Which of the following forms of business always imposes double taxation on the
earnings of the business?
A. A corporation
B. A limited liability company
C. A limited liability partnership
D. A sole proprietorship
Sharon and Martha are general partners in the SM general partnership. Sharon, acting
with authority, negotiated and signed for a $500,000 loan to SM from a bank. SM has
not repaid this loan. The bank can recover its loan from:
A. Sharon only.
B. SM and Sharon; they are jointly liable only.
C. SM, Sharon, and Martha; they are jointly liable only.
D. SM, Sharon, and Martha; they are jointly and severally liable.
Paco Corp., a building contractor, offered to sell Roy several pieces of used
construction equipment. Roy, engaged in the business of buying and selling equipment,
accepted the offer. Paco’s written offer had been prepared by a secretary who typed the
total price as $10,900, rather than $109,000, which was the approximate fair market
value of the equipment. Paco learned of the error in the offer and refused delivery of the
equipment unless Roy agreed to pay $109,000. Roy has sued Paco for breach of
contract. Which of the following scenarios is the likely outcome?
A. Paco will not be liable because there has been a mutual mistake of fact.
B. Paco will be able to rescind the contract because Roy should have known that the
price was erroneous.
C. Roy will prevail because Paco is a merchant.
D. The contract is enforceable because Roy had accepted it.
The rationale for the impostor rule is that the responsibility for determining the true
identity of the payee:
A. is shared by the bank and the maker of the negotiable instrument.
B. is on the drawer or maker of the negotiable instrument.
C. is on the bank that negotiates the instrument.
D. is on the payee whose name is mentioned in the negotiable instrument.
In order to establish a cause of action based upon strict liability in tort for personal
injuries resulting from the use of a defective product, the plaintiff must start the case by
proving that the seller (defendant):
A. was engaged in the business of selling the product.
B. failed to exercise due care.
C. defectively designed the product.
D. was in privity of contract with the plaintiff.
Which of the following is a personal defense against a holder in due course?
A. Fraud in the essence
B. Forgery
C. Breach of contract
D. Minority or infancy
Shawn purchases a computer from Adelaide Electronics, and writes them a check of
$1,000. However, after Shawn brought the computer home, it abruptly stopped working
due to a virus attack. Shawn calls his bank ordering a stop-payment on the check.
Adelaide Electronics gave the check to Jack Enterprises, their creditor. Shawn’s bank
honored the check when Jack presented it. Which of the following is true in this case?
A. The bank is liable to recredit Shawn’s account, since the bank did not follow Shawn’s
instructions.
B. Shawn will be able to show that he sustained losses since the bank honored the check
to Jack.
C. The bank is not liable to recredit Shawn’s account, since Shawn did not send the
stop-payment order well in advance.
D. Shawn cannot have his account recredited because he will not be able to show that
he sustained any loss.
Under the Securities Act of 1933, the registration of securities which are offered to the
public in interstate commerce is:
A. directed toward minimizing investor exposure to financially risky securities.
B. not required unless the issuer is a corporation.
C. mandatory unless the cost to the issuer is “prohibitive” as defined in the SEC
regulations.
D. required unless the offering or the securities are exempt from registration.
Under Title VII, when can a private plaintiff file a lawsuit?
A. Within 90 days of receiving the “right-to-sue” letter
B. Within 120 days of filing a charge with the EEOC
C. Within 120 days of receiving the “right-to-sue” letter
D. Within 90 days of filing a charge with the EEOC
Which of the following is true about dissolution and winding up the partnership?
A. In liquidation, the assets may not be sold separately.
B. Winding up always requires the sale of assets.
C. During winding up, the partners continue as fiduciaries to each other.
D. Most firms provide the partners with the firms’ assets rather than proceeds from the
sale of the same.
Assume that the Oklahoma Wholesale Lumber Suppliers’ Association, a trade
association formed by all lumber wholesalers in the state, adopts a “fair competition”
plan that divides the state into exclusive territories for member wholesalers. Each
member wholesaler is forbidden by the plan to sell to retailers in another wholesaler’s
territory. Under these circumstances, which of the following is true?
A. Since this is a case of ancillary vertical restraint, the courts would apply the rule of
reason to determine whether it is lawful.
B. Since this is a case of “naked” horizontal restraint, the courts would apply the per se
rule to determine whether it is lawful.
C. Since this is a case of ancillary horizontal restraint, the courts would apply the per se
rule to determine whether it is lawful.
D. Since this is a case of “naked” vertical restraint, the courts would apply the rule of
reason to determine whether it is lawful.
The usual Title VII suit is a suit by _____.
A. the EEOC
B. the Department of Labor
C. the states
D. a private plaintiff
A member of an LLC is treated as a transferee of his/her transferable interest only after:
A. he/she transfers his/her transferable interest to another person.
B. he/she gives notices to third parties about the transfer.
C. a creditor receives his/her transferable interest.
D. his/her dissociation from the LLC due to judicial expulsion.
Shareholders who hold at least _____ percent of the shares entitled to vote at the
meeting may call a special meeting.
A. 10
B. 50
C. 30
D. 25
What are legal rules in prior cases called?
A. Statutes
B. Precedents
C. First impressions
D. Uniform laws
The debtor is also permitted to void _____ liens against exempt properties that impair
her exemptions.
A. medical
B. tax
C. attorney
D. judicial
The _____ Amendment protects against compelled testimonial self-incrimination by
establishing that “[n]o person … shall be compelled in any criminal case to be a witness
against himself.”
A. Fifth
B. Fourth
C. Sixth
D. Eighth
A party to a contract who seeks to rescind the contract because of that party’s reliance
on the unintentional but materially false statements of the other party will assert:
A. reformation.
B. actual fraud.
C. misrepresentation.
D. constructive fraud.
Identify the difference between a case involving intentional fraud and innocent
misrepresentation.
A. The contractual remedy of rescission is not available in a misrepresentation case.
B. A person committing innocent misrepresentation is liable for punitive damages for
the tort of deceit.
C. Reasonable reliance of the complaining party is not required in a fraudulent case.
D. Materiality is not required in a fraudulent case.
Maple hired Birch to work as a taxi driver for Maple. After a long, hot summer day of
city driving and dealing with other rude drivers, Max, another driver, cut Birch off and
slightly dented Birch’s taxicab. An enraged Birch pulled Max out of the car and hit him
with a brick that was lying on the road. Max suffered serious and permanent injuries
and wants to sue. Who is liable in this situation?
A. Maple, under the doctrine of direct liability.
B. Birch, since he was not in scope of employment.
C. Maple and Birch, since the principal and the agent are responsible for the agent’s
torts.
D. Max instigated the incident and hence will not be successful in the lawsuit.
Which of the following actions is most likely to adhere to the Magnuson-Moss
Warranty Act of 1975?
A. A seller does not disclose any limitations on the duration of implied warranties.
B. A seller’s written warranty does not include information on the duration of the
warranty.
C. A seller refuses to disclose warranty terms to a buyer before the sale.
D. A seller fails to give a written warranty to a consumer for a consumer product.
Under the product liability theory of recovery known as strict liability, which parties
may be held liable? (Answer using the majority rule used in most States.)
A. The manufacturer only, engaged in the business of making that product.
B. Any seller who is a nonmerchant.
C. The wholesaler only, engaged in the business of selling that product.
D. The buyer of the product.
Odyssey Corp., a wholesaler of children’s toys, sells retailers across the country the
exceedingly popular Trojan Horse toy at a price of $14 per item. Odyssey has learned
that one of its competitors, Iliad Co., is selling the Trojan Horse toy at a price of $12 per
item to all retailers in the state of Utah. Odyssey would like to respond appropriately to
Iliad’s actions. Which of the following statements accurately sets forth how Odyssey
may respond without risking a violation of the Robinson-Patman Act?
A. Odyssey may begin selling the Trojan Horse toy at a price of $12 per item to Utah
retailers, while keeping the price at $14 per item for retailers elsewhere in the country.
B. Odyssey may begin selling the Trojan Horse toy at a price of $11.75 per item to Utah
retailers, while keeping the price at $14 per item for retailers elsewhere in the country.
C. Odyssey may begin selling the Trojan Horse toy at a price of $12 per item to Utah
retailers, but only if it lowers the price to $12 per item for retailers elsewhere in the
country.
D. Odyssey may begin selling the Trojan Horse at price of $11.75 per item all over the
country.
In which of the following cases can the remedy of rescission be invoked by the affected
party?
A. Mistake of tort
B. Mistake of contract
C. Mistake of law
D. Mistake of fact
_____ occurs when a principal manifests assent that his legal relations be affected, such
as stating orally that he wishes to be bound by a contract that has already been made.
A. Express ratification
B. Unauthorized ratification
C. Implied ratification
D. Valid ratification
If the delivery term of the contract is _____ the place at which the goods originate, the
seller is obligated to deliver to the carrier goods that conform to the contract and are
properly prepared for shipment to the buyer, and the seller must make a reasonable
contract for transportation of the goods on behalf of the buyer.
A. CFR
B. FOB
C. CIF
D. DAF
Jason believes that he is a limited partner in Yorktown Yankees Limited Partnership.
Jason discovers that no limited partnership certificate has been filed with the secretary
of state. What should he do?
A. Withdraw from the limited partnership by obtaining a refund of his capital
contribution.
B. Cause a proper certificate of limited partnership to be filed with the secretary of
state.
C. File with the secretary of state a limited partner certificate declaring his limited
partner status.
D. Nothing. His status is not affected by the failure to file a limited partnership
certificate.
Ryan enters into a contract with Dave, the neighborhood grocer, to supply fresh
vegetable daily. After four months, the grocery store expands its business considerably
and attracts customers from the neighboring areas as well. As a result, Dave demands
that Ryan triple his supply as he cannot keep up with the demand? Which of the
following will apply in determining the amount that can be supplied in such
circumstances?
A. Rule of reasonable price
B. Rule of requirements
C. Rule of needs
D. Rule of good faith
A void contract is:
A. a contract that one or both parties can cancel at their convenience.
B. a contract, even though the courts will not enforce it.
C. an agreement that creates no legal obligations.
D. created by operation of law rather than by the agreement of the parties.
Sometimes, an insurer may retain an attorney to defend the insured in a liability case
but can conclude later on, based on additional information, that it does not have the
obligation to pay any damages that may be assessed against the insured as a result of
the third party’s claim. It can do so through a(n):
A. equity of redemption.
B. advance directive.
C. reservation of rights notice.
D. declaratory judgment.