Which of the following provides that an acceptance is valid when it is placed in the
mailbox?
A. The acceptance rule.
B. The contract rule.
C. The reasonable rule.
D. The mailbox rule.
E. The contract legality rule.
Masked Bandit. Barry, who owned a small convenience store, was robbed when a
masked bandit entered his store and demanded his cash while pointing a gun at him. As
the bandit ran out of the store, Barry grabbed his own gun and shot the bandit in the leg.
When the police arrived, Barry was arrested along with the thief. Barry claimed that no
charges should be brought against him because his action in shooting the robber was
justified. After the arrest, the officers searched his store and found marijuana. When
Barry complained about the arrest and search, the officer in charge told him that since
the state police were involved, federal constitutional rights were waived. Barry is
attempting to obtain legal representation in an attempt to get out of jail, but cannot
afford a lawyer because he just spent all his funds buying the illegal drugs for resale
that have now been confiscated by the police. Sam, another inmate, asks Barry if the
officers explained his rights to him; but Barry only recalls being arrested, hustled into
the police cruiser, and whisked off to jail. Which of the following is true regarding the
officer’s statement that since state police were involved, federal constitutional rights
were waived?
A. The officer was correct.
B. The officer was correct only if it is proven that a felony was committed; otherwise,
federal constitutional rights applied.
C. The officer was correct only if it is proven that a misdemeanor was committed;
otherwise, federal constitutional rights applied.
D. The officer was incorrect because the Sixth Amendment extends most federal
constitutional rights to the state level.
E. The officer was incorrect because the Fourteenth Amendment extends most federal
constitutional rights to the state level.
If the parties of a contract put a new agreement in place of the original agreement it is
called a(n) _____________________.
A. accord and satisfaction
B. novation
C. substituted contract
D. mutual rescission
E. alteration
Bruce, who works for Laura’s used car dealership, forges Laura’s name to two checks,
cashes the checks, and deposits the funds into his own bank account. Later, Bruce’s
conscience starts to bother him and he confesses to Laura. Bruce promises to repay her
if she will only give him some time. Laura wants to keep Bruce as an employee because
he is great with sales, so she agrees to give him some time in which to repay her. Ten
months later, Bruce gets angry with Laura because he thinks she cheated him on a
commission and leaves town without ever reimbursing her for the checks. Laura tells
the bank that she wants her account credited. The bank asks your advice. What would
you tell the bank and why?
What are the three basic types of property?
A. Real, absolute, and personal
B. Real, intellectual, and land
C. Intellectual, land, and minerals
D. Real, personal, and intellectual
E. None of these choices.
_____________________ provides basic information about the corporation in the
corporate formation process.
A. The articles of subscription
B. The agreement to promote
C. The agreement to subscribe
D. The agreement to incorporate
E. The articles of incorporation
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 Ronnie confidential information about her finances and
debts. Ronnie decided that he needed help and paid Rick $300 to look for property for
Sue. Bruce 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
that amount. 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 that he thought were
excessive. What remedy 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
Painted House. Billy had a contract to paint Jan’s house for $800 including the duty to
clean up any debris. The contract between Billy and Jan did not contain an
anti-assignment clause. Billy, who was very busy, assigned the contract, including the
right to payment and the duty to paint, to Richard who was interested in making some
extra money and had experience painting. Billy did not tell Jan about the assignment
because he did not want any trouble nor did Richard mention the assignment to her. In
fact, Richard never met Jan because he painted while she was at work. After Richard
did a good job painting the house, Jan sent a check to Billy for $800. Billy needed the
money to pay some bills, so he spent it. He thought he would have money coming in
with which to pay Richard, but that did not happen. Richard asked Jan for $800 when it
was not forthcoming from Billy. Jan refused. Richard said that he was going to sue her
and Billy. Jan called Billy and told him that he had no right to assign the contract.
Another problem involved disposal of debris. Although Richard was a good, competent
painter, he forgot and left some old paint cans at Jan’s house. Jan demanded that Billy
come and properly dispose of the paint cans because they could not simply be put in the
trash. Billy refused and told her that she would have to get Richard to dispose of the
paint cans because that was his responsibility. What would be the likely result of a
lawsuit brought by Richard against Billy to recover the $800?
A. Richard will win.
B. Richard will win only so long as he had no reason to know that Billy had not given
notice of the assignment to Jan and was, therefore, not on notice to notify Jan himself.
C. Richard will win only if he can prove that he first brought a lawsuit against Jan and
lost.
D. Billy will win because Richard’s only right of recourse is against Jan.
E. Billy will win because Richard should have given notice to Jan himself.
Under which of the following does the court determine the percentage of fault of the
defendant requiring that the defendant be more than 50 percent at fault before the
plaintiff can recover?
A. Assumption of the risk.
B. Last-clear-chance.
C. Modified comparative negligence.
D. Pure comparative negligence.
E. Both modified comparative negligence and last-clear-chance.
Which of the following means that bankruptcy relief is ordered and that the bankruptcy
proceedings can continue?
A. An order of relief
B. A stay enforcement order
C. An approval order
D. A liquidation order
E. None of these because if bankruptcy relief is ordered, all collection efforts must
cease
Which of the following governs the transfer of checks between banks?
A. Article 1 of the UCC.
B. Article 2 of the UCC.
C. Article 3 of the UCC.
D. Article 4 of the UCC.
E. Article 5 of the UCC.
When an advertisement is true but incomplete it is a(n) ____________.
A. inaccurate truth
B. rule 8(a) violation
C. rule 3 violation
D. significant untruth
E. half-truth
Which type of agency is generally defined as any body created by the legislative branch
to carry out specific duties?
A. An administrative agency
B. A legal agency
C. A quasi-legal agency
D. A procedural agency
E. A regulatory agency
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.
B. The sale must be in a public sale.
C. The sale may be in either a private sale or a public sale.
D. The sale may be in a private sale, public sale, or an acknowledged sale.
E. The sale must be in an acknowledged sale.
UCC Article 2(A) labels commercial papers as negotiable instruments.
Which of the following articles of the UCC govern secured transactions in personal
property?
A. Article 1.
B. Article 4.
C. Article 5.
D. Article 7.
E. Article 9.
Masked Bandit. Barry, who owned a small convenience store, was robbed when a
masked bandit entered his store and demanded his cash while pointing a gun at him. As
the bandit ran out of the store, Barry grabbed his own gun and shot the bandit in the leg.
When the police arrived, Barry was arrested along with the thief. Barry claimed that no
charges should be brought against him because his action in shooting the robber was
justified. After the arrest, the officers searched his store and found marijuana. When
Barry complained about the arrest and search, the officer in charge told him that since
the state police were involved, federal constitutional rights were waived. Barry is
attempting to obtain legal representation in an attempt to get out of jail, but cannot
afford a lawyer because he just spent all his funds buying the illegal drugs for resale
that have now been confiscated by the police. Sam, another inmate, asks Barry if the
officers explained his rights to him; but Barry only recalls being arrested, hustled into
the police cruiser, and whisked off to jail. The bandit will likely be charged with a(n)
_____ offense.
A. felony
B. misdemeanor
C. petty
D. absolute
E. strict liability
Third-Party Woes. Trudy owed Sam $40 for a book she purchased from him. Trudy
mowed Betty’s yard for $40 and agreed with Betty that Betty would pay Sam for the
book. Sam is not initially aware of the agreement. Betty pays no one. Trudy also
mowed Bob’s yard for $40 in return for Bob’s agreement to give the payment to Sally
representing Trudy’s birthday present to Sally. Bob later refuses to do so saying that
promises to give gifts are not enforceable. He then moves out of town. Trudy tells both
Sam and Sally that she is broke, that Sam needs to get his $40 for the book from Betty,
and that Sally is owed $40 from Bob for her birthday present. What type of third-party
beneficiary is Sam?
A. Intended
B. Creditor
C. Both intended and creditor
D. Donee
E. Both creditor and donee
What system does the U.S. Constitution establish to keep the legislative branch from
dominating the other branches of government?
A. The Bill of Rights
B. The Commerce Clause
C. Federalism
D. Checks and balances
E. The Tenth Amendment
In the case of Smith v. Riley, referenced in the text, what did the court rule in regard to
whether a purchase in the amount of “the sum of One Dollar ($1.00) and other good and
valuable consideration” was sufficient consideration to support an agreement?
A. The Court ruled that the purchase amount was sufficient consideration.
B. The Court ruled that the purchase amount was insufficient consideration only
because the sale of an interest in a lease was involved.
C. The Court ruled that the purchase amount was insufficient consideration only
because a sale of goods was involved.
D. The Court ruled that the purchase amount was insufficient consideration only
because a domestic partnership was involved.
E. The Court ruled that the purchase amount was insufficient consideration because
over $50,000 was at issue.
Community Fair. Craig and Melinda are searching for a one-time business opportunity
that will enable them to make a sufficient amount of cash to take a really great vacation
to Galapagos. They live in a rather small rural community that has not, to date, had a
community fair. Craig and Melinda decide to sponsor a fair on a weekend in October
and to arrange for exhibits and awards, beauty contests, pie eating contests, food
vendors, and amusement rides. The profit to Craig and Melinda will come from ticket
sales and from charges to food vendors for the privilege of setting up shop. Apart from
some minor skirmishes between Craig and Melinda regarding management rights,
preparations go fairly well. When the weekend of the fair arrives, things initially go
fairly smoothly. Unfortunately, however, one of the beauty contestants slips on the
runway. An argument broke out during the pie eating contests resulting in angry
contestants throwing pies and injuring spectators. Finally, an elderly lady, who was
angry because she did not win the prize for the best honey, jabbed the volunteer judge
with her cane. All injured parties threaten to sue Craig and Melinda. Craig tells Melinda
that she should bear the larger percentage of any damages because the idea for the fair
was initially hers, and she obtained all necessary permits. Melinda, on the other hand,
tells Craig that he should be wholly responsible for any damages because he was put in
charge of all competitions. They can reach no agreement regarding winding up the
project and splitting the meager profits, and angrily go their separate ways with no
resolution. As she is leaving, Melinda shouts to Craig that as her agent he should have
done a better job with security. Which of the following is the type of business
organization that best fits Craig and Melinda’s project?
A. A partnership
B. A double proprietorship
C. A business trust
D. A joint venture
E. A distributorship
A(n) ______ check is a check that is accepted at the bank at which it is drawn.
A. cashier’s
B. certified
C. acknowledged
D. transferred
E. drawee
Under UCC Section 3-205(b), which of the following is the payee’s or last endorsee’s
signature and nothing else?
A. A special endorsement.
B. An allonge.
C. A blank endorsement.
D. A qualified endorsement.
E. A restricted endorsement.
Used Car Sales. Walter sells used cars. He is seeking a way to increase sales and profits
because he would like to take his girlfriend on a nice diving trip to the Grand Cayman
Islands. The first thing that Walter does is say that during the first week of December,
he will give a $500 rebate on used cars under two years old. To spice things up, he also
offers to sell any car on the lot that is under five years old for $1,000 to the first three
customers who can hula hoop ten hours straight on December 7th. (Hula hooping was a
practice popular some years ago in which a person, usually around the waist, would
swing around a large hoop.) Walter was not very concerned about the hula hooping
issue because he thought that no one would be able to hula-hoop for ten hours straight.
Walter put an advertisement pertaining to the rebate and hula-hoop opportunity in the
local newspaper. The promotion went over very well. Although he had several on hand,
Walter ran out of cars under two years old within one day. During the rest of the week
shoppers were told that no cars of that description were available. A customer named
Sam was very unhappy when he discovered the next day that no cars under two years
old were available. On December 7th, while Walter was watching the hula hoopers,
Sally was shopping for a car. She was in college and did not have much money. She
saw one, an older car, that she liked but she really did not know if it run or not. She was
going to talk to her parents. Walter eventually approached her and Sally asked him if he
would take $3,000 for the car. Walter said, “Yes, sold.” Sally tried to explain that she
needed to talk to her parents first, but Walter would not hear of it. While Walter was still
fuming from his encounter with Sally, Zack walked up and started to criticize the nature
of Walter’s inventory. Walter told him that he had great cars. Zack pointed at an old
jalopy that was banged up, had 200,000 miles on it, and a cracked windshield. Zack
said, “Sure, I’ll pay $10,000 for that car.” Walter said, “Sold.” Zack said, “Wait a
minute. I was only kidding.” Walter said, “No way.” Meanwhile all the hula hoopers
dropped out well prior to ten hours of hula hooping except for Barbara. One minute
before the ten hours were up, Walter yelled out “I revoke!” Barbara completed the hula
hooping anyway and asked for her car for $1,000. Walter refused saying that the offer
was revoked. Sam was very angry and sued Walter for not having a car available that
was under two years old so that he could get a good deal and a $500 rebate.
Additionally, Barbara sued Walter, and Walter sued Zack and Sally. What is the likely
result in the lawsuit brought by Walter against Zack?
A. Walter will win because Zack properly made an offer that Walter accepted.
B. Zack will win because he was merely expressing possible interest.
C. Zack will win because Walter did not properly accept.
D. Zack will win because under a subjective standard he was joking.
E. Zack will win because under an objective standard, it appears he was joking.
A contract that combines a good with a service is a _____ sale.
A. combined
B. mixed
C. service
D. goods
E. total
Which of the following are common classifications of torts?
A. Intentional, negligent, and criminal.
B. Intentional, criminal, and strict-liability.
C. Intentional, negligent, and strict-liability.
D. Criminal, negligent, and strict-liability.
E. Administrative, civil, and criminal.
Which of the following are examples of what is needed in order for goods to be
merchantable?
A. That goods pass without objection in the trade or market for similar goods.
B. That goods be fit for the ordinary purposes for which such goods are used.
C. That goods be adequately contained, packaged, and labeled as the agreement may
require.
D. That goods conform to the promises or affirmations made on the container or label,
if any.
E. All of these.
Which of the following is necessary in order to establish that a mutual mistake
involving a basic assumption about the subject matter of a contract was made?
A. That the mistake involved the existence, quality, or quantity of the items to be
exchanged.
B. That the mistake involved whether a party could profit from the contract.
C. That the mistake involved whether a party could profit from the contract or whether
a party misunderstood the time constraints involved in regard to the contract.
D. That the mistake involved the identity of parties to the contract or whether a party
misunderstood the time constraints involved in regard to the contract.
E. That the mistake involved a misunderstanding of law as to whether or not the UCC
applied.
Roofing Issues. Sally agrees to roof a house for Bob. After doing his research, Bob
chooses Sally based on her great reputation for being conscientious and doing good
work. Bob knows little about roofing and stays away from all the noise involved. Sally
provides her own tools for herself and other workers, sets her own schedule, and
charges a flat rate of $10,000 to be paid when the job is completed. Sally hires Trudy,
Glen, and Fred to help with the roofing. She pays them an hourly rate, supervises their
work, provides them with tools and materials, and sets their schedules. Curious about
what is going on there, Bob’s friend Spencer walks by the house while the roofing is
being done. Glen absent-mindedly throws some old shingles off the roof and hits
Spencer in the head resulting in him going to the local emergency room and receiving a
couple of stitches in his scalp. Spencer decides to sue all the roofers and also Bob and
Sally for his hospital expenses and for pain and suffering. Which of the following is the
most likely characterization of Trudy, Glen, and Fred in relation to Sally?
A. They are both employees and independent contractors.
B. They are employees.
C. They are independent contractors.
D. They are undisclosed principals.
E. They are both employees and disclosed principals.
A defendant in a lawsuit is to be provided by the plaintiff with a copy of the complaint.
That process is called ______.
A. summons issuance
B. service of process
C. service delivery
D. subpoena delivery
E. in personam service
Coffee shops. Bernice wants to open a chain of coffee shops and begins by asking her
friends in various states around the country to invest through the purchase of securities
in the coffee shops. Her friend Robbie says that he would like to invest but that she
should be sure that she satisfies requirements of the SEC. He tells her that she has to
provide information to the SEC involving a description of the securities, an explanation
of how proceeds will be used, information regarding the management of the company,
and other matters. He tells her that she also has to provide a document to the SEC that
will be provided as an advertising tool to potential investors who can rely on it to
decide whether they should buy securities. Bernice says that she does not want to do
that. She explains to Robbie that insofar as the coffee shop venture is concerned, she
does not want to advertise; and she wants to offer securities only to a limited number of
wealthy friends. Particularly, she has in mind Scott who has a net worth of at least $3
million and Mary, a psychiatrist. Mary recently filed bankruptcy because of some bad
decisions involving an elaborate decoration of her office. Although her income for the
past couple of years has been in the range of $80,000, business is improving based on
her recent involvement with a number of patients suffering anxiety based upon a fear of
alien invasion. Which of the following is the term for the document referenced by
Robbie to be provided to the SEC that will be used as an advertising tool by potential
investors who can rely on it to decide whether they should buy securities?
A. An advertising statement
B. A prospectus
C. An inventory
D. A proposed income statement
E. A securities advertisement
In noncontractual relationships which of the following may the agent seek in order to
force the principal to perform the contract?
A. Specific performance
B. Specific recoupment
C. Adequate performance
D. Reformation
E. None of these
Which party routinely buys goods in good faith from a person who routinely sells these
goods?
A. A buyer in the typical course of business.
B. An approved buyer.
C. An approved buyer in the ordinary course of business.
D. A buyer in the ordinary course of business.
E. An exchanger in the typical course of business.
The arbitrator typically provides a decision within ____ days of an arbitration hearing.
A. 10
B. 25
C. 30
D. 90
E. 120