Pam sells to Rob property which has a $50,000 mortgage in favor of First Bank. Rob
purchases the property subject to the mortgage. The value of the property declines and
there is a default on the mortgage. When First Bank forecloses, the property sells for
only $30,000.
a. Can First Bank recover the $20,000 balance from Rob? Explain.
b. Can First Bank recover the $20,000 from Pam? Explain.
All of the following are characteristics of a corporation EXCEPT:
a. it has perpetual existence.
b. it is a legal entity of its own.
c. it is able to be sued and to sue.
d. it is usually managed by its shareholders.
Registration of securities with the SEC guarantees to a potential investor the financial
soundness of the business represented by the stock.
a. True
b. False
The standard of conduct which is the basis for the law of negligence is usually
determined by a cost-benefit or risk-benefit analysis.
a. True
b. False
The articles of incorporation, incorporation statute, and bylaws set the number of
directors.
a. True
b. False
A trust created by will and effective after the death of a testator is called a(n):
a. charitable trust.
b. cy pres trust.
c. inter vivos trust.
d. testamentary trust.
The usual means of enforcing an agreement prohibiting an employee from competing in
a described territory for a stated period of time is by injunction.
a. True
b. False
Ralph sold a motel to Steve by stating that he had paid $250,000 for it and that his net
average annual profit from the business has been $40,000. In reality he paid $100,000
for the motel and has earned a net average annual profit of only $30,000. Steve made no
attempt to verify the statements until after the transaction was completed. In this case:
a. Ralph has committed fraudulent misrepresentation.
b. Steve is bound by the contract, because he failed to verify the statements which were
made to him.
c. Ralph has used economic duress to compel the sale.
d. All of these.
Which of the following results in a void, rather than voidable, agreement?
a. Duress by improper threat.
b. Fraud in the execution.
c. Fraud in the inducement.
d. Undue influence.
Sunset Properties, Inc. hires William to manage its 42-unit apartment complex. Nothing
is said as to expenses. William purchases fuel to heat the apartments and arranges for a
repairperson to do ordinary maintenance. William will be personally liable for these
expenses, because he has no authority to incur them.
a. True
b. False
The key distinction between larceny and embezzlement is whether the person taking the
property has the intent to deprive the victim permanently of the goods.
a. True
b. False
The UCC does not cover:
a. negotiable instruments.
b. investment securities.
c. sales of goods.
d. gifts.
When does acceptance of an offer to enter into a unilateral contract generally occur?
a. Upon notice of intent to accept by the offeree.
b. Upon full performance by the offeror.
c. Upon commencement of performance by the offeree.
d. Upon full performance by the offeree.
Ordinarily, an agent may delegate his duties to an equally qualified subagent.
a. True
b. False
Joe is mentally impaired from the effects of a prescribed medication. If he makes a
contract while under this impairment, the contract would be voidable if he cannot
comprehend the subject of the contract, its nature, and its probable consequences, even
if the other party does not know or have reason to know of his mental condition.
a. True
b. False
Article 2A carries over the warranty provisions of Article 2 with relatively minor
revisions that reflect differences in:
a. style.
b. leasing terminology.
c. leasing practices.
d. All of these.
e. leasing terminology but not leasing practices
In most cases, copyright protection lasts for the period of a person’s life plus an
additional seventy years.
a. True
b. False
Revised Article 3 provides that the impostor rule does not include an impostor who
impersonates an agent of a principal and who induces someone to create a negotiable
instrument payable to the principal.
a. True
b. False
An action for negligence consists of which of the following elements which the plaintiff
must prove?
a. Injury.
b. Res ipsa loquitur.
c. A reasonable person.
d. All of these.
X knows that Y has offered to sell wheat to Z at a certain price per bushel. Hoping to
get Z for a customer, X offers Z wheat at $.50 less a bushel than Y offered. X gets the
contract. X is liable to Y for the tort of interference with contractual relations.
a. True
b. False
Upon the termination of an agency, the agent’s actual authority ceases. However,
apparent authority may continue until actual notice of the termination is given to third
parties.
a. True
b. False
While comparative negligence is generally not a defense in a strict liability case,
contributory negligence generally is a successful defense.
a. True
b. False
Regarding the effect of termination of agency on authority, the general rule of the Third
Restatement is that:
a. it is reasonable for third parties to assume that an agents actual authority continues
unless and until the third party has notice of circumstances that make it unreasonable to
continue that assumption.
b. the termination of actual authority automatically terminates any apparent authority
held by the agent.
c. apparent authority ends only upon actual notice, either oral or written, to the third
party.
d. apparent authority continues until the third party with whom the agent has previously
dealt on credit receives constructive notice of termination.
The Labor-Management Reporting and Disclosure Act is aimed at eliminating
corruption in labor unions.
a. True
b. False
Ratification may relate to acts that have exceeded the authority granted to an agent.
a. True
b. False
The SEC may not advance the effective date of a registration statement.
a. True
b. False
Barbara owes Arthur $2,000. On July 1, Arthur assigns the debt to Caleb. Thereafter on
July 15, Arthur assigns the same right to David, who in good faith gives value for it and
knows nothing about the first assignee. David immediately notifies Barbara of the
assignment. In this case:
a. under the majority rule, David has priority.
b. under the English Rule, a second assignment of the same claim can never be
effective.
c. under the English Rule, David has priority.
d. under all of the rules, Caleb has priority since he was the first assignee in time.
The shareholders normally determine the price for which shares will be issued unless
the charter permits the board of directors to set the price.
a. True
b. False
The 1990 Negotiated Rulemaking Act requires agencies to use negotiated rulemaking in
the majority of circumstances.
a. True
b. False
Under the Revised Act, Bentry Corporations transfer of some of its assets to its wholly
owned subsidiary is considered a sale in the regular course of business.
a. True
b. False
Historically, an accountant’s liability for negligence extended only to the client and third
party beneficiaries.
a. True
b. False