Juanita works for Chevco but owns no Chevco stock. She buys 10 shares of a new issue
of company stock as a savings plan and afterward receives the signed registration
statement, which contains an untrue statement of material fact. Because she works for
Chevco, she recognizes the error. Can she sue the auditor?
a. Yes, under Section 11, proof of reliance is usually not required.
b. Yes, if she can prove she would not have bought the stock otherwise.
c. No, because she did not rely on the statement.
d. No, because there is no privity between Juanita and the auditor.
The failure by an applicant to disclose material facts that an insurer does not know but
has a right to know is called:
a. misrepresentation.
b. concealment.
c. waiver.
d. fidelity.
Since 1976, the Food and Drug Administration has had the increased authority to:
a. subject medical devices to premarket approval.
b. require manufacturers to do corrective advertising.
c. make manufacturers responsible for seeing that drugs are proven safe and effective
before being sold.
d. make package inserts or labels on drugs list possible side effects.
Jan owns lots in the Cruz neighborhood, where she was planning to build an 8-story
apartment complex. Cruz has adopted a single-family dwelling ordinance that
encompasses Jan’s lots. Jan goes to the library and finds she can attempt to get judicial
review of ordinances based on the following:
a. the zoning ordinance is invalid.
b. the ordinance has been applied unreasonably.
c. the ordinance amounts to confiscation of property.
d. All of the above.
Joanne, a minor, sold her laptop computer to Bruce, an adult. Bruce then sold the laptop
to Anna, also an adult, who had no knowledge of the fact that the original owner was a
minor. Under the Uniform Commercial Code, Joanne may:
a. avoid her contract with Bruce and recover her laptop.
b. not avoid her contract with Bruce and may not recover her laptop.
c. register with the UCC filing department and require that if Anna sells the laptop she
must give Joanne the rights of first refusal.
d. None of the above.
In the Jenkins v. Eckerd Corporation case, the court held that:
a. the trial court erroneously concluded that the lease unambiguously gave the lessee the
option to cancel the lease.
b. although the lease was unambiguous when read literally, the lease was not clear and
complete with regard to the operation of the lease should the lease be assigned.
Therefore, parol evidence should be admitted.
c. extrinsic evidence could not be admitted because the lease was an integrated
agreement complete in all essential terms and the lease contained no latent or patent
ambiguity.
d. the existence of a merger or integration clause establishes per se that a writing is
totally integrated.
A short-form merger:
a. is not a merger at all but a form of consolidation.
b. may be undertaken without director approval.
c. allows no appraisal rights for the parent’s minority shareholders.
d. requires shareholder approval.
The first federal statute for the regulation of securities offered for sale and sold through
interstate commerce was passed in:
a. 1916.
b. 1933.
c. 1934.
d. 1954.
An involuntary petition in bankruptcy:
a. eliminates the operation of an automatic stay.
b. may only be filed under Chapter 7 or 11.
c. must be filed by the trustee.
d. eliminates the need for the court to order a discharge.
Action Play Equipment ordered 200 feet of chain, 400 clasps, and 50 swing seats from
Brace Company for $1,600 to be delivered within three weeks of the order. Brace sent
back an acceptance form which stated payment was due within thirty days of delivery
or a finance charge of 2 percent per month would be added to the balance. What is the
status of the interaction between Action and Brace?
a. There is a valid contract under the UCC, and the additional payment terms become
part of the contract unless Action objects within a reasonable period of time.
b. There is a valid contract for the goods, but the payment terms will not become part of
the contract.
c. There is no contract, because Brace has made a counteroffer by adding payment
terms.
d. There is no contract, because the method of transportation has not been decided.
Ralph sold a motel to Steve by stating that he had paid $250,000 for it and that his net
average annual profit from the business has been $40,000. In reality he paid $100,000
for the motel and has earned a net average annual profit of only $28,000. Steve made no
attempt to verify the statements until after the transaction was completed. In this case:
a. Ralph has committed fraudulent misrepresentation.
b. Steve is bound by the contract, because he failed to verify the statements which were
made to him.
c. the contract is voidable at Steve’s option.
d. Both (a) and (c).
Assuming a note made by Barbara payable to Carol, which indorsement will limit
negotiability?
a. “Pay Al. Carol.”
b. “For deposit only, Acct. #602-043. Carol.”
c. “Pay Connie for Al. Carol.”
d. “Pay Claudia as attorney for John Jones. Carol.”
Smarth, King, and Finkel have been partners for years, but a court of equity is now
segregating and considering separately the assets and liabilities of the partnership and
the respective assets and liabilities of the individual partners. This process is called:
a. marshaling of assets.
b. liquidation.
c. dissolution of the partnership.
d. winding up.
The president has significant control over administrative agencies housed within the
executive branch by virtue of his power to:
a. remove commissioners for causes set forth by statute.
b. appoint and remove the chief administrator of those agencies.
c. impound moneys appropriated to the agency by Congress.
d. All of the above.
Which chapter of the Bankruptcy Act allows for the adjustment of debts of an
individual with regular income?
a. Chapter 7.
b. Chapter 11.
c. Chapter 12.
d. Chapter 13.
A transaction involving real estate whereby one party deposits a deed or money with a
third party who holds the deed or funds until the happening of an agreed upon event is
called:
a. adverse possession.
b. escrow.
c. foreclosure.
d. abstract of title.
Which of the following is untrue regarding closely held corporations?
a. Most corporations in the U.S. are closely held.
b. Shareholders frequently restrict the transfer of shares to prevent “outsiders” from
obtaining the stock.
c. Shareholders usually have little voice in the management and control of the business.
d. Some states have enacted special legislation to accommodate the needs of closely
held corporations.
Which of the following is a warranty of the transferor?
a. Transferor has no knowledge of any insolvency proceedings with respect to the
maker, acceptor, or drawer of an unaccepted instrument.
b. Transferor warrants that all signatures are authentic and authorized.
c. Transferor warrants that he is entitled to enforce the instrument.
d. All of the above.
An arm’s length transaction is one in which the parties owe each other special duties.
An agent has the power to contractually bind his principal whenever he has actual or
apparent authority and acts within his authority.
Apparent authority is not actual authority.
UCC Articles 3 and 8 cover items in the bank collection process.
When goods have been commingled, it is sometimes possible to get title by confusion.
In most states and under the Model Act, cumulative voting is permissive and not
mandatory.
A general partner may also be a limited partner and thereby share in profits, losses, and
distributions as a limited partner.
In determining whether a contract containing both a sale of goods and a service is a
UCC contract or general contract, a majority of states follow the predominant purpose
test.
What is an administrative agency? What powers does an administrative agency
possess? How does an administrative agency utilize its powers?
Gratuitous promises are generally legally enforceable.