A ______ is a specific draft, drawn by the owner of a checking account, ordering the
bank to pay the payee from that drawer’s account.
A. Promissory contract
B. Certificates of deposit
C. Note
D. Check
E. Time instrument
“Rough Start.” Debby, who just graduated from college, wanted to buy a new car. She,
however, did not have much of a credit history, and the bank would not give her a loan
unless she had a cosigner who agreed to be liable on the loan along with Debby.
Debby’s father cosigned with Debby on her loan at the bank. Debby also wanted to start
a real estate business. She needed funds with which to do so. Her boyfriend, George,
agreed in a signed writing with the bank that he would pay Debby’s start-up loan for the
real estate business if Debby did not do so. Unfortunately, Debby did not make any
money in the real estate business. She went bankrupt as did George who had been
acting as her receptionist.
What is the effect of George’s bankruptcy, if any, on the debt owed by George?
A. George may assert his bankruptcy as a defense against paying the debt.
B. George cannot bankrupt the debt because it is a suretyship agreement.
C. George cannot bankrupt the debt because it is a guaranty agreement.
D. George may only assert the bankruptcy as a defense if he filed for bankruptcy based
on excessive medical bills.
E. George may only assert the bankruptcy as a defense only if he filed for bankruptcy
protection within one year of agreeing to liability on Debby’s loan.
Which of the following is a characteristic of civil law?
A. Precedent is an important source of law in the civil law system.
B. Civil law systems use a form of system of separation of powers.
C. The civil law procedure is like the U.S. system of checks and balances.
D. In civil law systems the legislative branch has little authority.
E. The judicial branch in civil law systems may create its own new law.
Bob’s house was damaged by fire. He got three independent appraisals regarding the
damage and submitted those to his insurer informing the insurer that he was willing to
use the lowest appraisal as a basis for his insurance reimbursement. The adjuster for the
insurance company asked Bob to submit to an oral examination under oath regarding
the fire, but Bob refused. The insurance company denied reimbursement based on Bob’s
refusal to provide the examination under oath. Which of the following is true regarding
whether Bob should be allowed to recover under the policy if the court follows the case
in the text Hamilton v. State Farm Fire & Casualty Insurance Company?
A. The insurer will prevail if it can establish actual prejudice based on Bob’s refusal to
provide an examination under oath.
B. The insurer will prevail based on Bob’s refusal to provide an examination under oath
regardless of whether or not it can establish actual prejudice.
C. Bob will prevail even if he refuses to provide an examination under oath, but he will
not be allowed to recover penalties or attorney fees.
D. Bob will prevail only if he is able to establish that the insurer was not prejudiced by
his refusal to provide an examination under oath; and, assuming he is able to do so, he
will be allowed to recover penalties and attorney fees.
E. Bob will prevail without any obligation to establish that the insurer was not
prejudiced by his refusal to provide an examination under oath, and he will also be
allowed to recover penalties and attorney fees.
Which of the following is false regarding written contracts?
A. Disputes are easier to settle when contractual terms are solidified in writing.
B. The moment of writing allows both parties to reconsider terms and ensure what they
desire.
C. In general, written contracts aid in the conduct of smooth business contracts.
D. The idea of requiring a writing comes from an English law.
E. All contracts must be in writing in order to be enforced.
“Pet Police.” Millie breeds German Shepherd dogs. Bernard, who lives down the street,
took in a stray dog loosely identified as a Corgi-plus. The dog, Casanova, would
definitely be classified as a mixed breed. Bernard allowed Casanova to roam freely.
Unfortunately, Casanova went to visit Millie’s pure-bred German Shepherd. Puppies
resulted which were Shepherd and Corgi-plus puppies. Millie was incensed. She started
a campaign to round up all of the stray dogs, including Casanova, and haul them off to
the animal shelter. She picked up a few cats as well. She posted signs all over the
neighborhood saying that no animal, neither dog, cat, nor fowl, should come into her
yard and that she was going to begin shooting the next time, period. Understandably,
Bernard and some of the other neighbors took offense. Bernard comes to Millie’s house
while she is working in the yard. He walks behind her and shoves her. Millie did not see
him coming. Millie turned around and proceeded to have a heated conversation with
Bernard. Millie drew her fist back and told Bernard that she was going to punch him in
the nose. Millie raised back her arm and started to punch Bernard but he stepped back,
and all she managed to do was jab him in the shoulder, causing no actual pain. Sally,
who was going by on the street, saw Millie attempting to hit Bernard. Sally came over
and grabbed Millie’s hands, pinning Millie’s hands behind her back.
Millie’s action in jabbing Bernard after she missed his nose, constitutes which of the
following?
A. Battery.
B. Nothing because the conduct would not be deemed offensive.
C. Nothing because she missed the nose, and Bernard was not actually hurt.
D. Nothing because by entering Millie’s yard, Bernard consented to any offensive
touching.
E. Nothing because Bernard deserved what he got.
“The Stolen Book.” Susan is told by Betty that Bob stole her business law book out of
her car. The next day Susan confronts Bob and slaps him for stealing her book. Bob had
Susan arrested for slapping him, and the local district attorney is prepared to prosecute
that matter on behalf of the state. Susan sues Bob for damages to the book and for
maliciously having her arrested. Claiming that she lied, Bob sues Betty for defamation.
The action Bob has against Betty for defamation involves which of the following?
A. Criminal law and public law
B. Civil law and public law
C. Insider law and public law
D. Civil law and private law
E. Administrative law and public law
Alice owned a condominium directly above Sam. Alice failed to take proper care of
some plumbing problems, and on several occasions Alice’s plumbing problems caused
leaking into Sam’s apartment resulting in property damage. Both Alice and Sam had
signed a condominium association agreement providing that each tenant would pay for
any damage caused; that the agreement could be enforced by the management of the
association or, in a proper case, by an aggrieved owner; and that adherence to the
agreement was required “for the benefit of the Association and any person acquiring or
owning an interest in the property.” The association itself refused to sue Alice in order
to recover damages with which to reimburse Sam. Therefore, Sam sued Alice himself.
She claimed that he had no standing to sue. Which of the following is the most likely
result of the dispute if the court follows Allan v. Nersesova, the case in the text
involving a similar issue?
A. That Sam could proceed but only if he could convince the association to join the
lawsuit with his.
B. That Sam was an intended beneficiary of the agreement between Alice and the
association; that he had standing to sue; and that under the terms of the agreement, the
association’s failure to act gave him the right to proceed.
C. That the agreement between Alice and the association addressed issues involving
intentional wrongdoing, such as out-of-control parties, not issues involving utilities and
that Sam, therefore, could not sue.
D. That Sam was an intended beneficiary of the agreement between Alice and the
association but that he had no right to sue because he nevertheless lacked standing.
E. That Sam had standing based on the association’s failure to act but that he
nevertheless had no right to bring suit because he was not an intended beneficiary of the
agreement between Alice and the association.
Which of the following references stock and bonds issued by corporations to raise
capital for corporate expansion?
A. Acknowledgements
B. Securities
C. Stock and bond options
D. Investment options
E. Funding agreements
“Junk Food.” Mary Dogood, a member of the school board in ABC County, is appalled
at the amount of junk food in the schools. She convinces the state legislature to pass an
ordinance that no stores may sell any unhealthy junk food within 500 feet of any school
or day care center. A teacher of political science raises the issue of whether the
regulation is valid and is told that it is a valid exercise of the jurisdiction’s police power
to protect its citizens. Convenience stores balk at the regulation and challenge it in court
claiming that the law impermissibly affects interstate commerce.
What do courts generally presume regarding laws passed in accordance with states’
police power?
A. There is no presumption.
B. The laws are valid.
C. The laws are invalid.
D. The laws are invalid unless it involves a First Amendment right.
E. The laws are invalid unless it involves regulation of interstate commerce.
“Air Improvement.” Paula is very annoyed because a business near her neighborhood
has an incinerator that releases pollutants. She discussed the matter with her local city
council representative, Bruno, who told her that only the federal government can
enforce laws involving pollutants; that the government has done so through the
establishment of National Ambient Air Quality Standards; and that there is nothing she
as an individual can do. Paula tells the council representative that she considers the
emissions criminal. Bruno just shrugs and replies that industry is never subject to
criminal penalties under the Clean Air Act and that only the government can enforce the
Clean Air Act anyway.
Is Bruno correct that there are no criminal penalties under the Clean Air Act?
A. Yes, he is correct.
B. No, he is incorrect; and criminal penalties include the provision that parties who
knowingly violate the act can be subject to criminal fines of up to $1 million per day,
and corporate officers are also potentially subject to imprisonment for up to two years
for violating certain provisions of the act.
C. No, he is incorrect; and criminal penalties include the provision that parties who
knowingly violate the act can be subject to criminal fines of up to $1 million per day,
and corporate officers are also potentially subject to imprisonment for up to five years
for violating certain provisions of the act.
D. No, he is incorrect; and criminal penalties include the provision that parties who
knowingly violate the act can be subject to criminal fines of up to $1 million per month,
and corporate officers are also potentially subject to imprisonment for up to two years
for violating certain provisions of the act.
E. No, he is incorrect; and although violators are not subject to imprisonment under the
act, parties that knowingly violate the act can be subject to criminal fines of up to $1
million per day.
A ______ is an instrument of that conveys real property from one owner to another.
A. Deed
B. Form of acknowledgment
C. Transfer
D. Right of way
E. Title
Which of the following does the duty of obedience that one partner owes to another
reference?
A. The duty to obey instructions of any other partner.
B. The duty to keep other partners informed of the finances of the partnership.
C. The duty to keep other partners informed of partnership debts.
D. The duty to obey the articles of partnership.
E. The duty to reimburse the partnership for any personal expenditures.
Which of the following focuses on handling waste from creation through disposal?
A. The Resource Conservation and Recovery Act
B. The Comprehensive Environmental Response, Compensation and Liability Act
C. The Federal Hazardous Waste Act
D. The Hazardous Waste Disposal Act
E. The Authorized Disposal Waste Act
Which of the following is true regarding the court system in the Republic of China
(Taiwan)?
A. It is identical to the court system in the U.S.
B. For civil and criminal cases, and for cases interpreting the country’s constitution, the
Supreme Court is the court of last resort.
C. All cases go directly from the trial court to the Supreme Court, and there is no
intermediate appellate court system.
D. While constitutional issues are heard by the country’s Supreme Court, regular civil
and criminal cases are heard by the Court of the Judicial Yuan.
E. Responsibility for interpreting the country’s constitution falls to the Constitutional
Court of the Judicial Yuan.
Which of the following is an inquiry into the competitive effects of a company’s
behavior to determine whether the benefits of the behavior outweigh the harm of the
anticompetitive behavior?
A. The rule-of-reason analysis
B. The per se test
C. The quick-look standard
D. The consumer standard
E. The three-prong analysis
“To the Dogs.” Alice loves all animals and is starting a new grooming business for
them. She believes that animals are very important and plans to exceed any applicable
regulations regarding cleanliness and health standards. Alice thinks, however, some
local regulations make no sense. For example, there is a local ordinance that all dogs
must be kept on a leash at all times when not in an inside area. Although Alice is
placing her business on a large lot with a fenced outside area allowing plenty of room
for dogs to run free, she plans to obey the leash regulation and all others. She is aware,
however, that some members of the community have had success in changing local
regulations by petitioning city council. Alice plans to proceed in that manner to attempt
a change in the leash law.
Alice’s plan to obey all laws and regulations even if she does not agree with them is
rooted in which of the following?
A. Legal positivism
B. The historical school
C. Legal realism
D. Natural law
E. Cost-benefit analysis
An offer of performance by being ready, willing, and able to perform is known as ____.
A. Offering
B. Showing
C. Tender
D. Completer
E. Implied acceptance
Which of the following best expresses the court’s opinion in the case nugget Jackson v.
Bumble Bee Seafoods Inc., in which the plaintiff sued after small fish bones were found
in canned tuna fish the plaintiff ate?
A. That the plaintiff could not recover because the bone was not a foreign substance to
the fish and should have been expected.
B. That the plaintiff could recover based upon the implied warranty of fitness for a
particular purpose.
C. That the plaintiff could recover based on an express warranty.
D. That the plaintiff could recover based upon the implied warranty of merchantability
because even through bones are not a foreign substance to fish, they are not expected in
small pieces of tuna fish.
E. That the plaintiff could not recover because no food has warranties attached to it.
Which of the following is a corporation that, with minor errors, has substantially met
the requirements of the state incorporation statute?
A. A de jure corporation
B. A de facto corporation
C. A corporation by estoppel
D. A corporation by reservation
E. An inactive corporation
Business law teacher Penny is very sensitive about her upcoming 40th birthday. Her
students decide to surprise her with a cake. On behalf of her class, Brent, a student,
goes to the bakery and orders a cake that says “Happy Birthday – You Look Great!” The
salesclerk said that there was no problem in having the cake ready and that it should
make the birthday girl feel great. Brent was in a big hurry when he went to pick up the
boxed cake. Although the salesclerk asked Brent to take a look at the cake, he declined.
Unfortunately, when the cake was opened up in class, the icing said “Happy Birthday –
You Look Gray!” The students were mortified, and Penny angrily left the room vowing
to give a difficult final. Which of the following is true regarding what warranties the
bakery breached, if any?
A. Because the salesclerk promised that there would be no problem with the cake, the
bakery breached an express warranty and is liable for damages.
B. The bakery breached the warranty of merchantability and is liable for damages.
C. Because the salesclerk promised that the cake would make the birthday girl feel
great, the bakery breached the implied warranty of fitness for a particular purpose and is
liable for damages.
D. Because food was involved, no warranties were made.
E. Because Brent failed to inspect the cake, he waived implied and express warranties.
Which of the following is true regarding acceptable means of acceptance if no means of
communicating an acceptance is specified in an offer?
A. If no means of communicating an acceptance is specified in an offer, acceptance
must be done through the U.S. mail system.
B. If no means of communicating an acceptance is specified in an offer, acceptance
must be done either in person or through telephone communication.
C. If no means of communicating an acceptance is specified in an offer, acceptance
must be done either through the U.S. mail or through fax transmittal.
D. If no means of communicating an acceptance is specified in an offer, acceptance
must be done either through U.S. mail or through e-mail.
E. If no means of communicating the acceptance is specified, any reasonable means is
generally acceptable.
Which of the following provide remedies to buyers of defective cars?
A. Apple laws
B. Lemon laws
C. Clunker laws
D. Roadside laws
E. Peach laws
Which amendment protects against double jeopardy?
A. The First Amendment
B. The Second Amendment
C. The Third Amendment
D. The Fourth Amendment
E. The Fifth Amendment
Assume a buyer and seller execute a contract in which the seller is going to deliver a
couch later in the day to the buyer. With a simple delivery contract in which the seller is
a merchant, which party sustains a loss if, through no fault of either party, the couch is
destroyed through fire prior to delivery?
A. The seller
B. The buyer
C. Loss is proportioned 50% to the buyer and 50% to the seller
D. Loss is proportioned 75% to the buyer and 25% to the seller
E. Loss is proportioned 25% to the buyer and 75% to the seller
Which of the following is false regarding the parol evidence rule?
A. The purpose of the rule is to prevent evidence that substantially contradicts an
agreement in its written form.
B. The rule is a rule of evidence.
C. The rule relates to substantive legal issues.
D. The rule is not a unitary concept or rule.
E. The rule is an amalgamation of different rules and conditions.
Which of the following is false regarding ways in which people may acquire title to
property?
A. If a person creates a piece of property for himself or herself, then he or she owns that
property only so long as it is registered through either the patent or copyright process.
B. When a person is paid to create property for someone else, the property is owned by
the person who paid for its creation.
C. A means of acquiring ownership is by court order.
D. In a bankruptcy case the court may award ownership of certain property to a creditor.
E. A person may acquire ownership through confusion.
Which of the following is formed when a debtor uses borrowed money from the
secured party to buy the collateral?
A. A secured possessory interest.
B. A loaned money possessory interest.
C. A purchase-money security interest.
D. A purchase-cash consumer interest.
E. A perfected security interest.
Which of the following is false regarding security deposits?
A. A security deposit is typically in the amount of one month’s rent.
B. At the expiration of a lease, the landlord is required to return to the tenant the
security deposit minus any costs for damages caused by the tenant.
C. At the expiration of a lease, if a landlord retains any portion of the security deposit,
the landlord must provide the tenant with a list of the damages.
D. Federal law determines the amount of time that the landlord has to return the
security deposit to the tenant.
E. If the landlord exceeds the deadline in which to return the security deposit, the tenant
can recover the deposit, plus attorney fees.
Property of Mary is damaged in a fire. She claims the property damage amounted to
$10,000, and the insurer claims it only amounted to $5,000. Which of the following is
true in this situation?
A. Mary should demand an appraisal under her policy’s appraisal clause.
B. Mary has no alternative because she must accept the insurer’s valuation.
C. The insurer is required to accept the insured’s valuation unless the insurer can
establish that the insured failed to act in good faith.
D. Mary should call the state inspector who investigates and makes rulings in such
cases.
E. Mary should file for a field evaluation.
According to the UCC, which of the following is true regarding when a person has
notice of a fact?
A. Under the UCC a person has notice of a fact only when the person has actual
knowledge of the fact.
B. Under the UCC a person has notice of a fact under the following two circumstances:
(1) when the person has actual knowledge of the fact, and (2) when the person receives
notice or notification of the facts.
C. Under the UCC a person has notice of a fact under the following three
circumstances: (1) when the person has actual knowledge of the fact, (2) when the
person receives notice or notification of the facts, and (3) when the person has reason to
know the fact exists.
D. Under the UCC a person has notice of a fact only when the person has signed a
verification to the effect that notice was received.
E. Under the UCC a person has notice of a fact only when the person receives written
notification either through regular mail or electronic means.
Which of the following is the party giving the order to pay on a draft?
A. The drawer.
B. The drawee.
C. The payor.
D. The draftor.
E. The draftee.
Which of the following involves accountant liability to third parties based upon privity
or near privity?
A. The Ultramares rule
B. The Class test
C. The Reliance Rule
D. The Restatement test
E. The Carroll Rule
Which of the following was the result on appeal in Detroit Radiant Products Company
v. BSH Home Appliances Corporation, the case in the text in which the plaintiff, a seller
of gas-fired infrared heaters, sought to recover lost profits based on the defendants
breach of contract?
A. The court awarded the plaintiff lost profits based on the fact that lost profits are the
default measure of damages under Article 2 of the UCC.
B. The court awarded the plaintiff the difference between the contract price less the
market price plus incidental damages based on the fact that such damages were the
default measure of damages under Article 2 of the UCC.
C. The court awarded the plaintiff lost profits in addition to the difference between the
contract price less the market price plus incidental damages based on the fact that all
such damages were the default measure of damages under Article 2 of the UCC.
D. The court awarded the plaintiff the value of the unsellable inventory it had due to the
defendant’s breach and also lost profits because the default measure (the difference
between the contract price less the market price plus incidental damages) did not make
the plaintiff whole.
E. The court awarded the plaintiff lost profits and also the value of the unsellable
inventory it had due to the defendant’s breach because the default measure (lost profits)
did not make the plaintiff whole.