In general, an undisclosed principal and the third party to a contract are contractually
bound if the agent acts within the scope of his actual authority in making the contract.
a. True
b. False
Neal is the young, likable, optimistic, and generous son of a prominent public official.
He has a master’s degree in business and is the business partner of Ken and Bill in an oil
drilling and exploration business. Neal also serves as a director on the board of the
Bonanza Savings and Loan Association. While serving on the Bonanza Board, Neal
votes to approve major loans to Ken and Bill without disclosing to the other directors
that he is a business partner of Ken and Bill. Neal also personally arranges for a
$900,000 line of credit from Bonanza for an oil drilling venture in which he is a partner
with Ken. The drilling venture is unsuccessful and Ken and Bill both default on their
loans to Bonanza, which then causes the S & L to become insolvent. Federal banking
officials seize Bonanza and liquidate its assets to pay creditors and depositors. Because
Bonanza is federally insured, tax money is also used to pay off depositors whose
deposits are insured under federal programs. Bonanza shareholders lose their
investment money. Was Neal’s conduct as a director of Bonanza ethical? Analyze his
conduct in light of the following ethical theories:
a. Intuitionism and the “Television Test.”
b. Milton Friedman’s ideas on corporate governance.
c. Deontological theories.
d. Rule utilitarianism.
e. Ethical relativism.
There is an established rule in the law of torts that even one who has not created a peril
has a duty to take affirmative action to assist an imperiled person, no matter what the
relationship with that person, when the imperiled person can be saved from harm at
little or no personal risk to the rescuer.
a. True
b. False
The Justice Department has expanded its enforcement policy of the Sherman Act to
cover foreign companies’ conduct that harms U.S. exports.
a. True
b. False
In England and in a minority of states, the first of two or more assignees to give notice
to the obligor is entitled to the assigned performance.
a. True
b. False
The Home Equity Loan Consumer Protection Act:
a. defines a principal dwelling to include second or vacation homes.
b. amends the Truth-in-Lending Act to require that lenders provide a disclosure
statement to potential borrowers at least five days before they receive an application for
the loan.
c. only covers loans with adjustable rate mortgages.
d. forbids the creditor from accelerating the outstanding balance of the loan if the
consumer fails to make payments on time.
Under the RMBCA, the charter of the corporation is required to provide all of the
following EXCEPT:
a. the number of shares authorized.
b. the street address of the registered office.
c. names of the initial directors.
d. the name and address of each incorporator.
The UCC provides missing contract terms in which of the following instances?
a. The contract fails to specify the price.
b. The contract fails to specify the place of delivery.
c. Both failure to specify the price and failure to specify the place of deliver.
d. The UCC cannot provide missing contract terms; only the parties can provide terms.
If Corporation J and Corporation K combine all of their assets and create a consolidated
corporation; Corporation J and Corporation K will cease to exist.
a. True
b. False
If the buyer inspects the goods before entering into the contract, then implied
warranties:
a. still apply to any defects.
b. will in no circumstances be applicable.
c. do not apply to defects that are apparent upon reasonable inspection.
d. None of these.
A buyer who does not cover is precluded from consequential damages that could have
been prevented if the buyer did obtain cover.
a. True
b. False
Title VII of the Civil Rights Act of 1964 prohibits employment discrimination on the
basis of race, color, gender, religion, or national origin in any employment-related
process.
a. True
b. False
In a limited partnership, the contribution of a partner may be cash, property, services, a
promissory note, or an obligation to contribute cash, property, or to perform services.
a. True
b. False
If the buyer makes a wrongful rejection, the seller may resell the goods in good faith
and in a commercially reasonable manner and the seller may recover from the buyer the
difference between the contract price and the resale price, plus any incidental damages,
minus expenses saved.
a. True
b. False
Under Revised Article 3 of the UCC, failure to give notice of dishonor will discharge
the drawer from having to pay on the instrument.
a. True
b. False
In general, a tenant is under a duty to make minor repairs to the leased premises.
a. True
b. False
Latosha grants a quitclaim deed to some property to Glenn. Now Glenn has found that
someone else has a life estate in the land. Latosha has breached the warranty of title.
a. True
b. False
Revocation of acceptance is effective without notice to the seller.
a. True
b. False
All other estates are derived from the fee simple estate.
a. True
b. False
The parol evidence rule applies only to integrated contracts, meaning those in which the
parties have assented to the written agreement as the statement of the complete
agreement between them.
a. True
b. False
The way parties usually show mutual assent is by:
a. an offer by words or conduct and an acceptance by words or conduct.
b. a proposal in words and an acceptance in words.
c. an act exchanged for an act.
d. an offer and a counteroffer.
A director may make business decisions in reliance on information provided to him
without incurring liability for negligence as long as he:
a. notifies the preparer of the information.
b. reasonably believes that the information is reliable.
c. conducts his own independent investigation.
d. is given a sworn affidavit by the preparer.
Under the common law, the __________ must be the mirror image of the __________.
a. acceptance, offer.
b. offer, acceptance.
c. contract, offer.
d. contract, consideration.
A corporation has no constitutional protection against unreasonable searches and
seizures.
a. True
b. False
Sarah has a checking account at First Bank. Orrin steals one of her blank checks, writes
a check for $250 to himself, and then forges Sarah’s signature. Orrin then indorses the
instrument to Paul in payment of a debt. Paul, who does not know of the forgery,
presents the instrument to First Bank for payment. At First Bank’s request, Paul indorses
the instrument, and the bank then pays him $250. Which of the following is correct?
a. Paul has breached the warranties on presentment.
b. Orrin has breached the warranties on presentment.
c. Sarah has breached the warranties on presentment.
d. All of these are correct.
e. Both Paul and Orrin have breached the warranties on presentment.
a. How does Article 2 of the UCC modify the common law of contracts with regard to
consideration?
b. Explain how output and requirements contracts differ from illusory promises.
Like the Sherman Act, Section 3 of the Clayton Act applies only to practices involving
commodities, not to those that involve services, intangibles, or land.
a. True
b. False
Which of the following is untrue regarding the relationship of an accountant and the
client?
a. It is based upon mutual agreement.
b. The accountant is under an ethical obligation not to disclose confidential information.
c. The accountant must act in a competent and professional manner.
d. The accountant is under a contractual obligation to follow all of the client’s
instructions and to use the client’s figures without question.
Franco has the permission of George to walk across his yard on the way to school.
Franco now brings twenty of his friends across the yard, and they stop to play ball. In
this case:
a. Franco is not guilty of trespass to real property, because he had George’s permission
to cross the yard.
b. Franco’s friends are not guilty of trespass to real property, because they were with
Franco.
c. Franco is guilty of trespass to real property, because he walked across the yard.
d. Franco and his friends are guilty of trespass to real property, because they played ball
in George’s yard.
George offered to paint Catherine’s barn for $3,000. Catherine said she would accept
the offer if George would paint the woodshed, too. At this point, they have made a valid
and enforceable contract.
a. True
b. False