Which of the following instruments defines an order directed to a certain person,
namely a bank, to pay money from a person’s account to a third person?
A. Check
B. Promissory note
C. Certificate of deposit
D. Draft
Sean made an oral promise to sell a piece of land to Sean. Sean took a huge loan from
the bank by mortgaging everything he had. After taking almost half the money from
Manny, Sean decides that he wants to sell the land to Jason who is offering a higher
price for the property. Which of the following doctrines can Manny take recourse to in
order to implement his oral contract with Sean?
A. Integration
B. Subsequent agreement
C. Confirmatory memorandum
D. Part performance
According to several state statutes including the California statute, what is the least
number of directors required to form the board of directors?
A. 5
B. 9
C. 1
D. 3
Sharon entered into a preincorporation share subscription agreement on January 1,
2006. The corporation was formed on February 1, 2006. What is the status of this
agreement on March 1, 2006, under the Model Business Corporation Act?
A. It is binding only if Sharon has already paid for the shares.
B. It is binding even if Sharon has not already paid for the shares.
C. It is not binding because the corporation did not exist on January 1, 2006.
D. It is not binding unless Sharon ratifies the agreement after the corporation has been
formed.
What is the principal’s duty when his agent makes express or implied authorized
expenditure while acting on his behalf?
A. Duty to compensate
B. Duty to take care
C. Duty of accounts
D. Duty to reimburse
Jean agrees to lease Steven the fourth floor of his house. Jean himself resides on the
second floor. The person typing the contract strikes the wrong key, and the contract
reads the leased portion as the “second floor.” Neither Jean nor Steven notices this error
when they read and sign the contract. What will the courts do in the case of a dispute?
A. Avoid the contract
B. Rescind the contract
C. Enforce the contract
D. Reform the contract
What is a gift of real property called?
A. Residuary
B. Estate
C. Bequest
D. Devise
Mr. Green and Mr. Blue contract orally to transfer 500 widgets for $1000. Mr. Blue
sends Mr. Green a receipt one week after the agreement. If Mr. Green now refuses to
recognize the agreement a court will find what?
A. That a memorandum of understanding was created by the receipt sent by Mr. Blue
and an enforceable agreement exists
B. That no agreement exists because there is no typed agreement according to the
statute of frauds
C. There is no enforceable agreement because the receipt was not sent at the same time
as the agreement
D. The agreement is not enforceable because the Secretary of State did not approve the
agreement
Which of the following is true if an instrument is undated?
A. Its date is the date it is signed by the maker or the drawer.
B. Its date is the date it is issued by the maker or the drawer.
C. Its date is the date it is received by the payee.
D. The instrument is nonnegotiable if it is undated.
An advertisement is in violation of the Federal Trade Commission Act only when it:
A. is likely to mislead any consumer.
B. is likely to mislead a consumer who acts reasonably.
C. actually deceives any consumer.
D. does not involve a material misrepresentation.
The insurable interest requirement with regard to property insurance:
A. may be waived by a writing signed by the insured and insurer.
B. may be satisfied by a person other than the legal owner of the property.
C. must be satisfied at the time the policy is issued.
D. must be satisfied by the insured’s legal title to the property at the time of loss.
Which of the following is a condition necessary for an agreement for liquidated
damages to be enforced?
A. If actual damages would be difficult to prove in the event of a breach of the contract
B. If the amount is large enough to be considered penal
C. If the amount is considered unconscionable
D. If there is no breach of the contract agreed upon by both parties
Dan has leased a site from Mark for a period of 2 years. Bob is interested in purchasing
it and makes a great offer to him for the site. In this case:
A. Dan cannot sell the land because he does not have ownership.
B. Dan cannot sell the land, unless he stays on it for more than 5 years.
C. Dan can sell the land because he has leased it from Mark.
D. Dan can sell the land if the amount offered is equal to the value of the site.
What are depositions?
A. Written questions directed to a party, answered in writing, and signed under oath.
B. Documentary evidence introduced at a trial.
C. Oral examinations of a party by the opposing party’s attorney.
D. Written statements made during arbitration.
Vernon and Josh are partners in an accounting firm. They agree that only Josh has
authority to make contracts to perform audits of clients, an agreement known by
Mantron Company. Nonetheless, Vernon and Mantron contract for the partnership to
audit Mantron’s financial statements. Vernon takes the contract to Josh, who reads it and
says, “OK, we can perform the audit.” In this situation, Josh has _____ the contract.
A. nullified
B. modified
C. ratified
D. transferred
The Magnuson-Moss Warranty Act applies to sales of goods costing:
A. $15 or more to a consumer.
B. $15 or more to any purchaser.
C. $50 or more to a consumer.
D. $50 or more to any purchaser.
Which of the following is true of apparent authority?
A. It arises when an agent falsely claims to be acting under the authority of a principal.
B. It requires express authorization, in words or writing, from the principal.
C. It arises when the principal leads a third party to believe that an agent is authorized.
D. It requires that the agent receive consideration from the principal, i.e., the agent is
not a gratuitous agent.
In which of the following classes of corporation are the controlling shareholders the
only managers of the business?
A. For-profit corporation
B. Close corporation
C. Not-for-profit corporation
D. Publicly held corporation
Which of the following offers terminates earliest? Assume that there is no time
limitation on the offer unless the offer says otherwise.
A. An offer for the sale of land.
B. An offer to purchase stock on a stock exchange.
C. An offer that says that it will stay open for one week.
D. An offer with a valid five-day option attached to it.
Which of the following is a characteristic of profit maximization?
A. It is concerned with the equal distribution of wealth in society.
B. It protects everyone’s fundamental rights.
C. It is closely related to utilitarianism because it focuses on results.
D. It ensures complete responsible and ethical behavior by corporations.
Which of the following is true of termination of agency by operation of law?
A. The principal’s permanent loss of capacity ends the agency only if the agent is given
notice.
B. The bankruptcy of the agent automatically terminates the agency relationship.
C. Termination by the death of the principal is effective only when the agent has notice
of the principal’s death.
D. The death of an individual agent does not terminate the agency relationship if the
principal is not an individual.
What is the term for a shareholders’ right to offer resolutions, to speak for and against
ideas at a shareholders meeting?
A. The right of full participation
B. The right to proxy
C. The right to profit
D. The right to incorporate
If there is a conflict between the express terms of the contract and the past course of
dealing between the parties, the:
A. past course of dealing between the parties will prevail.
B. express terms of the contract prevail.
C. contract is voided.
D. seller is excused.
Mr. Green is a CPA who has been hired to perform an audit of a publically traded
corporation. As part of his duties Mr. Green comes into possession of sensitive
materials of the corporation. After the audit is over what should Mr. Green do with the
materials?
A. Return all of them to the corporation
B. Keep them until asked for them
C. Turn the documents over to the Secretary of State’s Office
D. Send the documents electronically to the SEC
A(n) _____ is something that is essential for the minor’s continued existence and
general welfare that has not been provided by the minor’s parents or guardian.
A. disaffirmance
B. necessary
C. estoppel
D. capacity
The settlement of an unliquidated debt is called a(n):
A. forbearance to sue.
B. accord and satisfaction.
C. past consideration.
D. moral obligation.
Which of the following is true regarding a transferor’s liability on a transfer warranty?
A. The warranties apply only when the transfer was accompanied by the transferor’s
indorsement.
B. The transferor is liable only after presentment to the drawee or a primarily liable
party, followed by that party’s dishonor.
C. It applies even when there was no consideration for the transfer.
D. If the transfer was by indorsement, the warranty extends to all subsequent
transferees, and not just the immediate transferee.
A nonprofit corporation will limit its powers pursuant to what?
A. The nonprofit corporation’s purpose clause
B. The nonprofit corporation’s articles of organization
C. The majority vote of the general class of shareholders
D. The majority vote of the preferred class of shareholders
Carl writes a check made payable to “Patricia Sullivan or William Hayes.” Who may
negotiate the check?
A. Neither Patricia nor William: The check is unenforceable.
B. Patricia as she is the first named party to whom the check is made payable.
C. William as he is the last named party to whom the check is made payable.
D. Either Patricia or William may negotiate the check.
Green and Nunn own a 40-acre parcel of land as joint tenants with the right of
survivorship. Nunn wishes to sell the land to Ink. If Nunn alone executes and delivers a
deed to Ink, what will be the result?
A. Green will retain a undivided interest in the 40-acre parcel, and will be unable to set
aside Nunn’s conveyance to Ink.
B. Ink will obtain an interest in of the parcel, or 20 acres.
C. Ink will share ownership of the 40 acres with Green as a joint tenant with a right of
survivorship.
D. The conveyance will be invalid because Green did not sign the deed.
Geometry Co. manufactures microchips for electrical products. Jojoba monopolizes the
supply of gallium arsenide, which is used heavily in the manufacturing of microchips.
Because of this monopoly and the demand for microchips, Geometry enters into a
long-standing agreement with Jojoba for 20 years. For the first couple of years, due to
the huge demand for the microchips, Geometry insisted on timely delivery of the raw
material. However, once the demand slumped, Geometry asserted economic duress to
avoid the contract. Will Geometry be successful?
A. Yes, because Geometry was forced to enter the contract due to Jojoba’s monopoly
over the supply of the raw material. The consent was not free.
B. No, because the facts prove that Jojoba had not caused any undue duress.
C. Yes, because there was economic duress and thus the contract is voidable at
Geometry & Co.’s discretion.
D. No, because Geometry has already taken benefits under the contract for two years.
In a situation in which there is a conflict of interest between an agent who is authorized
to make a certain transaction for a principal and the principal, the agent is allowed to:
A. engage in self-dealing transactions if the principal and the third party are unaware of
the transactions.
B. compete with the principal regarding the agency business.
C. act as agent for both parties to a transaction without disclosing the double role to
both principals.
D. act as a middleman and serve both parties to a transaction without notifying either
principal.