If untrue, which of the following would probably be considered a misrepresentation of a
material fact?
a. “This is the one that I think is the best buy.”
b. “This is the best computer on the market.”
c. “This car has new brakes.”
d. “These tires will wear like iron.”
Sam is a sales representative for the INC Corporation. Sam has a terrible driving record
and has had his driver’s license revoked, but nevertheless he continues to drive the
company car for his job. One day he drives too fast for conditions, goes through a red
light, and strikes a pedestrian. The accident happened despite the fact Sam’s supervisor
at INC had repeatedly reprimanded him and advised him to drive more cautiously. INC
has:
a. no liability, because they did not authorize Sam to drive carelessly.
b. no liability, because Sam’s actions were not a tort.
c. liability even though it did not authorize Sam to drive carelessly, because it employed
an improper person as its agent.
d. no liability, because it has adequately supervised Sam as its agent.
The term ‘scoping” concerning EIS procedures includes:
a. consulting relevant state environmental agencies to determine significant issues to be
addressed by the EIS.
b. consulting relevant federal agencies to determine the significant issues to be
addressed by the EIS.
c. preparing a final decision that no EIS is required.
d. only agency consultation and no public comment.
If destruction or casualty to goods, total or partial, occurs after risk of loss has passed to
the buyer, who is responsible for losses?
a. The seller
b. The buyer, who must pay the entire contract price of the goods
c. The buyer if the loss is partial; both parties share the loss if it is total
d. The carrier delivering the goods
ZYX Corporation purchases 1,000 shares of its own stock from Jones, a shareholder, at
a price of $50 a share. These shares will be known as:
a. treasury shares.
b. preemptive shares.
c. preferred stock.
d. no par stock.
The Food and Drug Administration:
a. uses three basic methods of enforcement.
b. is a relatively recent agency, having been formed in 1976.
c. is the oldest federal consumer protection agency.
d. has no authority to require premarket approval of medical devices.
A collection agency threatened to sue Martha for the unpaid hospital bills from her
heart operation. She signed a promissory note at a high but not illegal rate of interest.
What result?
a. The note is valid because she signed it.
b. The threat to bring a civil suit to collect money owed is permissible.
c. The note is invalid because she signed under duress.
d. The note is invalid because the agency put her under undue pressure.
A warehouse receipt:
a. is not a document of title.
b. is a receipt issued by a person engaged in the business of storing goods for hire.
c. grants a lien enabling a warehouser to sell goods only at a public sale.
d. All of the above.
Answer the following:
Theodore, as treasurer of Valleyview Corporation, had the duty to invest corporate
earnings as he deemed best for the company. When Valleyview Corporation went
public, the new board decided that a committee of the officers would make such
investment decisions. If Theodore thereafter unilaterally contracted to purchase
investment securities with corporate earnings as he had done many times before, such
contract would be valid:
a. since Theodore would have express authority.
b. since Theodore had implied authority.
c. under apparent authority if the seller knew of Theodore’s past transactions.
d. because of ratification if the board did not know of his actions.
An agency:
a. is a consensual relationship that the principal and agent may form by contract or
agreement.
b. must be created with consideration.
c. requires a formal writing, called a power of attorney.
d. which is voidable because of the incapacity of an agent results in only voidable
contracts with third parties.
Marketable title means that the title is free from which of the following?
a. Encumbrances
b. Defects in the chain of title appearing in the land records
c. Events depriving the seller of title
d. All of the above
e. None of the above
Which of the following would be likely to result in liability to a director of a textile
company? The director:
a. sells stock in the textile company before a merger is announced.
b. uses the corporation’s offices to buy and sell his own investment securities.
c. owns stock in an automobile company.
d. agrees to hire as president a man he has not personally investigated.
e. Two of the above, (a) and (b).
To which of the following limitations are the rights of the holder of a copyright subject?
a. Fair use
b. Compulsory licenses
c. Palming off
d. Both fair use and compulsory licenses
General Widget partnership assets amount to $34,000 after liquidation. Frank, Gene,
and Hank, equal partners, each contributed $3,000 into the capital pool at the inception
of the business. Gene later loaned the business $5,000. They owe $23,000 to creditors
for inventory. What will Gene get in distribution, assuming there is no agreement on the
distribution of profits?
a. $7,000
b. $5,000
c. $8,000
d. $11,000
A person, other than a collecting bank or other intermediary, who negotiates a document
of title for value:
a. warrants to her immediate purchaser that the document is genuine.
b. warrants to all who later take the document that it is genuine.
c. warrants that nothing impairs the document’s validity or worth.
d. makes no warranties.
e. Both (b) and (c).
Enforcement proceedings under the Sherman Act may not be brought by the:
a. U.S. Commerce Department.
b. U.S. Justice Department.
c. Federal Trade Commission.
d. state Attorneys General.
Respondeat superior:
a. imposes vicarious liability on the principal.
b. makes a principal liable for the acts of independent contractors.
c. makes a principal liable for employees’ acts committed within the scope of
employment.
d. Both (a) and (c) are correct.
Which of the following is required regarding indorsements?
a. An indorsement must be written on the back side of the instrument.
b. There must be compliance with Federal Reserve Board guidelines in order for the
instrument to be negotiable.
c. An indorsement must be written on the instrument or on a paper affixed to the
instrument.
d. An indorsement must be dated.
Which of the following is true with regard to contractual relations between the principal
and a third party?
a. There is no liability on the part of the principal if the agent acts with implied
authority.
b. An undisclosed principal and the third party are contractually bound if the agent acts
within her actual authority, unless the contract specifies otherwise.
c. Under the Second Restatement, no principal is bound if the agent acts without any
authority.
d. A partially disclosed principal is bound only if the agent acts within the scope of
actual authority.
Contract damages that put the injured party in as good a position as if the other party
had performed are:
a. compensatory damages.
b. incidental damages.
c. consequential damages.
d. liquidated damages.
Alice was briefly married at the age of 16. She is now 28 years old and plans to marry
Henry in the spring. Henry’s sister found out about Alice’s first marriage and then told
Henry’s parents. Alice now wants to sue Henry’s sister for public disclosure of private
facts. Does Alice have a case against Henry’s sister?
a. No, because marriage is a public and not a private fact.
b. No, because telling Henry’s parents is not sufficient publication for public disclosure
of private facts.
c. No, because the statement is true.
d. Both (a) and (b) are correct.
An amendment to a will is called a(n):
a. stipulated addition.
b. statutory adjustment.
c. codicil.
d. attestation.
If an anticipatory repudiation substantially impairs the value of the contract, the
aggrieved party may:
a. await performance for a reasonable time.
b. resort to any remedy for breach.
c. Both (a) and (b).
d. None of the above.
Michael, a minor, rents a car to attend the senior prom at his high school. He signs an
agreement stating that he will not take the car more than 100 miles from the rental
agency. At 2:00 a.m., after he has had a few beers, his friends talk him into driving 200
miles to Chicago for the weekend. On the way, the car is involved in a minor traffic
accident that damages the vehicle. In most courts, because the tort of negligence is
related to the rental contract for the vehicle, Michael has no liability to the rental
agency.
Article 2A carries over the warranty provisions of Article 2 with relatively minor
revision to reflect differences in:
a. style.
b. leasing terminology.
c. leasing practices.
d. All of the above.
e. (b) and (c), but not (a).
Gail sent a letter of acceptance to an offer that has expired. Gail has made:
a. a contract.
b. a rejection.
c. a revocation.
d. an offer.
Which of the following is correct with respect to election of remedies?
a. The Code rejects any doctrine of election of remedies; its remedies are cumulative.
b. The remedy of specific performance is inconsistent with that of restitution.
c. A person who seeks an injunction may also seek incidental damages for the breach.
d. All of the above are correct.
Which of the following is tangible real property?
a. Corn harvested and stored in a grain bin
b. The mortgage on an office building
c. A copyright
d. The freight elevator in an office building
An interest in the future that arises in a third party is called a(n):
a. reversion.
b. remainder.
c. assignment.
d. fee simple absolute.
A short-form merger:
a. is not a merger at all but a form of consolidation.
b. may be undertaken only with the subsidiary’s directors’ approval.
c. allows no appraisal rights for the parent’s minority shareholders.
d. requires shareholder approval.
Product liability exists if the:
a. consumer misuses the product.
b. consumer alters the product before he or she uses it.
c. product reaches the consumer without substantial change in the condition in which it
is sold.
d. consumer takes the product gratuitously.
The UCC and the Restatement make no provision for supplying terms omitted by the
parties’ contract.
The doctrine of subordination of claims might result in two unsecured creditors getting
unequal proportions of their debts paid.
A purchase money security interest in equipment takes priority over a conflicting
security interest if the purchase money interest is perfected within thirty days of the
debtor’s receipt of the goods.
The 1990 Clean Air Act Amendments provide that EPA must establish new NAAQS for
major pollutants every five years.
First Bank repossessed Bob’s television after he missed his last two $50 payments on it.
He came to the bank with the $100 plus service charges and expenses of repossession.
The bank will have to give him the television as long as they have not disposed of the
television or have not made a contract to sell it.
Constructive trusts are generally found where the creator clearly intended a trust to be
formed.
An oral stop payment order is binding on the payor bank for 14 calendar days.
Arthur offers Bob, an employee of Carl, a yearly salary of $10,000 more than Bob
receives under the contractual relationship between Bob and Carl. Arthur knows about
the contract between Bob and Carl and knows that the contract should run for another
five years, but Arthur badly wants Bob to work for him. Arthur probably is liable to
Carl for intentional interference with contractual relations.
List and define the common law causes of action for environmental damage.
In order for Bill to receive a permit for his plastic factory in a nonattainment area, he
must show that the factory’s emission rates will be within the average range for the
industry.
Dunbar Corp. is a debtor in relation to Martina, who is the holder of an income bond
issued by Dunbar.
If Able Corporation buys all the assets of Beta Corporation in a merger, Able
Corporation also assumes Beta Corporation’s liabilities.
The general rule is that an assignee stands in the shoes of the assignor. He acquires the
rights of the assignor but no new or additional rights.
An incidental beneficiary has no right to enforce a contract.
Under the UCC, an acceptance must always be identical to an offer for a valid contract
to be formed.