If an accommodated party pays a note when it is due, the accommodated party can
force any accommodation party to contribute based upon the number of accommodation
parties that exist.
Banks are required by the UCC to certify the check if a customer has sufficient funds in
the account.
A special type of express agent authority is known as a power of attorney.
The UCC assumes that the seller has defective title unless the seller proves otherwise.
Constitutions and statutes are complete in the sense of covering the detailed rules that
affect government and business relations.
Creating a mechanic’s lien on property automatically ensures that the contractor who
filed the lien will receive money.
In most civil cases, a plaintiff must prove her case beyond a reasonable doubt.
The United States has no bilateral trade agreements.
There is no right to a jury trial in administrative agency disputes.
The purpose of the parol evidence rule is to prevent attempts to use only oral evidence
to prove agreements.
A person may change a will with a codicil only once afterwards which a completely
new will must be written.
Consequentialism provides a rigid set of rules to follow regardless of the situation.
In the Case Opener “WorldCom,” the court ruled that the chairman of WorldCom’s
board of directors could have no personal liability for misrepresentations of the
company’s condition in filings with the Securities and Exchange Commission.
For purposes of jurisdiction, an LLC is considered a citizen of every state in which its
members reside.
An automated signature satisfies the UCC requirement that the signature of the creator
appear in order for an instrument to be negotiable.
Usually, express trusts are written and are called trust instruments or agreements.
Whether a contract is bilateral or unilateral depends upon what response the offeror
expects from the offeree.
When making decisions about an agency relationship’s liability to third parties, courts
must first identify whether property damage or personal injury, or both, is at issue.
The words “pay to cash” are sufficient words of negotiability.
When financing for a property purchase is needed, financing is often obtained by going
to a financial institution and obtaining a loan to pay for the property in exchange for
which the lender receives a security interest in the property called a title.
There is no right of appeal from a decision of an administrative law judge.
Environmental regulations are enforced primarily through lawsuits started in the state
court systems.
An instrument is dishonored when a party refuses to pay the instrument such as when a
bank refuses to pay because insufficient funds exist.
If Alice makes a proper tender of the full payment of $1,000 due on Richard’s note on
the note’s due date, but Richard improperly refuses to accept the money, any endorsers
are discharged from liability.
A consumer lease is the same thing as a finance lease.
A person who violates the 1933 Securities Act can be fined but not sent to jail.
If a partner dissolves a partnership in violation of the partnership agreement, the partner
can be held liable for wrongful dissolution.
Workers’ compensation laws are primarily federal laws.
Courts are generally critical and unsupportive of ADR methods.
Negotiation is a bargaining process in which disputing parties interact informally, but
only with lawyers, to attempt to resolve their dispute.
Embezzlement is distinguished from larceny because in embezzlement the individual
does not take the property from another and is already in possession of the property.
Presidents claim the power to issue executive orders on the basis of their Article II,
Section 1, constitutional power to “take care that the laws be faithfully executed.”
Whether third parties have a claim against an accountant on the basis of their reliance
upon negligently prepared financial statements is the same in all states because it is
governed by federal law.
A business arrangement in which stock owners appoint beneficiaries and place their
securities with trustees who manage the company and pay a share of their earnings to
the stockholders is referred to as a trust.
Which of the following is true regarding proof of design defect?
A. States are not in agreement as to how to establish a design defect.
B. State law across the country is generally uniform regarding how to establish a design
defect.
C. State law is irrelevant because federal law dictates how to establish a design defect.
D. Each local county in each state determines how a design defect will be established.
E. Because of the amount of international trade, there are international treaties
establishing for each U.S. state how design defects will be established.
Which of the following is a term describing the wrongful state of mind needed for a
criminal action?
A. Mens rea.
B. Actus reus.
C. Res judicta.
D. Stare decisis.
E. Carpe diem.
“Bank Robbery.” Safe Bank was robbed of a significant sum of cash by a robber later
identified as Victor Victory. Safe Bank offered a reward of $10,000 to anyone who
captured or provided information leading to the capture of Victor. Ted, a police officer
in town, promised Safe Bank officials that he would apprehend Victor. While on duty,
Ted arrested Victor at a hamburger joint in town. He found Victor based upon a hunch
he had after Ursula, who dated Victor, told him about various places Victor enjoyed
eating. The bank refuses to pay either Ursula or Ted any of the reward money.
In a lawsuit between the bank and Ted regarding the reward funds, who is likely to
prevail and why?
A. The bank is likely to prevail because Ted only provided past consideration.
B. The bank is likely to prevail because Ted had a preexisting duty to catch Victor.
C. The bank is likely to prevail because Ted’s promise to catch Victor was illusory.
D. Ted is likely to prevail because his promise to catch Victor resulted in a binding
bilateral contract.
E. Ted is likely to prevail because an enforceable unilateral contract exists based on his
performance.
Which of the following was the result of the claim of the U.S. Department of Justice
that Microsoft Corporation violated Sections 1 and 2 of the Sherman Act?
A. The court ruled that Microsoft violated both Sections 1 and 2 of the Sherman Act.
B. The court ruled that Microsoft violated neither Section 1 nor Section 2 of the
Sherman Act.
C. The court ruled that Microsoft violated Section 1 but not Section 2 of the Sherman
Act.
D. The court ruled that Microsoft violated Section 2 but not Section 1 of the Sherman
Act.
E. The court ruled that Microsoft violated both Sections 1 and 2 of the Sherman Act but
that because the U.S. Department of Justice ‘sat on its rights” and delayed prosecution,
the suit was subject to dismissal.
Which of the following is true regarding the elements that must be satisfied in order for
a mutual mistake to interfere with legal consent?
A. The required elements are: (1) a basic assumption about the subject matter of the
contract, and (2) an admission by one of the parties that a misrepresentation occurred.
B. The required elements are: (1) a basic assumption about the subject matter of the
contract, and (2) a material effect on the agreement.
C. The required elements are: (1) a basic assumption about the subject matter of the
contract, and (2) an adverse effect on a party who did not agree to bear the risk of
mistake at the time of the agreement.
D. The required elements are: (1) a basic assumption about the subject matter of the
contract, (2) an adverse effect on a party who did not agree to bear the risk of mistake at
the time of the agreement, and (3) a material effect on the agreement.
E. The required elements are: (1) a basic assumption about the subject matter of the
contract, (2) an adverse effect on a party who did not agree to bear the risk of mistake at
the time of the agreement, (3) a material effect on the agreement, and (4) fraud.
Bob is hired to do computer sales for an electronics store. He agrees that if he leaves his
employment, he will not work for another computer store within 25 miles for a period
of two years. That type of agreement is called a[n] ______.
A. Covenant not to compete
B. Employment covenant
C. Working covenant
D. Termination agreement
E. Public policy agreement
If no partnership agreement exists, which of the following generally establishes the
rules for the partnership?
A. The Federal Partnership Act
B. The Uniform Partnership Act
C. The Statutory Joint Act
D. The Partnership Unification Act
E. The Partnership Governance Act
Which of the following are debts incurred in an initial contract?
A. Secondary obligations
B. Primary obligations
C. Secondary promises
D. Collateral promises
E. Suretyship promises
In the civil law system, which of the following has the primary responsibility for the
development of evidence?
A. The attorneys
B. The court clerk
C. Officers of the court specifically charged with gathering evidence
D. The judge
E. Witnesses
How is absolutism different from ethical relativism and situational ethics?
A. It applies utilitarianism.
B. It holds that a cost-benefit analysis should be applied.
C. It holds that whether an action is moral does not depend on the perspective of the
person facing the ethical dilemma.
D. It applies virtue ethics and concentrates on the accepted values of the person at issue
as well as those of the community involved.
E. It applies corporate ethics principles.
Owners of which of the following types of stock enjoy preferences with respect to
assets and dividends?
A. Acknowledged
B. Preferred
C. Simple
D. Complex
E. Common
“Defective Windows.” Selina hired a contractor, Rex, to put new windows in her home
that she purchased herself from Good Windows. Unfortunately, Rex made a mess of the
windows. While the windows were initially in good shape, Rex cracked some,
scratched others, and did not get the windows properly fitted into their frames. Selina
received a bill for the windows from Good Windows, but she refused to pay. Selina was
told that Good Windows would file a lien, but she believed that there was no basis upon
which a lien would be granted. Rex, who refused responsibility for any problems, also
filed a lien after Selina refused to pay him.
Which of the following is the type of lien that Rex would likely seek?
A. Artisan’s
B. Mechanic’s
C. Removal
D. Construction
E. Judicial
For negotiation, which of the following types of paper require delivery and an
endorsement by the holder?
A. Bearer
B. Delivery
C. Order
D. Transfer
E. Acknowledgement
Which of the following is the majority rule regarding a minor’s misrepresentation of his
or her age?
A. That if a competent party relies on a misrepresentation in good faith, the minor gives
up the right to disaffirm the agreement.
B. That the minor must restore the competent party to that party’s precontractual
position before obtaining the disaffirmance.
C. That the minor may disaffirm but that the competent party has the right to sue the
minor in tort and recover damages for fraud.
D. That misrepresentation does not affect the minor’s right to disaffirm the contract.
E. That misrepresentation results in the minor receiving a return of only half the
consideration he or she supplied.
In making a transfer by ______ deed the grantor is only making the promise that he or
she has not done anything to lessen the value of the estate.
A. Quitclaim
B. Special warranty
C. Approved
D. General warranty
E. Specific
Which of the following is set out in the Restatement (Second) of Torts as a method by
which to prove a design defect?
A. The risk-utility test.
B. The consumer expectations test.
C. The feasible alternatives test.
D. The design defect test.
E. The consumer propensity test.
Which of the following is true regarding minimum-wage laws?
A. The People’s Republic of China has a national minimum-wage law.
B. Canada has a national minimum-wage law.
C. Italy has a national minimum-wage law.
D. Germany has a national minimum-wage law.
E. Australia has a national minimum-wage law.
Will a plaintiff be allowed to assert jurisdiction over a defendant in the plaintiff’s state
for a cause of action arising out of the defendant’s website?
A. It depends on the nature and quality of commercial activity that an entity conducts
over the Internet.
B. Yes, for any type of action.
C. Yes, but only if the defendant consented to jurisdiction in the plaintiff’s home state.
D. Yes, but only if the defendant has actually physically been in the plaintiff’s home
state within the 180 days prior to the filing of the complaint.
E. No, not under any circumstances.
Unless otherwise agreed in the articles of partnership, which of the following is true
regarding rights partners have in regard to their interactions with other partners?
A. Partners have the right to participate equally in management, the right to share
equally in profits, the obligation to share equally in losses, and the right to additional
compensation for devoting time to the business.
B. The right to participate in management according to the level of capital contribution,
the right to share in profits according to the level of capital contribution, the obligation
to share in losses according to the level of capital contribution, and the right to
additional compensation for devoting time to the business.
C. The right to participate in management according to the level of capital contribution,
the right to share equally in profits, the obligation to share equally in losses, and the
right to additional compensation for devoting time to the business.
D. The right to participate equally in management, the right to share in profits according
to the level of capital contribution, the obligation to share in losses according to the
level of capital contribution, but no right to additional compensation for devoting time
to the business.
E. The right to participate equally in management, the right to share equally in profits,
the right to share equally in losses, but no right to additional compensation for devoting
time to the business.
Legislative acts passed by state legislatures can be found in the ______.
A. U.S. Code
B. State codes
C. Uniform Register
D. State Reporter
E. State Reference Manual
Which of the following, if any, is property of a decedent that is not part of a probate
estate?
A. Exempt
B. Nonbequeathable
C. Nondevisable
D. Nonprobate
E. All property of a decedent is part of the probate estate.
In China, which of the following is defined as “an organization which possesses civil
legal capacity for civil acts and which, according to the law, independently enjoys civil
rights and assumes civil obligations”?
A. Legal person
B. Legal corporation
C. Public entity
D. Civil organization
E. Public organization
“Prudence’s Imprudence.” Unfortunately, Prudence failed to act prudently. She had a
bad day after failing a business law test and breaking up with her boyfriend. While
drinking a mocha and talking on the cell phone with her best friend, she slammed into
the back of George’s car. Shortly thereafter she received notice of a lawsuit setting forth
George’s claims for personal injury and property damage. Prudence was very busy
studying for her next business law test and hanging out with her boyfriend with whom
she had reconciled. Also, she just did not feel like dealing with a pesky lawsuit. Several
months later, Alice, a new agent with the insurer called Prudence and told Prudence that
she had just heard something about a lawsuit from the plaintiff’s lawyer. Alice told
Prudence that although investigation would be difficult after so many months, she
would like to talk with Prudence because the trial was scheduled for the next week.
Prudence told Alice that she had no time to meet at the moment and that just before
court, she would meet with the lawyer the company appointed to represent her. Alice
told Prudence that the insurance company was going to deny coverage. Alice also told
Prudence that vehicle insurance did not typically provide for legal representation and
that, in any event, no lawyer would be provided. Finally, Alice told Prudence that her
insurance was cancelled immediately because she was a real jerk and failed to help, that
insurance would not pay for accidents that were the fault of Prudence anyway, and that
the insurer wanted nothing more to do with her.
Which of the following is true regarding the assertion of Alice that the insurer was not
liable for accidents that were the fault of the insured?
A. Alice is correct because insurance on vehicles is meant to assist drivers who are
involved in accidents through no fault of their own.
B. Alice is correct only if Prudence has had at least two previous accidents.
C. Alice is only correct if Prudence is still carried on a parent’s insurance policy.
D. Alice is likely correct only because Prudence is a student with a student policy.
E. Alice is incorrect.
If corporate directors fail to sue when the corporation has been harmed by an
individual, another corporation, or a director, individual shareholders can file a[n]
______ on behalf of the corporation.
A. Investigative action
B. Shareholder action suit
C. Shareholder’s direct suit
D. Shareholder’s derivative suit
E. Active allocation suit
A[n] ______________ contract is commonly defined as a promise in exchange for a
promise.
A. Unilateral
B. Trilateral
C. Complete
D. Bilateral
E. Classified
“New Agency.” Debby just got a job as an assistant in a new federal agency called the
Accounting Commission that was set up to regulate the accounting and auditing
profession. The agency is headed by commissioners who serve for fixed terms and can
be removed only for cause. No more than a majority of the commissioners may be from
the same political party. The agency is getting ready to issue rules. The enabling
legislation that set up the Accounting Commission specified that the agency could make
rules but said nothing about the form of the rules. Debby’s boss, Blaire, gave her some
proposed rules and asked her to be sure that they were published and to take care of the
next step in the approval process. Blaire also told her that at this point she was not very
interested in hybrid rule making.
Which of the following is the most likely type of rule making that Debby will propose?
A. Informal
B. Formal
C. Legislative
D. Regulatory
E. Procedural
Which of the following occurs when purchased goods are transferred to the buyer from
the seller at either the time of the sale or some time later by the seller’s delivery, and the
seller has an agent deliver the goods to the buyer?
A. A voidable delivery contract
B. An average delivery contract
C. A simple delivery contract
D. A complex delivery contract
E. An acknowledged sale
“Environmental Concerns.” Connie, the president of a company that makes paper, has a
new interest in the environment. She recently went to a seminar on environmental
dangers and has decided to take steps to clean things up. She started at home and has
now felt compelled to change things at work. Connie had to face the fact that her
company has been cheating and is not in compliance with applicable environmental
regulations due to dumping in a nearby river. Her company has never been cited
because it employs a very large number of people in the community, including the
mayor’s wife and the chief-of-police’s brother. On her mission to clean things up,
Connie has decided to go even further than the law requires and install the very latest
environmental protections. When she announced her plan, the chair of the company’s
board of directors, Brooke, had a meeting with Connie. Brooke told Connie to analyze
the situation carefully because the cost of the additional equipment would mean no
dividend to shareholders and no raise for employees. Furthermore, Brooke told Connie
that installing all the new equipment would result in higher prices for the company’s
paper product and could bankrupt the company because of foreign competition. Brooke
hinted that Connie could be fired if she persisted. Brooke suggested that Connie just be
concerned with a minimal standard of ethics. Connie decides to go forward with her
plan to clean things up under the theory that she wants to treat others in the same
manner that she wants to be treated. Under Connie’s theory, if she did not understand
the importance of the environmental improvements, she would want them to be thrust
upon her.
Which of the following is true regarding meeting the minimal standard of business
ethics suggested by Brooke?
A. Decisions must be legal.
B. Decisions must meet the criteria of a follower of deontology.
C. Decisions must meet the criteria of a follower of utilitarianism.
D. Decisions must receive a majority vote of acceptance by employees.
E. Decisions must be legal and decisions must also receive a majority vote of
acceptance by employees.
Sally has a large farm and significant other assets. She agreed to loan her nephew Todd
$100,000 with payments of principle and interest to be made yearly. A few years later
she and Todd got into a dispute because Sally did not like his new girlfriend, Polly.
Soon thereafter Todd got notice that Sally was suing him for not paying interest on the
note. Todd defended on the basis that two years after the initial loan agreement was
entered into, he and Sally entered into an oral agreement that he would perform services
on her farm in lieu of paying interest on the note. If the court follows the reasoning of
the court in the Case Opener involving Monroe Bradstad and Jeanne Garland, which of
the following is the most likely result of the dispute between Sally and Todd involving
whether he owes past interest amounts?
A. Todd will be required to pay the interest amounts because the agreement involving
performing services in lieu of paying interest was not in writing.
B. Todd will be required to pay the interest amounts because the parol evidence rule
bars evidence of any oral agreement outside the written agreement.
C. Assuming the court credits Todd’s account of events, Todd will not be required to pay
the interest amounts because the oral agreement will be considered a separate
enforceable agreement.
D. Assuming the court credits Todd’s account of events, Todd will not be required to
pay the interest amounts because the oral agreement will be considered an extension
and part of the original written agreement.
E. Assuming the court credits Todd’s account of events, based on the parol evidence
rule, Todd will be required to pay only 1/2 of the interest amounts.
Which of the following is true regarding parties who are related to an order?
A. A drawer, payee, and drawee are all related to an order.
B. A payee and drawer are related to an order, but a drawee is not.
C. A drawee and payee are related to an order, but a drawer is not.
D. A payee is related to an order, but a drawer and a drawee are not.
E. A drawer and a drawee are related to an order, but a payee is not.
Which of the following is a condition required for the imposition of strict liability?
A. The activity involves negligence pertaining to the preparation of food products.
B. The activity involves trespassing in a way that reasonably leads to fright on the part
of home owners.
C. The activity is undertaken by a minor.
D. The activity is so inherently dangerous that it cannot ever be safely undertaken.
E. The activity is heavily regulated.
In a unilateral contract, the consideration for a promise is a[n] ____.
A. Action
B. Return promise
C. Acknowledgement
D. Consideration
E. Agreement
Which of the following is false regarding leases under French law?
A. Leases are governed by the Common Code.
B. Leases give tenants personal contractual rights.
C. Tenants are given considerable freedom to engage in various agreements without the
landlord’s involvement or consent.
D. If a lease is not renewed, the tenant has the right to collect compensation.
E. In a construction lease, the tenant will be building and maintaining structures, and
property rights are ceded to the tenant for the period specified in the agreement.
Set forth when an implied warranty of fitness for a particular purpose will be found.
Sally is involved in a motor vehicle accident. She is sued by George, the driver of the
other vehicle. Sally calls her insurer and tells them to handle it for her. Later, she is
asked to give some information to the insurer regarding the incident and to give a
deposition in litigation. She tells the insurer that she is too busy and that the insurer
should simply handle the matter because that is the reason she has insurance; and that,
furthermore, the insurer should not call her again regarding the accident. Is Sally correct
about her duties and why or why not?
Set forth the definition of a traveler’s check.
Identify and discuss the two separate elements of causation and how they are applied.
What types of contracts does the statute of frauds require to be in writing? Include in
your answer contracts, if any, the UCC requires to be in writing.
Yolanda and Rodney agreed that Rodney would paint Yolanda’s home for $800 with
Yolanda supplying the paint. Rodney went to Yolanda’s home on several occasions to
do the job, but she never had the paint ready. Finally, he moves on to other jobs. Six
months later Yolanda sues Rodney for not painting the home. Who is likely to win and
why? Set forth the legal term for Rodney’s offer of performance.
Barry is sending his brother-in-law and agent, Richard, who he does not particularly
trust, to deposit into Barry’s business bank account a check belonging to Barry. What is
the best way for Barry to endorse the check to attempt to limit any misappropriation?
Define a joint venture and set forth two differences under the law between a joint
venture and a partnership.
Explain the fair report privilege in relation to defamation and list the conditions
required for it to apply.
How is arbitration preferable to litigation, and what are criticisms of arbitration as
compared to litigation?
Set forth the conditions under which a permit will be issued to a landowner seeking to
add dredged or filled material to a wetland.
Set forth the rights of appeal a company has if issued a cease-and-desist order by the
Federal Trade Commission.
List and describe good title and void title, and give an example of when void title would
be passed.
Danny overhears Frank’s offer to sell Greg a boat for $1,000. Greg declines the offer,
but Danny immediately says “I accept.” Frank does not want to sell the boat to Danny
because he is afraid that Danny will not immediately pay him. Also, he thinks Danny is
a complainer and will find something to complain about regarding the sale. Is Frank
obligated to sell the boat to Danny, and why or why not? Also, discuss what you believe
the ethical rule should be on this issue.
Susie Starr, a highly successful movie star in both the United States and the United
Kingdom is concerned because a tabloid based in the United States with distribution in
both the United States and the United Kingdom falsely claimed that she has a problem
with alcohol and had an affair with best friend’s husband. She is considering a lawsuit
for defamation. She asked you whether it would be easier to win the case in the United
States or in the United Kingdom. What would you tell her and why? How does the
defamation law of the United Kingdom differ from that of the U.S.? Also discuss
whether Susie has an option to sue in the United Kingdom since the tabloid is published
in the United States.