Which of the following is false regarding bankruptcy proceedings in Spain?
A. In order to be effective, an arrangement representing a proposed settlement between
the debtor and creditors must be approved by creditors representing at least 20 percent
of the debtor’s liabilities and by the judge.
B. A failure to obtain the necessary approval of a proposed settlement between the
debtor and creditors may result in the debtor’s liquidation.
C. Bankruptcy proceedings start with a finding of insolvency.
D. Insolvency means that the business has failed to meet at least some financial
obligations for at least six months.
E. The bankruptcy filing may be done voluntarily by the debtor company, or it may be
done involuntarily by the debtor’s creditors in an enforced bankruptcy.
Which of the following best represents the ruling of the U.S. Supreme Court in Oncale
v. Sundowner Offshore Services Inc., the case in the text addressing whether a plaintiff
could prevail in a sexual harassment case when the harassers were of the same sex?
A. That same sex harassment states a claim under Title VII only if the harasser is a
homosexual.
B. That same sex harassment may never state a claim under Title VII.
C. That same sex harassment may state a claim in the male to male context but not in
the female to female context.
D. That same sex harassment may state a claim under Title VII.
E. That same sex harassment may state a claim only if there was also involvement by at
least one person of the opposite sex in the harassment.
The ______ is the person who receives transfer of possession of property in a bailment
situation.
A. Transferor
B. Transferee
C. Novator
D. Bailor
E. Bailee
“Coffee shops.” Bernice wants to open a chain of coffee shops but needs some
investors. Her friend Robbie tells Bernice that she should be sure that she satisfies
requirements of the SEC. Robbie tells her that she has to provide information to the
SEC involving a description of the securities, an explanation of how proceeds will be
used, information regarding the management of the company and other matters. He tells
her that she also has to provide a document to the SEC that will be provided as an
advertising tool to potential investors who can rely on it to decide whether they should
buy the securities. Bernice says that she does not want to do that. She explains to
Robbie that insofar as the coffee shop venture is concerned, she does not want to
advertise; and she wants to offer securities only to a limited number of wealthy friends.
Particularly, she has in mind Scott who has a net worth of at least $3 million.
Which of the following is the term for the document referenced by Robbie to be
provided to the SEC that will be used as an advertising tool to potential investors who
can rely on it to decide whether they should buy securities?
A. An advertising statement
B. A prospectus
C. An inventory
D. A proposed income statement
E. A securities advertisement
“Parent Involvement.” Marcy and George, both artists, discussed forming a partnership
to paint portraits. George’s parents were interested in investing in the partnership, but
they wanted to avoid any liability. George suggested forming a limited partnership. He
told Marcy and his parents that they could do it very informally, that an oral agreement
was sufficient, and that the parents would be protected from liability. Although George
protested strongly on the basis that it was a waste of money, Marcy insisted that a
certificate of limited partnership be filed with the secretary of state. After a few months,
Marcy and George decided that they wanted to add a new partner, Betty, to the
partnership as a general partner. Betty had some expertise in the portrait field but,
unfortunately, she had also had some scrapes with local law enforcement. George’s
parents objected strenuously to the admission of Betty. Marcy and George took the
position that the parents, as limited parents, had no say in the admission of a new
partner. George’s father, who had an interest in painting and was concerned that the
partnership was not making very much money, decided to start coming to the
partnership studio to manage the business and attempt to bring it into profitability.
Was George correct that a limited partnership may be created informally through an oral
agreement?
A. Yes, an oral agreement will suffice.
B. George was partially correct. A written agreement is required, but only the general
partners are required to sign it. Limited partners may agree orally.
C. George was partially correct. A written agreement is required, but only the limited
partners are required to sign it. General partners may agree orally.
D. George was incorrect, and both general and limited partners must sign a certificate of
limited partnership and file the certificate with the secretary of state.
E. George was incorrect, and both general and limited partners must sign a document of
partnership limitation that is kept on file in the primary business office of the limited
liability partnership.
“Refused Furniture.” Selina arranges to sell furniture from her furniture store to Roland
for $3,000. Roland was supposed to give Selina a $500 deposit on February 1 and pay
the remainder in monthly installments. Selina was to deliver the furniture by February
7. Roland did not pay Selina as promised on February 1. He asked her to wait until
March 1, but she refused. She told him that the contract was canceled, and she refused
to deliver the furniture at all. Selina was able to sell the furniture for only $2,500
because of a downturn in the economy. Roland told Selina that she had no right to
withhold or sell his furniture and that he was suing. Selina also incurred $100 in
additional amounts in advertising costs to advertise the furniture that Roland initially
purchased. Selina saved $40 in delivery costs because she did not have to deliver the
furniture to Roland. The subsequent purchaser picked up her own furniture.
Which of the following is true regarding Roland’s claim that Selina had no right to sell
the furniture he initially purchased?
A. Roland is correct. Selina had no right to sell the furniture, but she retained the right
to sue him for any deficiency.
B. Roland is correct but only because of the special UCC exception for consumer
goods.
C. Roland is incorrect. Selina had a right to resell the furniture.
D. Roland is incorrect but only if Selina can prove that she had no reason to believe that
he was a credit risk prior to signing the contract of sale.
E. Roland is correct because of federal consumer protection laws.
“Portraits.” Belinda, a famous portrait painter, agreed to paint Harry’s portrait for
$4,000. She also agreed to paint the portraits of Michelle’s two Corgi dogs, Baby and
Bree. Michelle agreed to pay Belinda $10,000 for the two Corgi portraits. Belinda
charged Michelle more because dogs annoyed her. Belinda met the spoiled dogs, and
they really got on her nerves. Plus, she was behind on finishing Harry’s portrait.
Belinda, therefore, assigned the right to receive the money for the dog portraits and
delegated the duty to paint the dog portraits to her assistant, Fred. He eagerly accepted
and painted the portraits. She also assigned to Fred, as payment for amounts she owed
him for various duties, the right to receive payment from Harry. The contract Belinda
had with Michelle did not address assignment in any way. The contract Belinda had
with Harry, however, prohibited the right to assign payment for services received. Harry
fancied himself as an experienced business person and insisted on that provision
because he had read somewhere that such a clause was a good idea. Belinda finished
the portrait of Harry and called him to come and pick it up. Meanwhile, a disgruntled
secretary who disliked Belinda told both Michelle and Harry about the assignments to
Fred. Michelle was furious and refused to pick up the portrait or pay anyone. Harry
likewise refused to pay for his portrait.
What would be the most likely result if Fred sues Harry for the $4,000 payment?
A. Harry will win because he did not expressly agree to the assignment.
B. Fred will win because the right to receive payment could be validly assigned.
C. Fred will win unless Harry can prove that Fred knew that Harry did not want the
benefits assigned.
D. Fred will lose unless Fred can prove that he was unaware that Harry did not want the
benefits assigned.
E. Harry will win because the portrait was personal in nature and payment for it could
not be assigned.
Which of the following is false regarding compliance with GAAP and GAAS?
A. Failure to comply with GAAP and GAAS will almost certainly constitute a breach of
duty.
B. Compliance with GAAP and GAAS does not automatically mean that the duty of
care has been met.
C. In some circumstances, a reasonable, competent accountant would do more than that
the GAAP or GAAS requires.
D. GAAP standards are established by the Financial Accounting Standards Board, and
GAAS standards are established by the American Institute of Certified Public
Accountants.
E. State statutes may not impose additional legal requirements on accountants beyond
GAAP and GAAS.
Which of the following was the result in the Case Opener involving whether a partner
wrongfully caused dissolution of a partnership thereby barring him from recovering
damages from other partners based upon improvements to an office building that were
not properly approved?
A. That the partner at issue was partially at fault for the wrongful dissolution of the
partnership but that he would be entitled to sue for damages because the dissolution was
not entirely his fault.
B. That the partner at issue was partially at fault for the wrongful dissolution of the
partnership and that he was therefore barred from recovering damages from the other
partners.
C. That the partner at issue was not at fault for the dissolution of the partnership
because expenditures were improperly made by the partnership and hidden from him
but that he was barred from recovering damages because the partnership had not yet
been wound up.
D. That the partner at issue was fully at fault for the wrongful dissolution of the
partnership and that he was therefore barred from recovering damages from the other
partners.
E. That the partner at issue was not at fault for the dissolution of the partnership
because expenditures were improperly made by the partnership and hidden from him
and that he could sue for damages based upon the wrongful acts of the other partners.
Which of the following do courts focus on when a strict product liability action is
involved?
A. Whether the product was in a defective condition and unreasonably dangerous when
sold.
B. Whether the manufacturer was negligent.
C. Whether the seller exercised all possible care in the preparation and sale of the
product.
D. Whether the consumer had a contractual relationship with the seller.
E. Whether the manufacturer knew of a problem with the product.
Which of the following types of title does a good-faith buyer hold when the seller
transfers a void title?
A. Void
B. Voidable
C. Good
D. Substantiated
E. Excised
Which of the following is a multilateral convention establishing procedures for
transnational discovery between private persons in different states?
A. Smith Evidence Conventions
B. International Evidence Convention
C. Discovery Convention
D. Hague Evidence Convention
E. NAFTA Evidence Convention
“Past Due Rent.” Christen operated a temporary help business. Planning to open a
second office, she rented office space from Dusty. Unfortunately, her business was not
doing very well, and she decided not to open a second office. Christen was able to reach
an agreement with Doug whereby she transferred her entire interest in the leased
property to him. The agreement she had with Dusty prohibited her from transferring her
interest. Dusty, however, accepted rent payments from Doug because it was the easiest
course of action. Doug started a catering business in the space. It did well during the
holiday season, but Doug was unable to maintain bookings and became unable to pay
the rent. Dusty called Christen and asked her to pay the rental payments reminding her
that she breached the lease agreement in the first place when she transferred her
interests in the lease to Doug. Christen told Dusty to forget any payments from her and
hung up. Dusty wants to sue Christen for the lease payments and also for breaching the
lease agreement, and he also wants to sue Doug. Christen talks to Doug and he says that
he has no plans to pay Dusty because Dusty is a jerk. Doug also says that he does not
believe that he has any liability to Christen if she pays Dusty. Doug says that the
premises were acceptable but that Dusty is rude and money hungry, traits he finds
untenable.
Which of the following is true regarding the right of Dusty to sue Christen for
transferring her interests to Doug?
A. When he accepted rent payments from Doug, Dusty waived any lease provision
prohibiting the transfer.
B. Any such provision in the lease was void as against public policy.
C. Any such provision in the lease was unenforceable so long as Doug was an
acceptable tenant.
D. Dusty could sue Christen and win for breaching the lease agreement.
E. Dusty could sue Christen and win for breaching the lease agreement only if Doug
has committed waste on the property.
When is dissolution of a partnership considered complete?
A. Only when any partner, by choice, stops fulfilling the role of a partner to the
business.
B. Only when any partner, by default, stops fulfilling the role of a partner to the
business.
C. When any partner, by choice or by default, stops fulfilling the role of a partner to the
business.
D. Thirty days after any partner, by choice or by default, stops fulfilling the role of a
partner to the business.
E. Thirty days after any partner, by default, stops fulfilling the role of a partner to the
business.
“Grooming Dispute.” Joshua has a successful dog grooming business called “Tub &
Dog.” He registered the business name for trademark protection. Sandy noticed how
well Joshua was doing and opened his own business called “Tub & Dog II.” Joshua is
unhappy about Sandy’s use of the name. He is also unhappy because Sandy is copying
Joshua’s practice of tying a bright orange bandana around each dog’s neck immediately
after grooming. Joshua sued Sandy for trademark infringement based upon the name
and the use of the orange bandana. Sandy replies that one reason Joshua should not
prevail is that he is involved primarily in the sale of dog grooming products while
Joshua is involved in the grooming of dogs. Sandy claims that his use of the orange
bandana is very rare because he does very little grooming. Sandy also defends on the
basis that actual confusion among consumers does not exist. Joshua insists that he
should prevail and notes that he is considering expanding into the product sales area.
Which of the following is true regarding Joshua’s claim of trademark infringement
involving the color of the bandana?
A. Color may not be a trademark.
B. Color can be a trademark regardless of whether it identifies goods with their source.
C. Color may be a trademark if it identifies goods with their source.
D. Color can be considered in a trademark infringement case only if another primary
trademark infringement has been established.
E. Color can be a consideration in a trademark infringement case only if a primary
additional infringement has been established and secondary meaning has been
established in regards to the color.
“Customer Uncertainty.” Wallace wanted baseball caps with the name of the firm of
which he was president, ABC Corporation, emblazoned on the front. Fran, a merchant
in specialized goods, orally agreed with Wallace that she would sell to him 200 baseball
caps at $5 each. No writing was ever made although there were a number of witnesses
to the conversation. After the caps were finished, but before they were shipped, Wallace
called to cancel the order because his firm had just announced a merger and would no
longer be known as ABC Corporation. Fran told him to forget canceling the contract
because she had just finished the caps. Wallace told Fran that she should have been
smarter and had him sign something because without a writing, she does not have a
chance in court. Fran is also having problems with other customers. A father who
voluntarily coached a youth softball league in his community called and orally ordered
150 baseball caps at a cost of $400 each to give out at a league banquet. He just wanted
a variety of caps with no name on them because players from different teams would be
at the banquet. Fran had sent a confirming letter to the coach. Fran had the caps packed
up and ready to go. Twenty days later, just before she shipped them, the coach called
and told her that there was a big feud, the banquet was canceled, and that he was
canceling the order. She believes that the coach should pay damages and that it is just
that he do so because a big order was involved. Finally, Fran plans on taking to small
claims court a merchant customer who orally ordered 500 plain T-shirts at a cost of $5
each but has not picked them up and has refused to do so after several demands.
Which of the following is true regarding Fran’s assertion that she should be allowed to
recover from the coach?
A. Based upon the facts given, Fran cannot recover because the father, who was not a
merchant in regards to the transaction and had not signed anything showing that he was
to be charged for the shirts.
B. Fran can recover because she sent the father a confirming letter, and he did not
object within 10 days of receipt.
C. Fran can recover because she sent the father a confirming letter, and he did not
object within 20 days of receipt.
D. Fran can recover because the transaction was not covered by the UCC.
E. Fran can recover only if she can prove by testimony of a witness that the father
received the confirming letter and read it.
Which of the following was the result on appeal in Forest Commodity Corp. (“FCC”) v.
Lone Star Industries Inc., the case in the text in which the Forest Commodity Corp.
denied that it violated a contractual nonassignability clause and claimed that it was
entitled to recover on a breach of contract claim because the defendant did not fully
perform?
A. The court ruled that FCC did not violate a nonassignability clause and that it was
entitled to recover.
B. The court ruled that even though FCC violated the nonassignability clause, the
nonassignability clause was against public policy; and FCC was allowed to recover.
C. The court ruled that even though FCC violated the nonassignability clause, the other
party also violated a nonassignability clause resulting in FCC being able to recover its
full claim.
D. The court ruled that FCC violated a nonassignability clause and was therefore unable
to recover on its claim.
E. The court ruled that FCC violated a nonassignability clause but that because the
other party also violated a nonassignability clause, FCC’s recovery would be reduced by
50%, not completely barred.
Sally agrees to mow Paul’s yard for $300 for the summer. Paul wishes to assign the
contract to his grandmother. Sally objects because Paul’s yard is very small while his
grandmother’s yard is over an acre. Which of the following is the correct legal outcome
for the dispute between Sally and Paul?
A. Sally will win because Paul’s attempted assignment would increase the duties to
which she agreed.
B. Sally will win because all assignments are invalid without the obligor’s consent.
C. Sally will win unless Paul paid her the $300 in advance in which case Paul will win.
D. Paul will win because he may validly assign the contract without Sally’s consent.
E. Paul will win so long as he tells Sally about the assignment prior to the time she
begins any performance whatsoever.
“Accountant Dissatisfaction.” Paul agreed to perform accounting services for Teresa,
and they entered into a contract setting forth the terms of their agreement. Teresa
wanted Paul to review her financial information and her system of internal controls.
Teresa became dissatisfied with Paul’s work after he reported some irregularities in her
financial statements. Paul, on the other hand, claimed that he had adequately performed
his duties and that, at the most, any mistakes that he made were minimal.
If Paul ______________ performed on the contract, he may be entitled to complete
compensation minus the amount of damages caused by the breach.
A. Completely
B. Substantially
C. Partially
D. Adequately
E. Materially
Under the UCC, how may an acceptance be made?
A. Only by a writing.
B. Only orally or by a writing.
C. Only by electronic communication or by a writing.
D. Only by facsimile or by mail.
E. By any reasonable means of communication.
“Book Sale.” Beverly offered to sell Rick a used business law book for $50. She told
him that he could use it in his upcoming business law class the next semester. In fact,
there was a problem with the book; it was several editions old. Rick was not aware of
that fact, and neither was Beverly. When Rick took the book to class and realized the
problem, he went back to Beverly requesting a refund. Beverly refused to return his
money. She claimed that subjectively she thought that the book was correct, that she did
not commit fraud, and that a binding contract existed. The book, however, is outdated
and cannot be appropriately used in the class.
Which of the following is the term representing the $50 to be provided by Rick and the
book to be provided by Beverly?
A. Encouragement
B. Material
C. Consideration
D. Inducement
E. Provisions
Under which of the following tests is an accountant held liable to any third-party that
was or should have been foreseen as a possible user of the accountant’s work product
and that, in fact, did use and rely upon that work product for a proper business purpose?
A. The Reasonably Foreseeable Users Test
B. The Restatement Test
C. The Privity Test
D. The Near Privity Test
E. The Ultramares Rule
Which of the following prohibits states from discriminating against citizens of other
states when those nonresidents engage in ordinary and essential activities such as
seeking employment?
A. The full faith and credit clause
B. The privileges and immunities clause
C. The contract clause
D. The citizens’ rights clause
E. The first amendment
“Overextended Debtor.” For his home, Dennis purchased a big screen television from
ABC Electronics and financed the purchase through ABC Electronics. Later, because
Dennis had bought a boat, a new car, an expensive engagement ring for his girlfriend,
and some other items, he was unable to continue making payments on the television.
The manager from ABC Electronics called 60 days after the sale and asked Dennis to
return the television. Dennis refused on the basis that ABC Electronics never perfected
its interest in the television. He also explained that he had later granted a secured
interest in the television along with his other goods to XYZ Credit in return for a loan.
No financing statement was filed on behalf of ABC Electronics although XYZ Credit,
with no knowledge of any interest of ABC Electronics, did file a financing statement.
Which of the following is true regarding any compensation that Molly is entitled to
from the bank because the bank did not timely file notice that it had no interest in her
goods?
A. She may recover $100 from the bank.
B. She may recover $200 from the bank.
C. She may recover $500 from the bank.
D. She may recover $1,000 from the bank.
E. She may not recover anything unless she incurred damages; and, in that event, she
may recover the amount of her compensatory damages.
Which of the following is true regarding Chinese Law?
A. Under the three tiers of corporate power in China, the board of directors is the
lowest, the board of supervisors makes up the second, and corporate officers compose
the top tier.
B. Under the three tiers of corporate power in China, the board of supervisors is the
lowest, the board of directors makes up the second, and corporate officers compose the
top tier.
C. Under the three tiers of corporate power in China, corporate officers make up the
lowest tier, the board of supervisors makes up the second, and the board of directors
composes the top tier.
D. Under the two tiers of corporate power in China, the board of directors is the lowest
and corporate officers compose the top tier.
E. Under the two tiers of corporate power in China, the board of supervisors is the
lowest and corporate officers compose the top tier.
“International Expansion.” Zach wants to expand his coffee business internationally –
into Zeno, a small remote country. He moves there temporarily in order to oversee
operations. His best friend Zora asks him if he plans to hire legal counsel for the
expansion. Zach replies, “Of course not. The U.S. has the strictest laws regarding
contracts, employment, and business practices in the world. So long as I’m legal in the
U.S., I’m legal anywhere. Besides, I studied up on Zeno law ten years ago, and I know it
all.” Zach proceeds and lands in jail in Zeno for violating recently passed laws
protecting employees and mandating certain benefits. Authorities there claim that he
sexually harassed an employee, failed to pay sufficient wages, and failed to give
employees Zeno’s mandated 12 weeks of paid vacation per year.
Which of the following is true regarding Zach’s legal problems in Zeno?
A. Zach can rely upon the federal statutory laws of the U.S. as a defense but not the
U.S. Constitution.
B. Zach is entitled to all U.S. Constitutional rights in Zeno because he is a U.S. citizen,
but he cannot rely on statutory law.
C. Zach can rely on U.S. laws as a defense only if he obtains an opinion from the office
of the U.S. attorney that his operations in the U.S. have strictly complied with the law.
D. Zach must obey the laws of Zeno when operating a business in Zeno and cannot rely
upon U.S. laws as a defense.
E. Zach can rely upon the federal statutory laws of the U.S. as a defense. Additionally,
Zach is entitled to all U.S. Constitutional rights in Zeno because he is a U.S. citizen.
Which of the following is false regarding a general partnership?
A. It is easy to create.
B. Income of the business is personal income.
C. Business losses can be deducted from taxes.
D. The partners are considered agents of the partnership.
E. In most cases partners do not have personal liability for losses.
Which of the following is false regarding the UCC’s signature requirement for a
negotiable instrument?
A. The signature may be an assumed name.
B. A signature may be made by means of a device or machine.
C. A signature may be made manually.
D. The signature of an agent on behalf of the principal binds the principal and satisfies
the signature requirement.
E. The UCC prohibits an “X” from being used as a signature.
What does the term “FOB” when used as a shipping term represent?
A. Fee on Board
B. Fee on Basis
C. Freedom of Board
D. Free on Board
E. Free of Basis
Which of the following is an element of a legally binding contract?
A. Inquiry
B. Acknowledgement
C. Capacity
D. Knowledge
E. Affirmance
“Accounting Advice.” Brad, a newly hired Certified Public Accountant, who barely
passed his boards, was asked by a business client, a chief executive officer, about the
effect of the Sarbanes-Oxley Act on an accounting issue. Brad assured the client that the
client should not be concerned about the Act because it is very vague, unspecific, and
difficult to understand. Brad told the CEO that in any event, the CEO could not be held
personally responsible regardless of what happened because only company business
was involved. Brad also told the CEO that there is no oversight involved with the act.
Later that same day, a coworker of Brad discovered that the CEO had been involved in
misstating some financial reports and had also destroyed financial documents to cover
up fraud. An employee at the company, Laura, had informed the coworker as well as the
SEC. When the issue was mentioned to the CEO, he immediately fired Laura.
Contrary to Brad’s statement, does the Sarbanes-Oxley Act create a board of oversight;
and, if so, what is its name?
A. Brad is correct. No oversight board was created.
B. A board called the Public Company Accounting Oversight Board was created by the
Act.
C. A board called the Public Accountability Commission was created by the Act.
D. A board called the CPA Oversight Commission was created by the Act.
E. A board called the Federal Accountability Commission was created by the Act.
Under which of the following may a court presume that an individual is abusing the
bankruptcy provisions of Chapter 7 when an individual’s debt is primarily consumer
debt and the individual’s income is above the median income in his or her state?
A. The means test
B. The assets test
C. The median test
D. The liquidation test
E. The bankruptcy test
What was the result on appeal in Figgie International Inc., v. Destileria Serralles Inc.,
the case in the text involving a dispute over bottle-labeling equipment that did not
perform as expected and whether usage of trade limited the buyer’s remedy to repair,
replacement, or return?
A. The court ruled that the remedy of repair, replacement, or a refund failed of its
essential purpose and that the buyer was therefore not limited to that remedy.
B. The court ruled that the remedy of repair, replacement, or a refund did not fail of its
essential purpose, and the remedy was enforced.
C. The remedy of repair, replacement, or a refund was found unconscionable and not
enforced.
D. The remedy of repair, replacement, or a refund was found unconscionable but
enforced anyway.
E. The remedy of repair, replacement, or a refund was not enforced because usage of
trade may not supplement a contract.
The ______ is the meeting at which the transfer of title actually takes place and delivery
and acceptance occur.
A. Closing
B. Termination
C. Conclusion
D. Transfer
E. Wrap-up
Which of the following was the result in Cameron v. Ewing, the case in the text
involving whether monthly proceeds from a reverse mortgage were subject to
garnishment?
A. The court ruled that the payments were not subject to garnishment because the
payments did not constitute earned income.
B. The court ruled that the payments were not subject to garnishment because the
defendant’s estate was ultimately liable to repay the monies received to the extent
repayment could be generated from sale of the property.
C. The court ruled that the payments were not subject to garnishment because it would
be against public policy to find as such.
D. The court ruled that the payments were subject to garnishment because the payments
constituted debts due the defendant.
E. The court ruled that the payments were subject to garnishment based on public
policy and also that the claimant was entitled to the full amount of the monthly
payments.