Transfer of corporate assets to shareholders for less than fair market value is called
“looting.”
The First Amendment prohibits state regulation of deceptive commercial advertising.
Obscene noncommercial expressions receive no First Amendment protection.
In some states the birth of a child will cause a will to be revoked.
Mr. Green agrees to purchase a lawn mower from Ms. White for $300. The act of
payment of $300 by Mr. Green is consideration for the act of passing ownership of the
lawn mower from Ms. White to Mr. Green.
Article 2 of the UCC determines the rights of the seller, the buyer, and third parties
irrespective of who has title at any given moment.
Professional insurance is also called malpractice insurance.
Under revised Article 9, the UCC allows a security agreement to be created by the
consumer online.
During a ‘Terry Stop’ officers may not conduct a pat down search of an individual
without a warrant.
Alvin and Billy own 70 percent of Beta Corporation. Claude owns 30 percent of Beta
Corporation. Alvin and Billy consistently vote and act in ways that benefit them, but
harm Claude. Claude may claim oppression as a minority shareholder.
As an association, a partnership is a voluntary and consensual relationship.
Once a buyer has accepted goods, he cannot later reject them unless at the time they
were accepted, the buyer had reason to believe that the nonconformity would be cured.
A patent can be transferred through an assignment to another party.
The most important elements for violation of Rule 10b-5 of the 1933 Securities Act are
misstatement or omission of material fact and negligence.
A partner charged with winding up of the partnership has implied authority to take such
appropriate actions necessary to accomplish the wind up.
A partner may not compete against the partnership unless he or she obtains consent
from the other partners.
When Congress created the U.S. Sentencing Commission and charged it with creating
Sentencing Guidelines, Congress sought (among other things) to decrease the discretion
of judges in making sentencing decisions.
If the goods required for the performance of a contract are destroyed without fault of
either party prior to the time that the risk of loss passed to the buyer, the contract is
voided.
Perfection by mere attachment of the security interest does not require giving of public
notice.
Negligence per se is defined as negligence where one party is a citizen of a foreign
nation.
The duty of trust requires a professional to maintain confidentiality.
The UCC defines good faith in commercial transactions as observance of reasonable
standards for fair dealing.
An exculpatory clause is a provision in a contract that purports to relieve one of the
parties from tort liability.
When a tenant remains in possession of the property after the expiration of a lease, a
tenancy at will occurs.
Safeco Corporation manufactures toys for distribution to retailers. In Safeco’s hands, the
toys are consumer goods.
Most state laws say that a valid mechanic’s lien has priority over all other liens that
attach after the first work is performed or the first materials are furnished.
The Robinson-Patman Act applies if a Texas manufacturer discriminated in price in
sales to two Texas customers.
In a strict liability case, the plaintiff must prove that the defendant breached a duty.
If a seller gives a written warranty for a product to a consumer, the warranty must be
designated in the nature of full or limited warranty.
The traditional view is that a corporation is not liable for a crime because criminal guilt
requires presence of intent.
In order to be liable for conversion, the defendant must know that the property
rightfully belongs to someone else.
In which of the following contexts is a professional most likely to experience a
nonclient action?
A. An accountant who prepares and audits financial statements of companies.
B. A consultant who gives advice to companies for improving performance.
C. A securities broker who provides investment advice to retail investors.
D. An attorney who advises companies on corporation and business laws.
While receiving a properly drawn and payable check on a person’s account, which of
the following circumstances make it a necessity for the bank to honor the check?
A. When the check is stale.
B. When there are sufficient funds in the account.
C. When there is a stop payment order.
D. When a postdated check is presented before the date of the check.
Discovery generally takes place without a need for court orders or other judicial
supervision. Which of the following is an EXCEPTION to this rule?
A. A request for written questions directed at the opponent.
B. Requests for admission directed at the opponent.
C. A request for a physical or mental examination of the opponent.
D. Requests for the production of documents in civil cases.
An artisan who makes an improvement on a personal property is given a _____ on it
until he is paid.
A. lien
B. warranty
C. guaranty
D. credit
Adrienne had contracted to convey real estate to Rich. However Adrienne died before
the conveyance is completed. What is the status of the parties?
A. Adrienne is excused for nonperformance.
B. Rich will be directed by the court to end the contract.
C. Adrienne’s performance was impossible.
D. Rich can enforce the contract against Adrienne’s estate.
The most important requirement of goods regarding their merchantability is that they
must:
A. be fit for the ordinary purposes for which they are used.
B. be passed without objection in the trade.
C. be adequately contained, packaged, and labeled.
D. conform to any promises or statements of fact made on the label.
Phil decided to rescue Bobo, the dancing bear, from a traveling circus that was closing
its business. Although Bobo was a well-behaved grizzly bear, Phil took great caution to
make sure that Bobo would not escape from his yard by reinforcing the yard’s fence
with steel and padlocking the gate. One day, without notice, Bobo rushed the fence,
knocked the padlock off the gate, and escaped from Phil’s yard. Bobo lunged at a young
child in the neighborhood, injuring him. Based on these facts:
A. Phil will be liable, only if he breached a duty of due care owed to the child.
B. Phil will be liable if the harm that resulted to the child was foreseeable to Phil.
C. Phil will be liable, regardless of the steps that he took to secure the yard.
D. Phil will most likely not be liable.
Which of the following defeats a bank’s liability for failing to observe a stop-payment
order?
A. That the order was oral rather than written.
B. That the bank was not given 14 days to obey the order.
C. That the bank paid a person against whom the customer did not have a defense.
D. That the bank has the customer sign a disclaimer holding the bank harmless for its
failure to exercise ordinary care and good faith regarding its handling of stop-payment
orders.
Sally has been running a small but popular dance studio in her neighborhood for the last
15 years. Recently, a zoning ordinance mandated her neighborhood as strictly
residential where no commercial activities could be undertaken. What is Sally’s best
approach to continue running her studio if she is asked to close it?
A. She should request for an amendment to the ordinance.
B. She should get her students to protest.
C. She could argue that the studio was in existence before the ordinance.
D. She does not have a choice and must close or relocate her studio.
Nathan wrote a new software and named it “Black Mamba.” To commercialize it, he
formed an LLC (with a 50-year term) with his friend Pete. Two years later, Nathan
withdrew from membership of the LLC since his and Pete’s working styles did not
match in any way. Under which of the following conditions can Nathan ask for a
judicial dissolution of the LLC?
A. The LLC failed to purchase Nathan’s interest within a week of his dissociation.
B. Since Nathan wrote “Black Mamba,” Pete should not profit from it or the LLC.
C. Pete is using the profits from the LLC to sell a fake version of “Black Mamba.”
D. The LLC failed to give fair value to Nathan for his transferable interest.
The federal and state governments are exempted from which of the following acts?
A. The Family and Medical Leave Act
B. The Fair Labor Standards Act
C. The Equal Pay Act
D. The Occupational Safety and Health Act
A(n) _____ can be negotiated or transferred by delivery of possession without
indorsement.
A. order paper
B. bearer paper
C. cashier’s check
D. teller’s check
In order to reduce creditor attempts to pressure debtors to reaffirm, which of the
following acts requires that a reaffirmation promise be made prior to the date of the
discharge and gives the debtor the right to revoke his promise within 30 days after it
becomes enforceable?
A. The National Labor Relations Act
B. The Bankruptcy Abuse Prevention and Consumer Protection Act
C. The Uniform Debt-Management Services Act
D. The Bankruptcy Reform Act
Sandra hired Jeff to work as a taxi driver for Sandra. Jeff had a long criminal record for
violent assaults, including three cases of vehicular homicide. However, Sandra was not
aware of this and she does not check employees’ criminal records. While Jeff was
driving a passenger, Ben, they got involved in a heated argument. Jeff pulled Ben out of
his car and hit him. Which of the following is true of this case?
A. Since Sandra was not aware of Jeff’s criminal history, she will not be held liable for
this incident.
B. Jeff was outside the scope of his employment, hence he is liable for this tort, and
Sandra escapes liability.
C. Sandra is liable for the incident only under the vicarious liability doctrine.
D. Sandra is liable because of the direct liability doctrine.
In general, a court has _____ if it is a territorially fair and convenient forum in which to
hear the case.
A. venue
B. original jurisdiction
C. limited jurisdiction
D. standing
An S corporation:
A. must have at least 100 shareholders.
B. may have only one class of shares.
C. has the ability to attract capital, more than the limited partnership.
D. has the disadvantage of its shareholders being double taxed at the federal tax level.
Jack, a resident of Texas, sued Jill, a resident of Kentucky, alleging breach of contract.
Jack may attach Jill’s bank account in Kentucky to recover the amount of the judgment
from the account, if his suit is successful. This is an example of:
A. in rem jurisdiction.
B. in personam jurisdiction.
C. quasi in rem jurisdiction.
D. venue.
The board of directors of Filex Corporation at a regular meeting of the board entered
into a contract with Ginger Grant, one of the directors. This contract called for Filex to
purchase 120 acres of land from Ginger. There were ten members on the board, eight of
whom were present at the meeting. One of the directors present was Ginger. All the
other directors were disinterested in the transaction and not related to Ginger. After a
lengthy discussion, six directors voted in favor of the contract and two voted against it.
Ginger voted for the contract. Which of the following is true?
A. The contract between Ginger and the corporation is illegal and invalid.
B. The contract is valid since it was approved by a majority of a quorum of the board.
C. The contract becomes void if the corporation proves that the contract was unfair to it.
D. The contract is voidable unless Ginger proves that the contract is fair to the
corporation.
The drawee does not have liability on the instrument until it _____ the instrument.
A. transfers
B. signs
C. negotiates
D. makes
A rule made by an agency through the informal rulemaking method can become
effective only:
A. 45 days after the publication of the rule in its final form in the Federal Register.
B. 45 days after the publication of a “Notice of Proposed Rulemaking” in the Federal
Register.
C. 30 days after the publication of the rule in its final form in the Federal Register.
D. 30 days after the publication of a “Notice of Proposed Rulemaking” in the Federal
Register.
The equal protection standard is generally judged in a lenient manner. However, laws
that discriminate regarding _____ are made to undergo a much more rigorous test.
A. education
B. profession
C. race
D. age
Gold, CPA, rendered an unqualified opinion on the 1987 financial statement of Eastern
Power Co. Egan purchased Eastern bonds in a public offering subject to the Securities
Act of 1933. The registration statement filed with the SEC included the financial
statements. Gold is being sued by Egan under Section 11 of the Securities Act of 1933
for the misstatements contained in the financial statements. To prevail, Egan must
prove:
A. scienter: no; reliance: no
B. scienter: no; reliance: yes
C. scienter: yes; reliance: no
D. scienter: yes; reliance: yes
Which of the following represents an agency coupled with an interest?
A. A contingent fee arrangement in which a plaintiff’s attorney will receive 20% of any
recovery she achieves.
B. A professional sports contract in which a team owner agrees to pay a player
insurance premiums on a policy that compensates the player should he suffer a
career-ending injury.
C. A loan agreement in which the borrower pledges collateral to the lender and gives
the lender the power to take the collateral should the borrower default on the loan.
D. A contract in which a sales agent is hired for three years at a salary of $80,000 plus
5% of sales.
_____ is defined to mean “a signature (other than that of a maker, drawer or acceptor)
that alone or accompanied by other words, is made on an instrument for purpose of (i)
negotiating the instrument, (ii) restricting payment of the instrument, or (iii) incurring
indorser’s liability on the instrument.”
A. Indemnification
B. Recoupment
C. Indorsement
D. Ratification
A dissenting shareholder seeking payment of the fair value of his/her shares (dissenters’
rights) must have the right to vote on the action to which he/she objects. In which of the
following cases does a shareholder have dissenters’ rights despite his/her lack of voting
power?
A. Short-form mergers
B. Significant amendments of the articles of incorporation
C. Share exchanges
D. Sales of all the assets
_____ voting allows a majority shareholder to elect the entire board of directors.
A. Preference
B. Cumulative
C. Ranked
D. Straight
The TILA’s detailed disclosure provisions break down into three categories. One of
those categories is that of:
A. open-end credit.
B. debit card applications.
C. mixed credit.
D. consumer loans.
Respondents who sign consent orders:
A. agree to discontinue the business practice that triggered the agency action.
B. admit to their wrongdoing.
C. retain all rights to judicial review.
D. need not accept sanctions imposed by the agency.
A(n) _____ is a legal relationship in which a person who has legal title to property has
the duty to hold it for the use or benefit of another person.
A. accession
B. lien
C. trust
D. codicil
An oral contract that is covered by the statute of frauds is:
A. voidable.
B. void.
C. unenforceable.
D. executory.
Goods lawfully bearing trademarks or using patents and copyrighted material but
entering the American markets without authorization are called _____.
A. counterfeit goods
B. Shanzai goods
C. black market goods
D. gray market goods
What is the express term in the insurance policy which serves as the basis for the
insurer’s liability?
A. Guarantee
B. Warranty
C. Surety
D. Representation
A(n) _____ surety is a person who acts as a surety without compensation, such as a
friend who cosigns a note as a favor.
A. obligatory
B. benefactor
C. accommodation
D. subrogated
Richard sells land to Jones but reserves the mineral rights to the property as well as an
easement to enter the land to remove the minerals. Richard has acquired easement by:
A. prescription.
B. grant.
C. reservation.
D. implication.
An exculpatory clause that protects a person from liability for fraud is:
A. valid but unenforceable.
B. valid if it is in writing.
C. against public policy.
D. valid if both parties agree.
