“Book Sale.” Beverly offered to sell Rick a used business law book for $50. She told
him that he could use it in his upcoming business law class the next semester. In fact,
there was a problem with the book; it was several editions old. Rick was not aware of
that fact, and neither was Beverly. When Rick took the book to class and realized the
problem, he went back to Beverly requesting a refund. Beverly refused to return his
money. She claimed that subjectively she thought that the book was correct, that she did
not commit fraud, and that a binding contract existed. The book, however, is outdated
and cannot be appropriately used in the class.
Which of the following is true regarding Beverly’s claim that she subjectively believed
the book was an appropriate edition and that an enforceable contract, therefore, existed?
A. She is correct because contract law is based upon a subjective theory of contracts.
B. She is correct because her genuinely held belief establishes that she did not commit
fraud.
C. She is correct because agreements for the sale of goods are based on a subjective
theory.
D. She is incorrect because her subjective belief would not be the basis for a
determination of whether the contract would be enforced in this case and also because
fraud is not necessary in order to find a breach of contract.
E. She is correct but only if Rick subjectively believed the same as she did.
Which of the following is the maximum interest rate?
A. 20%
B. 15%
C. 12%
D. 10%
E. It varies depending on the state involved.
“Styling Shenanigans.” Candy, who operated a hair and nail salon called “Up Sweep,”
had a crush on Bruce, a stylist there who was one of her employees. He paid her no
attention. Finally, Candy told him that if he wanted to keep his job and get the new
professional blow dryer he requested, he needed to take her on a date and give her a
kiss. Bruce reluctantly did so. After the date, Candy proceeded to make suggestive
comments to Bruce in front of other employees and to request that he rub her shoulders.
When she passed Bruce’s station, she would caress him while he worked. Candy also
decided that Robert, another of her employees, was cute; and she showered him with
the same type of attention. Robert enjoyed the attention, but Bruce was offended and
filed a claim against Candy for sexual harassment. Bruce asked Robert to join in on the
claim. Robert said that Candy’s attention never personally bothered him, but that if
Bruce can collect, then he wants in on the action. Bruce told Robert that he is going to
see a psychologist to substantiate his claim, that such substantiation is necessary, and
that Robert should consider doing likewise. Robert tells him that he has no interest in
seeing a psychologist but that his case is as strong as Bruce’s. He says that while he
found Candy entertaining, he should be able to recover if Bruce recovers.
In relation to Bruce, what type of harassment, if any, were Candy’s caresses and
suggestive statements?
A. Quid pro quo.
B. Hostile work environment.
C. Sexual discrimination.
D. Targeted.
E. None because she did not touch him in an inappropriate way.
“Garage Sale.” Richard, who is cleaning out his garage, offers to sell Dawn a used
computer for $200. Dawn replies that “I’ll think about it and buy it if I decide to do so.”
Richard also calls Denise and offers to sell Denise a used business law book for $ She
asks if she can clean his apartment in return for the book instead of pay cash, and he
agrees. Richard also agrees to sell a communications book for $5 to Jill who promises
to pick it up the next day. Meanwhile, Sam comes to visit and offers Richard $45 for the
business law book. Richard sells it to him because he decides his apartment is clean
enough. Sam also offers Richard $50 for the used computer. Richard sells it to Sam
because he does not expect to hear from Dawn. Sam sees the communications book and
offers Richard $45 for it. Richard decides to forget about Jill and proceeds to sell the
book to Sam for $45. The next day Denise shows up to clean Richard’s apartment and is
very angry because Richard did not save the book for her. Denise claims that Richard
breached their contract because they had a deal. Richard says that they never had a deal
because no consideration was present. He also said that even if cleaning house would be
considered consideration, any housekeeping done would have been wholly inadequate
to support receipt of the book because his house was already clean. Jill is also angry
because Richard sold the communications book and informs him that he breached the
contract he had with her. Richard tells her that he had no obligation to hold the book for
her because they had a unilateral contract. Two days after they first talked, Dawn tells
Richard that she would like the computer. She tells him that her response bound him
and that he should have awaited her action. Richard tells Sam that he needs to return
everything for a full refund. Sam refuses.
Which of the following is true regarding whether Richard breached a contract with
Dawn?
A. Dawn’s statement created an illusory promise which cannot be enforced.
B. Richard breached the contract because he had an obligation to wait a reasonable
length of time on Dawn’s response, and waiting only two days was not reasonable.
C. Richard did not breach the contract with Dawn because he waited a reasonable
amount of time before disposing of the computer.
D. Richard did not breach the contract with Dawn because it was for the sale of goods
and, therefore, a typical contract.
E. Richard did not breach the contract, but Dawn can recover based on promissory
estoppel.
Which of the following conducts investigations into the safety of motor vehicles?
A. The Vehicle Investigation Commission
B. The Vehicle Safety Administration
C. The National Highway Safety Administration
D. The Motorized Safety Administration
E. The Transportation Safety Commission
Which of the following occurs when a party unjustifiably fails to substantially perform
his or her obligations under the contract?
A. Immaterial breach
B. Substantial breach
C. Material breach
D. Delineated breach
E. Crossed breach
“Weeds.” Susie developed a product guaranteed to immediately kill weeds, but
absolutely no other type of grass or shrub. She has encountered several individuals and
businesses in other countries who would like to enter into contracts with her and market
her products internationally. She went to Willie, who just graduated law school and has
yet to pass the bar, and asks him for advice regarding those contracts. Willie proceeded
to tell her that she should simply enter into the same type of contract with international
businesses and individuals from other countries as she would if those individuals and
businesses were located in the United States. He tells her that if there is any problem,
then they will simply have to come to the United States to settle the matter, and that any
issues would be determined in Susie’s home county, in her home state, and under her
state’s law. He also mentions to her that she should consider contacting local foreign
officials in the areas in which she would like her product sold and suggest to them that
she can contribute heavily to election campaigns if she is allowed without any hassles
to obtain necessary business licenses and approvals to do business.
Assuming Susie does not take Willie at his word and wants additional assurance that
her state’s law would be applied, what should she do?
A. There is nothing she can do.
B. She should insert a forum selection clause in the contract.
C. She should insert a choice-of-law clause in the contract.
D. She should insert Hague evidence clause in the contract.
E. She should insert a GATT clause into the contract.
According to the principle of federalism established by the U.S. Constitution, how is
the authority to govern allocated?
A. It is allocated to the federal government.
B. It is allocated to the states.
C. It is allocated to local jurisdictions.
D. It is allocated to the U.S. Senate.
Under the Uniform Commercial Code, contracts for the sale of goods totaling more
than ______ must be in writing.
A. $200
B. $300
C. $500
D. $600
E. $1,000
Which of the following is true regarding the effect of an innocent misrepresentation on
a contract?
A. It permits the party that was misled by the false statement to rescind the contract, but
damages are not available.
B. It permits the party who made the false statement to rescind the contract.
C. It permits either the party that was misled by the false statement or the party who
made the false statement to rescind the contract.
D. The contract is automatically void and of no effect, and the party who was misled
may recover damages.
E. It permits either the party that was misled by the false statement or the party who
made the false statement to rescind the contract, and it also makes the contract void and
of no effect.
Which of the following represented the position of the Supreme Court of Tennessee in
the Case Opener in which the plaintiff attempted to hold a hospital vicariously liable for
her injuries?
A. That a defendant in the position of the hospital is vicariously liable for injuries
received within its premises without a need for further proof.
B. That because the plaintiff dismissed the hospital’s alleged agent from the lawsuit, she
could not proceed even though she had sued the hospital before dismissing the agent.
C. That the plaintiff was barred from proceeding because vicarious liability is not
recognized in the medical malpractice arena.
D. That the plaintiff could proceed but only because she had already established
liability on the part of the physician employees involved.
E. That the hospital could be held vicariously liable if the plaintiff established that a
wrongful act harming her occurred within the scope of the agent’s employment.
“Cosmetic profits.” Sally is the vice president at Big Name Cosmetics Company. She
learns that the company is soon going to purchase a smaller chain of stores. It is
expected that stock in Big Name Cosmetics will rise dramatically at that point. Sally
immediately buys a number of shares of her company’s stock. She also tells her friend
Alice about the expected purchase of stores. Alice wanted to purchase stock in the
company but lacked the funds with which to do so. Although she did not have the funds
in Bank A, Alice decided to draw a check on Bank A and deposit the check in Bank B
and then proceed to write a check on Bank B to cover the purchase of the stock. She
hoped that she would have sufficient funds to deposit before the check was presented
for payment.
Of what offense, if any, is Alice guilty of by her method of payment?
A. Ponzi scheme
B. Insider-trading scheming
C. Pretexting
D. Check defalcation
E. Check kiting
A[n] _____________ check is a check that is drawn by one bank and is usually drawn
on another bank.
A. Cashier’s
B. Certified
C. Teller’s
D. Acknowledged
E. Transferable
“Machine Malfunction.” Bruno, the president of a health club operation called ABC
Health Club, convinced the board of directors to approve a large purchase of a type of
fitness machine called “Perfect Body.” Bruno had carefully investigated the machine
and did a presentation to the board on its purported benefits. Unfortunately, after the
purchase, it was announced that “Perfect Body” was actually a very dangerous machine
that should not be used. The manufacturer of “Perfect Body” went bankrupt, and ABC
lost $200,000 on the purchase of the machines. The shareholders are furious and want
to sue Bruno and the directors. In an attempt to appease her, the board of directors
agrees to allow Frances, the ring leader of the shareholders, to purchase stock of the
company at below its fair market value. Frances purchases a considerable amount of
stock on that basis, but says that the shareholders plan to continue with an action
against Bruno and the board members.
Which of the following is a term for stock such as that issued to Frances?
A. No-par stock
B. Reduced stock
C. Watered stock
D. Less-value stock
E. Unapproved stock
“The Burial Emporium.” Fred operates a funeral home called Fred’s Burial Emporium.
Fred likes to keep things simple. He generally 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. Sometimes, Fred varies his sales tactic and tells consumers he talks to on
the phone aspects of the total cost in small increments, not mentioning the total price,
believing that if they are tired, they are less likely to ask too many questions. 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 requiring a complete
package purchase from him if the consumer desires any funeral services?
A. There is no problem with that practice under federal law.
B. There is no problem with that practice under federal law so long as Fred informs
customers of that prior to entering into any sales talk and negotiation.
C. That practice is prohibited by federal law.
D. That practice is prohibited by federal law unless Fred gives a 10% discount as
compared to the average price of funeral services in his state.
E. That practice is prohibited by federal law unless cremation services are involved in
which case Fred may link the cremation services with the purchase of other goods and
services because cremation in and of itself results in little profit.
Which of the following is true regarding the status of negotiable instruments in regard
to international transactions?
A. The World Trade Organization defines and enforces concepts of negotiability for all
member nations.
B. The United Nations Committee on Contracts defines and enforces concepts of
negotiability for all member nations.
C. The Uniform Commercial Code is accepted as the defining word on negotiability in
North America and Europe.
D. The Uniform Negotiation Act, agreed upon by a majority of countries, addresses
definitions in regard to negotiability.
E. The definitions in regard to negotiable contracts vary from country to country.
“Useless Friend.” Charles, who is very gullible, is friends with Bobby. Bobby, who
cannot be trusted, decides to try to bind Charles to a contract in Bobby’s favor. Bobby
has Charles sign a contract promising to wash Bobby’s car once a week for a month for
$80 per month in payment. The contract incorporated by reference terms on the back.
The terms on the back were in very small print and required Charles for one year to
cook dinner for Bobby, do his laundry, and clean his apartment. Bobby is also very
angry with his former girlfriend, Tessa, and decides to start rumors, that would
constitute the tort of defamation, such as that she has a vile disease, cheated on tests,
and stole from friends. Bobby wants to enlist the help of Charles in smearing Tessa but
knows that Charles would be hesitant to assist in his endeavors. One evening, however,
Charles drank too much beer and was clearly intoxicated – a fact apparent to Bobby.
Bobby had him sign a contract agreeing to defame Tessa for $50. When he sobers up,
Charles tells Bobby that he was drunk and that he has no intention of defaming Tessa,
who also happens to be Charles’ new girlfriend. He also finally takes a look at the
contract involving work for Bobby and tells Bobby that the contract is outrageous.
Which of the following is true under the Restatement of Contracts, Section 16,
regarding the claim of Charles that he should be able to avoid the contract involving
Tessa because he was intoxicated?
A. Contracts of an intoxicated person are voidable if the other party had reason to know
that because of the intoxicated person’s condition, that person was unable to understand
the nature and consequences of the transaction or was unable to act in a reasonable
manner in relation to the transaction.
B. Contracts of an intoxicated person are void if the other party had reason to know that
because of the intoxicated person’s condition, that person was unable to understand the
nature and consequences of the transaction or was unable to act in a reasonable manner
in relation to the transaction.
C. Contracts of an intoxicated person are enforceable because a person should be bound
by his or her actions.
D. Contracts of an intoxicated person are void only if it can be proven that the other
party was involved in encouraging the abuse of alcohol by the intoxicated person
rendering the intoxicated person unable to understand the nature and consequences of
the transaction or unable to act in a reasonable manner in relation to the transaction.
E. Contracts of an intoxicated person are voidable only if it can be proven that the other
party was involved in encouraging the abuse of alcohol by the intoxicated person
rendering the intoxicated person unable to understand the nature and consequences of
the transaction or unable to act in a reasonable manner in relation to the transaction.
In a hostile takeover situation, what does the term “going private” reference?
A. A leveraged buyout
B. A management buyout
C. An approved buyout
D. A corporate buyout
E. A closely managed buyout
“Green Trees.” Wally, the president of Green Corporation, a company that provides
landscaping services, wanted his corporation to purchase Tree Corporation, another
corporation providing landscaping services. The board of Tree Corporation, however,
did not wish to sell. The board of Green Corporation decided to buy any or all of Tree
Corporation’s stock in order to gain control of Tree Corporation. The management of
Tree Corporation and its board strongly objected to the attempt by Green Corporation to
take over the company. Green Corporation offered to purchase stock held by
shareholders of Tree Corporation at a price substantially above the current market value
of the stock. When that strategy was not wholly successful, Green Corporation offered
to give shareholders of Tree Corporation stock in Green Corporation in return for their
stock in Tree Corporation.
Which of the following terms describes Tree Corporation in the attempt of Green
Corporation to gain control?
A. Target corporation
B. Vulnerable corporation
C. Accessible corporation
D. Hostile corporation
E. Weak corporation
“Adult Floaters.” Bruce and Jimmy are both involved in businesses that manufacture
bathing suits for ladies with small personal flotation devices implanted to assist with
swimming. They both ship the suits to different states around the country. Bruce and
Jimmy get together and decide to raise their prices. They decide that since they are the
only two manufacturers of this type of suit, if they both stick together and raise prices to
an agreed upon amount, then consumers will be forced to pay that amount. They want
to make a lot of money before anyone else jumps into the market. A disgruntled
secretary of Bruce finds out about the agreement and sends out letters to consumers
revealing it.
What would the government’s best argument to the court be regarding the conduct of
Bruce and Jimmy?
A. That a rule-of-reason violation occurred.
B. That an acknowledged violation occurred.
C. That a per se violation occurred.
D. That a refusal to deal occurred.
E. That an intrastate concerted action occurred.
Which of the following is false regarding the treatment of a partnership as a legal
entity?
A. A partnership is often considered a legal entity when it is sued or being sued.
B. State law determines whether a partnership can or cannot be named in litigation.
C. Title to property can be put in the partnership name.
D. Every partner is considered an agent of the partnership, but not every partner has a
fiduciary duty with all other partners.
E. Under the doctrine of marshaling assets, partnership assets are arranged in a certain
order to pay any outstanding debts.
Which of the following is true if a bailment is for the mutual benefit of both the bailee
and the bailor?
A. The bailee is liable for harm to the bailed property arising out of the bailee’s ordinary
or gross negligence.
B. The bailee is liable for harm to the bailed property arising only out of the bailee’s
gross negligence.
C. The bailee is liable for harm to the bailed property caused by even the slightest lack
of due care on the part of the bailee.
D. The bailee is strictly liable for harm to the bailed property.
E. The bailee is not liable for harm to the bailed property because of the doctrine of
assumption of the risk.
“Past Due Rent.” Christen operated a temporary help business. Planning to open a
second office, she rented office space from Dusty. Unfortunately, her business was not
doing very well, and she decided not to open a second office. Christen was able to reach
an agreement with Doug whereby she transferred her entire interest in the leased
property to him. The agreement she had with Dusty prohibited her from transferring her
interest. Dusty, however, accepted rent payments from Doug because it was the easiest
course of action. Doug started a catering business in the space. It did well during the
holiday season, but Doug was unable to maintain bookings and became unable to pay
the rent. Dusty called Christen and asked her to pay the rental payments reminding her
that she breached the lease agreement in the first place when she transferred her
interests in the lease to Doug. Christen told Dusty to forget any payments from her and
hung up. Dusty wants to sue Christen for the lease payments and also for breaching the
lease agreement, and he also wants to sue Doug. Christen talks to Doug and he says that
he has no plans to pay Dusty because Dusty is a jerk. Doug also says that he does not
believe that he has any liability to Christen if she pays Dusty. Doug says that the
premises were acceptable but that Dusty is rude and money hungry, traits he finds
untenable.
Which of the following is the correct term for the action Christen took in transferring
her entire interest in the leased property to Doug?
A. She made an assignment
B. She made a sublease
C. She made a lease transfer
D. She made a sublet
E. She made a rental swap agreement
Which of the following was the result in Royal Capital Development LLC v. Maryland
Casualty Company, the case in the text involving whether on a policy of insurance
covering “direct physical loss of or damage to” a building that allows the insurer the
option of paying either “the cost of repairing the building” or “the loss of value,” the
insurer must also compensate the insured for the diminution in value of the building if
the insured elects to repair the building?
A. That the insurer could choose between repairing the building or paying for its loss of
value and that once proper repairs were made, the insurer had no obligation to cover
any diminution in value.
B. That unless the insured notified the insurer prior to the beginning of repairs that a
claim for diminution in value would be made, the issue was waived because the insurer
was entitled to take such a claim into consideration in making its decisions.
C. That a claim for diminution in value could be made only if the insurer delayed in
making repairs such that the insured had an equitable claim for diminution in value.
D. That when a policy promised to pay the insured’s loss, the insured has no claim for
diminution in value if repairs are made.
E. That when a policy promised to pay the insured’s loss, the insured had a claim for
diminution in value even if repairs were made.
“Bad Hair Day.” Molly started a new hair salon and leased space for the salon from
Peggy. Unfortunately, Molly’s styling caused some problems for customers. One
customer’s hair turned green from her bleaching process, and she burned another
customer with a curling iron. Not surprisingly, Molly had little business and was unable
to pay her lease payments as they came due. Peggy filed a lawsuit against Molly and
obtained a judgment against Molly for $7,000 in past due rent. Peggy asked for a
court-ordered judgment permitting the sheriff to seize and sell Molly’s equipment
including her hair-dryers, pedicure chair, nail polish, and other items, but the judge
refused her request. Peggy did, however, obtain an order allowing her to seize $3,000
held in Molly’s bank account with which to partially satisfy the debt. Peggy also
discovered that Molly had for her personal use a wide-screen television set worth
approximately $1,000 which was being held by Harold, a television repairer for the
costs of repair. Peggy asked him to turn over the television because her lien had priority,
but Harold refused.
What type of order allowed Peggy to seize money from Molly’s bank account?
A. Attachment
B. Garnishment
C. Relinquishment
D. Foreclosure
E. Consolidation
Following the case of MacPherson v. Buick Motor Company, any ______ plaintiff can
sue a manufacturer for its breach of duty of care.
A. contracting
B. adult
C. unforeseeable
D. foreseeable
E. believable
Which of the following is true regarding the Fourteenth Amendment?
A. It is part of the Bill of Rights.
B. Its safeguards only apply at the federal level.
C. It is not a part of the Bill of Rights and it extends federal guarantee of due process
and most constitutional protections to all states.
D. It is a part of the Bill of Rights, its protections apply at the federal level, and its
protections also apply at the state level.
E. It is a part of the Bill of Rights, and its protections apply only at the federal level.
Which of the following is false regarding classification of principals?
A. If the third party is aware of the principal’s existence but not his or her identity, the
principal is classified as a disclosed principal.
B. When the third party is aware that the agent is making an agreement on behalf of a
principal and also knows who the principal is, the principal is a disclosed principal.
C. An unidentified principal is in the same classification as a partially disclosed
principal.
D. If the third party does not know that an agent is acting on behalf of a principal, an
undisclosed principal is involved.
E. Classification of the principal is important because it helps determine the principal’s
liability.
Which of the following did the court determine in In re Holsinger, the case in the text in
which the debtor requested a waiver of debt-counseling under the Bankruptcy Abuse
Prevention and Consumer Protection Act?
A. That imminent foreclosure of real property and resultant eviction qualified as exigent
circumstances entitling the debtor to a waiver of the debt-counseling requirement.
B. That credit-counseling may be waived when the debtor establishes that work
obligations prevent attendance at any counseling session within 20 miles.
C. That credit-counseling may be waived when the debtor establishes that work
obligations prevent attendance at any counseling session within 50 miles.
D. That credit-counseling is in effect optional and may be waived when the debtor
establishes that attendance would create a hardship, for example, in regard to family
matters.
E. That even imminent foreclosure of real property does not entitle a debtor to waiver
when other requirements in relation to debt counseling remain unsatisfied.
The ethical system in which the development of virtues, or positive character traits such
as courage, justice, and truthfulness, is the basis for morality is called ______.
A. Absolutism decision
B. Virtual analysis
C. Virtue ethics
D. Fundamentalist approach
E. Categorical imperative
If a law prevents individuals from exercising a fundamental right, the law will be
subject to ___.
A. Intermediate scrutiny
B. Rational basis scrutiny
C. Severe scrutiny
D. Strict scrutiny
E. Legal scrutiny
As recognized in the case in the text, Toys “R” Us Inc., v. Canarsie Kiddie Shop Inc., to
obtain trademark protection, a descriptive term must have attained ____________.
A. Secondary meaning
B. Primary meaning
C. Primary application
D. Secondary application
E. Secondary acknowledgement
A condition ______ is a future event that terminates the obligations of the parties when
it occurs.
A. Precedent
B. Subsequent
C. Concurrent
D. At large
E. Certain