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"Friends and Family." Mindy was very close to her family and friends. She also liked to
spend and had a large amount of consumer debt for items such as jewelry, clothing, a
personal watercraft, and a new car. Mindy was having problems making her credit card
payments as they became due. She, however, wanted to make every effort to pay her
debts. She had borrowed money from her mother for some jewelry and repaid that loan
on January 1st. She repaid a loan to her business partner on May 15th of the same year.
On September 1st of that year, she also repaid a loan to Friendly Jewelry Store because
she wanted to remain on good terms with the manager. Unfortunately, Mindy was
simply unable to continue making payments and on November 1st of that year, she filed
a voluntary petition for bankruptcy relief under Chapter 7.
Which of the following is the most likely result of a claim of preferential payment
based on the payment to the jewelry store?
A. The payment was not preferential because it was for a consumer good and was not
made within 30 days of the filing of the bankruptcy petition.
B. The payment is presumed preferential on the basis that it was made within 90 days of
the filing of the bankruptcy petition only if the trustee is able to establish that the
jewelry store received more through the transfer than the jewelry store would have
received through bankruptcy proceedings.
C. The payment is presumed preferential on the basis that it was made within 90 days of
the filing of the bankruptcy petition only if the trustee is able to establish Mindy's
insolvency at the time and that the jewelry store received more through the transfer than
the jewelry store would have received through bankruptcy proceedings.
D. Because it was for a consumer good, the payment was not preferential unless the
bankruptcy trustee can prove intent to defraud.
E. The payment was preferential because it was made within 90 days of the filing of the
bankruptcy petition.
"Exercise Heat." Harold rented space for his health club operation from Holly. Holly
and Harold have an ongoing dispute regarding the air conditioning. Harold wants a new
unit because he says that old one needs too many repairs, but Holly says that the old
unit is fine. One day after a particularly heated dispute, Harold comes to work to find
that the aerobics room and one weight lifting room, areas with air conditioning
problems, have been padlocked. Harold is furious and calls Holly who tells him that if
the areas are so bad, then he should just stay out. Harold immediately rents different
space in an adjoining building and moves his health club.
What rights does Harold have against Holly?
A. Only the right to withhold rent.
B. Only the right to bring suit against Holly for damages.
C. Only the right to bring suit against Holly for breach of contract.
D. The right to not pay rent, and the right to bring suit against Holly for damages or
breach of contract.
E. He has no rights unless he can prove that he at all times had acted reasonably toward
Holly in the air conditioning dispute.
Which of the following standards allows a defendant to offer justification for a per se
violation of Section 1 of the Sherman Act, in which case the court will engage in a
rule-of-reason analysis?
A. Quick-look
B. Reasonableness
C. Justifiable
D. Necessary
E. Needful
Partners own partnership property as ____, meaning that the partners own the property
as a group.
A. Tenants in property
B. Joint tenants
C. Tenants in the entirety
D. Common tenants
E. Partnership tenants
Which of the following is true regarding the form of authority upon which an agency
relationship may be created?
A. Agency relationships can be created through expressed agency, but not through
implied authority, apparent agency, or through ratification.
B. Agency relationships can be created through expressed agency or through implied
authority, but not through apparent agency or through ratification.
C. Agency relationships can be created through ratification, but not through implied
authority, apparent agency, or expressed authority.
D. Agency relationships can be created through ratification or expressed agency, but not
through implied authority or apparent agency.
E. Agency relationships can be created through expressed agency, implied authority,
apparent agency, and ratification.
The ______ bank is the bank upon which a check is drawn.
A. Payor
B. Payee
C. Depositary
D. Transfer
E. Acceptor
Once an issuer files a registration statement and prospectus, the ______ period begins.
A. Advertising
B. Post-filing
C. Waiting
D. Approval
E. Prospectus
Which of the following is the appropriate term for the process by which an individual
decides what to do with his or her real and personal property during and after life?
A. Life planning
B. Estate planning
C. Probate succession
D. Allocation planning
E. Asset allocation
"Hot Toaster." Rebecca bought a toaster from Super Store and brought it home. A friend
of hers, Greg, was at her house making toast. The toaster malfunctioned and shocked
Greg resulting in a small burn to his hand requiring medical attention. At a garage sale,
Rebecca also purchased a blender from a friend, Samantha, a nurse, with the intention
of making smoothies. Unfortunately, the blender was not powerful enough to make
smoothies. Assume that not all blenders are designed to provide the texture required for
good smoothies.
Which of the following is true regarding whether Samantha made an implied warranty
of fitness for a particular purpose to Rebecca that the blender would make smoothies?
A. Samantha did not make an implied warranty of fitness for a particular purpose
because there is no proof that Rebecca was relying on Samantha to make the selection.
B. Samantha did not make an implied warranty of fitness for a particular purpose
because Samantha is not a merchant.
C. Samantha did not make an implied warranty of fitness for a particular purpose
because no express warranty was made.
D. Samantha made an implied warranty of fitness for a particular purpose to Rebecca
that the blender would make smoothies because she had a duty to tell Samantha
otherwise.
E. Regardless of whether she said anything or not, Samantha made both an express
warranty and a warranty of fitness for a particular purpose.
Which of the following promises to pay a set sum to the holder of a promissory note or
certificate of deposit?
A. Maker
B. Acceptor
C. Drawer
D. Endorser
E. Promisor
Which of the following occurs when a debtor turns over all assets to a trustee?
A. Liquidation
B. Reorganization
C. Reformation
D. Acknowledgment
E. Avoidance
Which of the following is the reason the Uniform Commercial Code was drafted?
A. Different states had different laws governing contracts which did not result in a
smooth flow of interstate commerce.
B. Some states had no law governing contracts.
C. Federal law governing contracts was difficult to apply.
D. The Uniform State Act on laws was not working.
E. The Restatement of the Law Second, Contracts was not being evenly and fairly
applied.
A person who has legal ______ to contract is one who has the mental ability to
understand his or her rights and obligations under a contract and, therefore, will
presumably be able to understand how to comply with the terms of the agreement.
A. Capacity
B. Understanding
C. Ratification
D. History
E. Consideration
Which of the following occurs when an individual is confined or restrained against his
or her will for an appreciable period of time?
A. Forcible detention.
B. False imprisonment.
C. Qualified imprisonment.
D. Contained detention.
E. False detention.
Which of the following if true regarding powers state incorporation statutes typically
grant to corporations?
A. State incorporation statutes give corporations the power to make charitable
contributions.
B. State incorporation statutes prohibit corporations from loaning money because that is
within the realm of state banks recognized by the state banking regulatory authority.
C. State incorporation statutes give corporations existence for up to 100 years.
D. State incorporation statutes expressly state the powers granted to corporations
thereby negating the existence of implied powers.
E. State incorporation statutes generally expressly give corporations only the broad
authority to operate within the law to the benefit of stockholders resulting in most
actions of corporations arising from implied powers.
Which of the following was the result in the Case Nugget in the text involving the
dispute between Dr. Ralph M. Aurigemma and New Castle Care, LLC, involving
whether an oral agreement entered into on September 4 involving Dr. Aurigemma
serving as medical director from October 1 of that year until October 1 of the next year
was enforceable?
A. That the contract was enforceable because agreements for professional services do
not come within the protection of the statute of frauds.
B. That the contract was enforceable because of the partial-performance exception to
the statute of frauds.
C. That the contract was not in writing and, therefore, could not be enforced.
D. That the contract could not be enforced because of the parol evidence rule.
E. That the contract could be enforced because of the parol evidence rule.
"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 which of the following, if any, is Sally guilty of by providing information to Alice
regarding the purchase?
A. She is guilty of an insider-trading violation by tipping the information.
B. She is guilty of an insider-trading violation by being tipped.
C. She is guilty of an insider-trading violation by both tipping and being tipped.
D. She is guilty of criminal extortion.
E. She is not guilty of any offense.
Which of the following was the result on appeal in the Case Opener in which the
plaintiff optometrist sued the defending bank for cashing over 500 checks that his
receptionist fraudulently embezzled through forging his signature?
A. Because both the plaintiff and the bank were found negligent, the plaintiff was
denied recovery.
B. Because only the bank was found negligent, the plaintiff was denied recovery.
C. Because both the plaintiff and the bank were found negligent, the plaintiff recovered
only 50% of his losses.
D. Because only the bank was found negligent, the plaintiff was entitled to recover the
value of the checks.
E. Based on public policy, the plaintiff was denied recovery although no negligence was
found on the part of either party.
Which of the following is true regarding revocation of accepted nonconforming goods?
A. Once goods have been accepted, they may not be rejected.
B. A buyer has an absolute right within 10 days after delivery in which to revoke
acceptance of nonconforming goods.
C. A buyer has an absolute right within 48 hours after delivery in which to revoke
acceptance of nonconforming goods.
D. A buyer has an absolute right within 30 days after delivery in which to revoke
acceptance of nonconforming goods.
E. While there is no set time limit, the UCC sometimes allows a buyer to revoke
acceptance of nonconforming goods.
"Scheming Friends." Willy very much wants to rent a basement apartment in Weaver's
home. Willy threatens to tell all Weaver's friends that he and Weaver had been arrested
for illegally smoking marijuana unless Weaver rents the apartment to him for $100 per
month. (The information regarding the arrests is true.) Weaver reluctantly agrees to rent
the apartment to Willy for $100 per month. Willy also wants to buy Weaver's car.
Weaver runs back the odometer on the car before Willy test drives it. Willy is impressed
by the low mileage and agrees to buy the car. Weaver offers to sell Willy a ring for
Willy's fiancée. Weaver tells Willy that the ring is a diamond and believes that to be
true. After the deal is made, however, a jeweler friend of Weaver informs him that the
ring is a fake. When Willy shows up with the money, Weaver says nothing. He just
hands Willy the ring and takes the money. Later, Willy finds out that the odometer was
run backwards from another friend to whom Weaver confided. Willy also finds out from
his girlfriend that the ring is a fake.
Which of the following is true regarding Willy's rights in regards to the ring purchase?
A. He will not be able to rescind the contract because Weaver did not make an express
false statement regarding the ring.
B. He will not be able to rescind the contract because Weaver did not know the ring was
a fake when the initial agreement was made.
C. He will not be able to rescind the contract unless he can prove that Weaver was at
least negligent in not realizing the ring was a fake when the initial agreement was made.
D. He will be able to rescind the agreement because Weaver was guilty of duress.
E. He will be able to rescind the agreement because Weaver was guilty of fraudulent
misrepresentation.
A contractual condition of satisfaction is considered a[n] ______ condition that must be
met before the other party's obligation to pay for the performance arises.
A. Partial
B. Conditional
C. Express
D. Implied
E. Concurrent
Which of the following allows the SEC to suspend securities trading if prices vary
excessively in a short time period?
A. The Sarbanes-Oxley Act of 2002
B. The Securities Acts Amendments of 1990
C. The Market Reform Act of 1990
D. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990
E. The National Securities Markets Improvement Act of 1996
"Self-Centered President." Tina is president of "We Manage You," a corporation set up
to manage physician practices. Tina has never been very concerned with minority
shareholders based on her belief that they have little influence over the company
because they cannot even elect a director. She is told, however, that her state just
instituted the practice of cumulative voting. An election is coming up in which 10
directors will be elected. Minority shareholders own 2,000 shares, while majority
shareholders own 8,000 shares. Tina tells her vice president, George, that she wants to
ignore minority shareholders and focus her interests on majority shareholders and the
directors. She also tells George that she wants to be particularly conscientious toward
directors because the directors appoint officers, and she does not believe that she owes
any actual duties to shareholders. She further orders George to destroy some documents
subpoenaed in a criminal investigation against the company for illegal dumping. When
George protests, Tina tells him not to worry because officers cannot be held responsible
for criminal actions so long as the actions are done as part of the duties of an officer.
She explains to him that only the corporation can be charged with liability in such
cases.
Is Tina correct in that officers cannot be held criminally responsible for their actions on
behalf of a corporation?
A. Yes, she is correct.
B. She is correct only so long as the corporation is solvent.
C. She is correct only if the board of directors has accepted all liability for acts of
officers.
D. She is correct only if environmental or employment matters are involved.
E. She is incorrect.
Which of the following was the result in GNOC Corp. v. Powers, the case in the text
involving the application of New Jersey's State Innkeeper's Act to Powers' claim
involving a thief who obtained a second key from the hotel and stole $75,000 in
gambling winnings and chips that the plaintiff had not placed in the hotel's safe?
A. That a jury question was presented as to whether the negligence of the hotel
prevented it from relying on the protection of the Innkeeper Act.
B. That as a matter of law, the plaintiff was entitled to prevail because the negligence of
the hotel prevented it from relying on the protection of the Innkeeper Act.
C. That as a matter of law, the plaintiff was entitled to prevail because the Innkeeper
Act applies to shield a hotel only from acts of its employees with pass keys, not acts of
a non-employee thief.
D. That the Innkeeper Act shielded the hotel from liability because the items could have
been deposited in the hotel safe and that the plaintiff was not therefore entitled to
recover.
E. That the plaintiff was entitled to recover only ½ of his losses due to the application of
the Innkeeper Act and the fact that the items could have been deposited in the hotel
safe.
"Big Spender." Wally was a partner in XYZ law firm. He decided to withdraw from the
partnership because he wanted to retire early somewhere in the Caribbean. The
partnership agreement of XYZ law firm did not specify the objective or duration of the
partnership. Although Wally gave proper notice, the other partners claimed that he had
no right to withdraw. Wally was angry and decided to get even. Two days after he
withdrew and before the partnership had provided notification to any suppliers of his
departure, Wally went to the office supply store at which he typically purchased
supplies on account for the firm. He purchased several cameras, a computer, and other
items which he placed on the firm account. Wally just smiled when Sam, the manager at
the store, told Wally that he really appreciated the law firm's business. The next day
Wally headed for the Caribbean and cannot be located. Sam later requests that XYZ
firm pay the bill for Wally's purchases. The law firm, whose members had decided to
continue the partnership after the dissolution resulting from Wally's resignation, refused
on the basis that Wally had no authority to make the purchases. Sam says that he did not
know that and that he expects to be paid immediately.
What type of partnership was XYZ law firm?
A. A partnership at will
B. An equitable partnership
C. An absolute partnership
D. A terminable partnership
E. An agency partnership
After notice of dishonor is received, how long do parties other than a collecting bank
have in order to give notice of dishonor to a secondarily liable party?
A. It must be given before midnight of the next day.
B. It must be given within 48 hours.
C. It must be given within 7 days.
D. It must be given within 10 days.
E. It must be given within 30 days.
Which of the following was passed largely in response to business scandals of the early
2000's, such as those implicated by Enron, WorldCom, Global Crossing, and Arthur
Anderson?
A. RICO.
B. The False Claims Act.
C. The Sarbanes-Oxley Act.
D. The Medicare Recovery Act.
E. The Healthcare Fraud Act.
The UCC is divided into sections known as ______.
A. Divisions
B. Articles
C. Subsections
D. Clauses
E. Amendments
Which of the following do courts often consider in determining whether a manufacturer
was negligent in failing to warn?
A. The likelihood of the injury only.
B. The seriousness of the injury only.
C. The ease of warning only.
D. The likelihood of the injury and the seriousness of the injury but not the ease of
warning.
E. The likelihood of the injury, the seriousness of the injury, and the ease of warning.
"House Painting." Susie Smith signed a check agreeing to pay, "Annie Greene, Mary
Hodge," $1,000. The payment was for painting her house. A problem with the note was
that it spelled Annie's last name, "Greene," whereas Annie spells it simply, "Green."
Annie and Mary were having a disagreement regarding how to split up the funds for
painting the house. Annie proceeded to sign the check on the back, "Annie Green," and
presented it to Bill Brown to satisfy a debt that she owed him. Bill Brown endorsed the
check on the back, "Bill Brown, without recourse," and gave it to his nephew, Sam, who
took it to the bank for payment. Meanwhile, Susie has stopped payment on the check
because following a rain storm, all the paint on the house looked spotted. Mary is
unhappy because she did not obtain any of the funds and stated that Annie could not
legally endorse the instrument because it misspelled her name and also because she,
Mary, did not sign it.
Which of the following is true regarding Mary's claim that the endorsement by Annie
was illegal because the note misspelled Annie's name?
A. Mary is correct.
B. Mary is correct, but only because Annie signed the note, "Green," instead of
"Greene," as such was on the note.
C. Mary is correct, but only because two payees are listed.
D. Mary is incorrect.
E. Mary is incorrect unless she can prove that Susie intentionally and purposefully
spelled the name wrong to prevent negotiation.
What is a summary jury trial?
A. An abbreviated trial that leads to a nonbinding jury verdict.
B. An unabbreviated trial that leads to a binding jury verdict.
C. An abbreviated trial that leads to a binding jury verdict.
D. An abbreviated trial in which only a few witnesses are called to the stand leading to
a binding verdict.
E. A binding trial conducted by a panel of mediators after a failed mediation.
Which of the following was the result in the "Case Opener," the case in the text in
which Roommates.com was sued for alleged violations of the Fair Housing Act and
some California statutes because of its involvement in matching roommates?
A. That the defendant had no liability to the plaintiffs because of the concept of caveat
emptor.
B. That the defendant had immunity under the Communications Decency Act.
C. That the defendant could not be held liable because neither the Fair Housing Act nor
the California statutes applied to tenants looking for roommates.
D. That the defendant was enabling discrimination and was not entitled to immunity
under the Communications Decency Act.
E. That the defendant was liable because it required discrimination in order to use its
services.
