An implied trust is also called a[n] ______ trust.
A. Untrue
B. Involuntary
C. Reviewed
D. Judicial
E. Trustless
Which of the following was the first federal administrative agency created?
A. The Interstate Commerce Commission
B. The Securities and Exchange Commission
C. The Internal Revenue Service
D. The Social Security Administration
E. The Food and Drug Administration
Which of the following is true regarding the result of the dispute in the Case Opener
involving whether a joint venture between law firms was liable for the actions of a
partner sanctioned for litigation misconduct?
A. That the law firms were not liable because on the basis of the independent
management of the law firms involved, no joint venture actually existed.
B. That while a joint venture existed, vicarious liability could not be asserted in order to
hold members of a joint venture vicariously liable for a partner’s misconduct.
C. That a joint venture existed and that members could be held liable for a partner’s
misconduct while acting in the ordinary course of the joint venture’s business.
D. That because a joint venture is defined as a multiple-purpose partnership, the
participants could be held liable, but only if the misconduct stemmed from activities
engaged in on behalf of the joint venture.
E. That because a joint venture is defined as a multiple-purpose LLC, the participants
could not be held liable regardless of whether the misconduct stemmed from activities
engaged in on behalf of the joint venture.
How many states have statutes requiring that people working in certain professions
obtain a license before practicing their craft?
A. 50
B. 49
C. 45
D. 30
E. 25
“Death.” Barbara is president and a large shareholder in Reuse It, a corporation that
sells used cellular telephones. Although the company was not insolvent, sales had been
significantly down, and Barbara decided that it would be a good idea to discontinue the
business. The board of directors agreed with her. The board members presented the
proposal to discontinue the corporation to shareholders. Initially, Willy, a disgruntled
shareholder, opposed ending the corporation. He claimed that the problem was that
Barbara had done a poor job in management. Barbara planned to go forward with the
termination of the company because a majority of the shareholders agreed. Willy,
however, came around; and upon a second vote to discontinue the corporation, the vote
was unanimous. Quill, a vice president of the corporation, was aware of a few
outstanding debts owed by Reuse It. He suggested hurrying along quietly with ending
the corporation because any claims not made before the corporation was dissolved
could be avoided. Barbara told him that she was not sure that was a good idea.
Therefore, the company proceeded with all appropriate notifications. When the time
came to liquidate the corporation, the members of the board did not want to participate.
Barbara was concerned about what action to take at that point because she really
wanted to be finished with Reuse It.
Which of the following is the proper term for the plan to discontinue Reuse It?
A. Voluntary corporate discontinuance
B. Involuntary corporate discontinuance
C. Voluntary relinquishment
D. Voluntary dissolution
E. Involuntary dissolution
If a corporation has fewer than _____ shareholders, the Revised Model Business
Corporation Act allows companies to eliminate the board of directors entirely.
A. 100
B. 50
C. 30
D. 25
E. 10
“Disgruntled Buyer.” Tom had lived in his home for five years without doing any
upkeep of any type. He was aware that the roof leaked, that he had defective piping, and
that the air conditioning did not work, among other problems. He sold the home to
Kathy. He did not tell her anything about the problems with the house. Shortly after
Kathy moved in, there was a thunderstorm resulting in water streaming down from the
ceiling. Within a few weeks of her moving in, pipes began to burst resulting in
significant water damage. The air conditioner also failed to work when she turned it on
for the first time. Kathy demanded that Tom refund her purchase price and take back the
house. Tom sent her a letter providing as follows:
Dear Kathy,
Caveat emptor. You have marketable title.
Regards, Tom
Kathy is furious and wants to sue.
Which of the following is meant by Bruce’s statement that Kathy has marketable title?
A. That all taxes have been paid.
B. That she has legal title and that there are no liens or restrictions on the property of
which she is unaware.
C. That Kathy has the legal title, not Bruce, and that she, therefore, has responsibility
for all repairs.
D. All of these.
E. That all taxes have been paid and that there are no liens or restrictions on the
property, but not that Kathy has legal title.
“Check Cashing Business.” Susan owns and operates a check cashing business. A
regular customer, Bob, comes in and cashes a $2,000 check issued by ABC Trucking.
The day after Susan cashed the check, she received a notice from ABC Trucking that
some checks had been stolen. It was later discovered that the checks she cashed for Bob
had been stolen. At the time she took the check, Susan was very busy with several
customers in line. She simply glanced at the check and cashed it. A reasonable
examination would have revealed that the check had been materially altered and
changed from the amount of $200 to $2,000. Susan decided that she needed to hire
some people to help her because she also had a problem with another check. On the
same day that she took Bob’s check, she took a check from another customer, Maurice.
It was later discovered that the check, which was four months old, was the subject of a
dispute between Maurice and the issuer of the check for whom Maurice had done some
work. The issuer claimed that the work was improperly done. Both ABC Trucking and
the issuer of the check to Maurice had stopped payment on the checks. Susan claimed
that as a holder in due course, she was entitled to payment on both checks.
What is the effect of Susan receiving notice the day after she cashed the check for Bob
that the check had been stolen?
A. The notice has no effect on her status as holder in due course because it was
provided after she cashed the check.
B. The notice prevents her from being a holder in due course.
C. The notice prevents her from being a holder in due course only if Bob had been
convicted of check cashing offenses in the past since she should have checked his
criminal record.
D. The notice prevents her from being a holder in due course only if she subjectively
knew that Bob had been charged criminally with check cashing violations in the past.
E. The notice prevents her from being a holder in due course because it was presented
to a business; only individuals can avoid the effect of notice of theft by cashing a check
prior to receiving notice.
Which of the following references a right of a corporation or its shareholder to purchase
any shares of stock offered for resale by a shareholder within a specified period of
time?
A. Right of adequate refusal
B. Right of first refusal
C. Right of first purchase
D. Right of first acknowledgement
E. Superior right of purchase
Which of the following was the result in Hartleib v. Sirius Satellite Radio et al., the
case in the text in which shareholders of Sirius sued Sirius XM after a merger claiming
that Sirius executives decreased stock prices by entering into agreements with XM to
the effect that both companies would refrain from looking at other merger deals?
A. That the plaintiffs’ generalized statements failing to identify specific wrongful acts
and coming after changes in board membership were insufficient.
B. That the plaintiffs’ statements, while generalized, were sufficient but that the plaintiff
failed to file the complaint in a timely manner.
C. That the plaintiffs’ statements were sufficiently specific, that the complaint was filed
in a timely manner, and that a trial would be conducted later.
D. That the plaintiffs’ statements were sufficiently specific, that the complaint was filed
in a timely manner, and that the plaintiff was entitled to damages as a matter of law.
E. That the plaintiffs had no authority to proceed after the merger.
“Contraceptive Injuries.” Drug company ABC Drugs came out with a new birth control
pill guaranteed to prevent pregnancy for one year after the consumption of one pill. The
FDA approved warnings of the drug’s side effects including nausea and headache to be
provided with the pill. After it was initially put on the market, the company became
aware of some risks of dizziness from taking the drug. The company, however, did not
warn of that risk because the company was concerned that individuals might not buy
the pill, and federal law did not specifically require a warning regarding dizziness.
Belinda thought the pill was a great idea and obtained a prescription for it at a date after
the company became aware of the issues involving dizziness. She took one and felt fine
for a few days. Then, however, she began feeling dizzy. Her dizziness caused her to fall
breaking her leg on some steps. She later discovered that the birth control pill likely
made her dizzy. Belinda decided to sue under a state law claim for failure to warn,
however, she waited a number of years before bringing her action. The drug company
claimed that it had no duty to list dizziness as a risk because its warning complied with
all FDA requirements. The drug company also claimed that the time in which it could
be sued had expired both because Belinda waited too long after she was injured and
also too long from the date of product purchase.
The defense that Belinda waited too long to bring suit from the time that she was
injured is a defense based upon which of the following?
A. The statute of limitations.
B. The statute of repose.
C. The statute of perpetuity.
D. The statute of time.
E. The statute of dates.
“Overextended Debtor.” For his home, Dennis purchased a big screen television from
ABC Electronics and financed the purchase through ABC Electronics. Later, because
Dennis had bought a boat, a new car, an expensive engagement ring for his girlfriend,
and some other items, he was unable to continue making payments on the television.
The manager from ABC Electronics called 60 days after the sale and asked Dennis to
return the television. Dennis refused on the basis that ABC Electronics never perfected
its interest in the television. He also explained that he had later granted a secured
interest in the television along with his other goods to XYZ Credit in return for a loan.
No financing statement was filed on behalf of ABC Electronics although XYZ Credit,
with no knowledge of any interest of ABC Electronics, did file a financing statement.
Which of the following is correct regarding the statement of Dennis that the security
interest of ABC was not perfected?
A. Dennis is wrong because the security interest perfected immediately.
B. Dennis is correct because the security interest perfected when he was still in
possession of the collateral 30 days after the purchase.
C. Dennis is correct because the security interest perfected when he was still in
possession of the collateral 60 days after the purchase.
D. Dennis is correct because no financing statement was filed.
E. Dennis is correct only because in the case of luxury goods, a financing statement
must be filed within 20 days of the sale in order for the seller to establish perfection.
A ________________ is an agreement by the person who issues a letter to pay a sum of
money on receipt of an invoice and other documents.
A. Letter of agreement
B. Letter of credit
C. Letter of acknowledgement
D. Negotiated credit instrument letter
E. Letter of simple contract
Which of the following is responsible for managing the business of a corporation?
A. Investors
B. Shareholders
C. Officers
D. Administrators
E. Members of the board of directors
Which of the following is the most likely result if an agent admits to the principal that a
check for the principal was forged by the agent and placed into the agent’s bank
account, but the principal does nothing until two months later after the agent leaves
town with the funds?
A. Because the checks were forged, the principal can receive reimbursement of the
funds from any maker involved or any bank that cashed the checks.
B. The principal can receive reimbursement from makers of the checks only.
C. The principal can receive reimbursement from any bank that cashed the checks only.
D. It is likely that it will be determined that the principal ratified the signatures and that
the principal cannot recover from either makers or banks that cashed the checks.
E. The principal can recover from either the makers or any banks who cashed the
checks only if it can be shown that the agent cannot be located for criminal prosecution.
Which of the following is true regarding a partner’s actual authority to bind a
partnership once a partnership is dissolved?
A. A partner has no actual authority to bind the partnership after the partnership is
dissolved.
B. A partner has actual authority to bind the partnership for 10 days after the partnership
is dissolved.
C. A partner has actual authority to bind the partnership for 30 days after the partnership
is dissolved.
D. A partner has actual authority to bind the partnership for 45 days after the
partnership is dissolved.
E. After a partnership is dissolved, a partner has actual authority to bind the partnership
to any third party who has not been given notice of dissolution.
In a consolidation, what happens to the property of the original corporations?
A. It must be sold and distributed to the respective shareholders.
B. It must be held in trust for at least one year to satisfy claims of creditors.
C. It must be held in trust for at least six months to satisfy claims of creditors.
D. It must be placed within the jurisdiction of the secretary of state for at least one year
in order to satisfy claims of creditors.
E. None of these.
An agent cannot represent both the principal and a third party in an agreement because
there could be a ______.
A. Consortium
B. Disagreement
C. Conflict of interest
D. Delineation of interest
E. Absolution
Which of the following articles of the UCC governs secured transactions in personal
property?
A. Article 1.
B. Article 4.
C. Article 5.
D. Article 7.
E. Article 9.
“Lakeside Property.” Ronnie agreed to act as the agent of Sue in finding a piece of
lakeside property for her at a good price and also in obtaining a loan for her with which
to purchase the property. She agreed to pay him $500 for doing so. To assist Ronnie in
his duties, Sue disclosed to him confidential information about her finances and debts.
Ronnie decided that he needed help and paid Rick $300 to look for property for Sue.
Rick told Ronnie about a great deal on a piece of lakeside property that Bruce had for
sale. In fact, the deal was so good that Ronnie purchased the property for himself. When
Sue found out about the property Ronnie bought for himself, she complained to Ronnie.
He defended himself on the basis that he was not actually working for Sue when he
found out about the deal. At the time, he was playing golf with Bruce. He also told Sue
that he had hired Rick for $300 to assist him and that he could not be held liable
because he had turned the job over to Rick. He asked Sue for reimbursement of the
amount he paid Rick. Sue fired Ronnie threatening to sue him. Ronnie told Sue that he
would counterclaim for the $300 owed to Rick. Only after he was fired, Ronnie
disclosed to a number of parties information regarding Sue’s spending habits which he
thought were excessive.
What should Sue seek if she wants possession of the lakeside lot Ronnie purchased?
A. A resolute trust
B. An actual trust
C. A constructive trust
D. A defined trust
E. An absolute trust
“Nails.” Mona and her friends Jack and Bobby, all U.S. citizens, want to open a nail
salon. They would all like to avoid personal liability for debts of the business and/or
wrongful acts of each other. They would also like to avoid taxation as much as possible.
Mona is in favor of a corporation and asks if there is any problem with that form of
business. Jack and Bobby say that they are concerned about double taxation with a
corporation and that they are in favor of a partnership, even if personal liability is a
concern. Mona said that she was concerned about the deductibility of losses if the
corporate form was chosen. She did some research and suggested an S corporation to
Jack and Bobby which she claimed would avoid the problem of double taxation.
Based on the information available, is there an impediment to the business qualifying as
an S Corporation?
A. Yes, because there must be at least 100 shareholders involved.
B. Yes, because a business must operate as a partnership for at least two years before
converting to an S corporation.
C. Yes, because a business must operate as a general corporation for at least two years
before converting to an S corporation.
D. Yes, because at least one-third of the shareholders in an S corporation must be
corporations.
E. No.
Which of the following administers international treaties pertaining to the protection of
intellectual property?
A. The United Nations Intellectual Property Association
B. The Federal Intellectual Property Organization
C. The National and World Intellectual Protection Agency
D. The World Intellectual Property Organization
E. There is no organization or agency with that responsibility
Which of the following is true regarding the manner in which a secured party may sell
collateral?
A. The sale must be in a private sale only.
B. The sale must be in a public sale only.
C. The sale must be in an acknowledged sale.
D. The sale may be in a private sale, public sale, or an acknowledged sale.
E. The sale may be in either a private sale or a public sale.
“Missing Earrings.” Elaine ordered a pair of diamond stud earrings from BIG Jewelry
Store. She paid in advance because the sales clerk told her that the store would have to
pay the supplier before the earrings could be shipped. Later that day, Elaine found out
from a friend of hers that BIG Jewelry Store was in financial trouble. Elaine was
concerned and immediately called her bank and issued a stop-payment order on the
check she wrote to BIG Jewelry Store. She gave the bank all of the correct information
orally needed to stop-payment on the check. The bank, however, did not stop payment
on the check. The check was paid, BIG Jewelry Store went bankrupt, and Elaine was
unable to get either her money or the earrings from BIG Jewelry Store. Elaine asked the
bank manager of the bank for a refund of the check amount. The bank manager told her
that the stop-payment order was not good because it was oral and that in any event,
under the UCC, banks are not liable for failing to stop payment on a check. The bank
manager further told Elaine that the bank was a holder in due course, and that Elaine is
liable for any damages sustained by BIG Jewelry Store or the bank based upon her
attempt to stop payment on the check.
Which of the following is correct regarding the manager’s statement that stop-payment
orders may not be oral?
A. The manager is incorrect because under the UCC, a stop-payment order may be
given orally.
B. It depends on the amount of the check because oral stop-payment orders may only be
given for checks in an amount over $500.
C. It depends on the amount of the check because oral stop-payment orders may only be
given for checks in an amount under $500.
D. It depends on the amount of the check because oral stop-payment orders may only
be given for checks in an amount under $1,000.
E. The manager is correct.
“Smelly Lake.” Barney, who lives on a navigable lake, is unhappy because he believes
that a local company is dumping pollutants into the lake resulting in harm to his
property and horrible odors. No one swims in the lake anymore. He calls a company
official, Warren, who tells him to mind his own business. Warren tells him that the state
has no authority, that federal investigators do not have time for Barney’s small smelly
lake, that swimming is not a concern of the government, and that any federal penalties
are negligible. Barney tells Warren that he is pushing for big penalties and that Warren
is likely to end up in jail. Warren just laughs.
Which of the following is true regarding Warren’s statement that the state had no
authority over any pollution for which his company was responsible?
A. While enforcement authority under the Clean Water Act is left primarily with the
federal government, the state government also has the authority to monitor, inspect, and
enforce.
B. While enforcement authority under the Clean Water Act is left primarily with the
federal government, the state government has the authority to monitor although other
powers are lacking.
C. Warren is correct.
D. Only the state has the power to enforce the Clean Water Act.
E. Enforcement of such violations under the Clean Water Act is left primarily to the
states.
Which of the following is true regarding types of powers administrative agencies have?
A. Agencies have legislative, judicial, and executive power.
B. Agencies have executive power and judicial power, but not legislative power.
C. Agencies have executive power and legislative power, but not judicial power.
D. Agencies have legislative power, but not executive power or judicial power.
E. Agencies have legislative power and judicial power, but not executive power.
Which of the following did the court determine on appeal in Wawel Savings Bank v.
Jersey Tractor Trailer Training Inc., the case in the text in which a lender who
perfected an interest in a debtor’s collateral claimed to have priority in bankruptcy over
an entity who later entered into an agreement whereby it purchased rights to the debtor’s
accounts receivables?
A. Under the “first in time” rule, the court ruled in favor of the lender who perfected the
interest in the debtor’s collateral.
B. Under the “first to file” rule, the court ruled in favor of the lender who perfected the
interest in the debtor’s collateral.
C. The court ruled in favor of the purchaser of receivables on the basis that the
agreement the lender had with the debtor did not expressly prohibit the sale of
receivables.
D. The court ruled in favor of the purchaser of receivables on the basis that an
immediate transaction for value was involved.
E. The court remanded the case for a determination as to whether the purchaser of
receivables was a holder in due course or a purchaser of instruments in which case it
would prevail.
Which of the following is the period between the time a check is written and the time it
is presented for final payment, during which time a customer can still use his or her
funds?
A. Transfer time.
B. Electronic time.
C. Chargeable time.
D. Float time.
E. Usable time.
“Smelly Lake.” Barney, who lives on a navigable lake, is unhappy because he believes
that a local company is dumping pollutants into the lake resulting in harm to his
property and horrible odors. No one swims in the lake anymore. He calls a company
official, Warren, who tells him to mind his own business. Warren tells him that the state
has no authority, that federal investigators do not have time for Barney’s small smelly
lake, that swimming is not a concern of the government, and that any federal penalties
are negligible. Barney tells Warren that he is pushing for big penalties and that Warren
is likely to end up in jail. Warren just laughs.
Which of the following is true regarding Warren’s statement that swimming is not a
concern of the government?
A. Warren is correct.
B. Warren is partially correct. Swimming may be a concern of the states, but such
swimming is not a concern of the federal government because it does not directly affect
harm through, for example, drinking contaminated water.
C. Warren is incorrect only if it can be established that swimmers were incurring
physical symptoms such as rashes.
D. Warren is incorrect only if it can be established that the area was designated as an
official tourist destination.
E. Warren is incorrect.
The parties express their agreement for insurance in a document called a[n] _____.
A. Catalog
B. Brochure
C. Application
D. Notification
E. Policy
Which of the following is the legal process by which a transfer of property is made by a
governmental entity against the protest of the property owner?
A. Allocation
B. Appropriation
C. Condemnation
D. Substitution
E. Publication
Which of the following presents a problem when considering the theory of ethics
known as absolutism?
A. The questionable nature of the rules in most absolutist repositories seems overly
flexible when applied to different situations.
B. The unquestionable nature of the rules in most absolutist repositories seems overly
inflexible when applied to different situations.
C. The lack of objectivity.
D. The fact that most individuals associated with this theory have been proven to have
acted to the detriment of their followers in one way or another.
E. The allegation that an excessive number of followers actually follow
consequentialism.
Which of the following is false regarding involuntary liquidation?
A. The state may initiate dissolution procedures.
B. Individual shareholders may not petition the state to order dissolution.
C. The secretary of state can compel involuntary dissolution if the corporation failed to
pay taxes within 60 days of the due date.
D. The secretary of state can compel involuntary dissolution if the corporation did not
have a registered agent or office in the state for 60 days or more.
E. The secretary of state can compel involuntary dissolution of the corporation if the
corporation’s duration as specified in its articles of incorporation has expired.