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Agency law is primarily federal law.
The Magnuson-Moss Act requires a full warranty on the sale of goods.
In some cases, the same neutral third party may act as both the mediator and then the
arbitrator.
In general, an oral contract for the sale of land is sufficient to prove terms of the
agreement in court.
Judicial decisions are law unless they are revoked later by new statutory law.
A person who has the legal right to bring an action in court has standing.
The average investor does not have to register securities when he or she wants to sell.
An accredited investor is allowed to accept private securities offerings under certain
specific guidelines set by the SEC.
Punitive damage awards in Japan are common and often very large.
On average, the U.S. Supreme Court hears 300 cases a year.
Shareholders are directly responsible for the daily management of a corporation.
Agents who go beyond their authority when the principal is disclosed or partially
disclosed are liable for breach of contract, not breach of implied warranty.
The Bill of Rights provides absolute individual freedoms.
Sometimes, language in the parties' agreement limits the rigidity of the perfect tender
rule.
The mirror-image rule is applicable when a unilateral contract is involved.
Puffery standard China is very similar to the standard used in the U.S.
Securities may be sold during the prefiling period.
The social responsibility of a business is formed by expectations employees have of
employers.
The existence of deceptive advertisements alone is sufficient to prove damages for
recovery when individual civil suits are filed for deceptive practices.
Corporations have rights under the U.S. Constitution.
A corporation must be dissolved if over 50% of the shareholders die.
Subleasing of leased property by the tenant to another party is permissible unless
specifically prohibited by the lease.
If goods identified in a contract are destroyed before the risk passes to the buyer, the
seller must obtain substitute goods.
A corporate executive may be found criminally liable even if he did not know about the
company's criminal violation.
The Small Business Administration is an example of an executive agency.
The U.S. Supreme Court has the power to dissolve an administrative agency.
An illusory promise is not an actual promise.
A promoter begins the corporate creation and organization process and, raises capital
for the new corporation.
A breach occurs whenever a party fails to perform her obligations under the contract.
The mirror-image rule has been adopted by the UCC.
In order to ensure that a case or controversy exists, the plaintiff must show:
A. An adverse relationship between the parties.
B. An actual legal dispute.
C. It is a proper matter for judicial determination.
D. An adverse relationship between the parties and an actual legal dispute.
E. An adverse relationship between the parties, an actual legal dispute, and it is a proper
matter for judicial determination.
What does the Fifth Amendment's takings clause reference?
A. The right of the government to take private property for public use without paying
compensation to the owner.
B. The requirement that the government pay the owner just compensation if the
government wants to take private property for public use.
C. The right of the government to put individuals in jail for up to ten days without a
hearing.
D. The right of the government to put individuals in jail for up to five days without a
hearing.
E. The requirement that the government compensate an owner for anything destroyed
during a search.
Belinda orders a certain type of hybrid rose for her wedding. A disease sweeps through
that type of rose, and the florist could only obtain the roses at great cost if at all. Which
of the following is the appropriate term for the florist's best defense?
A. Commercial unreasonableness
B. Commercial impracticability
C. Substantial hardship
D. Unforeseen circumstances
E. Unreasonable bride
__________________ regulates how companies issue corporate securities.
A. The Securities Act of 1933
B. The Securities Exchange Act of 1934
C. The Depression Act of 1932
D. The Oversight Act of 1935
E. The Stock and Bond Act of 1930
Tutoring Concerns. Wally and Sally want to go into business together and plan on
offering a tutoring service to high school and college students. Wally proposes that they
share control of the business and split profits equally and not bother with a written
agreement. Sally, however, is concerned about being able to pay their debts since they
will have to rent tutoring space and purchase computers and supplies. She is also
concerned about parents and students who may sue if the students' test scores do not
improve. She tells Wally that she just bought a new boat and car, and that she does not
want her assets to be in jeopardy. She tells Wally that they should form a corporation to
shield their personal assets. Wally, however, says their personal assets are not in danger
with his proposal because they are a business and that, furthermore, forming a
corporation would likely result in double taxation. What type of arrangement, if any,
would avoid double taxation for the endeavor of Wally and Sally?
A. An S corporation
B. A limited liability company
C. A corporation
D. An S corporation, a limited liability company, and a corporation
E. An S corporation and a limited liability company, but not a corporation
Multiplication. Phyllis, who is 30 years old, works for We Add for You Accounting.
Phyllis has worked there for a number of years and is considering quitting in order to
spend more time with her three active triplets, Sunny, Fussy, and Perky. She asks her
boss, Bolivar, about the pension plan at We Add for You. Her boss tells her that she has
no entitlement to information until she is at least 60 years old. Phyllis also asks about
retaining her medical insurance protection if she quits and is told that she would have
no right to do so. Bolivar also throws in that he has been monitoring her conversations
and that he particularly enjoys the conversations between her and her single female
friends involving failed dating experiences. He asks her to keep those up. Phyllis tells
him that her personal phone calls are none of his business. Bolivar says that he can
listen if he wants because the phones are his. Phyllis ends up starting her own company
called We Multiply for You, and makes much, much more money. (In answering the
following questions, assume all federal laws apply and that any pension and medical
plan qualifies for regulation under federal law.) Which of the following is true regarding
Bolivar's listening to the personal phone calls of Phyllis?
A. Bolivar can listen to the phone calls as long as he wants so long as he is Phyllis'
supervisor.
B. Bolivar can listen to the phone calls as long as he wants only if he is a sole proprietor
and truly owns the phones himself.
C. Bolivar can listen to the phone calls as long as he wants only if he has a policy
prohibiting the making of personal calls.
D. Bolivar can listen to the phone calls as long as he wants only if he notifies
employees first that he is going to do so.
E. Bolivar is prohibited from listening to the phone calls as long as he wants, and only
limited exceptions exist for the monitoring of calls.
A(n) ______ is the right to go onto someone's land and take part of the land or a
product of it away from the land.
A. appurtenance
B. profit
C. easement
D. fixation
E. joint use
New Agency. Debby just got a job as an assistant in a new federal agency called the
Accounting Commission that was set up to regulate the accounting and auditing
profession. The agency is headed by commissioners who serve for fixed terms and
cannot be removed for cause. Additionally, no more than a majority of the
commissioners may be from the same political party. Her agency is getting ready to
issue rules. The enabling legislation that set up the Accounting Commission specified
that the agency could make rules but said nothing about the form of the rules. Debby's
boss, Blaire, gave her some proposed rules and asked her to be sure that they were
published and to take care of the next step in the approval process. Blaire also told her
that at this point she was not very interested in hybrid rule making. Which of the
following is the appropriate agency classification for the Accounting Commission?
A. Executive
B. Independent
C. Administrative
D. Legislative
E. Judicial
Which of the following is true in regard to how Chinese law treats contracts entered
into by minors?
A. Because parents are considered responsible for their children's actions, parents are
held responsible for any contracts entered into by their minor children.
B. Minors are held responsible only for contracts involving necessities.
C. Minors are not held responsible for any contracts, and contracting with a minor is
illegal subjecting the adult contracting party to prison time.
D. Children between ten and eighteen are deemed competent for entering into certain
contracts appropriate to each child's mental state.
E. Children are held responsible only for contracts involving educational expenses.
Which of the following is found when one party was forced into an agreement by the
wrongful act of another?
A. Duress
B. Negligence
C. Fraud
D. Duress, negligence, and fraud
E. Duress and fraud, but not negligence
The bona fide occupational defense does not include which protected classes?
A. Race and color
B. Sex and religion
C. Sex and national origin
D. Race and religion
E. Race and sex
In most states, proximate cause is determined by __________.
A. statute
B. common law
C. foreseeability
D. but-for causation
E. strict liability
Which of the following was the result in Thrifty Rent-A-Car System v. South Florida
Transport, the case in the text in which in response to a claim for amounts due on a
franchise agreement involving the rental of vehicles, the defendant claimed that
hurricanes had rendered its rental car business commercially impracticable?
A. That a jury question existed as to whether the hurricanes made the business
commercially impracticable.
B. That as a matter of law, the defense of commercial impracticability was unavailable
to the defendant for reasons including that the absence of hurricanes was not a basic
assumption of the agreement.
C. That as a matter of law, the defense of commercial impracticability was available to
the defendant because the defendant established that it was current on its payments until
the advent of the hurricane season.
D. That as a matter of law, the defense of commercial impracticability was available to
the defendant because the defendant established that the hurricanes made the cost of
performance of the terms of the agreement unduly burdensome.
E. That as a matter of law, the defense of commercial impracticability was available to
the defendant because the plaintiff failed to establish that the defendant had been given
sufficient opportunity to recover from its business interruption due to several
hurricanes.
________________________ is the practice of advertising with claims that mislead or
could mislead a reasonable consumer.
A. Industry guides
B. Ad substantiation
C. Corrective advertising
D. Deceptive advertising
E. Consumer law
Once all of the terms of the contract have been fully performed, the contract is said to
be _____.
A. executory
B. executed
C. anticipatory
D. ended
E. stopped
Overextended Debtor. Dennis purchased a big screen television from ABC Electronics
and financed the purchase through ABC Electronics based on an agreement granting
ABC Electronics a security interest in the television and requiring that Dennis make
monthly payments. Three months later, because Dennis had bought a boat, a new car,
and 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 and asked Dennis to return the television. Dennis refused on the basis
that ABC Electronics never perfected its interest in the television. Which of the
following is the proper designation under the UCC for the television?
A. It is a consumer good.
B. It is a pledge.
C. It is an allonge.
D. It is unsecured property.
E. It is both unsecured and unperfected property.
The Big Sale. Christy, the owner of ABC department store, needed to hire a number of
employees in a hurry because of a planned big summer sale. Bob was hired by Christy
to run a cash register and to assist customers with taking large purchases to their cars.
Bob encountered a particularly annoying customer, Frank. Frank started complaining
the minute he saw Bob. Frank complained about having to wait for Bob to assist him
with carrying his television purchase to his car, about the merchandise in the store, and
about the quality of the store's employees. Bob tried to control himself while he carted
Frank's television to the car. The final straw, however, came when Frank told Bob that
he should get the earring out of his ear, cut his hair, and act professionally. Bob threw
the television to the ground and punched Frank in the nose. Frank did investigation and
discovered that Bob has just been fired from his last three jobs for violent actions
against customers. Two of his former employers are willing to testify that if Christy had
called them, they would have disclosed Bob's tendencies to her. Bob listed the former
employers on his application, but because she was in a hurry to hire employees, Christy
did not take the time to check with the former employers. Another problem confronting
Christy during the big sale is that Susie, a long-time employee of Christy who had
never caused any problem before, negligently dropped a box on the foot of Greg, a
customer. Greg had to have an X-ray and is threatening to sue both Christy and Susie.
Which of the following is true regarding whether Greg has any right of recovery against
Susie for his injured foot?
A. Greg has no right of recovery against Susie because of her status as an employee.
B. Greg has no right of recovery against Susie because she did not intentionally harm
him.
C. Greg has no right of recovery against Susie because of her status as an employee and
also because she did not intentionally harm him.
D. Greg has a right of recovery against Susie only if Christy is bankrupt.
E. Greg has a right of recovery against Susie.
Which of the following is an element of a legally binding contract?
A. Inquiry
B. Acknowledgement
C. Capacity
D. Knowledge
E. Affirmance
Under the UCC Section 1-205(1), any practice that members of an industry expect to be
part of their dealings is known as ____________________.
A. trade norm
B. course of dealing
C. anticipated trade dealing
D. usage of trade
E. course of performance
Cheap Principal. Jason, who is very knowledgeable regarding computers, agrees to
purchase computers for Nick's business. Jason is retained for that purpose only, he is
paid a set rate for the job, and Nick exercised no control over the manner in which
Jason did his work. Jason purchased computers on credit from ABC Computers without
any mention of Nick. The computers worked well and were not defective in any way.
Unfortunately, Nick did not pay ABC Computers on a timely basis. Jason, therefore,
paid ABC Computers out of his own pocket because he wanted to be able to do
business with ABC in the future and also because his name was on the invoice. Jason
asked Nick for reimbursement, but Nick refused. Nick claimed that if Jason had only
waited, ABC Computers might have agreed to take less. Which of the following likely
represents Jason's status in regards to his employment with Nick?
A. He was an independent contractor.
B. He was an employee.
C. He had a special status called employee-contractor, a term used to represent a
contractor who is neither an employee nor an independent contractor.
D. He was an express contractor.
E. He was an implied contractor.
Cat Chaser. Annette, who is angry because her neighbor, William, allows his dog to
chase her cat, decides that she wants to get even. She moves a number of farm animals
into her backyard and begins playing music at all hours of the night. She also steals a
nice lawn chair off of William's deck. She intends to keep the chair and not give it back.
Annette further took a rake off of William's deck that she plans to return after she
finishes raking her leaves. William did not give her permission to take the rake. William
is unhappy about the whole situation and wants to sue. What action would William have
against Annette for taking the rake?
A. Trespass to personal property.
B. Conversion.
C. Private nuisance.
D. Negligence.
E. Harassment.
Machine Malfunction. Bruno, the president of a corporation operating work out
facilities, convinced the board of directors to approve a large purchase of a type of
fitness machine called "Perfect Body." Bruno had carefully investigated the machine
and did a presentation to the board on its purported benefits. Unfortunately, after the
purchase, it was announced that "Perfect Body" was actually a very dangerous machine
that should not be used. The manufacturer of "Perfect Body" went bankrupt, and the
corporation lost $200,000 on the purchase of the machines. The shareholders are furious
and want to sue Bruno and the directors. The board of directors agrees to allow Frances,
the ringleader of the shareholders, to purchase stock of the company at below its fair
market value. She purchases a considerable amount of stock on that basis, but says that
the shareholders plan to continue with an action against Bruno and the board members.
Under which of the following should Bruno and the board of directors defend
themselves in an action brought by shareholders for harming the corporation?
A. The Superior Judgment Rule
B. The Research and Investigation Rule
C. The Business Judgment Rule
D. The Rule of Corporate Integrity
E. There is no defense.
Which type of meeting is where of all creditors listed in the Chapter 7 required schedule
for liquidation?
A. A debt meeting
B. A control meeting
C. A creditors' meeting
D. An enforcement meeting
E. A counseling meeting
Banking Problems. Constance and Blair are both loan officers at ABC Bank. Constance,
being somewhat dishonest, tells Henry, a customer of the bank who is wealthy and
rarely checks the status of outstanding loans and balances, that she is collecting money
for a local animal shelter. She asks him to sign a pledge that he will contribute $50 to
the animal shelter. In fact, she had him sign a promissory note made out to her for
$5,000, which she later endorsed to Richard. Henry proceeds back to one of his
businesses, a used car dealership. Taylor comes in to purchase a used car. He and Henry
agree that Taylor will purchase a used car for $3,000. Martha also comes in, and she
and Henry agree that she will purchase a used car for $4,000. Both Taylor and Martha
make out promissory notes payable to Henry. At the end of the day, Henry is looking
through the notes and decides that Taylor's was mistakenly made out for $3,000. Henry
mistakenly, but honestly, believed that the deal was for $3,500. Therefore, he changes
the note to reflect that Taylor owed $3,500. Henry, on the other hand, simply did not
like Martha. He decided that $4,000 was not enough for the car. Accordingly, he
changed the note to $4,500. Which of the following is true regarding Martha's liability
to Henry?
A. Because of the fraudulent alteration, Martha is not liable to Henry for any amounts
under the promissory note although she may be liable under some other theory.
B. Martha's obligation will be enforced only in the amount of $4,000.
C. Martha's obligation will be enforced in the amount of $4,500 unless she has a writing
signed by Henry to the effect that the deal was for 4,000. No other evidence would be
allowed.
D. Unless Martha has a written document from Henry to the effect that the agreement
was for $4,000 only, Martha and Henry will be legally required to split the remainder
with Martha being held responsible for $4,250.
E. Unless Martha either has a written document from Henry showing that the agreement
was for $4,000 or unless she can get Henry to admit that the agreement was for $4,000,
then Martha will be required to pay $4,500 because the obligation was upon Martha to
obtain confirmation of the terms of the original agreement.
Peanut Allergy. Kitty, who had a love of baking, decided to open her own bakery. She
decided that she did not need and did not want to pay for a lawyer to advise her on
different forms of ownership. Unfortunately, Kitty had not paid attention in business
law class. She proceeded, with little thought, to simply open her business called Kitty's
Baking. Bobby came in to order some cookies for his girlfriend, Bitsy, who was allergic
to peanuts. Bobby told Kitty that he needed some cookies for Bitsy but that Bitsy had
allergies to peanuts. Kitty told him not to worry because she would make up a special
batch just for him. Kitty had hired some assistants because she was so busy. She told an
assistant, Cathy, to make up several batches of cookies for different customers including
Bobby and to leave out the peanuts in Bobby's order. Cathy, however, forgot the
instruction and proceeded to make Bobby's cookies with crushed peanuts. Bobby
picked up the cookies and gave one to Bitsy in the car while they were on the way to
the movie in Bobby's new car. Bitsy became violently ill, vomited in Bobby's car, and
had to have her stomach pumped. Bobby and Bitsy sought recovery from Kitty who
told them that Bitsy's doctor bill and Bobby's car cleaning bill were business debts, that
the business was new and not making any money at the moment, and that she had no
personal liability. Following the incident involving Bobby and Bitsy, Kitty discussed
with her parents her problems with the bakery. Kitty's parents would like to invest in
her business and share in any profits, but they do not want to share in the management
responsibilities. What type of business did Kitty initially set up?
A. A limited liability company
B. A sole proprietorship
C. An individual proprietorship
D. A general company
E. An S corporation
Refusal to Pay. Business law teacher, Debby needed some yard work done. She told her
class that she would give $50 to the first person who mowed her yard. She also entered
into an agreement with Brenda to trim some shrubbery for $40. Max went to mow
Debby's yard. Unfortunately, just as he finished mowing, a neighborhood dog bit him,
and he had to go to the emergency room for a couple of stitches. Debby refused to pay
Max on the basis that the agreement was not in writing and that Max ended up being
more trouble than he was worth. Max refused to pay the emergency room because he
said that they did not have a binding, bilateral contract. Brenda refused to trim the
shrubbery because she got a better offer and claimed that she was not bound on the
contract until she started to perform. Which of the following is an appropriate
characterization of the agreement between Debby and Max?
A. They had a bilateral, express contract.
B. They had a bilateral, implied contract.
C. They had a bilateral and unilateral contract.
D. They had a unilateral contract.
E. They did not have any type of enforceable agreement.
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 is true under the Restatement of
Contracts, Section 16, regarding the claim of Charles that he should be able to avoid the
contract involving Tessa because he was intoxicated?
A. Contracts of an intoxicated person are voidable by the intoxicant if the other party
had reason to know that because of the intoxicated person's condition, that person was
unable to understand the nature and consequences of the transaction or was unable to
act in a reasonable manner in relation to the transaction.
B. Contracts of an intoxicated person are void if the other party had reason to know that
because of the intoxicated person's condition, that person was unable to understand the
nature and consequences of the transaction or was unable to act in a reasonable manner
in relation to the transaction.
C. Contracts of an intoxicated person are enforceable because a person should be bound
by his or her actions.
D. Contracts of an intoxicated person are void only if it can be proven that the other
party was involved in encouraging the abuse of alcohol by the intoxicated person.
E. Contracts of an intoxicated person are voidable by the intoxicant only if it can be
proven that the other party was involved in encouraging the abuse of alcohol by the
intoxicated person.
A(n) _____ contract is a contract created by a party to an agreement that is presented to
the other party on a take-it-or-leave-it basis.
A. substantively unconscionable
B. adhesion
C. outrageous
D. procedurally unreasonable
E. unreasonable
Which of the following is an exception to the rule requiring consideration?
A. Promissory agreement.
B. Promissory estoppel.
C. Quasi estoppel.
D. Quasi agreement.
E. Promissory performance.
Which of the following occurs when a party threatens to file a nonfrivolous civil
lawsuit unless another party gives consent to the terms of a contract?
A. Duress
B. Undue influence
C. Durable fraud
D. Criminal influence
E. None of these
Which of the following occurs when the purchased goods are transferred to the buyer
from the seller at either the time of the sale or some time later by the seller's delivery?
A. A voidable delivery contract
B. An average delivery contract
C. A simple delivery contract
D. A complex delivery contract
E. An acknowledged sale
What type of court order does a secured party need to take possession of the collateral if
the debtor defaults?
A. An order to take possession
B. An order to breach the peace
C. An order for retention of the collateral
D. An order for protective relief
E. The secured party does not need an order to take possession.
Blow-Up. Jeanie is hauling several containers of gasoline in her vehicle in preparation
for riding her personal watercraft. 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 car. The car 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 Holly is the
proximate cause of the bank burning?
A. Holly is not the proximate cause of the bank burning because it was not foreseeable
that Jeanie would have gasoline in the back of her car that would result in the fire.
B. Holly is not the proximate cause of the accident because her actions were not the
cause in fact of the accident.
C. Holly's actions were not the proximate cause of the accident because actual causation
cannot be established.
D. Holly's actions were the proximate cause of the bank's burning because actual cause
is present.
E. Holly's actions were the proximate cause of the bank's burning because cause in fact
can be established.
New Agency. Debby just got a job as an assistant in a new federal agency called the
Accounting Commission that was set up to regulate the accounting and auditing
profession. The agency is headed by commissioners who serve for fixed terms and
cannot be removed for cause. Additionally, no more than a majority of the
commissioners may be from the same political party. Her agency is getting ready to
issue rules. The enabling legislation that set up the Accounting Commission specified
that the agency could make rules but said nothing about the form of the rules. Debby's
boss, Blaire, gave her some proposed rules and asked her to be sure that they were
published and to take care of the next step in the approval process. Blaire also told her
that at this point she was not very interested in hybrid rule making. Which of the
following would be the appropriate location for publication of the proposed rules?
A. The Congressional Review
B. The Congressional Record
C. The Agency Periodical
D. The Comment and Review Forum
E. The Federal Register
New Furniture. Penny purchased $3,000 worth of furniture from Bob's furniture shop.
Through an arrangement with Bob, Penny financed the purchase through a financing
company called Let Us Help You. Twenty-nine days after the goods were delivered to
her, Penny had a disagreement with Let Us Help You regarding the amount of interest
she would be required to pay. She notified Bob on that day that she was rejecting the
goods. Bob claimed that she did not properly reject the furniture and also that she acted
in bad faith. Penny says that she properly rejected and denies that she acted in bad faith.
She also says that, in any event, she cannot be charged with both wrongful rejection and
also bad faith because of double jeopardy. Which of the following is true regarding the
standard of good faith that would be applied in regard to Penny?
A. In this situation, good faith means honesty in fact.
B. In this situation, good faith means honesty in fact and also reasonable commercial
standards of fair dealing.
C. In this situation, good faith means perfect tender.
D. In this situation, good faith means a lack of commercial impracticability.
E. In this situation, good faith means both perfect tender and a lack of commercial
impracticability.
