1) Lewis makes a note payable to Maxi Finance Corporation. Maxi Finance indorses
the back of the note and negotiates it to Notes & Drafts Investments, Inc. Primarily
liable on the note is
a.none of the choices.
b.Maxi Finance.
c.Notes & Drafts Investments.
d.Lewis.
2) Edgar, Jon, and Phoebe do business as Reliable Movers. Phoebe develops a
debilitating illness and can no longer work. Phoebe
a.may dissociate from the partnership.
b.may not dissociate from the partnership without the other partners’ consent.
c.must dissociate from the partnership.
d.may terminate the partnership.
3) Sunny enters into a contract with Trey to act as his personal sports trainer. If a
dispute later arises and the contract contains unclear terms, the rules of contract
interpretation will give effect to
a.the parties’ intent as expressed in their contract.
b.what the promisor claims was the parties’ intent.
c.what the promisee claims was the parties’ intent.
d.what the parties now agree they intended.
4) Fact Pattern 15-B3
In selling a commercial building, Birdie tells Colt that theproperty has a certain
capacity, making it suitable for a nightclub. Birdie knows nothing about the capacity of
the building, but it is not as she specifies. Colt buys the building.
Refer to Fact Pattern 15-B3. Under these circumstances, Colt’s best course of action is
most likely to
a.scam Birdie.
b.induce Birdie to give him the commission on her next sale.
c.recover damages or rescind the contract to buy the building.
d.sabotage Birdie’s career with bad publicity.
5) Petro Refining Corporation makes payments to potential customers, suppliers, and
others with whom they might do business, including foreign private companies and the
representatives of foreign labor organizations. If Petro knows that these payments will
be passed on to a foreign government, this practice is
a.illegal if the payments violate the Foreign Corrupt Practices Act.
b.legal if a third party acts as a “go-between.”
c.legal if private parties are involved on both sides of the deal.
d.legal if the payments are intended to facilitate business.
6) Laramie contracts to provide cattle-herding services to Miles for $1,400 per month.
Laramie cannot transfer this duty
a.under any circumstances.
b.without continuing to be potentially liable.
c.without Miles’s consent.
d.without paying Miles at least one monthly fee.
7) Fact Pattern 28-2B
Belle draws a check on her account in Capital Credit Bank in New York, payable to
Distribution Marketing, Inc., in San Francisco. Distribution Marketing deposits the
check in its account at Equity Bank. Equity Bank deposits the check in the Federal
Reserve Bank of San Francisco, which transfers it to the Federal Reserve Bank of New
York. That Federal Reserve Bank sends the check to Capital Credit.
Refer to Fact Pattern 28-2B. Central City, Distribution Marketing’s bank, is
a.the cashing bank.
b.the depositary bank.
c.the intermediary bank.
d.the payor bank.
8) WeatherGuard Roofing Corporation obtains an insurance policy that protects
WeatherGuard against liability in the event of injuries or losses sustained by its
employees during the course of their employment that are not covered under workers’
compensation insurance. This is
a.casualty insurance.
b.employer’s liability insurance.
c.key-person life insurance.
d.term life insurance.
9) Blair and Chanel are holders of common stock in Discount Retail Stores, Inc. Like
other holders of common stock, they have a residual position in the overall financial
structure of Discount Retail, because they
a.are guaranteed to receive more than the amount of their investment.
b.are the last to receive returns for their investment.
c.have priority to the firm’s assets if itbecomes insolvent.
d.reside in the state of the firm’s incorporation.
10) The abbreviation “P.A.” in the name “Conrad & Drake, Accountants, P.A.” means
that this organization is
a.a private association.
b.a professional association.
c.a public association.
d.a publicly administered corporation.
11) Ferris is refinishing his kitchen floor and needs a floor sander to complete the job.
Ferris’s neighbor Gerda suggests that he call Home Repair Rentals, Inc. Home Repair
leases Ferris a floor sander. In this transaction, the lessor is
a.Ferris.
b.Gerda.
c.Home Repair.
d.none of the parties.
12) Qiana has the right under a contract with Runway Retail, Inc., to buy the retailer’s
clothing overstock. Qiana’s sale of this right to Sade’s Style House is
a.a delegation.
b.an assignment.
c.prohibited.
d.a third-party beneficiary contract.
13) Business Enterprise Company agrees to sell a commercial office building and
parking garage to City Investments, Inc., which assigns the rights to the realty to
Downtown Properties, LLC. Downtown Properties does not yet exist, but once it is
created and comes into existence, the contract on novation will most likely be
a.quasi.
b.voidable.
c.void.
d.enforceable.
14) Thirty-one days before filing a petition in bankruptcy, Gavin transfers property and
makes payments that favor one creditor over another. These are
a.affirmation agreements.
b.preferences.
c.secured interests.
d.unsecured debts.
15) According to the terms of Diego’s will, specific gifts are made, and taxes and other
estate expenses and debts are paid. The assets of Diego’s estate that remain are most
likely to be distributed
a.by codicil.
b.holographically.
c.per capita.
d.through a residuary clause.
16) Qiana and Rex take title to a Shakes n’ Burgers restaurant in such a way that if one
dies, the other will be the sole owner. Qiana and Rex own the restaurant as
a.co-owners in fee simple.
b.joint tenants.
c.tenants by the entirety.
d.tenants in common.
17) Soft Drink Corporation is charged with violating the Sherman Act through conduct
subject to the rule of reason. When applying the rule of reason in this situation, a court
will not consider
a.the purpose of the agreement.
b.the parties’ market ability to implement the agreement.
c.the effect of the agreement on international trade.
d.the potential effect of the agreement on competition.
18) On March 1, Eugene retains Farley to act as his authorized agent. On April 1,
Eugene dies. On April 2, before Farley knows of Eugene’s death, he enters into a
contract on Eugene’s behalf. The contract is
a.binding on Eugene’s heirs.
b.binding on Farley.
c.void.
d.voidable.
19) Federal administrative agencies can exercise only those powers that a state
legislature has delegated to them in enabling legislation.
20) Stella bought a cup of coffee at the Roasted Bean Drive-Thru. The coffee had been
heated to 190 degrees and consequently had dissolved the inside of the cup. When
Stella lifted the lid, the cup collapsed, spilling the contents on her lap. To recover for
third-degree burns on her thighs, Stella filed a suit against the Roasted Bean. Can Stella
recover for breach of warranty? Explain.
21) A holder takes an instrument for value if he or she accepts the instrument in
payment of a preexisting obligation.
22) Floramaria is an elderly woman who lives with her niece Galaxy. Floramaria is
dependent on Galaxy for support. Galaxy advises Floramaria to “invest” in Galaxy’s
“professional gambling” venture, or Galaxy will no longer support her. Floramaria liq-
uidates her other investments and signs a contract with Galaxy, to whom Floramaria
gives the funds. Can Floramaria set aside this contract?
23) Federal law permits the intentional interception of any wire, oral, or electronic
communication.
24) A famous trademark may be diluted only by the unauthorized use of an identical
mark.
25) Like statutory law, administrative law is created by legislatures.
26) All states’ laws permit minors to disaffirm contracts.
27) A court can exercise jurisdiction over property that is located within its boundaries.