Mr. Blue is driving to work and gets into an accident. Since he was on his way to work
Mr. Blue will be able to recover damages through his state’s Workers Compensation
system.
Sometimes, Article 2 of the UCC holds merchants to standards different from the
standards it applies to nonmerchants.
Social guests are licensees in some states.
The tenant will generally be held harmless if an individual is injured on their property.
If a partnership leases a building that belongs to one of the partners, the property is said
to be owned by the partnership.
The Robinson-Patman Act prohibits sellers from making discriminatory payments to
competing customers for such customer-performed services as advertising and
promotional activities.
A shareholder must repay an illegal distribution if he/she had knowledge of the
illegality when he/she received the distribution.
A teller’s check is a check on which a bank is both the drawer and the drawee.
The term ‘independent contractor’ is defined in the Restatements on Contracts (Third).
A contract may be voidable even if the person making the misrepresentation believes in
good faith that what he/she says is true.
The preemption defense rests on a federal supremacy premise—the notion that federal
law overrides state law when the two conflict or when state law stands in the way of the
objectives underlying federal law.
Reliance means that an individual acts because of an assertion of another party.
The UCC section 2-207 allows a contract to be formed even though the terms of the
offer and the terms of the acceptance differ.
Manufacturers who fail to inspect their products before being shipped can be guilty of
negligence.
Pat promises to install granite countertops in the home at 123 Main Street that Bruce is
purchasing “provided that the escrow on the sale of 123 Main Street closes.” The close
of escrow on the sale of 123 Main Street is a condition precedent to Pat’s promise.
A bank will be liable if it charges a customer for a check that is postdated and the bank
was given prior notice of the postdate.
It is always necessary for an agent to disclose the identity of the principal to any third
person with whom he is contracting; else the contract becomes void.
If a $100 replacement part for a piece of manufacturing equipment is sold to a
manufacturing plant, the Magnuson-Moss Act does not apply to the sale.
A surety is a person who is liable for the payment of another person’s debt.
The Occupational Safety and Health Act applies to all employers engaged in a business
affecting interstate commerce.
A landlord who fails to maintain reasonable security may face liability for injuries
sustained by those who are criminally attacked on the property.
Only those shareholders who sign a shareholder voting agreement are bound by it.
The main federal body concerned with the safety of consumer products is the Consumer
Product Safety Commission (CPSC).
An agent filing for bankruptcy automatically terminates the agency relationship.
Theories that focus only on actions or decisions are called deontological ethical
theories.
A domestic corporation attempting to monopolize outside the United States with foreign
nations is guilty of a crime under the Sherman Act.
CISG applies only to sale of goods and commercial parties.
Owners of commercial property enjoy greater privacy expectations in their property for
Fourth Amendment purposes than do owners of residential property.
The proof of joint action required for violations of 1 is applicable when a single firm is
guilty of monopolizing or attempting to monopolize a part of trade or commerce.
The law of Agency generally calls for the principal to indemnify the agent against
financial loss while carrying out his/her duties.
The tort of negligent hiring is distinct from tort liability predicated upon the doctrine of
respondeat superior.
Exculpatory clauses that try to relieve a principal of liability for an agent’s
misrepresentations usually insulate the principal from tort liability and prevent the third
party from rescinding the contract.
Drug and alcohol testing of public employees is unconstitutional.
In a limited partnership, limited partners:
A. play an active role in the management of the firm.
B. do not pay federal income tax on their share of the profits.
C. are passive investors.
D. have unlimited liability for the firm’s debts.
Brandon leased his house to Patrick for 5 months. A few days after moving in Patrick
found that the house had several defects such as leaking taps, broken windows, faulty
electrical wiring. Despite repeated requests, Brandon did not do the repairs. As a result,
Patrick went ahead with the repairs and deducted the amount from the rent due that
particular month. Brandon threatened to sue him. Brandon will:
A. win the case because he is the owner of the house.
B. win the case because a tenant has no right to repair defects.
C. lose the case because he was informed of the defects before the repairs.
D. lose the case because the law is biased toward tenants.
West is seeking to collect on a property insurance policy covering certain described
property which was destroyed. The insurer has denied recovery based upon West’s
alleged lack of an insurable interest in the property. In which of the situations described
below will the insurance company prevail?
A. West is not the owner of the insured property but a long-term lessee.
B. The insured property belongs to someone else, but West holds the mortgage on it.
C. The insured property does not belong to West, but instead to a corporation which he
controls.
D. The property has been willed to West’s father for life, and upon his father’s death, to
West as the remainderman.
Generally, _____ have a shorter duration than debentures or bonds.
A. options
B. warrants
C. promissory notes
D. rights
What section of the UCC addresses enforcement of a negotiable interest that has been
altered?
A. 1-201
B. 3-407
C. 3-670
D. 6-224
Parsons, a pedestrian watching a construction project, sees that a metal beam being
lifted by a crane is about to drop on some unsuspecting workers. Thus, he rushes to the
scene to warn the workers. For his efforts, he is struck by the falling beam. He sues the
construction company for negligence. Which of the following is true? Assume that the
falling beam was caused by a breach of duty on the company’s part.
A. Parsons will recover against the company.
B. Parsons will recover, because it is foreseeable that a pedestrian would run onto the
scene of an accident such as this.
C. Parsons will not recover, because he knowingly and voluntarily assumed the risk of
being struck by the beam.
D. Parsons will not recover, because he should have instead sued the worker operating
the crane.
Mary Lee James, a certified public accountant at Edgewater, Florida, wishes to
incorporate. According to the corporate law requirements, she needs to incorporate
under the:
A. common corporation law.
B. professional corporation acts.
C. special professional charter.
D. general incorporation law.
Several states’ constitutions place stricter limits than the MBCA on permissible
considerations for issuance of common shares by corporations. Which of the following
considerations is permissible under the MBCA but not permissible by such state
constitutions?
A. A promoter’s preincorporation services worth $25,000, which services were
performed prior to incorporation.
B. A gratuitous promise to contribute $35,000 in cash to the corporation.
C. Bonds of another corporation, which bonds are worth $15,000.
D. The president’s actual performance of services for the corporation, which services
are worth $50,000.
Bobby goes to buy a CD player from Sammy’s Electronics. In testing one model, Bobby
notices that the “scan” function does not allow scanning once a selection from a CD is
playing. Bobby purchases the model despite this without mentioning the defect to
Sammy. Bobby takes the CD player to his office where he uses it for three months
before deciding that he wants to return it. Under these circumstances:
A. Bobby has rejected the CD player.
B. Bobby has accepted the CD player.
C. if Bobby informs Sammy of the defect now, he can reject the CD player.
D. a court will not consider Bobby to have accepted the CD player because it is
defective.
Which of the following is true of Restatements?
A. They are promulgated by courts.
B. They can be adopted as common law by the states.
C. They include only statutory laws.
D. They are law and binding on courts.
Jill is a month-to-month tenant. She had not paid her rent for 3 months and Landlord
Lou decided to evict her. He placed her furniture in a storage locker and changed the
lock on her apartment. Lou’s actions are:
A. proper because Jill had breached her obligations as a tenant.
B. proper because a landlord may evict a month-to-month tenant for any reason.
C. improper because the law allows a landlord a reasonable right of “self-help.”
D. improper because Lou should have gone to court and obtained an order of eviction.
S agrees to sell B 10,000 widgets at a price of $1.00 per widget. After B breaches the
contract, S resells the widgets for $0.90 per widget. This costs S an additional $100 in
sales commissions. What amount can S recover from B?
A. Nothing
B. $100
C. $1,100
D. $1,000
Goods that are not “merchantable” are:
A. unfit for any use.
B. unfit for the ordinary use for which such goods are used.
C. unfit for the particular use that the buyer intends.
D. unfit for the particular use that the buyer intends, and the buyer is a merchant.
Martha purchases a book from Just Books on credit and later sells the book to her
friend, Christina. Christina in turn sells the book to David, who agrees to pay the
balance to Just Books. Who is the creditor beneficiary in this exchange?
A. Martha
B. Christina
C. David
D. Just Books
All agency rules are compiled and published in the:
A. Code of State Regulations.
B. Code of Corporation Regulations.
C. Code of Specific Regulations.
D. Code of Federal Regulations.
Which of the following is true about the effect of purported partnerships?
A. Purported partners share profits of the business.
B. A purported partner does not have authority to make contracts for the partnership.
C. A purported partner is liable on contracts entered into by third parties on their belief
that he is a partner.
D. A purported partner is not liable for the torts committed in the course of relationships
entered by third parties who believed he was a partner.
Which of the following is correct about the history of corporations?
A. In the late 18th century, general incorporation statutes emerged in the United States.
B. From the 18th century onward, France started giving privileges of incorporation to
mercantile ventures.
C. Early American corporations received special privileges from state legislatures.
D. In England, the corporate form was used extensively after the 16th century.
A large drug company has recently started a promotional deal. This deal involves
discounts to pharmacies for buying its drugs. The discounts are linked to the total dollar
amount purchased. This deal also provides for restaurant vouchers for representatives of
the pharmacies who feature among the top ten buyers of the company’s drugs. Which of
the following laws is this deal most likely to violate?
A. Section 7 of the Clayton Act
B. The Robinson-Patman Act
C. Section 2 of the Sherman Act
D. The Hart-Scott-Rodino Antitrust Improvement Act
Brizon, a toy company enters into a five-year agreement with Toys Paradise (TP), a toy
shoppe. The agreement states that Brizon is to provide all the toys required by the
distinguished shop at a fixed rate. During the first 3 years of the contract, Brizon uses
its excess capacity to meet-up with the anticipated requirements and delivers between
1.25-1.5 million toys to TP. However, in the 4th year of the agreement TP wants Brizon
to deliver approximately twice as many toys, so that the toys can be used at other
outlets owned by TP. In such a case:
A. Brizon may be sued by TP if it does not comply.
B. Brizon need not provide the required amount of toys.
C. Brizon has to provide the required amount of toys by putting extra charges.
D. Brizon can claim that the contract was always void.
What is substantive law?
A. The laws that govern the rights and duties of people as they act in society.
B. The code of conduct of government bodies.
C. The procedures followed by Congress to make statutes.
D. The procedures followed by state legislatures in creating ordinances.
Bob is a merchant in New York and Betty is a merchant in California. Bob wants to do
business with Betty but he is concerned that if a lawsuit should result from their
transaction, he might have to travel to California and hire a California litigation lawyer
to litigate the dispute. What type of clause should Bob try to include in his contract with
Betty that will probably assure him that if litigation ensues, it will take place in New
York?
A. Confession of judgment clause
B. Forum selection clause
C. Choice of law clause
D. Substantive clause
Which of the following is an accurate statement about limitations on assignment and
subleasing in commercial lease agreements?
A. Public policy supports limitations on assignment and subleasing; therefore, such
limitations are almost always upheld.
B. Ambiguous contract language limiting assignment of leases is narrowly construed
and is usually resolved against the landlord.
C. Provisions requiring a landlord’s consent to assignment are almost never upheld by
the courts.
D. Total prohibitions against assignment can be enforced, and are favored under the
law.
Aaron promises to sell his boat to Matt, and Matt promises to buy it from Aaron. What
type of contract is this?
A. A unilateral contract
B. A quasi-contract
C. A bilateral contract
D. A promissory estoppel contract
An agent’s apparent authority ends when:
A. the principal revokes authority.
B. the third party receives notice of the termination of agency.
C. the principal loses capacity or dies.
D. the agent’s actual authority, both express and implied, ends.
Ian, a lawyer, sent an offer to Raymond on October 1 offering to sell Ian’s car for
$5,000. The offer did not contain a provision stating when it would terminate. Under
these circumstances, when will that offer terminate?
A. After 5 days, as per the “5 day rule.”
B. After 10 days, as per the “10 day rule.”
C. After a “reasonable” period of time.
D. When either Ian or Raymond terminates it.
Patent _____ occurs when a defendant, without authorization from the patentee, usurps
the patentee’s rights by making, using, or selling the patented invention.
A. assignment
B. licensing
C. infringement
D. violation
Bob is on the Board of Directors of both Acme Corporation and Beta Corporation.
Acme recently acquired Teen Co., a retailer of teen girls’ clothing. Beta Corporation had
previously acquired Limitless Co., another retailer of teen girls’ clothing. Except the
teen girls’ clothing business, Acme and Beta do not have any other competing
businesses. Under the Antitrust Amendments of 1990:
A. Bob must resign from the Board of Directors of both Acme and Beta corporations.
B. Bob must resign from the Board of Directors of Acme Corporation.
C. Bob need not resign from either Board of Directors if the teen girls’ clothing business
contributes minimally to either organization’s sales.
D. Bob need not resign until a competitor of Limitless and Teen Co. successfully
challenges Acme’s acquisition.
How can courts prevent an offeror from revoking a unilateral contract once the offeree
has started performance?
A. By providing additional terms according to the Code’s gap-filling provisions
B. By holding that the offeree’s acceptance has curtailed the power of revocation
C. By holding that the offeree’s performance has made it a bilateral contract
D. By making material changes in the terms of the original contract
Which of the following statutes enacted by Congress is also known as the “Refuse
Act”?
A. The Marine Protection, Research, and Sanctuaries Act
B. The Safe Drinking Water Act
C. The Clean Water Act
D. The River and Harbor Act
You are walking down a street and you pass by a beer brewery. A barrel rolls out of a
third story window and injures you. You have no idea how this accident occurred, and
you will have difficulty proving that the brewery was at fault. What legal theory will
serve you best if you sue the brewery?
A. Negligence per se
B. Res ipsa loquitur
C. Strict liability
D. Battery
Which of the following business forms means personal liability for the owner of the
business?
A. Sole proprietorship
B. LLC
C. Corporation
D. LLP
Lloyd is a partner in an ordinary partnership firm in the business of providing tax
services. While serving a client on behalf of the partnership, Lloyd’s partner Janet
intentionally understates the client’s taxable income on a federal tax return. When the
true income is reported a few years later, the client is required to pay a penalty. The
client sues the partnership and its partners. Which of the following is correct?
A. Janet is not liable to the client because she was acting on behalf of the partnership.
B. Lloyd is not liable to the client, unless he authorized Janet to understate the client’s
income.
C. The partnership is not liable to the client because the intentional tort is outside the
scope of business.
D. Janet is not liable to the client because she was acting in the ordinary course of
business.
_____ is defined as the desire to cause certain consequences or the substantial certainty
that those consequences will result from one’s behavior.
A. Intent
B. Negligence
C. Liability
D. Battery
Gary and Felix are partners in a general partnership. Gary does 2/3rd of the partnership
work, while Felix does 1/3rd of the work. Last year the partnership earned $300,000 in
profits. Under the RUPA, how much of the $300,000 is Felix entitled to receive?
A. $200,000
B. $150,000
C. $100,000
D. $250,000
Joe Smith, a police patrolman, joins a new religious sect which renounces any real or
threatened use of force against another human being for any reason. Thus, Joe refuses to
employ or threaten any kind of physical force against anyone he encounters in his
patrolman’s job. Instead, he tries to reason with lawbreakers and to instruct them about
God’s will. For this reason, the city police force reassigns Joe from his patrolman’s job
to an office job. Joe sues for religious discrimination under Title VII. Can the
department successfully argue that it isn’t discriminating against Joe’s religion, just the
way he does his job? If not, what else can the department argue? How successful is this
argument likely to be?
Ned Nerdman rented an apartment from Best Properties, Inc. The apartment did not
have a functioning lock on a sliding patio door. Nerdman had given Best notice of this
defective condition at least three weeks earlier. Best did not install a lock. As Nerdman
slept at night, Phil entered the apartment through the unlocked patio door, knocked
Nerdman unconscious, and stole Nerdman’s expensive computer. Does Nerdman have a
good cause of action against Best? Explain your reasoning.
Promissory estoppel protects reliance on a promise from one party to another.
Ajax has accumulated debts which the company is unable to pay. The company has four
creditors who hold security provided by Ajax and are valued as follows: Ace ($6,000),
Crest ($3,000), Maxton ($8,000) and Interon ($9,000). Which of these creditors will be
able to successfully file a petition for involuntary bankruptcy for Ajax?
Sue has transferred her transferable interest of the partnership business to her creditor to
discharge her debt. However, Sue is an efficient manager and she still manages the
business, even after the transfer. Is she still a partner?
What three things are seen in the corporate scandals of 2002, such as Enron and
WorldCom?
Acme, Inc. owned a warehouse that was insured under a property insurance policy
issued by Feelsafe Insurance Co. The warehouse was heavily damaged when a fire that
was negligently started by a hotdog stand worker (an employee of Funfoods Corp.)
went out of control and engulfed portions of the building. Since fire was a covered
peril, Feelsafe paid the claim submitted by Acme. What rights, if any, does Feelsafe
acquire? Explain.
Little LLP, a CPA firm, has been doing financial statement auditing for Honesty Corp.
for the last 10 years. While auditing last year’s financial statements of Honesty, Little
finds out that Honesty has overstated assets by 12 percent and revenues by 19 percent to
make up for the huge losses it incurred. When Little informed the management of
Honesty about this illegal act, Honesty’s management threatened to cancel Little’s
contract with Honesty and demanded back the personal records and working papers
from Little. Should Little give them back? Who owns them? Who has right of access to
them? If Little is forced by Honesty to destroy those papers, under which Act can Little
be punished?
Kenny, aged 17 years, 11 months, buys a used car on credit. The contract also includes
a service agreement obligating the seller to perform certain maintenance on the car for
one year. Kenny makes five monthly payments in the five months after he turns 18. In
addition, he has the seller service the car on four separate occasions. After making the
fifth payment, Kenny announces that he wants to disaffirm, i.e., return the car and get
back the full price. Can Kenny disaffirm?
Describe the similarities between the United States’ approach to advertising regulation
and that taken by other countries.
Explain the difference between an accommodation surety and a compensated surety.
What is the general priority rule established by the Uniform Commercial Code?
To be negotiable, an instrument must be payable on demand or at a definite time. Under
this test, how does the law treat instruments that do not state any time for payment?
Jones, a purchasing manager at the XYZ Corporation, has authority to make and sign
checks drawn on the corporation’s account. Jones completes a fake check to the Smith
Supply Company for $100,000, signs it for XYZ, indorses it in Smith’s name, and sells
it to Hirsch, who takes it in good faith. Has the check been negotiated to Hirsch?
A principal is liable for the misrepresentations made by an agent during a transaction
with a third party.
In a case involving an ultrahazardous or abnormally dangerous activity, the plaintiff
must prove recklessness on the defendant’s part. Any lower fault standard would be
unfair to the defendant in such a case.