Mentally infirmed Sasha contracts to purchase a piano for $2,500 in 60 monthly
installment payments. Six months later she tries to void the contract on grounds of
mental impairment. A court will:
a. normally void the contract without requiring anything further on Sashas part.
b. normally void the contract but will require Sasha to return the piano.
c. ordinarily not void the contract unless Sasha had a court-appointed guardian at the
time she entered into the contract.
d. not void the contract unless Sasha agrees to have the court appoint a guardian for her.
All of the following are characteristics of a closely held corporation EXCEPT:
a. the shares are publicly traded.
b. the corporation can typically operate without a board of directors.
c. the shareholders usually restrict share transfer.
d. minority shareholders are provided more protection than in regular corporations.
Exec-Pac, Inc. is extremely opposed to having its employees organize. What is true
about Exec-Pacs rights?
a. Exec-Pac may prevent the employees from interfering with the companys work
b. Exec-Pac mays speak out against unionization
c. The company may not offer better wages to prevent unionization
d. All of these answers are correct.
Bob, a house builder, contracts with Ollie to build a house on Ollie’s lot. Bob hires Rob
to take his place as the builder on this contract. What has Bob done?
a. Subcontracted Rob.
b. Breached the contract.
c. Delegated his duties.
d. Assigned his rights.
Under the Endangered Species Act, what federal agency is responsible for preparing a
list of species that are in danger of becoming extinct?
a. Department of Commerce.
b. Department of the Interior.
c. Department of Labor.
d. Both a and b are correct.
Travel Lines offered to sell 10 round-trip tickets to Elaine. Travel Lines stated that the
acceptance must be in writing by USPS next-day service. Which of the following
acceptances will create a contract between Travel Lines and Elaine?
a. Elaine calls Travel Lines and states that she will buy the tickets.
b. Elaine sends a fax to Travel Lines stating she will buy the tickets.
c. Elaine sends a letter by USPS next-day service to Travel Lines stating that she will
buy the tickets.
d. All of the above responses will create a contract between Travel Lines and Elaine
since they constitute reasonable means of communication.
In a contract modification, the phrase, “charged with such amendment means:
a. the party who suggested the change.
b. the party who will benefit from the change.
c. the party who will be adversely affected by the change.
d. the party who did NOT suggest the change.
Commonground Collections has been hired to collect past-due medical bills for
Lakeview Physicians. List some activities that Commonground may not do pursuant to
the FDCPA.
Tina is an undercover police officer. One evening she is posing as a prostitute in a bar.
Larry, a salesman who is attending an out-of-state convention, begins talking with Tina.
After about ten minutes, Tina suggests going to her room for a good time but points out
he will need to “donate” $100 to her. Arriving at Tina’s hotel room, Larry asks if she is a
policewoman. Tina lies and says she is not. When Larry gives her $100, Tina shows him
her identification and arrests him.
a. Larry appears to have been the victim of entrapment since Tina lied about being a
police officer.
b. Larry appears to have been the victim of entrapment since Tina was the one who
suggested the activity that resulted in Larry’s arrest.
c. Both of the above are correct.
d. None of the above is correct.
Which statement is not true of trusts?
a. Legal and beneficial ownership reside in the same entity
b. There are four parties involved: the grantor, the settlor, the donor and the beneficiary
c. A grantor can create a trust after her own death.
d. Trust documents are filed with the county court and are public documents.
Larry is a certified public accountant in a firm which audits public companies. Larry is
accused of unethical conduct. Is Larry required to abide by the ethical standards of the
Public Company Accounting Oversight Board?
a. Yes.
b. He can be held liable only if he had actual knowledge of the particular guideline he is
accused of violating.
c. No, the PCAOB establishes audit rules, not ethical guidelines.
d. No, the PCAOB has no authority over Larry.
Why do many major corporations actively encourage ethical behavior?
a. Unethical behavior always damages a business.
b. Unethical behavior can quickly destroy a business.
c. Unethical acts are always illegal.
d. All of the above are reasons that corporations actively encourage ethical behavior.
The Fair Labor Standards Act:
a. wage provisions do not apply to professional or managerial employees.
b. limits the number of hours an employer can require a person to work in any given
week.
c. does not apply to children.
d. preempts any state wage regulation.
Howson won a lawsuit against Hardwick for intentionally inflicting emotional distress.
The jury awarded Howson $500,000 in compensatory damages. It also awarded
Howson $4 million in punitive damages because Hardwick was quite wealthy and the
jury thought a large amount was necessary for Hardwick to feel the punishing effects of
the judgment. How does the jurys award fit into the guidelines offered by the U.S.
Supreme Court?
a. The punitive award is excessive because it exceeds the Supreme Courts suggested
ratio of compensatory damages to punitive damages.
b. The punitive award is excessive because the Supreme Court has stated that the trial
court may not use the defendants wealth as an excuse to award an unreasonably high
award.
c. The punitive award is excessive both because of the ratio of compensatory damages
to punitive damages and because the punitive damage award was based partly on the
defendants wealth.
d. The jury award is not excessive based on the Supreme Courts guidelines.
Ollie leased a building in Old Town. Ollie installed a washer and dryer unit and a new
furnace in the basement of the building with new duct work throughout the building.
Upon expiration of the lease, Ollie intends to remove the washer and dryer, but not the
furnace. The washer and dryer can easily be removed without harming anything.
Removal of the furnace, however, will damage the building. Are the washer, dryer, and
furnace fixtures?
a. The washer, dryer, and furnace are all fixtures.
b. The furnace is a fixture, but the washer and dryer are not.
c. The washer and dryer are fixtures, but the furnace is not.
d. The furnace and the washer are fixtures, but the dryer is not.
The United States has agreed to which of the following?
a. GATT.
b. NAFTA.
c. CISG.
d. All of the above.
The president does not like a new bill that Congress has passed.what can he do?
a. Veto it
b. Rewrite it
c. He must sign all bills Congress passes
d. Send it back to committee
The status of a third party is determined by:
a. the type of contract.
b. whether the third party gave consideration.
c. the reasonable expectations of the third party.
d. the intent of the contracting parties.
Jim told his manager, Lana, that a co-worker, Diane, had been in prison for theft. Lana
checked into the matter and, when she learned that Diane had served time in prison for
theft, fired her.
a. Jim is liable to Diane for defamation.
b. Jim is liable to Diane for defamation unless he can show a legitimate reason for
having to tell Lana about Diane’s prison history.
c. Jim is liable to Diane for defamation only if she is a public figure.
d. Jim is not liable to Diane for defamation.
A defense to a civil action brought under Section 10(b) and Rule 10b-5 of the 1934 Act
would be:
a. that the statute of frauds was not observed.
b. that the seller of the securities was not in privity of contract with the plaintiffs.
c. that the sellers did not intentionally or recklessly make a false representation.
d. All of the above.
The observation that “The one and only social responsibility of business is to increase
its profits” can be attributed to:
a. Justice Potter Stewart.
b. John Akers.
c. Milton Friedman.
d. Jeffrey Sachs.
The President of the United States:
a. creates federal common law.
b. can veto Congressional legislation.
c. determines the constitutionality of statutes.
d. passes statutes.
Marty, a 16-year-old, contracted with Cream-of-the-Crop Cycles to buy an $8,000
motorcycle. He agreed to make monthly payments until the purchase price plus interest
were paid in full. It is three years later and Marty has not disaffirmed the contract and
has made regular payments on the cycle since turning 18. Which of the following is
correct?
a. The contract is void and Marty has no obligation.
b. The contract is now voidable by Cream-of-the-Crop Cycles.
c. Marty has ratified the contract and is now bound by its terms.
d. Marty has ratified the contract but can still get a return of the payments made while
he was a minor.
An auditor can be held liable to a third party for:
a. Breach of the Accountant Client privilege.
b. Negligence
c. Fraud
d. b & c are correct
In January, Alex promised to pay Y-K Inc. $5,000 if it would refrain from filing suit
against him on a breach of contract action. Y-K agreed and accepted a $5,000 check
from Alex. Which of the following statements is correct?
a. Y-K’s promise to refrain from suing Alex was not supported by legal consideration.
b. Y-K’s promise to refrain from suing Alex was supported by legal consideration and is
enforceable.
c. This is an accord and satisfaction, and Y-K cannot sue.
d. The courts would apply promissory estoppel in this situation.
Susan took out a life insurance policy on herself, paying all of the premium payments.
She named her daughter, Jessica, as the beneficiary under the policy. Jessica has not
given anything in consideration for the policy. Jessica is:
a. a donee beneficiary who has rights to enforce the policy once Susan dies.
b. a creditor beneficiary who has rights to enforce the policy once Susan dies.
c. an incidental beneficiary because Jessica did not give any consideration for the policy
and therefore cannot enforce the policy even when Susan dies.
d. None of the above.
An express warranty can be created by which of the following?
a. An affirmation of fact or promise.
b. A description.
c. A model.
d. All of the above.
Fresh Air, a nonprofit environmental organization, believes that Cincy Co. is violating
the Clean Air Act. The EPA has not taken any action against Cincy Co. Fresh Air:
a. can file a citizen suit against the EPA.
b. can file an executive order with Cincy Co.
c. cannot file a lawsuit but can ask an administrative law judge to hear its complaint.
d. cannot file a lawsuit but can lobby Congress to force the EPA to act.
If a court determines a manager’s corporate decision amounted to self-dealing:
a. the business judgment rule will not apply.
b. the transaction being challenged will be automatically voided.
c. the manager is automatically personally liable to the corporation.
d. All the above.
Charles agrees to store Tuan’s car in Charles’s garage for the winter months while Tuan
visits his grandmother in California. As a bailee, Charles is automatically entitled to use
Tuan’s car while Tuan is away.
The duty of care that each of us must follow is to behave as a reasonable person.
The UCC has abolished the common law requirement of consideration in all contracts
involving the sale of goods.
The dissolution of a partnership means the same as its termination.
The prevention of significant deterioration (PSD) program was developed to prevent
deterioration in air quality that would create health problems for those affected.
Shoe Sunshine, Inc. filed for bankruptcy protection under Chapter 11 and submitted a
plan of reorganization within 120 days after filing for relief. Two of the classes of
creditors voted against the plan. However, the bankruptcy judge considered the plan to
be reasonable, achievable, and fair, and approved it in spite of these creditors’
objections. This action by the judge is called a “cramdown.”
A limited liability company, unlike a Subchapter S corporation, can have members that
are corporations, partnerships, or nonresident aliens.
Define and compare the terms “vagueness and “ambiguity.
DewDrop, Inc. has laid off 50 workers due to budget constraints. These employees were
previously receiving health insurance benefits. What health insurance options are
available to these laid-off workers?
Generally accepted accounting principles are the rules for preparing financial
statements.
Identify and discuss two specific causes of action a plaintiff can allege that deal
specifically with privacy rights.
Any contract involving a sale of goods of $100 or more must be in writing.
Maria, who lives in the United States, gains unauthorized access to a bank’s computer
system and steals financial information about customers. Of what is Maria guilty, and
under what statute(s) could she be prosecuted?
To be a holder in due course, one must possess bearer paper. No endorsement is
necessary.
Tommy is going to have heart surgery. He is afraid that he will not survive, so he gives
his favorite ring to his friend, Rod. Rod is aware of Tommy’s apprehensions. Tommy
survives the surgery and wants his ring back. Who is entitled to the ring and why?
Discuss the rules for insurable interests.
If a whistleblower successfully brings suit against a company that defrauds the
government, the whistleblower can receive 30 percent of the damages awarded to the
government.