Andrew owns a store in Polk County. His trade extends throughout River City, but not
beyond the county limits. He sells his store to Betty and, as part of the transaction,
agrees not to engage in the same business anywhere within the state for a period of
three years. The agreement:
a. is reasonable.
b. is unreasonable.
c. unduly interferes with the interests of the public.
d. Both (b) and (c).
In order to be valid, a will must generally include all but which one of the following?
a. Signature of the testator
b. A written document
c. Signatures of witnesses
d. Signature of the executor
Americana Printing wishes to sell its products in a foreign country. However, it also
wishes to retain some input over its operation in that country for quality control reasons.
Which of the following forms of business would be the best for Americana?
a. A foreign distributorship
b. Direct sales
c. A licensing agreement
d. Creating a subsidiary in the foreign country
A basic objective of the Securities Act of 1933 is:
a. to provide investors with material information concerning securities offered for sale
to the public.
b. to prohibit misrepresentation and other fraudulent acts in the sale of only registered
securities.
c. to provide disclosure requirements on publicly held corporations.
d. to regulate tender offers and proxy solicitations.
Which of the following are types of restrictive indorsements?
a. Conditional indorsements
b. Indorsements prohibiting further transfer
c. Indorsements in trust
d. All of the above are restrictive.
Sue owes $5,000 to the First National Bank for a student loan which will come due on
January 1 next year. She has been offered a two-year graduate fellowship, but she will
not be able to pay the loan back if she accepts the fellowship. The bank manager tells
Sue that if she pays $3,000 now, they will forgive the loan. Should Sue accept the offer?
a. No, because the bank can still sue for the remaining $2,000
b. No, because the manager’s promise is not binding on the bank
c. Yes, because the early payment of the loan is consideration that makes the bank’s
promise binding
d. Yes, because the bank must do whatever the manager says
Janet promises Eli $4,000 for one of his original paintings on the condition that she
receive $1 million from her mother’s will. Janet has made:
a. an illusory promise.
b. a legally sufficient promise unless Janet knew at the time she made the promise that
she could not inherit the $1 million.
c. a conditional promise which is not sufficient to form consideration.
d. a legally inadequate promise, and the courts will therefore not enforce it.
An ad in a newspaper or a circular describing goods and stating prices would generally
be considered a(n):
a. firm offer if made by a merchant.
b. offer if made by a merchant, but not a firm offer.
c. offer irrespective of who made the offer.
d. invitation to buyers to make an offer to buy goods.
Which of the following is an exception to the suretyship provision requirement under
the statute of frauds?
a. A collateral promise made to the creditor
b. A promise, the leading object of which is to obtain an economic benefit for oneself
c. A collateral promise where there are three parties and two contracts involved
d. A promise by an executor to pay the debts of the decedent from the executor’s own
funds
The Credit Card Fraud Act prohibits which of the following practices?
a. Possessing unauthorized cards
b. Counterfeiting or altering credit cards
c. Using accounts numbers alone
d. Using a card obtained from a third party with his consent when the third party
conspires to report the cards as stolen
e. All of the above
The common law of torts protects employees from:
a. an unreasonable intrusion into their private lives by employers.
b. unreasonable disclosure by employers of private information.
c. unreasonable publicity putting them in a false light.
d. All of the above.
e. None of the above.
A holder in due course could recover from the maker where the:
a. maker’s signature is forged.
b. bearer instrument was stolen after it was completed.
c. maker signed the instrument under physical duress.
d. maker is a fifteen-year-old.
The RMBCA (without the 1999 amendments) grants dissenters’ rights to all but which
of the following?
a. Dissenting shareholders to any plan of compulsory share exchange in which their
corporation is the one to be acquired
b. Dissenting shareholders to any amendment to the articles of incorporation that
materially and adversely affects the dissenters’ rights regarding their shares
c. A situation in which there is an established market, such as the New York Stock
Exchange, for the shares
d. Dissenting shareholders of each corporate party to a merger, other than a short-form
merger, where only the dissenting shareholders of the subsidiary have dissenters’ rights
e. Dissenters’ rights exist under the RMBCA in all of the above situations.
Stan purchased 400 pairs of gloves from Isaac at a contract price of $800. Fifty of the
gloves were defective, and a dispute arose as to the amount due and owing under the
contract. Stan refuses to pay the $800, and Isaac is threatening to sue. Which of the
following is correct with regard to this transaction?
a. If Isaac agrees to accept $600 to settle the dispute and Stan agrees to pay that amount,
the substitute agreement is enforceable.
b. If Isaac agrees to accept $600 to settle the dispute and Stan pays that amount, Isaac
can still sue for the balance of $200 and will win the lawsuit.
c. Stan is under a pre-existing legal obligation to pay the $800.
d. Both (b) and (c).
A plan for reorganization under Chapter 11 does not have to meet which of the
following requirements to be confirmed by the court?
a. Good faith
b. Feasibility
c. No creditor approval
d. Cash payments
At the ____ the accused is informed of the charge and the accused enters a plea.
a. preliminary hearing
b. arraignment
c. indictment
d. information
Susan is planning to incorporate a new landscaping company, “Evergreen and Growin’.”
She has held herself out as an agent for Evergreen and has contracted to buy a truck,
tools, fertilizer, and seed and also has entered into a lease on behalf of Evergreen for an
office. When she fails to get the loan from the bank, she cannot start the business, so
she cancels all the contracts. What are the consequences?
a. Susan can cancel all the contracts with no personal liability if she told them she was
acting as an agent and expressly warranted that she would not be responsible.
b. Susan may be held personally liable on the contracts because she misrepresented to
third parties that she had authority to make contracts on behalf of a non-existent
corporation.
c. Since the company never existed, she gave no implied warranty.
d. Susan will be held liable for the contracts only if she ever gets the loan.
Under which of the following provisions of the U.S. Constitution is a corporation not a
“person”?
a. The Fifth Amendment’s Due Process Clause
b. The Fourteenth Amendment’s Due Process Clause
c. The Fourteenth Amendment’s Equal Protection Clause
d. The Fifth Amendment’s clause protecting against self-incrimination
e. The Fourth Amendment’s protection against unreasonable searches and seizures
A contract by which of the following is void?
a. A fourteen-year-old girl.
b. A thirty-six-year-old man under a court-ordered guardianship for mental
incompetency.
c. A thirty-year-old woman who, because of intoxication, is unable to understand the
nature and consequences of signing the contract.
d. A twenty-five-year-old woman who is unable to understand the nature and effect of
signing a contract because of a mental illness.
William, who is a waiter, is injured when an unopened bottle of cola explodes in his
hand while he is putting it into the restaurant’s cooler. If William wants to sue the
bottling company for his injuries:
a. he will lose, because it will be impossible for him to prove that the bottle was
overpressurized by the bottler.
b. he will lose, because the bottling company has no duty to him.
c. he will probably win if the court allows him to use the res ipsa loquitur doctrine.
d. he will win based on the last clear chance rule.
John operates a small repair business and is in desperate need of a certain type of
building material. He obtains the material from a large corporation, but is charged a
grossly unreasonable price and is forced to buy other material he does not need. In view
of the buyer’s unequal bargaining power and unreasonable terms of the contract, this
may be a case of:
a. in para delicto.
b. partial illegality.
c. substantive unconscionability.
d. procedural unconscionability.
If you lose your wallet along with your bank ATM card, your liability is
a. unlimited unless you notify the bank within 30 days.
b. limited to $200 if you notify the bank within 2 days.
c. limited to $500 if you notify the bank within 2 days.
d. limited to $50 if you notify the bank within 2 days.
A registration statement requires all of the following EXCEPT:
a. financial statements certified by an independent accountant.
b. description of the business.
c. description of the management.
d. projection of future growth potential.
When may a trustee not avoid a transfer?
a. When such payment is of a debt incurred in the ordinary course of business or
financial affairs of the debtor and the transferee
b. When such payment is not made in the ordinary course of business or financial
affairs of the debtor and transferee
c. When the transfer is made according to extraordinary business terms
d. All of the above
Claire opened Claire’s Beauty Parlor in her home. She solicited funds to begin the
business from Jack, who was led to believe that the business was incorporated. Claire
had, in fact, never filed the papers. One day, Claire fell asleep while giving a customer a
permanent and the solution caused her customer severe burns. The customer sued the
Beauty Parlor for $500,000, an amount enormously in excess of the business assets.
Under the RMBCA, what would be the result?
a. Claire and Jack would not be personally liable.
b. Claire would not be personally liable, but Jack would.
c. Jack would not be personally liable, but Claire would.
d. Both would be personally liable since there was no corporation formed.
Oscar, who was driving too fast, collided with a truck carrying explosives. The truck
was unmarked, so Oscar had no way of knowing what it contained. The collision caused
an explosion, which shattered glass in a building a block away. The glass injured Ida,
who was working inside the building. John, who was walking down the street near the
site of the collision, was seriously burned as a result of the explosion. In this case:
a. Oscar’s negligent driving is the proximate cause of Ida’s injury.
b. Oscar’s negligent driving is the proximate cause of John’s injury.
c. both Ida and John are within the zone of danger of the collision.
d. All of the above.
A gratuitous assignment is rendered irrevocable if, prior to the attempted revocation, the
assignee:
a. receives payment of the claim from the obligor.
b. obtains a judgment against the obligor.
c. Neither of the above. A gratuitous assignment is always revocable.
d. Both (a) and (b).
Give an example of each of the following:
Under the Third Restatement, an agent who represents an undisclosed principal is
discharged from liability if:
a. the third party’s judgment against the principal is satisfied.
b. the third party becomes aware of the principal.
c. after learning the identity of the principal, the third party gets a judgment against the
principal.
d. The agent is never discharged from liability.
Regarding drug and alcohol testing of employees by employers:
a. the NLRB makes it a mandatory subject of collective bargaining in a union setting.
b. the constitutional protection from unwarranted search and seizure protects private
sector employees from the practice.
c. the Constitution prohibits any public sector employer from testing its employees
under any circumstances without a warrant.
d. federal legislation sets forth comprehensive guidelines for the practice.
To prevent the use of the insurance policy for wagering purposes, the person who is to
be indemnified under the contract must have:
a. good faith.
b. an insurable interest.
c. a binder.
d. a coinsurance clause.
The National Tax Accountants Professional Association (TAPA) has recommended that
its members charge a minimum of $25 per hour for completing tax forms. This
recommendation is probably:
a. a per se price-fixing violation of the Sherman Act.
b. not a violation of the Sherman Act, because it has been made by a professional
association.
c. not a violation of the Sherman Act, because a fee is different from a price.
d. subject to the rule of reason.
The RUPA provides that partners are ____ liable on all contract obligations of the
partnership.
a. jointly and severally
b. strictly
c. not
d. partially
Robert advances money to John so that John can purchase inventory for his business. In
return and for security on the loan, John makes Robert his agent. If John:
a. becomes incapacitated, Robert’s agency is terminated by operation of law.
b. files for bankruptcy, Robert’s agency is terminated by operation of law.
c. dies, Robert’s agency is terminated by operation of law.
d. All of the above are correct.
e. Robert’s agency is irrevocable.
The Abbot Corporation contracts with the Baker Corporation to sell to Baker its entire
production. After signing the agreement, Abbot can increase its production from one
shift to two shifts and Baker will have to buy all of the doubled production.
The law applies a subjective standard of intent in determining whether there was the
requisite intent to enter into a contract.
Revised Article 9 of the Code greatly complicates the provisions regarding the place(s)
for filing a financing statement.
Employers may be subject to criminal penalties for the unauthorized act of a manager
who is acting within the scope of employment.
An assignment is made when the tenant transfers control of part of his entire interest in
the leased property to a third party.
Edward, an engineer, is working on a new design for some highly technical equipment
which XYZ, Inc. hopes to market within the next five years. The employment
agreement between Edward and XYZ states that Edward will not go to work for another
company in the same business for a period of two years after termination of his
employment with XYZ, Inc. This agreement is void and unenforceable, because it
would make it difficult for Edward to find other employment.
A mere holder or an assignee takes a negotiable instrument subject to all claims and
defenses to it.
Malicious prosecution and wrongful civil proceedings impose liability for damages
caused by improperly brought proceedings, including harm to reputation, credit, or
standing; emotional distress; and expenses of defense.
An action to recover damages for breach of contract may be maintained only if the
plaintiff has sustained or can prove an injury or loss resulting from the breach.
Redemption of shares generally results in an increase of treasury stock.
Possessory interests in property include profits à prendre and easements.
One difference between a full and a limited warranty is that in a limited warranty, the
manufacturer may, if reasonable, limit the warranty of merchantability to two years.
What is the legal effect of an agreement that is criminal, tortious, or otherwise contrary
to public policy, and why does it have that effect?
A partner who does not have actual authority to order a fax machine for the partnership
office probably has apparent authority to do so.
The “impostor rule” is an exception to the general rule that negotiation of an order
instrument requires a valid indorsement by the person to whose order the instrument is
payable.
The Third Restatement of Torts has abandoned the doctrine of implied voluntary
assumption of risk in tort actions.