When both the bank and the customer failed to use ordinary care to prevent alteration or
forgery of checks then a comparative negligence is used to determine liability for
damages.
The Securities and Exchange Commission (SEC) is an example of an independent
agency.
Securities Exchange Act Rule 10b-5 liability attaches to anyone who trades in securities
for personal profit using confidential information misappropriated in a breach of
fiduciary duty owed to the source of the information.
Limited partners have the right to vote on partnership matters as a class.
When a court reviews formal agency adjudications or formal agency rulemaking, the
only agency findings that will be overturned are those that were unsupported by
substantial evidence.
Control is the only available perfection method, if the collateral is a deposit account.
The assignor impliedly warrants to the assignee that the obligor has capacity to
contract.
Prior to the filing of a 1933 Act registration statement, the issuer may use a Rule 134
tombstone advertisement to make investors aware of the upcoming offering of
securities.
A mistake in the principle of law will not justify a recession in a contract.
Crimes are private wrongs.
While economic pressure may amount to undue influence, it cannot constitute duress.
Termination occurs after all partnership assets have been distributed.
Under insurance policies (except life insurance), the insured and the beneficiary may be
the same person.
A partner’s express and implied authority constitutes his or her apparent authority.
Memberships in a nonpublic corporation are freely transferable.
Under the Clean Air Act, the federal government is required to develop a state
implementation plan for meeting national ambient air quality standards in every state.
In all partnerships, profits are shared according to the amount of capital contributed by
each of the partners.
Strictly speaking, a contract has nothing to do with the personal intent of the parties.
If the offeree accepts the offeror’s terms while complaining about them, it is called a
grumbling acceptance.
If the seller demands cash, the seller must give the buyer a reasonable amount of time to
obtain it.
The increasing use of comparative principles in product liability cases is due to the
popularity of the three traditional defenses used in product liability cases.
A noncompetition clause is also known as a “liability waiver.”
The Age Discrimination in Employment Act protects people aged 40 and over from age
discrimination.
Indorsers are not contractually liable on negotiable instruments they indorse.
All contract rights are assignable.
Antiassignment clauses in contracts are not enforceable.
Even if the buyer has misrepresented his solvency to the seller in writing within three
months before the delivery of the goods, the 10-day limitation on the seller’s right to
reclaim the goods still applies.
Negotiation, as defined by the UCC in section 3-201, is the transfer of a negotiable
instrument by one person to another person.
Acceptances by instantaneous forms of communication are effective immediately upon
communication to the offeror.
Rawls’s justice theory focuses on outcomes.
The UCC has incorporated the Common Law concept of rescission as a remedy
available to a buyer in a breach of contract dispute.
Under the Securities Act of 1933, the definition of a security excludes a promissory
note that matures not more than nine months from the date of issuance.
Trademark protection in the United States is for 30 years.
In United States v. Colgate & Co. (1919), the Supreme Court:
A. overruled a long-standing precedent that had required per se treatment for vertical
maximum price-fixing.
B. reaffirmed that horizontal divisions of markets are illegal per se and plainly represent
agreements not to compete.
C. held that a manufacturer could unilaterally refuse to deal with those who failed to
follow the manufacturer’s suggested resale prices.
D. held that vertical minimum price-fixing would be judged under the rule of reason
rather than the per se approach.
It is important to promptly notify the obligor that an assignment has occurred. Why?
A. It is a necessary requirement for a valid assignment.
B. The obligor might perform to the assignor rather than the assignee.
C. The obligor’s duty to perform is completely discharged.
D. If the obligor neither knew nor had reason to know about the assignment, the obligor
remains liable to the assignee.
According to the 2005 revisions of the Bankruptcy Code individual debtors must file,
along with their schedules of assets and liabilities:
A. copies of all payment advices and other evidence of payments they have received
from any employer within 30 days before the filing of the petition.
B. a statement of the amount of gross yearly income, itemized to show how the amount
is calculated.
C. a certificate from the Clerk of the Bankruptcy Court that they must receive credit
counseling to be eligible for relief.
D. a statement showing any anticipated increase in income or expenditures over the
24-month period following the date of filing the petition.
_____ makes any contract valid from its inception and can be done effectively only
after a minor reaches majority.
A. Disaffirmance
B. Emancipation
C. Ratification
D. Consideration
Sue Sandon and Joe Rhine have concluded their agreement in all substantial matters of
their contract for goods offer like price, quantity, and mode of delivery but the formal
written agreement has not been signed yet. Is there a binding contract at present?
A. Yes, because an oral contract should suffice.
B. Yes, because a contract is formed at the time the agreement is concluded.
C. No, because the minor terms also need to be taken care of.
D. No, because the agreement is not yet signed and thus, legally unenforceable.
Which of the following is the first step in the contract formation process?
A. Signing the agreement
B. An offer in definite terms
C. Selection of partners
D. Drafting the agreement
A particular trust has income-producing real property as its sole asset. Which of the
following trust proceeds or expenditures should be allocated to principal?
A. Annual payments on a fire insurance policy to protect trust property.
B. The cost of a long-term permanent improvement to trust property.
C. Rental income from the trust property.
D. Real estate taxes paid on trust property.
In a state that uses the Restatement (Second) of Torts of 1965, who amongst the
following may hold an accountant liable for common law negligence?
A. Only the client.
B. Only the client and a third party that the accountant knew would rely on the
accountant’s work for a particular purpose.
C. Only the client. A third party that the accountant knew would rely on the accountant’s
work for a particular purpose, and others who are in the same limited class as that third
party.
D. Any third party that is a foreseeable user of the accountant’s work may hold him/her
liable if that third party suffers a loss as a direct result of the accountant’s negligence.
Rachael was arrested by the police on suspicion of possession of a controlled substance.
She was informed of her Miranda rights. Rachael waived her right to remain silent and
confessed to the crime after a brief period of police interrogation. Her confession is:
A. admissible, according to Supreme Court precedent.
B. inadmissible because it was obtained in violation of her Fourth Amendment rights.
C. admissible, according to the “search incident to a lawful arrest” exception to
Miranda.
D. inadmissible because it was obtained in violation of her Fifth Amendment rights.
James goes to a dentist to have a tooth extracted. James never signs a written contract
for this service, and he and the dentist never made an oral agreement either. Later, the
dentist bills James who refuses to pay. The dentist sues James. Which of the following
is true?
A. The dentist can recover under quasi-contract.
B. The dentist cannot recover under an implied contract theory.
C. The dentist can recover under the doctrine of promissory estoppel.
D. The dentist cannot recover because there was no express contract here.
Which of the following is true regarding an exculpatory clause?
A. It is illegal in nature.
B. It is also termed a “release.”
C. It is invalid in negligence cases.
D. It imposes strict liability on the guilty party.
Sarah entered into an auto insurance contract with ABC Insurance (ABC). On the
application, Sarah stated that she had never been in an accident. In truth, Sarah had
been in seven accidents in the last ten years. As a result, this contract is:
A. illegal.
B. voidable at ABC’s option.
C. voidable at either Sarah’s or ABC’s option.
D. void.
When a holder makes a blank indorsement of a negotiable instrument that is bearer
paper, what legal effect does this have?
A. There is no effect—bearer paper does not need to be indorsed.
B. The bearer negotiates it by transfer alone and no further indorsement is necessary for
negotiation.
C. The instrument is no longer negotiable, as it has been altered.
D. The instrument is converted into order paper.
Catherine decided to have lunch at Tom’s, one of the most popular restaurants in town.
She ordered soup before her main course as usual. The soup served to Catherine
contained a maggot floating about in it. Fortunately, she noticed this before she had it.
She sued Tom’s for negligence. The most likely result will be:
A. Catherine will not win since she did not sustain any damages.
B. Catherine will not win as maggots in soup are foreseeable.
C. Catherine will win if she proves emotional distress.
D. Catherine will win because the restaurant failed to use due care.
Most owners of real property acquire title how?
A. Through tax sale
B. Through purchase
C. Through inheritance
D. Through gift
A client may receive _____ damages for a breach of contract or negligence.
A. only consequential
B. only punitive
C. consequential and punitive
D. only compensatory
Which of the following is also called “judge made law”?
A. Common law
B. Statutes
C. Uniform acts
D. Equity
If a shareholder is successful in a derivative suit then the shareholder is entitled to have
its attorney fees paid by?
A. The Corporation
B. The Secretary of State
C. The Incorporator
D. The Arbitrator
Which of the following is a prescribed guideline for ethical decision making?
A. What gives me maximum profit?
B. Will stakeholders offer support?
C. How can I increase the number of shareholders?
D. How do the alternatives impact my business firm?
Stacey wanted someone to paint her house. Jessica offered to do it for $300 while
Nancy offered to do it for $250. A few days after Stacey entered into a contract with
Nancy, the latter increased her fees to $400. By this time, Jessica was not interested in
entering into a contract with Stacey anymore. Stacey can seek to be compensated on the
basis of a _____.
A. quasi-contract
B. part performance
C. reliance interest
D. compensatory damages
Ace, Bud, and Chet leased an apartment from Stan Slumlord. They signed a lease that
established a 12-month rental period at $400 per month as rent. Two months after the
three tenants moved into the apartment, Ace and Bud moved out. Ace and Bud each
moved to a different and distant state. Slumlord insists that Chet is responsible for the
entire $400 per month rent. Is Slumlord correct?
A. Slumlord is incorrect. Under these facts, each tenant is responsible for one-third of
the rent payment as an implied term of the lease agreement.
B. Slumlord is correct. The tenants are jointly and severally liable for the rent payments
under the lease.
C. Slumlord is incorrect. This is a tenancy at sufferance, meaning that any tenant may
vacate without incurring liability for further rent payments.
D. Slumlord is correct, if the lease was executed in a state that has adopted the Uniform
Landlord-Tenant Act.
Incorporation by reference refers to:
A. the specification of heirs in a will without naming them, e.g., to my children.
Which of the following classes of corporation may not distribute surplus revenue from
its operations to its members?
A. An S corporation
B. For-profit corporation
C. Not-for-profit corporation
D. Publicly held corporation
Reliable Corp. owns the nationwide chain of Reliable Auto Repair shops. Although
Reliable has the single largest share in the nationwide auto repair market, the intensely
competitive nature of this market means that Reliable’s share is only 8 percent. In a
lawsuit filed against Reliable, the plaintiff alleges that Reliable regularly agrees to
provide automobile repairs only if the customer whose car needs repairs also agrees to
purchase a certain paste wax manufactured by Reliable. The plaintiff asserts that this
practice by Reliable violated Clayton Act Section 3. Which of the following is the
strongest argument for Reliable to make in an effort to avoid liability?
A. That Reliable does not possess sufficient auto repair market power to appreciably
restrain competition in the paste wax market.
B. That most of its customers need to buy paste wax anyway.
C. That auto repairs are not a commodity.
D. That Reliable’s competitors in the sale of paste wax are doing quite well, regardless
of how much paste wax Reliable may sell in this manner.
The Model Business Corporation Act (MBCA) provides that the _____ right of a
shareholder does not exist except to the extent provided by the articles of incorporation.
A. preemptive
B. information
C. dissenters’
D. liquidation
Kyle sent Tara a letter offering to sell Tara his car. Tara left the letter on her desk, where
her roommate, Maggie, saw it. After reading the letter, Maggie wrote to Kyle and stated
that she (Maggie) wanted to accept Kyle’s offer. Which of the following is true?
A. Kyle must sell Maggie his car unless Kyle is a merchant under the UCC.
B. There is no contract between Kyle and Maggie because Kyle did not communicate
the offer to Maggie.
C. Kyle and Tara have a contract for the purchase of Kyle’s car.
D. Maggie’s letter is a valid acceptance of Kyle’s offer.
A valid assignment always requires:
A. consideration.
B. writing.
C. filing with a local court.
D. an intention to assign.
Which of the following is least likely to be forbidden by Title VII?
A. Discrimination against a man solely because of his gender.
B. Discrimination against a woman solely because she is a lesbian.
C. Discrimination against a black woman solely because of her religion.
D. Discrimination against a person of French ancestry because he “talks like an
Englishman.”
Helen worked for ABC Motors for 25 years. The president of ABC said to her: “In
consideration of your past service for 25 years, I promise to give you a new car next
week.” However, he did not give the car. Is this promise legally enforceable?
A. Yes, a contract was formed.
B. Yes, promissory estoppel requires enforcement of the promise.
C. No, legal consideration is absent.
D. No, legal capacity is absent.
Poxabogue Associates, a partnership, is dissociated by the retirement of a partner. The
business is continued by the remaining partners and a new partner, Enrica. What is
Enrica’s liability to creditors for partnership obligations that arose before she became a
partner?
A. Enrica is liable to the extent of partnership assets.
B. Enrica is liable only if she agrees to assume the retired partner’s liability.
C. Enrica is fully liable.
D. Enrica has no liability.
In determining the quantity of goods to be produced or taken pursuant to an output or
needs contract, the rule of _____ applies.
A. good faith
B. demand
C. supply
D. performance
The central requirement for the primary benefit test is:
A. breach of contract.
B. fraud.
C. privity of contract.
D. breach of trust.
A surety has a right of _____, which is the right of the surety or guarantor to require the
debtor to make good on his commitment to the creditor when he (1) is able to do so and
(2) does not have a valid defense against payment.
A. reimbursement
B. exoneration
C. contribution
D. subrogation
Al hires Bob to move his furniture to his new house. On the day of the move, Bob does
not feel like moving furniture, so he asks his friend Chuck to move the furniture. Chuck
decides to leave before completing the move in order to watch a football game on TV.
Al has to delay his move and hire another mover at a higher price. Al wants to sue Bob
to recover for his damages. Given these facts, Al will most likely:
A. lose, because it was Chuck, not Bob, who failed to fulfill his duty to Al.
B. win, because Bob’s duty to Al was not delegable.
C. win, because Bob is liable to Al.
D. lose, because he failed to insist on Bob’s performance.
What is the number of events considered sufficient under the minimum contacts test to
confer jurisdiction on a state’s courts?
A. 10
B. 20
C. 1
D. 5
Why is filing a financing statement the only practical way to perfect a security interest
in equipment?
Courts may sometimes be sympathetic to an adult who has suffered losses due to a
minor who misrepresented his age. How so?
If an employer terminated an employee to prevent having to pay benefits on a case then
the employee may have an action for breach of the implied covenant of good faith and
fair dealing.
TRUE
A successful claim for a breach of implied covenant of good faith and fair dealing is
based on a bad faith termination usually attempting to deny an employee of benefits or
compensation.
Rement Corporation is incorporated under the laws of New Jersey. Rement maintains a
sales agent in New York City, who makes contracts in New York City. Can New York
impose an income tax on Rement’s profits from its New York sales at the same rate it
taxes income from domestic New York corporations?
Police detective Brenda Judd had a hunch that Beats, Inc., a retail seller of stereo
equipment and related supplies, was involved in a drug-smuggling operation. In order
to acquire evidence confirming her hunch, Judd posed as an ordinary consumer when
she entered the Beats store. She slipped out of the “public” part of the store and
proceeded down a hall to an office whose closed door was marked “Private. No Entry
without Authorization from Manager.” She entered the office which was unoccupied,
looked through files, and located documentary evidence indicating that Beats was
indeed involved in an illegal operation. The evidence obtained by Judd furnished the
primary basis for drug-smuggling and drug-dealing charges that are now pending
against Beats. Beats has filed a pretrial motion asking the court to suppress the evidence
obtained by Judd in her search of the office. Should the evidence be suppressed? Why
or why not?
Amelia contracts to have her portrait painted by Hamilton for $10,000. Hamilton
assigns the contract to Drew, another artist. Has there been a valid delegation of duties
here? Why or why not?
What are the strategies followed by the tort reform movement?
Sleazeco, Inc. was the respondent in an adjudicative proceeding initiated against it by
the Federal Trade Commission. Dissatisfied with the decision rendered by the
administrative law judge, Sleazeco wishes to appeal. Where does Sleazeco take its
appeal? What is the nature of the review in such an appeal?
A transfers a negotiable note to B, who in turn transfers it to C. Under what conditions
has A made a transfer warranty to C?
Give two reasons why the surety-guarantor distinction is important.
How does the Clean Water Act regulate wetlands?
After a student named Bob insults him in class, Marvin, a business law professor, pulls
out his .38-revolver and fires a shot at the student. The shot misses the first student, but
strikes another student named Cathy, who never saw the shot coming and never knew
what hit her. Bob and Cathy sue Marvin for assault and battery. Who can recover for
what? Why?
Tony enters into a contract with Joseph to supply his entire output of guava of each
season from his orchid at the then current market price. The guava is to be used by
Joseph for making jams. However, the contract didn’t contain any clause as to when it
can be terminated. Tony gave a one year notice period to Joseph prior to termination of
the contract. Joseph intentionally didn’t do any arrangements for himself to acquire
guavas from elsewhere. When Tony expressed his inability to supply Joseph the
Guava’s after one year, Joseph sued Tony for breach of contract. Whether or not the
approach of Joseph is justified?
What is the shelter rule in Article 3?
Ace Appliances, an appliance store, orders 100 toasters from Consolidated Electric
(CE). The toasters CE ships to Ace, however, are not the ones Ace ordered. Hence, Ace
rejects them. CE then insists that Ace return them, at the expense of Ace. Can CE make
Ace return the toasters? If so, who pays the cost of returning the toasters?
Under the MBCA, only directors of a corporation are entitled to mandatory
indemnification rights.
Tim and Julia are the majority shareholders of Eduventures, Inc.
If a shareholder receives a dividend with knowledge of it being an illegal distribution
then the shareholder is liable to the corporation for the amount of the dividend.
TRUE
Dividends and other distributions of a corporation received by a shareholder with
knowledge of their being illegally distributed may be held liable to the corporation for
the amount of the dividend.