. the offer must be made by the offeror.
A composition of creditors is a bankruptcy form of relief under Chapter 13 of the
Bankruptcy Code.
a. True
b. False
If the board delegates to a committee its duty to select a new company president:
a. the members of that committee may be responsible individuals other than board
members.
b. the committee must be approved by the shareholders.
c. the non-committee directors are relieved of liability for acts of the committee.
d. the committee may exercise all the authority of the board.
e. the committee must consist of board members and may be authorized unless
otherwise provided by the articles of incorporation or bylaws.
Under the Fair Credit Billing Act, if a consumer reports an error in the amount on his
charge account bill, until the creditor responds, it cannot:
a. take any action to collect the disputed amount.
b. restrict the use of an open-ended credit account because the disputed amount is
unpaid.
c. report the disputed amount as delinquent.
d. All of these are correct.
Where a party has been induced by fraud to enter a contract, the Restatement of Torts
permits the injured party to recover out-of-pocket damages but expressly excludes
recovery of benefit-of-the-bargain damages.
a. True
b. False
Actual authority terminates upon:
a. dissolution of the partnership.
b. illness of one of the partners.
c. physical destruction of partnership papers.
d. All of these.
A preliminary hearing is held in a criminal case to determine whether there is probable
cause to believe the defendant is the one who committed the crime.
a. True
b. False
Administrative agencies establish rules, and then act as both prosecutor and judge in
determining whether the rules have been violated.
a. True
b. False
Rayshawn served as a witness to Samuels will, but died before Samuel. When Samuels
will is probated, proof of Rayshawns handwriting is necessary unless there are enough
other witnesses to meet the statutory requirements without Rayshawn.
a. True
b. False
Duncan Supply has consigned goods to Huffman Hardware. Huffmans creditors may
not take possession of the consigned goods to satisfy their claims against Huffman.
a. True
b. False
Lynne agrees to buy Harriette’s farm for $200,000 and puts $20,000 down. Then Lynne
learns she is allergic to hay and repudiates the contract. If Harriette can sell the farm in
a good faith transaction for $190,000 a month later, 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.
A __________ is the refusal to accept an offer.
a. revocation.
b. counteroffer.
c. rejection.
d. statutory irrevocability.
Compliance with a legislative enactment or administrative regulation does not prevent a
finding of negligence if a reasonable person would have taken additional precautions to
avoid harm.
a. True
b. False
Jennifer, who stole a check “payable to cash, cannot be a holder since she did not
receive possession by voluntary transfer.
a. True
b. False
a. What public restrictions can be placed upon the use of land? Explain.
b. What private restrictions can be placed upon the use of land? Explain.
A buyer’s cancellation of a contract based on the seller’s anticipatory repudiation is
effective:
a. only if the buyer expressly notifies the seller of the cancellation.
b. if the cancellation precedes the seller’s attempt to retract her repudiation.
c. only if bond has been obtained.
d. All of these are correct.
Which of the following is correct with regard to the capacity of an agent?
a. The incapacity of the agent disqualifies him from making a contract that is binding on
his principal.
b. No mental capacity is necessary for an agent.
c. If an incompetent person who is not under guardianship appoints an agent, contracts
made by that agent are voidable.
d. A young child or a person under guardianship has the capacity to act as an agent.
For purposes of intentional torts, a person can have the intent to cause harm if the harm
is substantially certain to occur even if he or she doesn’t desire that such harm occur.
a. True
b. False
The UCC modifies the common law rule by requiring additional consideration for the
modification of a contract.
a. True
b. False
Prentice and Mercedes are partners in a catering business. The law of agency:
a. has no significance for their business.
b. is important to their business because both Prentice and Mercedes are agents of the
partnership and as such have the authority to represent and bind the business in all usual
transactions of that partnership.
c. will only affect their business if they hire employees.
d. will only affect their business if they hire independent contractors.
A condition subsequent is a much more frequent occurrence than a condition precedent.
a. True
b. False
A judge deciding a common law case must look for guidance to similar cases
previously decided by that court or superior courts.
a. True
b. False
The right of dissent would exist in all of the following cases EXCEPT where the
corporation:
a. is party to a consolidation.
b. is party to a merger.
c. will be the one acquired in a compulsory share exchange.
d. declines to declare dividends for the third year in a row.