The notice requirement of the Federal Trade Commission rule for consumer credit
contracts has the effect of:
a. limiting the types of defenses to payment available to a consumer.
b. eliminating the real defenses to payment.
c. placing a holder in due course in the position of an assignee.
d. permitting a holder in due course to have a questionable instrument reviewed by the
FTC.
Debra buys land from Oscar, relying upon a mortgage release executed and recorded by
the mortgagee, Keith. Keith, however, had previously assigned the mortgage to Andrew
who failed to have the assignment recorded. In this case, Andrew has:
a. no claim against the property in the absence of Debra’s actual knowledge of the
assignment by Keith.
b. no claim against the property because a mortgagee has no right to assign the
mortgage to another person.
c. a claim against the property because the assignment to him took place before Debra’s
purchase of the land.
d. a claim against the property because recording is not necessary to the effectiveness of
a mortgage assignment.
If a debtor defaults on the minimum payment of a credit contract, all states would allow
the creditor to:
a. impose a late charge.
b. garnish wages if there is a court proceeding to enforce the collection of a judgment.
c. Both of the above.
d. None of the above.
Which of the following run the day-to-day operations of a corporation?
a. Shareholders
b. Board of directors
c. Officers
d. Subscribers
Fred is a concert violinist who is scheduled to perform at Carnegie Hall for the first
time. He buys what he is told is a Stradivarius violin from a well-known, reputable
dealer in quality violins, and he pays the going rate for a Stradivarius. He later learns
the violin is an imitation, although it is such a good imitation that even the dealer
thought it was authentic. In this case:
a. Fred has made a unilateral mistake and cannot avoid the contract.
b. the dealer has committed fraud in the inducement.
c. the sale is voidable by the purchaser for mutual mistake.
d. the sale is voidable, because the dealer has made a fraudulent misrepresentation.
E-Sign provides consumers must:
a. evidence their consent on paper to conducting transactions with electronic records
after being informed of the types of hardware and software required.
b. receive a “clear and conspicuous” statement informing them of their right to
withdraw consent to receiving electronic records.
c. receive a “clear and conspicuous” statement informing them of their right to have the
record provided only in electronic form.
d. All of the above.
The National Labor Relations Act is also known as the:
a. Taft-Hartley Act.
b. Wagner Act.
c. Landrum-Griffin Act.
d. Norris-La Guardia Act.
Mel owns a neighborhood grocery store that he would like to sell. Katrina is interested
in purchasing the business, but she is concerned because she knows that Mel has built
up a lot of goodwill over the years, and she wonders whether Mel might not just open
another store down the block and take all of the business from the old store with him.
Katrina asks for and receives from Mel a clause in the sales agreement that Mel will not
open another grocery store within a 150-mile radius of the old store for a period of at
least ten years.
a. What is this agreement called?
b. Is the negotiated clause a valid one? Explain why or why not.
c. What guidelines would a court ordinarily use in determining whether to enforce such
a clause?
The doctrine of ____ is the basis for an employer’s liability for an unauthorized tort
committed by his employee in the course of his employment.
a. indemnification
b. respondeat superior
c. apparent authority
d. direct liability
An agency will terminate on the occurrence of all but which one of the following?
a. The goal of the agency is accomplished.
b. The agent decides to quit.
c. The subject matter of the agency is destroyed.
d. The principal leaves the country.
Which of the following may influence a promoter to choose to incorporate in a
particular state?
a. Its restrictions on dividend payments
b. Its tax on corporate earnings
c. The rights granted to shareholders
d. All of the above
Under the Americans with Disabilities Act (ADA), an employer may not use
qualification standards, tests, or selection criteria that screen out disabled workers.
If the goods or the tender of delivery fail in any respect to conform to the contract, the
buyer may:
a. reject the whole.
b. accept the whole.
c. accept any commercial unit(s) and reject the rest.
d. Any of the above.
Non-compete agreements drafted for employees of Internet companies:
a. are interpreted no differently in terms of standards of reasonableness than are
agreements for other types of companies.
b. are subject to larger geographic restrictions than for other types of companies.
c. are subject to longer periods of reasonable duration.
d. are irrelevant.
The tort of ____ is a false communication which injures a person’s reputation and good
name by disgracing him and diminishing the respect in which he is held.
a. false light
b. intrusion
c. defamation
d. disparagement
Which of the following is generally NOT a defense to a claim against a manufacturer
under 402A?
a. Contributory negligence on the part of the plaintiff
b. Express assumption of the risk
c. Misuse or abuse of the product
d. Subsequent alteration of the product by the plaintiff
A bailee’s duty of care:
a. is always the degree of care necessary to prevent any loss or injury to the bailed
goods.
b. varies depending on the nature of the bailment relationship.
c. varies depending on the character of the bailed property.
d. Both (b) and (c).
Barbara works for Chevco but owns no Chevco stock. She buys 10 shares of a new
issue of company stock as a savings plan and afterward receives the signed registration
statement, which contains an untrue statement of material fact. Because she works for
Chevco, she recognizes the error. Can she sue the auditor?
a. Yes, under Section 11, reliance is usually not required.
b. Yes, if she can prove she would not have bought the stock otherwise.
c. No, because she did not rely on the statement.
d. No, because there is no privity between Barbara and the auditor.
All but which of the following is required of a negotiable instrument?
a. It must be payable only out of a particular fund.
b. It must contain an unconditional promise to pay a fixed amount in money.
c. It must be payable on demand or at a fixed future date.
d. It must be in writing and signed by the maker or drawer.
Conduct on the part of the plaintiff which falls below the standard to which he should
conform for his own protection and which cooperates with the negligence of the
defendant in bringing about the plaintiff’s harm is:
a. comparative negligence.
b. contributory negligence.
c. res ipsa loquitur.
d. voluntary assumption of the risk.
In some states, preemptive rights do not apply to:
a. the reissue of previously issued shares.
b. shares issued for noncash consideration.
c. shares issued in connection with a merger.
d. the issuance of unissued shares that were originally authorized if the shares represent
part of the initial capitalization.
e. All of the above are correct.
A(n) ____ is a substituted contract that involves an agreement among three parties to
substitute a new promisee in place of an existing promisee, or to replace an existing
promisor with a new one.
a. accord
b. satisfaction
c. novation
d. mutual rescission
Bodily contact that is harmful or offensive can give rise to the tort of:
a. assault.
b. battery.
c. defamation.
d. appropriation.
When there was a contract with a previously undisclosed principal, the Third
Restatement:
a. holds that a third party’s rights against the principal are alternative to the third party’s
rights against the agent
b. rejects the election rule.
c. follows the same rules as the Second Restatement regarding a third person’s rights
against a principal and agent.
d. Both (b) and (c).
In deciding whether property owned by a partner before formation of the partnership
and used in the business is a capital contribution that belongs to the firm, a court will
consider which of the following?
a. Whether the property was improved with partnership funds
b. Whether the property was carried on the books of the partnership as an asset
c. Admissions or declarations of the partners
d. All of the above would be considered.
The National Highway Traffic Safety Administration:
a. seeks recalls on autos for safety reasons.
b. tests the fuel efficiency of each year’s car models.
c. enforces trademark laws on cars and car parts to ensure buyers get what they think
they are buying.
d. None of these are correct.
If the board delegates to a committee its duty to select a new company president:
a. the members of that committee may be responsible individuals other than board
members.
b. the committee must be approved by the shareholders.
c. the non-committee directors are relieved of liability for acts of the committee.
d. the committee may exercise all the authority of the board.
e. the committee must consist of board members.
Sareno Cheese Co. supplies mozzarella cheese to pizza restaurants at $1.50 per pound.
In order to snare the business from a pizzeria, Sareno offers to sell them cheese at $1.25
per pound. This will violate the Robinson-Patman Act unless:
a. the pizzeria can already get the cheese for $1.15 elsewhere.
b. Sareno can show it is cost justified because of quantity.
c. Sareno lowers the price to all its customers.
d. Two of the above, (b) and (c)
e. Any of the above
Which of the following is correct with respect to consequential damages under the
Code?
a. Consequential damages include damages for destruction of a warehouse caused by
the explosion of nonconforming goods.
b. Consequential damages include damages for lost profits from a contract to resell
goods which the seller never delivers.
c. Particular needs of the buyer need to be made known to the seller before the seller
can be held responsible for consequential damages relating to those needs.
d. All of the above are correct.
Under copyright law, the doctrine of works for hire states that:
a. if an employee prepares a work within the scope of her employment, her employer is
considered the author of the work.
b. if an employee prepares a work within the scope of her work, the employee is
considered the author of the work for copyright purposes.
c. if the work is specially ordered or commissioned, it is always considered, for
copyright purposes, the work of the employer.
d. a person’s original creations, if committed to tangible form, are always considered to
be authored by the actual creator in the law of copyright.
Which of the following is the correct definition for a partnership?
a. An association of two or more persons with one or more general partners and one or
more limited partners
b. A legal entity ordinarily consisting of an association of numerous individuals
c. An association of two or more persons to carry on as co-tenants in business
d. An association of two or more persons to carry on as co-owners a business for profit
E-Sign:
a. preempts the Uniform Electronic Transactions Act.
b. requires persons to agree to use or accept electronic records or electronic signatures,
provided they are informed of the types of hardware and software required and they
have the required equipment.
c. defines the included transactions narrowly.
d. ensures that the electronic form of Internet and e-mail agreements will not make
them unenforceable because of the statute of frauds.
Insurance protects a business from:
a. tort liability.
b. strict liability.
c. negligence.
d. intentional acts of its representatives.
e. All of the above.
Zelda signs a note for $500 to First Bank. If, at the request of both Zelda and the Bank,
Ann also signs the note as an accommodation maker:
a. Zelda is primarily liable on the note.
b. Ann is primarily liable on the note.
c. Ann has secondary liability on the note
d. Two of the above, (a) and (b), are correct.
e. Two of the above, (a) and (c), are correct.
Under the Magnuson-Moss Warranty Act, if a store wishes to market a mini-camera for
a retail cost of $5, it must give a written warranty.
Under the RUPA, if a partner is dissociated from a partnership without resulting in
dissolution, the business may choose whether to purchase the dissociated partner’s
interest in the partnership.
It is necessary that one own the instrument to be a “holder.”
In the absence of contractual restrictions, shares in a corporation may be transferred by
sale, gift, or pledge.
How can drawers and indorsers disclaim liability on an instrument? Does any different
rule apply to drawers of checks?
Limited partnerships are the same as limited liability partnerships.
All written contracts are considered to be formal contracts.
A quasi contract is another name for an oral contract.
As a general rule, illegal contracts are unenforceable and neither party can successfully
sue the other for breach or recover for any performance rendered.
Under the Fair Housing Act, a landlord cannot discriminate against a tenant with regard
to race, color, sex, religion, or disability.
A general partnership may be formed for a charitable purpose.
Compare and contrast a criminal case with a civil case. Be sure to use the correct
terminology.
Management buyouts commonly make extensive use of borrowed funds.
The SEC may not advance the effective date of a registration statement.
Define appropriation and give an example.
Seventeen-year-old Teresa wants to disaffirm her student loan agreements. Most states
will not allow her to avoid such contracts.