The purpose of compensatory damages is to punish the defendant and deter future
wrongdoers.
Under the UCC, a secured interest is an interest in property or fixtures that secures
payment or performance of an obligation.
The purpose of the shelter principle is to protect the holder from losing holder in due
course status.
The words “pay to cash” are sufficient words of negotiability.
Consideration is what a person will give in return for performing a contract obligation.
A prospectus is a written document filed with the SEC that contains a description of a
security and other financial information regarding the company offering the security.
A consumer law is a statute or administrative rule serving to protect consumer interests.
The U.S. Constitution is the foundation for all laws in the United States.
A corporation must be incorporated in the state in which it has its principal place of
business.
In regard to the board of directors of a corporation, German law is similar to the U.S. in
that a one-tier board system is in effect.
An acceptance, which is received after the offer was rejection, is still a valid
acceptance.
An arbitrator is more likely to issue a compromise decision than a judge.
Specific performance is an order requiring that the breaching party fulfill the terms of
the agreement.
A quasi contract is an agreement by the parties to prevent unjust enrichment.
A contract of an intoxicated person for necessaries will be enforced for the reasonable
value of the necessaries.
The statute of frauds is a law, which set forth requirements for which agreements can be
oral.
Bribery is when someone offers anything of value to influence the conduct of a person
in a position of trust.
A certificate of incorporation provides the rules and regulations that govern a
corporation’s internal management.
Shareholders of a corporation own that corporation.
Directors and officers are self-dealing when they make decisions that violate their
corporate duty of loyalty.
An agency relationship that arises when an individual misrepresents herself as an agent
for another party and that party accepts the unauthorized act is an agency by
ratification.
A person who has a duty to act primarily for another person’s benefit is an agent.
A statement of fact must be an actual assertion for fraudulent misrepresentation to exist.
Values are positive abstractions that capture one’s sense of what is good and desirable.
Disparate treatment is when an employee intentionally discriminates an employee based
upon membership in a protected class.
If an agreement, which is required to be in writing under the statute of frauds, contains
a serious and obvious typographical error, parol evidence is admissible to demonstrate
that the writing contained an error.
Ad substantiation is an FTC standard that requires advertisers have a reasonable basis
for the claims made in their ads.
Once a case is in the proper court system, venue determines which trial court in the
system will hear the case.
A prospectus is a financial instrument designed as a note, stock, or bond to raise capital
for corporate expansion.
A draft is an instrument validating an order by a drawer to a drawee to pay a payee.
The UCC does not recognize the concept of unconscionability.
ADR gives businesses more control over the resolution of a dispute.
An agreement consists of an offer by one party and acceptance of the terms by the other
party.
In order for an assignment to be valid, an assignee must agree to accept the assigned
rights.
Forbearance is the promise to refrain from entering into a unilateral contract.
Bankruptcy remedies are available for individuals only.
A hostile takeover is when the management of the target corporation objects to the
takeover.
A security interest may not apply to personal property that is not yet in the debtor’s
possession.
Scheming Friends. Willy very much wants to rent a basement apartment in Weaver’s
home. Willy threatens to tell all Weaver’s friends that he and Weaver had been arrested
for illegally smoking marijuana unless Weaver rents the apartment to him for $100 per
month. Weaver reluctantly agrees to rent the apartment to Willy for that amount. Willy
also wants to buy Weaver’s car. Weaver runs back the odometer on the car before Willy
test-drives it. Willy is impressed by the low mileage and agrees to buy the car. Finally,
Weaver offers to sell Willy a ring for Willy’s fiancée. Weaver tells Willy that the ring is
a diamond and believes that to be true. After the deal is made, however, a jeweler friend
of Weaver’s informs him that the ring is a fake. When Willy shows up with the money,
Weaver says nothing. He just hands Willy the ring and takes the money. Later, Willy
finds out that the odometer was run backwards from another friend to whom Weaver
confided. Willy also finds out from his girlfriend that the ring is a fake. Of which of the
following is Willy guilty in threatening to tell friends about the arrest unless Weaver
rents the apartment?
A. Duress
B. Unconscionability
C. Fraud
D. Duress, unconscionability, and fraud
E. Duress and unconscionability, but not fraud
What is the effect of a negligent misrepresentation?
A. There is no effect because there is no such term as “negligent misrepresentation.”
B. It is treated the same as an innocent misrepresentation.
C. It is treated the same as a fraudulent misrepresentation.
D. It is treated the same as a material misrepresentation.
E. It is treated the same as an implied misrepresentation.
Which of the following occurs when a party unjustifiably fails to substantially perform
his obligations under the contract?
A. Material breach
B. Substantial breach
C. Immaterial breach
D. Delineated breach
E. Crossed breach
A(n) _______________ is a written document filed with the SEC that contains a
description of a security and other financial information regarding the company offering
the security.
A. security
B. prospectus
C. advertisement
D. proxy
E. solicitation
What type of relationship typically exists when an employer hires an employee to enter
into contracts on behalf of the employer?
A. Principal-agent relationship
B. Employer-agent relationship
C. Employer-independent contractor relationship
D. Avowed relationship
E. Acknowledged relationship
Under which of the following circumstances will a court refuse to uphold modifications
or limitations to remedies agreed upon by the parties?
A. When they seem unfair.
B. When one party is a corporation.
C. When neither party is a corporation.
D. When one side was not represented by an attorney.
E. When the remedies fail in their essential purpose.
The Securities and Exchange Commission has established that any shareholder who
owns more than _____ worth of stock in the corporation can submit proposals to be
included in proxy materials.
A. $4,000
B. $3,000
C. $2,000
D. $1,000
E. None of the these because shareholders may not present proposals in proxy materials
A right to _____ is the ability of a party to seek reimbursement.
A. reimbursement
B. recourse
C. renunciation
D. remedy
E. refusal
Death of a corporation occurs in which of the following phases?
A. Dissolution and trial
B. Dissolution and proceedings
C. Dissolution and liquidation
D. Reforming and liquidation
E. Notification and liquidation
Under the UCC, when may orders for specific performance of a contract for the sale of
goods be awarded?
A. Only when the goods are unique.
B. Only when the goods are in excess of 500 in quantity.
C. Only when the goods have been ordered at least six months in advance.
D. When the goods are unique and when the goods are in excess of 500 in quantity.
E. When the goods are unique or in other proper circumstances.
A ______ is a written document, created by a principal, expressing his or her wishes for
an agent’s authority not to be affected by the principal’s subsequent incapacity.
A. general purpose power of attorney
B. living power of attorney
C. notarized power of attorney
D. durable power of attorney
E. lasting power of attorney
Credit card applications include ___________ under the Truth in Lending Act.
A. the APR
B. annual fees
C. the grace period for paying without a finance charge
D. the APR, annual fees, and the grace period for paying without a finance charge
E. the APR and the annual fees, but not the grace period for paying without a finance
charge
What is the national standard to perfect an automobile or boat?
A. Perfection by pledge
B. Perfection by filing
C. Perfection by possession
D. Automatic possession
E. There is no national standard to perfect an automobile or boat.
Which of the following is a condition required for the imposition of strict liability?
A. The activity involves negligence.
B. The activity involves trespassing.
C. The activity is undertaken by a minor.
D. The activity is so inherently dangerous that it cannot ever be safely undertaken.
E. The activity is heavily regulated.
What law does the courts rely upon to clarify the sellers’/buyers’ and the lessors’/lessees’
obligations if the agreement is unclear?
A. The U.S. Constitution
B. Common law
C. Restatement of Contracts
D. The UCC
E. None
Cheap Motorcycle. Tony, a hateful, disgruntled, business law teacher notices that a
student, Peter, who is past the age of majority, has bought a new motorcycle. Peter has
struggled through school, is in his last semester, and needs to pass business law in order
to graduate. Tony tells Peter that he would like to see Peter pass; and, in the next
sentence, Tony says that he wants to buy the motorcycle for $100, a price far below the
value of the motorcycle. Peter asks if Tony is serious about the price, and Tony replies,
“I have the power here!” Tony proceeds to draw up a contract for the sale of the
motorcycle for $100 with lots of fine print by which he can sue Peter and recover any
maintenance costs for the next five years. Seeing that he is at an advantage, Tony also
throws into the deal that Peter will mow Tony’s one acre yard for $5 all summer long.
After Tony tells Peter to either take the contract or leave it, Tony reluctantly signs.
Which of the following is true if Peter seeks to rescind the contractual agreement to sell
the motorcycle?
A. Peter may rescind the agreement on grounds of fraud.
B. Peter may rescind the agreement on grounds of unconscionability.
C. Peter may rescind the agreement on grounds of mistake.
D. Peter may rescind the agreement on grounds of fraud, unconscionability, and
mistake.
E. Peter may rescind the agreement on grounds of fraud or unconscionability, but not
mistake.
An agent may demand _______________, if the agent believes that he or she is not
being properly compensated.
A. specific performance
B. accounting performance
C. an accounting
D. a contractual documentation
E. a contractual audit
Assume a restaurant chain is forced to pay damages to a person who suffered food
poisoning after eating at the restaurant. What type of law is involved?
A. Public law only
B. Private law only
C. Civil law only
D. Public, private, and civil law
E. Private law and civil law
A treaty is a binding agreement between:
A. States
B. International organizations
C. Local governments
D. States and international organizations
E. States, international organizations, and local governments
Stolen Purses. Sandra and Mary were having lunch at their favorite restaurant.
Unfortunately, a thief stole their purses containing their ATM cards. Mary notified her
bank the next day of the theft of the ATM card. Unfortunately, the card had already
been used to fraudulently obtain over $1,000. Sandra thought back to her business law
class and did not call her bank, however, because she believed that she would not be
liable for any charges on the ATM card because of the rules involving forgeries.
Nevertheless, a week or so later when Sandra was in the bank, she casually mentioned
to the teller that she needed a new card because hers had been lost. She was shocked
when a bank representative attempted to hold her responsible for hundreds of dollars of
goods bought with the ATM. Sandra told the bank representative that she refused to
cover the amounts, that she was moving her account, and that she wanted all
preauthorized payments and EFTs stopped immediately. Which of the following is true
regarding the bank’s obligation to end preauthorized payments?
A. The bank must immediately end preauthorized payments on the same day requested
so long as the request is made during regular business hours.
B. The bank must end preauthorized payments on the same day requested so long as the
request is made by 2 p.m.
C. The customer must notify the bank to stop the payment at least three days before the
preauthorized payment is scheduled.
D. The customer must notify the bank to stop the payment at least five days before the
preauthorized payment is scheduled.
E. The customer must notify the bank to stop the payment at least ten days before the
preauthorized payment is scheduled.
Which of the following is true regarding an award of attorney fees under Title VII?
A. Attorney fees are always awarded to the prevailing party in Title VII cases.
B. Attorney fees are never awarded to the prevailing party in Title VII cases.
C. Attorney fees may be awarded to a successful plaintiff in a Title VII case and are
typically denied only when special circumstances would render the award unjust, but
attorney fees are not awarded to prevailing defendants.
D. Attorney fees are not awarded to prevailing plaintiffs; but if it is determined that a
plaintiff’s action was frivolous, unreasonable, or without foundation, the courts may
award attorney’s fees to the prevailing defendant.
E. Attorney fees may be awarded to a successful plaintiff in a Title VII case and are
typically denied only when special circumstances would render the award unjust; and if
it is determined that a plaintiff’s action was frivolous, unreasonable, or without
foundation, the courts may award attorney’s fees to the prevailing defendant.
Which amendment extends most of the provisions of the Bill of Rights prohibiting state
interference in citizens’ exercise of their rights to the states?
A. Thirteenth
B. Fourteenth
C. Twenty-first
D. Twenty-second
E. Fortieth
A type of ADR in which lawyers for all parties present their arguments to a neutral third
party, who then offers a nonbinding opinion as to what the verdict would be is called:
A. Med-arb.
B. Private trial.
C. Mediation.
D. Minitrial.
E. Arbitration.
Which of the following is an example of an intangible(s)?
A. Accounts.
B. Goodwill.
C. Literary rights.
D. Accounts, goodwill, and literary rights.
E. Accounts and goodwill, but not literary rights.
A director may be removed _____.
A. at the will of the president
B. in the discretion of the shareholders upon majority vote
C. in the discretion of the shareholders upon a two-third vote
D. in the discretion of other directors upon a majority vote
E. for cause
Diving Fiasco. Mike, who owns a dive shop in the U.S., decides to take a group of his
customers diving in U.S. waters. Mike is aware that sharks occasionally visit the area
where the divers will be visiting. He is also aware that, while sting rays are usually
tame, they can become aggressive when fed. Mike does not reveal that information to
the group of divers going with him. The divers go down into the water, and some have
squid with which to feed the sting rays. During the dive, one of the sting rays becomes
agitated and latches onto diver Susie’s arm. Susie is so disconcerted that she drops her
regulator (her breathing device) from her mouth and is in considerable difficulty.
Another diver, Billy, encounters a shark, which snaps at him. While the shark does not
actually bite Billy himself, the attack results in damage to his diving equipment. Mike,
who is in charge of the dive, does nothing to help and leaves the other divers to return
to the boat because the dive turned out to be more trouble than expected. Wendy,
another diver on the trip, also returns to the boat without doing anything to help the
divers in distress. Sam, on the other hand, goes to rescue the divers who are in distress.
He manages to do so but in the process he pulls his back and requires medical care. All
divers are very unhappy with Mike. Billy wants to sue Mike for damages because of his
damaged equipment. Which of the following is the most likely result?
A. He will win because Mike should have warned him about the occasional appearance
of sharks.
B. He will lose because Mike had no duty to warn him of anything.
C. He will lose because he did not sustain physical injury.
D. He will win only if he can establish that he had a contract with Mike whereby Mike
would reveal harmful conditions.
E. He will win only if he can establish that he did not have insurance to cover the
equipment.
Legislative acts passed by the U.S. Congress can be found in __________.
A. the United States Code
B. state codes
C. the Uniform Register
D. the State Reporter
E. the State Reference Manual
For a corporation to be held criminally liable for the acts of an employee, the prosecutor
does not have to prove:
A. that the employee was acting within the scope of his/her employment.
B. the employee was acting with the purpose of benefiting the corporation.
C. the act was imputed to the corporation.
D. the act is not punishable only by prison time.
E. that the employee was receiving a benefit from the criminal act.
Which of the following is false regarding property interests in Vietnam?
A. The constitution asserts that the state owns all the land.
B. If an individual wants to use land, he or she must pay tax on it as a form of rent.
C. Transference of property can occur only with the approval of a state official.
D. A new owner can never be given a longer term of right or more extensive rights over
the land than the original owner had.
E. The transferring owner determines the price for which property will be transferred.
Under which of the following situations does the tort of trespass to realty occur?
A. When a person causes an object to be placed on the land of another without the
landowner’s permission.
B. When a person stays on the land of another when the owner tells him to depart.
C. When a person refuses to remove something he placed on the property that the owner
of the property asked him remove.
D. When a person causes an object to be placed on the land of another without the
landowner’s permission, when a person stays on the land of another when the owner
tells him to depart, and when a person refuses to remove something he placed on the
property that the owner of the property asked him remove.
E. None of these because a person does not commit trespass to realty unless it can be
established that the person initially entered the land of another without permission.
Which of the following did the U.S. Supreme Court rule in Hertz Corp. v. Friend as the
appropriate test for determining a corporation’s principle place of business for purposes
of diversity jurisdiction?
A. The “predominance of business” activity test
B. The “nerve center” test
C. The “general business activities” test
D. The “primary business” test
E. The “profit maximization” test
Sam offers Betty his bicycle for $75. Which of the following is an example of an
illusory promise on the part of Betty?
A. “I’ll take it.”
B. “I’ll take it if I decide to do so.”
C. “I won’t pay $75, but I will pay $50.”
D. “I’ll take it if you will let me try it out first and the brakes work well.”
E. “I’ll take it if you will buy new tires.”
Which of the following modifies the mirror-image rule?
A. The Absolute Business Code.
B. The Uniform Commercial Code.
C. The Governing Business Agreement.
D. The International Business Code.
E. None of these because the common law has not been modified.
Explain the concept of the “dormant commerce clause.” Address whether or not a state
law banning the importation of out-of-state apples in order to assist in-state growers
would violate the dormant commerce clause.
What three key guidelines regarding mail-order sales were established by the Mail or
Telephone Order Merchandise Rule of 1993 that amended the 1975 Mail-Order Rule?
John and Joan enter a contract whereby John will feed Joan’s cat for $100 while Joan is
on vacation. Another part of the contract provides that John will mow Joan’s whole yard
for the summer for $500. Just before Joan leaves for vacation, John discovers that
Joan’s cat is not a domesticated cat, but a lion rescued from the circus. John tells Joan to
forget it, that she misrepresented the nature of the animal, and that she can forget about
the contract, including the lawn mowing deal. Joan, being a somewhat reasonable
person, feels bad about not telling John the whole truth about the cat; and she is willing
to give in on that issue. She does, however, want to enforce the yard mowing
agreement. What is her best argument?
Identify and describe the two types of digital signatures.
Define and give an example of an express contract and an implied contract.
Everett buys a new bicycle on credit from Bicycle City. Bicycle City has a security
agreement for a purchase-money security interest in the bicycle but did not file a
financing statement. Everett, however, discovers that he does not have enough money to
pay his rent. Therefore, he sells his bicycle to his neighbor, Helen, who is unaware of
Bicycle City’s security interest in the bicycle. Everett fails to make payments on the
bicycle and Bicycle City seeks to repossess it. Discuss the rights and obligations of the
parties.
Henry’s boss, Jacob, tells him that because he has been such a valuable employee, he
will receive an extra week of vacation. When Henry decides to schedule the vacation,
he reminds Jacob of his statement. Jacob says that he has changed his mind and that he
really cannot afford to let Henry off. Henry says that Jacob has breached the contract he
had with Jacob for an extra vacation week. Who is right and why?
Describe a traveler’s check setting forth the elements necessary for its proper payment.
Identify and describe the four elements that are necessary for a contract to exist.
Set forth in detail the test that most states follow regarding the treatment of the capacity
of intoxicated persons to enter into contracts.
What are the requirements for being a director? Must a director own stock in the
corporation?
What is a proxy solicitation and how does the SEC regulate it?
Set forth the three reasons referenced in the text that would permit a court to invalidate
a contract on grounds of unilateral mistake.