Leroy writes a letter that said, “I agree to sell to Jay 5 modern art paintings” and he
signs the letter. What happens according to the code if Jay is a merchant and he receives
this writing from Leroy and does not object in writing within 10 days after receiving it?
A. Jay would have a good statute of fraud defense as he has not signed the contract.
B. Jay loses his statute of fraud defense.
C. It will be considered as a void contract.
D. Leroy will be prevented by the statute of frauds to take the case to the court.
Answer:
Under Revised Article 3, an exception to the rule that an instrument payable on demand
is not payable before the date of the instrument is made for:
A. checks.
B. promissory notes.
C. a holder in due course.
D. certificates of deposits.
Answer:
Spendthrift clauses:
A. operate to restrict the voluntary or involuntary transfer of a beneficiary’s interest in a
trust.
B. give the trustee discretion concerning the amount of principal or income to be paid to
a beneficiary.
C. enable a person to put their own property beyond the claims of their own creditors.
D. prevent divorced spouses from claiming alimony.
Answer:
It does not matter whether or not the buyer dealt directly with the manufacturer
because:
A. the obvious danger rule is not used anymore as defense.
B. liability based on negligence does not involve a contractual relationship.
C. liability based on negligence involves a contractual relationship.
D. the obvious danger rule is used as a complete defense.
Answer:
Rowell and Associates, a CPA firm, was engaged by American Widget Corp. to audit its
annual financial statements. American Widget officials told Rowell that the company
planned a new issue of stock and that Rowell’s audit report would be included in the
registration statement. Rowell’s audit team “booked” several large sales for which no
written contracts or orders appeared in the files, but for which verbal confirmations
were given by “customers” during telephone conversations initiated by American
Widget personnel. The customers were nonexistent; the purchases never were made.
American Widget went bankrupt shortly thereafter. Several investors in the new
common stock then sued Rowell. Rowell’s audit team truly believed the sales in
question had been made and that the customers had confirmed the validity of the sales.
In view of these facts, the plaintiffs:
A. will lose their suit because they cannot show that Rowell committed a willful wrong.
B. will win their suit if it is a Rule 10b-5 suit, because Rowell was negligent.
C. will win their suit if it is brought under Section 11 of the Securities Act of 1933,
because Rowell cannot prove due diligence.
D. will lose the suit because they cannot show that Rowell was aware of the oversight.
Answer:
Which of the following statements is TRUE of fixtures?
A. When an item is of little value except for use with certain real property, it is likely to
be considered a fixture even if it is unattached.
B. One who provides fixtures to real property without a request to that effect from the
owner is entitled to compensation from the owner.
C. Personal property that may be removed with little injury to the property is likely to
be considered a fixture.
D. Actual physical attachment to real property is necessary for an item to be considered
a fixture.
Answer:
Municipal courts are:
A. courts of record.
B. known as superior courts.
C. known as justice of peace courts in rural areas.
D. courts that handle civil matters involving a limited amount of money.
Answer:
Under which of the following contract devices for using real estate as security for an
obligation does the seller usually retain title until the property is paid for?
A. Mortgage
B. Land sales contract
C. Deed of trust
D. Strict foreclosure
Answer:
Objections to a discharge of bankruptcy can be filed by ___.
A. a creditor, the trustee, or the U.S. attorney
B. the U.S. attorney only
C. the trustee only
D. the secured creditors only
Answer:
The FTC:
A. has authority to decide whether specific marketing and sales practices are unfair or
deceptive.
B. does not have power to regulate unfair and deceptive practices in cyberspace.
C. can find that a seller is engaged in unfair trade practices only if the seller violated
one of the other federal laws the FTC is empowered to enforce.
D. holds no powers to order federal courts to award redress.
Answer:
When an incomplete instrument is completed after it has left the drawer’s hands, a
holder in due course can:
A. enforce it as completed.
B. enforce only the intent of the drawer.
C. do nothing’”he/she loses any rights to the instrument.
D. not enforce it as completed.
Answer:
In terms of interests in real property, this is not an interest in land but a temporary right
to use another’s land for a limited and specific purpose.
A. A private restriction
B. A fee simple
C. A leasehold
D. A license
Answer:
A consumer who misuses a product:
A. may still recover under the theory of strict liability.
B. may not recover under the theory of strict liability.
C. may recover under the theory of strict liability even if the misuse was not
foreseeable.
D. cannot recover under the theory of strict liability even if the danger it created was
foreseeable.
Answer:
In a duress, there is no voluntary consent if:
A. either party can rescind.
B. there is a confidential relationship between the parties.
C. the plaintiff’s free will has been overcome.
D. the mistaken party is able to rescind under certain conditions.
Answer:
Lloyd deposits money in First Bank, in trust for his daughter, Kelly. At Lloyd’s death, if
he has not revoked this trust then:
A. the money in the account will belong to Kelly.
B. the money in the account will be transferred to a charitable organization.
C. the money in the account will belong to the bank.
D. the money will automatically belong to the state and will be used for the benefit of
the society.
Answer:
Under John Rawls’s justice theory:
A. decision makers’ choices are to be guided by fairness and impartiality.
B. the focus is on the process of decision making, not the outcome.
C. society’s benefits and burdens should fall on only certain segments of society.
D. the morality of any action is determined by applying the categorical imperative.
Answer:
The World Trade Organization (WTO) addresses intellectual property rights under the:
A. TRIPS agreement.
B. TRIMS agreement.
C. FCRA agreement.
D. ERISA agreement.
Answer:
The time limit set by the UCC statute of limitations for contracts involving the sale of
goods is:
A. four years.
B. five years.
C. ten years.
D. twenty years.
Answer:
Simons purchased a home for $120,000, insuring it for $120,000 with Mutual Life. She
later purchased a $60,000 policy from Equitable. The home was totally destroyed by
fire while it still had a fair market value of $120,000 and the losses amounted to
$30,000. Under these circumstances, which of the following statements is TRUE?
A. Simons can claim the damages only from Mutual Life as its policy amount is greater.
B. She cannot claim insurance from either as policies with pro rata clauses cover only
partial losses.
C. Simons can recover $180,000’”the total of both policies, as part of his insurance
contract.
D. Simons cannot claim more than $60,000 from Equitable.
Answer:
Which of the following defenses goes to the merits of a primary contract and can be
used by a surety?
A. Lack of consideration
B. Lack of capacity
C. Insanity
D. Bankruptcy
Answer:
Which of the following is TRUE of strict liability?
A. All courts will not hold the retailer liable if the manufacturer is available for suit.
B. Most states hold that plaintiffs cannot recover for purely economic losses under strict
liability.
C. No state will allow economic loss recovery even if the defect caused the product to
be unreasonably dangerous.
D. It is applied only to situations involving the sale of used merchandise.
Answer:
The Credit Card Accountability and Disclosure Act (CARD) regulates credit card
billing cycles by:
A. allowing a $30 penalty fee for late payment of credit card debts.
B. allowing penalties to exceed the minimum balance due.
C. prohibiting double-cycle billing.
D. issuing cards to applicants under 21 years without a cosigner.
Answer:
Which of the following statements is TRUE for consideration?
A. It always has a monetary value, regardless of a legal value.
B. A promisee can be enforced by the courts to keep his/her promise.
C. It enforces gratuitous (free) promises.
D. It is a legal value given in exchange for an act or promise.
Answer:
Generally, employers covered under the FLSA are:
A. those engaged in interstate commerce.
B. those whose annual gross sales exceed $1 million.
C. those whose business affects intrastate commerce.
D. those whose annual gross sales exceed $10 million.
Answer: