Elmer wrote a letter to his friend Fred offering to sell Fred an 80-acre farm for
$200,000. After mailing the letter, Elmer learns that the farm is actually worth $300,000
and changes his mind about selling. Elmer:
a. has made a firm offer to Fred which cannot be revoked.
b. can revoke his offer at any time before acceptance, because there is no consideration
to keep the offer open.
c. must keep the offer open, because this is an option contract.
d. is prohibited from revoking his offer to Fred under the doctrine of promissory
estoppel.
Percy buys stock in XTX Corporation that pays dividends of $5 per share before
dividends are paid on other stock of XTX. If the dividends are not paid in any given
year, the dividends for that year must be paid when the company next declares
dividends, until fully paid. Percy’s dividends per year will not exceed $5 per share.
Percy’s stock is:
a. cumulative common stock.
b. noncumulative preferred stock.
c. cumulative preferred stock.
d. participating preferred stock.
Margaret told Bill she would give him her tickets to an upcoming concert. Later she
changed her mind and decided to go to the concert after all. Can Bill require Margaret
to give him the tickets?
a. No, because there was no intent to make a present gift
b. No, because there was no delivery
c. No, because there was no acceptance
d. All of the above are correct.
A misrepresentation is material if:
a. it would likely induce a reasonable person to enter into a transaction.
b. the maker knows it would likely induce the other party to enter into the transaction.
c. it is made knowingly.
d. Both (a) and (b).
Sales of personal property are governed by Article ____ of the Uniform Commercial
Code (UCC).
a. 1
b. 2
c. 3
d. None of the above.
Which of the following is incorrect with regard to treasury shares?
a. No dividends may be paid on treasury shares.
b. They are issued but not outstanding.
c. A corporation may sell treasury shares for any amount the board of directors
determines, even if the shares have a par value that is more than the sale price.
d. The concept of treasury stock was created by the MBCA and is carried forward in the
RMBCA.
Odessa owes Kevin $2,000. On July 1, Kevin assigns the right to the $2,000 to Troy.
Thereafter, on July 15, Kevin assigns the same right to Donna, who in good faith gives
value for it and knows nothing about the first assignee. In this case:
a. Troy has the right to the payment of $2,000.
b. Donna has the right to the $2,000.
c. neither Troy nor Donna can claim the $2,000.
d. the rule differs in different states. Depending on which rule a state follows, the
answer will vary.
The apple which identifies Apple Computers is an example of a:
a. trademark.
b. service mark.
c. certification mark.
d. collective mark.
Under the Second Restatement, which of the following is correct with regard to a
contract entered into with a third person by an agent of an undisclosed principal?
a. The agent has no liability to the third person if the agent has acted within the scope of
her authority.
b. The agent is personally liable upon the contract unless the third person discovers the
existence and identity of the principal and elects to hold the principal to the contract.
c. Once the third person learns of the existence and identity of the principal, that third
person may hold both the principal and the agent to the performance of the contract.
d. If the third party obtains a judgment against the principal, the agent may still have
liability to that third party.
All of the following are true concerning the Occupational Safety and Health Act
EXCEPT:
a. penalties for violations are civil only.
b. OSHA develops standards, conducts inspections, monitors compliance with
standards, and institutes enforcement actions against those not in compliance.
c. a stated purpose of the Act is to encourage state participation in regulating safety and
health.
d. the Act prohibits an employer from discharging an employee who exercises rights
under the Act.
If Steve, wanting to protect his warehouse, closes two pit bulldogs inside and they
attack and kill an intruder, Steve would be found to have:
a. subjective fault.
b. objective fault.
c. liability without fault.
d. no fault, as he was merely protecting his property.
Under the UCC, ____ refers to the manner and extent to which the respective parties to
a contract have accepted successive tenders of performance by the other party without
objection.
a. course of dealing
b. usage of trade
c. course of performance
d. integrated document
Which of the following products would impose strict liability in tort according to
Section 402A?
a. Popcorn containing large amounts of genuine butter
b. 150-proof Virgin Island rum
c. A chain saw sold with the safety shielding removed
d. A sports car capable of speeds in excess of 150 MPH
Which of the following is correct with regard to a contract?
a. All contracts must be in writing.
b. A person who deposits money in a bank account has entered into a contract with the
bank.
c. A contract may be for a tortious purpose.
d. To be valid, a contract must be bilateral and cannot be unilateral.
If Carol, acting as agent for Steve, signs a contract, she alone will be personally bound
by it:
a. if Steve’s name or the fact that Carol is an agent is never mentioned and Steve does
not carry out the contract.
b. never; as an agent she is only a representative.
c. if she decides to sue.
d. if Steve is discovered by the third party to be the principal and the third party elects
to hold him liable for performance.
Which of the following is not an express warranty?
a. Restating facts or market figures about a product
b. The opinion of an expert in a certain field regarding a product in that field
c. A statement of the product specifications
d. The seller’s opinion of the value of goods
Marilyn brought her $300 silk dress to University Dry Cleaners to be cleaned. On the
back of the ticket she received in exchange for the dress was written, “liability limited
to five times the cost of cleaning.” Marilyn’s dress was lost and University now claims
it owes her only $45, five times the cost of cleaning. Is that true?
a. No, because Marilyn is not a bailor.
b. No, because the cleaner is not a common carrier.
c. No, because the limitation was not communicated to her before she bailed the
property.
d. Yes, because the cleaner had the right to limit its liability to a reasonable amount.
Losses due to computer crimes are estimated to be:
a. minimal, as the federal government has passed comprehensive legislation prohibiting
computer crime.
b. in the millions of dollars.
c. in the tens of billions of dollars.
d. decreasing, as legislation and enforcement have been increasing.
Greg has been in the business of selling encyclopedias for twenty years. Margaret
agreed to buy a set if Greg would also bring her a bookcase for them. Greg bought one
and sold it to Margaret along with the books. While shelving the books, she ran her
hand over the back edge of the shelves and cut herself severely. The wood was not
finished on that side and nails were protruding through the shelf. Can Margaret sue
Greg under strict liability?
a. Yes, because the bookcase was in an unreasonably dangerous condition.
b. Yes, because the bookcase was defective.
c. No, because she was not a true consumer under Section 402A.
d. No, because Greg is not a seller under Section 402A.
The administration of the assets of the deceased and the proving of the validity of the
will are determined in:
a. probate proceedings.
b. a domicile of intent.
c. an equity proceeding.
d. a testamentary hearing.
Which of the following names would NOT be permitted under most general
incorporation statutes?
a. Acme Ltd.
b. Acme Co.
c. Acme Inc.
d. Acme
e. All of the above are permissible.
The scope of an EIS:
a. does not apply to psychological effects.
b. does not apply to the urban environment.
c. is narrowly construed.
d. applies to a broad range of environmental effects.
Almost all jurisdictions require that:
a. express trusts of real property be in writing.
b. trusts have at least four witnesses.
c. an inter vivos trust has at least two trustees.
d. a charitable trust has at least two trustees.
Infringement of a mark occurs when:
a. a person intends to confuse purchasers by using an identical or substantially
indistinguishable mark.
b. it is proved that purchasers were actually confused by use of an identical or
substantially indistinguishable mark.
c. and only when, an identical mark was used in an unauthorized way.
d. a person without authorization uses an identical or substantially similar mark that is
likely to cause confusion, to cause mistake, or to deceive.
Under the UPC, a person must be what age to make a valid will?
a. Sixteen
b. Eighteen
c. Twenty-one
d. Age does not matter as long as the person is of sound mind and has the intent to make
a will.
Which of the following determines when to declare dividends and in what amount?
a. The stockholders
b. The officers of the corporation
c. The board of directors
d. The state in which the corporation was chartered
Everett is an accountant for a major accounting firm. One day at work, he is discussing
his collection of rare coins with one of his co-workers. Everett tells his co-worker that
he keeps his collection at home and that he has recently purchased several Chinese gold
Panda coins at an exceptional price. The co-worker expresses an interest in buying two
of the coins at a price of $250, and a contract is duly formed. If no place for delivery is
expressed, where are the coins to be delivered?
a. At the office of the accounting firm where the parties to the contract work
b. At Everett’s home
c. At the co-worker’s home
d. In the parking lot of the accounting firm
Under the RUPA, in which of the following situations may a court order dissolution
upon application by a partner?
a. An event makes it unlawful to continue substantially all of the partnership’s business.
b. A definite term for the partnership has expired.
c. A partner files a petition for personal bankruptcy.
d. The court finds the economic purpose of the partnership is likely to be unreasonably
frustrated.
An express condition is usually preceded by such words as:
a. if.
b. while.
c. how.
d. All of the above.
e. Both (a) and (b).
Discrimination based on ____ in the extension of credit is prohibited under the Equal
Credit Opportunity Act.
a. sex, marital status, or race
b. religion, national origin, and age
c. income, color, or occupation
d. Both (a) and (b).
Henry hires Ace Roofing to put a new roof on his house. When Ace comes, Henry
refuses to let them on the roof, saying that he has a headache and doesn’t want to listen
to pounding. The next day, Henry still has a headache and he refuses to allow them on
the roof. The day after, the baby is sleeping and Henry refuses to allow them to work.
After four weeks of this, Ace:
a. may be discharged, but Henry is not.
b. may be discharged, and so would Henry.
c. can sue for damages, but must perform when Henry is ready.
d. has no choice but to keep coming back each day until Henry is ready.
Miller does the payroll for XYZ Company. In between Adams and Bates, he inserts the
name Appleton and makes out a weekly paycheck in that name. He keeps the check for
himself, signing “Appleton” and cashing it at a local bank. Auditors discovered the fake
payee many months later. May XYZ require the bank to recredit?
a. No, because of the holder rule
b. No, because Miller is an XYZ employee and the fictitious payee rule applies
c. Yes, because the indorsement is forged
d. Yes, because the check was, in effect, stolen
The UCC provides that if a court as a matter of law finds a contract for the sale of
goods or a clause of such a contract to have been unconscionable at the time it was
made, the court may:
a. refuse to enforce the contract.
b. enforce the part of the contract that is not unconscionable.
c. limit the application of any unconscionable clause in order to avoid an
unconscionable result.
d. All of the above.
The Norris-La Guardia Act prohibited “yellow dog contracts,” through which
employers coerced their employees into promising they would not join a labor union.
If a security interest has attached, it is enforceable against the debtor.
Carl owes Baker $100. Al impersonates Baker and receives a $100 check made payable
to Baker. Al indorses the check by forging Baker’s signature and cashes the check at a
supermarket. Carl cannot require his bank to recredit his account for $100.
For bankruptcy purposes, insolvency means that debts are greater than assets.
Presentment for payment is excused if the person entitled to enforce the instrument
cannot with reasonable diligence present the instrument.
The exemption from application of the Fair Housing Act applies to single-family homes
owned by private individuals who own fewer than four houses.
The statute of frauds has to do with fraud in the inducement of a contract.
Robert’s payroll check was made payable “to the order of Robert Lewis.” Robert
deposited, but never indorsed, the check in ABC bank. Robert has no warranty liability
on the check because his signature is not on the instrument.
A consumer transaction would include one in which the purchaser uses the item at a
hotel while on vacation.
Prices can be controlled through direct price fixing or by market allocation.
When the nonconformity or default substantially impairs the value of the installment
but not the value of the entire contract, the buyer can reject the installment, even if the
seller gives adequate assurance of the installment’s cure.
A usage of trade is a practice or method of dealing, regularly observed and followed in
a place, vocation, or trade.
Generally, consent is not a defense in an intentional tort action.
In an employment agreement with Karl, Arnold promises to work for Karl for the rest
of his life. This promise must be in writing to be enforceable.
The student government of State University has a contract with a famous rock band to
perform at the university on homecoming weekend. The band cannot assign its rights
and delegate its duties under this contract.
Forrest has a contract with Denzel to construct a new condominium complex. The
contract provides that Forrest must furnish a certificate of occupancy and conformity
with the local fire code before Denzel has an obligation to pay. The furnishing of the
certificate is an implied in fact condition subsequent to the construction of the building.
The same item may not be the object of both tangible and intangible property rights.
A contract between the seller and buyer may not provide for remedies in addition to or
instead of those provided in the Code.
A company may not initially issue all the shares authorized by the corporate charter. It
can hold back shares.