1) To borrow money to finance the start-up of his business, Rollo executes an
instrument in favor of Security Bank. For the instrument to be negotiable, the signature
must be
a.anywhere on the instrument.
b.anywhere on the lower half of the instrument only.
c.in the lower left-hand corner of the instrument only.
d.in the lower right-hand corner of the instrument only.
2) Fruit & Flowers Mail Order Corporation’s creditors agree to a workout with the firm.
This is
a.an agreement to pay a debt dischargeable in bankruptcy.
b.an accountant’s summary of a debtor’s financial situation.
c.a private, negotiated adjustment of creditor-debtor relations.
d.a reorganization of corporate debts and debtors.
3) A contract for a sale of land from Bayside Properties, Inc., to City Development
Corporation contains an erroneous legal description. The most appropriate remedy for
these parties is
a.quasi-contractual recovery.
b.reformation.
c.rescission.
d.specific performance.
4) A contract between Recreational Games & Rides, Inc., and Summer Fair Corporation
includes a provision excluding liability as a result of fraud. This provision is
a.enforceable because the parties are protected from liability.
b.enforceable because the parties consented to it.
c.enforceable if the parties have equal bargaining power.
d.not enforceable.
5) Fact Pattern 15-B3
In selling a commercial building, Birdie tells Colt that theproperty has a certain
capacity, making it suitable for a nightclub. Birdie knows nothing about the capacity of
the building, but it is not as she specifies. Colt buys the building.
Refer to Fact Pattern 15-B3. On learning the truth, Colt confronts Birdie, who says she
was not trying to fool him-she was only trying to make a sale. This is
a.a mistake of value.
b.a valid defense to a charge of fraud.
c.negligent misrepresentation.
d.unconscionable.
6) The U.S. Fish and Wildlife Service discovers that Grosse Farm Fisheries, Inc. has
violated a federal regulation. If no negotiated settlement can be reached, the agency will
most likely
a.issue a formal complaint against Grosse Farm.
b.do nothing.
c.file a petition with the U.S. Supreme Court.
d.impose immediate sanctions on Grosse Farm.
7) Data & Data Accountants, a private employer, handles bookkeeping for small
employers. In most circumstances, with exceptions, federal law clearly prohibits Data
& Data from subjecting its employees to
a.job-skills tests.
b.monitoring of business communications.
c.drug tests.
d.lie-detector tests.
8) Esmeralda promises to pay Fiorello $400 because “he does not have as much money
as other people.” Esmeralda’s promise is not enforceable because
a.society does not want gifts cheapened by making them legally enforceable.
b.the redistribution of wealth on a one-to-one basis is not a valid social goal.
c.Esmeralda could have paid more.
d.Fiorello has not given consideration in return.
9) 3.
Fact Pattern 19-B1
Ambrose enters into a contract to buy 350 acres from Belle Vista Farms to cultivate
grapes and open a winery.
Refer to Fact Pattern 19-B1. If Ambrose breaches the contract, Belle Vista’s remedy
would most likely be
a.a certain ratio of the amount that Ambrose expected to invest in the project.
b.a percentage of Ambrose’s unrealized profit.
c.the difference between the land’s contract and market prices.
d.specific performance.
10) Octavio receives from Pastry Dough, Inc., its catalogue and a “personalized” letter
inviting Octavio to buy any item at the advertised price. This is
a.an offer because of the “personalized” letter.
b.an offer because there is no room for price negotiation.
c.an offer only if Octavio previously bought items from Pastry Dough.
d.not an offer.
11) Bread & Brews, Inc., files its articles of incorporation with the appropriate
government agency. Least likely to appear in the articles is the name of
a. each of the corporation’s incorporators.
b. each of the corporation’s shareholders.
c. the corporation.
d. the corporation’s initial registered agent.
12) BioChemical Disposal Corporation operates a hazardous waste storage facility.
ChemCo Inc. buys BioChemical before it is discovered that the firm€s disposal
practices violated CERCLA. With respect to these violations, Superfund imposes on
ChemCo
a.strict liability.
b.liability under the nuisance doctrine.
c.liability on a negligence theory.
d.no liability.
13) Jordan is a surety for Kelly’s loan from Lenders Credit Corporation. When the loan
comes due, Kelly tries to pay Lenders Credit, but the creditor rejects the payment.
Jordan is
a.released from any obligation on the debt.
b.required to pay the amount of the debt to Lenders Credit.
c.required to pay up to half of the amount of the debt to Lenders Credit.
d.required to pay the amount of the debt to Kelly.
14) Lieko wants to put some money in trust for her daughter Mari, but she does not
want to lose full control over the funds in case she may need them in the future. One
trust suited to Lieko’s needs is
a.a constructive trust.
b.a resulting trust.
c.a spendthrift trust.
d.a Totten trust.
15) To obtain a business license, Bess writes a check to a certain state agency. Bess is
a.the drawee.
b.the drawer.
c.the indorser.
d.the payee.
16) Debt & Loan Collection Agency calls Ethel several times a day, and sometimes in
the middle of the night, about an overdue bill that a Furniture4U store turned over to
Debt & Loan for collection. This is a violation of
a.no federal law.
b.the Fair and Accurate Credit Transactions Act.
c.the Fair Debt Collection Practices Act.
d.the Truth-in-Lending Act.
17) Bev is an employee of the accounting firm Catz & Douglas, which obtains
key-person life insurance on Bev in the amount of $1 million from Equity Insurance
Company. Bev quits Catz & Douglas to join Financial Analysis, LLC. Bev dies. Under
the principle of insurable interest, Equity Insurance must pay the $1 million to
a.Bev’s spouse Grant.
b.Catz & Douglas.
c.Financial Analysis.
d.no one.
18) Bart, the owner of Clear Cut Corporation, signs an instrument that includes the
phrase “payment for this note will be made from the proceeds of next year’s timber
sale.” This instrument is
a.negotiable.
b.nonnegotiable, because payment can be made only out of a particular source.
c.nonnegotiable, because it states an express condition to payment.
d.nonnegotiable, because the reasons for the note are not clear on its face.
19) Fresh Fruit Company has assets of less than $10 million and fewer than fifty
shareholders. Gourmand Pastries, Inc., has assets of more than $50 million and more
than five hundred shareholders. The Securities Exchange Act of 1934 applies to
a.Fresh Fruit and Gourmand Pastries.
b.Fresh Fruit only.
c.Gourmand Pastries only.
d.neither Fresh Fruit nor Gourmand Pastries.
20) If a buyer breaches a contract, the seller can choose to simply cancel the contract.
21) Ralph gets his paycheck from Shakes n’ Burgers Restaurant, his employer, and
attempts to deposit it in his account at Town Bank. Uri, the bank’s teller, notices that on
the check the amount stated in words is different from the amount stated in numerals.
Which amount can the bank lawfully credit to Ralph’s account?
22) Ethics is based more on research than judgment.
23) An unenforceable contract is one that cannot be enforced because of certain legal
defenses against it.
24) On May 1, Newtown Motors, a used-car dealer, wrote a letter to O’Reilly, which
stated, “We have a 1969 Pontiac Firebird in mint condition that we will sell you for
$12,500 at any time before June [Signed] Newtown Motors. By May 15, having heard
nothing from O’Reilly, Newtown Motors sold the Firebird to another party. On May 25,
O’Reilly told Newtown Motors that he accepted the offer and tendered $12,500. When
Newtown Motors told O’Reilly it had sold the car to another party, O’Reilly claimed
Newtown Motors had breached their contract. Is Newtown Motors in breach? Explain.