The concept of negotiation is unimportant to the law of negotiable instruments.
Compensatory damages are intended to compensate a non-breaching party for the loss
of the bargain.
No state recognizes marriage between persons of the same sex.
The Digital Millennium Copyright Act prohibits access to copyrighted digital works by
circumventing the encryption, even if the work is not misused.
In determining the fair distribution of marital property, the court may not consider
which party is awarded custody of the children.
There is no requirement that a buyer establish that an incorrect statement was part of the
basis of the bargain in order to recover for breach of express warranty.
A section of the Sarbanes-Oxley Act establishes rules for separating the investment
banking and securities advice functions of securities firms, thereby eliminating many
conflicts of interest.
Kathy endorses a check for which she is the payee to Mike by simply signing her name
and handing him the check. If he later adds the words, “Pay to Mike” above her
signature, he is committing a material alteration that voids Kathy’s indorsement and
negotiation to him.
Licensing statutes enacted to protect the public are called in loco parentis statutes.
In a contract situation involving fraud, the innocent party can either rescind the contract
and obtain restitution, or enforce the contract and sue for contract damages.
A gift causa mortis is established when the donor makes a gift in anticipation of
approaching death from some potential sickness or peril.
Another terms for limited partnership is limited liability company (LLC).
Once title insurance is purchased, it is good for all subsequent sales of the land covered,
and does not need to be repurchased.
Under common law, a principal generally is not liable for injuries caused by its agents
and employees while they are on their way to or from work.
Title for goods can pass before they are identified to the contract.
The Chief Justice of the U.S. Supreme Court is always the justice who has served on
the court the longest.
When property is attached to satisfy a judgment, the property is seized by the sheriff
and given to the plaintiff in satisfaction of the judgment.
Under the UCC, the parties are free to set reduce the statute of limitations applicable to
a contract but may not extend it.
The signature of the drawee named in a draft on the face of the draft or another location
on the draft indicates that the signer is an acceptor of the draft.
There must be confirmation of a Chapter 11 plan of reorganization by the bankruptcy
court for the debtor to be reorganized under Chapter
If the price is omitted from a sales contract, a “reasonable price” will be implied upon
delivery.
For trade secrets to be protected, a business owner is obligated to take all reasonable
precautions to prevent discovery of the trade secrets by others.
The United States enacted the Fair Labor Standards Act in 1968.
A principal can authorize an independent contractor to enter into contracts.
Corporate officers are elected by the board of directors at such time and by such manner
as prescribed in the corporation’s bylaws.
If the contract requires the occurrence (or nonoccurrence) of an event before a party is
obligated to perform a contractual duty, there is a condition precedent.
In a Title VII case, a court can award punitive damages to the plaintiff if the employer
negligently disregarded the plaintiff’s federally protected rights.
The Securities Act of 1933 primarily regulates the issuance of securities by
corporations, limited partnerships, and companies.
Shareholders, directors, and officers have equal rights in managing a corporation.
A holder who takes an instrument with notice of its dishonor cannot qualify as a holder
in due course.
The term caveat emptor means “to the winner goes the spoils.”
Section 1 of the Robinson-Clayton Act permits any person who suffers antitrust injury
in his or her “business or property” to bring a private civil action against the offenders.
The party who employs an independent contractor is called a principal.
Certified public accountants must comply with generally accepted auditing standards.
A limited liability company is an “at-will” limited liability company unless it is
designated as a “term” limited liability company, and the duration of the term is
specified in the articles of organization.
Signature liability on a negotiable instrument is also known as:
A) contract liability.
B) agent liability.
C) warranty liability.
D) secondary liability.
E) shelter liability.
What was the first document to set out the operation of the United States government?
A) the Declaration of Independence
B) the Colonial Government Manifest
C) the Articles of Confederation
D) the Gettysburg Address
E) the U.S. Constitution
A(n) ________ by the offeree simultaneously terminates the offeror’s offer and creates a
new offer.
A) conditional offer
B) formal offer
C) informal offer
D) counteroffer
E) acceptance
Which of the following actions could be acceptable if the purpose is to prevent a
company from going bankrupt?
A) price-fixing
B) resale price maintenance
C) price-fixing and setting a price floor
D) a merger with another firm
E) a merger with another firm, and resale price maintenance
The two general types of shareholders’ meetings are:
A) annual and special.
B) annual and quarterly.
C) general and annual.
D) general and special.
E) general and quarterly.
In Lindholm v. Brandt, when Malmberg sold Lindholm’s “Red Elvis” to Brandt, the
court found that:
A) Malmberg had stolen the artwork, so he couldn’t pass his void title to Brandt.
B) Malmberg had stolen the artwork and could pass the void title to Brandt because
Brandt qualified as a good faith purchaser.
C) Malmberg had been entrusted with the artwork but had a void title because he
breached the terms of the entrustment so he couldn’t pass good title to Brandt.
D) Malmberg had been entrusted with the artwork and could pass the void title to
Brandt because Brandt qualified as a good faith purchaser.
E) Malmberg had been entrusted with the artwork and could pass the voidable title to
Brandt because Brandt qualified as a good faith purchaser.
Which of the following is true about the Securities Act of 1933 small offering
exemption?
A) Sales of securities up to $5,000,000 qualify.
B) Sales can be made only to accredited investors.
C) Sales must all be made to investors in the same state.
D) There are no limits on the number or types of investors.
E) Even with the exemption, a simplified registration process must be followed.
What type of clause in an insurance policy states that the insurer will pay for a covered
loss only to the extent that it exceeds a certain stated amount that the insured pays
toward that loss?
A) indemnity clause
B) coinsurance clause
C) endorsement clause
D) deductible clause
E) subrogation clause
Sarah, who manages a limited liability company, borrows $500,000 from a bank. She is
careful to sign the note to the bank in the name of the limited liability company only.
When the company goes bankrupt, however, the bank seeks repayment from her. Is she
liable?
A) yes, she is liable, but only because a bank note is involved; otherwise, she would
have no liability
B) yes, she is liable as manager of the company
C) yes, she is liable, because the bank did not specifically give her a release
D) no, she is not liable, but only because bankruptcy is involved; otherwise, she would
be liable
E) no, she is not liable, because a manager of a limited liability company is not
personally liable for the debts of the company
A(n) ________ contract has no legal effect.
A) executory
B) unilateral
C) bilateral
D) voidable
E) void
Approximately ________ percent of divorce cases are settled between the parties prior
to trial.
A) fifty (50)
B) sixty (60)
C) seventy (70)
D) eighty (80)
E) ninety (90)
The intent to enter into a contract is determined using the ________ theory of contracts.
A) subjective
B) objective
C) prospective
D) conjectural
E) hypothetical
In a criminal trial, which of the following is true?
A) The government must prove that the accused is guilty beyond a reasonable doubt.
B) The accused is presumed guilty once an indictment has been issued.
C) The government must prove that the accused is guilty beyond all possible doubt.
D) At the trial, the grand jury listens to evidence to determine guilt or innocence.
E) The right to a speedy trial does not apply to death penalty cases.
Which of the following states is not a “right-to-work” state?
A) Arizona
B) North Carolina
C) California
D) Oklahoma
E) Texas
A contract under seal is called a(n):
A) formal contract.
B) informal contract.
C) express contract.
D) bilateral contract.
E) quasi-contract.
What is an exemption under the bankruptcy laws?
A) a debt that does not need to be paid
B) a debt that is not forgiven
C) an asset that is not required to be used to satisfy outstanding debts
D) a debtor who cannot be granted a discharge
E) a non-binding property restriction
Assume that the state of Colorado institutes a law requiring that persons from outside
the state of Colorado take a skiing exam and obtain a skiing license before being
allowed to ski at a downhill resort on runs other than the beginner runs. The fee for this
license is $75. Colorado residents are not required to get a license because most resident
skiers learn to ski properly at an early age. This statute could be challenged under:
A) the Equal Protection Clause.
B) the Privileges and Immunities Clause.
C) the Interstate Commerce Clause.
D) the Equal Protection Clause and the Privileges and Immunities Clause, but not under
the Interstate Commerce Clause.
E) the Equal Protection Clause, the Privileges and Immunities Clause, and the Interstate
Commerce Clause.
Which of the following is not one of the common classifications of product liability
defects?
A) design
B) manufacture
C) materials
D) packaging
E) failure to warn
Which of the following is not a duty that the principal owes to the agent in an agency
relationship?
A) compensation
B) reimbursement
C) obedience
D) cooperation
E) indemnification
When an employer breaches an employment contract, what obligation does the
employee have in seeking substitute employment?
A) Because it was the employer who breached, the employee has no obligation to seek
substitute employment.
B) The employee must accept any employment available with the same employer, but is
not required to accept any substitute employment with a different employer.
C) The employee must accept any employment available with a different employer, but
is not required to accept any substitute employment with the same employer.
D) The employee is obligated to accept any employment for which the employee is
qualified.
E) The employee is obligated to accept substitute employment, but only if it is
comparable employment.
In criminal law, what is an information?
A) the testimony of someone who has been given immunity as part of a plea bargain
B) the evidence presented by the prosecutor at trial
C) mitigating circumstances presented by a defendant at a sentencing hearing
D) a formal charge of a crime issued by a magistrate
E) a summary of facts learned in the discovery process
Which of the following is not an advantage of franchising?
A) The franchisor can reach new markets.
B) In the typical franchise relationship, the franchisor will cover some of the losses of
the franchisee in its first few years of operation.
C) The franchisee has access to the franchisor’s knowledge and resources.
D) Consumers are assured of uniform product quality.
E) The franchisee operates an independent business.
Which of the following is false regarding the Small Corporate Offering Registration
Form?
A) The Securities and Exchange Commission amended Regulation A by adopting the
Small Corporate Offering Registration Form.
B) The Small Corporate Offering Form is a “question-and-answer” disclosure form that
small businesses can complete and file with the Securities and Exchange Commission if
they plan on raising $1 million or less from the public issuance of securities.
C) The questions on the Small Corporate Offering Registration Form constitute the
offering circular that must be given to prospective investors.
D) The Small Corporate Offering Form questions require the issuer to develop a
business plan that states specific company goals, and how it plans to reach them.
E) The Small Corporate Offering Form is available to both domestic and international
businesses.
In November 2010, Susan orally hires John to walk her dog twice daily for $20 per day
from January 1, 2011 through December 31, 2011. In December 2010 Susan decides
that the dog is not worth all that money and tells John to forget it. John sues. What
would be the result under the Statute of Frauds?
A) John loses, because the contract could not be performed by its own terms within one
year of its formation and therefore had to be in writing.
B) John loses, because no judge is going to enforce a contract involving a dog.
C) John wins, because the contract could have been performed within a year from when
he was supposed to start work and was, therefore, not within the Statute of Frauds.
D) John wins, because contracts for personal services are not within the Statute of
Frauds.
E) John loses, because an insufficient amount of money per month is at issue.
Jessica contracts with a custom furniture maker for the construction of an ornate walnut
desk. Jessica explains to the furniture maker that this desk is a gift for Jessica’s
boyfriend and that the desk should be shipped directly to the boyfriend. They agree that
the desk will be delivered on June 1, 2010. On May 27, 2010, Jessica tells her boyfriend
about the gift. Which of the following is true?
A) Jessica has delegated the duty to deliver the desk to the furniture maker.
B) If Jessica tells the furniture maker that there has been a change in plans and that her
boyfriend is to not get the desk, the boyfriend can sue either Jessica or the furniture
maker.
C) Because the boyfriend gave no consideration for the desk, he acquires no rights to
sue under the contract.
D) Jessica and the furniture maker have entered into a novation agreement.
E) The boyfriend can recover from the furniture maker if the furniture maker delivers a
defective desk.
A sales contract that requires the seller to deliver goods to the buyer’s place of business
is a ________ contract.
A) performance
B) shipment
C) destination
D) due-on-sale
E) sale-on-approval
The fact that Holly may hire employees to work at a lingerie shop that she manages,
despite the fact that her employment agreement with the owner says nothing about
Holly’s right to hire employees, is an example of:
A) express authority.
B) implied authority.
C) apparent authority.
D) ratification authority.
E) intentional authority.
In New York Times v. Sullivan, the United States Supreme Court held that public
officials cannot recover for defamation unless they can prove that the defendant acted
with actual ________.
A) negligence
B) intent
C) malice
D) mala in se
E) mala prohibita
In general, when can a corporate officer be removed from position?
A) only pursuant to a violation of the officer’s employment contract
B) only if shareholders vote unanimously to remove the officer
C) any time the board believes removal would be in the best interests of the corporation
D) only for violation of the “business judgment” rule
E) only if both the board of directors and the shareholders vote unanimously to remove
the officer
Corporations were first formed in ________.
A) Europe
B) the United States
C) Russia
D) Asia
E) Canada
A retailer ordered some inventory by phone from a manufacturer. The order was for
1,000 machines from the manufacturer’s inventory at $300 each. Moments later, the
manufacturer sent a fax to the retailer detailing the order. The retailer looked at the fax
and was satisfied that it stated the terms of the contract, but never responded in any
way. When the goods were delivered on time a month later, the retailer refused to
accept them, asserting that the contract was unenforceable. Which is true?
A) No writing is needed because of one of the exceptions to the statute of frauds.
B) The contract is unenforceable because the retailer has not signed a writing.
C) The contract is enforceable because it would be unconscionable to not enforce it.
D) The contract is enforceable under the written confirmation rule.
E) Because the fax was not responded to, this was an accommodation shipment.
If a tenant transfers all of his rights under a lease to another party, it is called a(n):
A) assignment.
B) sublease.
C) restrictive covenant.
D) lease renewal.
E) illegal action.
Which of the following is true about the purpose(s) of a corporation?
A) A corporation is considered to be formed for any lawful purpose, and can therefore
engage in any legal activity.
B) A corporation must identify all specific purposes for which it has been formed.
C) A corporation can have more than one purpose, but the purposes must be related; if
they are not, the state will order the corporation split up into two or more separate
corporations.
D) A corporation can have either a general purpose or a limited purpose.
E) The secretary of state’s office will review new filings of articles of incorporation to
prevent the formation of too many corporations with identical purposes.
Tammi Tenant was a university student in Ohio who rented a house from Loretta, who
also lived in Ohio. Upon graduation, Tammi moved to Nebraska. Assuming that one
party sued the other in connection with the lease after Tammi had moved to Nebraska,
which of the following correctly describes the court(s) with jurisdiction over the
defendant?
If Loretta sued, there would be If Tammi sued, there would be
personal jurisdiction over Tammi in: personal jurisdiction over Loretta in:
A) Ohio only Ohio only
B) Nebraska only Ohio only
C) Nebraska or Ohio Nebraska only
D) Nebraska or Ohio Nebraska or Ohio
E) Nebraska or Ohio Ohio only