Mere promotion of a security makes a person a seller and, therefore, liable under
section 5 of the 1933 Act based upon the sale of a security without an effective
registration statement or by means of a noncomplying prospectus.
a. True
b. False
Answer:
In order to take advantage of the business judgment rule, directors must have made an
informed decision and have no conflict of the interest with the corporation.
a. True
b. False
Answer:
If the promisee entered into the contract in order to discharge a duty he or she owed the
third party, then the third party is a(n) __________ beneficiary.
a. express
b. implied
c. creditor
d. donee
Answer:
To prevail on a claim for retaliation under Title VII, a plaintiff does not need to prevail
on his or her Title VII discrimination claim.
a. True
b. False
Answer:
Which of the following was created by food advertisers in an attempt to halt
government regulation aimed at stopping marketing preying on children’s vulnerability?
a. The Children’s Advertising Review Unit
b. The Minor’s Board Unit
c. The Minor Protection Review Unit
d. The Children’s Enhancement Board
Answer:
The ownership interests of tenants in common are by definition equal.
a. True
b. False
Answer:
Under the duty of __________ an agent has a duty to act solely for the benefit of his or
her principal in all matters directly connected with the agency undertaking.
a. loyalty
b. subservience
c. trust
d. obedience
Answer:
The federal statutes on race, gender and employment discrimination apply both to
employees and independent contractors.
a. True
b. False
Answer:
In CASE 4.4, United States v. Windsor (2103), the U.S. Supreme Court addressed the
question of:
a. whether the case should be analyzed using a ‘strict scrutiny’ analysis.
b. the constitutionality of a state statute denying state benefits to same-sex couples who
were married in states where same-sex marriage is legal.
c. the constitutionality of a federal statute denying federal benefits to same-sex couples
who were married in states where same-sex marriage is legal.
d. whether the case should be analyzed using a ‘rational basis’ analysis.
Answer:
A controlling shareholder is traditionally considered an insider.
a. True
b. False
Answer:
__________ for arrest is defined as a reasonable belief that the suspect has committed a
crime or is about to commit a crime.
a. Probable cause
b. Support
c. Probable reason
d. Reasonable cause
Answer:
If an issuer wanted to raise $100 million, and offer her company’s securities to no more
than 35 unaccredited investors and an unlimited number of accredited investors, she
would choose to exempt her offering under the __________ exemption.
a. Rule 506
b. Rule 504
c. Rule 505
d. Private Placement
Answer:
In CASE 20.5 Third Point LLC v. Ruprecht (2014), the Delaware Court of Chancery
considered whether the __________ had breached its __________ duty when it adopted
a(n) __________ stock rights plan in response to an activist hedge-fund’s increased
holdings in the company’s stock.
a. board of directors, fiduciary, two-tiered
b. CEO, fiduciary, poison-pill
c. board of directors, loyalty, poison-pill
d. board of directors, fiduciary, poison-pill
Answer:
Under the __________, a statement made by a defendant in custody is admissible only
if the defendant was informed prior to police interrogation of his or her constitutional
rights.
a. forced self-incrimination rule
b. double jeopardy rule
c. Miranda warnings
d. due process right
Answer:
Which of the following is NOT an accredited investor under Rule 501?
a. Any national bank
b. Any director of the issuer
c. Any corporation with total assets in excess of $1 million
d. Any natural person with a net worth in excess of $1 million
Answer:
Utilitarianism is a major deontological system that operates under the proposition that
the ideal is to focus on motivation rather than on consequences.
a. True
b. False
Answer:
Paul suspects that his girlfriend Jen, who does a significant amount of photography on a
freelance basis from her home, is cheating on her income taxes. One day he and Jen
have a big argument, and she tells him to get lost. The next weekend, while Jen is out
with her new boyfriend, Paul uses his spare key to her house and goes in to her home
office. He goes through the records she keeps of her receipts and checks, as well as
copies of her income tax filings. Just as he suspected, Jen was taking significant cash
payments without paying tax. He took the incriminating records to the Internal Revenue
Service. Jen was later arrested for income tax evasion. She tells her lawyer that she
wants to defend on the basis that Paul violated her Fourth Amendment rights by
conducting an illegal search. Which of the following is true regarding her claim?
a. She is correct that her Fourth Amendment rights were violated by the search, and the
evidence Paul obtained should be excluded from the trial.
b. She is correct that her Fourth Amendment rights were violated by the search, but the
evidence Paul obtained should not be excluded from the trial.
c. She is correct that her Fourth Amendment rights were violated; but the evidence will
be excluded from trial only if she can establish that she had requested that Paul return
the key, and he had wrongfully refused to do so.
d. She is incorrect in asserting that her Fourth Amendment rights were violated by
Paul’s actions.
Answer:
Generally, prior to upholding a contract, a court will carefully scrutinize the value of
consideration to be sure that the contract is a fair one.
a. True
b. False
Answer:
The legislature may probe agency officials to determine why they acted as they did.
a. True
b. False
Answer:
Fact Pattern 23-1
Bailey has been making large credit card purchases for months. He has also borrowed
money from Jack and Susan, friends of his, so that he can continue his rather lavish
lifestyle involving foreign travel. He borrowed $1,000 from Jack and $2,000 from
Susan. He also borrowed $500 from his mother. Bailey finally decides that he can no
longer continue to make even the minimum payments on his credit cards and considers
filing for bankruptcy. He does, however, want to pay some of his debts. Bailey,
therefore, puts off the credit card companies and saves his cash. He starts the New Year
off by paying on January 1 all funds owed to his mother. He was particularly concerned
about repaying his mother because he still lived at home and had some concerns that
she would kick him out of the house if he did not repay her. Then, on June 1 he pays
Jack; and on July 4, he pays Susan. Bailey proceeds to file bankruptcy on August 2
because he has repaid anyone he really cares about. He plans to complete the
bankruptcy and move to the Caribbean.
Refer to Fact Pattern 23-1. Which of the following is true regarding the repayment of
the loan to Bailey’s mother?
a. It will be considered a preference because Bailey’s mother would be considered an
insider, and it was made within one year of the filing for bankruptcy.
b. Although Bailey’s mother would not be considered an insider, the payment would be
considered a preference because it was made within one year of the filing for
bankruptcy.
c. The filing will be considered a preference only if Bailey and his mother had an
agreement that she would advance the amounts to him again once the bankruptcy was
completed.
d. The payment would not be considered a preference because it was not made within
30 days of the filing for bankruptcy.
Answer:
An undisclosed principal will be bound by any contract the agent enters into with actual
authority.
a. True
b. False
Answer:
When directors on a board serve for a fixed term but are not elected all at once it is
known as a(n) __________ board.
a. cumulative
b. staggered
c. proxy
d. inside
Answer:
Utilitarianism seeks to equalize the benefit to everyone.
a. True
b. False
Answer:
Fact Pattern 6-2
Officials of the town of Sunnyville were concerned about the number of dogs running
loose. They set up a new administrative agency called “Dog Control.” The new agency
issued a regulation that all dogs must be on leash in public. Tony who had moved to
Sunnyville in the previous month did not own a dog and had no plans to get one. He,
however, thought the regulation was outrageous and decided to sue on the basis that it
was not validly enacted. Mona, another resident, was also concerned about the law. She
rents a home with a fence in the backyard that was in public view. She was concerned
that the regulation would be applied to her dogs while in the fenced area. She decided to
bring a preemptive strike and sue the city for revocation of the regulation before the city
could sue her. Both Tony and Mona rush to file suit before the city has a chance to take
any action to enforce the new rule.
Refer to Fact Pattern 6-2. Of the following arguments, which is the best for the city to
raise in the lawsuit brought by Mona?
a. That courts have no authority to determine the validity of agency regulations.
b. That the issue is not ripe for determination.
c. That Mona must be a property owner in the jurisdiction in order to challenge the
agency regulation.
d. That Mona is guilty of self incrimination.
Answer:
Managers can make their own __________ law by entering into contracts and crafting
certain governance structures.
a. public
b. primary
c. cohesive
d. private
Answer:
When may a defendant be held liable for vicarious copyright liability?
a. So long as it can be shown that the defendant has the right and ability to control the
infringer’s acts.
b. So long as it can be shown that the defendant receives a direct financial benefit from
the infringement.
c. When he defendant has the right and ability to control the infringer’s acts and
receives a direct financial benefit from the infringement.
d. Never because vicarious copyright liability is not recognized.
Answer:
The rate at which major financial institutions offer to lend to their most creditworthy
customers is called the prime rate.
a. True
b. False
Answer:
Product liability is the legal liability manufacturers and sellers have for defective
products that cause injury to purchasers, users, bystanders, or their property.
a. True
b. False
Answer:
Intellectual property is any product or result of a mental process that is given legal
protection against unauthorized use.
a. True
b. False
Answer:
Under the doctrine of __________, the plaintiff’s negligence is an absolute bar to
recovery against the defendant.
a. contributory negligence
b. comparative negligence
c. contribution
d. indemnity
Answer: