MegaCorp is incorporated under Delaware law. It is registered to do business in New
York. Legally, in New York MegaCorp is known as what kind of corporation?
a. Domestic.
b. Foreign.
c. Alien.
d. Cumulative.
What is the purpose of a corporation?
a. Make the shareholders money.
b. Include consideration of the welfare for all stakeholders
c. Both answers are true
d. Neither answer is true
Ralph is a professional football player. He signs a valid contract with the Jets. Later, he
claims that he was also promised free use of the Jets private jet, but this was not in the
contract. What type of clause in his contract would prevent him from flying away with
this claim?
a. A complete agreement clause.
b. A “no additional terms clause.
c. An integration clause.
d. A severability clause.
Marco agrees to sell Clowns R Us some balloons. The contract states that Clowns may
buy as many balloons as it wishes. This agreement is:
a. a requirements contract.
b. an output contract.
c. an illusory contract.
d. an enforceable contract.
ABC Siding, Inc. manufactures aluminum siding. ABC enters into a contract to deliver
siding to Slippery Siding, Ltd., a retailer of aluminum siding. The written agreement
insists that all modifications to the agreement be in writing and signed by both parties.
This prohibition against oral modifications is:
a. valid regardless of whether the clause is signed separately.
b. invalid unless the clause is signed separately by Slippery Siding, Ltd.
c. invalid unless the clause is signed separately by ABC Siding, Inc.
d. invalid unless new consideration is supplied by the parties when the modification
agreement is made.
Master Glue Hairspray, Inc. contracts to purchase 100 umbrellas with its logo and
slogan, “A spray a day keeps the rain and wind away!” specially printed on the
umbrellas and its 1-800 telephone number on the umbrella handle. After the seller
completes the order, Master Glue refuses to accept or pay for the umbrellas. Because of
the special logo and telephone number, the seller has been unable to find a new buyer. If
the seller sues Master Glue, what is the proper measure of the seller’s damages?
a. Contract price minus market value of the goods at the time of delivery.
b. Contract price.
c. Lost profits.
d. Cover price minus contract price.
The United States has taken a position that legal issues are best resolved by lawsuits
involving parties with conflicting interests presenting their strongest possible case to a
neutral factfinder. Because of this, the legal system in the United States is considered:
a. an adversary system.
b. a conflict system.
c. an alternative dispute resolution system.
d. a mediation system.
In order to satisfy the statute of frauds, a writing must:
a. be a formal written document drafted by an attorney.
b. be signed by the defendant and contain the name of each party, the subject matter of
the agreement, and the essential terms and promises.
c. be notarized.
d. All of the above.
Debts that cannot be discharged in bankruptcy include all EXCEPT:
a. alimony.
b. income taxes.
c. negligence judgments.
d. fraud judgments.
Insurance obtained by a limited partnership on the life of the general partner would be:
a. double indemnity insurance, because both the limited partnership and the general
partner are insured.
b. key-person insurance, because the general partner is a key person, contributing a
great deal to making the business successful.
c. a co-insurance policy because both the limited partnership and the general partner are
insured.
d. whole life or straight life insurance which builds a cash value.
Astrid and Razi formed a partnership in which they agree to share profits 60 percent to
Astrid and 40 percent to Razi. Losses will be shared:
a. equally, unless otherwise agreed.
b. 60 percent to Astrid and 40 percent to Razi, unless otherwise agreed.
c. according to their capital contributions to the partnership.
d. in whatever proportion provides the greatest tax advantage for the partners that year.
A company that makes a commercial with a person who does an excellent, realistic job
of pretending to be a famous movie star could be sued by the real actor for the tort of:
a. intrusion.
b. defamation.
c. commercial exploitation.
d. none of the above, since public figures are often imitated by other actors.
An accommodation party on a negotiable instrument:
a. must receive consideration.
b. is secondarily liable on the instrument.
c. is the same as a “guarantor under the UCC.
d. has the same liability to a holder as the person for whom he signed.
Larry purchased a Leisure Lawnmower because the company salesperson intentionally
misled him by assuring him that the mower was self-propelled, had a mulching feature,
and had a five-year unlimited manufacturer’s warranty. When Fred finds out that his
new Leisure Lawnmower is not self-propelled, does not mulch, and has a 90-day
warranty, he may successfully sue for:
a. reformation of the contract only.
b. restitution only.
c. restitution and possibly punitive damages.
d. compensatory damages only.
The Securities and Exchange Commission (SEC) has proposed a set of rules that would
ultimately require U.S. companies to use international financial reporting standards.
Why?
a. With global business there is a need for consistency
b. More than 100 countries already use it.
c. foreign companies would be more willing to invest in the United States if they could
use international accounting rules.
d. All of these answers are true
The Code’s requirement of good faith in the performance and enforcement of every
contract imposes:
a. a greater duty on merchants than consumers.
b. a greater duty on consumers than merchants.
c. the same duty on both consumers and merchants.
d. a greater duty on parties to a sales contract with the purchase price over $500.
Anti-takeover tactics include all EXCEPT:
a. staggered board of directors.
b. negative tender offers.
c. greenmail.
d. chewable poison pills.
In incorporating E-prise, the promoter gave an incorrect ZIP Code for the registered
agent. All of the other requirements for incorporation were met. E-prise is a(n):
a. de jure corporation.
b. de facto corporation.
c. corporation by estoppel.
d. indemnified corporation.
A company advertised a pain relief ointment called “Aspercreme.” The package stated
“the strong relief of aspirin right where you hurt.” The product did not contain any
aspirin. The FTC ruled that:
a. the advertising was not deceptive since the benefit of the product outweighed any
harm caused by potentially misleading claims.
b. the advertising was misleading, and the company would have to change the name of
the product or add aspirin to its formula.
c. the advertising was deceptive, and the FTC required the company to specifically state
in its promotions that the product did not contain aspirin.
d. None of the above
Stacy believes her rights as a union worker have been violated by her employer. If the
specific rights are addressed by both state and federal law:
a. the state law will apply.
b. the federal law will apply.
c. both state and federal law will apply.
d. she may choose which law, state or federal, will govern her rights.
In bailment cases, exculpatory clauses:
a. are very rarely used.
b. are somewhat more likely to be enforced than in other types of cases.
c. ordinarily involve an attempt to limit liability for damage to persons rather than
property.
d. None of the above.
Mercury Motors inadvertently mixes up a work order on Peter’s car. Peter brought the
car in to have the tires rotated. Mercury tuned up the motor by mistake, conferring a
benefit on Peter. If Mercury Motors insists that Peter pay for the price of the tune-up,
Mercury Motors:
a. can recover its reliance interest.
b. cannot recover its expectation interest because there was no enforceable agreement.
c. will win based on breach of contract.
d. will lose because a personal service contract was involved.
Travel Lines offered to sell 10 round-trip tickets to Elaine. Travel Lines stated that the
acceptance must be in writing by USPS next-day service. Which of the following
acceptances will create a contract between Travel Lines and Elaine?
a. Elaine calls Travel Lines and states that she will buy the tickets.
b. Elaine sends a fax to Travel Lines stating she will buy the tickets.
c. Elaine sends a letter by USPS next-day service to Travel Lines stating that she will
buy the tickets.
d. All of the above responses will create a contract between Travel Lines and Elaine
since they constitute reasonable means of communication.
A plaintiff sues in negligence but has no direct proof that the defendant behaved
unreasonably. Which of the following is most likely to help the plaintiff?
a. Res judicata.
b. Stare decisis.
c. Res ipsa loquitur.
d. Mens rea.
Ramona has received a discharge in bankruptcy, but wants to reaffirm a debt to her
sister. To be valid, the reaffirmation:
a. will be scrutinized by the court to make sure her sister has not unfairly pressured
Ramona.
b. will be automatically disallowed because allowing Ramona to promise to pay a
discharged debt would be contrary to the goals of the bankruptcy proceedings.
c. will be automatically allowed if Ramona voluntarily chooses to make it.
d. must clearly disclose that Ramona has the right to rescind at any time since the debt
was already discharged.
Meister Bros. shipped 250 radiator belts to fill Braybons order. Quality control
measures had been in place in Meisters factory when the belts were manufactured.
When Braybon received the order one day before it was due, it notified Meister that it
rejected the belts because of a variation from the contract specifications. Meister,
although it believed the original belts met the contract specifications, notified Braybon
that it would supply conforming goods within one week. When the conforming goods
arrive in one week:
a. Braybon must accept them, but does not have to pay the full price because the
contract deadline has passed.
b. Braybon does not have to accept them because Meister Bros. only has one chance to
fill the order correctly.
c. Braybon should accept them because Meister Bros. has a right to cure even after the
contract deadline under these circumstances.
d. Braybon does not have to accept them because Meister Bros. failed to meet its UCC
requirement to deal in good faith.
Which of the following is NOT true under the Electronic Communications Privacy Act?
a. An intended recipient of an e-mail has the right to disclose it to third persons.
b. ISPs are prohibited from disclosing the content of electronic messages to anyone
other than the addressee, even if the disclosure is necessary for the performance of the
ISP’s service.
c. An employer has the right to monitor workers’ e-mail if the monitoring occurs in the
ordinary course of business or the employer provides the e-mail system.
d. To access e-mail messages that have been stored for 180 days or less, the government
must first obtain a search warrant.
Ikerd was entering the United States from a trip abroad when the Customs Service
confiscated some goods she had purchased and brought back with her. The
determination of whether the government is attempting to take property and what type
of hearing the Customs Service must offer Ikerd, is an analysis of:
a. substantive due process.
b. procedural due process.
c. the Takings Clause.
d. eminent domain.
A requirements contract is a contract:
a. in restraint of trade.
b. in which the seller provides all of the goods that the buyer needs.
c. in which the buyer purchases all of the goods that the seller produces.
d. in which a party must buy a product it does not want in order to be allowed to buy a
product it requires.
John owns a thoroughbred horse named Prince Charming that just ran in the Kentucky
Derby. Prince Charming came in last, much to John’s frustration and embarrassment.
John exclaims in a loud voice, “I’m selling that horse to the first person who hands me
$100 bucks!” John has:
a. made an offer to anyone within hearing distance and will be bound by his offer to the
first person who produces $100.
b. made a firm offer and will be bound by his offer for a reasonable period of time.
c. made an acceptance to the first person who can produce $100.
d. not made an offer because under the circumstances a reasonable person would not
conclude that John had intent to make an offer.
Defining a corporation with such information as the corporate name, the number and
type of authorized shares of stock, identification of the purpose and the agent, is done
through the:
a. charter.
b. articles of incorporation.
c. certificate of organization.
d. All of the above. All of these terms are used to identify the same document.
The National Labor Relations Act guarantees employees the right to join unions.
Discuss how SEC rules affect the legal and the ethical relationship between accountants
and the companies they audit.
Lucky, a contractor, enters into a contract with Penny, a homeowner, to remodel her
kitchen. The contract provides a specific completion date, but does not specify what
will happen if Lucky does not have the job finished by the date. So, Penny may deduct
$100 per day from the contract price until the job is finished, because this is the
industry norm.
Wilmas arm is broken when Paula knocks her down during an argument. If Wilma sues
Paula for battery, what damages is Wilma likely to receive?
When measured in dollars, street crime costs society more than twice as much as
white-collar crime.
Under the Equal Pay Act of 1963 an employee may not be paid at a lesser rate than
employees of the opposite sex for tasks requiring equal skill, effort, and responsibility
under similar working conditions.
Li is the vice president of marketing for Felson, Inc., a manufacturer of childrens
clothing Felson is considering building a factory in a developing country, where there
are few restrictions on working conditions, wages, or maximum work hours. Which
viewpoint: utilitarian or deontological would support this move? Why?
The city of Richmond needs land owned by the Neelans to expand a middle school. The
Neelans do not want to sell. Discuss what course of action the city can take and the
basis for this action.
Reva prepares and signs a document that she intends to be her will. If she has not
followed the legal technicalities of her state regarding executing a will, the court may
not enforce the will.
Strict liability is based on contract law.
Per se violations are subject to both civil and criminal penalties.
A partner always has the right, though not the power, to leave a partnership.
Under the amended Securities Exchange Act of 1934, accountants are liable jointly and
severally whether or not they knew they were violating the law.
List and briefly describe the basic elements of a contract.
Companies with substantial assets must notify the FTC before consummating a merger.
The Williams Act regulates the conduct of the target company in a takeover situation.
Herb was interviewed for a job on Wednesday. The employer orally offered Herb a job
right on the spot. Herb orally agreed to start working the following Monday, to be
employed from that Monday, for one year thereafter. Three weeks after starting the job
Herb was fired without cause and replaced by the employer’s friend. Will Herb be
successful in an action brought against the employer for breach of contract?