a. What are the two types of duress and what is the effect of each on the contract
involved?
b. Give an example of each type of duress.
c. Who does the law intend to protect by reason of the defense of duress? Why does the
law protect this type of person?
Dan dies without a valid will in a state that uses the Uniform Probate Code. Which of
the following is correct?
a. If there are no children and no surviving parents, Dan’s widow is entitled to the entire
estate.
b. The surviving spouse is entitled to the entire estate regardless of other possible heirs.
c. If Dan has a parent surviving as well as a wife, then Dan’s parent will get one-half of
the estate remaining after payment of $50,000 to the wife.
d. If Dan is survived by his wife and two children from a previous marriage, his wife is
entitled to the first $200,000 plus half of the remaining estate.
The Clayton Act:
a. was intended to stop certain trade practices before they become restraints of trade.
b. added criminal sanctions to the Sherman Act.
c. repealed the Robinson-Patman Act.
d. included labor organizations in its coverage.
Eliza was an antique expert. She went to a tea party at Grandma Jones’ house and saw a
magnificent Queen Anne table out on the back porch. She asked Grandma about it and
was told it was in the way so they were going to store it in the barn. Eliza offered to buy
it from her for $200. The next week, Grandma saw it in Eliza’s store on sale for $3,000.
Grandma:
a. can get the table back because of fraudulent concealment of the value.
b. can get the true value, because it would not be fair otherwise.
c. cannot rescind the contract because Eliza did not have a duty to tell her the value of
the table.
d. cannot rescind the contract because she did not rely on Eliza to give her a fair price.
A compulsory share exchange:
a. is a transaction by which the corporation becomes the owner of all the outstanding
shares of one or more classes of another corporation by an exchange that is compulsory
on all owners of the acquired shares.
b. may be carried out by a corporation acquiring shares in another corporation with its
or any other corporation’s shares or other securities, but not for cash or other property.
c. affects the separate existence of the corporate parties to the transaction.
d. All of the above.
If no special words are used when real property is conveyed to two or more persons, it
will create a:
a. tenancy by the entireties.
b. tenancy in partnership.
c. tenancy in common.
d. joint tenancy.
A tailor agrees to sew a suit for Bryan, who promises in return to pay $500 for the suit
if he is satisfied with it. The tailor completes the suit, which fits Bryan perfectly.
Nevertheless, he says that he is not satisfied and refuses to accept or pay for it. Bryan is
honest in his dissatisfaction, but he is unreasonable. In this case:
a. Bryan must pay for the suit even if he is dissatisfied.
b. this is an illusory contract, because only the tailor is bound.
c. Bryan’s approval is an objective standard.
d. the tailor has no recourse, because he agreed to the subjective standard.
Match the following:
a. The sender of a payment order.
b. A specialized form of draft; an order to pay money, drawn on a bank and payable on
demand.
c. Defenses available against all holders.
d. Signature identifying an indorsee to be paid and making the instrument order paper.
e. A person who is in possession of an instrument with all necessary indorsements.
f. Signature that specifies no indorsee and may consist of merely the signature of the
indorser or her authorized agent.
g. The person who executes a promissory note and who promises to pay it.
h. A written acknowledgment by a bank of the receipt of money that it promises to
repay on demand or at a stated future date, with interest at a stated rate; a specialized
form of promise to pay money that is given by a bank.
i. A party to whom a draft is directed, and who is requested to pay the amount of money
ordered therein; the bank on which a check is drawn.
j. The person who writes a check or draft; the person on whose account a draft is drawn.
k. A signature that attempts to limit the rights of the indorsee in some fashion.
l. A sender’s written, electronic, or oral instruction to a receiving bank to pay, or to
cause another bank to pay, a fixed or determinable amount of money to a beneficiary.
m. The person in whose favor a promissory note or draft is made or drawn.
n. Defenses which are good against holders unless they have rights of holders in due
course.
o. An instrument involving two parties, one of whom promises to pay to the order of the
second a stated sum of money either on demand or at a stated future date.
p. A paper, containing an indorsement, affixed to a negotiable instrument.
q. The transferee of a holder in due course succeeds to the rights of a holder in due
course even if the transferee does not qualify for holder in due course status.
r. The bank in which the payee or holder deposits a check for credit.
s. A bank, other than the depositary or payor bank, involved in the collection process.
t. Legal concept that makes written instruments freely transferable and therefore a
readily accepted form of payment in substitution for money.
1) real defenses
2) special indorsement
3) certificate of deposit
4) check
5) blank indorsement
6) restrictive indorsement
7) negotiability
8) drawee
9) drawer
10) holder
11) maker
12) allonge
13) payee
14) promissory note
15) payment order
16) shelter rule
17) personal defenses
18) originator
19) intermediary bank
20) depositary bank
The Code greatly alters the common law doctrine of material breach by adopting what
is known as the:
a. perfect tender rule.
b. anticipatory repudiation rule.
c. prevention of performance rule.
d. discharge by operation of rule law.
The right of a shareholder to examine the books and records of the corporation is a
valuable right. However, it may be denied if the shareholder:
a. seeks information to determine the financial condition of the corporation.
b. desires to know the amount of executive salaries.
c. seeks information to embarrass or cause loss to the corporation.
d. desires the names and addresses of other shareholders.
White, Gray, and Greene enter into a contract to form a partnership, but the contract
says nothing about the sharing of profits and losses. Which of the following will take
place?
a. Profits and losses will be shared in a ratio based on the dollar amount of their capital
investments.
b. Profits will be shared equally; losses will be absorbed based on dollar amount of
capital investment.
c. Profits will be based on amount of time each partner spends working for the firm;
losses will be shared equally.
d. Profits and losses will be shared equally.
If Yeron Corporation buys all of the assets of Aeron Corporation:
a. Yeron becomes a parent corporation.
b. Aeron is merged into Yeron.
c. Aeron’s board is dissolved and replaced by Yeron’s.
d. None of the above.
Under the Bankruptcy Code’s provisions for proof of claims, a court may not allow any
claim that is:
a. unenforceable against the debtor or his property.
b. for matured interest.
c. for reasonable insider fees.
d. All of the above.
Under the UCC, a(n) ____ is a practice or method of dealing, regularly observed and
followed in a place or vocation or trade.
a. course of dealing
b. usage of trade
c. course of performance
d. integrated document
Cal sprayed pesticide on his crops in a very careful manner on a windless day.
Nevertheless, some of the pesticide spray fell on his neighbor’s side of the fence and
contaminated the feed for the chickens. The chickens died, and the neighbor sues. What
is the likely result?
a. Cal is not liable because he was not negligent in his spraying operation.
b. Cal is not liable because the neighbor assumed the risk of damage to the feed by
placing it so close to the fence.
c. Cal is liable because spraying pesticides is an abnormally dangerous activity.
d. Cal is not liable for the damage because of contributory negligence.
When can an accountant release audit working papers?
a. When a client consents
b. When a court orders disclosure
c. Both (a) and (b)
d. Neither (a) nor (b)
Which of the following is correct with respect to RICO?
a. It subjects to penalties enterprises that engage in a pattern of racketeering, defined as
the commission of two or more specified state or federal criminal offenses within a
period of ten years.
b. It was enacted with the stated purpose of terminating the infiltration of organized
crime into legitimate businesses.
c. It provides for both civil and criminal penalties for violators.
d. All of the above are correct.
Marilyn contracted with Bravo Builders to build an addition to her house for $15,000.
After digging the foundation, Bravo decides that it will take more work and more
concrete than it had originally thought and that it will need to charge an additional
$5,000 for the job. Assuming Marilyn agrees, which of the following is correct?
a. Marilyn will have to pay $20,000.
b. This is a contract under seal which is enforceable.
c. This is a modification of a preexisting contract, which under common law must be
supported by additional consideration on the part of Bravo Builders.
d. This is the settlement of a disputed debt that requires no additional consideration on
the part of Bravo Builders.
Which of the following is not a right conferred on the owner of an equity security?
a. The right to title to a proportionate share of the corporation’s property
b. The right to participate in control of the corporation
c. The right to participate in the earnings of the corporation
d. The right to participate in the residual assets of the corporation upon dissolution
e. All of the above are rights of an owner of an equity security.
Of the following elements, which one is NOT required to create an enforceable trust?
a. Consideration
b. A settlor
c. Specific property
d. A beneficiary
Which of the following is not true regarding a partnership name?
a. The name selected may not be the same as or deceptively similar to the name of any
other existing business.
b. It may be a fictitious name.
c. It may not be likely to indicate to the public that it is a corporation.
d. It may not be the name of any one of the partners.
Russell promises Marty $1,500 if he will completely landscape Russell’s yard. Which of
the following would discharge Russell’s obligations to pay under this contract?
a. Marty leaves a one-foot strip of land barren.
b. Marty doesn’t begin work on the landscaping until after he finishes two other jobs.
c. Marty doesn’t plant any flowers, shrubs, or grasses.
d. Russell isn’t satisfied with Marty’s design.
Which of the following is/are correct with regard to conditions subsequent?
a. Conditions subsequent are quite common in contracts.
b. A ‘sale or return” contract is an example of a contract with a condition subsequent.
c. A condition subsequent must occur before performance is due under a contract.
d. All of the above are correct.
Non-bankruptcy compromises to give debtors relief while protecting the rights of
creditors include:
a. compositions.
b. nonstatutory assignments for the benefit of creditors.
c. receiverships under the direction of a court with equity powers.
d. All of the above.
Albert read Gem City’s ad in the local newspaper advertising a one-quarter carat
diamond ring for $89. Albert rushed to the store to buy the ring, only to be told by the
salesperson that the ad was a misprint and the price should have been $289. Albert gave
the salesperson $89 plus sales tax and demanded the ring. In this case:
a. the ad is a firm offer by the merchant, and the ring must be sold for $89.
b. the ad is a contract and the store must abide by terms stated in the contract.
c. the store must accept the price stated in the ad, but only if Albert has a copy of the ad
with him.
d. Albert is merely making an offer to Gem City to buy the ring for $89 plus sales tax.
Patrick agrees to sell two different goods to his friend Ron, a retailer. One item is legal,
and one item is illegal. The contract price is $2,000. In this case:
a. Patrick may not recover payment for either of the goods if delivered.
b. Patrick may recover for the legal item, but he may not recover for the illegal item.
c. the contract is unconscionable under the UCC.
d. the court may view the contract as in (a) or (b).
The CISG was developed by the:
a. UNCITRAL.
b. National Conference of Commissioners on Uniform State Law.
c. EU.
d. World Trade Organization.
Under the Third Restatement of Torts, a person acts recklessly if the person:
a. has an unconscious disregard of the consequences of the act committed.
b. knows facts that make the risk obvious to another in the person’s situation.
c. exhibits malice or a fraudulent or evil motive.
d. All of the above.
A partnership interest:
a. is personal property that may be assigned without dissolving the limited partnership.
b. may be assigned to a person who then becomes a partner.
c. may not be assigned without dissolving the limited partnership.
d. may not be assigned unless this right is specifically provided for in the partnership
agreement.
A court will not grant a discharge under Chapter 7 to a debtor who:
a. has been granted a Chapter 7 discharge within eight years prior to filing.
b. has made false claims to the court.
c. has destroyed collateral.
d. is a corporation.
e. All of the above.
The right to cut and remove trees from another’s land would be a(n):
a. easement.
b. profit.
c. license.
d. covenant.
Bill has a right against Heather and assigns it for $100 to Dan. Later, Bill grants
Heather a release. Bill:
a. is liable to Dan for damages because he breached an implied warranty.
b. has no liability to Dan because he did not expressly warrant that he would not impair
the assignment.
c. has no liability to Dan because the only implied warranty he made was that the
assigned right actually existed at the time of the assignment.
d. was acting contrary to public policy by assigning a contractual right for money.
Mark hires Joe’s real estate agency to sell his estate, telling Joe he has lost too much
money playing the stock market to afford to keep it up. Then Mark wins the three
million-dollar lottery! Joe reads this in the newspaper and that afternoon makes a
contract with Sharon to sell the estate. Is the contract valid?
a. No, the agency terminated because of the change in conditions.
b. No, the agent has no right to sell without consent.
c. Yes, Mark would have to notify Joe if he wanted to stop the sale.
d. Yes, Joe had apparent authority to sell.
In 2008, Bill created a trust that would become effective on his death. In the trust
instrument, Bill specified that all of the income from his stocks and bonds be used for
the benefit of St. John’s Hospital and indicated that his brother Chad should administer
the trust.
a. What kind of trust is this?
b. What is Bill in relationship to the trust?
c. What is the corpus of the trust?
d. What is Chad in relationship to the trust?
Professor Dought has a life insurance policy on his own life that provides that in the
event of his death, his mother will receive the proceeds. Professor Dought’s mother is
a(n):
a. incidental beneficiary.
b. creditor beneficiary.
c. donee beneficiary.
d. assignee.
Sharing of gross returns establishes a partnership.
The federal government leaves corporate stock regulation to the states, since
corporations are state-created entities.
A principal who authorizes his agent to commit a tortious act with respect to the
property or person of another is not liable for the injury or loss sustained by that person.
There has been an explosion at Johnson’s Oil refinery because of a lightning strike.
Fumes from the resulting fires at the plant have sent the nearby townspeople to the
hospital for severe respiratory distress. Johnson’s Oil will be liable for the
townspeople’s injuries directly resulting from the fumes.
An executory promise is the giving of value to support holder in due course status.
Renunciation is a statutory right of a surviving spouse to give up her statutory share in
the estate.
An agency agreement does not have to always be in writing.
Laura is considering the possibility of becoming a surety to Carl on a debt by David,
but she would like more information on the relationship between Carl and David
concerning the transaction. If Laura requests such information from Carl, he must
disclose it, because his failure to disclose material facts will constitute fraud.
Jerry received a bill for $300 from Johnson for a tune-up Johnson had performed on
Jerry’s car. Jerry called Johnson and told him, “The car runs no better now than before
the tune-up. I am sending you $100 and no more.” Johnson received the $100 check
which was marked “paid in full” and cashed it. Jerry is still liable to Johnson for $200.
When delivery is to be made by physically moving the goods, title passes at the time
and place at which the seller completes performance with reference to delivery of the
goods.
A voting trust does not permit a concentration of corporate control in one person.
The term “public policy” is precisely and narrowly defined in the Restatement and by
state statutes.
List four areas of contract law where the common law of contracts and the law of sales
differ. Give both the common law rule and the rule under Article 2.
Federal protection of a registered trademark is perpetual.
If a bank pays on a check even though it has a ‘stop payment order,” it is liable to the
customer only if the customer can prove a loss because of the payment.
Lance has a contract with Smith to resurface a driveway at the Smith residence. Lance
by mistake stops at the Jones residence and resurfaces Jones’ driveway. Jones lives next
door to Smith and knows that Lance is at the wrong residence. Jones, however, says
nothing and watches while Lance resurfaces his driveway. Is Jones under any
contractual obligation to pay Lance for resurfacing his driveway? Explain your answer.
Identification may be made by either the seller or the buyer.
Electronic surveillance for the purpose of acquiring trade secrets is permissible under
the law of unfair competition.