Which of the following is not a reason for the use of negotiable instruments?
a. Reduction of the chance of forgery or material alteration
b. Convenience
c. Elimination of the risk of loss or theft of cash
d. Reduction of cost to the federal government of maintaining an adequate supply of
currency
If an auditor of financial statements required by the 1934 Act becomes aware of an
illegal act, the auditor must:
a. inform the issuer’s management and make sure the audit committee or the board of
directors is adequately informed.
b. notify the SEC within one day of discovering the illegal act.
c. resign if the issuer does not notify the SEC of the illegality within ten business days.
d. be subject to criminal penalties if the auditor willfully violates the Reform Act by not
resigning or furnishing reports to the SEC.
Dr. Olson is a board-certified ophthalmologist who constructs some specially designed
examining tables to use in looking at his patient’s eyes. The tables are firmly attached to
the floor of the space he rents for his office. If Dr. Olson decides to move his office,
which of the following is correct?
a. The tables are fixtures that cannot be removed.
b. The tables are trade fixtures.
c. Dr. Olson may remove the tables if they can be removed without materially
damaging the realty.
d. Both (b) and (c) are correct.
Elmer agreed to act as the conditional guarantor of collection on a debt of $50,000 that
Fred owed to Gloria. Fred paid Elmer a premium to serve as surety. If Fred defaults on
the debt, what are Gloria’s rights against Elmer?
Chapter 13 provides a procedure to adjust debts of:
a. individuals.
b. sole proprietorships.
c. partnerships and corporations.
d. All of the above.
e. (a) and (b) only.
The rule which permits the jury to infer both negligent conduct and causation from the
mere occurrence of certain events is:
a. proximate cause.
b. res ipsa loquitur.
c. causation in fact.
d. comparative negligence.
Which of the following would be a bearer instrument?
a. A check payable to cash
b. A check that says “pay to the order of John Jones”
c. A check that says “pay to the order of bearer”
d. Both (a) and (c)
Jan Arthur writes a $200 check to Bruce Nole who indorses it “Bruce Nole.” Bruce
gives the check to Anne Tate who indorses it “Without Recourse. Anne Tate.” Anne
sends the check to Joe Black, MD to pay her medical bill. If the bank refuses to honor
the check, Black:
a. can only collect from Jan Arthur.
b. can only collect from Jan Arthur or Bruce Nole.
c. can collect from the drawer or any indorser whose name appears on the check.
d. has no recourse.
Where a partner acts without either actual or apparent authority, the partnership:
a. cannot be bound.
b. is bound only if it ratifies the act.
c. is bound only if the third person did not know the partner was acting on behalf of the
partnership.
d. is bound under all circumstances, since the partner is an agent of the partnership.
Edith files a Chapter 7 petition in bankruptcy. She owns the following property: (1) an
automobile valued at $1,000; (2) a homestead valued at $75,000, on which First Bank
holds a mortgage of $50,000; (3) personal jewelry valued at $1,100; and (4) monthly
disability payments of $1,000. Assuming Edith elects to use the exemptions listed in the
Bankruptcy Code, what property may Edith keep?
a. The disability payments only.
b. The disability payments and the homestead only.
c. The disability payments plus the automobile, at least part of the equity in the
homestead, and the jewelry.
d. Nothing. She must sell all of her assets and have the proceeds distributed to the
creditors, and she must turn the disability payments over to the trustee.
Match the following:
a. Unsecured bonds, having only the obligation of the corporation behind them.
b. Corporation created under the laws of a given state.
c. Corporation created under the laws of any other state or jurisdiction.
d. Persons who take the preliminary steps to incorporate.
e. Persons who agree to purchase the initial stock in a corporation.
f. Rules governing a corporation’s internal management.
g. Corporation formed in substantial compliance with the incorporation statute and
having all corporate attributes.
h. Corporation not formed in compliance with the statute but recognized for most
purposes as a corporation.
i. Persons who sign the articles of incorporation.
j. The associates are denied the benefits of incorporation.
k. Any actions taken or contracts made by a corporation that go beyond its express and
implied powers.
l. Source of capital creating no ownership interest and involving the corporation’s
promise to repay funds loaned to it.
m. Debt securities.
n. Entity created to administer a unit of local civil government or created by the federal
government to conduct business.
o. Debt securities that condition the payment of interest to some extent on corporate
earnings.
p. Bonds subject to redemption.
q. Stock not having any special contract rights.
r. Stock having superior contractual rights with regard to dividends and/or assets upon
liquidation.
s. May be exchanged for other securities.
t. Claims against a corporation’s general assets and also a lien on specific property.
u. A proportionate ownership interest in a corporation.
v. Shares reacquired by a corporation.
w. Opportunity to purchase a pro rata share of new stock offerings.
x. Source of capital creating an ownership interest in the corporation.
y. Basic organizational documents of corporations; also known as articles of
incorporation.
1) shares
2) income bonds
3) common stock
4) subscribers
5) domestic corporation
6) corporation de jure
7) ultra vires acts
8) equity securities
9) incorporators
10) callable bonds
11) bylaws
12) public corporation
13) foreign corporation
14) treasury stock
15) preferred stock
16) bonds
17) corporation de facto
18) debt securities
19) secured bonds
20) preemptive right
21) defective corporation
22) convertible bonds
23) debentures
24) promoters
25) charters
The international organization which seeks to stabilize currency exchange is the:
a. United Nations Exchange Branch.
b. International Court of Justice.
c. United States Treasury.
d. International Monetary Fund.
Which of the following would be charged to the life tenant’s interest in the course of
administering a trust?
a. Expenses of selling a trust investment
b. The costs of establishing the trust
c. Ordinary repairs
d. Permanent improvements to the trust property
Before granting an injunction enjoining a former employee from competing in a
described territory, the courts insist that the employer demonstrate that the restriction is:
a. exculpatory.
b. conscionable.
c. necessary to protect the employer’s legitimate interest.
d. in compliance with the state’s Blue Law.
Temporary insurance coverage prior to the issuance of the actual policy may be
obtained by use of a(n):
a. premium agreement.
b. coinsurance clause.
c. option clause.
d. binder.
Redemption is not permitted if the corporation:
a. asks for an injunction.
b. would reduce its total assets below the stated capital amount by the redemption.
c. has outstanding treasury shares.
d. is likely to be rendered insolvent by the redemption.
Which one of the following is NOT true of a criminal suit?
a. A criminal suit is brought by the government, not by an individual.
b. In a criminal suit, guilt is never presumed.
c. One purpose of a criminal suit is compensation for the victim.
d. A criminal suit requires a higher burden of proof than a civil suit.
Lois takes her paycheck to Third National Bank for deposit at 6 p.m. on Wednesday.
Third National Bank has until when to forward the check?
a. Midnight Thursday
b. Midnight Friday
c. Close of business Friday
d. Close of business Thursday
If a person dies without a will and without any heirs or next of kin, her property:
a. escheats to a vestry commission.
b. vests in her neighbors.
c. vests in her church.
d. escheats to the state.
Under the Equal Pay Act, once an employee has demonstrated that the employer pays
unequal wages for equal work done by members of the opposite sex, the employer may
attempt to establish that he is not in violation of the act by reason of:
a. a valid seniority system.
b. a system which measures earnings by quantity of production.
c. any factor except sex.
d. All of the above can be used as defenses.
The accountant-client privilege is recognized:
a. only in federal court proceedings.
b. by virtue of the common law in most states.
c. only in those states that have enacted statutes creating such a privilege.
d. in most states by reason of court decisions.
Margaret tells the members of the Raleigh Association of Restaurant Owners that they
will be able to get a better price on linen supplies (tablecloths, napkins) if they will deal
with one supplier rather than split their business between two. They all know Margaret
deals with Niagara Linen rather than Cayuga. Under the Sherman Act, if they all sign
contracts with Niagara:
a. there is no violation since there is no express agreement to boycott Cayuga.
b. illegality may be inferred from this conduct.
c. there is no concerted action.
d. this is horizontal market allocation.
On January 3, Cara wrote to SunTime Mfg. asking for shipment of 100 swimsuits on
90-day credit. In the letter, she gave references that indicated that her store was
financially sound. Actually she had bills that she could not pay and hoped to turn the
business around with the summer swimsuit sales. SunTime ships the suits on March 1;
they are received March 15. Cara immediately puts them on display and seven are sold
by March 20 when SunTime discovers that Cara has lied. SunTime may:
a. recover 93 suits plus incidental damages.
b. recover 100 suits provided that SunTime acts in ten days from the delivery date.
c. recover no suits since it has been ten days since the suits were shipped.
d. recover 93 suits.
Anna by mistake delivers to Bob a plain, unaddressed envelope containing $50 intended
for Cora. Bob:
a. can keep the money.
b. is under a contractual obligation to return the money.
c. has a quasi-contractual obligation to return the money.
d. has an implied in fact obligation to return the money.
Under the CISG:
a. loss of or damage to the goods after the risk of loss has passed to the buyer does not
discharge the buyer from the obligation to pay the purchase price.
b. loss of or damage to the goods after the risk of loss has passed to the buyer
discharges the buyer from the obligation to pay the purchase price.
c. if the buyer is bound to take over the goods at a place other than the seller’s place of
business, the risk of loss passes when the goods arrive at that location.
d. if the sales contract does not involve the carriage of the goods, the risk of loss passes
to the buyer as soon as the goods are placed at his disposal, regardless of the amount of
time it takes him to take possession.
Which of the following terms indicates a shipment contract?
a. F.A.S. seller’s port
b. C.I.F.
c. C.& F.
d. All of the above are shipment contracts.
Which of the following would most likely be enforceable?
a. An agreement supported by past consideration
b. A substitute agreement to settle an undisputed debt
c. A debt agreed to seven years ago in a state where the statute of limitations is six years
d. A promise following the rendering of emergency services that is not supported by
new consideration
In which of the following ways do debt and equity securities necessarily differ?
a. In their characteristic of being sources for corporate financing.
b. In whether they represent an ownership interest.
c. Voting rights.
d. Debt and equity securities do not differ in any of the above ways.
Buyer breaches a contract for the sale of goods and seller resells the goods, although the
seller acts in bad faith and not in a commercially reasonable manner. Because of the
seller’s actions, the seller:
a. can recover from the buyer the difference between the resale price and the contract
price, plus incidental damages.
b. may only recover damages for nonacceptance or repudiation.
c. may choose between the remedy for resale and the remedy of recovery of damages
for nonacceptance or repudiation.
d. is denied any remedies.
A living will is a will that:
a. is videotaped.
b. contains instructions to one’s physician.
c. is capable of being changed from time to time, unlike other wills.
d. cannot be revoked.
Eminent domain would permit condemnation of land for all the following purposes
except:
a. constructing a railroad bridge over a river.
b. building senior citizens’ center.
c. building a store.
d. building a post office.
When were the last revisions made to the RULPA?
a. 1970
b. 1976
c. 1985
d. 2001
Distinguish between: (a) express and implied contracts; (b) executed and executory
contracts; and (c) bilateral and unilateral contracts.
An adhesion contract is offered on a “take-it-or-leave-it” basis.
Once a check is issued, the drawee bank becomes primarily liable.
A deed of trust differs from a mortgage in that the former conditionally conveys the
property to a trustee for the creditor’s benefit.
A possessor of land is under a duty to exercise reasonable care to protect invitees
against dangerous conditions they are unlikely to discover.
Reverse discrimination refers to achieving affirmative action by remedying the
underrepresentation of a given race or sex in a traditionally segregated job by
considering race and gender when hiring or promoting individuals.
Thomas is the treasurer of Padgett, Inc. He has authority to sign on behalf of the
company. One day, he signs a note as follows: “Thomas Seggway, as treasurer.” The
company’s name does not appear on the note. Is the company liable on the note? Is
Thomas liable on the note? Explain.
To be effective, a deed need not be conveyed for consideration.
A tenancy at sufferance is created after the tenant’s lease has expired.
A contract for the sale of a copyright is governed by Article 2 of the Uniform
Commercial Code.
When a bid is made at an auction, it can be revoked if the auctioneer has not yet
accepted the bid because the auctioneer has the power of acceptance.
In a unilateral contract, a promise is exchanged for an act or forbearance to act.
The general rule in negligence is that a person is under a duty to all others at all times to
exercise reasonable care for the safety of others.
The EPA may impose criminal fines and seek incarceration or imprisonment for persons
who are convicted of violations of some environmental laws.
If a minor principal disaffirms a contract and returns the consideration, the surety is
discharged.
Sharp Finance Company has furnished Carl with some pre-printed forms for customers
to sign to finance repairs on their homes. After the customers sign the notes naming
Carl as the payee, he sells them to Sharp Finance. Sometimes Carl is busy and does a
poor job on the homes so he can get on to the next job. When customers complain, he
says he’ll get around to it. If the customers don’t pay the note, Sharp Finance sues them.
Can the customers use the defenses they have against Carl against Sharp Finance?
Explain what law or laws apply to this situation.
Pablo promises to sell to Candice an automobile for $12,000, for which Candice
promises $12,000. A bilateral contract exists.
Eviction must be actual.
A suit may be brought by the state to challenge the existence of a de facto corporation
in a quo warranto action.