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The Securities and Exchange Commission permits a company to obtain an audit from
either an independent certified public accountant or a certified public accountant who
works for the company.
The directors and officers of a corporation must act within the authority conferred upon
them by the state's corporation code, the articles of incorporation, the corporate bylaws,
and the resolutions adopted by the board of directors. This duty is called the duty of
care.
Only one creditor can have a perfected security interest in specific collateral at any
given time.
"Line of commerce" refers to products, but not to services.
An auditor's opinion may be conditional, unconditional, or reserved.
After owning and operating a business for eight years, Bud recently sold it to Lou.
Since Lou is a recent graduate, and this is his first business venture, Lou would be
considered an entrepreneur.
Rescission is not available for a contract involving mistake.
Article 3 of the Uniform Commercial Code establishes the rules and principles that
regulate bank deposit and collection procedures for checking accounts offered by
commercial banks.
Although most price fixing agreements occur between sellers, an agreement among
buyers to set the price they will pay for goods or services is also price fixing.
Physical delivery must be accomplished in order to create a bailment.
Under the Statute of Frauds, a bailment agreement must be in writing if it is for more
than three (3) months.
Section 7 of the Clayton Act tries to prevent potentially anticompetitive mergers before
they occur.
"Short-swing" profits pertain to trades involving equity securities occurring within one
year of each other.
Joint ventures resemble partnerships in that they are both usually formed to pursue
ongoing business operations.
Violators of the Immigration Reform and Control Act are subject to both civil and
criminal penalties.
The use of a living trust reduces the grantor's income tax.
A competitor can lawfully discover a trade secret by performing reverse engineering.
Prior to the Industrial Revolution, employees and employers had somewhat equal
bargaining power.
Holding someone for trial on a misdemeanor is usually based on the issuance of an
information statement rather than an indictment.
The EU treaty creates open borders for trade by providing for the free flow of capital,
labor, goods, and services among member nations.
There is concurrent state and federal jurisdiction for diversity of citizenship cases so
long as the minimum amount in controversy is met.
The appealing party is called the petitioner.
A bank is not obligated to certify a check.
When parties agree to settle a legitimate dispute over an existing contract, the
agreement to settle the dispute will meet the consideration requirements even if no new
consideration is paid.
Commercial paper held by a holder in due course is virtually as good as money.
To qualify as a holder in due course under the shelter principle, the holder must acquire
the instrument from a holder in due course, or be able to trace his or her title back to a
holder in due course.
The Food and Drug Administration may not withdraw approval of any
previously-licensed drug.
In order to be enforceable, a covenant not to compete must be ancillary to a legitimate
employment contract or contract for the sale of a business.
The Federal Trade Commission Act (FTC Act) is a federal statute, enacted in 1970, that
prohibits unfair methods of competition.
If a student leaves a book bag in class by accident and the professor takes possession to
safeguard the bag, an implied bailment has been formed.
In order for an offer to be valid, an offeror must promise to undertake some affirmative
action.
Under the UCC, if a merchant seller gives an assurance that an offer will be held open
for a certain amount of time, but sells the goods prior to that date, then the buyer can
sue the seller for breach of contract.
The North American Free Trade Agreement includes strict provisions in favor of
environmental protection, applicable to all three (3.) of its trading bloc nations.
Which of the following is true about meeting the quorum requirement at a corporate
shareholders' meeting?
A) Shareholders owning the required number of shares must be present in person at the
beginning of the meeting, and at the time each individual vote is taken.
B) Shareholders owning the required number of shares must be present either in person
or by proxy at the beginning of the meeting, and at the time each individual vote is
taken.
C) Shareholders owning the required number of shares must be present in person at the
beginning of the meeting, but once the quorum is established, it exists for the entire
meeting.
D) Shareholders owning the required number of shares for a quorum must be present
either in person or by proxy at the beginning of the meeting, but once the quorum is
established, it exists for the entire meeting.
E) Shareholders owning the required number of shares must be present either in person
or by proxy for at least half the meeting in order to meet the quorum requirement.
Which of the following is true?
A) Because of the Commerce Clause, states do not have any power to regulate
commerce.
B) In order for the federal government to have power to regulate commerce, the
commerce in question must actually cross state lines.
C) The states' police power gives states the power to regulate intrastate and much
interstate business within their borders.
D) Although a state cannot regulate interstate commerce within its borders, it has full
power to prevent interstate business activities within its borders.
E) Cases involving interstate commerce are decided under strict scrutiny.
Which types of property interests can be sold?
A) fee simple absolute
B) fee simple absolute and fee simple defeasible
C) fee simple defeasible and life estate
D) fee simple absolute and life estate
E) fee simple absolute, fee simple defeasible, and life estate
What is the distinguishing characteristic that makes a contract a formal contract?
A) a signature by both parties
B) the contract being in writing
C) a legal requirement that the contract be in a specific form
D) all possible scenarios being addressed in the contract terms
E) no handwriting in the document
________ states permit foreclosure sales.
A) Seventeen (17)
B) Twenty-one (21)
C) Thirty-one (31)
D) Forty-one (41)
E) All
Which of the following statements is generally not true about state intermediate
appellate courts?
A) The appellate court reviews the record of the trial court.
B) The appellate court usually allows the parties to file briefs outlining support for their
positions.
C) The appellate court allows the parties to make oral arguments outlining their
position.
D) The appellate court allows the parties to introduce new evidence, so long as it was
not previously introduced at the original trial.
E) Appellate court decisions are appealable to the state's highest court.
Which of the following is true regarding a dissolved corporation?
A) A dissolved corporation does not continue its corporate existence.
B) A dissolved corporation may not carry on any business.
C) In a voluntary dissolution, liquidation is usually carried out by the secretary of state.
D) Termination occurs after the winding-up of the corporation's affairs, the liquidation
of its assets, and the distribution of the proceeds to the claimants.
E) Termination occurs as soon as assets are liquidated.
Nicole agrees to purchase 400 cell phones from Mike, for $1,000. Mike agrees to
deliver the cell phones by May 1. On April 15, Nicole realizes that she will be unable to
resell the cell phones without protective covers. Nicole calls Mike and asks him to
include 400 cell phone covers in her order. Surprisingly, Mike agrees to ship 400 cell
phones and covers for a total amount of $1,000. Nicole pays Mike the $1,000. Which of
the following is true?
A) The modified contract is valid under the UCC and common law.
B) The modified contract is valid under the UCC, but not under common law.
C) The modified contract is valid under common law, but not under the UCC.
D) The modified contract is valid under the Revised UCC articles, but not Articles 2
and 2A.
E) The modified contract is valid under Articles 2 and 2A, but not under the Revised
Articles.
Which of the following is true regarding a statute of limitations?
A) It establishes the length of an actual trial.
B) The statute of limitations is always one year for all types of lawsuits.
C) The statute of limitations is always four years for all types of lawsuits.
D) The length of the statute of limitations varies, depending on the applicability
ofequitable principles.
E) It establishes the period during which a plaintiff must bring a lawsuit against a
defendant, although the length of the statute of limitations varies according to the cause
of action alleged and the jurisdiction in which the cause of action arises.
A secondhand buyer of consumer goods that were subject to a purchase money security
interest while in the hands of the original buyer takes those goods free of the purchase
money security interest:
A) under no circumstances.
B) so long as the original creditor perfected by automatic perfection.
C) so long as the original creditor perfected by filing a financing statement.
D) if the secondhand buyer does not have actual or constructive knowledge of the
security interest, gives value for the goods, and buys the goods for personal, family, or
household purposes.
E) in all circumstances.
Where there has been a material breach of contract, the non-breaching party may
________ the contract and seek ________ of any compensation paid under the contract
to the breaching party.
A) rescind; restitution
B) rescind; reclamation
C) abscond; restitution
D) abscond; reclamation
E) avoid; reclamation
Under the "Superfund" legislation, who may be held liable for the cleanup costs of a
hazardous waste site?
A) the generator of the waste
B) the generator and the transporter of the waste
C) the generator, the transporter, and the owner of the land at the time of the waste
disposal
D) the generator, the transporter, the owner of the land at the time of disposal, and the
current owner and operator of the site
E) the transporter of the waste, and the owner of the land at the time of disposal
Lewis and Reggie enter into an oral agreement. Reggie agrees to sell Lewis $400 worth
basketball equipment. Two days later, Lewis calls Reggie and orally requests $1,000
worth of basketball equipment instead of $400. Reggie agrees and attempts to deliver
the $1,000 worth of basketball equipment to Lewis. Lewis refuses to accept the
equipment and pay, so Reggie sues, who wins and why?
A) Reggie wins because an enforceable contract was created.
B) Reggie wins because the Statute of Frauds was satisfied by the original contract of
$400.
C) Reggie wins because the contract became irrevocable when Reggie attempted to
deliver the basketball equipment.
D) Lewis wins because Lewis did not provide additional consideration for the
modification.
E) Lewis wins because the Statute of Frauds has not been satisfied.
Generally, if two creditors have perfected security interests in the same collateral, which
has the superior right (priority)?
A) the first to perfect
B) the first to attach
C) the first to sue the debtor
D) the first to repossess the collateral
E) they have equal priority
A construction contractor entered into a contract to build a family room addition onto
Harry's home for $25,000. In order to encourage timely performance, the agreement
provided that the contractor would be penalized $5,000 as liquidated damages for each
day that the project was late in getting finished. The contractor was 30 days late in
finishing the project, but otherwise met the terms of the agreement. What is most likely
in this situation?
A) The liquidated damages clause would not be enforced due to its being excessive.
B) The liquidated damages clause would be limited to $25,000, the amount of the
contract price.
C) The liquidated damages clause would be enforced.
D) The liquidated damages clause would not be enforced because the parties made a
mutual mistake about when the contract would be finished.
E) The liquidated damages clause would be enforced only if it can be shown that the
contractor has made that much in profits over the past six months.
When an express agency agreement does not provide enough detailed agency powers to
cover all contingent situations, what type of authority does an agent have to act in the
event of an emergency that is not specifically covered by the agency agreement?
A) express agency
B) apparent agency
C) agency by estoppel
D) incidental authority
E) apparent authority
A check that has been outstanding from more than ________ is considered 'stale," and
the bank is under no obligation to pay it.
A) one (1) month
B) three (3) months
C) six (6) months
D) one (1) year
E) three (3) years
The followers of this school of jurisprudential thought are known as realists:
A) the Sociological School
B) the Critical Legal Studies School
C) the Command School
D) the Analytical School
E) the Psychological School
The Court of Appeals for the Federal Circuit is the appellate court for:
A) federal district court cases.
B) federal circuit courts.
C) the U.S. Tax Court and U.S. Bankruptcy Court.
D) the Court of Claims, the Patent and Trademark Office, and the Court of International
Trade.
E) the fifty (50) state supreme courts.
Websites and webpages are stored on servers throughout the world, which are operated
by ________.
A) Internet access facilitators (IAFs)
B) Internet access providers (IAPs)
C) Internet service facilitators (ISFs)
D) Internet service providers (ISPs)
E) Internet service protocols (ISPs)
Which of the following is true about the tests used to determine whether a principal is
responsible for the intentional torts of his agent?
A) The "work-related" test and the "motivation" test are two names for the same test.
B) In most states, the plaintiff can choose which test to use.
C) Application of the "work-related" test will result in employer liability more
frequently than through use of the "motivation" test.
D) Under either test, the plaintiff must also prove that the agency was fully disclosed in
order to recover.
E) Application of the "motivation" test will result in employer liability more frequently
than through use of the "work-related" test.
An initial license fee is a(n) ________ payment for the privilege of being granted a
franchise.
A) lump-sum
B) periodic
C) in-kind
D) credit
E) installment
Assuming that a finder of property would like to keep the property, what would the
finder prefer that the property be classified as?
A) lost property
B) mislaid property
C) From the finder's perspective, it makes no difference how the property is classified.
D) The finder can choose the classification most beneficial to him or her.
E) estrayed property
The tort of intentional infliction of emotional distress is also known as the ________.
A) tort of outrage
B) crime of outrage
C) tort of approbation
D) crime or approbation
E) tort of obsequiousness
Which of the following is true regarding a corporation that conducts business in a
foreign country using a branch office?
A) A branch office is a separate legal entity.
B) The corporation is liable for the contracts of a branch office, but not for torts
committed by the personnel of a branch office.
C) The corporation is liable for torts committed by the personnel of a branch office, but
is not liable for the contracts of a branch office.
D) A corporation is not liable for torts committed by the personnel of a branch office, or
for the contracts of a branch office.
E) A corporation is liable for torts committed by the personnel of a branch office, and
also for the contracts of a branch office.
Tandem Corporation is the target of a hostile takeover by Alpha Corporation.
Management of Tandem fears for their jobs because of statements made by Alpha's
management about the need to streamline the Tandem management. Tandem works out
a deal with Beta Corporation for the two corporations to merge, with Beta surviving.
Beta has indicated that it will leave present management intact. Two years after the
merger with Beta, an independent consultant reports that there are too many levels of
management in the combined corporation, and that thirty percent of management
positions should be eliminated. In this circumstance:
A) Tandem prevented the merger with Alpha with a "poison pill."
B) Tandem prevented the merger with Alpha by a "white knight merger" with Beta, an
illegal tactic.
C) Tandem prevented the merger with Alpha by a "white knight" merger with Beta,
which was legal; Tandem's management is liable to shareholders for the loss of profits
due to the excessive levels of management.
D) Tandem prevented the merger with Alpha by a "white knight" merger with Beta,
which was legal, assuming it met the "business judgment rule." Tandem's management
is not liable to shareholders for the loss of profits due to the excessive levels of
management, assuming the business judgment rule is satisfied.
E) The merger was illegal, and Tandem's management is liable to shareholders for the
loss of profits.
Under Section 2 of the Sherman Act, rather than making a presumption about whether
monopoly power exists, the courts will examine all the facts and circumstances to
determine whether monopoly power exists when the defendant holds between
________ percent and ________ percent of the relevant market.
A) thirty; eighty
B) twenty; seventy
C) zero; fifty
D) thirty-three; seventy
E) fifty; seventy
The ________ rule is applicable to restraints of trade considered inherently
anticompetitive. Once this determination is made about a restraint of trade, the court
will not permit any defenses or justifications to save it.
A) per se
B) prima facie
C) inherency
D) per diem
E) prima donna
Zora and Wayne are both adults. Zora does not like Wayne because Wayne made fun of
her in elementary school. Zora became a successful fashion designer. Wayne got a job
at a local bank at a relatively low salary. Zora, who really holds a grudge, thinks that
she has finally decided on a way to get even with Wayne. Knowing that she is being
untruthful, Zora tells Wayne that if he will quit his job at the bank, she has a great
opportunity for him hiring models for her clothing and that she wants to employ him for
a period of two years at $100,000 per year. Nothing was in writing, but in reliance on
her promise, Wayne quit his job at the bank and showed up at Zora's office eager to
interview models. Zora says "Ha, ha, I'm even with you get lost. I'd never trust you to
hire models. You should have paid more attention in Business Law and gotten the
agreement in writing." Wayne is really mad and sues. Who should win?
A) Zora should win, because the agreement should have been in writing.
B) Zora should win, because Wayne deserved what he got.
C) Wayne should win on the basis of promissory estoppel.
D) Wayne should win, because the agreement was not within the Statute of Frauds.
E) Zora should win, because Wayne had no basis upon which to rely upon her promise.
Most offers and contracts set forth ________ terms that identify the parties, the subject
matter of the contract, the consideration to be paid by the parties, and the time of
performance.
A) conditional
B) hypothetical
C) express
D) implied
E) subjective
The doctrine of caveat emptor means:
A) let the seller beware.
B) let the seller be liable for all damages.
C) let the buyer beware.
D) that the legal remedy must be just and fair.
E) let the seller and buyer beware.
A famous psychologist has written a highly-acclaimed book targeted at victims of
domestic abuse. This book gives practical advice on getting out of such abusive
relationships and avoiding further injury prior to getting out of the relationship. Pat
thinks the book is excellent, but knows that many persons who could benefit from the
book are unaware of its existence and unable to afford its $39.95 price. Pat is
considering photocopying significant portions of the book and selling the photocopied
portions to such persons at the cost of photocopying, which is much less than $39.95. In
using a utilitarianism approach to decide whether to undertake this, Pat would:
A) look to an outside source regarding the photocopying and selling.
B) look for a universal rule about photocopying and selling such material.
C) try to determine the fairest thing to do.
D) determine if the total good to the world would be increased if Pat were to undertake
the photocopying and selling of the copied book sections.
E) determine the likelihood that the psychologist would sue him for copyright
infringement before making a decision.
There will never be a dissenting opinion filed when the U.S. Supreme Court has issued
a:
A) majority opinion.
B) unanimous opinion.
C) plurality opinion.
D) tie opinion.
E) opinion written by the Chief Justice.
If a parent corporation owns ________ percent or more of the outstanding shares of a
subsidiary corporation, a ________ -form merger procedure may be followed to merge
the two corporations.
A) 50; short
B) 66 2/3rds; short
C) 50; long
D) 66 2/3rds; long
E) 90; short
