The Big Sale. Christy, the owner of ABC department store, needed to hire a number of
employees in a hurry because of a planned big summer sale. Bob was hired by Christy
to run a cash register and to assist customers with taking large purchases to their cars.
Bob encountered a particularly annoying customer, Frank. Frank started complaining
the minute he saw Bob. Frank complained about having to wait for Bob to assist him
with carrying his television purchase to his car, about the merchandise in the store, and
about the quality of the store’s employees. Bob tried to control himself while he carted
Frank’s television to the car. The final straw, however, came when Frank told Bob that
he should get the earring out of his ear, cut his hair, and act professionally. Bob threw
the television to the ground and punched Frank in the nose. Frank did investigation and
discovered that Bob has just been fired from his last three jobs for violent actions
against customers. Two of his former employers are willing to testify that if Christy had
called them, they would have disclosed Bob’s tendencies to her. Bob listed the former
employers on his application, but because she was in a hurry to hire employees, Christy
did not take the time to check with the former employers. Another problem confronting
Christy during the big sale is that Susie, a long-time employee of Christy who had
never caused any problem before, negligently dropped a box on the foot of Greg, a
customer. Greg had to have an X-ray and is threatening to sue both Christy and Susie.
Which of the following is true regarding whether Greg has any right of recovery against
Christy for his injured foot?
A. Greg has no right of recovery against Christy because Susie had not dropped any
boxes before, and Christy had no reason to suspect she would injure Greg.
B. Greg has a right of recovery against Christy only if Susie is insolvent.
C. Greg has a right of recovery against Christy, but only for 50% of his damages.
D. Greg has no right of recovery against Christy because he will not be able to establish
any wrongdoing on her part in hiring Susie.
E. Greg has a right of recovery against Christy.
Which of the following was the result on appeal in Fernando Tatis v. U.S. Bancorp, the
case in the text in which the plaintiff, a major-league baseball player, asked that the
defending bank hold his bank statements and failed to notify the bank within 30 days of
forgeries by one of his employees?
A. That by agreeing to hold the bank statements the bank impliedly agreed to waive any
timely notice of forgeries.
B. That regardless of when notice was received, the plaintiff/depositor was entitled to
the return of funds released based on forgeries.
C. That the plaintiff/depositor and the bank would be required to split losses on a 50/50
basis based on comparative principles because they were both at fault.
D. That the plaintiff/depositor could not recover for forgeries made and not reported for
more than 30 days after bank statements were made available.
E. That the plaintiff/depositor could not recover because the forgeries were not reported
within 30 days of when bank statements were made available and also that by not
timely reporting the first forgery, the plaintiff/depositor lost all rights to recover funds
lost because of forgeries by the same forger.
Which law controls how financial institutions handle customer information, ultimately
providing greater privacy protections to financial institution customers?
A. The Gramm-Leach Bliley Act
B. The Gorhan-Bell Act
C. The Customer Privacy Act
D. The Requisite Privacy Act
E. The Knight-Beecher Act
Disputed Ring. While working in the yard, Tina found a beat up ring. Becca, an
eighteen-year old teenager and neighbor, came over to visit and liked the ring. Tina
said, “You can have this old thing if you would like.” Becca replied, “I really like it –
Maybe it’s a real diamond!” Tina laughingly told her that there was a one in a billion
chance of that and that Tina was more likely to win the lottery. A few months later
Becca ran over to Tina’s house and told Tina that the ring was actually a diamond worth
thousands! Becca gave Tina the ring to examine. Tina put it in her pocket and told
Becca that she would never have given it to her if she had realized its value and that
possession was back where it had always belonged. Tina also told Becca that Becca
failed legally to accept the gift because she did not know its true value and also because
Tina did not sign any document turning over title. Becca sues. Which of the following is
true regarding Tina’s statement that Becca could not have validly accepted the ring?
A. If the ring is valued at $500 or over, then Tina is correct that Becca did not validly
accept the ring because a writing would have been needed to validate acceptance.
B. If the ring is valued at $1,000 or over, then Tina is correct that Becca did not validly
accept the ring because a writing would have been needed to validate acceptance.
C. If the ring is valued at $10,000 or over, then Tina is correct that Becca did not validly
accept the ring because a writing would have been needed to validate acceptance.
D. Tina is correct that Becca could not have validly accepted the ring when she did not
understand its true value.
E. Tina is incorrect, and Becca validly accepted the ring as a gift.
Which of the following occurs when a party to a contract transfers her rights to a
contract to a third party?
A. Assignment
B. Referral
C. Disgorgement
D. Privity
E. Transfer
Inattentive Driving. While cutting class and driving off campus to check on her new
dress for the upcoming formal, Molly, a busy college student, is busy talking on her cell
phone with her friend Sharon in an attempt to talk Sharon into going to the dance with
Molly’s brother, who has a big crush on Sharon. Unfortunately for Molly, there is a
statute in her state outlawing talking on a cell phone while operating a motor vehicle.
Molly crashes into the side of Sam’s new convertible when she looks down to pick up a
can of soda she just dropped onto her new jeans. A police officer just down the street
comes over to investigate. Molly explains to him that it was difficult to hold the cell
phone in one hand, the soda in the other, and also drive. The officer was not impressed.
Around that time Sam comes along. He is furious regarding the significant dent in his
new car. Molly says she has insurance and that she will cover the whole incident. Sam
says that is insufficient. The officer is annoyed because it is his lunch break. He tells
Molly that she must obey the law, and proceeds to write several citations to her. Which
type or types of law is involved in the above situation considering Molly’s interaction
with both the officer and Sam?
A. Public law only
B. Private law only
C. Civil law and private law only
D. Criminal law and public law only
E. Public law, private law, civil law, and criminal law
What is the federal minimum wage?
A. $5.85
B. $6.00
C. $6.50
D. $7.00
E. $7.25
In which school of jurisprudence is the concept of stare decisis rooted?
A. The Historical school
B. Legal-realism
C. The cost-benefit analysis school
D. Positivism
E. Cultural reenactment
In a destination contract who bears the risk of loss while the goods are in transit?
A. The seller
B. The buyer
C. Both the buyer and seller with the loss being proportioned 50% to the buyer and 50%
to the seller
D. Both the buyer and seller with the loss being proportioned 75% to the buyer and
25% to the seller
E. Both the buyer and seller with the loss being proportioned 25% to the buyer and 75%
to the seller
Which of the following is true regarding whether employers may discriminate against
smokers?
A. There is a federal law specifically prohibiting employers from firing employees who
smoke.
B. There is a federal law specifically prohibiting employers from firing or from refusing
to hire employees who smoke.
C. There is a federal law specifically prohibiting employers from firing employees who
smoke and from refusing to hire employees who smoke, and it also requires that
employers have a designated smoking area.
D. There is no federal law prohibiting employers from firing employees who smoke.
E. No states have laws prohibiting employers from firing employees who smoke.
Congress created the Federal Trade Commission (FTC) through the Federal Trade
Commission Act of ____.
A. 1900
B. 1914
C. 1929
D. 1934
E. 1976
Which of the following is true in the event an instrument contains more than one
endorsement?
A. Each endorser is liable for the full amount to the subsequent endorser or to the
holder.
B. Only the last endorser is liable to the holder and no prior endorsers are liable to a
subsequent endorser.
C. Each endorser is liable for the full amount to the subsequent endorser, but only the
last endorser is liable to any holder.
D. The last endorser is liable to the holder, whereas subsequent endorsers are
responsible for reimbursing previous endorsers in proportion to the number of endorsers
that exist.
E. Each endorser is liable to the holder in proportion to the number of endorsers.
A person who illegally accesses or enters another person’s or a company’s computer
system to obtain information or to steal money is known as a _____.
A. backer
B. reacher
C. hacker
D. trespasser
E. illicit user
What type of liability arising when the transfer of the instrument breaches a warranty
associated with the instrument?
A. Warranty liability
B. Payee liability
C. Signature liability
D. Primary liability
E. Secondary liability
The Truth in Lending Act applies to _____________.
A. loans to a natural person
B. loans to a natural person and to a limited partnerships
C. loans to a natural person, loans to a limited partnership, and loans to a general
partnership
D. loans to a natural person, loans to a limited partnership, loans to a general
partnership, and loans to a corporation
E. all loans
Which type of party must pay the stated amount of an instrument when it is initially
presented for payment?
A. A party who is secondarily liable
B. A party who is a drawer and a party who is secondarily liable
C. A party who is an endorser
D. A party who is a drawer or an endorser
E. A party who is primarily liable
Which of the following is true regarding regulation of tobacco under federal law?
A. Radio advertisement of cigarettes is prohibited.
B. Radio advertisement of smokeless tobacco is prohibited.
C. Television advertisement of smokeless tobacco is prohibited.
D. Radio advertisement of cigarettes is prohibited, radio advertisement of smokeless
tobacco is prohibited, and television advertisement of smokeless tobacco is prohibited.
E. Radio advertisement of cigarettes is prohibited and television advertisement of
smokeless tobacco is prohibited, but radio advertisement of smokeless tobacco is
allowed.
Monetary damages awarded to a plaintiff in a very small amount are _________.
A. consequential
B. punitive
C. liquidated
D. nominal
E. None of these because no damages are available if no actual damages are incurred.
Environmental Concerns. Connie, the president of a company that makes paper, has a
new interest in the environment. She recently went to a seminar on environmental
dangers and has decided to take steps to clean things up. She started at home and was
also committed to change things at work. Connie had to face the fact that her company
has been cheating and is not in compliance with applicable environmental regulations
due to dumping in a nearby river. Her company has never been cited, however, because
it employs a very large number of people in the community, including the mayor’s wife
and the chief-of-police’s brother. On her mission to clean things up, Connie has decided
to go even further than the law requires and install the very latest environmental
protections. When she announced her plan, the chair of the company’s board of
directors, Brooke, had a meeting with Connie. Brooke told Connie to analyze the
situation carefully because the cost of the additional equipment would mean no
dividend to shareholders and no raise for employees. Furthermore, Brooke told Connie
that installing all the new equipment would result in higher prices for the company’s
paper products and could bankrupt the company because of foreign competition.
Brooke hinted that Connie could be fired if she persisted. Brooke suggested that Connie
just be concerned with a minimal standard of ethics. Which of the following would be a
stakeholder in the company?
A. The community only
B. The shareholders only
C. Future generations only
D. The community and shareholders only
E. The community, shareholders, and future generations
Run Around. Millie issues a note to Bob. Bob endorses the note and transfers it to Anne.
Anne endorses the note and transfers it to Henry. In a timely fashion, Henry endorses
the note and presents it to Millie for payment. When Henry presents the note to Millie,
she asks him for reasonable identification. He did not have any identification with him
and told her that she had no right to dishonor the instrument. Millie, however, refused to
provide him the funds until he returned with proper identification. Nevertheless, when
he returned with proper identification, Millie refused to pay the note, claiming that she
lacked the funds with which to do so. Henry proceeded immediately to request that
Anne pay the note, but she told him that he would have to get his money from Bob,
who cannot be found. Which of the following is true regarding when, and if, the note
was dishonored?
A. The note was never dishonored by Millie because she eventually acknowledged his
entitlement to payment and only refused to pay because she lacked funds with which to
do so.
B. Millie dishonored the instrument when she asked for proper identification.
C. Millie dishonored the instrument when she refused to pay it on the basis that she
lacked funds with which to do so, but Anne did not dishonor the instrument.
D. Anne dishonored the instrument when she told Henry that he would have to seek
recovery from Bob, but Millie did not dishonor the instrument.
E. Millie dishonored the instrument when she told Henry that she could not pay him
because she lacked the funds, and also Anne dishonored the instrument when she told
Henry that he would have to seek payment from Bob.
The court may properly grant a ______ if after reviewing the pleadings, the judge
determines that the only reasonable decision is in favor of the moving party.
A. motion for judgment on the pleadings
B. motion for summary judgment
C. motion for sanctions
D. motion for discovery
E. motion for production
Which of the following sets forth the common law rule that the terms of an acceptance
must mirror the terms of the offer?
A. The matching rule.
B. The complete rule.
C. The mirror image rule.
D. The exact rule.
E. The parallel rule.
Saturday Auction. Barry, an auctioneer, was holding an auction on a Saturday morning.
At the beginning of the auction, Barry announced that the auction was being held
without reserve. Helen, Mary, and Chris were all in attendance. Helen saw an old cash
register with a stuck drawer that she thought would look great in her den. The
auctioneer put the cash register up for sale, noting that the drawer was stuck and that no
one really knew what was inside. Helen bought it for $20. At the same auction, Mary
saw a great deal on a used table. She bid $20 on it. No one else bid anything. Barry
announced that $20 was clearly insufficient for the table, that it was worth much more
than that, and that he was taking it out of the auction. Chris started bidding on a
diamond ring for his girlfriend. He bid $2,000. Just as Barry was getting ready to say
“Sold”, Chris looked over at his girlfriend, decided that he was not sure about marriage,
and leaped up yelling, “I revoke.” Barry, however, immediately yelled “Sold.” When
she got it home and broke into it, Helen discovered that the cash register actually
contained $5,000. Unfortunately, Helen had a teenage son named Tad who started
bragging to his friends about the family’s good fortune. Barry heard about what had
happened and sued Helen for return of the $5,000. Mary sues Barry attempting to
obtain possession of the table. Barry sues Chris attempting to enforce a contract for the
sale of the engagement ring. What is the likely result in the lawsuit brought by Mary
against Barry for the table?
A. Barry will win because Mary was simply making an offer that he was free to decline.
B. Barry will win because the price was clearly insufficient for the table.
C. Barry will win because no acceptance occurred.
D. Mary will win because the auction was without reserve, and Barry had agreed to
accept the highest bid.
E. Barry will win because he did not inform attendees in writing that the auction was
without reserve.
Which of the following is true if a contract is disaffirmed on the basis of intoxication?
A. Each party to the contract must return the other to the condition he or she was in at
the time the contract was entered into.
B. The intoxicated person must be returned to the condition he or she was in at the time
the contract was entered into, but that is not true for any other party.
C. Any party other than the intoxicated person must be returned to the condition he or
she was in at the time the contract was entered into.
D. So long as the contract was objectively fair, neither party must be returned to the
condition he or she was in prior to the time the contract was entered into.
E. So long as the contract was subjectively fair in the opinion of the intoxicated party,
neither party must be returned to the condition he or she was in prior to the time the
contract was entered into.
Easement Dispute. Sally buys a house from Bob that borders on a lake. Her deed gives
her the most complete estate a person may have. She is in her bathing suit sunning one
day when her neighbor, Fred cuts through her yard. Sally tells him not to do that
anymore. Fred informs her that he had previously purchased and properly recorded a
right to cut across her yard to get lake access. Sally asks you what she should do to try
to get rid of Fred because she doesn’t like him cutting through her yard when she is
sunning. What type of estate did Sally purchase from Bob?
A. A life absolute estate
B. A conditional estate
C. A fee simple absolute estate
D. A limited estate
E. A subject estate
How is the number of corporate directors determined?
A. In the discretion of the president of the corporation
B. By vote of the stockholders in compliance with state law
C. According to the corporate articles or bylaws in compliance with state law
D. According to the number of shares issued
E. According to the amount of profit projected by incorporators for the first year
_________________ are accredited investors.
A. Natural persons whose annual income has been at least $200,000 for the two
previous years and expects to make at least $200,000 in the current year
B. Corporations or partnerships with total assets in excess of $5 million
C. Insiders of the issuers, such as executive officers or directors
D. Colleges and universities
E. All of these.
A(n) _____ promises to pay a set sum to the holder of a promissory note or certificate
of deposit.
A. maker
B. acceptor
C. drawer
D. endorser
E. promisor
What is the legal enforcement of an otherwise unenforceable contract due to a party’s
detrimental reliance on the contract?
A. Promissory agreement.
B. Promissory estoppel.
C. Quasi estoppel.
D. Quasi agreement.
E. Promissory performance.
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 an appropriate term for the contract drawn up by Tony?
A. Adhesion
B. Valid
C. Misapplied
D. Misdrafted
E. Misdirected