Sam, a new police officer, was criticized by his supervisor for failing to make a
sufficient number of arrests. Sam went into a section of town known for criminal
activity, picked up several suspicious looking individuals, read them the Miranda
rights, and arrested them hoping that they would confess to something. Alice, one of the
detainees, was scared; and, hoping to cut a deal, immediately confessed to burglarizing
a local pawnshop. Which of the following is Alice’s best defense at trial?
A. That the officer failed to have probable cause to make the arrest.
B. That the officer violated her First Amendment rights.
C. That the officer failed to obtain a form signed by Alice verifying that she understood
the Miranda rights as read.
D. That the officer failed to satisfy the burden of proof.
E. That a confession prior to an initial appearance is invalid.
Courts usually award punitive damages in cases in which the offender has committed
_________.
A. negligence
B. strict liability offense
C. a res ipsa loquitur offense
D. compensatory negligence
E. gross negligence
Which of the following are examples of collateral?
A. Goods and indispensable paper.
B. Goods and intangibles.
C. Goods and proceeds.
D. Goods, indispensable paper, and proceeds.
E. Goods indispensable paper, intangibles, and proceeds.
Which of the following is true of the term “tort”?
A. It is a French word meaning “wrong.”
B. It is a German word meaning “mistake.”
C. It is a Latin word meaning “dessert.”
D. It is an English word meaning “negligence.”
E. It is a civil law term meaning “liability.”
Which is not a method of perfection?
A. Perfection by pledge
B. Perfection by filing
C. Perfection by possession
D. Automatic possession
E. Perfection of movable collateral
Which of the following is true regarding the UCC’s definition of default?
A. The UCC defines default as failure to make any payment when due.
B. The UCC defines default as failure to make a payment within 30 days after a
payment is due.
C. The UCC defines default as failure to make a payment within 60 days after a
payment is due.
D. The UCC defines default as failure to make a payment within 90 days after a
payment is due.
E. None of these because the UCC does not define default.
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. For how much can the bank
hold Sandra responsible based on the fraudulent use of the card?
A. Nothing
B. $50
C. $100
D. $500
E. For everything charged prior to the time she gave notice
Why have most states replaced the contributory negligence defense with a comparative
negligence theory?
A. In order to assist a defendant in defending against unfounded claims.
B. In order to assist a plaintiff in avoiding the assumption of the risk doctrine.
C. In order to assist a defendant in avoiding the assumption of the risk doctrine.
D. Because of situations in which a plaintiff is barred from recovery due to minimal
contributory negligence.
E. None of these. Most states have not replaced the contributory negligence defense
with a form of comparative negligence.
Puppy Woes. Sam promised to sell Linda a Welsh Corgi puppy for $300 but backed out
of the deal. Linda sued Sam in state court for breach of contract. Linda asked for a jury
in her complaint. During jury selection, one juror, Ann, said that they did not think they
could be fair to Linda because Linda did not appear to be a dog lover. Linda asked that
Ann not hear the case, and the judge excused Ann. Linda also decided that another
juror, Sandy, looked at her in a grumpy manner so she asked the judge to excuse that
juror from serving. The judge did so. After the jury was chosen, Linda made a statement
to the jury, as did Sam. Linda then called to the witness stand a friend of hers, Brenda,
who heard the discussion held between Linda and Sam regarding the purchase of the
puppy. Brenda testified under questioning by Linda that she heard Linda say that she
would pay $300 for the puppy and that she also heard Sam say that he would sell the
dog for that amount. Unfortunately for Linda, Brenda also testified in response to
questioning by Sam that Sam distinctly told Linda that he would only sell the puppy to
her if Linda came with cash for the puppy within seven days. Linda did not show up
with the money for ten days and Sam had already sold the dog to someone else. The
judge ruled in favor of Sam. The challenge to the juror who seemed grumpy is referred
to as a(n)
A. Peremptory challenge.
B. Challenge for cause.
C. Stipulated challenge.
D. Fairness challenge.
E. Approved challenge.
Earthquake. Stewart, the owner of ABC Construction, agreed with Joan, the owner of
XYZ Hotel that he would complete renovations on her upper scale hotel on the beach in
Florida by October 1. The amount due to Stewart under the contract was $250,000. The
contract contained a clause by which Stewart would pay Joan $50,000 for each day he
was late on completing the project. Unfortunately, an unexpected strong earthquake
shook the area; and while the earthquake did not damage the hotel itself, Stewart
encountered significant difficulty in getting supplies due to the high demand for
building material following the earthquake. Because he believed that traveling, himself,
to other states to obtain supplies would be prohibitively expensive, he delayed the
project for two weeks while waiting for local stores to have sufficient supplies
available. Stewart finished renovations six days late. Joan told Stewart that she owed
him nothing but that he owed her $50,000. Stewart told Joan that he was suing for the
entire $250,000 because it was not his fault the earthquake delayed matters. Which of
the following is the appropriate term for the agreement that Stewart would pay Joan
$50,000 for each day he was late in completion?
A. Mitigated damages term
B. Liquidated damages clause
C. Stipulated damages
D. Acknowledged damages clause
E. Approved and acknowledged damages clause
Scuba Diving. Marcy invented a new type of mask for scuba divers that was not subject
to fogging. She agrees to allow Jenny to manufacture and sell the mask. She receives a
sum of money for every mask that Jenny sells. Marcy also entered into an agreement
with Frank to allow him to sell the masks but only if he also purchased non-patented
diving suits from Marcy. All parties proceeded to do very well with their sales.
Payments that Marcy would receive from Jenny for the sale of the mask are referred to
as which of the following?
A. Profits
B. Receipts
C. Royalties
D. Payoffs
E. Illegal
What is the term for a gift that is made in contemplation of one’s immediate death?
A. Adverse possession
B. Profit
C. An easement
D. Causa mortis
E. Inter vivos
Zack, the president of ABC Company, falsified documents to make it appear as if he
had been granted stock options on certain dates, and he selected the dates after the fact,
picking dates on which the stock price was low. Which of the following offenses, if any,
did he commit?
A. Insider trading
B. Pretexting
C. Defalcation
D. Stock-option backdating
E. He did not commit any offense
Angry employee. Martin is in charge of payroll and other expenses for ABC, Inc. He
becomes very angry with his boss Adam because Adam started dating Martin’s
girlfriend Stacy. Martin decided to quit but not before he got some extra money from
ABC, Inc. Martin wrote five checks from the account of ABC, Inc. to pay off the five
credit card companies that Martin owed money. The credit card companies took the
checks without reason to be suspicious as to the source of payment. The checks to the
credit card companies in total amounted to $30,000, and each check was in an amount
under $10,000. Martin also made out ten checks on the account of ABC to twenty
alleged employees who did not really exist. Each of these checks was in the amount of
$5,000. Martin took the checks, endorsed and cashed the checks in the names of the
various fake employees, and kept the cash. Finally, Martin discovers through office
gossip that Adam has been looking for another job with XYZ, Inc. located in a
neighboring state and that Adam is supposed to go there for an in person interview in a
few weeks. Martin sets up an interview with XYZ, Inc. pretends to be Adam, and
induces XYZ, Inc. to give him, posing as Adam, a check for $5,000 as a signing bonus.
Martin immediately endorses the check pretending to be Adam and pockets the cash.
Finally, Martin leaves town heading for the Caribbean. Is ABC, Inc. entitled to a refund
from its bank for the five checks used to pay Martin’s credit card companies?
A. Yes, ABC, Inc. is entitled to a refund because the credit card companies cannot be
considered payees.
B. Yes, ABC, Inc. is entitled to a refund because the credit card companies cannot be
considered holders in due course.
C. Yes, ABC, Inc. is entitled to a refund because the credit card companies can reverse
the credits.
D. No, ABC, Inc. is not entitled to a refund because none of the checks were in an
amount over $10,000.
E. No, ABC, Inc. is not entitled to a refund because the credit card companies are
holders in due course entitled to the funds.
Divorce Fallout. Dr. Fred, following a messy divorce, has encountered significant
financial difficulties. Dr. Fred has a friend named Slick Slim who tells Dr. Fred that he
has been making lots of money by selling people a wristband that allegedly places
pressure on a nerve that signals hunger resulting in a lack of appetite. Slick Slim tells
Dr. Fred that, although the device does not really work, people who want to lose weight
and look good in their bathing suits will do anything and that it sells like hotcakes. Slick
Slim tells Dr. Fred that he will pay Dr. Fred five dollars for every band that Dr. Fred can
sell to his patients. Dr. Fred proceeds to mail letters to patients suggesting the use of the
band for weight loss. He also uses UPS to mail samples of the band to some patients
along with letters encouraging purchase of the bands. Dr. Fred then proceeds to bill
Medicare for office consultations he has with patients when they come in to purchase
the bands. The scheme is wildly successful. Dr. Fred is able to entirely satisfy his
alimony obligations within just a few months. Unfortunately, as patients begin to see
that they are not having any weight loss, he has been receiving numerous complaints,
and a friend of his told him that he could even be facing some criminal prosecution. By
which of the following acts, if any, did Dr. Fred commit health care fraud?
A. Dr. Fred did not commit any acts of health care fraud.
B. By the submission of false claims to Medicare only.
C. By the receipt of kickbacks from Slick Slim only.
D. By the submission of false claims to Medicare and also by the receipt of kickbacks
from Slick Slim.
E. By submitting false claims to Medicare, by receiving kickbacks from Slick Slim, and
also by merely discussing the matter with Slick Slim.
Which Amendment provides the right to a speedy and public trial?
A. The Second Amendment.
B. The Third Amendment.
C. The Fourth Amendment.
D. The Sixth Amendment.
E. None, because there is no such right.
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. Which of the following is true regarding whether
Wendy and Sam had a duty to come to the assistance of the divers in peril?
A. Neither Wendy nor Sam had a duty to go to the aid of the divers who were in peril.
B. Wendy and Sam had a duty to go to the aid of the divers in peril only if Mike refused
to do so.
C. Wendy and Sam did not have a duty to go to the aid of the divers in peril unless they
were the first to see the problem.
D. Wendy and Sam had a duty to assist the divers in peril only if they were acquainted
prior to the dive with the divers who were in peril. They had no duty to help strangers.
E. Sam and Wendy had a duty to help the divers who were in peril if personal safety
was involved but not if the only issue was damage to property.
Which of the following are considered goods under the UCC?
A. Minerals taken from real estate and sold by the owner.
B. Soil taken from real estate and sold by the owner.
C. The right, sold by the owner to another party, to remove soil from real estate.
D. Minerals taken from real estate and sold by the owner; soil taken from real estate and
sold by the owner; and the right, sold by the owner to another party, to remove soil from
real estate.
E. Minerals taken from real estate and sold by the owner and soil taken from real estate
and sold by the owner; but not the right, sold by the owner to another party, to remove
soil from the real estate.
In Trouble. Bruno, an issuer of stock, may be in trouble. He sold stock in a new health
club venture before the effective date of registration. He did so because he was in
financial trouble involving other ventures of his and needed additional funds. Bruno
thought that the health club venture would be such a success that he would never get
caught in regard to the stock sale. Unfortunately, he was wrong. The health club venture
was going very poorly and investors were looking for some way to hold Bruno
responsible. Another problem Bruno has is that he inflated information regarding the
prospects of the health club in the prospectus. Investors bitterly complained. Rick, a
new lawyer, told Bruno that as far as he knew, the SEC could fine Bruno under the
Securities Act of 1933 but could not send him to jail. Bruno told Rick that was good
news and that no one should feel sorry for the investors because none of them made any
effort to check on information contained in the prospectus or to investigate the future
profitability of the health club venture. Bruno says that he plans to rely on the due
diligence defense. Bruno also asks Rick if he is aware of any other defenses. Bruno says
that he has never previously been in trouble with the SEC. Which of the following is
true regarding Bruno’s sale of securities before the effective date of registration?
A. He will be able to avoid liability if he can establish the due diligence defense.
B. He will be able to avoid liability if he can establish that the investors who purchased
stock early were aware that the securities were sold before the effective date of
registration.
C. He will be able to avoid liability if he can establish that the sales before the effective
date did not directly result in any losses to investors.
D. That is not a violation of the securities laws, so there is no question about liability.
E. He will almost certainly be liable because the 1933 act provides no defenses for that
violation.
Overextended Debtor. Dennis purchased a big screen television from ABC Electronics
and financed the purchase through ABC Electronics based on an agreement granting
ABC Electronics a security interest in the television and requiring that Dennis make
monthly payments. Three months later, because Dennis had bought a boat, a new car,
and an expensive engagement ring for his girlfriend, and some other items, he was
unable to continue making payments on the television. The manager from ABC
Electronics called and asked Dennis to return the television. Dennis refused on the basis
that ABC Electronics never perfected its interest in the television. Which of the
following is the correct designation for the television in the agreement between Dennis
and the electronic store?
A. Pledged goods.
B. Acknowledged goods.
C. Collateral.
D. Defined security.
E. Illegal security.
________________ generally do not offer stock to the public.
A. Alien corporations
B. Foreign corporations
C. Closely held corporations
D. Carefully held corporations
E. Minority shareholder controlled corporations
Lakeside Property. Ronnie agreed to act as the agent of Sue in finding a piece of
lakeside property for her at a good price and also in obtaining a loan for her with which
to purchase the property. She agreed to pay him $500 for doing so. To assist Ronnie in
his duties, Sue disclosed to Ronnie confidential information about her finances and
debts. Ronnie decided that he needed help and paid Rick $300 to look for property for
Sue. Bruce told Ronnie about a great deal on a piece of lakeside property that Bruce had
for sale. In fact, the deal was so good that Ronnie purchased the property for himself.
When Sue found out about the property Ronnie bought for himself, she complained to
Ronnie. He defended himself on the basis that he was not actually working for Sue
when he found out about the deal. At the time, he was playing golf with Bruce. He also
told Sue that he had hired Rick for $300 to assist him and that he could not be held
liable because he had turned the job over to Rick. He asked Sue for reimbursement of
that amount. Sue fired Ronnie threatening to sue him. Ronnie told Sue that he would
counterclaim for the $300 owed to Rick. Only after he was fired, Ronnie disclosed to a
number of parties information regarding Sue’s spending habits that he thought were
excessive. Which of the following is the most likely result if Ronnie sues Sue for the
$300 paid to Rick?
A. Ronnie will lose.
B. Ronnie will win only if he can establish that he had express permission from Sue to
assign the duties.
C. Ronnie will win only if he can establish that he had either express or implied
permission from Sue to assign the duties.
D. Ronnie will win only if he can establish that he had express, implied, or assumed
permission from Sue to assign the duties.
E. Ronnie will lose only if Sue can establish that Rick is incompetent to deal in real
estate.
Which of the following is true under the Magnuson-Moss Act if a written warranty is
silent as to whether or not it is a full warranty?
A. It is presumed to be a limited warranty.
B. It is presumed to be an express, limited warranty.
C. It is presumed to be a limited warranty of merchantability.
D. It is presumed to be a limited usage of trade warranty.
E. It is presumed to be a full warranty.
What types of powers do administrative agencies have?
A. Legislative and judicial
B. Judicial and executive
C. Executive and legislative
D. Legislative, judicial, and executive
E. None
Liability without fault is also known as which of the following?
A. Strict liability.
B. Negligence.
C. Actus reus.
D. Intentional wrongdoing.
E. Recklessness.
Which of the following are types of due process?
A. Procedural due process only
B. Substantive due process only
C. Independent due process only
D. Procedural, substantive, and independent due process
E. Procedural and substantive due process, but not independent due process
The Age Discrimination in Employment Act was enacted to prohibit employers from
__________ older workers.
A. refusing to hire
B. discharging
C. discrimination terms of employments
D. discriminating conditions of employment
E. All of these
If someone commits an act against the public, they will be violating what type of law?
A. Civil law
B. Criminal law
C. Procedural law
D. Civil law and procedural law, but not criminal law
E. Civil law, criminal law, and procedural law
Which of the following types of securities represent ownership in a corporation?
A. Debt
B. Equity
C. Finance
D. Formal
E. Certified
Which Amendment to the U.S. Constitution provides that all powers that the
Constitution neither gives exclusively to the federal government nor takes from the
states are reserved for the states?
A. 1st
B. 2nd
C. 5th
D. 6th
E. 10th