“Convertibles.” Barry, a new car dealer, advertised that a new brand of convertible
called Wind would be available at his dealership for the price of $10,000 each. He had
only three Wind vehicles, however; and when those were sold, he tried to convince
shoppers to purchase a much more expensive new convertible at a price of $25,000.
Kathy, a customer who decided to purchase one of the more expensive vehicles needed
financing in order to do so. She had $10,000 to pay on the car and sought a loan from
ABC Bank for the remainder. She wanted the loan for a specific amount of time. ABC
Bank offered her the loan and she agreed. The only information she received from ABC
Bank was confirmation that she borrowed $15,000 at an 8% interest rate. After
receiving several complaints, the Federal Trade Commission disapproved of Barry’s
action in regard to the Wind vehicles. After appropriate proceedings, the Commission
proceeded to issue a cease-and-desist order involving Barry’s misleading advertisement
in regard to Wind vehicles and also in regard to any other vehicles he offered for sale.
What kind of objectionable advertising, if any, was Barry engaged in when he offered
convertibles for sale for $10,000 but only had three and then tried to convince
customers to purchase a much more expensive vehicle?
A. Advertise-and-deny
B. Claim-and-refuse
C. Bait-and-switch
D. Ad trickery
E. He was not engaged in any objectionable advertising so long as he had at least one
vehicle in stock at a price of $10,000.
“Used Car Sales.” Walter sells used cars. He is seeking a way to increase sales and
profits because he would like to take his girlfriend on a nice diving trip to the Grand
Cayman Islands. The first thing that Walter does is say that during the first week of
December, he will give a $500 rebate on used cars that are under two years old. To
spice things up, he also offers to sell any car on the lot that is over five years old for
$1,000 to the first three customers who can hula hoop ten hours straight on December
7th. (Hula hooping was a practice popular some years ago in which a large hoop would
be swung around by a person, usually around the waist.) Walter was not very concerned
about the hula hooping issue because he thought that no one would be able to hula hoop
for ten hours straight. Walter put an advertisement pertaining to the rebate and the hula
hoop opportunity in the local newspaper. The promotion went over very well. Although
Walter had several cars available, he ran out of cars under two years old within one day.
During the rest of the week shoppers were told that no cars of that description were
available. Sam was very angry at Walter for not having a car available that was under
two years old so that he could get a good deal and a $500 rebate. On December 7th,
while Walter was watching the hula hoopers, Sally was shopping for a car. She was in
college and did not have much money. She saw one, an older car, a real clunker, that
she liked; but she really did not know if it could be repaired sufficiently to be
dependable. Walter had not even put a price on it because he planned to have it crushed.
Sally was going to talk to her parents about it. Walter eventually approached her, and
Sally asked him if he would take $450 for the car. Walter said, “Yes, sold.” Sally tried to
explain that she needed to talk to her parents first, but Walter would not hear of it.
While Walter was still fuming from his encounter with Sally, Zack walked up and
started to criticize the nature of Walter’s inventory. Walter told him that he had great
cars. Zack pointed at an old jalopy that was banged up, had 200,000 miles on it, and a
cracked windshield. Zack said, “Sure, I’ll pay $100,000 for that car!” Walter said,
“Sold.” Zack said, “Wait a minute. I was only kidding.” Walter said, “No way.”
Meanwhile all the hula hoopers dropped out well prior to ten hours of hula hooping
except for Barbara. She completed the hula hooping and asked for her car for $1,000.
Walter refused saying that the offer was revoked. Sam and Barbara sued Walter, and
Walter sued Zack and Sally. Under the applicable law in Walter’s state, common law
will be applied, and there are no state statutes impacting the situation.
Which of the following is the most likely result in the lawsuit brought by Sam
complaining that Walter ran out of cars available for a rebate?
A. Sam will win because Walter was required to have sufficient cars on hand for anyone
who requested one.
B. Sam will win because a rebate was involved.
C. Sam will win because Walter should have run another ad revoking the offer.
D. Sam will lose because he did not properly accept the offer.
E. Sam will lose because a court would interpret the intent of Walter as being to invite
readers to make an offer that Walter was free to reject.
Assuming res ipsa loquitur is established, what is the effect of that doctrine?
A. It requires a finding of negligence.
B. It prohibits a finding of negligence.
C. The burden of proof shifts to the plaintiff.
D. The burden of proof shifts to the defendant.
E. The burden of proof rises to proof beyond a reasonable doubt.
Which of the following is a claim on property either created by a sales contract or
imposed by a court in the interest of fairness?
A. Equitable
B. Consummate
C. Possessory
D. Broker’s
E. Common law
Which of the following references the maturing of rights such that a party can legally
act on the rights?
A. Absoluting
B. Gelling
C. Forming
D. Vesting
E. Finishing
Which of the following is true regarding corporate structure in Germany?
A. Germany has three tiers of corporate power with the board at the lowest tier,
management on the second tier, and the supervisory board on the top tier.
B. Germany has three tiers of corporate power with the board at the lowest tier, the
supervisory board on the second tier, and management on the top tier.
C. Germany has three tiers of corporate power with management at the lowest tier, the
board on the second tier, and the supervisory board on the top tier.
D. Germany has three tiers of corporate power with management at the lowest tier, the
supervisory board on the second tier, and the board on the top tier.
E. Germany has three tiers of corporate power with the supervisory board at the lowest
tier, management on the second tier, and the board on the top tier.
Which of the following begins when the SEC declares the registration statement
effective, and ends when the issuer sells all securities offered or withdraws them from
sale?
A. The posteffective period
B. The acknowledgement period
C. The approved period
D. The sell period
E. The investment period
The primary type of damages in tort law is referred to as _____.
A. Punitive damages
B. Compensatory damages
C. Nominal damages
D. Accrual damages
E. Perspective damages
A ______ is a gift of personal property by will.
A. Behest
B. Grant
C. Bestowment
D. Devise
E. Bequeath
What is a difficulty with the application of virtue ethics?
A. The applicable categorical imperatives.
B. The lack of agreement about the meaning of “the good life.”
C. The applicable principle of rights.
D. The ethics of care analysis.
E. The lack of agreement regarding which rules on balance produce the greatest amount
of pleasure for the greatest number of people.
Which of the following is a document that notifies the defendant of the lawsuit and
explains that if the defendant does not respond to the lawsuit within a certain period of
time, a default judgment will be entered?
A. Complaint
B. Answer
C. Summons
D. Instructional guide
E. Transactional analysis
Which of the following may a buyer/lessee do when the seller/lessor delivers
nonconforming goods?
A. Reject the goods only
B. Obtain cover only
C. Cancel the contract only
D. Reject the goods, and then obtain cover or cancel the contract
E. Reject the goods and obtain cover, but the buyer may not cancel the contract
Which of the following is true regarding types of common-carrier delivery contracts?
A. Common-carrier delivery contracts include origin and shipment contracts, but not
destination or transfer contracts.
B. Common-carrier delivery contracts include destination contracts, but not origin,
transfer, or shipment contracts.
C. Common-carrier delivery contracts include transfer contracts but not origin,
shipment, or destination contracts.
D. Common-carrier delivery contracts include origin and transfer contracts, but not
destination contracts.
E. Common-carrier delivery contracts include origin and destination contracts, but not
transfer contracts.
Under Article 2(a) of the UCC which of the following is defined as a transfer of the
right to possession and use of goods for a term in return for consideration?
A. A sale of goods
B. A lease
C. A transfer
D. A rental
E. A consignment
“Smelly Lake.” Barney, who lives on a navigable lake, is unhappy because he believes
that a local company is dumping pollutants into the lake resulting in harm to his
property and horrible odors. No one swims in the lake anymore. He calls a company
official, Warren, who tells him to mind his own business. Warren tells him that the state
has no authority, that federal investigators do not have time for Barney’s small smelly
lake, that swimming is not a concern of the government, and that any federal penalties
are negligible. Barney tells Warren that he is pushing for big penalties and that Warren
is likely to end up in jail. Warren just laughs.
Assuming that Warren’s company is engaged in pollution, which of the following
identifies the source?
A. Identified
B. Point
C. Specific
D. Specified
E. Standard
Which of the following is false regarding a condominium interest?
A. The holder has exclusive ownership rights of a unit within the condominium.
B. The holder shares joint tenancy with the other condominium owners over the land.
C. The holder has tenancy in common with the other condominium owners over the
buildings and improvements of the common areas of the development.
D. The architecture and use of common areas are regulated by a condominium
association.
E. The condominium association has the power to levy assessments against the unit
owners for maintenance of common areas.
If a merger increases the number of the surviving corporation’s shares by no more than
______ percent, most states do not require the approval of the surviving corporation’s
shareholders.
A. 5
B. 10
C. 15
D. 20
E. 30
In a[n] ______ debt, the parties either dispute the fact that any money is owed or agree
that some money is owed but dispute the amount.
A. Disputed
B. Unacknowledged
C. Uncertain
D. Liquidated
E. Unliquidated
Which of the following does the Sarbanes-Oxley Act of 2002 require regarding working
papers?
A. Accountants must maintain working papers for ten years starting with the end of the
fiscal period in which the audit was conducted.
B. Accountants must maintain working papers for seven years starting on the last day of
the audit.
C. Accountants must maintain working papers for five years starting with the end of the
fiscal period in which the audit was conducted.
D. Accountants must maintain working papers for one year starting on the last day of
the audit.
E. The act does not require that accountants maintain working papers.
Which of the following is reported in the Code of Federal Regulations?
A. Statutes
B. Executive orders
C. Common law
D. Administrative law
E. Congressional orders
Which of the following is defined as the series of legal steps a secured party takes to
protect its rights and collateral from other creditors who wish to have their debts
returned through the same collateral?
A. Perfection
B. Filing
C. Noticing
D. Financing noticing
E. Arrangement
Which of the following is true under the UCC regarding checks marked “paid-in-full”?
A. If a business inadvertently cashes such a check, the business has 30 days from the
date it cashed that check to offer repayment in the same amount to the debtor and avoid
an accord and satisfaction.
B. If a business inadvertently cashes such a check, the business has 60 days from the
date it cashed that check to offer repayment in the same amount to the debtor and avoid
an accord and satisfaction.
C. If a business inadvertently cashes such a check, the business has 90 days from the
date it cashed that check to offer repayment in the same amount to the debtor and avoid
an accord and satisfaction.
D. If a business inadvertently cashes such a check, the business has 120 days from the
date it cashed that check to offer repayment in the same amount to the debtor and avoid
an accord and satisfaction.
E. The business has no recourse, and the debt is deemed discharged and satisfied.
Which of the following is false regarding the Private Securities Litigation Reform Act?
A. The act sets forth a specific set of actions and guidelines an accountant must follow
after identifying a potentially illegal activity when conducting an audit.
B. The act makes no reference to notifying the SEC of wrongdoing although it does
reference notifying the applicable company’s board of directors.
C. The act states that accountants are liable for the portion of the damages for which
they are responsible.
D. In the event of a willful violation of the act, the SEC can seek an injunction against
the accountant.
E. Under the act, an accountant’s silence when the accountant thinks he or she might
have discovered fraud is enough to constitute aiding and abetting.
Susan, who owned a pet store, bought a number of dog leashes from a business called
Happy Paws in Florida. Susan, who was somewhat unorganized, was very busy and told
her assistant, Zach, to pay her bills, including the bill she owed to Happy Paws. Susan
had lost the invoice. She knew that she owed Happy Paws $1,000, and simply told Zach
to send Happy Paws $1,000. She told Zach she did not know the address, but that he
should be able to find it on the Internet. Zach checked on the Internet and found a
listing and an address for a company called Happy Paws in North Carolina. Zach,
therefore, sent the check for $1,000 to Happy Paws in North Carolina. The bookkeeper
for Happy Paws in North Carolina did not act in bad faith and thought that the check
was for goods sent to Susan. The treasurer endorsed Susan’s check along with a number
of other checks to ABC Financing Company in order to receive operating funds. Happy
Paws in North Carolina was not affiliated with the Florida Happy Paws. In fact, Happy
Paws in North Carolina sold booties for children. Happy Paws in North Carolina was
also in financial difficulty and went bankrupt. Happy Paws in Florida contacted Susan
regarding the $1,000 they were owed. Susan and Zach then discovered their mistake.
They requested that Happy Paws in North Carolina refund the money, but bankruptcy
prevented that. Susan then attempted to get the funds returned from ABC Financing.
What is the most likely result regarding Susan’s attempt to receive the funds from ABC
Financing and why?
Which of the following is true regarding the creation of the Uniform Commercial
Code?
A. The Uniform Commercial Code was created by the National Conference of
Commissioners on Uniform State Laws, the American Law Institute, and the U.S.
Commercial Consortium.
B. The Uniform Commercial Code was created by the U.S. Commercial Consortium
and the National Conference of Commissioners on Uniform State Laws, but not the
American Law Institute.
C. The Uniform Commercial Code was created by the National Conference of
Commissioners on Uniform State Laws and the American Law Institute, but not the
U.S. Commercial Consortium.
D. The Uniform Commercial Code was created by a federal congressional committee.
E. The Uniform Commercial Code was created by state legislative representatives from
all 50 states.
Under the Magnuson-Moss Act, what is the effect of a full warranty?
A. It means that if the good fails or is defective, the good or its defective part will be
replaced; and if replacement cannot be timely effected, the buyer has the right to a
refund or a full replacement.
B. It means only that the good or its defective part will be repaired. The buyer has no
other remedy.
C. It means that the good or its defective part will be repaired or replaced if it cannot be
repaired. The buyer has no other remedy.
D. It means that the buyer must be immediately refunded the full purchase price.
E. It means that the buyer has the option of an immediate refund of the full purchase
price or repair of the good.
When an accord and satisfaction is at issue, the ______ is the payment, by the debtor, of
the reduced amount.
A. Satisfaction
B. Accord
C. Seal
D. Written compromise
E. Written acknowledgement
Which of the following is true regarding the holding of the court in The Travelers
Property Casualty Company of America and Hellmuth Obata & Kassabaum Inc., v.
Saint-Gobain Technical Fabrics Canada Limited, the case in the text involving whether
the statute of frauds barred enforcement of a contract and also whether the United
Nations Convention on Contracts of the International Sale of Goods (CISG) applied to a
contract in view of the fact that a particular state’s law was referenced in the contract?
A. That the CISG did not apply because the contract referred to provisions of the UCC
and that the statute of frauds contained within the UCC barred enforcement of the
contract.
B. That the CISG did not apply because a construction of an arena, which would result
in a type of realty, was concerned and that the statute of frauds contained within the
UCC barred enforcement of the contract.
C. That the CISG did not apply because significant provisions in the contract were left
unwritten but that the statute of frauds was inapplicable.
D. That the CISG applied and that oral discussions could have formed a contract.
E. That the CISG applied and that no contract could have resulted because of the lack of
a writing.
A[n] ______ contract is a contract created by a party to an agreement that is presented
to the other party on a take-it-or-leave-it basis.
A. Substantively unconscionable
B. Adhesion
C. Outrageous
D. Procedurally unreasonable
E. Unreasonable
“Not So Rich Uncle.” Bruce is attempting to convince Sally to marry him. He promises
her that if she will marry him, he will buy a new Mercedes automobile for her within
six months of the marriage and take her on a world tour within a year of the marriage
date. Sally reluctantly agrees, and they sign an agreement by which Bruce agrees to
provide the Mercedes and world tour. Bruce and Sally marry on January 1.
Unexpectedly, on March 1, Bruce’s supposedly rich uncle, Frank, dies. Frank has no
living relatives other than Bruce and has a will leaving everything to Bruce who is also
appointed executor. In attempting to settle the estate, Bruce agrees orally to pay out of
his own pocket debts of Frank totaling $10,000. Sally is concerned about Bruce’s doing
so. Bruce tells her not to worry because he will get all the money back when the estate
settles. Bruce admits to a number of friends that he agreed to settle the debts out of his
own pocket because he needed to obtain assets from the estate in a hurry and did not
want anything to slow down probate. The assets were needed in large part to satisfy his
obligations to Sally. Surprisingly, it later came to light that prior to his death Frank had
signed away all his assets to his girlfriend in Argentina. There was nothing left in the
estate for Bruce to inherit. Bruce disavowed his agreement to pay the $10,000 to
various creditors of Frank.
Which of the following is the appropriate term for the marriage agreement entered into
between Bruce and Sally?
A. Marital solution agreement
B. Marital dissolution agreement
C. Prenuptial agreement
D. Marriage acknowledgement agreement
E. Marriage consideration agreement
A policy of fidelity insurance is an example of which of the following types of
insurance?
A. Business loss
B. Profit loss
C. Commercial
D. Economy
E. Economic
Which of the following states that in the case of multiple assignments of the same right,
the first party granted the assignment is the party correctly entitled to the contractual
right?
A. The first-assignment-in-time rule
B. The last-assignment-in-time rule
C. The English rule
D. The French rule
E. The American rule
“Wedding photos.” Bobby took a number of wedding photos at Jill’s wedding. He was
paid as the photographer. On all of the photographs, he appropriately noted in the
bottom right-hand corner information showing that he was claiming copyright
protection. Jill came to see Bobby three years after the initial photographs were taken
and requested that he grant her permission to run off as many copies as she wanted at
the local photo shop from the pictures that she initially purchased. The photo shop had
refused to reproduce the photographs without his permission. When he refused to give
her permission to do so, Jill started a heated argument. She told Bobby that photographs
are not entitled to copyright protection. She also told him that even if he was correct
that there was some copyright protection, it only lasted for two years and that, in any
event, damages for copyright infringement are unavailable.
Which of the following is correct regarding Jill’s statement pertaining to damages?
A. Damages are available, but a copyrighted work must be registered in order for the
creator to recover damages from infringement.
B. It is not necessary that a copyrighted work be registered in order for the creator to
obtain damages.
C. It is necessary for a photograph to be registered before the creator may obtain
damages, but that is not true for other materials subject to copyright.
D. Some material that is subject to copyright must be registered before its creator may
recover damages for infringement, but that is not true for photographs.
E. She is correct that damages are unavailable in copyright infringement actions.