The widest range of tort liability arises in the area of:
a. negligence.
b. absolute liability.
c. violation of statute.
d. assumption of risk.
A depositor issued a check and, after mailing the check, suffered a heart attack and died.
In the regular course of business, the bank paid the check when presented for payment,
despite the fact that the bank had received notice fourteen (14) days earlier of the
depositor’s death. In terms of the bank’s payment of the check
a. the bank is not because the payment was made within 20 days of the notification of
the death.
b. the bank is potentially liable to the depositor’s estate.
c. the bank is not liable unless the depositor’s executor posted an indemnity bond.
d. the bank’s authority to act for the depositor ended on the depositor’s death, regardless
of whether the bank had been notified of the depositor’s death.
When a person has performed services under an oral contract that cannot be enforced
because of the statute of frauds, such person:
a. can recover the agreed payment for the services because a refusal to make payment
would be a breach of the contract.
b. can recover the reasonable value of the services because there is a quasi-contractual
duty to pay for the benefit received from such services.
c. cannot recover the value of the services because they were rendered under a
unilateral mistake of law.
d. can have the party receiving the services arrested for obtaining property by false
pretenses.
When a business owner uses an independent contractor to perform nonhazardous work,
the owner ordinarily is:
a. not liable for harm to third persons or their property.
b. not bound to contracts made by the independent contractor.
c. not liable for the negligence of employees of the independent contractor.
d. all of the above.
Sarbanes-Oxley (SOX):
a. created a new form of mail and wire fraud.
b. requires corporate officers to certify their financial statements.
c. provides for both fines and jail time for corporate fraud
d. all of the above.
If an offeree accepts an offer before it is effectively revoked:
a. a void contract is formed.
b. a voidable contract is formed.
c. an unenforceable contract is formed.
d. a valid contract is formed.
Under Regulation D, Rule 506, sales may be made to:
a. an unlimited number of accredited investors
b. an unlimited number of unaccredited investors
c. no more than 500 accredited investors
d. no more than 35 unaccredited investors
Paul purchased a house and also purchased fire insurance coverage on the house. The
policy contained an 80 percent coinsurance clause. Paul maintained coverage in the
amount of $150,000 and the value of the house was $250,000. A fire caused a loss of
$100,000. Paul will collect:
a. the full $100,000, because he had coverage for $150,000.
b. only part of the $100,000 loss, because he failed to maintain coverage at 80 percent
of the value of the house.
c. nothing, because he failed to maintain coverage at 80 percent of the value of the
house.
d. 80 percent of $250,000, or $200,000.
Where a testatrix executes a will and later has a child:
a. the child is prohibited by law from receiving anything from the estate.
b. many states hold that the will of the testatrix is partially revoked by operation of law
to provide a share to the after-born child.
c. a new will must be executed because the birth voids the original will.
d. the after-born child takes a share by escheat.
A minor cannot avoid a contract that has been:
a. ratified.
b. signed.
c. processed.
d. disallowed by the court.
A person who would suffer a direct pecuniary loss if a particular piece of property were
destroyed has a(n):
a. contractual risk.
b. hazard.
c. underwriting.
d. insurable interest.
A partner’s authority to act for the partnership is similar to the authority of a(n):
a. agent to act for a principal.
b. independent contractor to act for an employer.
c. shareholder to act for a corporation.
d. employee to act for another employee.
Which of the following is a defense to defamation?
a. Slander
b. Libel
c. Truth
d. All of the above.
Customers are precluded from asserting unauthorized signatures or alterations if they do
not report them within __________ from the time the bank statement is received.
a. fourteen (14) days
b. forty (40) days
c. six (6) months
d. one (1) year
Delivering stock to a creditor as security for a debt owed by the shareholder:
a. transfers ownership rights.
b. gives rise to a perfected security interest.
c. makes the creditor a perfected party after filing.
d. makes the debtor a perfected party after filing.
A sale of goods or services for $25 or more made to a buyer at home may be set aside
within __________ days.
a. three (3) business
b. three (3) calendar
c. five (5) business
d. five (5) calendar
When an employer has a contract with an employee for the employee to work for a set
period of time, which of the following would not justify discharging the employee?
a. financial hardship of the employer
b. nonperformance of duties by the employee
c. theft by the employee
d. possession of drugs by the employee
The elements of a contract include all of the following except:
a. an agreement.
b. two or more competent parties.
c. consideration.
d. an illegal purpose.
When a seller breaches a contract for the sale of goods to a buyer, the buyer is entitled
to specific performance of the contract if the:
a. goods are unique.
b. market cost of the goods has increased.
c. goods can be purchased in any major city in the country.
d. buyer’s customers will be disappointed if the buyer does not obtain the goods.
If an express warranty is breached:
a. the warrantor is not liable if due care was exercised in the manufacture or handling of
the product
b. the seller has no warranty obligation if the buyer had the opportunity to inspect the
goods before purchasing them.
c. the warrantor is not liable if (s)he honestly believed that the warranty was true.
d. the warrantor is always liable.
Partners hold title to firm property by:
a. tenancy in partnership.
b. tenancy in common.
c. joint tenancy.
d. none of the above.
The plaintiff in a quasi-contractual action can recover:
a. lost profits.
b. damages for mental distress.
c. the reasonable value of the benefit conferred upon the defendant.
d. for all the damages sustained.
Which of the following is an effective means of notice to purchasers of shares that there
are restrictions on the sale?
a. notation in the bylaws
b. resolution of the shareholders at a shareholders’ meeting
c. notation on the stock certificate
d. resolution of the directors at a directors’ meeting
Louise Feldspar obtained the exclusive right to sell TastyCrunchy Chicken in a
specified area. Under the agreement, Feldspar was permitted to use the TastyCrunchy
name and logo for her restaurant and she agreed to comply with TastyCrunchy’s
restaurant requirements. She purchased her equipment, as well as the chicken she
served, from the firm. She agreed to devote a certain percentage of her revenues to
promoting the TastyCrunchy operation in local media. The operation was successful
from the start, and Feldspar has had no problem meeting the sales quotas imposed by
TastyCrunchy. The past year TastyCrunchy informed Feldspar that it intended to open a
new restaurant on an interstate highway that had just been completed in her exclusive
area of trade. Because her operation would be competition for the new store, Feldspar’s
right to sell TastyCrunchy products and use the name TastyCrunchy was revoked. What
can Louise do?
Theoretically, the relationship between a franchisor and a franchisee is one of:
a. parent and subsidiary.
b. an “arm’s-length” relationship between two (2) independent contractors.
c. an “arm’s-length” relationship between two (2) partners.
d. an “arm’s-length” relationship between two (2) joint tenants.
The partners who manage the limited partnership and are personally liable for the firm
debts are __________ partners.
a. general
b. active
c. licensed
d. unreserved
In determining whether a partnership exists, which of the following factors is not
evidence of a partnership?
a. Shared profits and losses
b. Co-ownership of property
c. Equal control of the business
d. All of these are evidence of partnership.
Which of the following is an example of a legal restriction that may be imposed on a
tenant’s deposit?
a. A statutory limitation on the amount of the deposit.
b. A requirement that the landlord hold the deposit in a trust fund.
c. A requirement that the landlord pay interest for the period the deposit is held.
d. All of the above.
The Sherman Act applies to:
a. buying activities.
b. selling activities.
c. production activities.
d. all of the above.
Concerning torts and crimes, choose the correct statement:
a. Every tort is a crime.
b. Every crime is a tort.
c. No crime is a tort.
d. A crime may also be a tort.
Over half of all Fortune 500 firms train their employees to recognize and deal with
particular types of behavior that breach their ethical codes.
An option contract gives one of the parties an absolute right to enter into a second
contract at a later date.
Megan owns a manufacturing business in a nonattainment area under federal air
pollution law. She wishes to triple the size of the manufacturing operation using land
she just purchased next to her current location. What must Megan demonstrate in order
to secure a permit to operate in the nonattainment area?
Since 1947 and the end of the World War II era, the goal of the General Agreement on
Tariffs and Trade (GATT) has been to restrict world trade.
Fire insurance is a personal contract, and in the absence of statutory or contractual
authorization, it can be assigned without the consent of the insurer.
Each partner is an agent of the partnership.
Unclaimed property is often transferred to the government under the concept of escheat.
Antilapse statutes commonly provide that the gift to the deceased beneficiary shall not
lapse but that the children or heirs of that beneficiary may take the legacy in the place
of the deceased beneficiary.
Potential employers are free to do pre-hiring monitoring of applicants without their
knowledge.
Joint tenancy and tenancy in common both feature the right of survivorship.
A person who makes a promise is the promisor, while a person to whom the promise is
made is the promisee.
Fungible goods are always homogeneous.
The sharing of profits and losses is conclusive evidence of partnership.
Hal was a merchant who deposited 2,000 barrels of olive oil in a public warehouse
operated by Welcome Warehouse. Hal was issued a warehouse receipt for the 2,000
barrels that by its terms was deliverable “to bearer.” Hal had engaged in many other
transactions with Welcome and was in arrears for quite a bit of money to Welcome. Hal
duly negotiated the warehouse receipt to Esmeralda Enterprises in payment of cash.
Hal’s financial affairs continued to deteriorate and Welcome never was paid the debt.
When Esmeralda’s agent requested the oil and offered to remit the warehouse receipt,
Welcome refused to release the oil, claiming a lien on the oil for Hal’s debt. Esmeralda
sued. Decide the case.
All owners of a limited liability company are known as officers.