Fred Sweet runs dancing classes for middle-aged and elderly people. Some of Fred’s
customers lack physical coordination, and injuries from kicks, falls, etc. are common.
Fred naturally fears that injured customers will sue him for negligence. Thus, he makes
each customer sign a written contract containing a clause relieving Fred of all liability
for injuries suffered during his dancing classes. However, fearful that he will lose
business if potential customers become aware of his strategy, Fred states the clause in
fine print and doesn’t point it out to them. An injured customer sues Fred in negligence.
Fred wants to defend on the basis of the clause in the contract. Which of the following
is the biggest weakness in Fred’s position?
A. That Fred tried to use an exculpatory clause at all, because such clauses are invalid
on public policy grounds.
B. That Fred tried to use an exculpatory clause to relieve himself of negligence liability.
C. That Fred has superior bargaining power, which makes the customer’s acceptance of
the exculpatory clause involuntary.
D. That Fred used a fine-print exculpatory clause, which means that the customer
lacked knowledge of the clause’s existence.
Anthony, a partner of a partnership firm, was convicted for rash driving. Following this,
all other partners dissociated him from the partnership, as per the terms of the
agreement. This is an example of _____ dissociation.
A. wrongful
B. nonwrongful
C. discriminatory
D. valid
Don is a partner of the firm Shaw Associates, which offers recruitment services. Don
entered into a contract with Bradman & Sons to sell the land on which the partnership
business is situated for $85,000. Is this contract enforceable?
A. Yes, because Don has apparent authority to enter into contract with Bradman &
Sons.
B. No, because Don has only express authority not actual authority.
C. Yes, because Don, being a partner, has implied authority to enter into contract.
D. No, because Don does not have the power to convey the partnership’s real property.
Which of the following was NOT taken into account by classical law in assessing
contracts?
A. Fraud
B. Duress
C. Misrepresentation
D. Fairness
When a piece of Real Property is sold who will own the fixtures?
A. The new owner of the Real Property
B. The former owner of the Real Property
C. The Secretary of State
D. No one owns the fixtures, they are community property
For proving liability of a professional under _____, privity of contract between the
plaintiff and the defendant is required.
A. Section 12(a)(2) of the Securities Act of 1933
B. Section 18 of the Securities Exchange Act of 1934
C. Section 17(a) of the Securities Act of 1933
D. Section 11 of the Securities Exchange Act of 1934
Which of the following is correct concerning the election of directors?
A. Straight voting is the cleanest way to allocate equity ownership of the corporation
among shareholders.
B. In cumulative voting, each share has one vote for each new director to be elected.
C. Cumulative voting can prevent harmful coalitions in close corporations.
D. Under straight voting, the voting power of minority shareholders is increased.
Ms. White lost her puppy. She advertises a reward of $50 for the return of her puppy.
What is the contractual nature of Ms. White’s advertisement?
A. An offer for a unilateral contract
B. An invitation for an offer
C. An invitation for a gift
D. An acceptance on a bilateral promise
Negligence “per se” is a legal rule that established a defendant’s negligence when:
A. a statute intended to protect persons like the plaintiff has been violated.
B. the defendant intended to harm the plaintiff.
C. the plaintiff intended to harm the defendant.
D. both the defendant and the plaintiff intended to harm each other.
The Electronic Signatures in Global and National Commerce Act (E-Sign):
A. invalidates agreements between parties conducting transactions by electronic means.
B. states that electronic transactions on subjects covered by the statute of frauds require
an additional writing.
C. overrides state laws that are inconsistent with the UETA.
D. creates barriers to e-commerce by invalidating electronic records and digital
signatures.
The SEC does NOT have the power to:
A. direct a defendant to stop violating the securities laws.
B. impose fines for violation of securities laws.
C. desist a defendant from future violations of securities laws.
D. issue injunctions against alleged violators of securities laws.
Which of the following is true regarding reorganizations under Chapter 11?
A. Only corporations are eligible for Chapter 11.
B. Chapter 11 proceedings are voluntary only.
C. No trustee can be appointed.
D. The court must confirm any reorganization plan approved by the creditors.
Directors and officers owe what kind of duty to the corporation?
A. Fiduciary duty based on trust
B. Duty to make a profit
C. A duty to be innovative
D. A duty to be generous
Mr. Yellow delivers a stack of newspapers to Mr. Green’s store to see if he wants them.
A note attached indicates the stack of papers is $50. Mr. Green without communicating
an acceptance sold the entire stack of papers to his customers. What is the status of the
agreement between Mr. Yellow and Mr. Green?
A. There is no contract because Mr. Green did not expressly accept the offer
B. There is a contract because Mr. Green accepted by implied action
C. There is no contract because the goods are treated as gifts to Mr. Green
D. There is no contract because the Secretary of State was not notified
A court has held that a certain contract violates public policy. This contract will be
treated the same as a(n):
A. illegal contract.
B. contract between a minor and an adult.
C. private contract.
D. adhesive contract.
The Total Household Appliance store sells a refrigerator to Alvin, on the condition of
making payments in installments. In this case, the store:
A. has to file its purchase money security interest.
B. need not file its purchase money security interest.
C. has to take possession of the refrigerator.
D. need not attach the refrigerator.
Why are insurers liable for both compensatory and punitive damages for a breach which
is in bad faith?
A. The insured needs to be compensated for the amount spent on the case.
B. Bad faith is considered an independent tort by itself.
C. Courts have traditionally favored punitive damages.
D. Such breaches in bad faith are a very rare phenomenon.
The Environmental Protection Agency administers the “Superfund.” The cost of
cleaning up a Superfund site can be substantial. Where does the money come from to
pay for this?
A. Federal tax revenues
B. State tax revenues
C. Fees assessed against all chemical companies
D. Fees assessed against all corporations that use chemicals
What is the liability faced by an insurer if it breaches its policy obligations by means of
a good faith but erroneous denial of coverage?
A. Compensatory damages
B. Punitive damages
C. Special damages
D. Liquidated damages
All the gas stations in Smalltown agree to charge the same price for gas. The owners of
the various companies get together every Friday in a coffee shop to decide what the
price will be next week. This is:
A. a violation of the Sherman Act, Section 1.
B. a violation of the McCarran-Ferguson Act.
C. a violation of the Robinson-Patman Act.
D. not a violation, as long as it benefits consumers.
Martin Nowak, an accountant, entered into a written contract with Jane Gibson to
perform certain tax services for Jane. Shortly thereafter, Jane was assessed additional
taxes and she wanted to appeal the assessment. Jane was required to appeal
immediately and the workpapers held by Martin were necessary to appeal. Martin
refused to furnish Jane with the workpapers unless he was paid a substantially higher
fee than was set forth in the contract. Jane reluctantly agreed in order to meet the filing
deadline. The contract as revised is:
A. voidable at Jane’s option based on undue influence.
B. voidable at Jane’s option based on duress.
C. void on the ground of undue influence.
D. void on the ground of duress.
What section of the UCC governs Statute of Limitations in contract disputes?
A. 2-703
B. 1-102
C. 2-725
D. 2-301
Is it possible for a party that has waived rights to a portion of the contract not yet
performed to retract the waiver? Why?
A. Yes. The party will be able to immediately assert the late payments as grounds for
later canceling the contract.
B. Yes. The party can give reasonable notice to the other party that strict performance
will be required.
C. No. Once a party has waived rights to a portion of the contract, it will not be able to
assert this as grounds for later canceling the contract.
D. Yes. The contract is assumed to be made in good faith.
While at home, Kyle Kinston, the president and chief executive officer of Remstat, Inc.,
is called by the CEO of Viokam Corporation, who asks Kinston if Remstat would be
interested in buying about 25 percent of the outstanding shares of Viokam. Remstat is a
billion dollar conglomerate that has contemplated acquiring Viokam for some time, but
Kinston tells Viokam’s CEO that Remstat is not interested. Kinston tells the CEO,
however, that KKIM, Inc., is willing to buy the shares. Kinston is the 100 percent
shareholder of KKIM. Viokam sells the shares to KKIM for $35 million. A year later,
KKIM sells the shares for $55 million to a mutual fund company. When Remstat’s
directors discover KKIM’s purchase and sale of the Viokam shares, they sue Kinston on
behalf of the corporation. Which of the following is correct?
A. Kinston has exceeded her authority to act for the corporation.
B. Kinston has self-dealt with the corporation.
C. Kinston has done nothing wrong.
D. Kinston has usurped a corporate opportunity.
According to _____, most of the Constitution’s individual rights provisions block only
the actions of government bodies, and not private bodies, in cases of violation of rights.
A. independent checks
B. due process
C. state action
D. federal supremacy
Which of the following would be most suitable to be tried under comment k of section
402A of the Restatements (Second) of Torts?
A. Cases related to development of medicines
B. Cases of manufacturing defect
C. Cases of design defect
D. Cases of failure-to-warn
Under the Freedom of Information Act (FOIA), administrative agencies must normally
respond to public requests for documents within _____ after such a request has been
received.
A. 30 days
B. 20 days
C. 10 days
D. 40 days
Which Section of The Clayton Act originally prohibited local and territorial price
discrimination by sellers?
A. Section 2
B. Section 3
C. Section 7
D. Section 8
What form of partnership prevents the partners from being personally liable for the
actions of the business?
A. LLP
B. Incorporation
C. International Partnership
D. Domestic Partnership
In a contract for the sale of land, how close must the terms of the acceptance be to the
terms of the offer, in order to form a contract?
A. They must be identical or almost identical.
B. They must agree on the major terms of the transaction.
C. They must indicate a definite intent to form a contract.
D. They must be identical only with regard to the price quoted.
Jack went to the ABC Casino to gamble. ABC offers its customers one free spin of the
Million Dollar Wheel if they fill out an application form. Jack filled out the form, spun
the Million Dollar Wheel, and won. However, now ABC refuses to pay, claiming that
because Jack did not purchase his chance at the Million Dollar Wheel, Jack gave no
consideration and therefore, no contract was formed. Identify the accurate statement.
A. No contract was formed because Jack paid no money for his chance at the Million
Dollar Wheel.
B. No contract was formed because ABC did not sign any written contract as an
obligation to do so.
C. A contract was formed because filling out an application can constitute legal
consideration.
D. A contract was formed because no consideration is needed when a customer takes
advantage of a “free” offer.
Lyle and Susie had three children: Seed, Sierra, and Shasta. All three children are
adults. Although Sierra and Shasta each attend college, Seed hasn’t quite found himself.
Seed tours with various music bands. He plays guitar, spends most of the year hiking
the Cascade Mountains, and plans to live on a commune in Big Sur, California. Lyle
and Susie visited their attorney to plan their estates. They wish to leave equal shares of
their estates to their children, but they are concerned that Seed will not be able to handle
an inheritance. What should they do with respect to Seed’s share?
An involuntary bankruptcy petition can be filed against:
A. banking corporations.
B. multinational companies.
C. agricultural corporations.
D. nonprofit organizations.
Henry brought a lawsuit against NewAge Inc., claiming that the CEO of NewAge had
misappropriated funds last year, as a result of which NewAge ended the year in the red.
However, Henry was not a shareholder of NewAge last year and his only motive of
buying NewAge shares was to bring this lawsuit in order to gain out-of-court
settlements for himself. This kind of lawsuit is known as a:
A. double derivative suit.
B. derivative action.
C. strike suit.
D. class action.