Jon, a high-school senior, bit into a turkey bone in a bite-sized cube of white turkey
meat in his high-school cafeteria. He felt something in his throat and after some effort
expelled a small ½ inch bone. He sustained injury to his esophagus and was
hospitalized for four days. Jon brought suit against the school, claiming breach of
warranty of merchantability in the food served to him in the cafeteria. What test should
be applied to determine whether there was a breach of warranty of merchantability
because of the presence of a bone in the meal served to Jon?
Answer:
The CAN-SPAM Act:
A. requires that all e-mail messages be labeled.
B. requires that unsolicited commercial e-mail include opt-out instructions.
C. prohibits interference with computers used by the government or financial
institutions.
D. allows an ISP to disclose private information to a government agent if the provider
believes that the information concerns a serious crime.
Answer:
In the sale of real estate:
A. many courts are holding that sellers have a duty to disclose defects that seriously
undermine the value of the home.
B. the Truth in Lending Act puts the burden on the buyer to discover defects.
C. the doctrine of caveat emptor applies without exception.
D. courts are increasingly protecting developers, sellers, and their agents.
Answer:
An investment contract:
A. is a public offer by a bidder to purchase a target company’s equity securities directly
from its shareholders at a specified price for a fixed period of time.
B. regulates the sale of securities while they are passing from the hands of the issuer
into the hands of the public investors.
C. may be defined as an investment of money in a common enterprise with an
expectation of profits from the efforts of others.
D. is a type of securities exemption that need not be registered, regardless of who sells
the securities, how they are sold, or to whom they are sold.
Answer:
Which of the following is TRUE of joint ventures?
A. They are arrangements in which two or more entities collaborate with respect to
research, development, production, marketing, or distribution.
B. They directly violate Section 2 of the Sherman Act.
C. If the venture partners have complied with the act’s notification requirements, they
are liable for only treble damages in any civil suits that successfully challenge the
arrangement.
D. They refer to the acquisition of one company by the other.
Answer:
In an FAS contract, the seller:
A. must deliver the goods alongside the vessel at his own risk and expense.
B. must deliver the goods alongside the vessel at the buyer’s risk and expense.
C. must deliver the goods alongside the vessel at his own expense but at the buyer’s
risk.
D. has title to goods till they are delivered alongside a vessel.
Answer:
The Civil Rights Act of 1991:
A. provides Title VII coverage only to U.S. citizens working in the U.S.
B. curbed remedies for people harmed by discrimination thereby prohibiting claimants
from suing for damages.
C. provides Title VII coverage to persons of all nationalities working in the U.S.
D. established that an employment decision based partly on discriminatory motives and
partly on legitimate reasons is still illegal discrimination.
Answer:
A term life insurance contract:
A. obligates the insured to pay the specified premium for the duration of his or her life.
B. obligates the insurer to pay the face amount of the policy if the insured dies within a
specified period of time.
C. develops a loan value that the insured can recover if the policy is terminated.
D. develops a cash surrender value that the insured can recover if the policy is
terminated.
Answer:
Tosca took his friend Scarpia to the amusement park for a roller coaster ride. Due to the
intensity of the ride, Scarpia, who had an especially weak heart, died of a heart attack
there. This would be considered an act of negligence in accordance with the concept of:
A. proximate cause.
B. negligence per se.
C. breach of duty.
D. principles of causation.
Answer:
The unauthorized reproduction of creative works is prohibited by a(n):
A. inventor’s certificate.
B. patent.
C. compulsory license.
D. copyright.
Answer:
Jelly Manufacturer, a food processor in Chicago, placed a phone order with Grape
Grower, a grower in California, for a quantity of perishable product. The shipping term
was “CIF” with payment to be made on delivery. Grower delivered the goods called for
in the contract to a carrier and contracted for their shipment. However, it neglected to
have the goods shipped under refrigeration. The goods were loaded on a
non-refrigerated boxcar and as a result the product was spoiled when it reached
Chicago. Under these circumstances:
A. Grape Grower bears risk of loss as he did not insure the goods.
B. Jelly bears the risk of loss because under CIF shipment the buyer has to bear all
risks.
C. Jelly bears the risk as the contract did not mention that Grape Grower guarantee their
delivery.
D. Grape Grower bears the risk of loss because under a CIF shipment, the seller bears
the expense and the risk of loading the goods.
Answer:
A director of a corporation has the right to:
A. establish the price for the sale of shares of stock.
B. elect and remove officers.
C. sell, lease, and mortgage assets of the corporation outside the normal course of its
business.
D. inspect the corporate books and records.
Answer:
A CPA firm agrees to complete an audit by the 28th of February because it has been
informed of a deadline set by a prospective lender to the client. If the audit report is not
finished until the end of March then:
A. the firm would be liable even though the delay was due to the client’s having
obstructed performance of the audit.
B. the accounting firm would not be liable if they had other deadlines to meet at the
same time. This could be used as a complete defense.
C. the accountant would be liable for the client’s resulting loss if the lender has no more
funds available at that time.
D. the firm would not be liable if they have delegated their responsibilities to another
CPA firm.
Answer:
An express warranty is created when:
A. a seller makes an affirmation of fact or promise concerning the goods that becomes
part of the basis of the bargain.
B. a seller uses descriptive terms as a part of the bargaining process, but the buyer does
not take it into consideration when making the purchase.
C. a seller sells goods meant for use for ordinary purposes.
D. a seller avoids using a sample or model as the basis for the contract.
Answer:
Blue laws:
A. prohibit performing certain acts on Sunday.
B. regulate betting.
C. regulate interest charged for the use of money.
D. regulate licensing activities.
Answer:
Which of the following creates a revocable living trust?
A. Doctrine of cy pres
B. Express trust
C. Spendthrift trust
D. Totten trust
Answer:
Technology transfer agreements:
A. protect “distinctive” or “famous” marks from unauthorized uses even when
confusion is not likely to occur.
B. permit a company to quickly penetrate a foreign market without incurring the
substantial financial and legal risks associated with direct investment.
C. prevent an intellectual property owner from granting to another the right to use
protected technology in return for some form of compensation.
D. assert that priority of trademark rights in the United States depends solely upon the
priority of use in the States, and not anywhere else in the world.
Answer:
If the seller has justifiably withheld delivery of the goods because of the buyer’s
breach, the buyer is entitled to:
A. recover any money or goods he has delivered to the seller over and above the agreed
amount of liquidated damages.
B. an amount in excess of $500 or 20% of the value of total performance.
C. recover any money or goods he has delivered to the seller only to the agreed amount
of liquidated damages.
D. an amount in excess of $1,000 or 20% of the value of total performance or
whichever amount is higher.
Answer:
Brian offers to sell Jerry his Ranch house but a hurricane destroys the house before
Jerry accepts the offer. What would be the possible outcome of this offer?
A. A written statement must be produced to the court of law, to terminate the offer.
B. If the offer is not revoked within a week after the incident took place, the offer is
considered to be open and Jerry can claim the recovery charges.
C. Jerry must be paid the recovery charges for losing the house as he had already been
offered by Brian.
D. The offer is terminated when the house is destroyed as it happened without the
knowledge or fault of either of the parties.
Answer:
Jose, a migrant worker who lived in a mobile home with six other workers, died in a
fire in the home. The smoke alarm did not go off, and he was trapped in the bedroom.
The state had a law that required dwellings to be equipped with smoke detectors and
that they be maintained. Jose’s widow can sue the owner of the mobile home under
___.
A. recklessness
B. negligence per se
C. breach of duty
D. strict liability
Answer:
Fillmore, Willis, and Polk form a partnership. Fillmore’s capital contribution to the firm
is $10,000. Willis and Polk contribute $5,000 each. The parties make no express
agreement concerning how profits are to be divided, but they agree to share losses as
follows: Fillmore, 40%, Willis and Polk, 30% each. During the partnership’s first year,
the business has a profit of $30,000. What is Fillmore’s share of the profit?
A. $7,500
B. $9,000
C. $10,000
D. $12,000
Answer: