1) When a corporation earns profits, it must pass them on to shareholders in the form of
dividends.
2) Credit can be denied solely on the basis of race.
3) Generally, a corporation that purchases the assets of another corporation is
automatically responsible for the liabilities of the selling corporation.
4) Account numbers on credit-card receipts must be truncated (shortened).
5) Negligence cases against professionals usually focus on the element of causation.
6) The shareholder’s appraisal right does not extend to share exchanges and sales of
substantially all of the corporate assets.
7) Rural Financial Corporation is a secured party with a security interest in property
owned by Strawberry Fields, Inc. Perfection of this security interest may not protect
Rural Financial against the claim of
a.a bank.
b.a buyer in the ordinary course of business.
c.a subsequent lien creditor.
d.a trustee in bankruptcy.
8) Tucker is a director of USA Auto Parts, Inc. Under the standard of due care owed by
directors of a corporation, Tucker’s decisions must be
a.unwavering and unquestionable.
b.arguable and defensible.
c.informed and reasonable.
d.perfect and unassailable.
9) Gene sells a trail bike to Hollis without disclosing that the odometer, which reads
10,000 miles, was disconnected 90,000 miles ago. Gene is most likely liable for
a.unconscionability.
b.fraud.
c.mistake.
d.nothing.
10) Karen is a judge hearing the case of Local Dispatch Co. v. National Transport Corp.
Applying the relevant rule of law to the facts of the case requires Karen to find cases on
point€previously decided cases that, in relation to the case under consideration, are
a.as different as possible.
b.as similar as possible.
c.at odds.
d.exactly identical.
11) Dorothy files a petition for bankruptcy in bankruptcy for relief through an
individual’s repayment plan. If she is granted a discharge, debts that will most likely be
discharged include
a.claims not provided for by the plan.
b.payments on retirement accounts.
c.claims for domestic support obligations.
d.credit-card debt incurred more than one year before filing.
12) Cathy is an accountant with Discount Retail Corporation. Efrem buys Discount
Retail stock and loses money on the investment. To recover from Cathy under Section
10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, Efrem must prove
a.only the purchase and sale of a security.
b.fraud, reliance, materiality, and lack of knowledge about securities.
c.fraud, reliance, materiality, and incompetence.
d.fraud, reliance, materiality, causation, and scienter.
13) Odina signs a covenant not to compete with her employer, Penultimate Sales
Corporation. A court decides that the covenant is overly restrictive. Depending on the
jurisdiction, the court will likely
a.enforce it as written so as not to undercut the freedom of contract.
b.enforce it but evaluate its effects over time.
c.reform its terms to prevent any undue burden.
d.refuse to enforce it unless Penultimate pays a fine to the court.
14) Nina contracts with Office Suites Corporation to buy a suite in its Prospect Point
Tower at a premium for its view of Quay Harbor. Unforeseeably, the town of Quay
Harbor changes its zoning law, and Resort Hotels, Inc., constructs Seaview Resort,
blocking what would have been Nina’s view. Nina’s best argument for a change in the
Office Suites contract or its price is
a.frustration of purpose.
b.objective impossibility of performance.
c.anticipatory repudiation.
d.commercial impracticability.
15) Bailey is an agent for Culinary Delites Company. In the course of Bailey’s
performance for Culinary Delites, she pays Drivers’ Repair Service for certain vehicle
maintenance and repair work. Bailey’s right to obtain the amount of the payments from
Culinary Delites arises under the principal’s duty of
a.avoidance.
b.cooperation.
c.indemnification.
d.reimbursement.
16) 19.
Fact Pattern 16-B1
Alain and Brie sign a contract for the sale of Alain’s Coffee Caf© to Brie. The parties
intend their written contract to be a final statement of most, but not all, of the terms of
their agreement-Alain must first buy the building from Developed Commercial
Properties, Inc., after which Alain and Brie will negotiate a price.
Refer to Fact Pattern 16-B1. The writing that Alain and Brie signed is
a.a completely integrated contract.
b.a conditionally integrated contract.
c.a partially integrated contract.
d.a supplemental integrated contract.
17) Congress enacts the Supplemental Income Tax Act (SITA) to exempt the citizens of
New Jersey from federal taxes until their coastal towns are rebuilt from the ravages of a
recent hurricane. SITA will most likely be
a.rendered invalid under the supremacy clause.
b.held to be valid under the equal protection clause.
c.struck down under the taxing and spending clause.
d.upheld under the commerce clause.
18) Dave and Ellen enter into a contract via e-mail. When a dispute arises over the
performance of the deal, Dave files a suit against Ellen. The emerging body of law that
governs transactions conducted via the Internet is referred to by the term
a.cyberlaw.
b.civil law.
c.equitable maxims.
d.IRAC.
19) Dian and Elton buy a duplex in Fargo, North Dakota. On the death of either owner,
that owner’s interest in the duplex passes to his or her heirs. This is
a.a joint tenancy.
b.a life estate.
c.a tenancy in common.
d.ownership in fee simple absolute.
20) Seth offers to buy a house from Tia for less than Tia paid for it, stating that he
would “hate to see anything bad happen to Tia or her house.” Tia agrees to sell.
Regarding this agreement, a court would likely
a.enforce it.
b.not enforce it.
c.reform it to reflect the true market value of the property.
d.order the parties to renegotiate the price.
21) Guardian Security, Inc., and Hedge Fund Corporation enter into an oral contract
under which Guardian Security agrees to provide security services for Hedge Fund
offices for as long as Hedge Fund needs them. This contract may be enforceable by
a.Guardian Security only.
b.Hedge Fund only.
c.any interested third party, such as a Hedge Fund shareholder.
d.either Guardian Security or Hedge Fund.
22) The rights of a third party beneficiary under a contract vest if the third party
materially changes his or her position in justifiable reliance on the promise.
23) Nichelle, Owen, and Porter organize a nonprofit business – Quality Markets, Inc. –
to buy groceries from wholesalers and sell them to consumers who buy a membership
in Quality Markets. Because the firm is a nonprofit entity, it is able to sell the groceries
for less than a commercial grocer could. What form of business organization is Quality
Markets? Is it significant that Quality Marketsis incorporated?
24) The seller’s right to cure does not affect the right of the buyer or lessee to reject
goods.
25) Motor Vehicles Body Shops contracts to buy from Paint Supply & Equipment
Headquarters, Inc., twenty-four spray paint guns at $30 each to be delivered by October
1. Paint Supply knows that Motor Vehicles Body Shops will use the guns to complete a
special job by October 31 for a certain auto dealer. Motor Vehicles Body Shops expects
to make $17,000 profit from the job. Paint Supply fails to deliver on October 1. Motor
Vehicles Body Shops attempts to buy substitute spray guns, but must pay $40.00 for
each and take delivery on October 15, cutting Motor Vehicles Body Shops’ profits when
the dealer arranges for some of the job to be done elsewhere. Motor Vehicles Body
Shops sues Paint Supply. What is the measure of recovery?
26) The law does not restrict the “fair use” of methods for the circumvention of
encryption software or other technological antipiracy protection for educational and
other noncommercial purposes.
27) If a voidable contract is avoided, the promisee, but not the promisor, is released
from it.
28) When a contract’s writing is not clear, a court will enforce it according to its
obvious terms.
29) All adhesion contracts are unconscionable.