Contracts of a ward may be ratified by his guardian during the period of guardianship.
a. True
b. False
Actual notice requires a written, not oral, communication to the third party.
a. True
b. False
A composition would bind all of the debtor’s creditors to the settlement.
a. True
b. False
The 1933 Securities Act defines the term ‘security.” The Supreme Court of the United
States has adopted a two-tier analysis of what constitutes a security. Within this analysis
the Court has used a three-part test to determine whether a non-traditional financial
transaction constitutes an investment contract and thus a security. Explain (a) the 1933
Act’s statutory definition of security, (b) the courts’ general interpretation of the 1933
Act’s definition and (c) the Supreme Court’s two-tier test. Use case law to illustrate your
explanation, if appropriate. Also, why do you think the Supreme Court had to devise
such an analysis?
Which of the following would most likely be a merchant with respect to the goods in
question under the UCC definition?
a. Arthur is an authorized IBM computer dealer.
b. Brian employs two salesmen to sell his homemade furniture.
c. Clarence has a store in which he sells used lawn mowers.
d. All of these would be merchants.
e. None of these would be merchants.
The officers and the directors are fiduciaries of the corporation, but the business
judgment rule may preclude liability on officers and directors for honest mistakes of
judgment.
a. True
b. False
Andre invested $100,000 in a partnership with Erik and Louis. Andre’s contract with the
partnership states he will receive a portion of partnership profits, but he will be liable
for partnership’s debts only to the extent of the $100,000 he invested. Andre is:
a. a subpartner.
b. a dormant partner.
c. a limited partner.
d. an aggregate partner.
Diane appoints Edward as her agent to sell goods in markets where the highest price
can be obtained. Edward sells the goods in a market that is glutted and obtains a low
price, even though he could have obtained a higher price in a nearby market by using
more care in obtaining the available market information. Edward is liable to Diane for
breach of the duty of diligence.
a. True
b. False
A characteristic of a tenancy in common is that:
a. it is a rarely used form of concurrent ownership.
b. each co-owner has an undivided interest in the property and has the right to
possession.
c. there is a right of survivorship.
d. All of these.
The Bill of Rights restricts the power and authority of the federal government.
a. True
b. False
Transferors warranties and presenters warranties are implied warranties imposed only
on those who sign an instrument.
a. True
b. False
To prevent the use of the insurance policy for wagering purposes, the person who is to
be indemnified under the contract must have:
a. good faith.
b. an insurable interest.
c. a binder.
d. a coinsurance clause.
The Ajax Corporation issues bonds that pay a minimum of 6% interest but that can pay
more if corporate earnings reach certain specified levels. The holder of the bond may
exchange it for stock of the corporation. This bond would be a:
a. callable income bond.
b. convertible participating bond.
c. convertible unsecured bond.
d. convertible secured bond.
To a __________ , whether telling a lie in a given instance would produce greater
pleasure than telling the truth is less important than deciding if a general practice of
lying would maximize society’s pleasure.
a. deontologist
b. rule utilitarian
c. ethical fundamentalist
d. ethical relativist
The liability of partners for a tort or breach of trust committed by any partner is
unlimited, personal liability.
a. True
b. False
General Supply owns all the stock of Playne Pencils. A Playne employee commits a tort
for which the employer is liable. The suit results in a judgment for $1 million against
Playne. Playne’s assets total $650,000, but General Supply’s assets are in the millions.
In which of the following situations would the judgment have to be paid by General?
a. General Supply’s board of directors is exactly the same as Playne’s.
b. The president of General Supply is also the vice president of Playne.
c. Playne’s income and General Supply’s income is held in one account.
d. None of these.
Margaret tells the members of the Raleigh Association of Restaurant Owners that they
will be able to get a better price on linen supplies (tablecloths, napkins) if they will deal
with one supplier rather than split their business between two. They all know Margaret
deals with Niagara Linen rather than Cayuga. Under the Sherman Act, if they all sign
contracts with Niagara:
a. there is no violation since there is no express agreement to boycott Cayuga.
b. illegality may be implied from this conduct.
c. there is no concerted action.
d. this is horizontal market allocation.
What is required by the substantial evidence test?
a. The conclusions reached must be supported by such relevant evidence as a reasonable
mind might accept as adequate to support a conclusion.
b. It requires the court to try the facts de novo.
c. It requires only that the agency had a rational basis for reaching its decision.
d. It requires proof beyond a reasonable doubt.
Which of the following is found in the Fifth Amendment to the U.S. Constitution?
a. A privilege against self-incrimination.
b. A requirement of probable cause.
c. A prohibition against cruel and unusual punishment.
d. The right to an attorney.
Adverse possession:
a. is an involuntary transfer of title.
b. is an illegal transfer of title.
c. allows a person a chance to retrieve their mortgage.
d. None of these.
Jan Arthur writes a $200 check to Bruce Nole who indorses it “Bruce Nole.” Bruce
gives the check to Anne Tate who indorses it “Without Recourse. Anne Tate.” Anne
sends the check to Joe Black, MD to pay her medical bill. If the bank refuses to honor
the check, Black:
a. can collect only from Jan Arthur.
b. can collect only from Jan Arthur or Bruce Nole.
c. can collect from the drawer or any indorser whose name appears on the check.
d. has no other recourse.
Renunciation is a statutory right of a surviving spouse to give up her statutory share in
the estate.
a. True
b. False
Section 1 of the Sherman Act outlaws monopolies and attempts to monopolize.
a. True
b. False
“Attachment” occurs when a secured party gives value, the debtor has acquired rights in
the collateral, and:
a. the debtor has completed his obligation to pay.
b. the collateral is delivered to the borrower.
c. the debtor and secured party have an agreement.
d. All of these.
Which of the following is correct with regard to the doctrine of respondeat superior?
a. It is a form of liability without fault.
b. It ordinarily holds an employer liable for the acts of both employees and independent
contractors.
c. The liability of the principal under the doctrine is vicarious and depends upon proof
of wrongdoing by the employee within the scope of employment.
d. It is a form of liability without fault and the liability of the principal under the
doctrine is vicarious and depends upon proof of wrongdoing by the employee within the
scope of employment.
The decision of an arbitrator is called a(n):
a. verdict.
b. judgment.
c. award.
d. binding decision.
Discuss how the Dodd-Frank Act affects: (a) the SECs authority regarding aiders and
abettors of securities law violators, (b) whistleblowing, and (c) disclosure requirements
in annual proxy statements regarding executive compensation.
Bradley buys a television set that turns out to be stolen. He can sue the seller for breach
of warranty.
a. True
b. False
Which of the following is correct with respect to a bank customer’s duty to discover and
report unauthorized signatures?
a. The customer is required to exercise reasonable care and promptness to examine the
bank statement.
b. A customers duty of examination includes checking the signatures of payees or
indorsers.
c. The bank is liable on all items with unauthorized signatures even if these canceled
checks were returned to the customer four years prior to the discovery of the alterations.
d. The bank is not required to exercise ordinary care in paying the items.
A defective acceptance does not create a contract, but does constitute a new offer.
a. True
b. False