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Which of the following is needed in order for a business to qualify as an S corporation?
A. No more than 100 shareholders
B. Only individuals, trusts, and in some circumstances corporations as shareholders
C. At least $10,000 in capital
D. No more than 100 shareholders; only individuals, trusts, and in some circumstances
corporations as shareholders, and at least $10,000 in capital
E. No more than 100 shareholders and only individuals, trusts, and in some
circumstances corporations as shareholders; but there is no requirement of at least
$10,000 in capital
By filing a(n) ______ petition under Chapter 7, creditors can attempt to force a debtor
who is not paying debts as they become due into bankruptcy.
A. voluntary
B. involuntary
C. complaint
D. accusatory
E. dispute
Lawrence v. Fox was one of the earliest cases that upheld the right of:
A. tenants to sue their landlords
B. enforcement of an oral contract for land
C. third parties to sue promisors
D. creditors to sue debitors
E. obligors to sue obligees
Raffles v. Wichelhaus, the case involving two ships named Peerless, is a classic example
of a(n) _____.
A. rescinded contract
B. mutual mistake
C. unenforceable agreement
D. unilateral mistake
E. misrepresentation
When an accord and satisfaction is at issue, the ______ is the payment, by the debtor, of
the reduced amount.
A. satisfaction
B. accord
C. both satisfaction and accord
D. fund transfer
E. bond
Under the UCC, what is a change, without consent, that modifies the obligation of a
party to the instrument?
A. An alteration.
B. A defacement.
C. A material addition.
D. A transformation.
E. A reformation.
Disappointed Applicant. Polly, who had a regular driver's license to operate an
automobile, decided that she really wanted to drive a tractor-trailer truck. She thought
that it would be nice to earn money while seeing the country. Polly had all applicable
training and went to her state's department of motor vehicle office to take the test
required in order to obtain a license to drive a tractor-trailer truck. While taking the test,
in an effort to relieve stress, Polly was stretching her neck and looking around at the
other nervous test takers. The proctor for the exam saw her and accused her of
stretching and straining to look at the exam answers of other test takers. Her application
to drive a tractor-trailer was denied. The local agency department head was also furious
with Polly and proceeded to revoke her regular automobile driver's license as well.
Applicable statutes provide as follows: (1) "the DMV may suspend or revoke the
privilege of any person to operate a motor vehicle upon any of the grounds which
authorize the refusal to issue a license"; (2) "the DMV may refuse to issue a license to
any person who has "committed any fraud in any application." Polly hears that you
have just finished business law and asks for advice. She says that she had decided that
she does not really want to drive a tractor-trailer truck because of her neck problems but
that she really would like to have her license to operate a regular automobile reinstated.
Assuming Polly seeks to appeal revocation of her license to drive an automobile
through any available avenues, what is the most likely result?
A. The agency decision will be upheld so long as it is determined that the agency head
reasonably thought she was cheating, even if she was not.
B. The agency decision will be upheld so long as it is determined that substantial
evidence supported the agency head's decision that she was cheating, even if she was
not.
C. The decision will be reversed because Polly has decided that she no longer wants a
license to drive tractor-trailer trucks.
D. The appeal will be dismissed because Polly had no right to review of the agency
head's decision.
E. The revocation of her license to drive automobiles will be reversed because the
agency had no authority to take that step.
Men and women may be paid different wages under the Equal Pay Act when ____.
A. payment is made pursuant to a seniority system
B. payment is made pursuant to a merit system
C. payment is made pursuant to a system which measures earnings by quantity or
quality of production
D. payment is made pursuant to a seniority system, when payment is made pursuant to a
merit system, and when payment is made pursuant to a system that measures earnings
by quantity or quality of production
E. payment is made pursuant to seniority system or when payment is made pursuant to
a merit system, but not when payment is made pursuant to a system that measures
earnings by quantity or quality of production
An agreement in which two parties enter into before marriage that clearly states the
ownership rights each party enjoys in the other party's property is known as a(n)
_________.
A. preliminary agreement
B. planned contract
C. approved resolution
D. prenuptial agreement
E. arranged marriage
Stocks that are issued to individuals below their fair market value are called
_______________.
A. no-par stocks
B. reduced stocks
C. watered stocks
D. less-value stocks
E. unapproved stocks
The right to enter onto property to remove underground materials is included in the
ownership of ____________________.
A. subsurface rights
B. underground rights
C. earth rights
D. terrestrial rights
E. None of these, because there is no such right
Which of the following is the first element of a contract?
A. An agreement.
B. Intent.
C. An offer.
D. An acceptance.
E. A writing.
DUI Charge. Monique was licensed to train massage therapists. A new federal agency,
the Aesthetic and Massage Commission, took very seriously its role of enforcing the
statute enabling the Commission to do its work and providing that licensed massage
therapists must refrain from "any act or conduct indicating bad faith, incompetence,
dishonesty, or improper dealing." Monique, while driving home late one night from a
party, was stopped by the police and arrested for driving under the influence of alcohol.
She pled guilty to the offense. When the Aesthetic and Massage Commission
discovered the offense, the officials of the agency met, decided that Monique might
drink on the job, and that she might pose a danger to students. Accordingly, her license
to teach massage therapy was revoked. Monique threatened to sue to retain her license
and was told by the agency head that she had no right to appeal to court because of the
nature of the Aesthetic and Massage Commission; and that, in any event, action by an
agency is always upheld. Which of the following is true regarding the statement of the
agency that Monique had no right to appeal to court?
A. The agency representative was wrong; and if Monique cannot resolve the issue
within the agency, she may appeal to court for judicial review.
B. Because the agency was set up to protect the safety of the public, the agency
representative is correct unless Monique can establish that she entered into a separate
contractual arrangement with the agency when she was hired that gave her the right to
appeal decisions to court.
C. Further information is needed regarding whether the agency was an executive
agency or an independent agency because while actions of an independent agency may
be appealed to court, actions of an executive agency may not be appealed to court.
D. Further information is needed regarding whether the agency was an executive
agency or an independent agency because while actions of an executive agency may be
appealed to court, actions of an independent agency may not be appealed to court.
E. Because the agency was set up to protect the safety of the public, the agency
representative is correct; and Monique has no right to a court action and no right to
enter into a contractual agreement with the agency regarding appeal rights.
According to the principle of federalism established by the U.S. Constitution, how is
the authority to govern allocated?
A. It is allocated to the federal government.
B. It is allocated to the states.
C. It is allocated to local jurisdictions.
D. It is allocated to the U.S. Senate.
E. It is divided between federal and state governments.
Which of the following is a term for contracts within the statute of frauds involving
promises to pay a debt of another if the other party fails to pay?
A. Secondary promises
B. Primary promises
C. Primary debts
D. Third-party debts
E. Commercial promises
Which of the following would not be considered an example of consideration?
A. A promise to stay in a job until a particular project is completed.
B. A promise to your football coach to refrain from riding your motorcycle during
football season even though you love riding it.
C. A promise to cook dinner for your roommate for the next six months.
D. A promise to stop drinking alcohol during exam week.
E. A promise to pay your employees as required by law.
Which of the following is true under the UCC regarding a security interest in collateral
that has been perfected in one state when the collateral is moved to another state?
A. A security interest in collateral that has been perfected in one state will generally
expire immediately when the collateral is moved to another state.
B. A security interest in collateral that has been perfected in one state will generally
transfer to another state for a period of four months from the date that the property is
brought into the other state.
C. A security interest in collateral that has been perfected in one state will generally
transfer to another state for a period of six months from the date that the property is
brought into the other state.
D. A security interest in collateral that has been perfected in one state will generally
transfer to another state for a period of two months from the date that the property is
brought into the other state.
E. A security interest in collateral that has been perfected in one state will generally
transfer to another state for a period of 30 days from the date that the property is
brought into the other state.
Which law governs partnerships in many states in the absence of an express agreement?
A. The Joint Partnership Act
B. The Uniform Joint Agreement Act
C. The Uniform Partnership Act
D. The Associated Partnership Act
E. The Joint Agreement Act
Four Paws Protection. Congress set up a new agency to more closely regulate testing of
personal and cosmetic products on animals. Legislation was passed naming the agency
the "Animal Protection Commission," and setting forth the function of the agency and
its specific powers. Congress provided the agency with the power to make rules,
investigate violations, and adjudicate charges of wrongdoing. The agency proceeded to
properly give notice and issue rules. The rules provided for civil as well as for criminal
penalties. Agency personnel issued an order for Fluffy Shampoo Corporation to attend a
hearing regarding its animal testing and to bring to the hearing all company documents
pertaining to animal testing. Fluffy Shampoo resisted on the basis that the agency had
no power to compel its attendance at a hearing or to require it to provide any
documents. Fluffy Shampoo also claimed that criminal penalties may not flow from
violation of agency rules. The agency proceeded to issue a ruling that Fluffy Shampoo
cease all activity based upon its refusal to cooperate. Which of the following is the
correct term for legislation passed by Congress specifying the name, functions, and
specific powers of the Animal Protection Commission?
A. Enabling legislation
B. Enacting legislation
C. Approving legislation
D. Administrative regulation
E. Agency regulation
Useless Friend. Charles, who is very gullible, is friend with Bobby. Bobby, who cannot
be trusted, decides to try to bind Charles to a contract in Bobby's favor. Bobby has
Charles sign a contract promising to wash Bobby's car once a week for a month for $80.
The contract incorporated by reference terms on the back. The terms on the back were
in very small print and required Charles for one year to cook dinner for Bobby, do his
laundry, and clean his apartment. Bobby is also very angry with his former girlfriend,
Tessa, and decides to start rumors, that would constitute the tort of defamation, such as
that she has a vile disease, cheated on tests, and stole from friends. Bobby wants to
enlist the help of Charles but knows that Charles would be hesitant to assist in his
endeavors. One evening, however, Charles drank too much beer and was clearly
intoxicated - a fact apparent to Bobby. Bobby had him sign a contract agreeing to
defame Tessa for $50. When he sobers up, Charles tells Bobby that he was drunk and
that he has no intention of defaming Tessa, who also happens to be Charles' new
girlfriend. He also finally takes a look at the contract involving work for Bobby and
tells Bobby that the contract is outrageous and that he has no intentions of going
through with any of it. Which of the following would be a possible defense to Bobby's
contract involving chores based upon the small print on the back of the contract?
A. Substantive unconscionability
B. Unclear drafting
C. Procedural unconscionability
D. Outrageous wording
E. Adhesion conscionability
S corporations _____.
A. are considered partnerships yet taxed like corporations as long as they follow
regulations
B. cannot have more than 80 shareholders
C. shareholders do not report profit on their personal income tax forms
D. are formed under federal law
E. income is not taxed when it is distributed to shareholders
If a law prevents individuals from exercising a fundamental right, the law will be
subject to _____.
A. intermediate scrutiny
B. rational basis scrutiny
C. severe scrutiny
D. strict scrutiny
E. legal scrutiny
Check Cashing Business. Susan owns and operates a check cashing business. A
customer, Bob, claiming to be Sam, comes in and cashes a $2,000 check issued by ABC
Trucking to Sam. The day after Susan cashed the check, she received a notice from
ABC Trucking that some checks had been stolen. It was later discovered that the
customer had forged Sam's name on the check issued by ABC Trucking. At the time she
took the ABC Trucking check, Susan was very busy with several customers in line. She
simply glanced at the check and cashed it. A reasonable examination would have
revealed that the check had been materially altered and changed from the amount of
$200 to $2,000. Susan decided that she needed to hire some people to help her because
she also had a problem with another check. On the same day that she took the ABC
Trucking check, she took a check from another customer, Maurice. It was later
discovered that the check from Maurice, which was four months old, was the subject of
a dispute between Maurice and the issuer of the check for whom Maurice had done
some work. The issuer claimed that the work was improperly done. Both ABC Trucking
and the issuer of the check to Maurice stopped payment on the checks. Susan claims
that she was entitled to the status of holder in due course and was entitled to payment
on both checks. What is the effect on Susan's status as a holder in due course in taking
the check from the customer that was four months old?
A. There is no effect on her status as a holder in due course because an instrument is
only considered overdue if it is outstanding for 150 days.
B. There is no effect on her status as a holder in due course because an instrument is
only considered overdue if it is outstanding for 180 days.
C. There is no effect on her status as a holder in due course because an instrument is
only considered overdue if it is outstanding for one year.
D. She would not be considered a holder in due course because a check is considered
overdue 90 days after its date.
E. It has no effect because a check is never considered overdue.
The employer-independent contractor relationship is not subject to
__________________.
A. workers' compensation
B. workplace safety
C. employment discrimination
D. unemployment statutes
E. All of these
Which of the following is true regarding lost property?
A. In most states the finder of lost property has title to the lost good against all
including the person who lost the property.
B. In most states the finder of lost property has title to the lost good against all except
the person who lost the property.
C. In most states the finder of lost property has no title to the lost good because the
good is to be turned over to the police department for later sale if the true owner cannot
be located.
D. In all states the finder of property has an obligation to put a notice in the local paper
looking for the true owner before the finder of the property can claim ownership.
E. In most states the finder of lost property has title to the lost good against all except
the person who lost the property, but that right only arises after the finder of the
property can establish that the finder spent at least one-third of the fair market value of
the property in locating the owner.
Bob is hired to do computer sales for an electronics store. He agrees that if he leaves his
employment, he will not work for another computer store within 25 miles for a period
of two years. That type of agreement is called a(n) _____.
A. covenant not to compete
B. employment covenant
C. working covenant
D. termination agreement
E. public policy agreement
_______________ are laws governing labor-management relations in the U.S.
A. The Wagner Act
B. The Taft-Hartley Act and the Wagner Act
C. The Landrum-Griffin Act and the Taft-Hartley Act
D. The Wagner Act and the Landrum-Griffin Act
E. The Wagner Act, the Taft-Hartley Act, and the Landrum-Griffin Act
Claims to Funds. Paul had a great job as a bank executive. Unfortunately, his bank
came under scrutiny by federal regulators and while Paul had done nothing illegal, he
ended up being fired. Unfortunately for Paul, he had a number of debts. Among his
assets was a house worth $250,000 on which he owed $150,000 to a bank, which held a
security interest; three vehicles; an expensive watch worth $5,000; and $120,000 in an
Individual Retirement Account "IRA". He owed $900 per month in child support to his
ex-wife Suzy and was behind on payments in the amount of $1,800. He also owed
$2,000 in wages consisting of four months of back pay to Bob who took care of Paul's
landscaping needs and swimming pool care. Unable to find a job and believing that he
had no other option, Paul filed for Chapter 7 bankruptcy. All debtors angrily demanded
payment from liquidation of Paul's assets. Paul, on the other hand, claims that he needs
all the above-mentioned assets and that he should not have to give up anything. Only
federal bankruptcy exemptions apply to Paul's case. Which of the following forms
Paul's bankruptcy estate?
A. All his prepetition assets.
B. Only the jewelry and Individual Retirement Account.
C. Only the nonexempt assets.
D. Only the personal goods lacking a security interest.
E. Only the real estate.
Which of the following is a duty that typically cannot be delegated to a third party?
A. Mowing a yard
B. Payment of money owed
C. Delivering goods
D. Painting a house
E. Painting a portrait
What is a summary jury trial?
A. An abbreviated trial that leads to a nonbinding jury verdict.
B. An unabbreviated trial that leads to a binding jury verdict.
C. An unabbreviated trial that leads to a nonbinding jury verdict.
D. An abbreviated trial in which only a few witnesses are called to the stand.
E. Both an abbreviated trial that leads to a nonbinding jury verdict and an abbreviated
trial in which only a few witnesses are called to the stand.
If there is no room on an instrument for an endorsement or if all the room has been
taken by previous endorsements, a(n) ______ may be attached.
A. acknowledgement
B. blank endorsement
C. special endorsement
D. allonge
E. None of these. The instrument can no longer be endorsed.
Which of the following is not a defense available for an action of battery?
A. Self-defense
B. Consent
C. Defense of others
D. Defense of property
E. Defense of one's reputation
When a person decides to go into business on his or her own and is solely responsible
for management and profits a(n) __________________ is formed.
A. individual entity
B. sole proprietorship
C. single entity
D. sole entrepreneurship
E. single entrepreneurship
If a customer's ATM card is lost or stolen, the customer must notify the bank within
_____ days; and if that is done, the customer is then liable for only the first _____
stolen.
A. 5; $50
B. 3; $100
C. 2; $50
D. 7; $200
E. 1; $500
