Creditors of Northern Hydraulics file an involuntary bankruptcy petition against the
company and the petition is approved. What is true of Northern Hydraulics?
a. Northern Hydraulics has at least $10,425 in debts.
b. There are at least 12 creditors.
c. A custodian has automatically been appointed.
d. It must make all the filings necessary under a voluntary petition.
A corporation must obtain shareholder approval before the company
a. sells off a major portion of its business to another company.
b. opens additional offices.
c. hires or fires a significant number of employees.
d. expands into foreign markets.
Under a contract for the sale of land, the statute of frauds
a. does not apply if the purchase price for the land is less than $500.
b. does not apply if the buyer must secure a loan for the purchase of the land.
c. requires the defendant to sign the agreement.
d. does not apply if the total price of the land is to be paid in less than one year.
Hank owns 100 shares of cumulative preferred stock in Wayside Transport, Inc. Kelsey
owns 50 non-cumulative preferred shares, and Oleg owns 120 shares of common stock.
Wayside does not pay dividends in 2007. In 2009
a. Hank and Kelsey must receive their 2009 dividends before Oleg is paid any 2009
dividends.
b. Oleg cannot receive any 2009 dividends until Hank is paid for the 2007 dividends.
c. Kelsey cannot receive the dividends Wayside could not afford to pay in 2007. She
will just lose them.
d. All of the above.
Nella offers to sell her crop of strawberries, which have just been picked, to Morgans
Market. Since Nella does not specify a time limit for acceptance, Morgans can accept
the offer at any point in time.
a. True
b. False
According to Immanuel Kant, the truth should be told, no matter the outcome. This is
the idea behind what he called
a. moral universalism.
b. the categorical imperative.
c. moral relativism.
d. the veil of ignorance.
Revocation is the withdrawal of an offer by the offeror.
a. True
b. False
Which of the following does NOTact as a revocation of a will?
a. Creating a codicil
b. The testator’s putting an X through it
c. Physically destroying the will by intentionally shredding it
d. Signing a new will that expressly revokes prior wills
Which of the following insurance policies continues for a stated period of time with the
premiums increasing with the age of the insured?
a. double indemnity
b. term insurance
c. annuity contract
d. comprehensive insurance
Patrick owns an office building and leases space on a year-to-year basis. Patrick
maintains a reversionary interest on the property.
a. True
b. False
Which of the following statements regarding instrument liability is TRUE?
a. The holder of an instrument must first ask for payment from those who are
secondarily liable.
b. For any given instrument, only one person can be liable at a time.
c. A person with primary liability is unconditionally liable and must pay unless he or
she has a valid defense.
d. A person with secondary liability has the same liability to the holder as a person with
primary liability.
Miles purchased a lawnmower with an attached warning that said, “The manufacturer is
not responsible in the case of an injury caused by the lawnmower.” If Miles is injured
because of a defect in the mower and sues the lawnmower manufacturer, he will most
likely
a. lose, as he agreed to not hold the lawnmower manufacturer liable.
b. lose, as he assumed the risk.
c. win, as this warning would be unenforceable.
d. win, as all lawnmower manufacturers are strictly liable.
The NYSE and NASDAQ bothrequire that the members of the nominating committee
be independent directorswho are less likely to simply go along with whatever the CEO
wants.
a. True
b. False
Which of the following is a stated purpose of Article 2 of the UCC?
a. to simplify the law governing real estate transactions
b. to free up the courts from having to decide on contract issues
c. to make the laws governing sales uniform among the various jurisdictions
d. to come up with a boilerplate form to be used in all sales transactions
Max, Jenny, and Craig are partners. They have purchased an elegant Victorian home
and converted it into an office for their partnership. Craig decides to use the
partnership’s office to host some evening parties. Craig has a sideline business of
arranging expensive gatherings and charging each person a handsome price to attend
these “elite” parties. When Max and Jenny find out what Craig is doing, they demand
that he pay them for the use of the property. How much money, if any, is Craig required
to pay the partnership?
a. Nothing. He is free to use partnership property for his own uses.
b. Nothing, but he will be removed from the partnership for violating his fiduciary duty.
c. He must turn over any profits he earned from this activity.
d. He must pay the fair market value for the use of the house.
Ralco was preparing Heidi’s tax return. In confidence, Heidi revealed some information
to Ralco. Under the federal accountant-client privilege, the information Heidi disclosed
is protected from disclosure in a criminal action by the U.S. government.
a. True
b. False
Jerry purchased a laptop computer for his personal use from Computer City on an
installment loan contract. The sales contract stated that in the event the contract is
assigned to a third party, the purchaser (Jerry) promises he will not assert any claim or
defense against the assignee which he might have against Computer City. Computer
City immediately assigns the contract rights to Finance USA. The computer stops
working within two weeks of the purchase.
a. This is a valid waiver of defense clause. Jerry signed the contract, so he can’t raise a
defense to Finance USA.
b. Finance USA is an intended third party beneficiary and may therefore enforce the
contract.
c. In general, this type of waiver is not permitted in consumer contracts, so Jerry can
raise his claim against Finance USA.
d. This is a delegation of Jerry’s duties and the delegator remains liable on the contract
unless a novation agreement is made.
Any contract involving a sale of goods of $100 or more must be in writing.
a. True
b. False
Even though a car has an obvious dent in the rear quarter panel, the salesperson tells a
potential customer, “This car has never been in an accident. The salespersons statement
creates a valid express warranty.
a. True
b. False
By definition, a sale under Article 2 of the UCC requires
a. that the parties involved be merchants.
b. that the product involved be goods, services, or a mixture; that the sale be between or
among merchants; and that the sale take place in the normal course of business for that
industry.
c. that title to the goods pass between the seller and the buyer and that a price be paid
for the goods.
d. that the product involved be an item that can be sold or leased.
If a court applies res ipsa loquitur
a. the plaintiff needs to prove the case by a preponderance of the evidence.
b. the plaintiff must prove the case by clear and convincing evidence.
c. the defendant has the burden of proving he or she is not liable.
d. the defendant is strictly liable.
Sarah works for a company that has offered a promotion if she was willing to relocate.
Sarah accepted the position and put her house on the market right away. She sold her
house the first day that the realtor held an open house. The buyer agreed to pay cash for
the full purchase price of the house. Sarah was thrilled, except that it meant that she
would have to put her furniture in storage until she found another house in her new city.
She entered into a written contract with Safe Storage, Inc. The agreement included a
clause excusing Safe Storage, Inc. from any liability for loss or damage, even if the loss
or damage resulted from Safe Storage’s negligent acts. Because of Self Storage’s
negligence, a fire destroyed the warehouse and all of its contents, including Sarah’s
household goods and furniture. Sarah claims that Safe Storage, Inc. is liable for the full
value of the contents, which is approximately $10,000. Is Sarah correct?
a. Yes, because storage warehouses are strictly liable for loss or damage, regardless of
fault and regardless of exculpatory clauses.
b. No, because there was equal bargaining power between Sarah and Safe Storage, Inc.
c. Yes, because exculpatory clauses are illegal and never enforceable.
d. Probably, because often a court will reject an exculpatory clause against a bailor who
is a consumer.
In the historic case of Hamer v. Sidway, the nephew
a. lost, as the Court found therewas no consideration.
b. lost, as the uncle was dead.
c. won, as the Court found therewas consideration.
d. won, as there was a completed gift.
Valley National Bank issued a note promising to repay an investor on October 1, 2011,
three years from the date of issue, plus interest. The note
a. is a certificate of deposit, and it will pay a lower rate of interest than a regular savings
account at Valley.
b. is a certificate of deposit, and it will pay a higher rate of interest than a regular
savings account at Valley.
c. is a certificate of deposit, and whether the bank pays a higher or lower rate of interest
than it pays on its regular savings accounts depends upon particular bank policy.
d. constitutes a trade acceptance.
During the development of commercial law centuries ago, businessmen throughout
England and Europe
a. began to rely on the same set of laws used to govern land transactions.
b. began to rely on a body of rules calledlex mercatoria.
c. had little need for laws to resolve commercial disputes.
d. had a vast body of rules governing contracts.
The Williams Act regulates the conduct of the target company in a takeover situation.
a. True
b. False
What is ethics?
a. Always telling the truth
b. The study of how people should behave
c. Following the law
d. The rules by which you live your life
Monumental, Inc. contracts with Champion Builders to erect a three-story office
building on a parcel of land it has purchased. Before construction begins, the local
zoning board changes the zoning of the parcel and those adjoining it to residential use
only. Monumentals contract with Champion is discharged.
a. True
b. False
What term is used to indicate the termination of liability on an instrument?
a. Collection
b. Discharge
c. Accommodation
d. Conversion
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.
The UCC’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.
Most states recognize some form of comparative negligence.
a. True
b. False