Which of the following powers is not reserved solely to the national government?
a. power to regulate interstate commerce
b. power to tax
c. power to coin money
d. power to borrow money on the credit of the United States
A homeowner who refinances her home mortgage may cancel the transaction:
a. if the terms of the contract were less favorable than anticipated.
b. within three business days.
c. only if she was the victim of fraud.
d. upon payment of a $1,000 penalty, as required by a Federal Trade Commission rule.
An unlawful sale under the Insider Trading Sanctions Act of 1984 can result in a civil
penalty of up to how many times the profit gained or loss avoided?
a. two (2)
b. three (3)
c. four (4)
d. five (5)
Sales of goods transactions are subject to a statute of limitations period of:
a. one (1) year.
b. two (2) years.
c. three (3) years.
d. four (4) years.
If oral, a stop payment order is binding on the bank for __________ days unless
confirmed in writing within that time.
a. five (5)
b. seven (7)
c. fourteen (14)
d. thirty (30)
A corporate officer, while still employed by his or her firm, may be in breach of the
officer’s fiduciary duty of __________ by recruiting key management employees to join
a competing company.
a. obedience
b. loyalty
c. conflict of interest
d. confidentiality
“Superfund” is a creation of which of the following?
a. the Comprehensive Environmental Response, Compensation, and Liability Act
(CERCLA)
b. the Occupational Safety and Health Administration (OSHA)
c. the National Environmental Policy Act (NEPA)
d. the Environmental Protection Agency (EPA)
Deirdre read that bids were being solicited for the construction of an apartment tower.
Deirdre submitted the lowest bid and was offered the contract contingent on her
providing acceptable sureties in the amount of $1 million. Because Deirdre never had
done work on this scale, it was virtually impossible for her to obtain the appropriate
sureties. She convinced Reassuring Sureties, Inc. to issue the necessary commitment by
misrepresenting that she was a famous builder in Canada. As the work progressed, it
seemed to be going well and Deirdre was asked to make the project 52 stories instead of
50 stories, which was the original contract height. She agreed to this change.
After the work was completed, many breaches of contract on the part of Deirdre
became evident. Reassuring Sureties was sued for a $500,000 loss. Reassuring Sureties
defended on the grounds of fraud and material change in the contract. Decide.
An individual who has been authorized to vote the share of another stockholder is said
to be voting by:
a. trust.
b. proxy.
c. estoppel.
d. agency.
The rule of mitigation of damages requires that a party injured by a breach of contract
must:
a. take any and all steps possible to reduce the damages that will be sustained because
of the breach.
b. discharge the contract before filing suit for breach.
c. hire someone else to perform the contract.
d. take reasonable steps to reduce the damages that would otherwise be sustained
because of the breach.
Jeff purchased in good faith a warehouse receipt for 1,000 pairs of running shoes
without notice of any defense to it, for value, and in the regular course of his business.
Unknown to Jeff, the goods had been stolen from Jane and delivered to the warehouse
that issued the receipt purchased by Jeff. Which of the following statements is true?
a. Jeff holds a duly negotiated document of title and is not subject to Jane’s title.
b. Jane is entitled to the goods and will prevail over Jeff.
c. Jeff is not a holder of a duly negotiated document.
d. Jane cannot recover the goods but can sue the warehouse for conversion.
An unqualified indorser who receives consideration for the indorsement impliedly
warrants that:
a. the warrantor is a person entitled to enforce the instrument.
b. all signatures on the instrument are authentic and authorized.
c. the instrument has not been altered.
d. all of the above.
The General Agreement on Tariffs and Trade (GATT):
a. is a multilateral treaty
b. is subscribed to by the United States
c. has as its goal the liberalization of world trade
d. all of the above
Who is entitled to file a motion to dismiss?
a. defendant only
b. plaintiff only
c. both plaintiff and defendant
d. none of the above
If there is a time limitation or any other restriction in a contract, a third-party
beneficiary:
a. may ignore it.
b. may void it.
c. is bound thereby.
d. must consent to be bound thereby before it is effective.
Consumer protection statutes and regulations do not protect against:
a. deceptive advertising.
b. the consumer’s own negligence.
c. unsolicited credit cards sent to creditworthy consumers.
d. unreasonable methods of debt collection by debt collection agencies.
When there are two perfected secured creditors in the same collateral:
a. priority goes to the creditor who perfected first.
b. priority goes to the creditor who is owed the greatest amount of money.
c. each perfected secured creditor has a 50% interest in the collateral.
d. Both perfected secured creditors are treated like unsecured creditors in regards to the
collateral.
The importance of trust as a fundamental principle underlying business transactions is
illustrated by expectations that:
a. investors will be able to earn a return on their investments.
b. employees may be discharged at any time for any reason without notice.
c. litigation is inevitable because parties to agreements usually break promises.
d. insider trading proves that the economic system underlying business is flawed.
Universal defenses work against:
a. holders.
b. a holder through a holder in due course.
c. a holder in due course.
d. all of the above.
A finance company may reject an applicant for a loan on the grounds that the applicant
is:
a. married.
b. sixty-five or older.
c. divorced.
d. none of the above.
Management of an LLC is vested in its:
a. members
b. partners
c. shareholders
d. managers
A crime generally consists of:
a. an act or omission.
b. a mental state.
c. a mental state and an act or omission.
d. a mental state, an act or omission, and harm.
When an anticipatory repudiation of a contract occurs, the aggrieved person’s option(s)
include:
a. doing nothing and waiting for performance per the contract.
b. immediately declaring a breach of contract.
c. considering the contract cancelled.
d. all of the above.
A minor cannot avoid a contract to purchase a car if the:
a. car has been destroyed.
b. car has been damaged.
c. car is used for non-commercial purposes.
d. minor is able to return the car but does not do so.
When a carrier accepts goods for land shipment, it ordinarily issues to the shipper a(n):
a. bill of lading.
b. intent to transport memorandum.
c. warehouse receipt.
d. trust receipt.
Where the debtor has fewer than twelve (12) creditors, how many must sign an
involuntary petition?
a. one (1), assuming that the creditor’s unsecured claim is at least $14,425
b. one (1), assuming that the creditor’s secured claim is at least $15,575
c. three (3), assuming that the creditors’ unsecured claims total at least $14,425
d. three (3), assuming that the creditors’ secured claims total at least $15,575
Testing of prospective employees:
a. cannot have been developed by one employer and applied by another.
b. can be adjusted to favor members of a particular race.
c. must bear a relationship to job performance.
d. all of the above.
A finding of undue influence would most likely not occur in a contract between:
a. parent and child.
b. attorney and client.
c. neighbor and neighbor.
d. guardian and ward.
Which of the following is a possible remedy for a nuisance?
a. termination by police authority
b. injunction
c. money damages
d. all of the above
SEC Rule 10b-5:
a. is the principal antifraud rule relating to the secondary distribution of securities.
b. provides that a civil action for damages may be brought by any private investor who
purchased or sold a security and was injured because of false, misleading, or
undisclosed information.
c. applies to all securities, whether registered or not, as long as use is made of the mail,
interstate commerce, or a national stock exchange.
d. all of the above.
Which of the following terms would make an instrument nonnegotiable?
a. It is dependent upon an event.
b. It is undated.
c. It is payable in foreign money.
d. It gives the holder the right to receive interest.
Sarbanes-Oxley (SOX):
a. created a new form of mail and wire fraud.
b. requires corporate officers to certify their financial statements.
c. provides for both fines and jail time for corporate fraud
d. all of the above.
When a U.S. trademark holder licenses a foreign business use of its trademark overseas
and a third party imports these goods into the United States to compete against the U.S.
manufacturer’s goods, the foreign-made goods are called __________ goods.
a. “gray market”
b. counterfeit.
c. specially-licensed.
d. dumped goods.
The concept of perfection concerns:
a. the creation of the security interest.
b. protection against the claims of others to the collateral.
c. the rights of the creditor against the debtor.
d. converting unsecured creditors into secured creditors.
Under which of the following scenarios would a third person be able to successfully sue
a corporate manager if the manger’s advice to the corporation causes loss to the third
person?
a. The manager’s advice has resulted in the corporation’s successful underselling of the
third person’s product.
b. The manager’s advice has resulted in the corporation’s breach of a contract with the
third person under which the corporation was losing a substantial sum of money.
c. The manager’s advice has resulted in the corporation’s refusal to deal with the third
person because the third person has not maintained the standards and quotas set by the
corporation.
d. none of the above.
Under a freehold estate, a person owns property only for a specified number of years.
The CISG governs all contracts between parties in the countries that have ratified it.
With regard to a bailment, a valid delivery and acceptance need not require that the
bailee be aware that goods have been placed within the bailee’s exclusive possession or
control.
The EPA has the authority of have activities halted through the use of injunction.
Contract formation in cyberspace is the result of a desire for businesses to use a
common language to form contracts.
If there is a written contract, a disclaimer of the implied warranty of merchantability
must be conspicuous.
Mary offered to sell Mike several pieces of rare Chinese art at a very good price
because they were duplicates in her own collection. Mike could not accept the offer at
that time, but he did give Mary $500 in return for her promise to keep her offer open for
three (3) weeks. Mike returned with the agreed-upon balance two weeks later to find
that Mary already had sold the pieces she had offered to sell to him. Mary explained
that she had been able to get a better price from another buyer. She offered to return
Mike’s $500 and insisted that this was all she was obligated to do. Is Mary right?
A security interest gives a creditor the same protection than is afforded by a right to sue
on the debt.
A seller does not have the right to stop shipment if the buyer has received goods on
credit and the seller learns that the buyer is insolvent.
A person who acquires the instrument on which the last indorsement is blank becomes
the holder.
In states that follow the community property tradition, property acquired after the
marriage belongs solely to the party who acquired it.
When parties are not equally guilty, the least guilty party is granted relief when it is in
the public interest.
Every trust must have a beneficiary.
Janet Jones sold the assets and liabilities of her coin-operated laundry to Kevin Katz for
$10,000. The assets of the business included all of the washers and dryers. The
liabilities included the amounts still owing on seven new dryers, which had been
purchased recently from Dryer Company under an installment contract. Katz agreed to
make the installment payments on the new dryers as they came due. After Katz failed to
make an installment payment when it was due, Dryer Company sued Jones. Jones
claimed she no longer was liable. How will the court decide?
A letter from a collection agency to a consumer that gives the impression a lawsuit is
about to be brought against the consumer when in fact it will not be brought is not a
violation of the Fair Debt Collection Practices Act.
Modern law holds that an employer is liable for an intentional tort committed by an
employee for the purpose of furthering the employer’s business.
The vested rights of partners are not extinguished by dissolving the firm, and the
existing liabilities remain.