Under the common law, artisans, innkeepers, and common carriers were not entitled to
liens.
A principal is liable on a contract made by his agent if the agent had actual authority to
make the contract.
Ms. White is contracted by Mr. Green to make her “world famous” apple pies. Ms.
White has an accident, falls into a coma and the pies are not delivered to Mr. Green by
the time stated in the contract. Ms. White will be considered in breach of her contract to
Mr. Green.
A bequest in a will is a gift of personal property or money.
An advertisement offering a reward for the return of lost property is usually treated as
an offer for a unilateral contract.
Because they serve for free, gratuitous agents have no authority to bind their principals.
Chapter 14 of the Bankruptcy Code allows for special protections for family farmers.
Section 7 of the Clayton Act prohibits mergers of companies that would lessen
competition in the market or create a monopoly.
The essence of a contract is that it is a legally enforceable promise or set of promises.
Although an administrative agency’s interpretive rules do not have the force of law, its
legislative rules do.
Promoters are personally liable on a preincorporation contract but are released from
liability when the corporation adopts the contract.
There cannot be subjective standards of personal taste and comfort when determining a
promisee’s performance.
The TILA also deals in consumer credit advertising and thus prevents a creditor from
“baiting” customers.
Mandatory dividend provisions enacted in corporate laws have generally been held
legal.
In order to acquire title to property by adverse possession, the adverse possessor must
continually use the property for a statutorily prescribed period of time.
Under RUPA, a new partner just joining a partnership has no liability for past debts of
the business.
“What would happen if everyone acted in this way?” is a question that Kant would ask.
If there is a conflict between the express terms of the contract and the past course of
dealing between the parties, the express terms of the contract prevail.
Interrogatories are a form of discovery requiring a party to file written answers to
questions submitted to that party.
The charging order creditor is a lien creditor and is entitled to receive only the partner’s
share of the partnership distributions.
The exercise of the power of judicial review depends on the court’s reading of the
Constitution.
The owner of Caf Coffee Day declaring that his restaurant makes the world’s best cup
of coffee is an example of an express warranty.
Chapter 13 of the Bankruptcy Code gives individuals an opportunity to pay their debts
free of such problems as garnishments and attachments of their property by creditors.
An accountant performing an audit of a client has a specific duty to uncover an
employee’s embezzlement from the client.
A person can have multiple domiciles at a time.
Prior to bringing a derivate action a shareholder must first demand that the board of
directors bring the suit and they must decline.
In a Clayton Act Section 7-based challenge to a merger, the court’s adoption of a broad
relevant market definition will usually enhance the government’s or private plaintiff’s
difficulty in demonstrating the challenged merger’s probable anticompetitive effect.
As per the Colgate doctrine, a manufacturer cannot unilaterally refuse to deal with those
who fail to follow the manufacturer’s suggested resale prices.
Courts and legislatures in dealing with professional negligence usually defer to the
members of a profession to determine what the professional standard should be.
Statutes that require proof of character and skill and impose penalties for violation are
considered to be revenue-raising in nature.
Under tariff rules, a common carrier may limit her liability to a shipper’s declaration of
value, provided that the rates are dependent on value.
Which of the following is often used by agreements that try to make gratuitous
promises look like true bargains?
A. Nominal consideration
B. Past consideration
C. Composition agreement
D. Requirements contract
A promoter:
A. may have liability on the contracts he negotiates on behalf of the prospective
corporation.
B. does not hold any liability to third parties on preincorporation contracts.
C. automatically becomes one of the initial directors of the corporation.
D. is not liable on a preincorporation contract after the corporation’s adoption of the
contract.
Generally, corporate acceptance of preincorporation subscriptions occurs by action of
the:
A. board of directors after incorporation.
B. promoters during their issuance.
C. board of directors during their issuance.
D. promoters before incorporation.
Sellers of goods sometimes attempt to disclaim (avoid) their liability under warranties.
Which type of warranty disclaimers must be written in order to be effective?
A. Disclaimers of industrywide liabilities.
B. Disclaimers of the warranty of fitness for a particular purpose.
C. Disclaimers of the warranty of the Magnuson-Moss Act.
D. Disclaimers of the warranty of strict liability.
Susan Smith steals a valuable necklace from Pamela Jones. The necklace bears Jones’s
full name. Smith takes the necklace to a pawnshop, sells it to the shop, and gets a check
for $10,000 in the name of Pamela Jones. Smith then indorses the check in Jones’s name
and transfers it to Harry Anderson. Which of the following is true about this situation?
A. Harry cannot be a holder because the indorsement was forged.
B. Harry cannot be a holder because of the “imposter rule.”
C. The check has been negotiated to Harry.
D. Susan Smith can keep the necklace since she is now the owner.
Which of the following is true about mergers?
A. The shareholders of the surviving corporation must approve the merger.
B. The MBCA does not recognize mergers done solely for the profit motive.
C. A merger may be invalidated if it freezes out minority shareholders.
D. Shareholders of the acquired corporation must be paid a premium on their shares.
Mendel had his car repaired by Harry’s Garage (HG). He paid by check drawn on ABZ
Bank when he collected his car. On the drive home, Mendel realized that the repair had
not been made. He immediately called ABZ on his cell phone and told the bank to stop
payment on the check. Three days later, HG negotiated the check to Amy, a holder in
due course. When Amy went to cash the check, ABZ Bank refused to honor it. What is
Mendel’s liability on this check?
A. Mendel is not liable to anyone because he stopped the check in time.
B. Mendel is liable to Amy because the stop payment order was made through a phone
call.
C. Mendel is not liable to Amy because she took the check from HG.
D. Mendel is liable to Amy because he is the drawer of the check.
Arthur offered to sell his house to Mike for $50,000. Even before Mike responded to
the offer, Jack learnt of the offer and called up Arthur to accept the offer. Jack’s action
represents a(n) _____.
A. offer
B. promise
C. notification
D. acceptance
Which of the following is not a remedy that may be pursued by a tenant for a landlord’s
breach of implied warranty of habitability?
A. Action for damages
B. Termination of the lease
C. Rent abatement
D. Appeal an injunction by the landlord
Termination of the agency relationship at the option of the agent is known as _____.
A. revocation
B. renunciation
C. falsification
D. liquidation
A stop-payment order is authorized by the:
A. bearer.
B. creditor.
C. drawer.
D. drawee.
Which of the following is true about shareholder proposals and eligibility of
shareholders to get their proposals included by a corporation in its proxy statement?
A. A shareholder must own at least 0.5 percent of the securities to be voted at the
shareholders’ meeting.
B. An eligible shareholder may submit only one proposal per shareholder meeting.
C. The shareholder proposal and its supporting statement may not exceed 1500 words.
D. A shareholder must own at least $1,000 of the securities to be voted at the
shareholders’ meeting.
The rule against perpetuities does not apply to a:
A. testamentary trust.
B. spendthrift trust.
C. charitable trust.
D. Totten trust.
A charitable trust is valid even when no definitely ascertainable beneficiary is named
and even though it is to continue for an indefinite or unlimited period, i.e., rule against
perpetuities.
An agent is not liable for making an unauthorized contract if:
A. the third party does not know that the agent lacks authority.
B. the principal fails to subsequently ratify the contract.
C. the agent does not notify the third party that he does not warrant his authority to
contract.
D. the third party actually knows that the agent lacks authority.
A party who borrows money to buy a home and signs an agreement giving the bank the
right to repossess the home in case of default is called a:
A. mortgagor.
B. guarantor.
C. creditor.
D. trustee.
Joe sells his business to Shirley. During the negotiations, Joe negligently tells Shirley
that the business has earned a profit for the last five years. In reality, the business
operated at a loss for each of those years. However, Shirley did not hear Joe’s
misstatement. Shirley cannot rescind the contract because:
A. Joe’s false statement was negligent rather than intentional.
B. Joe’s misstatement was not material.
C. Shirley did not actually rely on Joe’s misstatement.
D. an untrue assertion of fact was made.
Which of the following is both a transfer warranty and a presentment warranty? Assume
that the instrument in question is a draft.
A. That the draft has not been altered.
B. That the draft is negotiable.
C. That the draft is not subject to any defense or claim for recoupment.
D. That the drawer is not insolvent.
Although not a complete defense to criminal liability, _____ may diminish the degree
of a defendant’s responsibility in a crime.
A. voluntary intoxication
B. premeditation
C. infancy
D. insanity
Huge, Inc. owns an East coast grocery chain. It has recently acquired a West coast
grocery chain. This is an example of a:
A. product extension merger.
B. horizontal merger.
C. market extension merger.
D. vertical merger.
Express authority is created by:
A. words.
B. actions.
C. past dealings.
D. body language.
For which of the following contracts, is a party’s subjective dissatisfaction sufficient to
excuse his performance under a “personal satisfaction” clause in a contract?
A. A contract to construct an intercontinental ballistic missile
B. A contract to paint someone’s portrait
C. A contract to build a steam boiler
D. A contract to rebuild an automobile engine
What is the law’s main purpose in imposing the implied covenant of good faith and fair
dealing?
A. Providing adequate remedial measures to injured parties
B. Punishing the breaching parties in a contract
C. Encouraging litigation regarding breach of contracts
D. Encouraging ethical behaviour in contracts
A pastor of a church (a nonprofit corporation) believes that his salary is too small to
cover his meager expenses. When repeated requests to management and superiors do
not lead to a salary increase, he starts supplementing his salary with church donations.
What risk is he running?
A. None, because the pastor and the church are separate and distinct legal entities.
B. None, because the pastor’s meager salary justifies this action.
C. The veil between the pastor and the church will be pierced because the pastor’s act is
immoral.
D. The veil between the pastor and the church will be pierced because the pastor’s act is
defrauding church members.
A holder in due course of a negotiable instrument takes the instrument free of all
defenses to the instrument except those that concern its:
A. validity.
B. reliability.
C. adaptability.
D. collectibility.
Rule _____ of the SEC prohibits insider trading on nonpublic corporate information.
A. 10b-5
B. 14e-3
C. 14a-8
D. 10c-7
A difference between a surety and a guarantor is that the guarantors:
A. must be paid for their services.
B. should enter into a deed of trust with the creditors.
C. should keep a collateral with the creditors.
D. become liable only if the principal debtor first defaults.
Which of the following is most important in determining who bears the risk of loss in a
sale of goods contract?
A. The shipping terms.
B. The agreement of the parties.
C. One who has title to the goods.
D. One who has possession of the goods.
In order to have standing in a federal antitrust case what must a potential plaintiff have?
A. Direct injury resulting from the antitrust violation
B. Indirect injury resulting from the antitrust violation
C. An injury that crosses international boundaries
D. An injury that has caused a plaintiff to file for bankruptcy protection
What Chapter of the Bankruptcy Code covers liquidation?
A. Chapter 7
B. Chapter 13
C. Chapter 5
D. Chapter 11
Which of the following is true of conditional gifts?
A. They are considered completed gifts.
B. They come with certain restrictions.
C. They cannot be revoked.
D. They need to be delivered.
After entering into a contract, a buyer becomes concerned that the other party may not
be able to perform his contract obligations. The buyer demands assurance from the
other party that the contract will be performed. What is the maximum time period that
the buyer would have to wait before considering the other party has repudiated the
contract?
A. 90 days
B. 10 days
C. 30 days
D. 365 days
Landlord has leased the property to the tenant. Tenant has to pay $5 as a late charge for
the late payment of rent. Tenant pays his rent late for five month, but landlord accepts it
without objection. Can landlord afterward recover the late charges?
If a state offers a granted privilege, like accountant-client privilege then the federal
courts in that jurisdiction will also allow that privilege.
TRUE
Generally if a state offers a particular privilege, then the federal courts will recognize
that privilege in the same jurisdiction.
Press Publishers sold 100 copies of a new hardback book entitled Business Law to
Boardwalk Books. The contract between Press Publishing and Boardwalk Books
provides, in relevant part, that Boardwalk may return to Press any unused copies of the
book within six months. During the six-month period, Boardwalk sold only five copies
of these books. However, twenty copies were damaged from sitting on the bookshelf for
six months and having customers rip pages and spill coffee on them. Boardwalk wants
to return all ninety-five copies to Press. Discuss.
Clean up of Superfund sites is paid for by federal tax funds.
TRUE
The EPA uses federal tax funds to pay for the cleanup of Superfund sites.
The White Forest Employment Agency has 35 employees. White Forest pays all its
female employees less than all its male employees. It also refuses to refer female
customers to any “Fortune 500” corporations (all of which are big and have operations
in more than one country). Of the two kinds of discrimination in which White Forest
engages, which is covered by Title VII?
A music store lets Laura take a guitar home with her so that Laura might test how it
plays. After playing the guitar for a day, Laura puts it on a sofa and forgets about it.
Two weeks later, the guitar is damaged due to fire. Who must bear the risk of loss for
the damage to the guitar?
Joe goes into bankruptcy under Chapter 7 and in due course all of his debts are
discharged thereby. After the discharge is granted, Joe signs an agreement promising to
repay one of those discharged debts. Joe’s attorney certifies that Joe is able to pay the
debt. Is Joe bound to pay this debt?
Acme Co., a widget manufacturer, is acquiring Basic, Inc., another widget
manufacturer. In view of the nature of the widget industry, a manufacturer’s sales
territories tend to correspond closely to the states in which it has manufacturing plants.
Both Acme and Basic have plants in North Carolina, South Carolina, Tennessee, and
Kentucky. In addition, Acme has plants in Illinois and Indiana, and Basic has a plant in
Ohio. The post-merger market share of the two firms is likely to be 5 percent in the
combined North Carolina, South Carolina, Tennessee, Kentucky, Illinois, Indiana, and
Ohio markets, 10 percent in the combined North Carolina, South Carolina, Tennessee,
and Kentucky markets, and 32 percent in the combined North Carolina-South Carolina
market, where Acme and Basic have been historically strong competitors. Which of the
above markets is likely to be treated as the relevant geographic market for purposes of
determining the legality of the acquisition? Why that market?
Andrew appoints Matthew to be his agent for a period of 2 years. After 6 months,
Andrew meets with an accident after which he permanently losses his capacity to
understand things going on around him. This terminates the contract automatically. But
Matthew is demanding damages for breach of contract. Is Andrew liable to pay
damages?
Laura gets a statement and a pile of paid checks from her bank on June 1. Within the
pile of checks, is one check with a forged drawer’s signature. Laura does not notify the
bank about the forged check until the next month, July 1. Does this delay remove the
bank’s obligation to recredit Laura’s account?
The principal’s death automatically terminates an agent’s apparent authority.
Paul, an East State University physics major, rented an apartment from Jayvee Villas,
Inc. for one year, beginning September 1, 1999. The lease contained a term giving Paul
the right to renew his lease for an additional year, at a rent increase of $25 per month by
giving notice to the landlord of his intent to renew at least 30 days before the
termination of the lease. After the fall semester, Paul had an opportunity to study in
Spain, so he assigned his lease to Joel for the remainder of the months covered by the
lease (January through August 2000). If Joel failed to pay the rent for the month of
August 2000; is Paul liable for the unpaid rent? Why or why not? Assuming now that
Joel is not in arrears on the rent as of July and August 2000, would he (Joel) have the
right to renew the lease under its renewal term? Discuss.
State a situation where state law is preempted by federal regulation.
Explain the concept of buyer’s right to cover.
Describe the three criteria that need to be fulfilled to enforcing a noncompetition clause.
Dr. Matt Fornfeld, a physician practicing as a sole proprietor, falls behind in his
payments to First Bank, a creditor to whom he owes $275,000. First Bank agrees to
take reduced payments from Matt, but wants more money if Matt’s practice becomes
more profitable. Matt agrees to pay First Bank at least $4,000 per month up to a
maximum of 15 percent of his profits. Does this agreement make First Bank a partner
with Matt?
What is the “mailbox rule”? What risk does it create for the offeror?
