Although he knows the ring is really valuable, Alex tells Mona her ring contains
artificial gems, but he would be willing to buy it for $50. Mona agrees. Alex quickly
takes the ring to Hanna’s Antique Jewelry Shop and sells it for $1,000. A month later,
Mona sees her ring on sale for $2,000 at the shop. Is Mona entitled to get the ring back?
a. Yes, she is the true owner of the ring since she was defrauded.
b. Yes, since Alex had void title to the ring.
c. No, since Alex had voidable title to the ring and Hanna was a good faith purchaser.
d. No, since Mona was an entruster.
A chronological report of recorded transfers and encumbrances to the property can be
obtained by a(n):
a. warranty deed.
b. title search.
c. attorney’s opinion.
d. assumption of a mortgage.
Answer the following:
A publicly held corporation is one that is both (a) owned by at least 50 shareholders and
(b) required to register under the Federal Securities and Exchange Act of 1934.
The Landrum-Griffin Act would protect against:
a. a union officer keeping a member from giving his opinion at a union meeting.
b. an employer forbidding union workers from meeting.
c. an NLRB representative influencing elections.
d. an employer requiring all its employees to be union members.
An involuntary petition in bankruptcy may be filed:
a. by any three or more creditors with unsecured claims totaling at least $7,500 if there
are more than twelve creditors.
b. by one or more creditors with an unsecured claim of $7,500 or more if there are less
than twelve creditors.
c. Neither (a) nor (b).
d. Both (a) and (b).
A(n) ____ is an unincorporated business association that provides limited liability to all
of its owners and permits all of its owners to participate in the management of the
business.
a. limited partnership
b. limited liability company
c. general partnership
d. association of fiduciaries
Larry leaves his hat under the seat at the movie theater. Is this a bailment?
a. No, because the theater manager does not have physical control of the area in which
Larry left the hat
b. No, because Larry did not pay the theater to keep his hat
c. Yes, if the theater manager finds the hat
d. Yes, since the theater controls the building
In suing to recover for environmental damage, under the common law, plaintiffs
generally have had causes of action in:
a. nuisance.
b. trespass.
c. strict liability.
d. All of the above.
Defenses that may be asserted against a holder in due course are called:
a. personal defenses.
b. real defenses.
c. special defenses.
d. holder in due course defenses.
William draws a check on City Bank payable to the order of Tara. Tara indorses it to
Rebecca. Rebecca deposits it to her account in Town Bank. Town Bank properly
presents it to City Bank, the drawee. City Bank dishonors it because William did not
have enough funds on deposit to cover the check. In this case:
a. William is discharged from liability only if he fails to receive notice of dishonor.
b. City Bank has until midnight of the following day to notify Town Bank, Rebecca, or
Tara of the dishonor.
c. if Town Bank received notice of dishonor on Monday, it would have until midnight
on Wednesday to notify Tara or Rebecca.
d. Rebecca has until midnight of the following day after receipt of notice of dishonor to
notify Tara.
The FTC policy statement addressing the meaning of unfairness provides that an injury
is unfair if it is:
a. likely to mislead the consumer.
b. substantial and not outweighed by any benefits to consumers or competition.
c. one that consumers themselves could not reasonably have avoided.
d. Both (a) and (b)
e. Both (b) and (c)
The majority of states follow the ____ rule in awarding damages for fraud.
a. benefit-of-the-bargain
b. out-of-pocket
c. liquidated
d. restitution
New Horizons delivers 20 dozen blankets to its agent, Marketall, for sale by Marketall.
Marketall maintains a place of business where it sells bedding under its own name. A
creditor of Marketall may obtain possession of New Horizons’ blankets:
a. under the Code, since a consignment is regarded as a sale or return.
b. but cannot prevail against New Horizons because New Horizons keeps title in a
consignment until the goods are sold to a third party.
c. and will prevail against New Horizons even if Marketall had a sign, in compliance
with state law, evidencing New Horizons’ ownership interest in the blankets.
d. and will prevail against New Horizons even if Marketall can establish that it is
generally known by its creditors to be substantially engaged in selling the goods of
others.
e. Choices (a), (c), and (d) are correct.
Jill contracted to purchase Kevin’s automobile under the belief that she could sell it at a
profit to Linda, but after Jill bought the car, she found out that Linda isn’t interested in
buying it. Jill:
a. cannot void the contract with Kevin.
b. can rescind the agreement with Kevin.
c. could rescind the agreement with Kevin if she was mistaken in her estimate of the
value of the auto.
d. can sue Linda for detrimental reliance.
Article 2 of the Uniform Commercial Code deals with what type of property?
a. Real
b. Personal
c. Intangible
d. Business
According to the UCC, an enforceable agreement involving the transfer of title of goods
from a seller to a buyer for a price is called a(n):
a. commercial contract.
b. express contract.
c. formal contract.
d. sale.
A defense that can only be asserted by the principal debtor is called a ____ defense.
a. real
b. subrogated
c. personal
d. joint
Under the UPA, which of the following acts does not bind the partnership unless
authorized by all of the partners?
a. Selling goods in the ordinary course of the partnership business
b. Use of partnership property for partnership business
c. Acting as an agent for the partnership
d. Confessing judgment in a claim against the partnership
Which of the following would be an invalid restrictive covenant in a deed?
a. A requirement that all buildings are of a certain style
b. A requirement that all homes contain a double garage
c. An agreement not to sell to African-Americans
d. An agreement requiring a minimum size for homes
The Check Clearing for the 21st Century Act:
a. creates a new negotiable instrument.
b. requires banks to accept checks in electronic form.
c. requires banks to create image replacement documents for any checks received.
d. All of the above.
In May 2006, Dad grants a life estate to Mom, with a remainder interest in daughter,
Sally. In June 2006, Mom sells her life estate to Bob who dies in June of 2007. Mom
dies in October of 2009. Sally claims she has a right to the land after Bob dies. Does
she?
a. No, it goes to Bob’s heirs until Mom dies
b. No, it goes back to Mom
c. Yes, since Bob’s life estate ended
d. No, it goes to Mom’s heirs
Which of the following is not an exception to the act of state doctrine?
a. A sovereign waives its right to raise the act of state defense.
b. A foreign sovereign contracts to sell a service.
c. A foreign sovereign’s decides to grant a license to export a natural resource.
d. There is a claim to property based on the assertion that a foreign state confiscated the
property in violation of the principles of international law.
The act of state doctrine:
a. allows foreign countries to be liable for their torts.
b. allows state governments in the United States to ignore treaties entered into by the
United States.
c. provides that the judicial branch of a nation should not question the validity of
actions taken by a foreign government within that foreign sovereign’s own borders.
d. is a very recent addition to U.S. law.
Chapter 3 of the Bankruptcy Code deals with:
a. the meetings of creditors.
b. proof of claims.
c. priority of claims.
d. All of the above.
Sam agrees to sell Bill one 18-cubic-foot, yellow refrigerator for $700. It is to be
delivered to Bill’s home on July 7. Under the perfect tender rule, which one of the
following cases would be a rightful rejection of the goods?
a. Sam delivered an 18-cubic-foot, blue refrigerator on July 7, and Bill calls Sam to
complain.
b. Sam sent an 18-cubic-foot, yellow refrigerator with a dent in it on July 7. Bill refuses
delivery but never bothers to call Sam.
c. Sam sent his truck to Bill’s home with the 18-cubic-foot, yellow refrigerator on July
7, but Bill was not home.
d. Sam sent an 18-cubic-foot, yellow refrigerator without ice cube trays on July 5 and
notifies Bill of the defect.
Sylvia deposits a $50 check drawn on Valley Bank into her account at First Bank. First
Bank transfers the check to Second Bank, which in turn forwards it to Valley Bank,
which pays the item. Which of the following is correct?
a. Valley Bank is the payor bank.
b. Valley Bank is the drawee bank.
c. Valley Bank is the collecting bank.
d. Both (a) and (b) are correct.
In which of the following types of cases can issues of accountant-client confidentiality
arise?
a. Civil litigation
b. Criminal cases
c. Tax disputes
d. All of the above are situations where it can arise.
The management of Corporation A forms Corporation B in which management owns
some stock and institutional investors own the rest. Corporation B issues bonds to
institutional investors to raise cash, with which it purchases the assets or stock of
Corporation A. The assets of Corporation A are used as security for the bonds. This
action by management is best described as a:
a. leveraged buyout.
b. cash-out combination.
c. short-form merger.
d. compulsory share exchange.
The Article 2 battle of the forms provision is found in Section:
a. 2-201.
b. 2-205.
c. 2-207.
d. 2-209.
Which of the following promises in consideration of marriage would be outside the
statute of frauds?
a. In consideration of Joan’s promising to marry him, a man promises to pay her an
allowance and to give her all of his property upon his death.
b. John and Mary mutually agree that their marriage shall not affect the existing
property rights of the other.
c. John and Joan mutually promise to marry each other in a formal ceremony on June
23.
d. Joan promises to release a money judgment against Steven in consideration of his
marrying her.
Under the common law, the ____ must be the mirror image of the ____.
a. contract, consideration
b. contract, offer
c. offer, acceptance
d. acceptance, offer
Tom makes pottery in his spare time. Jackie asks if he’d sell her a particular covered
bowl. Later that day, he telephones her and says she can have it for $50. She agrees, so
he tells her he’ll wrap it up for her and it will be ready in half an hour. Six days later,
Jackie had not yet come for the bowl when a dog knocks the box off the shelf and
breaks the bowl. Who is liable?
a. Tom, because he is a merchant regarding the pottery and Jackie had not yet received
the bowl
b. Tom, because the bowl was in his possession when the dog broke it
c. Jackie, because she had identified the bowl
d. Jackie, because Tom had it ready for her to pick up for nearly a week
When a state government adopts an affirmative action plan that is challenged as
constituting illegal reverse discrimination, the plan is subject to:
a. a rational basis test under the Equal Protection Clause of the Fourteenth Amendment.
b. strict scrutiny under the Equal Protection Clause of the Fourteenth Amendment.
c. Due Process Clause scrutiny.
d. a disparate treatment test under the Civil Rights Act.
The majority of courts view a stock subscription as merely an offer that cannot be
accepted until:
a. the corporation enters a novation with the subscriber.
b. the promoter signs in the name of the corporation.
c. the corporation comes into existence.
d. there is a written agreement.
The Federal Organizational Corporate Sentencing Guidelines may require restitution to
victims of certain corporate crimes.
If a person, without knowing of an advertised reward for information leading to the
return of a lost dog, gives information that leads to its return, is she entitled to the
reward?
A member of a limited liability company has a property interest in the property owned
by the LLC.
Arthur, who works for Peter, sees what he thinks is a good deal for Peter. Without
asking whether he has authority to negotiate the deal, Arthur enters into a contract on
Peter’s behalf. Peter says later that he isn’t interested. Is Peter liable on the contract? Is
Arthur liable on the contract? Explain.
The Sarbanes-Oxley Act created a powerful Accounting Oversight Board with authority
to review and discipline auditors.
Under the RUPA, dissociation of a partner results in dissolution only in limited
circumstances.
Negotiability is wholly a matter of form.
In some states a promise under seal is binding without consideration.
In a bilateral contract, if one party is not bound, neither party is bound.
“Piercing the corporate veil” will result in personal liability of shareholders.
Currently, Julia is vice president of Speller Corporation. Under the Revised Act, Julia
will not be permitted to also hold the office of treasurer.
John entered into a contract with Miriam to build her a walnut dining room table for
$1,000. A few days later, the price of walnut lumber increased 200%, which will result
in John’s incurring a $300 loss on the table. Due to the price increase, John is
automatically excused from performance under the contract.
In determining a defendant’s liability for negligence, his or her superior skill or
knowledge will be attributed in applying the reasonable person standard, thus
increasing the chance that the defendant may be held liable.
If a stock offering is made only to “accredited investors,” there is no limit on the
amount of the offering for the exemption to apply.
RICO provides for criminal penalties, but contains no provision for civil penalties.
In applying the reasonable person standard, the court takes into account a person’s
physical, but not mental, handicaps.
The parol evidence rule would allow evidence to be introduced to explain what the
parties meant by the term ‘serrated.”