Which of the following is generally true regarding management of a corporation?
A. Shareholders do not participate in corporate management.
B. Shareholders elect a board of directors.
C. The board of directors selects officers to manage the day-to-day business of the
corporation.
D. Shareholders do not participate in corporate management, shareholders elect a board
of directors, and the board of directors selects officers to manage the day-to-day
business of the corporation.
E. Shareholders do not participate in corporate management and shareholders elect a
board of directors, but shareholders select officers to manage the day-to-day business of
the corporation.
Which of the following is an extension of negotiation?
A. Arbitration
B. Initials
C. Neutral case evaluations
D. Mediation
E. Private trials
Which of the following is a group that comes together for the explicit purpose of
financing a specific large project?
A. A business trust
B. A joint venture
C. A syndicate
D. A franchise
E. An enterprise
The statute of frauds is intended to prevent which type of unreliable evidence from
interfering with a contractual relationship?
A. Hearsay
B. Oral
C. Irrelevant
D. Immaterial
E. Hearsay and irrelevant
A partnership in which the partners divide profits and management responsibilities and,
share unlimited personal liability for the partnership’s debt is called a _______.
A. general partnership
B. limited partnership
C. limited liability partnership
D. corporation
E. limited liability company
Beauty Shop Woes. When Janice went to work as a hair stylist in Rick’s beauty shop,
she entered into an agreement with Rick, whereby, if she left she would not work for
another beauty shop within 50 miles for 2 years. Rick trained Janice in a number of new
techniques. After nine months, Janice was offered a great job down the street at a new
beauty shop, quit Rick, and had a number of customers follow her down the street to
her new job. Rick claimed that she had signed a contract and had no right to go to work
at the new shop. Janice disagreed and told Rick that no judge in the country would
enforce such an agreement. Janice told Rick that she was more worried about a
customer, Treena, who was threatening to sue her because her hair turned green after
Janice worked on it. Janice agreed that Treena’s hair was damaged. Janice pointed out,
however, that she told Treena that odd results could result from a dye attempt, and she
required that Treena sign a contract releasing Janice from all liabilities before she did
anything with Treena’s hair. Treena, however, sued anyway. The agreement Rick and
Janice entered into is referred to as which of the following?
A. A competition agreement
B. A prohibited competition agreement
C. A covenant not to misappropriate
D. A policy agreement
E. A covenant not to compete
The legislators of New State institute a law that mothers of children in elementary
school, but not fathers, are entitled to seven days off each year in order to attend school
events. A lawsuit is brought by a group of fathers challenging the law on equal
protection grounds. Which level of scrutiny will be applied to the law?
A. Intermediate scrutiny
B. Rational basis scrutiny
C. Severe scrutiny
D. Strict scrutiny
E. Legal scrutiny
The Big Sale. Christy, the owner of ABC department store, needed to hire a number of
employees in a hurry because of a planned big summer sale. Bob was hired by Christy
to run a cash register and to assist customers with taking large purchases to their cars.
Bob encountered a particularly annoying customer, Frank. Frank started complaining
the minute he saw Bob. Frank complained about having to wait for Bob to assist him
with carrying his television purchase to his car, about the merchandise in the store, and
about the quality of the store’s employees. Bob tried to control himself while he carted
Frank’s television to the car. The final straw, however, came when Frank told Bob that
he should get the earring out of his ear, cut his hair, and act professionally. Bob threw
the television to the ground and punched Frank in the nose. Frank did investigation and
discovered that Bob has just been fired from his last three jobs for violent actions
against customers. Two of his former employers are willing to testify that if Christy had
called them, they would have disclosed Bob’s tendencies to her. Bob listed the former
employers on his application, but because she was in a hurry to hire employees, Christy
did not take the time to check with the former employers. Another problem confronting
Christy during the big sale is that Susie, a long-time employee of Christy who had
never caused any problem before, negligently dropped a box on the foot of Greg, a
customer. Greg had to have an X-ray and is threatening to sue both Christy and Susie.
Which of the following is a theory under which Christy may be held directly liable for
her own tortuous conduct in regards to Frank’s injury?
A. Negligent hiring
B. Strict liability
C. Breach of customer warranty
D. Negligent hiring, strict liability, and also breach of customer warranty
E. There is no theory under which Christy may be held liable
Hot Dress. Doreen writes a check for a dress to Hot Dresses, Inc., a small specialty
shop owned primarily by Betty. Betty was getting ready to go on an extended European
vacation and temporarily closed down the shop the day after the dress sale to Doreen.
When Betty returned, she had a number of other things to do and did not take Doreen’s
check and some other checks to the bank for three months. Betty was independently
wealthy and only ran the shop as a hobby, so she had not been in need of funds. When
Betty finally took Doreen’s check to the bank, Betty requested that her bank, ABC
Bank, deposit the check into her account. When ABC Bank, however, requested
payment from Doreen’s bank, XYZ Bank, the check was dishonored because of
insufficient funds in Doreen’s account. Although Betty did not particularly need the
funds, she did not like to feel as if she had been cheated; therefore, she demanded that
Doreen make the check good. Which of the following would be considered the drawer
of the check Doreen presented to Betty at Hot Dresses, Inc.?
A. Doreen
B. Hot Dresses, Inc.
C. Betty, because she owned Hot Dresses, Inc.
D. Doreen’s bank
E. Betty’s bank
What type of paper indicates both a monetary obligation and a security interest in
specific goods?
A. Chattel paper.
B. Combined paper.
C. Transactional paper.
D. Monetary and secured paper.
E. Specific interest paper.
Dogs and Formals. Paul owns a dog grooming business and needs patient people to
work there. He gives all applicants a test he obtained from a management firm that has
been proven to measure psychological traits such as patience. Penny alleges sex
discrimination after she fails the test miserably and Paul refuses to hire her. Paul tells
her that there is no way he is giving her a dime because he is entitled to protect his
client’s dogs. Upon learning that her state lacked a state office representing the Equal
Opportunity Commission, Penny immediately sues him in federal court alleging a
violation of Title VII. Paul, who is getting tired of the dog grooming business, also
opens a new formal wear shop and needs to hire employees there as well. He wants to
appeal to high school and college age young ladies attending proms and formals. Paul
decides that he does not want older sales clerks to assist in choosing formal dresses. He
only wants young, attractive ones. Paul runs an ad in the local paper-seeking applicants
for sales clerks and stating that a qualification for the job is computer training while in
high school. Tina, age 60, applies and tells Paul that while she sees no reason that
computer training should be required, she attended computer training in adult education
and has excellent computer as well as sales skills. Paul refuses to hire her telling her
that unless he follows the ad, he may be seen as practicing discrimination. Deciding that
formal wear is more trouble than dogs, Paul shuts down the formal wear store. Which
of the following is true regarding Penny’s action in federal court?
A. Her lawsuit was improperly filed because she did not first file with the federal Equal
Employment Opportunity Commission, and she lacked a right to sue letter.
B. Her lawsuit was improperly filed because she did not first insist on mediation.
C. Her lawsuit was improperly filed because she did not first insist on arbitration.
D. Her lawsuit was properly filed because her state had no state Equal Opportunity
Commission.
E. Her lawsuit was properly filed regardless of whether or not her state had a state
Equal Opportunity Commission.
Which element of a contract requirements that a contract not be either illegal or against
public policy?
A. Consideration.
B. Capacity.
C. Legal object.
D. Illegal prohibition.
E. Ethical requirement.
Which amendment protects freedom of religion?
A. First
B. Second
C. Fourth
D. Sixth
E. Eighth
____________ enables employees who lose their jobs or have their hours reduced to a
level at which they are no longer eligible to receive medical, dental or optical benefits
to pay to continue receiving benefits for themselves and their dependents under the
employer’s policy.
A. The Employee Income Security Act
B. The Consolidated Omnibus Budget Reconciliation Act
C. The Family and Medical Leave Act
D. The Fair Labor Standards Act
E. Workers’ compensation laws
To the Dogs. Alice loves all animals and is starting a new grooming business for dogs.
She believes that animals are very important and plans to exceed any applicable
regulations regarding cleanliness and health standards. Alice thinks some local
regulations make no sense. For example, there is a local ordinance that all dogs must be
kept on a leash at all times when not in a fenced area. Although Alice lives on a large lot
with plenty of room for dogs to run free, she plans to obey the leash regulation and all
others. She is aware, however, that members of the community have had success in
changing local regulations by petitioning the city council. Alice plans to proceed in that
manner to attempt a change in the leash law. Alice’s idea that dogs have basic rights,
and her plan to exceed laws involving cleanliness and health standards is rooted in
which of the following?
A. Legal positivism
B. The historical school
C. Legal realism
D. Natural law
E. Cost-benefit analysis
The ________ standard is a measurement of the way members of society expect an
individual to act in a given situation.
A. reasonable person
B. above-average person
C. without error
D. perfect accountability
E. reasonable accountability
A plea in which the defendant does not admit guilt but agrees not to contest the charges
is known as a _____.
A. petit defense
B. information
C. nolo contendere
D. sine qua non
E. plea avoidance
_______________ is a business organization governed by a group of trustees who
operate the trust for the beneficiaries.
A. A joint enterprise
B. A syndicate
C. A business trust
D. An S corporation
E. An E corporation
Which of the following is false regarding how the Japanese tend to view contracts?
A. The Japanese tend to view contracts as ongoing relationships.
B. The Japanese tend to view contracts as relationships in which parties work with each
other to smooth out any problems that arise in performance.
C. The Japanese tend to be suspicious of long, detailed contracts.
D. The Japanese have a preference for flexible contracts.
E. The Japanese do not desire that any terms be left to be decided later.
When one of the parties to an agreement wants to substitute a different performance for
his original duty under the contract, he is seeking a(n) _____________.
A. accord and satisfaction
B. novation
C. substituted contract
D. mutual rescission
E. alteration
Which of the following is true under the UCC regarding liability of a principal to an
agent if the agent enters into a contract that is a negotiable instrument?
A. The principal is liable to the same extent as if no negotiable instrument were
involved because the negotiable instrument has no effect on the principal’s liability.
B. The principal cannot be held liable unless the principal’s name is on the instrument.
C. The principal cannot be held liable unless the agent’s signature indicates that it was
made in a representative capacity.
D. The principal cannot be held liable unless the principal’s name is on the instrument
or the agent’s signature indicates that it was made in a representative capacity.
E. The principal cannot be held liable unless the principal’s name is on the instrument or
the agent’s signature indicates that it was made in a representative capacity, or the agent
has been adjudicated insolvent.
Which of the following is true regarding the ability of persons suffering from a mental
illness to enter into a binding contract?
A. Persons suffering from a mental illness never have capacity to enter into a binding
contract.
B. Persons suffering from a mental illness have full capacity to enter into a binding
contract so long as they do not present a danger to themselves or others.
C. Persons suffering from a mental illness have full capacity to enter into a binding
contract so long as they inform the other party that they are in treatment.
D. Persons suffering from a mental illness may have full, limited, or no legal capacity to
enter into a binding contract depending on the nature and extent of their mental
deficiency.
E. Persons who suffer from a mental illness always have full capacity to enter into a
binding contract.
Which of the following is false regarding trade-secret protection?
A. Competitors may not legally discover trade secrets by doing reverse engineering.
B. Competitors may discover secrets by going on public tours of plants and observing
the use of the trade secret.
C. Lawful discovery of a trade secret means there is no longer a trade secret to be
protected.
D. An invention may be considered a trade secret.
E. A design may be considered a trade secret.
Which of the following must a mutual mistake involve in order for a mutual mistake to
interfere with legal consent?
A. A basic assumption about the subject matter of the contract.
B. A material effect on the agreement.
C. A basic assumption about the subject matter of the contract and an adverse effect on
a party who did not agree to bear the risk of mistake at the time of the agreement, but
not a material effect on the agreement.
D. A basic assumption about the subject matter of the contract, an adverse effect on a
party who did not agree to bear the risk of mistake at the time of the agreement, and a
material effect on the agreement.
E. An admission by one of the parties that a misrepresentation occurred.
A party’s contractual obligations are terminated through _______________.
A. performance
B. the failure of a condition to occur
C. operation of law
D. performance, the failure of a condition to occur, and operation of law
E. performance and the failure of a condition to occur, but not operation of law
Employers are required to provide __________ to plan participants under ERISA.
A. a plan information (i.e., features and funding)
B. a grievance and appeals process for participants to get benefits from their plans
C. the right to sue for benefits and breaches of fiduciary duty
D. a plan information (i.e., features and funding), a grievance and appeals process for
participants to get benefits from their plans, and the right to sue for benefits and
breaches of fiduciary duty
E. a plan information (i.e., features and funding) and a grievance and appeals process
for participants to get benefits from their plans, but not the right to sue for benefits and
breaches of fiduciary duty
___________________________ are not permitted to file under Chapter 11
reorganization.
A. Stockbrokers
B. Commodities brokers
C. Banks
D. Savings and loan companies
E. All of these
Which of the following chapters of the Bankruptcy Code recognizes insolvency
proceedings pending in a foreign country and relief for foreign debtors?
A. Chapter 7
B. Chapter 9
C. Chapter 11
D. Chapter 14
E. Chapter 15
Which of the following is generally false when a consolidation occurs?
A. The new corporation has independent legal status.
B. The shareholders of the new corporation create new articles of incorporation.
C. The consolidated entity assumes the debts of the original corporations.
D. The consolidated entity obtains the original corporations’ assets.
E. The consolidated entity does not obtain the original corporations’ rights, powers, and
privileges.
Carpet Woes. Beau went shopping at ABC Carpet. He saw some carpet he liked but
could not make up his mind. The manager at ABC Carpet wrote down the proposed
purchase price for him along with a statement that the price would be good for three
months. Two months later Beau went back to ABC Carpet to purchase the carpet.
Unfortunately, the price had gone up. Beau showed the manager his writing and
guaranteed price, but the manager said that the offer was no longer good. Although he
had to pay more than the ABC manager had initially promised, Beau proceeded to
purchase his carpet from ABC Carpet, and he also contracted with ABC to do the
installation. Unfortunately, Beau almost immediately started to have problems with the
carpet. Beau told the sales manager of ABC Carpet that he was planning on bringing
suit for breach of warranty. The sales manager, however, told him that the breach of
warranty provisions only applied to sales of goods and that the carpet purchase was for
installation, a service. Which of the following is true regarding the enforceability of the
offer made by the manager at ABC Carpet?
A. ABC Carpet is not bound by the offer because Beau did not provide any
consideration.
B. ABC Carpet is bound by the offer, but only for a period of seven days.
C. ABC Carpet is bound by the offer, but only for a period of ten days.
D. ABC Carpet is not bound by the offer both because Beau did not provide any
consideration and also because such an offer is only good for a period of ten days.
E. ABC Carpet was bound by the offer and Beau had the right to sue for the refusal to
honor the agreement.
Which of the following was the result on appeal in the case of Webster v. Blue Ship Tea
Room Inc., the case in which the plaintiff sued after getting a bone caught in her throat
while eating clam chowder?
A. That the plaintiff could recover based upon the implied warranty of merchantability.
B. That the plaintiff could recover based upon the implied warranty of fitness for a
particular purpose.
C. That the plaintiff could recover based on an express warranty.
D. That the plaintiff could not recover because she waited too long in which to sue and
also because she was not the direct purchaser of the fish.
E. That the plaintiff could not recover for reasons including that the bone should not
have been unexpected.
What type of dispute resolution process is med-arb?
A. A process in which the parties agree to start out in mediation and, if the mediation is
unsuccessful on one or more points, to move on to arbitration.
B. A process in which the parties agree to start out in arbitration and, if the arbitration is
unsuccessful on one or more points, move on to court-annexed ADR.
C. A process in which the parties agree to start in mediation and move to litigation if the
mediation is unsuccessful.
D. A process in which the parties agree to start in arbitration and move to litigation if
the mediation is unsuccessful.
E. None of these is contained within the umbrella of med-arb.