In most states, proximate cause is determined by _______.
A. Actual cause
B. Common law
C. Foreseeability
D. But-for causation
E. Strict liability
The concept of _____ suggests that individuals should have the freedom to disobey a
law enacted by people if their conscience goes against the law and they believe the law
is wrong.
A. Legal positivism
B. Natural law
C. Legal Realism
D. Conscience reaction
E. Comparative law
Proximate cause is also sometimes referred to as which of the following?
A. Actual cause.
B. Cause in fact.
C. Legal cause.
D. Significant cause.
E. Factual Cause.
Which of the following was the result on appeal in Douglas v. Kriegsfeld Corporation,
the case in the text in which the tenant claimed that under the Fair Housing Act she was
entitled to reasonable accommodation in cleaning her apartment due to her mood
disorder?
A. The court ruled in favor of the landlord on the basis that the Fair Housing Act did not
have sections requiring accommodation.
B. The court ruled in favor of the landlord on the basis that while accommodations may
be required at times under the Fair Housing Act, assisting with cleaning is not one of
them.
C. The court ruled in favor of the tenant on the basis that the tenant had established a
reasonable basis supporting the need of reasonable accommodation in regard to
cleaning.
D. The court ruled in favor of the tenant on the basis that the tenant was caused
additional stress due to harassment regarding rent and that, therefore, the landlord was
responsible for providing assistance with cleaning.
E. The appellate court remanded the case to the lower court for consideration of the
facts according to the test outlined in its decision for determining if a requested
accommodation is required.
“Presidential Profits.” Linda was president of a publicly traded tractor company, Tough
Tractors. Linda became aware that stock in her company would likely increase
significantly in value because her company had a contract to purchase the assets of
Rough Tractors. The boards of both companies wanted the information kept
confidential until the purchase was complete and a news release was made. Before the
news was made public, Linda immediately purchased a significant number of shares in
Tough Tractors. Linda also told her friend Frank about the contract to purchase assets
although she told him to keep it quiet because it had not been made public yet.
Nevertheless, unable to keep a secret, Frank told his brother, George. Frank and George
purchased a number of shares of stock in Tough Tractors prior to any public
announcement of the sale. After the public announcement was made and the purchase
of assets went through, Linda, George and Frank, all sold their shares in Tough Tractors
and made a nice profit.
Which of the following would describe Frank in providing information about the asset
sale to George?
A. Tipper
B. Provider
C. Providee
D. Tippee
E. There is no descriptive term for Frank because he did nothing wrong.
A court may hold that a defective corporation is a[n] ______ in order to prevent it from
claiming it is not a corporate entity in order to escape liability to a third party.
A. De jure corporation
B. De facto corporation
C. Corporation by estoppel
D. Corporation by reservation
E. Inactive corporation
The ethical theory that requires that we evaluate the morality of an action by imagining
ourselves in the position of the person facing the ethical dilemma is called ______.
A. Situational ethics
B. Ethical relativism
C. Absolutism
D. Consequentialism
E. Relativity ethics
Why is it important to distinguish between unilateral and mutual mistakes?
A. Because it determines which contracts are considered fraudulent.
B. Because it determines which contracts are voidable.
C. Because it determines which contracts lack consideration.
D. Because it determines how much may be awarded in damages under a contract.
E. Because it determines whether punitive damages may be awarded.
How many circuits does the U.S. Court of Appeals have?
A. 6
B. 50
C. 12
D. 10
E. 13
A[n] ______ clause states that the insured has a grace period in which to make an
overdue payment during which time the insurance is effective.
A. Antilapse
B. Incontestability
C. Assurance
D. Approval
E. Waiver
Which of the following options have most states adopted in regard to warranty rights of
third parties?
A. Seller’s warranties extend to the buyer’s household members and guests.
B. Seller’s warranties extend to any reasonable and foreseeable user.
C. Seller’s warranties extend to anyone injured by the good.
D. Seller’s warranties extend to the buyer only.
E. Seller’s warranties extend to the buyer and the buyer’s family only.
Which of the following is a term for a lien that has priority over other types of liens?
A. An excess lien
B. A super-priority lien
C. A top lien
D. A novation lien
E. A priority lien
Who are potentially responsible parties under the Comprehensive Environmental
Response, Compensation and Liability act (CERCLA)?
Which of the following is true regarding the number of creditors who must vote to
accept a reorganization plan under a Chapter 11 proceeding?
A. For the plan to be accepted, one-third of the class of unsecured creditors must vote to
approve it.
B. For the plan to be accepted, one-half of the class of secured creditors must vote to
approve it.
C. For the plan to be accepted, two-thirds of the creditors of each class of creditors must
vote to approve it.
D. For the plan to be accepted, three-fourth of the creditors of each class of creditors
must vote to approve it.
E. For the plan to be accepted, one-fourth of the class of unsecured creditors must vote
to approve it.
When one company at one level of the manufacturing-distribution system acquires a
company at another level of the system, the merger is called a ______ merger.
A. Horizontal
B. Vertical
C. Conglomerate
D. Joining
E. Predatory
Which of the following was the result in Cousins Subs Systems Inc., v. Michael R.
McKinney, the case in the text involving whether the defendant wrongfully terminated a
franchise agreement with the plaintiff?
A. That the defendant rightfully terminated the franchise agreement because the
plaintiff made false representations in violation of state statutory law regarding how
much money the defendant would make.
B. That the defendant rightfully terminated the franchise agreement because the
plaintiff made false representations in violation of state statutory law regarding the
amount of advertising that would be done.
C. That the defendant rightfully terminated the franchise agreement because the
plaintiff made false representations in violation of state statutory law regarding efforts
at recruitment of other franchisees.
D. That the plaintiff did not violate the franchise agreement because the written
documents did not contain untrue statements of material facts or omissions of material
facts.
E. That while the plaintiff violated the franchise agreement, the defendant also violated
the agreement, and that no damages would therefore be awarded to either party.
Which of the following is true regarding the number of states that have adopted the
Restatement Test of accountant liability for negligence to third-parties?
A. None because there is no Restatement test
B. All the states
C. About half the states
D. One-fourth of the states
E. Only a few states
Which two markets does a court consider in identifying the relevant market for
monopolization purposes?
A. Product and geographic
B. Geographic and customer
C. Reasonable and product
D. Customer and product
E. Reasonable and customer
Which of the following is true regarding how directors are chosen during
incorporation?
A. Prior to incorporation, either the incorporators appoint them or the corporate articles
name them.
B. Prior to incorporation, either the incorporators appoint them or by a majority vote of
the shareholders.
C. Prior to incorporation, directors may only be named through the incorporators
appointing them.
D. Prior to incorporation, directors may only be named by the corporate articles naming
them.
E. Prior to incorporation, directors may only be named by the president appointing
them.
Which of the following permits the SEC to seek punishment of violators of foreign
securities laws?
A. The Sarbanes-Oxley Act of 2002
B. The Securities Acts Amendments of 1990
C. The Market Reform Act of 1990
D. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990
E. The National Securities Markets Improvement Act of 1996
How does ratification of international agreements occur in the U.S.?
A. Through the advice and consent of two-thirds of the Senate after the president
submits the agreement for consideration.
B. Through the advice and consent of two-thirds of the House of Representatives after
the president submits the agreement for consideration.
C. Through the advice and consent of two-thirds of the Senate and two-thirds of the
House of Representatives after the president submits the agreement for consideration.
D. Through consent of the president.
E. Through the consent of the president and the approval of at least half the individual
state legislatures.
When ______ occurs, the creditor becomes the secured party who has a security interest
in the collateral.
A. Attachment
B. Transformation
C. Reaffirmation
D. Security
E. Perfection
Which of the following is false regarding officers of a corporation?
A. Officers are executive managers.
B. Officers run the day-to-day business of the corporation.
C. In most cases an individual may serve as both a director and an officer.
D. The rules of agency do not apply to the work of officers.
E. Qualifications required of officers are set forth in the corporate articles and bylaws.
“Accountant Dissatisfaction.” Paul agreed to perform accounting services for Teresa,
and they entered into a contract setting forth the terms of their agreement. Teresa
wanted Paul to review her financial information and her system of internal controls.
Teresa became dissatisfied with Paul’s work after he reported some irregularities in her
financial statements. Paul, on the other hand, claimed that he had adequately performed
his duties and that, at the most, any mistakes that he made were minimal.
Assuming that Teresa can establish that Paul failed to meet his contractual obligations,
which of the following would be available to her?
A. Only a recovery for the cost of obtaining a different accountant to perform breached
contractual duties.
B. Reasonable and foreseeable damages related to the breach excluding the cost of
another accountant to perform breached contractual duties.
C. Reasonable and foreseeable damages related to the breach and damages for fraud
which would be presumed.
D. The cost of obtaining a different accountant to perform breached contractual duties
and also any reasonable and foreseeable damages related to the breach.
E. Nothing unless the contact specifically provides for damages in the event of a
breach.
“Garage Sale.” Richard, who is cleaning out his garage, offers to sell Dawn a used
computer for $200. Dawn replies that “I’ll think about it and buy it if I decide to do so.”
Richard also calls Denise and offers to sell Denise a used business law book for $50.
She asks if she can clean his apartment in return for the book instead of pay cash, and
he agrees. Richard also agrees to sell a communications book for $5 to Jill who
promises to pick it up the next day. Meanwhile, Sam comes to visit and offers Richard
$45 for the business law book. Richard sells it to him because he decides his apartment
is clean enough. Sam also offers Richard $50 for the used computer. Richard sells it to
Sam because he does not expect to hear from Dawn. Sam sees the communications
book and offers Richard $45 for it. Richard decides to forget about Jill and proceeds to
sell the book to Sam for $45. The next day Denise shows up to clean Richard’s
apartment and is very angry because Richard did not save the book for her. Denise
claims that Richard breached their contract because they had a deal. Richard says that
they never had a deal because no consideration was present. He also said that even if
cleaning house would be considered consideration, any housekeeping done would have
been wholly inadequate to support receipt of the book because his house was already
clean. Jill is also angry because Richard sold the communications book and informs
him that he breached the contract he had with her. Richard tells her that he had no
obligation to hold the book for her because they had a unilateral contract. Two days
after they first talked, Dawn tells Richard that she would like the computer. She tells
him that her response bound him and that he should have awaited her action. Richard
tells Sam that he needs to return everything for a full refund. Sam refuses.
Which of the following is true regarding Jill’s claim that by selling the communications
book for a higher price, Richard breached the contract he had with her?
A. Jill is correct.
B. Jill is correct only if she can establish that she had prior dealings with Richard.
C. Jill is correct only if she can establish that she had provided past consideration in
addition to the amount she agreed to pay for the book.
D. Jill is incorrect because her acceptance was illusory.
E. Jill is incorrect because the amount she agreed to pay was significantly less than the
fair market value of the book and, therefore, did not amount to consideration.
“Animal Care.” Susan, a licensed veterinarian, was recently elected to the U.S. Senate.
Susan is very concerned about the lack of care for homeless cats and dogs. She
proposes legislation that citizens of all states be taxed sufficiently to provide for no-kill
animal shelters that citizens in states with higher than average incomes be taxed at a
higher rate than citizens of other states. She also proposed that federal funds for state
highways be denied to any state that fails to provide assistance to low income citizens
in covering pet vaccinations. Bill, another new senator, tells Susan that, apart from the
mandated federal income tax, Congress lacks the authority to tax states because the
U.S. Constitution expressly reserves that right to the states. Sam, another senator, tells
Susan that Congress has no authority to link highway funds or any other funds with
social welfare objectives. Ellen, a clerk in the Senate, tells Susan that Congress is
absolutely prohibited from taxing residents of one state at a higher rate than citizens of
another state.
The first _____ amendments to the U.S. Constitution are known as the Bill of Rights.
A. Five
B. Six
C. Eight
D. Nine
E. Ten
“Furniture Store Woes.” Manny was hired by John to deliver furniture purchased from
John’s furniture store, Good Furniture. John had authorized Manny to drive the delivery
truck home from work, but Manny was not authorized to use the truck for any personal
errands. Manny decided to help his friend Helen move believing that John would never
find out. Unfortunately, while moving Helen’s furniture to her new home, Manny was
speeding and hit Bobby’s vehicle in the rear causing whiplash to Bobby. Bobby is
threatening to sue both John and Manny. Then, on his way to work in the same truck the
next day, Manny again bumped a car driven by Joan who is threatening to sue both
Manny and John. John also has another problem involving Connie, his niece, an
aspiring interior designer who John hired to provide design services to customers. Both
Connie and John were aware that customers would likely have no interest in the
services of Connie if they knew she had no experience and no training in design.
Therefore, they inflated her accomplishments to customers telling them that she had
both training and experience. In reliance on those claims, Beth agreed to have Connie
do the interior design work for her new business building while Beth was out of town
on an extended business trip. Unfortunately, Connie did a terrible job. For example, she
put in purple carpeting and painted the walls orange. Beth was outraged when she
returned. She found out from Sandy, a disgruntled employee of John, that Connie
actually had no training or experience in interior design. Sandy wants to sue both
Connie and John.
Which of the following is true regarding any liability John has to Sandy?
A. John has no liability to Sandy.
B. John has liability to Sandy under the theory of misrepresentation but only if Connie
is insolvent.
C. John is liable to Sandy under the theory of negligence.
D. John is liable to Sandy for only 50% of any damages she can prove.
E. John is liable to Sandy under the theory of misrepresentation.
In the area of employee testing, which of the following measures a psychological trait
needed to perform a job?
A. Content validity
B. Criterion-related validity
C. Construct validity
D. Object validity
E. Performance validity
“Cheap Principal.” Jason, who is very knowledgeable regarding computers, agrees to
purchase computers for Nick’s business. Jason is retained for that purpose only, he is
paid a set rate for the job, and Nick exercised no control over the manner in which
Jason did his work. Jason purchased computers from ABC Computers without any
mention of Nick. The computers worked well and were not defective in any way.
Unfortunately, Nick did not pay ABC Computers on a timely basis. Jason, therefore,
paid ABC Computers out of his own pocket because he wanted to be able to do
business with ABC Computers in the future and also because his name was on the
invoice. Jason asked Nick for reimbursement, but Nick refused. Nick claimed that if
Jason had only waited, ABC Computers might have agreed to take less.
Did Jason have any legal liability to ABC Computers?
A. Yes, because he made the purchase from ABC Computers without mention of Nick.
B. Yes, but only because office equipment is involved.
C. No, because his status was as an agent regardless of whether ABC Computers was
aware of that fact.
D. Yes, but only if Nick refused to pay.
E. Yes, but only if Nick were declared judicially insolvent.
“Lost Check.” Susan Jones teaches business law at Learn-A-Lot University.
Learn-A-Lot requested that all of the teachers ask the students to wear on the day of the
first football game T-shirts with “Learn-A-Lot University Football” printed on the front.
All of the teachers were asked to sell the shirts in class. A student, Bobby, wrote a check
to Susan for $10 for payment for one of the shirts. Bobby, however, put Susan Jones as
the payee. Susan wanted to turn the check over to the school, so on the back of the
check, she wrote, “Susan Jones, without recourse.” She then gave the check to the
treasurer for Learn-A-Lot University. Unfortunately, the treasurer for Learn-A-Lot
dropped the check on the ground as she was going to the bank. A student, Shifty, found
the check and promptly took it to the bank and cashed it. The treasurer, Bernice, did not
want to get into trouble, so she asked Susan to personally cover the check because she
said that Susan had endorsed the check on the back guaranteeing payment.
Was the check properly delivered to Shifty?
A. Yes, because it was bearer paper, delivery occurred whenever possession was taken.
B. Yes, because it was order paper, delivery occurred whenever possession was taken.
C. Yes, but only because it was thereafter presented to the bank and cashed.
D. Yes, because both Shifty and the bank are considered holders in due course.
E. No, because he was not entitled to receive it.