“Four Paws Protection.” Congress set up a new agency to more closely regulate testing
of personal and cosmetic products on animals. Legislation was passed naming the
agency the “Animal Protection Commission,” and setting forth the function of the
agency and its specific powers. Congress provided the agency with the power to make
rules, investigate violations, and adjudicate charges of wrongdoing. The agency
proceeded to properly give notice and issue rules. The rules provided for civil as well as
for criminal penalties. Agency personnel issued an order for ABC Co. to attend a
hearing regarding its animal testing and to bring to the hearing all company documents
pertaining to animal testing. ABC Co. resisted on the basis that the agency had no
power to compel its attendance at a hearing or to require it to provide any documents.
ABC Co. also claimed that agencies do not have the power to impose criminal
penalties. The agency proceeded to issue a ruling that ABC Co. cease all activity based
upon its refusal to cooperate.
Which of the following is true regarding the claim of ABC Co. that agencies have no
power to issue rules containing criminal penalties?
A. ABC Co. is correct.
B. ABC Co. is incorrect, but any criminal penalties enforced by an agency may not
exceed a fine of $1,000.
C. ABC Co. is incorrect, but any criminal penalties enforced by an agency may not
exceed a fine of $10,000.
D. ABC Co. is incorrect regarding its claim that all agencies lack the authority to
enforce a criminal penalty, but correct in that the Animal Protection Commission cannot
enforce a criminal penalty because an agency can only enforce a criminal penalty if
human health or national security is involved.
E. ABC Co. is incorrect, and the Animal Protection Commission can enforce criminal
penalties.
If a customer makes a deposit over ____, the depositary bank may place an 8-day hold
on the funds.
A. $1,000
B. $2,000
C. $3,000
D. $4,000
E. $5,000
“Bank Robbery.” Safe Bank was robbed of a significant sum of cash by a robber later
identified as Victor Victory. Safe Bank offered a reward of $10,000 to anyone who
captured or provided information leading to the capture of Victor. Ted, a police officer
in town, promised Safe Bank officials that he would apprehend Victor. While on duty,
Ted arrested Victor at a hamburger joint in town. He found Victor based upon a hunch
he had after Ursula, who dated Victor, told him about various places Victor enjoyed
eating. The bank refuses to pay either Ursula or Ted any of the reward money.
Which of the following is true regarding the offer of the reward?
A. It pertained to a bilateral contract that could be accepted only with consideration
consisting of a promise.
B. It pertained to a bilateral contract that could be accepted only with consideration
consisting of performance.
C. It pertained to a bilateral contract that could be accepted with consideration
consisting of a promise or performance.
D. It pertained to a unilateral contract that could be accepted with consideration
consisting of a promise.
E. It pertained to a unilateral contract that could be accepted with consideration
consisting of performance.
Which of the following is a written document signed by the maker or drawer with an
unconditional promise or order to pay a certain sum in money on demand or at a
specified time to the order of bearer?
A. An acknowledged instrument.
B. A contract instrument.
C. A negotiable instrument.
D. A holder instrument.
E. A delivered instrument.
Which of the following is not a right of corporate directors?
A. The right of compensation
B. The right of participation
C. The right of inspection
D. The right of indemnification
E. The right of obedience
“Third-Party Woes.” Trudy owed Sam $40 for a book she purchased from him. Trudy
mowed Betty’s yard for $40 and agreed with Betty that Betty would pay Sam for the
book. Sam is not aware of the assignment. Betty pays no one. Trudy also mowed Bob’s
yard for $40. She agreed with Bob that Bob would give the payment to Sally
representing Trudy’s birthday present to Sally. Bob later refuses to do so saying that
promises to give gifts are not enforceable. He then moves out of town. Trudy tells both
Sam and Sally that she is broke and that they will have to get any amounts due from
Betty and Bob respectively. Sally is very unhappy because she wanted to buy a new
pair of sandals with the money.
What type of third-party beneficiary is Sam?
A. Intended and donee
B. Creditor and incidental
C. Intended and creditor
D. Donee and incidental
E. Creditor and donee
“Family Trust.” Gracie had made lots of money in the stock market. She was getting
older and was concerned about the integrity of her children and grandchildren who
seemed unwilling to work. She decided that she would place the majority of her money
in a trust and instruct that it be distributed only to family members who were gainfully
employed or attending school on a full-time basis throughout the next twenty years. The
remainder of the trust at that time was to be given to a local animal shelter. She also told
her lawyer, Joe, that although she was in good health and mind at the present time, she
would like a document drawn up giving her daughter Marcy the power to make
decisions for her, including financial decisions, should her health deteriorate to the
point that she could not handle her own affairs.
Which of the following identifies the document that Gracie wanted giving Marcy the
power to handle her affairs should she become unable to do so herself?
A. Power of attorney
B. Durable power of attorney
C. Disciplined trust
D. Acknowledged power of conveyance
E. Undisciplined trust authority
Which of the following arises when a consumer knows that a defect exists but still
proceeds unreasonably to make use of the product, creating a situation where the
consumer has voluntarily assumed the risk of injury from the defect and thus cannot
recover?
A. Assumption of the risk.
B. Pure comparative fault.
C. Contributory negligence.
D. Last-clear-chance.
E. Strict behavior.
In Japan adverse possession for ______ years leads to a transfer of ownership as long as
the possessor began with a nonnegligent good-faith belief that he or she had legal title
to the property.
A. 10
B. 15
C. 20
D. 25
E. 30
Which of the following is false regarding organ donation in Japan?
A. Japan now has a nationwide Organ Transplant Law.
B. Prior to passage of the Organ Transplant Law, death in Japan was official only when
the heart stopped beating.
C. Japanese law requires that organs be donated under certain circumstances even if the
family of a decedent objects and the decedent had given no indication that he or she
desired transplantation.
D. Japan has one of the lowest rates of organ transplantation in the developed world.
E. Japanese law permits potential donors to note their consent on medical insurance
cards and driver’s licenses.
Which of the following is an agreement stating that continuing partners can keep
partnership property and carry on the partnership business?
A. A continuation agreement
B. A limitation agreement
C. A proceeding agreement
D. A forward agreement
E. A non-liquidation agreement
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. Because of situations in which a defendant is released from liability based on the last
clear chance doctrine when equity requires that the defendant bear at least some
responsibility.
If a contract does not clearly specify that the satisfaction is to be personal, the ______
standard applies.
A. Express
B. Subjective
C. Objective
D. Absolute
E. Unbiased
When a specific payee is named in an instrument, the instrument is known as a[n]
_____ instrument.
A. Demand
B. Order
C. Transactional
D. Bearer
E. Payor
An endorsement that places a condition on payment is referred to as which of the
following types of endorsements?
A. Conditional endorsement.
B. Trust endorsement.
C. Endorsement to prohibit further endorsement.
D. Bearer endorsement.
E. Conditional bearer endorsement.
In which of the following are two or more corporations combined with neither of the
original corporations continuing to exist legally?
A. A merger
B. A consolidation
C. A combination
D. An alteration
E. A reorganization
Penny, who is the president of XYZ Corporation, tells Andy that buying stock in XYZ
Corporation right now is a good idea. Andy is only casually acquainted with Penny and
did not know that she was an officer of the corporation. He, however, acting on her
information investigated the company somewhat and proceeded to buy some stock.
Both Penny and Andy were charged with insider trading. Both Penny and Andy say that
they did not know that insider trading was against the law. Also, Andy says that he did
not even know that Penny was an officer of XYZ Corporation and that he thought the
information at issue was public information. Provide the legal definitions for the
defenses asserted and discuss whether they are adequate.
Which of the following is the term used to describe the duty and responsibilities of the
agent as specified in the agency agreement?
A. Duty of action
B. Duty of contract
C. Express duty of action
D. Duty of performance
E. Duty of obedience
Which of the following was the result in Angela & Raul Ruiz v. Fortune Insurance Co.,
the case in the text in which the plaintiffs claimed that the defending insurer was liable
to them for a loss to their mobile home although the agency to which plaintiffs’
premium was remitted no longer had an agency relationship with the defendant; and the
defendant had not received the payment nor renewed the plaintiffs’ policy?
A. The defendant was held liable to the plaintiffs because they had not been notified of
the agency termination and the nonrenewal.
B. The defendant was held liable to the plaintiffs because even if the defendant sent a
notice of nonrenewal, the plaintiffs did not receive it.
C. The defendant was held liable to the plaintiffs because its former agent was in
possession of funds meant for the defendant, and it was up to the defendant to obtain
the funds from the former agent.
D. The defendant was not held liable to the plaintiffs because of proof it had mailed the
notice of nonrenewal, even if the plaintiffs did not receive it or did not read it.
E. The court ruled that a jury question existed as to whether the plaintiffs understood
the meaning of the notification of nonrenewal and that if the plaintiffs did not
understand its meaning, then they were entitled to recover from the defendant.
According to the text, which of the following may be a part of the “how” in the WPH
process of decision making?
A. Public disclosure, universalization, security, and the Golden Rule
B. Values, public disclosure, and security
C. Profit maximization, security, and public disclosure
D. Whistle-blowing, the Golden Rule, values, and public disclosure
E. Public disclosure, universalization, and the Golden Rule
To ensure that a dissolving partner does not create additional liability for the
partnership, which of the following is true regarding notice to be provided to a third
party that has provided credit to a partnership?
A. There is no requirement that notice be provided because by law, the dissolving
partner has no authority to bind the partnership.
B. The third party may be notified through advertisement in the newspaper.
C. The third party may be notified through a general post on the Internet at the
partnership’s website.
D. The third party must be provided direct verbal or written notice.
E. The third party must be provided written notice based on the statute of frauds.
“Irresponsible Teen.” At age 17, in a state in which the age of majority is 18, Sally
purchased a prom dress from Formal Stuff. She wore it to the prom and then attempted
to return it to the store claiming that she was a minor and that she was entitled to a
refund. The dress had clearly been worn and had a purple stain which Sally claimed was
from grape juice. Additionally, a few days before she turned 18, Sally purchased a used
car from Dings and Dents used cars. She had a deal whereby she paid $100 per month
on the car. She drove the car and made payments for six months after she turned 18.
Sally then returned the car to Dings and Dents, informed the owner that she was under
18 when she entered into the contract to purchase the car, and told the owner that she
was returning the car for a full refund. Dings and Dents claimed the car was a necessity.
Sally and her parents disagreed claiming that the parents were ready and willing to
provide a car to Sally, and that she only purchased the car from Dings and Dents
because she liked that particular style and color. When purchases of the dress and car
were made, the sellers knew that Sally was under the age of 18.
In the dispute between Sally and the owner of Dings and Dents, which of the following
is true regarding the claim of Sally and her parents that the car was a necessary?
A. The claim will have no effect because the law does not recognize the concept of
necessaries when minors are involved.
B. Social status is irrelevant as a matter of law in addressing a claim that an item was a
necessary.
C. Whether or not parents would buy the item at issue is irrelevant in addressing a claim
that an item was a necessary.
D. A minor may not disaffirm a contract for a frivolous matter that is clearly not
required.
E. Even if a minor disaffirms a contract for a necessary, the minor will still be held
liable for the reasonable value of the necessary.
_____ torts occur when the defendant is careless and acts in a way that subjects other
people to an unreasonable risk of harm.
A. Criminal
B. Liability
C. Intentional
D. Negligent
E. Strict-liability
“Dream Home.” Maurice finds a dream home on the lake. He wants to buy it but is
unsure whether he can get a loan. He signs a contract with the seller that he will buy the
home provided that he can get a loan. Maurice also includes a contractual clause in the
contract with the seller that if he loses his job before the date the purchase contract is
signed, the seller will release him from any obligation. After getting a loan and buying
the home, Maurice decided that he wanted new windows. He entered into a contract
with a window contractor. The window contractor visited the home, but Maurice was
always gone. The contractor made several attempts to reach Maurice, but Maurice
would not return phone calls and made no attempt to assist the contractor with
installation.
The provision that Maurice did not have to buy the house unless he was able to get a
loan is referred to as which of the following?
A. A condition subsequent
B. A condition precedent
C. A bona fide condition
D. A condition concurrent
E. An exculpatory condition
“DUI Charge.” Monique was licensed by her state to train massage therapists. The state
licensing agency, the Aesthetic and Massage Commission, took very seriously its role
of enforcing the state statute enabling the Commission to do its work and providing that
licensed massage therapists must refrain from “any act or conduct indicating bad faith,
incompetence, dishonesty, or improper dealing.” Rules were passed authorizing the
agency to revoke the license of anyone found guilty of such acts or conduct. Monique,
while driving home late one night from a party, was stopped by the police and arrested
for driving under the influence of alcohol. She pled guilty to the offense. When the
Aesthetic and Massage Commission discovered the offense, the officials of the agency
met, decided that Monique might drink on the job, and that she might pose a danger to
students. Accordingly, her license to teach massage therapy was revoked. Monique
threatened to sue to retain her license and was told by the agency head that she had no
right to appeal to court because, based on her admission of guilt, no factual dispute was
involved. The agency official went on to say that even if an appealable issue existed,
agency action may only be overturned when there is clear and convincing evidence that
the agency exceeded its discretion. The administrative system in Monique’s state is
identical to the federal system.
Which of the following is true regarding the statement of the agency that Monique had
no right to appeal to court?
A. The agency representative was wrong; and if Monique cannot resolve the issue
within the agency, she may appeal to court for judicial review.
B. Because the agency was set up to protect the safety of the public, the agency
representative is correct unless Monique can establish that she entered into a separate
contractual arrangement with the agency when she was hired that gave her the right to
appeal decisions to court.
C. Further information is needed regarding whether the agency was an executive
agency or an independent agency because while actions of an independent agency may
be appealed to court, actions of an executive agency may not be appealed to court.
D. Further information is needed regarding whether the agency was an executive
agency or an independent agency because while actions of an executive agency may be
appealed to court, actions of an independent agency may not be appealed to court.
E. Because the agency was set up to protect the safety of the public, the agency
representative is correct; and Monique has no right to a court action and no right to
enter into a contractual agreement with the agency regarding appeal rights.
What does the UCC provide regarding a limitation on consequential damages allowing
for repair, replace, or refund in the event of equipment malfunction?
A. That consequential damages may be limited or excluded unless the limitation or
exclusion benefits one party over the other.
B. That consequential damages may be limited or excluded unless the limitation or
exclusion is unconscionable.
C. That consequential damages may be limited but not excluded entirely.
D. That consequential damages may be limited or excluded entirely unless any type of
breach of warranty is involved in which case consequential damages may be limited but
not excluded.
E. That consequential damages may be limited or excluded entirely unless any type of
breach of warranty is involved in which case consequential damages may be neither
limited nor excluded.
Which of the following types of life insurance provides coverage for a specified term?
A. Whole-life
B. Term-life
C. Surrender-life
D. Useful-life
E. Entire-life
Which of the following is not a duty of a bailee?
A. The bailee must at his or her own expense maintain the property.
B. The bailee must take reasonable care of the bailed property.
C. The bailee must use the bailed property only as stipulated in the bailment agreement.
D. The bailee must not alter the bailed property in any unauthorized manner.
E. The bailee must return the bailed property in good condition at the end of the
bailment.
Which of the following was the result on appeal in King v. Riedl, the case in the text in
which the plaintiffs claimed that the defendant lacked the right to proceed against them
for sums allegedly owed because the contractor was not licensed as a residential home
builder as required by state law?
A. The court ruled in favor of the plaintiffs on the basis that the contractor was
statutorily barred from bringing an action to enforce payment because he lacked a
residential home builder license and the amount of the contract satisfied statutory
requirements.
B. Although recognizing that the contractor’s failure to be properly licensed would not
in and of itself bar recovery, the court ruled in favor of the plaintiffs because the facts at
trial showed that the contractor performed inadequate work.
C. The court ruled that because the contractor lacked the required state license and the
amount of the contract satisfied statutory requirements, under common law he could
only recover for expenses for materials and labor costs, not the full contract price.
D. The court ruled that the defendant could maintain an action against the plaintiffs and
prevail because the proof showed that he was eligible for the required license although
he had not yet obtained it.
E. The court ruled that the defendant could maintain an action against the plaintiffs and
prevail because the state statute only applied when the cost of a contractual undertaking
exceeded $10,000, and because the contractor billed periodically, the plaintiffs were
never presented with a bill exceeding $10,000.
To have a[n] ______ in property or life, a person must be subject to economic loss if
there is damage or harm to the person or property.
A. Acknowledged loss
B. Protected loss
C. True injury
D. Insurable interest
E. Understandable failure