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Which of the following is true regarding the effect of a debtor offering to pay a different
type of payment, for example, goods instead of money, on a debt for which there is not
a dispute over the amount or existence of the debt, and the creditor agrees?
A. A liquidated debt is involved, and there is an accord and satisfaction.
B. A liquidated debt is involved, and there is an accord but no satisfaction.
C. A liquidated debt is involved, and there is not a satisfaction or an accord.
D. An unliquidated debt is involved, and there is an accord and satisfaction.
E. An unliquidated debt is involved, and there is an accord but not satisfaction.
Which of the following was created specifically to combat white-collar crime?
A. The Sarbanes-Oxley Act.
B. RICO.
C. The False Claims Act.
D. Section 1983.
E. Section 1984.
"Refusal to Pay." Business law teacher Debby needed some yard work done. She told
her class that she would give $50 to the first person who mowed her yard. She also
entered into an agreement with Betty who agreed to trim some shrubbery for $40. Max
went to mow Debby's yard. Unfortunately, just as he finished mowing, a neighborhood
dog bit him, and he had to go to the emergency room for a couple of stitches. Debby
refused to pay Max because she said that he had angered the neighbors and their dog,
and that he was more trouble than he was worth. Secretly, Debby was glad about the
dog bite because she felt it gave her an excuse not to pay. Max refused to pay the
emergency room because he said that they did not have a binding, bilateral contract.
Betty refused to trim the shrubbery because she got a better offer and claimed that she
was not bound on the contract until she started to perform.
Which of the following is an appropriate characterization of the agreement between
Debby and Max?
A. They had a bilateral, express agreement.
B. They had a bilateral, implied agreement.
C. They had a bilateral and unilateral agreement.
D. They had a unilateral, express agreement.
E. They had a unilateral, implied agreement.
Which of the following governs the issuance of credit reports?
A. The Prohibited Report Act
B. The Fair Credit Reporting Act
C. The Unfair Reporting Act
D. The Loan Reporting Act
E. The Credit Protection Act
"Scuba Gear." Shirley is a popular manufacturer of scuba gear. Before she allows a
store to carry her line of scuba gear, she requires that the store owner agree that her line
is the only line of scuba gear the store will carry. She also requires that if a store carries
her line of scuba gear, it must carry her line of wet suits. Sales of other manufacturer's
gear and wet suits have begun a steady decline. She is accused of violating antitrust
laws. Shirley, however, replies that she is simply conducting good business practices.
Trudy, the president of ABC Scuba, calls Shirley and tells her that she is prepared to
bring suit against Shirley for antitrust violations. Shirley tells Trudy that although she is
not in violation, that only the government could take action against her, and that the
government is way too busy to get involved in a dispute over scuba gear.
The agreements between Shirley and sellers to the effect that the stores would only
carry Shirley's gear are ______ contracts.
A. Mandatory-dealing
B. Exclusionary
C. Exclusive-dealing
D. Unilateral
E. Primary
When an individual product has a defect making it more dangerous than identical
products, that individual product is said to have which of the following defects?
A. Design.
B. Warning.
C. Primary.
D. Exclusionary.
E. Manufacturing.
Once the administrator of the EPA establishes National Ambient Air Quality Standards,
each state has _____ to draft a state implementation plan.
A. 18 months
B. 12 months
C. 9 months
D. 6 months
E. 3 months
"Hot Toaster." Rebecca bought a toaster from Super Store and brought it home. A friend
of hers, Greg, was at her house making toast. The toaster malfunctioned and shocked
Greg resulting in a small burn to his hand requiring medical attention. At a garage sale,
Rebecca also purchased a blender from a friend, Samantha, a nurse, with the intention
of making smoothies. Unfortunately, the blender was not powerful enough to make
smoothies. Assume that not all blenders are designed to provide the texture required for
good smoothies.
Which of the following is true regarding whether Samantha made an implied warranty
of merchantability in regard to the blender?
A. There is no implied warranty of merchantability because of a lack of evidence that
Samantha made any express statements regarding the blender.
B. There is no implied warranty of merchantability because a consumer appliance was
involved.
C. There is no implied warranty of merchantability because Samantha was not a
merchant in respect to consumer appliances.
D. There was an implied warranty of merchantability because a consumer appliance
was involved.
E. There was an implied warranty of merchantability because no merchant in goods of
that type was involved.
Which of the following is reported in the United States Code?
A. Statutes
B. Executive orders
C. Common law
D. Administrative law
E. Local ordinances
Which of the following is a mark affixed to a good, its packaging, or its labeling?
A. Product trademark
B. Collective mark
C. Certification mark
D. Service mark
E. Physical activity mark
Which of the following is true of lemon laws in Canada?
A. They are generally the same as lemon laws in the U.S.
B. They allow for replacement of defective parts but not a new car unless the plaintiff
agrees to pay the difference between the amount received for the used car when sold
and the amount charged for the new car.
C. They guarantee a buyer of a lemon a new car.
D. They guarantee the buyer of a lemon a return of all consideration.
E. Canada does not have a lemon law such as is known in the U.S. Instead, an
arbitration program is run through which a buyer may lodge complaints.
"Family Dispute." When Trudy and Mark married, they both had children from
previous marriages. After their marriage, Trudy and Mark purchased a home together as
tenants by the entirety and lived there for many years. Mark died when he was 93 and
Trudy was 95. Mark's will left any property he owned to his son, Alex, who promptly
told Trudy that she needed to get out of the house. Trudy told him to forget it. Trudy
died a week later. Her will left everything she owned to her daughter, Samantha, who
moved in the home and refuses to leave. Mandy, who had loaned Mark $10,000, has
filed a claim against any heir of Mark or Trudy, including Alex and Samantha, claiming
an interest in the home to satisfy the debt Mark owed her.
Which of the following would be the most likely result regarding Samantha's claim to
the house?
A. She receives all her mother's things including the house.
B. Because of the form of ownership previously held by Trudy and Mark, she only
receives a portion of the ownership of the house with the remainder being held by any
other children of Trudy or Mark, including Alex.
C. She receives only a life estate with the remainder going to Alex when she dies.
D. She does not receive anything because the entire title had already passed to Alex.
E. She must provide Alex with a one-half interest in the house only because her mother
did not live longer than 6 months following the death of Mark.
Which of the following is false regarding provisions of the Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005?
A. Under the act, an individual may not generally be considered a debtor unless within
180 days prior to filing, the debtor receives credit counseling from a nonprofit budget
and credit counseling agency.
B. Under the act, if an individual was a debtor in a bankruptcy case that was dismissed
within 180 days of the current case, the individual is generally not eligible to be a
debtor under Chapters 7, 11, or 13.
C. Under the act, if a previous bankruptcy was completed rather than dismissed, the
individual is generally permitted to file for bankruptcy again.
D. Under the act if a party completes a Chapter 7 bankruptcy, the party is not permitted
to seek a Chapter 7 bankruptcy again for eight years.
E. Under the act if a party has at least $10,000 in assets, the party may not file for any
type of bankruptcy protection.
"Green Gold." Martin owned a factory in which he manufactured furniture. Martin had
some extra space in the factory and decided to use heat lamps to grow marijuana. He
smuggled the marijuana into the hands of dealers by hollowing out the furniture and
placing the marijuana inside and by putting the marijuana in drawers, etc. Law
enforcement became suspicious and unexpectedly burst into the building without a
warrant, discovering the marijuana. Martin asked the agent in charge about the lack of a
warrant. The agent told him that Fourth Amendment protections did not extend to
businesses. Martin was charged with growing marijuana. Martin refused to testify at
trial. At his trial, however, the judge excluded any evidence obtained from the search,
and Martin was declared not guilty because there was no evidence against him. The
agent was very angry and arrested Martin immediately for the same offense as he was
walking down the courthouse steps from the first trial. The agent tells Martin that he
should be tried again because the judge was incorrect. Martin is placed in a holding cell
and immediately calls his attorney in an attempt to get out of jail free.
Which of the following is correct regarding Fourth Amendment protections for
businesses and the necessity of a search warrant prior to a search of a business?
A. The protections of the Fourth Amendment are not extended to businesses.
B. The protections of the Fourth Amendment are extended to businesses only if the
businesses involve highly regulated industries.
C. The protections of the Fourth Amendment are extended to businesses only if the
businesses are sole proprietorships.
D. The protections of the Fourth Amendment are extended to businesses, and warrants
are necessary for any searches.
E. The protections of the Fourth Amendment are extended to businesses although at
times no warrant is necessary to search highly regulated industries.
If a legal contract is formed and the subject of the contract then becomes illegal under a
new statute, the contract is ____.
A. Discharged
B. Enforced
C. Disregarded
D. Executed
E. Executory
Which of the following is true regarding joint ventures?
A. Participants in a joint venture usually share profits equally, but share losses based on
the percentage of contribution.
B. Participants in a joint venture usually share losses equally, but share profits based on
the percentage of contribution.
C. The joint venture is not automatically terminated when one of the members dies.
D. A joint venture requires the filing of a formal agreement with the state.
E. Courts frequently apply sole proprietorship law to joint ventures.
Which of the following is true when the designation FAS is used?
A. The buyer, at the buyer's expense, delivers the goods alongside the ship before the
risk passes to the seller.
B. The buyer, at the seller's expense, delivers the goods alongside the ship before the
risk passes to the seller.
C. The seller, at the seller's expense, delivers the goods alongside the ship before the
risk passes to the buyer.
D. The seller, at the buyer's expense, delivers the goods alongside the ship before the
risk passes to the buyer.
E. The common carrier, at the carrier's expense, delivers the goods alongside the ship
before the risk passes to the buyer.
A certificate of deposit is a ______ of the bank.
A. note
B. draft
C. novation
D. check
E. promissory contract
"Cheap Motorcycle." Tony, a hateful, disgruntled, business law teacher notices that a
student, Peter, who is past the age of majority, has a nice motorcycle that is for sale.
Peter has struggled through school, is in his last semester, and needs to pass business
law in order to graduate. Tony tells Peter that he would like to see Peter pass and, in the
next sentence, says that he wants to buy the motorcycle for $100, a price far below the
value of the motorcycle. Peter asks if Tony is serious about the price, and Tony replies,
"I have the power here! Take it or leave it!" Tony proceeds to draw up a contract for the
sale of the motorcycle for $100 which Peter signs. Peter does some research and finds
that Tony has had several arrests for driving under the influence in a nearby town. As an
act of revenge, Peter tells Tony that unless Tony sells Peter his new Mustang
convertible for $50, he is publishing the facts about the arrests in the school newspaper.
Tony reluctantly agreed to the deal. Which of the following is true if Peter seeks to
rescind the contract for the sale of the motorcycle?
A. Peter may rescind the contract on grounds of fraud or on grounds of duress.
B. Peter may rescind the contract on grounds of duress or on grounds of
unconscionability.
C. Peter may rescind the contract on grounds of undue influence or on grounds of
duress.
D. Peter may rescind the contract on the ground that although he is past the age of
majority, he is still a student.
E. Peter may not rescind the contract.
Which of the following is using fraudulent means to obtain information about
someone's phone use?
A. Pretexting
B. Ponzi scheme
C. False pretenses
D. False token
E. Defalcation
A ______ is a court order that authorizes law enforcement agents to search for or seize
items specifically described in the warrant.
A. Search warrant
B. Subpoena warrant
C. Search authorization form
D. Seek warrant
E. Review authorization
"Defective Computer." Clara went to buy a new computer from XYZ Computer Sales.
The manager there, Harold, told her that the store carried the best computers in the
state, even in the country. Unfortunately, after Clara bought the computer and took it
home, she discovered that it had a number of problems. When she took it back to the
store, Harold told her that he was sorry, that he was simply giving his opinion when he
sold her the computer, and that the store did not warranty products. Harold told her that
is why he never mentioned warranties - because they were not given.
Which of the following is the most likely result if Clara sues based upon the statement
of Harold that the store carried the best computers in the state, even in the country?
A. She would win so long as the store cannot prove that Clara knew Harold was just
giving his opinion.
B. She would win so long as she can prove that she did not know that Harold was only
giving his opinion.
C. She may rely on the statement and win because it was made by Harold in his
capacity as a manager, not by an uninformed sales clerk.
D. She would lose because Harold was only expressing his opinion.
E. She would lose because a consumer good was involved.
Which of the following are rules of an agency that are policy expressions that have the
effect of law?
A. Procedural
B. Interpretive
C. Legislative
D. Adjudicative
E. None of these
"Peanut Allergy." Kitty, who had a love of baking, decided to open her own bakery. She
decided that she did not need and did not want to pay for a lawyer to advise her on
different forms of ownership. Unfortunately, Kitty had not paid attention in business
law class. She proceeded, with little thought, to simply open her business called Kitty's
Baking. Bobby came in to order some cookies for his girlfriend, Bitsy. Unfortunately,
Bitsy was allergic to peanuts. Bobby told Kitty that he needed some cookies for Bitsy
but that Bitsy had allergies to peanuts. Kitty told him not to worry because she would
make up a special batch just for him. Kitty had hired some assistants because she was
so busy. She told an assistant, Cathy, to make up several batches of cookies for different
customers including Bobby and told her to leave out the peanuts in Bobby's batch
because of the allergy. Cathy, however, forgot about the peanut allergy and proceeded to
make Bobby's cookies with peanuts. Bobby picked up the cookies and gave one to Bitsy
in the car while they were on the way to the movie in Bobby's new car. Bitsy became
violently ill, vomited in Bobby's car, and had to have her stomach pumped. Bobby and
Bitsy sought recovery from Kitty who told them that Bitsy's doctor bill and Bobby's car
cleaning bill were business debts, that the business was new and not making any money
at the moment, and that she had no personal liability. Following the incident involving
Bobby and Bitsy, Kitty discusses her problems with the bakery with her parents. Kitty's
parents would like to invest in her business and share in any profits, but they do not
want to share in the management responsibilities.
Which of the following would be an appropriate form of business organization for Kitty
and her parents such that her parents could invest but not participate in management?
A. General partnership
B. Limited partnership
C. Managed partnership
D. Combined partnership
E. Family-Based partnership
Which of the following is used when, by agreement one of the parties substitutes a
different performance for his or her original duty under the contract?
A. Accord and satisfaction
B. Novation
C. Substituted contract
D. Mutual rescission
E. Alteration
Which of the following was the result in the bankruptcy case in the text In re Robert O.
Troupe and Dawn Lynn Troupe involving the issue of whether a tractor dealer's failure
to file a financing statement rendered its purchase money security interest unperfected
because the tractor was equipment used for business purposes, or whether the security
interest was automatically perfected as an interest in a consumer good?
A. The tractor dealer prevailed because classification of collateral is determined as of
the time of the creation of the security interest, and the consumers were bound by the
representation on the security agreement that the tractor was to be used as consumer
goods.
B. The tractor dealer prevailed because although representations made by the buyers on
the security agreement were not controlling, the buyers were using the tractor as a
consumer good at the time of default, the time at which classification of collateral is
made in any dispute.
C. The bankruptcy trustee prevailed because the consumers made misrepresentations at
the time of the sale as to the use of the tractor and wrongfully claimed that it was for
consumer use when it was actually to be used as equipment in a business endeavor.
D. The bankruptcy trustee prevailed because although no misrepresentations were made
at the time of the sale, the tractor was being used as equipment in a business endeavor
at the time of default; and the time of default is the point at which issues involving use
are determined.
E. The bankruptcy trustee prevailed because when at the time of default, collateral is
used partly as a consumer good and partly as equipment in a business endeavor, the
collateral loses its status as a consumer good.
Which of the following is false regarding the statute of frauds and promises made in
consideration of marriage?
A. Agreements regarding marriage in which one party is gaining something other than a
return on his or her promise to marry are within the statute of frauds and must be in
writing.
B. Mutual promises to marry fall within the statute of frauds.
C. Prenuptial agreements fall within the statute of frauds.
D. A prenuptial agreement is not automatically enforceable just because it is in writing.
E. When one party promises something to the other as part of an offer of marriage, the
contract must be in writing to be enforceable.
Which of the following is false regarding the status of women in Saudi Arabia?
A. Women are not allowed to drive.
B. Women constitute only 25 percent of Saudi Arabia's workforce.
C. The law limits the industries in which women can be employed.
D. Women are forbidden to receive business licenses if they may have to interact with
males or government officials.
E. Places of employment are segregated by sex.
Which of the following types of securities represent loans to a corporation?
A. Debt
B. Equity
C. Finance
D. Formal
E. Certified
Monetary damages are also referred to as ______ damages.
A. Equitable
B. Fair
C. Public
D. Legal
E. Injunctive
"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 true regarding the bank manager's statement that the bank
was a holder in due course, and that stop-payment orders could not affect the right of a
holder in due course to collect?
A. The bank manager is wrong.
B. The bank manager is correct only if he can establish that the bank employee who
actually paid the check had no knowledge of the stop-payment order.
C. The bank manager is correct unless Elaine can affirmatively prove that the bank
employee who actually paid the check had knowledge of the stop-payment order.
D. The bank manager is correct unless Elaine can prove fraud in the factum on the part
of BIG Jewelry.
E. The bank manager is correct unless Elaine can prove fraud in the factum on the part
of BIG Jewelry and that the bank was aware of the fraud.
The Securities and Exchange Commission is headed by how many individuals?
A. 50
B. 25
C. 20
D. 10
E. 5
Which of the following is false regarding the management of nonhazardous solid
waste?
A. The federal government sets national standards for municipal solid waste landfills.
B. The federal government provides technical assistance to the states for the
management of nonhazardous waste.
C. The federal government provides financial assistance to the states for the
management of nonhazardous waste.
D. The federal government requires that each state has a solid waste management plan
that must include provisions for encouraging resource conservation or recovery.
E. Managing nonhazardous solid waste is the responsibility of the federal government,
not the states.
What fundamental duty or duties does the bailor have toward the bailee in a bailment
for consideration?
A. Only the duty of compensation and reimbursement.
B. The duty of compensation and reimbursement, and the duty to warn the bailee of
known defects or any that could have been discovered through reasonable investigation.
C. Only the duty to provide the bailee with property free from hidden defects that could
harm the bailee.
D. Only the duty of compensation.
E. The duty of compensation and reimbursement, the duty to provide the bailee with
property free from hidden defects that could harm the bailee, and the duty to keep
accurate records of the transaction.
Which of the following is not an example of material information under Section 10(b)
and Rule 10(b)-5?
A. A change in the status of litigation against the company.
B. A change in dividends.
C. A new product, process, or discovery.
D. Any change in the financial status of the company.
E. A contract for the sale of corporate assets or for the purchase of assets.
