Many states provide that a lease for a term exceeding __________ must be in writing.
a. three (3) months
b. six (6) months
c. one (1) year
d. three (3) years
Under the __________doctrine, the holder has taken so many instruments from its
transferor or is so closely connected with the transferor that any knowledge the
transferor has is deemed transferred to the holder, preventing holder in due course
status.
a. constructive partnership
b. close-connection
c. symbiotic relationship
d. collaborative relationship
The standard of care for accountants’ liability for malpractice:
a. is the same in all cases.
b. does not vary from community to community.
c. requires accountants to exercise the degree of skill and care commonly exercised by
others following the same calling within the same community.
d. requires accountants to exercise the degree of skill and care commonly exercised by
the best accountants within the same community
The validity of a contract is not affected by:
a. the effect of the contract on the community.
b. unconscionability.
c. the absence of good faith.
d. the fact that the contract turned out to be a bad bargain for one of the parties.
Jack sells Jim a used car that Jack falsely described as having been driven only 12,000
miles. Fraud has occurred if:
a. Jim bought the car solely because of its color.
b. Jim knew that the mileage was more than 12,000 miles.
c. Jim relied upon Jack’s statement.
d. Jack is a merchant.
When a surety pays a debt that it is obligated to pay, it automatically acquires the claim
and the rights of the creditor through:
a. assignment.
b. exoneration.
c. subrogation.
d. default.
The rule of mitigation of damages requires that a party injured by a breach of contract
must:
a. take any and all steps possible to reduce the damages that will be sustained because
of the breach.
b. discharge the contract before filing suit for breach.
c. hire someone else to perform the contract.
d. take reasonable steps to reduce the damages that would otherwise be sustained
because of the breach.
A court may not imply a term:
a. governing the details of performance.
b. governing the time of performance.
c. limiting the cost in a cost-plus contract to 10 percent of the estimated cost.
d. requiring good faith.
John owed Barney money. Barney called John’s home several times per day for five
weeks asking for repayment, with some of the calls coming after midnight. Barney
might be liable for:
a. defamation.
b. wrongful interference with a contract.
c. intentional infliction of emotional distress.
d. trespass.
To avoid litigation over impossibility and impracticability issues, modern contracting
parties often contract around the doctrine of impossibility, specifying the failures that
will excuse performance in their contracts. The clauses in which they do this are called
__________ clauses, and they are generally enforced by courts as written.
a. delta force
b. force majeure
c. magnum force
d. force corporeal
A nonconforming use:
a. that is discontinued for a period of less than thirty (30) days may be resumed.
b. has a right to continue for only five (5) years.
c. has a constitutionally-protected right to continue.
d. that continues for more than one (1) year cannot be lost by abandonment.
A third-party beneficiary contract may be amended:
a. with the consent of the beneficiary.
b. by operation of law.
c. if the contract allows modifications without the beneficiary’s consent.
d. all of the above.
The process by which the buyer conducts a thorough investigation of the property and
its current and former uses to determine whether there are any problems with respect to
environmental law or nuisance is called:
a. continuing the nuisance.
b. due diligence.
c. nuisance per se.
d. nuisance per fact.
When the president negotiates a treaty with a foreign country and submits it to the
Senate for approval, the president’s action is based on:
a. an express Constitutional amendment.
b. an amendment by judicial interpretation.
c. an amendment by practice.
d. the power of manifest destiny.
The provisions of the United Nations Convention on Contracts for the International
Sale of Goods have been strongly influenced by:
a. the GATT’s most-favored nation clause.
b. the European Economic Community’s Treaty of Rome.
c. the Uniform Commercial Code.
d. the success of the Organization of Petroleum Exporting Companies.
The statute of frauds applies to:
a. a contract of indefinite duration that is terminable at will by either party.
b. a promise made directly to a debtor that the promisor will pay the creditor of the
debtor what is owed.
c. a promise by an executor to pay a claim against the estate out of his or her personal
funds.
d. mutual promises to marry.
__________ courts impose liability on the accountant to a total stranger who gets
possession of the accountant’s work and then sustains a loss because of a false statement
in the work.
a. No
b. A minority of
c. A majority of
d. All
Which of the following will affect the perpetual life of a corporation?
a. a change in stock ownership
b. the death of a shareholder
c. both a. and b.
d. neither a. nor b.
The damages that are typically recoverable when a contract has been breached and one
party has suffered loss are called:
a. punitive damages.
b. emotional distress damages.
c. compensatory damages.
d. liquidated damages.
Any adversely affected person may challenge the validity of an Occupational Safety
and Health Administration (OSHA) standard in a U.S. Court of Appeals.
An assignment:
a. is a contract.
b. requires consideration.
c. is a transfer of rights.
d. is not enforceable.
Which statement is incorrect concerning mortgages?
a. The mortgagee’s interest terminates upon performance of the obligation secured by
the mortgage.
b. The mortgagee has the right to enforce the mortgage by foreclosure upon default by
the mortgagor.
c. An unrecorded mortgage is invalid between mortgagor and mortgagee.
d. Generally, no particular form of language is required to create a mortgage.
A common carrier of goods has the right to:
a. make reasonable and necessary rules for the conduct of its business.
b. charge a rate that enables a fair return.
c. charge demurrage.
d. all of the above.
The obligation of a cosigner is discharged by:
a. the minority status of one of the parties.
b. the majority status of one of the parties.
c. the court’s declaration of the contract’s provision of necessaries.
d. the payment of the debt.
A sales contract must be evidenced by a writing if the sales price of goods is equal to or
more than:
a. $100.
b. $300.
c. $500.
d. $1,000.
A contract is interpreted to give effect to:
a. the intent manifested by the contract.
b. what the court believes is a fair contract.
c. what the defendant thought the contract meant.
d. what will be best for the economic life of the community.
A customer requested a price from a carpenter on a teak cabinet to be built according to
the buyer’s specifications. Because teak wood is difficult to obtain, the customer agreed
to pay the cost of the wood plus $175 and the carpenter agreed to build it. Which of the
following is correct?
a. Although the price is somewhat unclear, the parties have entered into a contract.
b. This is an agreement to agree, and is not binding.
c. This agreement fails for indefiniteness.
d. The carpenter is bound by the agreement, but not the customer.
If no termination date is specified for an offer, the offer will remain open:
a. for one year.
b. for six months.
c. for a reasonable period of time.
d. until someone accepts the offer.
Who is entitled to file a motion to dismiss?
a. defendant only
b. plaintiff only
c. both plaintiff and defendant
d. none of the above
A Federal Trade Commission regulation gives a buyer three (3) business days in which
to cancel a home-solicited sale of goods or services costing more than:
a. $25.
b. $50.
c. $100.
d. $500.
Joe Swartz, an employee of Acme Company, worked for months during company time
and used Acme’s equipment to develop an idea that he had been nurturing. Finally, the
idea came to fruition. Swartz’s employer laid claim to the invention on the grounds that
the firm’s equipment had been utilized on company time. Swartz had obtained a patent
on the invention and claimed that his employer had no rights to the invention at all.
Who is right? How could an employer guard against such arguments in the future?
A corporation may be judicially dissolved when its management is deadlocked and the
deadlock cannot be broken by the shareholders.
Nelson took her computer to ABC Computer for repairs. ABC repaired the computer at
a cost of $350 and informed Nelson that her computer was ready. Before Nelson came
to pick up her computer, ABC was burglarized and Nelson’s computer was taken. ABC
had a commonly-used alarm system that was operating properly on the night of the
burglary, and all the doors and windows were properly secured. Nelson sued ABC for
the cost of the computer. ABC denied any liability and counterclaimed for the $350 in
repairs. Who will win?
The rights of a third-party beneficiary always can be destroyed without that
beneficiary’s consent.
The privity rule permits the filing of an accounting malpractice lawsuit by a third party
against an accountant.
A franchise agreement in which the franchisor grants the franchisee authority to
manufacture and sell products under the trademark(s) of the franchisor is known as a
manufacturing or processing franchise.
In many instances, malpractice is both a breach of contract and a tort.
In general, there is no requirement that an insurable interest exist at the time that a
property insurance contract is created.
In a corporation, a large number of investors may pool their assets to finance a large
business enterprise.
A person who is prevented from enforcing a contract because of the statute of frauds
also is prevented from recovering the value of services, property, or money furnished
the other party to the oral contract.
A seller cannot be held liable for the breach of an express warranty if the seller honestly
believed that the warranted statement was true.
Truth is not a defense to defamation.
No writing is required for a contract by which a broker agrees with a customer to buy or
sell securities for the customer.
Factual incapacity is imposed because of the class or group to which a person belongs.
A special agent is authorized by the principal to transact all affairs in connection with a
particular type of business or trade or to transact all business at a certain place.
Howard bought goods from Williams. Howard sent Williams a draft covered by a letter
of credit issued by First National Bank. Is the bank required to investigate to determine
whether the goods sent by Williams conform to the contract?
Quickness Computer, Inc. was a manufacturer of computers. A Hollywood star
indicated on national television that Quickness was his favorite computer. Buoyed by
this comment, sales of Quickness computers surged. Since demand outpaced supply,
Quickness decided to sell no more computers unless an accompanying software
package was purchased. A competitor informed the Office of the Attorney General of
this policy, asserting it was illegal. Decide.