Anderson Clock Company is in the business of selling and repairing clocks. Jay
purchased a grandfather clock from them. Laurie had left the clock at Anderson’s for a
cleaning and calibration. When Laurie found out the clock had been sold, she contacted
Jay and demanded he return it. Must Jay comply with Laurie’s demand? What other
options does she have?
The federal government may impose regulations on business:
a. by virtue of its police power.
b. to advance the interests of homeland security.
c. to advance the nation’s economic needs.
d. if those regulations do not impose an unreasonable burden on interstate commerce.
Under the Revised Model Business Corporation Act (RMBCA), corporate existence
begins when the articles of incorporation are filed with the secretary of state.
A corporation may be prosecuted and convicted of:
a. a criminal offense if its agent committed the offense while acting within the scope of
the agent’s authority.
b. an error in business judgment, assuming that no other reasonable corporation would
have committed such an error.
c. operating without a corporate charter if the corporation has never sought a charter
from the secretary of state’s office, or if its directors and/or officers either knew of
should have known that the secretary of state’s office had revoked the charter.
d. none of the above; a corporation itself is not subject to criminal prosecution and
conviction.
______ is a body of law that provides justice when the law does not offer an adequate
remedy.
a. Ethics
b. Regulations
c. Equity
d. None of the above.
The Public Company Oversight Board:
a. is a governmental body.
b. must have at least three board members that are CPAs.
c. enforces rules to ensure audit quality and auditor independence.
d. all of the above.
A tenancy for an indefinite time period that may be terminated at any time by landlord
or tenant is called a tenancy:
a. at will.
b. for years.
c. at sufferance.
d. from year to year.
A person who becomes a party to an instrument to add strength to the instrument for the
benefit of another party to the instrument is called a:
a. benefactor.
b. secondary obligor.
c. collateral obligor.
d. contingent beneficiary.
What damages are recoverable in a case of promissory estoppel?
a. profits that the promisor expected
b. profits that the promisee expected
c. an amount necessary to restore the promisee to the position he or she would have
been in had the promisee not relied on the promise
d. an amount necessary to restore the promisor to the position he or she would have
been in had the promisor not relied on the promise
Federal supremacy refers to:
a. the power of the President.
b. the power of the Supreme Court to make decisions.
c. the power of the federal government to legislate in certain areas.
d. all of the above.
Which of the following is not a product liability theory that protects buyers and allows
them to recover for injury and economic loss?
a. express warranty
b. implied warranty
c. strict tort liability
d. assumption of the risk
The failure to have a license will not render agreements void if the license:
a. is based on formal education
b. is required for engaging in a particular business or trade
c. is a regulatory license
d. is readily obtainable by anyone who offers payment of a required fee
A consumer who notifies the issuer of an EFT card within two (2) days after learning of
a loss or theft of the card is limited to a maximum liability of:
a. $500.
b. $50.
c. There is no liability limitation in this situation.
d. There is no liability in this situation.
The federal court system consists of ____ level(s) of courts.
a. one
b. two
c. three
d. four
An unincorporated association:
a. cannot sue in its own name.
b. cannot be sued in its own name.
c. does not have any legal existence apart from the members who compose it.
d. all of the above.
The Digital Millennium Copyright Act :
a. made notice of copyrights no longer mandatory.
b. changed the life of a copyright.
c. was enacted to curb the pirating of software and other pirated works.
d. all of the above.
Immanuel Kant’s categorical imperative theory:
a. requires that we avoid one-sided benefits as a result of ethical decisions.
b. makes it easier to settle international business ethical decisions.
c. believes you have to be fair and ethical whether you want to be or not.
d. all of the above.
A third-party beneficiary:
a. may be obligated to pay for services rendered.
b. may bring suit on and enforce the contract.
c. must consent to the contract.
d. must be identified by name.
When it comes to administrative agencies, courts:
a. regard agencies as able to perform their duties effectively.
b. accept rules that have been established by agencies using a rational basis.
c. do not substitute their own judgment in agency decisions.
d. all of the above.
In a consignment, the dealer-consignee is often referred to as a(n):
a. remainder.
b. factor.
c. quotient.
d. exponent.
A liquidation of damages clause in a consumer contract is enforceable if it:
a. is not in excess of twice the provable damages.
b. is agreed to by both parties to the contract.
c. reasonably attempts to estimate the actual harm caused by a breach.
d. is a reasonable amount designed to punish the breaching party.
Which is not a true statement about a warehouser?
a. A warehouser is a bailee.
b. A warehouser may issue a negotiable or nonnegotiable receipt.
c. A warehouser is an insurer of the goods.
d. A warehouser is liable for damaged goods if damage is caused by the warehouser’s
negligence.
The parties may decide that their contract is not the one they want. They may then
replace it with another contract. If they do, the original contract is discharged by
__________.
a. solution
b. elocution
c. retribution
d. substitution
Regarding partnership property:
a. only a managing partner has the right to use firm property for firm business.
b. where a three-person partnership owns three autos, each partner owns one of the
autos individually.
c. on the death of a partner, that partner’s share of partnership property vests in his or
her next of kin.
d. a creditor of a partner cannot proceed against any specific items of partnership
property.
The privity rule:
a. allows for an accountant’s client to recover from an accountant in a negligence
malpractice suit.
b. allows for a third part to recover from an accountant in a negligence malpractice suit.
c. both a. and b.
d. neither a. nor b.
In which of the following situations would a third party acquire greater rights than the
original lessee?
a. an assignment
b. a sublease
c. a. and b.
d. neither a. nor b.
A Federal Trade Commission regulation gives a buyer three (3) business days in which
to cancel a home-solicited sale of goods or services costing more than:
a. $25.
b. $50.
c. $100.
d. $500.
An agreement or provision in an agreement that one party shall not be held liable for
loss is:
a. contribution.
b. exoneration.
c. indemnity.
d. subrogation.
Which is not a correct statement concerning rescission of a contract?
a. The breach must be material.
b. The injured party who rescinds may recover money paid under the contract.
c. The contract remains in effect after the rescission.
d. Rescission is the undoing of the contract.
An accountant may be able to raise the defense of lack of privity in a malpractice suit:
a. brought under federal securities statutes.
b. based on negligence.
c. based on fraud.
d. all of the above.
It is important to protect trade dress against adoption by a competitor because such
adoption can:
a. deceive purchasers into believing they have obtained a comparable product.
b. dilute the originator’s resource investment in its product appearance.
c. usurp the business goodwill of the developer of the trade dress.
d. all of the above.
An agent who commits a crime is:
a. always liable.
b. only liable if acting in self-interest.
c. only liable if the act is done to advance the interest of the principal.
d. never liable when acting in the role of an agent .
In a merger situation, what is the right of a dissenting shareholder?
a. to block the merger until satisfied regarding its terms.
b. to have their shares appraised and purchased by the corporation.
c. to enforce a consolidation instead of a merger.
d. dissenting shareholders have no rights with respect to a merger.
A common carrier transporting goods under a COD shipment may:
a. make delivery without first obtaining payment.
b. not make delivery without first receiving payment.
c. accept a check as payment and have no liability.
d. not avoid liability without a signed release.
Which of the following can satisfy the statute of frauds writing requirement?
a. bills of sale
b. Letters
c. Telegrams
d. all of the above
Upon a default by a buyer, the secured seller may resell the collateral:
a. not less than three (3) months after the buyer’s default.
b. not less than six (6) months after the buyer’s default.
c. only at a public sale.
d. at either a public or a private sale.
An oral agreement to supply a line of credit for two (2) years cannot be enforced
because of the statute of frauds.
Although a drawer has stopped payment on a check, the drawer still may be held liable
on the check.
A letter of credit agrees to provide the seller with needed currency exchanges when
transactions with foreign buyers occur.
Smarts and Then Some, Inc. developed a software program after several years of
research and development. The particular software program was then test”marketed, at
which point a competitor filed suit claiming that the Smarts and Then Some program
violated the competitor’s copyright on a program they too were test-marketing. What is
the test to determine whether a copyright has been violated?
The decision of an association tribunal is binding on both the association member and
the consumer.
Title VII requires that employers make reasonable efforts to accommodate their
employees’ religious beliefs.
The FTC requires advertisers to maintain records of the data used as support for
statements made in the ads that deal with the safety, performance, efficacy, quality, or
comparative price of an advertised product.
A contract of insurance ordinarily is stated in a writing called a policy.
A security agreement must be backed by a written record even if the creditor has
possession of the collateral.
When Gordon told Hanson that he was considering selling his house, Hanson offered to
buy it. Gordon and Hanson entered into a contract in which Hanson paid Gordon
$1,000 in cash for the right to buy Gordon’s house for $150,000 in the event Gordon
decided to sell it. Two weeks later, Jones offered Gordon $200,000 for his house, and
Gordon agreed to sell it to her for that amount. Hanson sued Gordon to force Gordon to
sell the house to him for $150,000, rather than to Jones for $200,000. Identify the
probable result of the action. What type of contract, if any, was entered into between
Gordon and Hanson?
State supreme courts generally hear all cases appealed to them.
A variance permits an owner of land to use it in a specified manner that is inconsistent
with zoning ordinances.
A custodian who holds money for the benefit of a minor under the Uniform Gifts to
Minors Act may choose to use the money to send the minor to summer camp.
Mark purchased a very expensive automobile on credit. Within a week, Mark
discovered that a tune-up was necessary, for he was in the habit of driving at an
excessive rate of speed. When the car was repaired, the bill was more than $1,000.
Mark does not have the money to pay for the car repairs or the monthly car payments.
The credit company as well as the repair shop are concerned over who has priority of
repayment. Who has priority and why?
Miriam issued two checks. The first check was made payable to her neighbor for a used
car that the neighbor sold to Miriam. The second check was a rent payment to Miriam’s
landlord for the current month’s rent.
The car was purchased on the basis of the neighbor’s written assurance that the car had
only 38,000 miles of use. After Miriam took possession of the car, Miriam’s mechanic
checked the vehicle and substantiated that the odometer had been turned back. The car
had actually been used for 79,000 miles. Miriam stopped payment on the check and
offered to return the car. Meanwhile, the neighbor had purchased a computer and had
negotiated Miriam’s check to the vendor in payment. Discouraged by the problems with
the car, Miriam decided to take a vacation. She issued a written stop payment to her
bank on the rent check because she intended to use this money for the vacation.
Although the drawee bank had ample time to act, it made an error and paid the rent
check instead of stopping payment. Two lawsuits resulted. In the first, the vendor of the
computer sued Miriam on the check. In the second, Miriam sued her bank for paying
over her timely stop payment order. Decide both cases.
When a buyer makes a purchase without relying on the seller’s skill and judgment, no
warranty of fitness for a particular purpose exists.
A trustee cannot make decisions on matters that could not be foreseen by the settlor.
Law is the result of the desire of the lawmaker to achieve certain goals.
Mark Hubbard has been very successful in the cattle business over a number of years.
Hubbard has decided to establish a cattle program as an investment tool. He will
purchase cattle with investors’ money and then provide medical care, feed, and
transportation on a service contract basis. The profits then will be divided
proportionately among the investors. An investment company, Money Ventures, Inc., is
interested in the entire offering of Hubbard’s cattle program. Hubbard is unsure as to
whether the securities acts apply to him. In addition, he wonders whether his venture, as
structured, is exempt if the activity is within the securities acts. Should Hubbard be
concerned?