Which of the following is true with regard to contractual relations between the principal
and a third party?
a. There is no liability on the part of the principal if the agent acts with implied
authority.
b. An undisclosed principal and the third party are contractually bound if the agent acts
within her actual authority, unless the contract specifies otherwise.
c. A principal cannot be bound if the agent acts without any authority.
d. An unidentified principal is bound only if the agent acts within the scope of actual
authority.
Anna has a contract to perform accounting services for Intercend Corporation. She
breaches her contract in a nonmaterial way. Which of the following is correct with
respect to Anna’s liability?
a. Anna is not entitled to any compensation for her services.
b. Anna may have liability to third party intended beneficiaries.
c. Anna is entitled to the contractually agreed upon fee less any damages or loss her
breach has caused her clients.
d. Both (b) and (c).
Marilyn contracted with Bravo Builders to build an addition to her house for $15,000.
After digging the foundation, Bravo decides that it will take more work and more
concrete than it had originally thought and that it will need to charge an additional
$5,000 for the job. Assuming Marilyn agrees, which of the following is correct?
a. Marilyn will have to pay $20,000.
b. This is a contract under seal which is enforceable.
c. This is a modification of a preexisting contract, which under common law must be
supported by additional consideration on the part of Bravo Builders.
d. This is the settlement of a disputed debt that requires no additional consideration on
the part of Bravo Builders.
There are certain transactions that are enforceable without consideration. These include:
a. promises to pay a debt barred by the statute of limitations.
b. a promise to pay a debt that has been discharged in bankruptcy if certain
requirements are met.
c. a new promise to perform a voidable obligation that has not previously been avoided.
d. All of the above.
Diversity of citizenship exists when:
a. the plaintiffs are all citizens of a state or states different from the state or states of
which the defendants are citizens.
b. a foreign country brings an action against citizens of the United States.
c. the controversy is between citizens of the United States and citizens of a foreign
country.
d. All of the above.
The amount of liquidated damages included in a contract that would be upheld by a
court:
a. must be reasonable in light of the inconveniences or lack of feasibility of obtaining
an adequate remedy.
b. may be so high as to be punitive to the breaching party.
c. may be regarded as a penalty.
d. None of the above.
Which of the following would meet the requirement of a holder in due course’s having
given value?
a. A third party receives an instrument as a gift from the holder.
b. An executory promise is given in receipt of an instrument.
c. A holder takes an instrument in payment of an antecedent debt.
d. A holder promises to perform several major household tasks in exchange for an
instrument.
Rebecca sees a pair of beautiful silver shoes in a store window. She goes in and tells the
shopkeeper, “If I am asked to the prom, I will buy those shoes. Please hold them for me
for two weeks.” If the shopkeeper signs a note that says, ‘Will hold until May 5 for
Rebecca silver shoes, style 1028, size 8,” will he have to honor that promise?
a. Yes, and there is a condition precedent to the contract.
b. Yes, there is a contract with a condition subsequent.
c. No, there is no contract but simply an illusory promise.
d. No, a contract is formed after Rebecca is asked to the prom.
Maureen is taking a prescribed medication which makes her drowsy and inattentive.
Any contracts she makes:
a. would be voidable if, when she makes them, she is unable to comprehend the subject,
nature, and consequences of the contracts.
b. would be void.
c. would be void only if the medication impaired her ability to act in a reasonable and
rational way.
d. would be unaffected as long as she took the medication exactly as prescribed by her
doctor.
Which of the following is correct regarding the characteristics of a corporation?
a. A corporation is considered a person within the meaning of the Fourteenth
Amendment’s equal protection clause.
b. The Fifth Amendment provisions against self-incrimination protect a corporation.
c. A corporation is protected by the Fourth Amendment’s provision against unreasonable
searches and seizures.
d. Both (a) and (c).
Randy, a minor, buys a new four-wheel drive truck from the Jones Dealership. Randy
sells this truck to his cousin, Steve, who is an adult. Steve conveys this vehicle to
Arthur Smith. Arthur does not personally know Steve or Randy. Which of the following
expresses the status of this situation?
a. Randy may recover the vehicle from Mr. Smith.
b. Randy may not recover the vehicle from Mr. Smith.
c. Randy may hold Steve liable in tort.
d. Randy may recover the reasonable value of the vehicle but not the vehicle itself.
The Ajax Corporation issues bonds that pay a minimum of 6 percent interest but that
can pay more if corporate earnings reach certain specified levels. The holder of the
bond may exchange it for stock of the corporation. This bond would be a:
a. callable income bond.
b. convertible participating bond.
c. convertible unsecured bond.
d. convertible secured bond.
Carlos, a contractor, and Lyle, a landowner, have a contract whereby Carlos is to
perform routine construction services according to the blueprints that Lyle has
provided. Carlos assigns the contract to David, a developer. As a result of this
assignment:
a. Lyle can bring suit based upon detrimental reliance.
b. Carlos has no more rights or responsibilities with regard to the contract.
c. Carlos no longer has any rights under the contract, but he remains responsible for the
duties he agreed to perform.
d. Carlos has all of his rights under the contract, but he has no responsibility for the
performance of the duties.
The basic purpose of __________ is to facilitate the flow of trade by establishing
agreements concerning potential trade barriers such as import quotas, customs, export
regulations, subsidies, and import fees.
a. WTO
b. Foreign Sovereign Immunities Act
c. World Bank
d. None of the above.
Geoff’s fiancée, Susan, comes to meet his parents for the weekend. On Saturday
morning, while using Geoff’s mother’s hair dryer, the blower short-circuits sending
sparks across the guest room. Susan’s angora sweater and her hands are covered with
tiny burns. Susan’s mother is a lawyer and wants her to sue the seller of the dryer. Can
she?
a. No, because horizontal privity would extend only to members of the family.
b. No, because privity would require that Geoff’s mother sue.
c. Yes, since she is a guest in the home of the buyer, the warranties would extend to her
in most states.
d. Yes, since under the Code all reasonable users are protected from injury.
Z, a seller in Miami, enters into a contract which states that goods are to be delivered to
X, a buyer in New York. Title is to remain with Z until delivery. This is:
a. a shipment contract.
b. an FOB Miami contract.
c. a destination contract.
d. a consignment.
Under comparative negligence, the court apportions damages between parties in
proportion to the degree of fault or negligence it finds against them.
A decision of a state court is binding on all courts inferior to it in its jurisdiction. Thus,
the decision of a state supreme court binds all other courts in that state.
Most nations submit their international disputes to the International Court of Justice.
The Bankruptcy Code grants to U.S. District Courts original and exclusive jurisdiction
over all bankruptcy cases.
Under the CISG, a party may suspend performance of his obligations if, after the
conclusion of the contract, it becomes apparent that the other party will not perform a
substantial part of his obligations.
Tender is an offer by a party, who is ready, willing, and able, to perform his obligations
under the contract.
Miller and Baker formed a partnership and purchased a cycle shop. The name of the
new business cannot be “Miller Cycle Shop” because the name of the partnership must
include the names of both partners if it includes the name of one partner.
The states initially had primary responsibility for controlling air pollution.