“Air Improvement.” Paula is very annoyed because a business near her neighborhood
has an incinerator that releases pollutants. She discussed the matter with her local city
council representative, Bruno, who told her that only the federal government can
enforce laws involving pollutants; that the government has done so through the
establishment of National Ambient Air Quality Standards; and that there is nothing she
as an individual can do. Paula tells the council representative that she considers the
emissions criminal. Bruno just shrugs and replies that industry is never subject to
criminal penalties under the Clean Air Act and that only the government can enforce the
Clean Air Act anyway.
Is Bruno correct that only the federal government can enforce the Clean Air Act?
A. Yes, he is correct.
B. No, he is incorrect because either the federal government or state environmental
agencies may enforce the Clean Air Act.
C. No, he is incorrect because only the states may enforce the Clean Air Act.
D. No, he is incorrect because only the states or individuals may enforce the Clean Air
Act.
E. No, he is incorrect because the federal government, individuals, or state
environmental agencies may enforce the Clean Air Act regulations involving carbon
monoxide emissions.
“Miracle Face.” Tara developed a great new type of face cream guaranteed to provide
total sun protection, remove wrinkles, and result in anyone looking at least ten years
younger. Her product, Miracle Face, became extremely popular in the U.S., where she
has several shops, and also in other countries to which it was shipped. Tara has a
number of individuals in other countries seeking to team with her in selling Miracle
Face. Sam, a citizen of Mexico, asks that she grant him permission to use her name and
any associated trademarks, and allow him to sell Miracle Face in Mexico. Tara has an
offer, however, from another Mexican citizen, Maria. Maria proposes that she and Tara
associate together, open a business to sell Miracle Face, and share profits and
management responsibilities. Tara has also thought about opening her own business in
Mexico in conformity with Mexican laws. She would then, hire employees in Mexico to
sell the product. Another matter Tara has considered is simply arranging for her
products to be shipped to Mexico for sale, and she is interested in the effect of any trade
agreements in effect between the U.S. and Mexico.
Which of the following should Tara consider with regard to trade agreements between
the U.S. and Mexico?
A. The North American Free Trade Agreement
B. The Central American Free Trade Agreement
C. The Tri-Country Free Trade Agreement
D. The Multi-Country Free Trade Agreement
E. The Accessibility Trade Agreement
“House Painting.” Susie Smith signed a check agreeing to pay, “Annie Greene, Mary
Hodge,” $1,000. The payment was for painting her house. A problem with the note was
that it spelled Annie’s last name, “Greene,” whereas Annie spells it simply, “Green.”
Annie and Mary were having a disagreement regarding how to split up the funds for
painting the house. Annie proceeded to sign the check on the back, “Annie Green,” and
presented it to Bill Brown to satisfy a debt that she owed him. Bill Brown endorsed the
check on the back, “Bill Brown, without recourse,” and gave it to his nephew, Sam, who
took it to the bank for payment. Meanwhile, Susie has stopped payment on the check
because following a rain storm, all the paint on the house looked spotted. Mary is
unhappy because she did not obtain any of the funds and stated that Annie could not
legally endorse the instrument because it misspelled her name and also because she,
Mary, did not sign it.
Which of the following is true regarding Sam’s rights in relation to the check?
A. As a holder, Sam may demand payment from either Susie, Annie, or Mary.
B. As a holder in due course, Sam may demand payment from either Susie, Annie, or
Mary.
C. As a holder, Sam may demand payment from either Susie or Annie, but not Mary.
D. As a holder in due course, Sam may demand payment from either Susie or Annie,
but not Mary.
E. Sam may not demand payment from either Susie, Annie, or Mary.
“Unreliable Boyfriend.” Bobby needs a business law book. He hears that Gwen has one
for sale. Bobby asks his girlfriend Susie to buy it for him from Gwen if Susie can get it
for under $40. Susie sees Gwen in the hall and asks if she will sell the book for $30, and
Gwen agrees. They are between classes, and Susie does not mention that the book is for
Bobby although all the parties were on good terms, and the identity of the buyer should
not have affected Susie’s agreement. Later, however, Polly agrees to give Bobby her
used business law book. Bobby tells Susie that he no longer wants the book. Susie tells
Gwen about the situation with Bobby. Gwen replies that she does not care if Bobby
wants the book or not. Gwen says that she passed up a couple of opportunities to sell
the book because she thought she already had it sold and that she wants her money from
either Gwen or Bobby – she doesn’t care who pays.
Which of the following is true regarding whether Bobby is liable to Susie for the cost of
the book if Susie pays Gwen the purchase price?
A. Bobby is liable to Susie for the cost of the book.
B. Bobby is liable to Susie for the cost of the book only if Susie had Bobby sign a
document affirming his liability before Susie paid Gwen.
C. Bobby is liable to Susie only if she resells the book and is unable to recover as much
as she paid for it.
D. Bobby is not liable to Susie for the cost of the book.
E. Bobby can avoid liability to Susie only if he can establish that his actions constituted
“justifiable expectations” under the law absolving him from liability.
“Presidential Profits.” Linda was president of a publicly traded tractor company, Tough
Tractors. Linda became aware that stock in her company would likely increase
significantly in value because her company had a contract to purchase the assets of
Rough Tractors. The boards of both companies wanted the information kept
confidential until the purchase was complete and a news release was made. Before the
news was made public, Linda immediately purchased a significant number of shares in
Tough Tractors. Linda also told her friend Frank about the contract to purchase assets
although she told him to keep it quiet because it had not been made public yet.
Nevertheless, unable to keep a secret, Frank told his brother, George. Frank and George
purchased a number of shares of stock in Tough Tractors prior to any public
announcement of the sale. After the public announcement was made and the purchase
of assets went through, Linda, George and Frank, all sold their shares in Tough Tractors
and made a nice profit.
For which of the following is Linda liable?
A. Her own profits only.
B. Her profits and those of Frank only.
C. Her profits, the profits of Frank, and also the profits of George.
D. Her profits only plus a 10% penalty.
E. Nothing because she acted legally.
The UCC defines _____ as previous commercial transactions between the same parties.
A. Trade norm
B. Course of dealing
C. Anticipated trade dealing
D. Usage of trade
E. Course of performance
Which of the following was the result in Margaret Kawaauhau v. Paul W. Geiger, the
case in the text in which the plaintiff claimed that the defending doctor, who had no
malpractice insurance, could not discharge in bankruptcy a judgment for malpractice on
the basis that he deliberately chose less effective treatment to cut costs while knowing
that he was providing substandard care.
A. That the defendant could not discharge the judgment because he was negligent.
B. That the defendant could not discharge the judgment because he was reckless.
C. That as a matter of public policy, the defendant could not discharge the judgment
because he failed to carry malpractice insurance.
D. That the defendant could discharge the judgment because as a matter of public
policy, all malpractice judgments may be discharged.
E. That the defendant could discharge the judgment because he did not intend to cause
injury.
Which of the following is a person who controls, is controlled by, or is in common
control with the issuer?
A. An affiliate
B. An associate
C. A partner
D. A holder
E. A tipper
Which of the following occurs upon dissolution of a partnership when liabilities of the
partnership are greater than the liquidated assets of the partnership?
A. The liabilities remain unpaid because the partners are not liable.
B. The managing partner is liable for the liabilities, but other partners are not liable.
C. Each partner must contribute his or her share of the losses to pay creditors.
D. Only partners who did not participate in the management of the business must
contribute his or her share of the losses to pay creditors.
E. Only partners who participated in management of the business must contribute his or
her share of the losses to pay creditors.
Because ______ does not favor intoxication, the courts tend to be unsympathetic to
intoxicated parties and will fairly liberally interpret behavior that seems like ratification
as ratifying the contract.
A. Morality
B. Popular opinion
C. Medical literature
D. Religion
E. Public policy
Which of the following are rules regarding the internal operations of an agency?
A. Procedural
B. Interpretive
C. Legislative
D. Adjudicative
E. Executive
A[n] ______ contract is one requiring complete performance by both parties, even if it
appears as if the contract contains multiple parts.
A. Adhesion
B. Divisible
C. Justifiable
D. Indivisible
E. Independent
Which of the following is literally the “law of merchants?”
A. Lex Mercatoria
B. Lex Seller
C. Ad Merchandiso
D. Lex Loci
E. Res Judicata
Which of the following is false regarding what must occur in order for the exemption
involving intrastate issues to apply?
A. Issuers must do at least 80 percent of their business within the state.
B. Issuers must have at least 80 percent of their assets within the state.
C. Issuers must plan to use at least 80 percent of the profits within the state.
D. Issuers must have their main offices in the state.
E. Issuers must conduct at least 80 percent of advertising in the state.
“Irresponsible Teen.” At age 17, in a state in which the age of majority is 18, Sally
purchased a prom dress from Formal Stuff. She wore it to the prom and then attempted
to return it to the store claiming that she was a minor and that she was entitled to a
refund. The dress had clearly been worn and had a purple stain which Sally claimed was
from grape juice. Additionally, a few days before she turned 18, Sally purchased a used
car from Dings and Dents used cars. She had a deal whereby she paid $100 per month
on the car. She drove the car and made payments for six months after she turned 18.
Sally then returned the car to Dings and Dents, informed the owner that she was under
18 when she entered into the contract to purchase the car, and told the owner that she
was returning the car for a full refund. Dings and Dents claimed the car was a necessity.
Sally and her parents disagreed claiming that the parents were ready and willing to
provide a car to Sally, and that she only purchased the car from Dings and Dents
because she liked that particular style and color. When purchases of the dress and car
were made, the sellers knew that Sally was under the age of 18.
In the dispute between Sally and the owner of Dings and Dents, which of the following
is true regarding the effect of Sally turning 18 before she attempts to disaffirm the
contract?
A. So long as, after reaching the age of majority, Sally did not state orally or in writing
that she intended to be bound by the contract, then she did not commit an express
ratification.
B. Sally was required to expressly ratify the contract before she could be bound to it.
C. An implied ratification occurs when parents agree to accept the debt entered into by
a minor.
D. If Sally caused any damage whatsoever to the car, she was said to have impliedly
ratified the contract.
E. Sally was required to expressly ratify the contract before she could be bound to it so
long as no damage was done; but if she did any damage to the car, as a matter of law,
she is said to have impliedly ratified it.
Which of the following is false regarding groups and activities that are exempt from
antitrust law?
A. Individuals in the fishing industry can cooperate for purposes of catching and
preparing fish for market.
B. Labor unions can organize and bargain.
C. When insurance businesses are subject to state antitrust regulation, they are exempt
from federal antitrust law.
D. States can set their own quotas regarding the amount of oil to be sold in interstate
commerce.
E. Regulatory bodies of the airline and banking industry have authority to approve
behaviors that would otherwise violate antitrust law, but the same is not true for the
utility industry.
How many actual people (not persons as defined by the Uniform Partnership Act) are
required in order to have a partnership under the Uniform Partnership Act?
A. None
B. At least one
C. Ten or more
D. More than two and less than 75
E. Two or more and less than 100
If an instrument is silent as to the time of payment, which of the following is assumed
by the UCC?
A. That it is a demand instrument
B. That it is a time instrument
C. That it is a void instrument
D. That it is a voidable instrument
E. That it is a nonnegotiable instrument
When an accord and satisfaction is at issue, the ______ is the new agreement to pay less
than the creditor claims is owed.
A. Satisfaction
B. Accord
C. Seal
D. Compromise
E. Acknowledgement
Which of the following is false regarding revocation of the authority of an agent and
renunciation by an agent?
A. At any time a principal can revoke an agent’s authority.
B. A principal’s revocation of an agent’s authority may result in a breach of contract
entitling the agent to damages.
C. An agent can terminate the agency relationship by renouncing the authority given to
the agent.
D. An agent’s wrongful ending of the agency relationship may be a breach of contract
entitling the principal to damages.
E. If an agent has breached a fiduciary duty to the principal, the principal can revoke
the agent’s authority; but the agent may be entitled to damages.
Which of the following is true regarding the law of negligence in Germany?
A. It is the same as the law of negligence in the United States.
B. It focuses only on conscious negligence.
C. It focuses only on unconscious negligence.
D. Courts distinguish between conscious and unconscious negligence with defendants
who have engaged in only conscious negligence being found not guilty.
E. Both mental and physical capabilities are taken into account in determining whether
a defendant is negligent.
When a patent is issued for an object, it gives its holder the exclusive right to produce,
sell, and use the object of the patent for __________ years from the date of application.
A. Ten
B. Twenty
C. Thirty
D. Forty
E. Fifty
All states, except Louisiana, follow the ______ common law.
A. English
B. French
C. Italian
D. Spanish
E. German
What does the UCC provide regarding liquidated damages if the parties do not agree to
them?
A. That the nonbreaching seller may claim against a breaching buyer 20 percent of the
purchase price or $500, whichever is less, as liquidated damages.
B. That the nonbreaching seller may claim against a breaching buyer 20 percent of the
purchase price or $500, whichever is more, as liquidated damages.
C. That the nonbreaching seller may claim against a breaching buyer 30 percent of the
purchase price or $1,000, whichever is less, as liquidated damages.
D. That the nonbreaching seller may claim against a breaching buyer 30 percent of the
purchase price or $1,000, whichever is more, as liquidated damages.
E. Nothing because liquidated damages are unavailable under the UCC unless the
parties have expressly agreed to them.
Which of the following requires that we see murder as a moral action as long as the
murderer believes that the action is best for himself or herself?
A. Absolutism
B. Deontology
C. Categorical imperative
D. Uncertainty of thought
E. Ethical relativism
Which of the following is punishable by imprisonment for more than one year or death?
A. Misdemeanor.
B. Felony.
C. Petty offenses.
D. Tort offenses.
E. Any business related crime.
A[n] ______ clause states that after an insurance policy has existed for a specified
period of time, the insurance company cannot contest any statements made in the
insurance application.
A. Antilapse
B. Incontestability
C. Assurance
D. Approval
E. Waiver
“The Burial Emporium.” Fred operates a funeral home called Fred’s Burial Emporium.
Fred likes to keep things simple. He generally has one flat price with no itemization and
requires that customers purchase a complete package from him if they want any
services whatsoever. Fred also goes door-to-door selling funeral packages. He tries to
visit neighborhoods in which there has been a recent death because residents in the
neighborhood will have final arrangements on their minds. He believes and informs
customers that once customers sign a contract for burial services, there is no backing
out. Fred also obtains a good deal of business from phone solicitation. He enjoys calling
late at night, between 10 p.m. and 11 p.m., when people are tired, but before they go to
bed. He believes that if people do not feel well, they are more likely to consider funeral
arrangements. Sometimes, Fred varies his sales tactic and tells consumers he talks to on
the phone aspects of the total cost in small increments, not mentioning the total price,
believing that if they are tired, they are less likely to ask too many questions. After
some pesky consumer complaints, the Federal Trade Commission and other federal
agencies investigate Fred. He hires a good lawyer with his profits in an attempt to stay
out of trouble.
Which of the following is true regarding Fred’s door-to-door solicitation and his
practice of informing customers that there is no backing out of contracts entered into for
funeral services?
A. There is no problem with Fred’s actions so long as he truly gives specific notice that
he will not agree to any cancellations.
B. Fred must give customers at least 24 hours in which to cancel such a contract, but
that is only because funeral services are involved.
C. There is no problem with Fred’s actions even if he does not give specific notice that
he will not agree to any cancellations.
D. Because door-to-door sales are involved, Fred must give consumers 24 hours in
which to cancel.
E. Because door-to-door sales are involved, consumers must have three days in which
to cancel purchases.
Which of the following was the result on appeal in the case in the text, Gary W. Cruse
and Venita R. Cruse v. Coldwell Banker/Graben Real Estate Inc., in which the court
considered whether the plaintiffs could prevail based on alleged misrepresentations by a
salesman that a house was new when it was actually not new leading the plaintiffs to
forego a home inspection?
A. That the realtor had merely engaged in sales talk when marketing the home as new
which could not be relied upon by the purchasers.
B. That the plaintiffs were barred from proceeding because they knew that the home
builder had occupied the house.
C. That the plaintiffs were barred from proceeding because they signed an “as-is”
disclaimer.
D. That as a matter of law the plaintiffs were allowed to recover.
E. That a jury question was presented on whether the plaintiffs could have justifiably
relied on the defendants’ misrepresentation.
Which of the following is true regarding what may constitute collateral?
A. Goods, indispensable paper, intangibles, and proceeds may all constitute collateral.
B. Goods, indispensable paper, and intangibles may constitute collateral, but proceeds
may not.
C. Goods may constitute collateral, but indispensable paper, intangibles, and proceeds
may not.
D. Goods and proceeds may constitute collateral, but indispensable paper and
intangibles may not.
E. Goods and intangibles may constitute collateral, but indispensable paper and
proceeds may not.
“Squirt Gun Mishap.” Zora decided to purchase a large squirt gun for her son, Rambo,
to use while playing in the pool. The squirt gun was of the very elaborate variety and
had a number of different attachments for different sprays of water. The squirt gun came
with instructions for assembly and use, and provided warnings against various types of
misuse. The pamphlet that came with the squirt gun advised that the squirt gun should
be used only under adult supervision, that it must not be used by children under eleven,
and that nothing should be put into the squirt gun except water. Rambo had a party for
his tenth birthday at the pool. A number of children came. One of the children, Sam,
who was ten years old at that time, decided to load pebbles along with water into the
gun. He began shooting with the pebbles and hit Alice in the eye, requiring an
emergency room visit. Alice required some minor surgery, but sustained no permanent
injury. Alice’s parents complained that they looked at the squirt gun when they initially
arrived at the party but did not notice any warnings whatsoever affixed directly to the
product. Alice’s parents want to sue someone for something, but they do not particularly
want to sue Rambo’s mother.
Which of the following is true regarding warnings and the usage of products by
children?
A. There is no duty to warn when children are involved because it is assumed that
parents are responsible.
B. There is a duty to warn when children are involved, but it is no different from the
duty to warn when only adults are expected to use a product.
C. Picture warnings could be required if children are likely come into contact with the
product and risk harm from its use.
D. Warnings are only required for children whose parents actually purchased the
product.
E. Warnings are only required for minors above the age of twelve because it is assumed
that children under that age will not be able to comprehend warnings.
“Union Avoidance.” Penny owned and operated a large book store with 50 employees.
She was aware of union organization attempts. She prohibited any discussion of the
union and the distribution of literature at any time, including during employee breaks
and lunches in the employee break room. She told employees that she would refuse to
grant a raise to any employee who supported the union. Penny was extremely unhappy
when the union obtained enough support for an election. At that point, she promised
employees that she would give a $1,000 bonus to any employee who voted against the
union. Surprisingly to Penny, employees who voted overwhelmingly supported the
union. On the other hand, employees who voted failed to constitute all employees of the
book store. A number of employees were absent on the day of the election and did not
vote. Penny stated that it was her understanding that the union would not be certified as
the bargaining representative of the employees because fewer than 50% of the total
number of the store employees voted for the union. Penny further stated that, in any
event, she would not deal with the union under any circumstances.
Assuming that the union is certified as the bargaining representative of the employees,
which of the following is true regarding Penny’s statement that she would not deal with
the union under any circumstances?
A. Nothing in the law requires that she meet or bargain with the union.
B. She is required to meet with the union, but only once.
C. She is required to meet with the union, but only twice.
D. She is required to meet with the union at reasonable times and confer in good faith,
but nothing in the law can require her to agree to any benefits.
E. She is required to meet with the union at reasonable times and confer in good faith,
and is required by law to agree to demands for reasonable benefits made by the union.