The Code section which sets forth the requirements that must be met for an instrument
to be negotiable is:
a. 2-209.
b. 3-104.
c. 4-405.
d. 3-250.
Which of the following would be considered consequential damages?
a. Commissions paid to effect cover
b. Expenses reasonably incurred for inspection of the goods
c. Damages to personal property and personal injury resulting from the malfunction of a
machine warranted by the seller to be suitable for the buyer’s purpose.
d. Storage charges for rejected nonconforming goods
Jason’s mother would like him to go to college, so in June he enrolls at State University.
He also quits his job and tells his mother his plans to continue taking classes. His
mother says, “I’m so happy that you are going to college that I want to pay for your
books.” Jason then sends her a bill for $485. Which of the following is true regarding
his mother’s promise?
a. It is enforceable, because Jason returned to college.
b. It is enforceable, because Jason is giving up the right to do something else.
c. It is unenforceable, because it is a unilateral contract.
d. It is unenforceable, because Jason had already enrolled in school and there is no
consideration.
Express contracts and implied contracts are:
a. both genuine contracts.
b. equally enforceable.
c. not really contracts.
d. Both (a) and (b).
A gift causa mortis is contingent upon:
a. the donee’s surviving the donor.
b. the donor’s surviving the donee.
c. the donee’s death as anticipated.
d. the donee’s not revoking the gift prior to the donee’s death.
e. Both (a) and (c).
Payment to a named payee by a bank with a check drawn on itself is a:
a. cashier’s check.
b. trade acceptance.
c. sight draft.
d. time draft.
The combination of two or more corporations’ total assets, title to which is vested in one
of them, which is known as the surviving corporation, is a:
a. dissolution.
b. liquidation.
c. consolidation.
d. merger.
Wanda makes a note payable to Henry in return for Henry’s car. Henry negotiates the
note to his cousin, Sharon, who accidentally drops it on the floor where it is swept into
the garbage. What effect?
a. The note is canceled.
b. The note is ineffective.
c. The obligation is discharged.
d. The obligation is not affected.
Caroline signs a contract to work as a sales rep for Incellmed Corporation for a period
of two years. This contract is governed by:
a. Article 2 of the UCC.
b. state common law.
c. federal statute.
d. the law of quasi contract.
Generally, when may a security interest be perfected in collateral?
a. By the secured party’s filing a financing statement in the designated public office
b. By the secured party’s taking or retaining possession of the collateral
c. Automatically, on the attachment of the security interest
d. Temporarily, for a period specified by the Code
e. All of the above
Order paper is negotiated by:
a. indorsement alone.
b. delivery alone.
c. either delivery or indorsement.
d. transfer of possession and indorsement.
Harry said to Marge, “I have a ring once owned by Marilyn Monroe. Would you like to
buy it for $500?” Marge pays for the ring, but the next day a friend tells her that Harry
had recently purchased the ring at a local department store. Marge enjoys wearing the
ring and wears it constantly for twelve months. Finally, she goes to Harry and says,
“Here is the ring you lied about. Give me my $500.” Most likely Marge will:
a. get her money back since Harry’s representation was fraudulent.
b. not get her money back since she should have investigated the facts about the ring
more carefully.
c. get her money back since she is a good faith purchaser of merchandise.
d. not get her money back since she has affirmed the contract by taking an unduly long
time to disaffirm.
A partner has ____ authority to hire and fire employees whose services are necessary to
carry on the business of the partnership.
a. actual implied
b. apparent
c. no
d. ostensible
Bart sends Carla an offer by express mail. Carla receives it at 10 a.m. on Tuesday. At 11
a.m. on Tuesday, Carla delivers an acceptance to Federal Express, but due to an error,
the letter is not sent out by the company until Wednesday at 8 a.m. At what time does
the law consider the acceptance to be effective?
a. At 10 a.m. on Tuesday
b. At 11 a.m. on Tuesday
c. At 8 a.m. on Wednesday
d. At the time Bart receives the letter
Wes, who is an art collector, offered to buy a print from Le Monde Gallery. Le Monde
balked at the price, sending Wes a letter of rejection. That day it discovered that the
print was not as highly valued as originally thought. Le Monde immediately telephoned
Wes to accept his offer. Is there a contract?
a. Yes, since the acceptance was received before the rejection
b. No, because the rejection was effective upon dispatch
c. No, because the rejection terminated the offer
d. Yes, because the acceptance is always effective upon dispatch
The Truth-in-Lending Act:
a. applies only to such lenders as banks and savings and loans.
b. protects individuals who receive loans for more than $25,000, except for home
mortgage loans.
c. is regulated by the FTC and the Federal Reserve Board under Regulation Z.
d. allows a buyer who is financing his home with a first mortgage to rescind that
transaction within three days.
One type of fraudulent transfer consists of the:
a. distribution of the debtor’s property among creditors.
b. debtor’s transferring of property with actual intent to hinder her creditors.
c. avoidance of statutory liens when debtor becomes insolvent.
d. discharge of debts of unsecured tardy creditors.
Elvis makes an offer to Miguel, but before Miguel can accept, the state supreme court
decides a case that makes the offer illegal. The court decision:
a. automatically terminates the offer.
b. has no effect on the offer.
c. acts as a condition on the offer.
d. acts as a rejection of the offer by the offeree.
To accommodate electronic commerce, which of the following was enacted or
promulgated?
a. Amendments to UCC Articles 2 and 2A in 2003
b. The CISG
c. The UETA
d. Both (a) and (c).
Under RICO, a ____ is any of several criminal offenses such as murder, kidnapping,
arson, extortion, and drug dealing.
a. predicate act
b. liable act
c. white-collar crime
d. mala in se act
Answer the following:
a. What is “order paper?” How is it negotiated?
b. What is “bearer paper?” How is it negotiated?
c. Is it possible for order paper to become bearer paper? If so, how? Is it possible for
bearer paper to become order paper? If so, how?
What is the role of shareholders in managing the corporation?
a. Election of directors
b. Approval of corporate transactions that are void or avoidable unless ratified
c. Right to bring enforcement suits
d. All of the above
The antifraud provisions of the 1934 Act would prohibit which of the following?
a. Lying about the value of the firm’s assets to sell stock
b. Disclosing that the firm has discovered oil on its property in order to sell stock
c. Telling about the bad health of the CEO in a transaction to purchase stock
d. Not disclosing the salaries of secretaries of a large firm whose stock is being sold
Which of the following is correct with respect to negotiability?
a. The writing requirement means that a check must be written on paper.
b. An order or promise to pay only out of a particular fund is permissible.
c. Money must be in U.S. dollars.
d. A negotiable instrument must be payable at a definite time.
Who is primarily liable on a note?
a. The maker
b. The indorsers
c. The drawee bank
d. The holder
A statement signed by the required number of witnesses who observe the execution of a
valid will is called a(n):
a. validity clause.
b. ambulatory clause.
c. attestation clause.
d. fiduciary clause.
Personal defenses include all but which of the following?
a. Breach of contract
b. Fraud in the execution
c. Misrepresentation
d. Failure of consideration
Howard needs a truck to pull a 2,000-pound trailer. Gordon tells Howard, “My truck
will pull a 2,000-pound trailer with ease.” Relying on Gordon’s statement, Howard buys
the truck, but it will not pull a 2,000-pound trailer. If Gordon did not intend to deceive
and Howard sues for nonfraudulent misrepresentation, he can recover:
a. punitive damages, but not out-of-pocket damages.
b. out-of-pocket and consequential damages, but not punitive damages.
c. out-of-pocket damages plus punitive damages.
d. nominal damages, because Howard should have known the capacity of the truck.
Barry’s Sport Shop calls Champs Tee Shirt Company to order 200 designer tee shirts at
$2 per shirt. The next day, Barry decides he can easily sell 100 more. Before the order is
filled, he calls to change the order to 300 tee shirts. Champs sends 200. Can Barry force
Champs to send the additional 100?
a. No, because there is no consideration for the extra 100 shirts
b. No, because Barry does not have a writing signed by Champs Tee Shirts
c. Yes, because this is a subsequent modification of the original contract
d. Yes, because Champs Tee Shirts is a merchant within the meaning of Article 2 of the
UCC
Which of the following is correct regarding a foreign corporation?
a. A foreign corporation is incorporated in a foreign country.
b. A foreign corporation may not do business, except for acts in interstate commerce, in
any state other than the state of its incorporation.
c. Doing or transacting business within a particular state makes a foreign corporation
subject to local litigation, regulation, and taxation.
d. All of the above are correct.
Howard stole a computer and then sold it to his friend Ivan for $100. Ivan has:
a. good title to the computer, because he paid for it.
b. a voidable title to the computer.
c. a void title to the computer.
d. good title to the word computer if he is a good faith purchaser for value.
Under the Private Securities Litigation Reform Act of 1995, those who audit financial
statements required by the 1934 Securities Exchange Act must establish procedures
capable of:
a. detecting material illegal acts.
b. identifying material related to party transactions.
c. evaluating whether there is a substantial doubt about the issuer’s ability to continue as
a going concern during the next fiscal year.
d. All of the above.
e. None of the above.
An indorsement must be written within 1 1/2 inches of the trailing edge of the back of
the check and must be written in ink or the check’s negotiability is destroyed.
Apparent authority is actual authority.
The Elm Street Partnership is a limited partnership in which Arlo is the sole general
partner and Barbara and Charles are the limited partners. Now the partnership is being
dissolved, and Barbara wants her money. The partnership creditors include Charles for a
$1,000 loan in addition to his capital contribution. In what order should the partnership
assets be distributed?
One hundred crystal flower vases have been identified to the contract and a down
payment of $1,000 of the $10,000 purchase price has been paid. If the seller becomes
insolvent, the buyer may still pay $9,000 and get the goods.
A person other than the owner of an instrument cannot be entitled to enforce it.
In expanding its policy of enforcement regarding the Sherman Act to cover conduct by
foreign companies that harms exports, the Justice Department has indicated that it will
focus primarily on boycotts and cartels that injure the export of U.S. products and
services.
The Magnuson-Moss Warranty Act contains disclosure and labeling requirements for
sellers of consumer products containing a written warranty.
In some states, the authority of an agent to sell land must be in writing and signed by
the principal.
Under Article 2A, a lessor retains title to the goods and therefore has the right to
recover possession of them upon default by the lessee.
Rejection is ineffective unless the buyer notifies the seller.
Under the RMBCA, a pre-incorporation subscription may be revoked at any time
without the consent of the subscribers.
The contract between the buyer and the seller may expressly limit or exclude
consequential damages so long as the contract is not unconscionable.
Jack has been on the board of his brother’s company for three years but has never
attended a board meeting. He may be liable for failing to act.
What are the general Code requirements for a disclaimer of warranties? What specific
requirements exist for a disclaimer of the warranty of merchantability and the warranty
of fitness?
Breach of one installment of an installment contract is never considered to impair the
value of the whole contract.
General contract law provisions govern the sale of real property.
Murphy and her child, who are both Caucasian, are seeking an apartment. Murphy is
not married and never has been. Grant owns an apartment complex with 8 units ready to
rent. Grant will not be violating any laws by his refusal to rent to Murphy and her child
on the basis that Murphy is a single, unwed mother.