“Animal Care.” Susan, a licensed veterinarian, was recently elected to the U.S. Senate.
Susan is very concerned about the lack of care for homeless cats and dogs. She
proposes legislation that citizens of all states be taxed sufficiently to provide for no-kill
animal shelters that citizens in states with higher than average incomes be taxed at a
higher rate than citizens of other states. She also proposed that federal funds for state
highways be denied to any state that fails to provide assistance to low income citizens
in covering pet vaccinations. Bill, another new senator, tells Susan that, apart from the
mandated federal income tax, Congress lacks the authority to tax states because the
U.S. Constitution expressly reserves that right to the states. Sam, another senator, tells
Susan that Congress has no authority to link highway funds or any other funds with
social welfare objectives. Ellen, a clerk in the Senate, tells Susan that Congress is
absolutely prohibited from taxing residents of one state at a higher rate than citizens of
another state.
Which of the following is true regarding Ellen’s statement?
A. Ellen is incorrect. The U.S. Congress has complete discretion on taxation.
B. Ellen is partially incorrect because before the U.S. Congress taxes one state’s
residents at a higher rate than citizens of other states, a rational relationship between the
difference and governmental need must be shown.
C. Ellen is incorrect because before the U.S. Congress taxes one state’s residents at a
higher rate than citizens of other states, an important need must be shown.
D. Ellen is incorrect because before the U.S. Congress taxes one state’s residents at a
higher rate than citizens of other states, a disparity of income of over 30% between one
state and another must be shown.
E. Ellen is correct.
Which of the following is true regarding the preexisting duty rule?
A. Unforeseen circumstances is an exception, but additional work and past
consideration are not exceptions.
B. Additional work is an exception, but unforeseen circumstances and past
consideration are not exceptions.
C. Past consideration is an exception, but unforeseen circumstances and additional work
are not exceptions.
D. Unforeseen circumstances and additional work are exceptions, but past consideration
is not an exception.
E. Unforeseen circumstances and past consideration are exceptions, but additional work
is not an exception.
Under the Sarbanes-Oxley Act, it is now a felony to willfully fail to maintain proper
records of audits and work papers for at least ______ years.
A. 2
B. 3
C. 4
D. 5
E. 6
Which of the following permits the SEC to exempt persons, securities, and transactions
from securities regulations?
A. The Sarbanes-Oxley Act of 2002
B. The Securities Acts Amendments of 1990
C. The Market Reform Act of 1990
D. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990
E. The National Securities Markets Improvement Act of 1996
Which of the following is the way people and businesses are located on the web?
A. Through product names
B. Through Internet names
C. Through domain names
D. Through trademark names
E. Through search engines
Which of the following is fraud without fraudulent intent?
A. Actual fraud
B. Presumed fraud
C. Immaterial fraud
D. Constructive fraud
E. Reliance fraud
Which of the following is true regarding the liability of accountants under the law of
Canada?
A. Canadian law is well settled in relation to an accountant’s liability to nonclients.
B. Canadian law does not recognize liability of an auditor in relation to a prospectus
distributed with the auditor’s filed consent by an issuer of securities containing
misrepresentations.
C. Canadian law does not recognize liability on the part of an auditor for
misrepresentations made in secondary-market disclosures made with the auditors’
written consent.
D. As in the U.S., in Canada the common law holds accountants liable for negligence to
clients.
E. In Quebec alone, accountants may not be held liable even if a causal link between
fault and damage is established.
Which of the following refers to the practice of an owner of a particular stock telling
other investors about the virtues of the stock, artificially increasing demand for the
stock, and causing an increase in price only to sell it for a quick profit?
A. Pumping and dumping
B. Marketing and selling
C. Pushing and pulling
D. Increasing and decreasing
E. Inflating and deflating
Ann, a Massachusetts resident, breached a contract entered into in Florida with Bruce.
Bruce successfully obtains a judgment against Ann for $150,000 in a Florida state court.
Ann lives in a nice apartment in Massachusetts, and her only substantial asset is a
vacation beach house in North Carolina. Which of the following is true regarding
Bruce’s ability to obtain funds from a sale of the beach house?
A. Bruce is only entitled to obtain funds from property located in Florida, the location
of the lawsuit, and cannot benefit from the property in North Carolina.
B. Bruce is only entitled to obtain funds from property located in Florida, the location
of the lawsuit, or from Massachusetts, Ann’s domicile, and cannot benefit from the
property in North Carolina.
C. Bruce will be able to sell the beach house in North Carolina through attachment
jurisdiction, and he is entitled to keep any funds obtained in excess of amounts owed.
D. Bruce will be able to sell the beach house in North Carolina through attachment
jurisdiction, but he must return to Ann any funds obtained in excess of amounts owed.
E. Under federal law, Bruce will only be able to sell the beach house through
attachment jurisdiction if after two years Ann has failed to satisfy the judgment, and any
sums received in excess of amounts owed to Bruce go the Federal Housing
Administration.
Which of the following results in liability for the principal because the principal
approved of an unauthorized agent’s signature?
A. Ratification
B. Authorization
C. Acknowledgement
D. Pre-approval
E. Post-approval
“Exercise Heat.” Harold rented space for his health club operation from Holly. Holly
and Harold have an ongoing dispute regarding the air conditioning. Harold wants a new
unit because he says that old one needs too many repairs, but Holly says that the old
unit is fine. One day after a particularly heated dispute, Harold comes to work to find
that the aerobics room and one weight lifting room, areas with air conditioning
problems, have been padlocked. Harold is furious and calls Holly who tells him that if
the areas are so bad, then he should just stay out. Harold immediately rents different
space in an adjoining building and moves his health club.
Which of the following promises in the lease did Holly breach, if any?
A. None
B. The covenant of real use
C. The covenant of advantageous business practices
D. The covenant of fair use
E. The covenant of quiet enjoyment
A party to a contract who transfers his or her duty to perform to a third party who is not
part of the original contract is called a[n] _____.
A. Delegatee
B. Delegator
C. Assignor
D. Assignee
E. Transferor
Which of the following was the result in Alexis Perez v. John Ashcroft, the case in the
text in which the plaintiff alleged that the Immigration and Naturalization Service (INS)
wrongfully adopted a requirement of religious training in order to qualify for a visa to
immigrants who seek to enter the U.S. to work in a religious vocation?
A. That the INS wrongfully adopted the requirement without entering into the formal
rule-making procedure.
B. That the INS wrongfully adopted the requirement without entering into at least
informal rule making and giving the public an opportunity to comment.
C. That the INS initially wrongfully adopted the requirement but that it would be
allowed to remain because of its long-standing nature and the fact that mandating either
informal or formal rule making would not change matters.
D. That the INS rightfully adopted the requirement because it merely represented an
interpretation of previously existing INS regulations.
E. That the INS rightfully adopted the requirement without entering into the formal
rule-making procedure because of the emergency situation existing in the U.S. in regard
to immigration.
Which of the following chapters recognizes insolvency proceedings pending in a
foreign country and relief for foreign debtors?
A. Chapter 7
B. Chapter 9
C. Chapter 11
D. Chapter 14
E. Chapter 15
Which of the following occurs when the sale itself is contingent on approval?
A. A transferable contract
B. An unapproved contract
C. An average delivery contract
D. A conditional sales contract
E. A goods-in-transfer contract
Which of the following is true regarding an arrest without a warrant?
A. A law enforcement agent can arrest a suspect without a warrant if the officer believes
there is probable cause but not enough time to obtain a warrant.
B. A law enforcement officer may not arrest a suspect without a warrant even if the
officer believes there is probable cause but insufficient time to obtain a warrant.
C. A law enforcement agent can arrest a suspect without a warrant only if a felony is
involved.
D. A law enforcement officer can arrest a suspect without a warrant only if a violent
crime is involved.
E. A law enforcement officer can arrest a suspect without a warrant only if the suspect
is a repeat offender.
“Teenage Driver.” Sally bought a new car, a yellow convertible. She also had a teenage
son at home, Bobby, but she did not plan to let him drive the car. She was annoyed
because Bobby had run her last car into the lake. Sally decided to change insurers
because she thought her previous insurance agent was annoyed over Bobby’s antics. She
went to ABC Insurance to apply. She got an application from Mark. Sally was a little
nervous because the application asked about other drivers in the home. It also asked if
there were any teenagers in the home. Sally answered “no” on both counts because she
had no plans to let Bobby drive. Sally got full coverage on the car, and the policy was
issued shortly after she completed the application. She renewed the policy without
revising any of the information she provided. Thirteen months later, Sally really needed
some gas in the car for the next day. Under the belief that he had sufficiently matured,
Sally sent Bobby to get some gas at the station just down the street. Unfortunately, a
drunk driver who had no insurance hit the car and totaled it. Sally immediately called
Mark. When Mark reviewed the police report, however, he told Sally that there would
be no coverage on the car because Bobby was driving. Sally said that was completely
unfair and that she would appeal to the jury. Sally told Mark that ABC issued the policy
and that she was relying on the incontestability clause. Mark told Sally that she was
wrong and that based on how disputes were handled under the policy, she would not
even see a jury.
Which of the following is most likely true regarding Sally’s reliance on an
incontestability clause if typical state laws are in effect?
A. Sally is correct, and the insurance has been in effect over one year, a sufficient
length of time for the incontestability clause to bar any defense by the insurer based on
her failure to mention Bobby on the application.
B. Sally is incorrect because the incontestability clause does not generally apply until
coverage has been in effect for at least two years.
C. Sally is incorrect because the incontestability clause operates to deny her the right to
dispute inaccuracies on the application, not as a bar against the insurer.
D. Sally is correct because the incontestability clause acts to bar an insurer from
denying coverage in cases in which any driver with permission is driving an insured’s
vehicle.
E. Sally is incorrect because incontestability clauses were barred by federal law a
number of years ago.
Which of the following is true regarding factors considered by a court in determining
whether a party is an intended or incidental beneficiary?
A. Whether performance of the contract is done directly to the third party and whether
the contract directly states that the third party is the benefiting party, but not the third
party’s ability to control the specifics of performance of the contract.
B. The third party’s ability to control the specifics of performance of the contract but
not whether performance of the contract is done directly to the third party or whether
the contract directly states that the third party is the benefiting party.
C. Whether the contract directly states that the third party is the benefiting party but not
the third party’s ability to control the specifics of performance of the contract or
whether performance of the contract is done directly to the third party.
D. Whether performance of the contract is done directly to the third party and the third
party’s ability to control the specifics of performance of the contract, but not whether
the contract directly states that the third party is the benefiting party.
E. Whether performance of the contract is done directly to the third party, the third
party’s ability to control the specifics of performance of the contract, and whether the
contract directly states that the third party is the benefiting party.
Which of the following was the result on appeal in Delgado v. Phelps Dodge Chino
Inc., the case in which the plaintiff sued in tort seeking damages after her husband died
from burn injuries he received after allegedly being required to perform a task in a
smelting plant that would almost certainly cause serious injury or death?
A. The case was dismissed because the plaintiff’s only avenue or recovery was through
the state workers’ compensation system.
B. The case was dismissed because the plaintiff was unable to prove that the employer
actually required the work resulting in the injuries.
C. The case was dismissed because it was determined that the employee’s carelessness
caused his injuries.
D. The case was allowed to proceed because the employer’s acts of willfully causing
injury prevented it from relying on the exclusive nature of the workers’ compensation
system.
E. The case was allowed to proceed only if the plaintiff could establish that the
employer had been warned by the Occupational Safety and Health Administration
regarding the dangers involved and wrongfully refused to remedy them.
Gretchen offers $100 to anyone who can return her lost dog, Sparky. Haley returns the
dog and requests the money. Gretchen says that there is no binding contract. Which of
the following is true regarding Gretchen’s statement?
A. Gretchen is incorrect because there is a binding bilateral contract.
B. Gretchen is incorrect because there is a binding unilateral contract which Haley
accepted by performing.
C. Gretchen is correct because there is no binding bilateral contract.
D. Gretchen is correct because there is no binding unilateral contract.
E. Gretchen is correct because Haley acted incorrectly by her manner of attempted
acceptance.
Which of the following means that bankruptcy relief is ordered and that the bankruptcy
proceedings can continue?
A. An order of relief
B. A stay enforcement order
C. An approval order
D. A liquidation order
E. A documentation order
“Fast Food Dilemma.” Richard, who just started at his new job as an assistant manager
at a fast-food restaurant, wants to make a good impression. He thinks that things are
going great. On only the second day on the job, however, he sees his boss Jill, the
manager, slink out of the restaurant with a big box of hamburger that she puts in her car.
Jill then speeds away. Richard is fairly certain that Jill did not pay for the hamburger.
Richard asks advice of his best friend, Bruce; his girlfriend, Sally; his sister, Jenny; and
his dad, Frank. Bruce says that there are no real objective standards and that Richard
should just decide what is best for him. Sally says that Richard should focus on the
consequences and focus on the greatest benefit to all involved. She believes that it will
do no real harm for Richard to keep his mouth shut because the fast-food restaurant is
making plenty of money and probably does not pay Jill enough anyway. Plus, getting in
trouble with Jill could cause problems at work, and if Richard loses his job, Richard and
Sally might have to put off their marriage. Jenny says that on balance the rule producing
the greatest good would be to tell Jill because stealing does not generally produce the
greatest satisfaction. Richard’s dad says that as a matter of principle Richard should tell
Jill because stealing is simply wrong.
Which of the following theories most accurately fits the advice given by Bruce?
A. Deontology
B. Act utilitarianism
C. Rule utilitarianism
D. Ethical relativism
E. Virtue ethics
The resulting contract from an agreement reached because one of the parties has so
much more bargaining power than the other that he or she dictates the terms of the
agreement is called which of the following?
A. An outrageous contract
B. An out-of-bounds contract
C. An adhesion contract
D. An untrue contract
E. An unaffirming contract
Under the UCC which of the following is true if goods are identified at the time the
parties entered into a contract and these goods are partially destroyed through no fault
of the parties before risk passes to the buyer or lessee?
A. The contract is void.
B. The buyer may inspect the goods and decide whether to (1) treat the contract as void
or (2) ask the seller for a reduction of the contract price and then accept the damaged
goods.
C. The seller may inspect the goods and decide whether to (1) treat the contract as void
or (2) offer the buyer a reduction of the contract price for the damaged goods.
D. Unless the parties can agree on a price, the matter must be submitted to arbitration
for a determination as to an appropriate price.
E. Unless the parties can agree on a price, the contract is voidable at the option of the
seller.
Which of the following is the proper term for canceling a will?
A. Revoking
B. Rescinding
C. Leaving
D. Terminating
E. Discharging
Under ____, if the buyer in an alleged contract for the sale of land has paid any portion
of the sale price, has begun to permanently improve the land, or has taken possession of
the land, the courts will consider the contract partially performed, and this partial
performance will amount to proof of the contract.
A. Substantial performance
B. Partial performance
C. Sales substantiation
D. The purchase proof rule
E. The sales proof rule
“Green Trees.” Wally, the president of Green Corporation, a company that provides
landscaping services, wanted his corporation to purchase Tree Corporation, another
corporation providing landscaping services. The board of Tree Corporation, however,
did not wish to sell. The board of Green Corporation decided to buy any or all of Tree
Corporation’s stock in order to gain control of Tree Corporation. The management of
Tree Corporation and its board strongly objected to the attempt by Green Corporation to
take over the company. Green Corporation offered to purchase stock held by
shareholders of Tree Corporation at a price substantially above the current market value
of the stock. When that strategy was not wholly successful, Green Corporation offered
to give shareholders of Tree Corporation stock in Green Corporation in return for their
stock in Tree Corporation.
Which of the following is a term used to describe Green Corporation in its attempt to
buy any or all of Tree Corporation’s voting shares?
A. Bully
B. Aggressor
C. Pusher
D. Demander
E. Incentive giver
“Blow up.” Jeanie is hauling gas in the back of her pick-up truck for her personal
watercraft. She is planning a lake party and thinks she will need a lot of it. On the way
home, Jeanie stops at the automatic teller machine at her bank and exits her car. Holly
pulls behind her and negligently rear-ends Jeanie’s pick-up. The truck explodes and
results in the bank building burning to the ground. The bank sues Holly for negligence
claiming that Holly should have to pay for the entire bank building. The bank claimed
that it should be able to recover under the res ipsa loquitur doctrine.
Which of the following is true regarding whether actual cause exists in the bank’s action
against Holly?
A. Actual causation would exist because the bank would not have been burnt down if
Holly had fulfilled her duty to drive properly.
B. Actual cause is present because as a matter of policy, it is believed that someone who
rear-ends a vehicle should be responsible for damages.
C. Actual cause is present because Holly was the legal cause of the bank burning.
D. Actual cause is not present because Holly is not the legal cause of the bank burning.
E. Actual cause is not present because Holly is not the proximate cause of the bank
burning.
A defendant who argues that commission of a crime was necessary to prevent a more
severe crime from occurring is relying upon the defense of _______.
A. Entrapment
B. Necessity
C. Justifiable use of force
D. Duress
E. Inescapable action
Which of the following is true regarding the UCC and norms in the industry?
A. The UCC requires that courts consider norms in a particular trade only if consumer
goods are involved.
B. The UCC allows courts to consider norms in a particular trade only if the perfect
tender rule has been satisfied.
C. The UCC requires that courts consider norms in a particular trade.
D. The UCC does not require that courts consider norms in a particular trade.
E. The UCC requires that courts consider norms in a particular trade only if goods with
a unit price of over $500 are involved.
With a simple delivery contract, when is an insurable interest in the buyer created?
A. When money is transferred
B. When the items are delivered
C. When the buyer takes possession
D. When the goods are identified to the contract
E. When goods are identified to the buyer