Any contract that is deemed illegal is also a criminal violation.
Generally, professional shareholders are personally liable for the obligations of the
professional corporation.
Creditors wishing to obtain funds from a bankruptcy must typically file proof of a claim
with the estate within a certain time.
The Fair Labor Standards Act requires double-pay for all working hours in excess of 40
per week.
Two corporations in a state may have the same names.
At common law, the risk of loss for shipped goods falls upon the person or party who
had “technical title” at the time the goods were damaged or destroyed.
For federal district court diversity jurisdiction to exist, the amount in controversy must
exceed $500,000.
Public policy never changes and is constant for judges to rule on.
Debra allowed Frank to stay in the guesthouse located at the rear of her property. Debra
and Frank never discussed rental terms. It is very likely a tenancy at will has been
created.
The Federal Trade Commission is a state agency.
Although not required, a partnership agreement is highly desirable for the same reasons
that written contracts are generally preferred.
The U.S. Constitution gives the federal government to regulate business activity that
occurs across state lines.
Alex has executed a deed in favor of Baxter which conveys in his favor whatever title
he has at the time he executes the deed. This deed is called a warranty deed.
In general, an employee who has been fired and who wants to sue for breach of contract
need not do anything to limit or mitigate his damages, such as looking for another job.
This would unfairly benefit an employer who has wrongfully breached a contract.
The amount recoverable by an injured employee under each category of damages from
a workers’ compensation system is frequently more than or at least equivalent to what
would be obtained in a successful negligence suit.
Real property cannot be turned into personal property.
Article 2 of the UCC never applies to mixed goods-services contracts; instead, it treats
them as pure service contracts.
An administrator makes an oral promise to pay the debts of the deceased. The debts
amount to $60,000. This oral promise is enforceable.
The Robinson-Patman Act applies to discriminatory acts that occur in trade and
commerce.
When a person owes an unconditional duty to another, then he/she must perform it
unless the performance is excused.
Congress cannot invalidate state laws that are passed pursuant to the state’s police
power.
An oral stop-payment order normally is good for 14 days.
A revocation is effective at the time it is dispatched by the offeror.
The FACT Act was a 2003 amendment to the Fair Credit Reporting Act that created
protections for individuals that were the victims of identity theft.
The relevant product market is composed of those products meeting the functional
interchangeability test.
Generally, real defenses arise out of the transaction in which the negotiable instrument
was issued and are based on negotiable instruments law or contract law.
Horizontal price-fixing is not covered under antitrust legislation and is lawful.
A signature is sufficient to form the basis of authenticity of a written contract.
The sources of assignment law today are the common law of contracts and provisions
of the UCC.
Deborah owes a debt to Casey. Sean contracts with Deborah to pay her debt to Casey.
Casey is a creditor beneficiary of the contract between Sean and Deborah.
An involuntary bailee has the right to use or destroy the property.
Shareholders are owners as well as managers of a corporation.
Profit maximization is a deontological theory.
An agreement can be illegal even if no statute specifically states that such an agreement
is illegal.
Ratification is a process whereby a principal binds himself to an unauthorized act done
by an agent, or by a person purporting to act as an agent.
The objective of the UCC in regards to remedies for contract breach is to punish the
offending party.
Although agency “captives” and agency “shadows” are different phenomena, they
contribute to the same arguable result: an increase in agency independence.
Regardless of what state a corporation files in, that business will need to produce an
annual report and pay fees to the state.
The Takings Clause comes from the Fifth Amendment of the Constitution.
The motion to dismiss for failure to state a claim upon which relief can be granted is
sometimes called the:
A. deposition.
B. demurrer.
C. interrogatory.
D. directed verdict.
Which of the following would indicate a rejection under the mirror image rule?
A. Inquiry regarding terms
B. Material changes to offer
C. Grumbling acceptance
D. Present intent to accept
Anna hired Juan to act as her sales agent in her auto dealership. However, Anna has
instructed Juan not to enter into any sales contracts before she has had a chance to
review the transaction. However, one day Juan entered into a sales contract with
William, without informing Anna first. Has Juan created a contract with William that is
binding on Anna in this situation?
A. Yes, Juan did have actual authority to act.
B. Yes, Juan did have express authority to act.
C. Yes, Juan did have implied authority to act.
D. Yes, Juan did have apparent authority to act.
Anya leaves her expensive handbag in the washroom of a restaurant. Melissa follows
her inside, quietly hides the handbag inside her coat, and leaves the washroom. She
refuses to tell Anya the truth even when the former frantically starts searching for her
handbag as soon as she discovers its loss. Melissa is guilty of:
A. conversion.
B. bailment.
C. confusion.
D. fixture.
“The challenged law must be necessary to the fulfillment of a compelling government
purpose.” This is laid down for the:
A. rational basis test.
B. intermediate scrutiny.
C. full strict scrutiny test.
D. still-controlling test.
Which of the following are automatically covered as of the time the security interest
attaches to the collateral?
A. Future advances
B. Loaned funds
C. Sale expenses
D. Proceeds
Under the theory of agency law, the agent is required to follow whose instructions?
A. The principal
B. The subagent
C. The incorporator
D. The organizer
In the famous Du Pont cellophane case, the Supreme Court ruled that even though Du
Pont had a 75 percent market share in cellophane, it did not have monopoly power in
cellophane, because:
A. other functionally equivalent products were available in the market.
B. Du Pont had not acquired its market power through improper means.
C. cellophane was not a significant product in interstate commerce.
D. inference of monopoly power requires market share in excess of 80 percent.
Which of the following is an apparent authority during winding up?
A. Providing a third party notification of the dissolution
B. Continue making new contracts with disregard to the third parties’ awareness about
the same
C. Conducting business the way it was before dissolution
D. Filing a Statement of Dissolution with the secretary of state
Under exceptional circumstances in which the creation of a trust is necessary to
effectuate a settlor’s intent or avoid unjust enrichment, the law imposes a trust even
though no express trust exists. This is known as a(n) _____ trust.
A. implied
B. spendthrift
C. Totten
D. blind
Nearly all for-profit corporations are incorporated under what laws?
A. Government owned incorporation law
B. General incorporation law
C. State LLC law
D. State Non Profit law
A software engineer installs new software in Dick’s computer and returns the computer
to Dick. Dick defaults in his payments for the new software. The software engineer
loses his right of lien because:
A. this kind of service is not covered under statutory liens.
B. there is no surety or guarantor involved in the transaction.
C. he has given the computer voluntarily without asking for any consideration.
D. the computer rightfully belongs to Dick.
In 2001, Tom purchased a home with a fair market value of $100,000. At the same time,
he also purchased a valued policy with a face amount of $100,000 to insure the house
against various risks, including fire. In 2002, the house was destroyed by fire. The fair
market value of the house at the time of the fire was $150,000. What is Tom entitled to
under the policy?
A. $100,000
B. $150,000
C. $250,000
D. Nothing
Bonn, a secured party, sells collateral at a private sale to a good faith purchaser for
value after the debtor defaults. Which of the following statements is true with regard to
the UCC Secured Transactions Article?
A. In all cases, the collateral will remain subject to the security interests of subordinate
lien creditors.
B. The security interest under which the sale was made and any security interest or lien
subordinate to it will be discharged.
C. In all cases, Bonn may not buy the collateral at a private sale.
D. Bonn will be entitled to receive a first priority in the sale proceeds.
On April 2, 1987, Ritz Corp. purchased a warehouse that it insured for $500,000. The
policy contained a 75% coinsurance clause. On April 25, 1988, a fire caused $900,000
damage to the warehouse. The fair market value of the warehouse was $800,000 on
April 2, 1987, and $1 million on April 25, 1988. Ritz is entitled to receive insurance
proceeds of, at most,
A. $375,000
B. $500,000
C. $600,000
D. $750,000
In which of the following transactions is the buyer most unlikely to be entitled to
specific performance of the contract?
A. A contract for purchasing a historical artifact
B. A contract for purchasing 10,000 tons of wheat
C. A contract for purchasing a Rembrandt painting
D. A contract for purchasing a 1910 Ford
In case of resale of goods arising out of a breach of contract, if the seller sets aside
goods intended for the contract or completes the manufacture of such goods, he is:
A. not obligated to try to resell the goods to someone else.
B. obligated to try to resell the goods to someone else.
C. obligated to enter into future contracts with the buyer.
D. obliged to destroy the goods.
How have the drafters of the Code tried to promote fair dealing and higher standards in
the marketplace?
A. By applying stringent technicalities to contracts.
B. By recognizing void contracts.
C. By discriminating between merchants and nonmerchants.
D. By imposing the doctrine of good faith.
A buyer claiming lost profits caused by the seller’s breach of contract is claiming for
_____.
A. incidental damages
B. unconscionable damages
C. penalties
D. consequential damages
Many alleged violations of statutes or trade regulation rules are never adjudicated by
the FTC. Instead, they are settled through a _____.
A. cease-and-desist order
B. standard $16,000 fine per violation
C. consent order
D. standard $26,000 fine per violation
Elvisco, Inc. owns the building that houses its business. Elvisco obtained a property
insurance policy on the building from Graceland Mutual Insurance Co. The policy,
whose face amount was $200,000, contained a 75 percent coinsurance clause. The
building had a fair market value of $400,000. While the policy was in effect, the
covered peril of fire caused $90,000 of damage to the building. Elvisco has filed a claim
and proof of loss with Graceland Mutual. How much is Graceland Mutual obligated to
pay Elvisco?
A. $90,000
B. $60,000
C. $30,000
D. Nothing
One of the most important factors in establishing co-ownership of the business is:
A. making profits.
B. sharing management.
C. encouraging voluntary relationships.
D. creating joint ventures.
Contracts in which one party to the agreement agrees to buy all of the other party’s
production of a particular commodity is called a(n):
A. requirements contract.
B. composition agreement.
C. output contract.
D. nominal consideration.
Tanya, a tenant gave Lou, her landlord, a $1,000 security deposit when she moved in.
When she moved out four years later, Lou withheld $500 from Tanya’s deposit because
the carpet was 50% worn out. This was the only damage in the apartment. The carpet
has a normal useful life of eight years, and it costs $1,000. How much of the security
deposit was Lou entitled to withhold?
A. $500, because wear and tear is the responsibility of the tenant.
B. Nothing; Tanya should replace the carpet before moving out.
C. Nothing, because the wear and tear here was ordinary and reasonable.
D. The entire value of the carpet, i.e., $1000.
Sue offers to buy a house from John and they were negotiating the price of the house. In
the meantime, Sue confides in John’s wife that she is willing to pay an amount of
$50,000 for the house. Delighted to hear this, John’s wife tells him the good news. John
immediately calls up Sue and accepts her offer. Is there a binding contract?
A. Yes, because there is valid consideration.
B. Yes, because a third party has communicated the terms of Sue’s offer to John and that
John had accepted the same.
C. No, because the offeror had not communicated the terms of the offer to the offeree.
D. No, because the contract is still not signed by both the parties.
A buyer who is not a merchant rejects nonconforming goods that are not perishable. He:
A. may destroy the goods.
B. must sell the goods for the seller.
C. must hold the goods till the seller is willing to take them back.
D. need not return the goods to the seller.
If the goods are covered by a negotiable warehouse receipt, then the:
A. seller must notify the bailee about the buyer.
B. seller must endorse the receipt and give it to the buyer.
C. seller must obtain bailee’s consent before selling his goods.
D. seller must release the goods to the buyer.
Bony Corp. requires retailers and wholesalers that purchase Bony’s $200 video cassette
recorders to purchase $20-worth of blank Bony videotapes with each VCR. Under these
circumstances, which of the following statements is accurate?
A. Bony’s tying requirement will be deemed legal by the courts because it provides a
great value proposition for end users.
B. The competitive harm in this case would be to Bony’s competitors in the sale of
video cassette recorders.
C. That Bony is the market leader in the VCR market is a relevant factor insofar as the
legality of Bony’s tying requirement is concerned.
D. Evidence that almost all of Bony’s VCRs sold last year were part of the tying
agreement would be helpful to Bony if it were sued under Section 1 of the Sherman
Act.
When an auction is advertised as being _________, the seller is treated as having made
an offer to sell the goods to the highest bidder.
A. without intent
B. without reserve
C. without price
D. without offer
Which of the following is true about partnership agreements?
A. The removal or delegation of a partner’s management power eliminates that partner’s
apparent authority.
B. A partnership agreement may create classes of partners, some of whom may have
greater voting rights.
C. In large partnerships, decisions such as hiring employees and making contracts
require the unanimous agreement of all partners.
D. Unequal voting rights are often found in small partnerships.
Which of the following should a buyer who is a merchant do if the rejected goods are
perishable?
A. The buyer must make a reasonable effort to sell the goods.
B. The buyer should store the goods for the seller.
C. The buyer should reship them to the seller.
D. The buyer should immediately make the payment.