Pursuant to the __________ theory, when a corporation is so dominated and controlled
by shareholders, officers, and/or directors that the separate personalities of the
individuals and the corporation no longer exist and there is a wrongful use of that
control, the courts will disregard the corporate entity so as not to sanction a fraud or
injustice.
a. alter ego
b. altered states
c. puppeteer
d. invisible hand
The express period of irrevocability in a firm offer cannot exceed __________
month(s).
a. one (1)
b. three (3)
c. six (6)
d. twelve (12)
A contract to build a house is deemed performed when:
a. there has been substantial performance of the contract.
b. the house is approved by the city housing inspectors.
c. the house is approved by the owner’s architect.
d. the house is approved by the owner.
When the indorser merely signs a negotiable instrument, the indorsement is called a
__________ indorsement.
a. special
b. qualified
c. blank
d. restrictive
Which of the following is a defense to defamation?
a. slander
b. libel
c. truth
d. none of the above
When two corporations merge:
a. their separate existences cease, and a new corporation is formed.
b. one of the corporations absorbs the other.
c. the liabilities of the two merging corporations are eliminated.
d. a new charter is needed.
If a lease is assigned, who is liable for the rent?
a. the assignor
b. the assignee
c. either the assignor or the assignee, but the landlord is entitled to only one satisfaction
of the amount due under the lease
d. the landlord can collect from both the assignor and the assignee
Private lotteries, which generally are held to be illegal, involve three elements:
a. prize, chance, and consideration.
b. return, skill, and wager.
c. prize, skill, and consideration.
d. attractive return, minimal involvement, and skill.
An assignment is valid only if:
a. it is written.
b. it is written and sworn to before a notary public.
c. there is a manifestation of the intent to assign.
d. the assignment is paid for by the assignee.
The promisor in a contract may also be called the:
a. obligor.
b. grantor
c. obligee
d. grantee
Members of a limited liability company share profits:
a. according to their status (general or limited) in the firm.
b. in proportion to their contribution of services.
c. in proportion to their capital contribution.
d. according to the terms of the operating agreement.
In a bilateral contract, each party will be a promisor and, therefore, each party will:
a. be an obligor.
b. be able to avoid the contract.
c. not be in privity of contract.
d. be an agent for the other side.
Which of the following is not a sale of goods?
a. a bailment
b. an option to purchase
c. a gift
d. all of the above
With regard to priority of claims in the payment of unsecured debts, which of the
following has priority over alimony and child support obligations?
a. costs and expenses of the administration of the bankruptcy case.
b. claims arising in the ordinary course of the debtor’s business after commencement of
the case
c. claims for wages, salaries or commissions earned within 180 days before the filing of
the petition
d. none of the above
Which of the following is not an element of an accord and satisfaction?
a. a bona fide dispute
b. a proposal to settle the dispute
c. performance of the agreement to settle the dispute
d. reservation of rights under the federal Consumer Credit Protection Act
With regard to future goods:
a. no security interest is possible.
b. a financing statement must be filed to create a security interest.
c. the security interest does not attach until the buyer has rights in the goods.
d. a security interest may be held only by a bank.
A promise to pay a debt must be in writing if:
a. the debt is for more than $500.
b. the debt is now due and payable.
c. the promise is to pay the debt of another.
d. the debt owed is the promisor’s.
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.
Money __________ involves the knowing and willful participation in a financial
transaction involving unlawful proceeds when the transaction is designed to conceal or
disguise the source of the funds.
a. ironing
b. vacuuming
c. laundering
d. cooking
Who serve as agents of the corporation and run the “day-to-day” operations of the
business?
a. officers
b. directors
c. shareholders
d. employees
Examples of illusory promises include:
a. cancellation provisions.
b. conditional promises.
c. apparent obligations.
d. real obligations.
The major purpose of field warehousing is to:
a. create warehouse receipts that the owner can pledge as security for loans.
b. create additional space in the firm’s own warehouse.
c. allow warehousers an opportunity to service common carriers.
d. transfer title to buyers without requiring them to pick up merchandise at the plant’s
location.
The passage of federal securities disclosure laws occurred largely as the result of:
a. voluntary self-regulation by ethics experts in the securities industry.
b. the stock market crash of 1929.
c. changes in the international market for securities and negotiable instruments.
d. all of the above.
When a plaintiff sues on the basis of strict tort liability, the action is subject to:
a. the UCC statute of limitations.
b. the appropriate state’s tort statute of limitations.
c. no statute of limitations.
d. FTC approval.
A landlord who sells his property transfers the __________ interest in the leased
premises to the buyer.
a. diversionary
b. reversionary
c. subversionary
d. reciprocal
A bailee’s __________ gives the bailee the right to maintain possession of the bailed
property until reasonable storage and/or repair charges are paid.
a. reversionary interest
b. lien
c. remainder interest
d. mortgage
When a buyer has possession of goods after rightfully rejecting them, the buyer is
treated:
a. the same as a seller in the possession of goods after default by a buyer.
b. as being strictly liable for the safety of the goods.
c. the same as if an entrustment had been created.
d. as an insurer of the goods until the seller retakes possession.
Which of the following is not a third-partybeneficiary contract?
a. a contract in which A hires B to give A’s niece piano lessons
b. a contract to repair sewers in front of Macy’s Department Store
c. a life insurance contract with a named beneficiary
d. a contract between X and Y for Y to install a new door on Z’s home
Only the parties to a sales contract could sue each other under the traditional concept of:
a. exclusivity of contract.
b. privity of contract.
c. privacy of contract.
d. priority of contract.
The perfection obtained by filing a financing statement lasts for __________.
a. five (5) years, and is renewable.
b. five (5) years, and is non-renewable.
c. ten (10) years, and is renewable.
d. ten (10) years, and is non-renewable.
A __________ indorsement consists of the signature of the indorser and words
specifying the person to whom the indorser makes the instrument payable.
a. qualified
b. restrictive
c. special
d. blank
A copyright bestows upon the creator of an artistic or literary work a federal statutory
right to exclusively:
a. use the work.
b. reproduce the work.
c. display the work.
d. all of the above.
The filing of an involuntary case petition automatically constitutes an order for relief if
the debtor fails to contest the petition within the time specified by the Bankruptcy Code.
All owners of a limited liability company are known as officers.
A court with limited jurisdiction can only hear certain types of cases.
Ex post facto laws can be adopted by either states or the national government.
Unincorporated associations are generally formed to further a common purpose.
When a credit application is refused, it is sufficient that the lender give the applicant a
written statement saying: “application refused.”
It is worse for the holder to lose order paper than to lose bearer paper.
If an agent makes a properly authorized contract with a third person on behalf of a
disclosed principal, the agent has no personal liability on the contract.
When necessary medical care is provided to a minor, a parent is liable at common law
for the medical expenses provided the minor child.
The rights of a holder of a duly negotiated warehouse receipt are extinguished by the
warehouser’s surrender of goods to the depositor.
When a party waives compliance with one provision of a contract, the other party may
thereafter ignore other provisions of that contract.
Through incorporation by deference, a contract can consist of both the original
document and the detailed statement that is incorporated in it.
When a buyer has breached the contract by failing to accept conforming goods, the
seller may sue the buyer for the full purchase price if the goods cannot be resold by the
seller.
A will may only be revoked by operation of law; it may not be revoked by act of the
testator.
An issuer has an obligation to honor drafts under a letter of credit if the conditions
specified in the letter have been satisfied. This obligation includes the bank’s obligation
to assure that the goods sold by the seller in fact conform to the contract.
If an agent’s act causes loss to the third person, that third person may generally hold the
agent liable for the loss.
If a contract is unclear, it will be interpreted against the party who drafted it.