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A transaction in which the payment of a debt is guaranteed by personal property owned
by the debtor is called a secured transaction.
A gratuitous agent is one who acts without consideration.
A shareholder may not be held personally liable to a corporation for receiving watered
stock.
To recover damages on a quasi-contract, the plaintiff only has to show that the
defendant received a benefit from the plaintiff and that the plaintiff has reasonably
expected to be compensated for the benefit received by the defendant.
Law is rules of conduct in many organized societies that are enforced by the governing
authority of the community.
Public law involves disputes between private individuals or groups and their
government.
The law does not permit an oral negotiable instrument.
White-collar crimes are nonviolent acts against society, which occur most frequently in
the business content.
The security agreement must be signed by the debtor and give an accurate and detailed
description of the collateral.
Under Chapter 7, liquidation may be voluntary but not involuntary.
The supremacy clause is located in Article I of the U.S. Constitution.
A firm offer may be oral or written.
If a buyer accepts nonconforming goods, the buyer may not seek damages.
Fraudulent misrepresentation is a false representation of a material fact that is not
intended to mislead the other party.
State laws may give employees more, but not less protection than federal laws.
In some situations, the law specifies the duty of care one individual owes to another.
Mistakes in contract law result from untrue statements made by one party to the
contract.
When an item is transferred, the transferee acquires all the rights the transferor had to
the item under the shelter principle.
Under the Americans with Disabilities Act, employers must make reasonable
accommodations to known physical or mental disabilities unless the necessary
accommodations would impose an undue burden on the employer's business.
The association between one party and an agent who acts on behalf of that party is an
agency relationship.
Negotiable instruments can be payable in a national currency or stocks but may not be
tangible goods or services.
The bona fide occupational qualification defense allows an employer to discriminate in
hiring on the bases of sex, religion, or national origin if it is necessary for the
performance of the job.
In an express contract, all terms of the agreement must be clearly set forth in writing.
The UCC assumes that the seller has defective title unless the seller proves otherwise.
Condemnation is a legal process that is protected by the federal constitution and allows
the government to take private property only if the property is used for new schools or
roads.
The Truth in Lending Act requires that sellers disclose the terms of the credit or loan to
help consumers compare credit lines or loans.
While an agent owes duties to a principal, the principal owes no duties to an agent.
A principal may be entitled to a variety of contract and tort remedies beyond those
stated in their agreement if an agent breaches duties owed to that principal.
Under the common law, a corporation could not be found guilty of a crime due to the
lack of mens rea.
The U.S. Constitution allocates power of the federal government between the executive
and judiciary branches.
Order paper must be delivered but not endorsed in order to be negotiated.
In most cases, a partnership can be inherited.
Under the UCC, sellers and lessors are obligated to accept and pay for conforming
goods in accordance with the contract.
The party who receives the rights of another party in a contract is called an assignee.
The debt must be unliquidated for the parties to enter into an accord and satisfaction.
Under the Equal Credit Opportunity Act, creditors may not deny credit on the basis that
the applicant receives public assistance benefits.
A landowner may be required to involuntarily transfer their property to the government.
Which of the following conditions occur when each party's performance is conditioned
on the performance of the other?
A. Precedent
B. Subsequent
C. Concurrent
D. At large
E. Certain
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 on credit 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 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 purchased the computers.
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. No, because he was an independent contractor.
E. No, because he was an employee.
Which of the following are summaries of common law rules in a particular area of the
law that have been enacted by most states?
A. Restatements of the Law
B. Codifications of the Law
C. Reporters
D. Reports of the Law
E. Codes of Reporters
Which of the following is true regarding state courts of appeal?
A. States only have an intermediate court of appeals if there is no state Supreme Court.
B. In states that do not have an intermediate court of appeal, appeals go to the federal
court of appeals.
C. In states that do not have an intermediate court of appeal, there is no right of appeal
to any court.
D. All states in this country have intermediate courts of appeal.
E. Not all states have intermediate courts of appeal; and in those states, appeals go to
the state court of last resort.
A when the party making the statement would have known the truth about the fact had
he used reasonable care to discover or reveal it, the statement is considered.
A. Innocent misrepresentation
B. Material representation
C. Immaterial representation
D. Negligent misrepresentation
E. Scienter
The "public disclosure" test is also known as the ______ test.
A. television
B. Powell
C. self-conscious
D. golden
E. primary
If a principal agrees to hire no other agent for a period of time or until a particular job is
done, the principal and agent have entered into a(n) ______ agency contract.
A. limited
B. specific
C. exact
D. identified
E. exclusive
When parties include a(n) ______ clause in their contract, the parties are attempting to
limit their ability to assign their rights under the contract.
A. anti-obligation
B. anti-assignment
C. anti-contract
D. severability
E. integration
Which of the following is false regarding the liability of directors and officers for
criminal behavior?
A. Directors and officers can be held personally responsible for their own crimes.
B. Directors and officers can be held personally responsible for the crimes of other
employees within the organization when they have failed to adequately supervise the
employee's behavior.
C. An officer can be held criminally liable for conduct of an employee if the court
determines that a responsible person would have known about and could have
prevented the illegal activity.
D. Directors and officers who use insider information to trade the corporation's stock
for a profit can be held liable for breaching their fiduciary duty.
E. According to the responsible person doctrine, a court may not find a corporate officer
criminally liable for conduct of an employee unless the officer profited personally from
the illegal activity.
Bob, who has a large trust fund, is angry with Alice because she stopped dating him.
Alice ran a successful dog grooming shop but Bob decided to open a dog grooming
shop next door solely to run her out of business because he was angry over the break
up. Which of the following is correct?
A. Bob has committed the tort of unfair competition.
B. Bob has committed the tort of interference with contract.
C. Bob has committed the tort of unfair competition and also the tort of interference
with contract.
D. Bob has committed the tort of disparagement.
E. Bob has not committed any torts.
Supreme Court. Jim, who is a bit eccentric, says that he is fed up with the way a certain
employer in his town treats employees and that he is going to sue that employer in an
effort to improve matters. Jim also says that he is going to start his case at the appellate
court level, skipping over all those "lesser" judges. Jim says that those justices will
surely hear him out and that he will also seek a jury. Although he is not a lawyer, Jim
believes that the offenses of the employer are so severe that the justices will appreciate
his attempt to make things better for the employees involved. Regardless of what court
is involved, can Jim act as plaintiff for the employees?
A. Yes, so long as he gets permission slips from them.
B. Yes, so long as they file no objection.
C. Yes, so long as he gives any money he receives to them.
D. No, because he lacks standing.
E. No, because venue is lacking.
A corporation may distribute their income to shareholders through ____________.
A. allocations
B. grants
C. dividends
D. provisions
E. allowances
Which of the following are rules that explain how the agency views the meaning of the
statutes for which the agency has administrative responsibility?
A. Procedural
B. Interpretive
C. Legislative
D. Adjudicative
E. Judicial
________________ are outside directors who do not have business contacts with the
corporation.
A. Approved directors
B. Outside directors
C. Inside directors
D. Affiliated directors
E. Unaffiliated directors
Which of the following was the result on appeal in New Wave Technologies Inc. v.
Legacy Bank of Texas, the case in the text involving whether endorsements of both
payees were required in order for the bank involved to properly release funds on a
check made out to "Maxim Solutions Group/New Wave Technologies" and providing
on the back that "Each Payee Must Endorse Exactly As Drawn"?
A. That under the UCC the slash meant "and" resulting in the endorsements of both
payees being required before the bank could properly release funds on the check.
B. That the slash was ambiguous and would, therefore, be interpreted to mean "and"
resulting in the endorsements of both payees being required before the bank could
properly release funds on the check.
C. That the slash was ambiguous and would, therefore, be interpreted to mean "or"
resulting in the endorsement of only one payee being required before the bank could
properly release funds on the check.
D. That the slash was ambiguous resulting in the check being non-negotiable regardless
of how many signatures were on it.
E. That while the check would normally be interpreted to require only one payee, the
statement on the back that "Each Payee Must Endorse Exactly As Drawn" resulted in
the signature of both payees being required before the bank could properly release
funds.
Lottery Winnings. Frank, a hypochondriac who was also very compulsive, was having
minor surgery to repair a bone spur on his foot. He had just purchased a lottery ticket
for a chance at the grand prize of $30,000,000. Frank's girlfriend, Bubbles, went with
him to the hospital. While in the waiting room, Frank said to her, "Bubbles, I may not
make it out of this bone spur surgery. Take my lottery ticket. If I don't make it, I hope
you win and live it up, but please don't get another boyfriend." Bubbles replied, "I could
never be happy without you." A nurse saw and heard the whole exchange. Frank came
out of the surgery just fine but with a sore foot. While he was recuperating, that
evening, Bubbles watched the lottery drawing and discovered that Frank's ticket was
indeed the winning ticket. She immediately moved out and collected the winnings.
Frank saw her on television with her new boyfriend, George. She appeared to be very
happy. He checked the numbers and discovered that she won off of his ticket. Frank
says that the lottery money is his. Which of the following is true regarding Frank's
statement at the hospital regarding Bubbles taking the ticket?
A. At that point he made a valid gift that could not be revoked.
B. He did not make a gift because he placed a condition on it.
C. He made an irrevocable gift at that time only if Bubbles never had another
boyfriend; otherwise, she had to give the ticket and any resulting cash to Frank.
D. He made an irrevocable gift at that time if Bubbles refrained from having another
boyfriend until she cashed the ticket; and, after the ticket was converted, the condition
no longer applied.
E. None of these.
A false statement about a fact material to an agreement that the person making the
statement believed to be true is considered _____.
A. wrongful discharge
B. innocent misrepresentation
C. false misrepresentation
D. misleading misrepresentation
E. illegal misrepresentation
A corporation commits an ultra vires when _____.
A. it creates contracts outside the scope of its powers
B. it hires incompetent managers
C. it hires employees with criminal backgrounds
D. it refuses to declare dividends
E. it refuses to declare a stock split
How many states regulate professional licenses?
A. 50
B. 49
C. 45
D. 30
E. 25
Nasty Break-Up. Harold wants to purchase a lot next door to Sarah's home that is
owned by Sarah. Harold knows Sarah will not sell the lot to him because they dated in
the past and had a nasty break-up. Harold agrees with Alice that Alice will purchase the
lot from Sarah for him. Alice and Sarah reach an agreement and enter into a contract
whereby Sarah is to sell the lot to Alice for a price within the scope of Alice's authority.
Alice tells Sarah nothing about her plan to later transfer the lot to Harold. Before title to
the lot is transferred to Alice, Harold tells Alice that he no longer wants the lot. Alice
tells Sarah about Harold. Sarah tells Alice that as far as she is concerned, Alice has
bought the lot. Sarah says that she plans to move anyway and really does not care
whether Alice or Harold ends up with the lot. She just wants her money. Which of the
following is true regarding whether Harold is liable to Alice for the cost of the lot if
Alice pays Sarah the purchase price?
A. Harold is liable to Alice for the cost of the lot.
B. Harold is liable to Alice for the cost of the lot only if the contract between Harold
and Alice expressly stated that he would reimburse her for the cost of the lot.
C. Harold is liable to Alice only if she resells the lot and is unable to recover as much as
she paid for it.
D. Harold is not liable to Alice for the cost of the lot.
E. Harold can avoid liability to Alice only if he can establish that unexpected
circumstances caused him to refuse to purchase the lot from her.
A ______ is a person's present right to future property ownership and possession.
A. conditional estate
B. life estate
C. leasehold estate
D. future interest
E. fee simple absolute
Powder Room Mess. For $300,000, Willis agrees to build a new home for Robert, who
is very picky. Willis builds the home to Robert's specifications with one exception. The
faucets and linoleum flooring in an upstairs powder room are not exactly what Robert
specified. That was a mistake on Willis' part, but he had not intentionally failed to
follow specifications. When Robert sees the powder room, he goes ballistic and tells
Willis that he will not pay Willis anything for the house. It will take $300 to put in
correct faucets and linoleum. Willis says that he is willing to pay $300 to put Robert in
the position he would have been in had the correct faucets and linoleum been used, but
that is all he is willing to pay. Which of the following is true regarding whether Willis
breached the contract?
A. Willis did not breach the contract.
B. Willis materially breached the contract.
C. Willis substantially breached the contract.
D. Willis breached the contract, but the breach was not material.
E. Willis committed an anticipatory breach of the contract.
Which of the following is false regarding revocation of the authority of an agent and
renunciation by an agent?
A. At any time, a principal can revoke an agent's authority.
B. A principal's revocation of an agent's authority might be a breach of contract entitling
the agent to damages.
C. An agent can terminate the agency relationship by renouncing the authority given to
the agent.
D. An agent's renunciation of a contract might be a breach of contract entitling the
principal to damages.
E. If an agent has breached a fiduciary duty to the principal, the principal can revoke
the agent's authority, but the agent may be entitled to damages.
Mike gets angry because Ben made a better grade on a test than he did. They get into an
argument, and Mike takes a swing at Ben intending to hit him. Ben shoves Mike in
order to avoid the blow. Which of the following is true regarding Ben's actions?
A. Ben has committed a battery.
B. Ben has committed both an assault and a battery.
C. Ben has not committed an assault or a battery because he acted in self-defense.
D. Ben cannot rely on self-defense because he was involved in the argument and not
completely innocent.
E. Ben cannot rely upon self-defense because his life was not in danger.
The Burial Emporium. Fred operates a funeral home called Fred's Burial Emporium.
Fred likes to keep things simple. He has one flat price with no itemization and requires
that customers purchase a complete package from him if they want any services
whatsoever. Fred also goes door-to-door selling funeral packages. He tries to visit
neighborhoods in which there has been a recent death because residents in the
neighborhood will have final arrangements on their minds. He believes and informs
customers that once customers sign a contract for burial services, there is no backing
out. Fred also obtains a good deal of business from phone solicitation. He enjoys calling
late at night, between 10 p.m. and 11 p.m., when people are tired, but before they go to
bed. He believes that if people do not feel well, they are more likely to consider funeral
arrangements. After some pesky consumer complaints, the Federal Trade Commission
and other federal agencies investigate Fred. He hires a good lawyer with his profits in
an attempt to stay out of trouble. Which of the following is true regarding Fred's
practice of offering one flat price for funeral services with no itemization?
A. Federal law does not prohibit that practice.
B. That practice is prohibited under federal law in funeral home situations.
C. That practice is prohibited under federal law in funeral home situations only if there
is no other funeral home within 20 miles.
D. That practice is prohibited under federal law in funeral home situations only if there
is no other funeral home within 10 miles.
E. That practice is prohibited by federal law unless consumers receive a 10% discount
as compared to the average price of funeral services in his state.
Hair Stylist Woes. Maryann went to see her hair stylist, Candy. Maryann, who had
black, curly hair, requested straight, blond hair. Candy told her that she could make that
change, but there would be significant upkeep involved. Candy made the change, but
Maryann did not do the upkeep required. She also falsely claimed that Candy did not do
what Maryann asked her to do, that Candy lied to her, and that Candy was
professionally incompetent. Maryann made the statements to friends of hers. She also
wrote an editorial in her college newspaper to the effect that Candy's shop should be
avoided at all costs because Candy was incompetent. In fact, Candy was a good hair
stylist and enjoyed a good reputation up until the time that Maryann started her
criticism. Candy threatened to sue Maryann for defamation, but Maryann told Candy
that Candy could not prevail because Candy could not prove loss of income. Candy had
to admit that while her reputation had been damaged somewhat, the damage was
primarily among the college population. Her income kept increasing from other
segments of the community, and she had suffered no net loss. The defamation printed in
the school newspaper would be which of the following?
A. Libel.
B. Slander.
C. Both libel and slander.
D. Neither libel nor slander because an editorial was involved.
E. Neither libel nor slander because the falsehood involved matters of appearance not
business-related matters.
Which of the following is generally used to determine the value of stock when a
dissenting shareholder exercises an appraisal right when a proposed merger is involved?
A. The value of shares on the day after the shareholder vote.
B. The value of shares on the day before the shareholder vote.
C. The value of shares on the day of the shareholder vote.
D. The value of shares 10 days before the shareholder vote.
E. The value of shares on the day the proposed merger was announced.
A person who makes a misrepresentation but has no knowledge about the falsity of the
statement does not have _____.
A. information
B. premeditation
C. planning
D. plotting
E. scienter
Which of the following is not a purpose of the law as set forth in the text?
A. Encouraging taxation
B. Serving as an alternative to fighting
C. Encouraging social justice
D. Guaranteeing personal freedoms
E. Providing order such that one can depend on a promise or an expectation of
obligations
When a contracting party refuses to complete the contract before the actual time of
performance, it is called a(n) __________________________________.
A. preemptive repudiation
B. anticipatory repudiation
C. advance refusal
D. advance repudiation
E. preparatory refusal
Carpet Woes. Beau went shopping at ABC Carpet. He saw some carpet he liked but
could not make up his mind. The manager at ABC Carpet wrote down the proposed
purchase price for him along with a statement that the price would be good for three
months. Two months later Beau went back to ABC Carpet to purchase the carpet.
Unfortunately, the price had gone up. Beau showed the manager his writing and
guaranteed price, but the manager said that the offer was no longer good. Although he
had to pay more than the ABC manager had initially promised, Beau proceeded to
purchase his carpet from ABC Carpet, and he also contracted with ABC to do the
installation. Unfortunately, Beau almost immediately started to have problems with the
carpet. Beau told the sales manager of ABC Carpet that he was planning on bringing
suit for breach of warranty. The sales manager, however, told him that the breach of
warranty provisions only applied to sales of goods and that the carpet purchase was for
installation, a service. Which of the following is true regarding whether the UCC
applies to the contract Beau had with ABC Carpet?
A. Common law will be applied, not the UCC, because the contract was mixed.
B. The UCC will be applied, not common law because the contract was mixed.
C. The court will determine whether the predominant purpose of the contract was the
sale of goods in which case the UCC would apply.
D. The court will apply the service-warranty test to determine whether the predominant
purpose of the contract was the provision of a service in which case the UCC would
apply.
E. The court will apply the service-warranty test to determine whether the predominant
purpose of the contract was the sale of goods in which case the UCC would apply.
Under UCC Section 3, HDC is the abbreviation for _____.
A. holder of debt collection
B. holder of due conditions
C. holder of due complications
D. holder in due course
E. holder in down companies
Which of the following involves disputes between private individuals or groups and
their government?
A. Public law
B. Private law
C. Governmental law
D. Public law and private law, but not governmental law
E. Public law, private law, and governmental law
