An agent is not normally liable on a contract he makes with a third party on behalf of
a(n) ____ principal.
a. undisclosed
b. disclosed
c. partially disclosed
d. All of the above are correct.
In a “closed shop,” an employee:
a. cannot be hired if he is a union member.
b. cannot agitate for union representation.
c. must be a union member before being hired.
d. need not be a union member to work but must pay the union an amount equal to
normal dues.
The fraudulent marketing of one person’s goods as those of another is referred to as:
a. palming off of goods.
b. trade secrets.
c. fraud.
d. a tying arrangement.
Ellen, age 25, was recently divorced and has applied to Mayberry Bank for a loan. The
bank, as regulated by the Equal Credit Opportunity Act:
a. can ask her if she is married.
b. can ask her if she plans to have children soon.
c. can discount her loan rating because she is 25 and likely to have children within the
next five years.
d. must notify Ellen within 30 days after receiving her credit application of the action
taken, and if she is denied credit, the bank must give her specific reasons for the denial.
An insurable interest in property must exist:
a. at the time the insurance policy is obtained.
b. at the time the loss occurs.
c. from the time the policy is obtained to the time the loss occurs without interruption.
d. for only one person at a time in a particular property.
Damages a buyer may recover for loss resulting from requirements, the needs of which
the seller had reason to know at the time of contracting and which could not reasonably
be prevented by cover, are:
a. incidental.
b. consequential.
c. punitive.
d. liquidated.
Contract law is significant in that it is basic to other fields of law such as:
a. sales of personal property.
b. commercial paper.
c. secured transactions.
d. All of the above.
Harry Jones at Jones Brothers Furniture Co. does not like the Bryte Lamp Co.
representative, so he decided that Jones Brothers would boycott Bryte. Under the
Sherman Act, this is:
a. per se illegal.
b. no violation.
c. a tying arrangement.
d. vertical market allocation.
Consideration:
a. must be given by the promisee to the promisor.
b. must be adequate.
c. may be given to the promisor or to some other person by the promisee or by some
other person.
d. need not be equal between the parties, but must be proportionate.
The Electronic Signatures in Global and National Commerce Act:
a. makes electronic records and signatures valid and enforceable across the United
States for many types of transactions affecting interstate commerce.
b. excludes all transactions covered under the UCC.
c. was enacted by all the states after being promulgated as a uniform act.
d. defines an “electronic agent” as a true agent.
Fraudulent or intentional misrepresentation is covered under Section ____ of the
Restatement.
a. 525
b. 537
c. 538(a)
d. None of the above
A corporation is considered a citizen:
a. under the Fourteenth Amendment’s “privileges or immunities” clause.
b. of the state of its incorporation.
c. of the state in which it has its principal office.
d. All of the above.
e. Both (b) and (c) for the purpose of identifying diversity of citizenship as a basis for
federal court jurisdiction in lawsuits.
Assume that Denmark, a member of the European Union, is contemplating the
enactment of a protective tariff for its fledgling CD industry due to domestic political
and economic pressures. Assume further that the EU has a tariff that it has also enacted
for all CD manufacturers within the EU that is considerably lower than the one that is
being proposed in Denmark. The policy behind the lower EU tariff is to promote freer
trade even at the risk of destroying some of the weaker manufacturers in that
organization. In this situation:
a. Denmark could enact the higher tariff since EU members give up no authority to the
organization in regulating trade and business practices.
b. Generally, when EU economic policies and rules conflict with the laws of member
nations, EU law will prevail. Thus, Denmark’s tariff may be illegal.
c. Denmark could petition the United Nations Council of Economic Policy and if it
concurs with Denmark, the EU tariff policy would be overridden.
d. Assuming Denmark is a signatory to WTO, it could retain its higher tariff since the
purpose of WTO is to protect domestic industries by promoting higher tariffs.
Which of the following remedies are mutually exclusive and could not be obtained
simultaneously?
a. Cover, incidental and consequential damages
b. Identification of the goods and withholding delivery
c. Withholding delivery and suit to recover incidental and consequential damages
d. None of the above. The Code’s remedies are cumulative, unless under the facts of an
individual case one remedy bars another.
Leonard offers to sell his diamond ring to Emily. If Diane overhears the offer and says,
“I accept the offer”:
a. Diane cannot accept the offer, because it wasn’t made to her.
b. this is a valid acceptance.
c. the offer has not been communicated to the offeree.
d. this is an invitation seeking offers and not an offer.
Nancy, who lives in Birdville, wants to open a McHenry Roast Chicken franchise.
Mark, a representative of McHenry, told Nancy, “If you will buy a lot and build a
building in River City, we will give you a franchise.” Nancy bought the lot and built the
building as instructed, only to discover that McHenry had awarded the franchise to a
large corporation. McHenry claims no liability to Nancy since there was no
consideration. Which statement is most accurate?
a. McHenry is not liable to Nancy since there is no consideration.
b. McHenry is not liable to Nancy since there is past consideration.
c. McHenry is liable to Nancy since adequate consideration is given by both parties.
d. McHenry is liable to Nancy based on the concept of promissory estoppel.
No implied warranty exists:
a. if it is disclaimed in any manner.
b. if it applies to defects that are apparent upon examination and the buyer inspects the
goods before entering into the contract.
c. as to defects that an examination ought to have revealed, where the buyer examined
the goods as fully as he desired or where the buyer refused to examine the goods.
d. All of the above.
e. Both (b) and (c).
Which of the following is least likely to be classified as a necessary for which a minor
will be held liable on a contract?
a. A camera
b. School supplies
c. Boots for a snowy climate
d. An automobile
An offer to purchase capital stock in a corporation yet to be formed is made by a(n):
a. promoter.
b. subscriber.
c. incorporator.
d. subsidiary.
Pam certified a statement prepared by John, her employee, without checking John’s
work. He was never known to be anything but diligent and his integrity had never been
questioned. The audit contained gross misstatements. Pam defends a suit against her
claiming “due diligence.” She will:
a. succeed, since she had no reason to believe her employee would lie.
b. succeed, because a reasonable person would not have inquired further.
c. fail, because due diligence requires reasonable investigation.
d. fail, because she is automatically liable for her employee’s act.
If a registered copyright is willfully infringed, the owner may ask for and receive which
of the following remedies?
a. Rescission and restitution
b. Punitive damages
c. Injunction
d. Both (a) and (c) above
e. All of the above
A sculptor wishes to protect one of his original works. He may do so by applying for a:
a. copyright.
b. patent.
c. service mark registration.
d. trademark registration.
Diego, a widower, dies intestate, leaving two surviving children and two grandchildren
who are children of his deceased daughter. If Diego’s surviving children each take
one-third of his estate and the grandchildren each take one-sixth of the estate, this is
described legally by the statement that:
a. lineal descendants of predeceased children take property per stirpes.
b. lineal descendants take property per capita.
c. collateral heirs take the property per stirpes.
d. lineal descendants and collateral heirs take the property per capita.
Milton owns a business delivering coffee and donuts within the downtown area of the
city. Smith Co. calls him to deliver a large quantity of his products to their local office.
While taking a coffee urn through the Smith Co.’s office, Milton drops it on Lester,
scalding him. Who is liable?
a. Smith Co. and Milton are liable
b. Milton alone is liable
c. Lester has to absorb the cost himself since he assumed the risk by working at Smith
Co
d. Smith Co. alone is liable
When does acceptance of an offer to enter into a unilateral contract generally occur?
a. Upon notice of intent to accept by the offeree.
b. Upon full performance by the offeror with the intention of accepting.
c. Upon commencement of performance by the offeree.
d. Upon full performance by the offeree with the intention of accepting.
Match the following:
a. A sequence of previous conduct between parties establishing a common basis for
interpreting their agreement.
b. A practice or method of dealing regularly observed and followed in a place, vocation,
or trade.
c. The transfer of a major part of one’s inventory not in the ordinary course of business.
d. A contract in which the risk of loss remains with the seller until the buyer accepts the
goods.
e. Requires the seller to unload the goods from the carrier at the named destination.
f. Tangible, movable personal property.
g. Unfairness of the bargaining process.
h. A signed writing by a merchant that gives assurance an offer for the purchase or sale
of goods will be kept open for a maximum of three months.
i. A contract in which the risk of loss is on the buyer until she returns the goods.
j. Delivery term for a shipment contract; free on board.
k. The obligation of the seller to convey the right to ownership without a lien.
l. Relationship pertaining to remote sellers in the chain of distribution.
m. A term used to indicate that the price includes the cost of transportation and delivery
of the goods alongside the carrier.
n. A contractual relationship between the plaintiff and the defendant that was necessary
at common law to maintain a breach of warranty lawsuit.
o. An affirmation of fact or promise about the goods or a description, including a
sample of the goods, which becomes part of the basis of the bargain.
p. Provides the goods are reasonably fit for the ordinary purposes for which they are
used.
q. Limitation on the time period for which a manufacturer is liable for injury caused by
its defective product.
r. A contract in which the seller agrees to pay costs of freight, insurance, and
transportation to the destination.
s. A person who is a dealer in the goods, or who by his occupation holds himself out as
having knowledge or skill peculiar to the goods or practices involved, or who employs
an agent or broker whom he holds out as having such knowledge or skill.
t. Oppressive or grossly unfair contractual provisions.
1) course of dealing
2) firm offer
3) procedural unconscionability
4) goods
5) merchant
6) statute of repose
7) usage of trade
8) bulk transfer
9) CIF
10) ex-ship
11) FAS
12) sale on approval
13) sale or return
14) warranty of merchantability
15) express warranty
16) privity
17) vertical privity
18) warranty of title
19) FOB place of shipment
20) substantive unconscionability
Which of the following may be used to redress the ultra vires acts committed by a
corporation?
a. A proceeding by shareholders to enjoin furthers such acts
b. A shareholder derivative suit against the directors or officers for exceeding their
authority
c. A proceeding by the Attorney General of the state to enjoin the corporation from the
transaction of unauthorized business
d. All of the above may be used.
An involuntary petition for bankruptcy can be filed with respect to a:
a. nonprofit charitable organization.
b. partnership that invests in real estate.
c. life insurance company.
d. wheat farmer.
Which of the following would most probably be considered a valid offer?
a. “Would you like to buy this?”
b. “I’d give $50 for a cold glass of water.”
c. “Special sale on DVRs today – $200 each.”
d. “$100 reward for return of lost white-gold, men’s wedding band inscribed with
initials ‘TEA’ to Tony Adams, 350 Main Street, Peoria.”
Michael issues a check to Paula. She negotiates the check to Harold as payment for a
used television. Harold has no notice of any claims or defenses and takes the check in
good faith. Harold indorses the check and gives it to his son as a birthday present.
a. Is Harold’s son a holder in due course? Explain.
b. What rights does Harold’s son have with respect to the check? Why? Explain.
c. Assume that Michael has a personal defense of fraud in the inducement against Paula.
Can he use that defense against Harold? Can he use that defense against Harold’s son?
Explain.
Mary goes to a stockbroker, purchases 50 shares of a certain stock, and instructs the
broker to register the stock in her husband Warren’s name. If this stock is intended as a
Valentine’s Day gift, Warren becomes a(n):
a. donee beneficiary.
b. transferee.
c. delegatee.
d. assignee.
On April 6, Ellen sends a check for a magazine subscription and then discovers she has
already paid for it. She calls her bank and orders that the bank not make payment. That
order will be good until:
a. April 13.
b. October 6.
c. April 13 if confirmed in writing.
d. October 6 if confirmed in writing.
If Jack contributed $1,000 as a limited partner and signed a certificate of limited
partnership, but the certificate was filed in the wrong office:
a. Jack may avoid liability as a general partner if he withdraws from the business and
quickly renounces future profits.
b. Jack is not a partner at all and may withdraw his contribution.
c. Jack is a general partner for all purposes.
d. Jack may become a limited partner by quickly filing an affidavit stating he was not
responsible for the erroneous filing.
Under the RUPA, a partnership agreement may be written or oral, but not implied.
Embezzlement and forgery are considered white-collar crimes.
Most state statutes permit a landlord to evict a tenant for nonpayment of rent.
The tort of false light imposes liability if the matter in question is objectionable to a
reasonable person but is not necessarily defamatory.
The UCC uses a transactional approach to risk of loss questions.
The Model Business Corporation Act provides for small, closely held corporations to be
organized and creates Subchapter S corporations with special benefits.
Presentment is excused where the acceptor is undergoing bankruptcy.
The Pregnancy Discrimination Act of 1978 extended the benefits of Title VII to
pregnant women.
The common law recognizes an accountant-client privilege.
The Clayton Act weakened the Sherman Act by eliminating illegal acts that had
previously been prohibited.
A noncontractual promise may be enforceable where there has been justifiable reliance
on the promise.
An implied agreement in the contractual relationship is the agreement by the accountant
to act in a competent and professional manner.
If a lease contract does not sufficiently cover the particulars of performance, Article 2A
provides many gap-filler provisions.
Mary tells her accountant, “I must have this year’s audit completed by March ” The
accountant agrees to complete the audit by March Under general contract law, if the
audit is not completed by March 1, Mary does not have to pay the accountant for the
audit.
Under U.S. law, the CISG does supersede the UCC whenever the CISG applies.
An advertisement is usually an offer to sell.
The common law “mirror image” rule applies to an offer and the acceptance of that
offer in a contract for the sale of goods.
The parol evidence rule prohibits introduction of all evidence that would result in
modifying written contracts.