Revenge. Jane, a first year law student, while walking to school in inclement weather,
accidentally slipped on ice knocking down Greg, another first year law student,
breaking his glasses. He was very angry with Jane and let the air out of one of her car
tires. Greg also decided to sue Jane for negligence, claiming as damages $300 for his
broken glasses. He decided that he already knew all about the law and did not need a
lawyer. Greg sued Jane in state court. Jane, in the same lawsuit, brought an action
against Greg for letting the air out of her tire. At trial in state court, Jane told the judge
that a friend, Susie, told her that she saw Greg let the air out of Jane’s tire. The judge
disallowed Jane’s testimony on that issue. Susie, however, who was in the courtroom
also came and testified to that effect. The state court judge ruled in favor of Susie. Greg
said that he was not giving up and that he would seek double damages on appeal in
federal court. Jane and Greg live in different states when not attending school. After
trial, Jane reported Greg’s actions in letting the air out of her tire to the police who said
that they would proceed with a criminal action against Greg. Greg goes to see Alex, a
recent graduate who had just passed the bar, and asked Alex to represent him in a
federal court appeal. What advice should Alex give to Greg regarding an appeal filed in
federal court?
A. He should tell Greg that a federal appeal looks promising and that he will be glad to
represent Greg for an hourly rate of $400.
B. He should tell Greg that the federal appeal looks good only if Greg can get Jane to
admit she was negligent.
C. He should tell Greg that the federal appeal looks good only if Susie does not come to
testify in person.
D. He should tell Greg that the federal appeal is not possible unless Greg first gets the
trial court judge to certify the case to federal court.
E. He should tell Greg to forget about a federal court appeal because an appeal from a
state trial court would not be transferred to federal court.
Under the Magnuson-Moss Act, what is the effect of a full warranty?
A. It means that if the good fails or is defective, the good or its defective part will be
replaced; and if replacement cannot be timely effected, the buyer has the right to a
refund or a full replacement.
B. It means only that the good or its defective part will be repaired. The buyer has no
other remedy.
C. It means that if the good fails or is defective, the good or its defective part will be
replaced; and if replacement cannot be timely effected, the buyer has the right to a
refund or a full replacement; and also that the buyer will receive extra funds to account
for expenses.
D. It means that the buyer must be immediately refunded the full purchase price.
Claims to Funds. Paul had a great job as a bank executive. Unfortunately, his bank
came under scrutiny by federal regulators and while Paul had done nothing illegal, he
ended up being fired. Unfortunately for Paul, he had a number of debts. Among his
assets were a house worth $250,000 on which he owed $150,000 to a bank that held a
security interest; three vehicles; an expensive watch worth $5,000; and $120,000 in an
Individual Retirement Account “IRA”. He owed $900 per month in child support to his
ex-wife Suzy and was behind on payments in the amount of $1,800. He also owed
$2,000 in wages consisting of four months of back pay to Bob who took care of Paul’s
landscaping needs and swimming pool care. Unable to find a job and believing that he
had no other option, Paul filed for Chapter 7 bankruptcy. All debtors angrily demanded
payment from liquidation of Paul’s assets. Paul, on the other hand, claims that he needs
all the above-mentioned assets and that he should not have to give up anything. Only
federal bankruptcy exemptions apply to Paul’s case. Which of the following is true in
regard to Paul’s claim to his vehicles?
A. All vehicles will be sold with the entire proceeds being used to satisfy claims of
creditors.
B. All vehicles will remain Paul’s property because vehicles are automatically exempt.
C. One vehicle with the least value will remain Paul’s property as an exemption, and the
others will be sold to satisfy claims of creditors.
D. An interest in a motor vehicle up to $3,450 is exempt.
E. An interest in a motor vehicle up to $5,000 is exempt.
Disputed Ring. While working in the yard, Tina found a beat up ring. Becca, an
eighteen-year old teenager and neighbor, came over to visit and liked the ring. Tina
said, “You can have this old thing if you would like.” Becca replied, “I really like it –
Maybe it’s a real diamond!” Tina laughingly told her that there was a one in a billion
chance of that and that Tina was more likely to win the lottery. A few months later
Becca ran over to Tina’s house and told Tina that the ring was actually a diamond worth
thousands! Becca gave Tina the ring to examine. Tina put it in her pocket and told
Becca that she would never have given it to her if she had realized its value and that
possession was back where it had always belonged. Tina also told Becca that Becca
failed legally to accept the gift because she did not know its true value and also because
Tina did not sign any document turning over title. Becca sues. Which of the following is
true regarding Tina’s statement that she was entitled to the ring because she would not
have given it to Becca if she had known the true value?
A. Tina is entitled to ownership of the ring if she can prove that she did not realize its
true value.
B. Tina is entitled to ownership of the ring only if she can prove that she did not realize
its true value, and also that there was a difference of at least $1,000 between what she
believed the value to be and its true value.
C. Tina is entitled to ownership of the ring only if she can prove that she did not realize
its true value and also that there was a difference of at least $10,000 between what she
believed the value to be and its true value.
D. Tina is entitled to ownership of the ring but only because neither she nor Becca
realized its true value.
E. Being ignorant of the value of the ring does not entitle Tina to ownership of it.
Which of the following is a contractual party who agrees to do something for the other
party?
A. Obligor
B. Obligee
C. Assignor
D. Assignee
E. Boundee
Zachary, who has been authorized to write a check from a company account to pay
employees, draws bonus checks from the company account for five imaginary
employees; endorses the checks in their names; and deposits those into his own bank
account. Which of the following is true regarding whether the company will be required
to take the loss on the checks?
A. Under the fictitious payee rule, the company will be required to take the loss on the
checks unless the company can obtain the funds from Zachary.
B. Under the imposter rule, the company will be required to take the loss on the checks
unless the company can obtain the funds from Zachary.
C. Under the transferor rule, the company will be required to take the loss on the checks
unless the company can obtain the funds from Zachary.
D. Under the employee-liability rule, the company will be able to recover from any
bank that cashed the check in addition to Zachary.
E. Under the banking liability act, the company will be able to recover from any bank
that cashed the check in addition to Zachary.
Four Paws Protection. Congress set up a new agency to more closely regulate testing of
personal and cosmetic products on animals. Legislation was passed naming the agency
the “Animal Protection Commission,” and setting forth the function of the agency and
its specific powers. Congress provided the agency with the power to make rules,
investigate violations, and adjudicate charges of wrongdoing. The agency proceeded to
properly give notice and issue rules. The rules provided for civil as well as for criminal
penalties. Agency personnel issued an order for Fluffy Shampoo Corporation to attend a
hearing regarding its animal testing and to bring to the hearing all company documents
pertaining to animal testing. Fluffy Shampoo resisted on the basis that the agency had
no power to compel its attendance at a hearing or to require it to provide any
documents. Fluffy Shampoo also claimed that criminal penalties may not flow from
violation of agency rules. The agency proceeded to issue a ruling that Fluffy Shampoo
cease all activity based upon its refusal to cooperate. Which of the following is true
regarding the claim of Fluffy Shampoo that criminal penalties may not result from
violation of agency rules?
A. Fluffy Shampoo is correct.
B. Fluffy Shampoo is incorrect, but any criminal penalties may not exceed a fine of
$1,000.
C. Fluffy Shampoo is incorrect, but any criminal penalties may not exceed a fine of
$10,000.
D. Fluffy Shampoo is incorrect regarding its claim that all agencies lack the authority to
institute a criminal penalty, but correct in that the Animal Protection Commission
cannot enforce a criminal penalty because an agency can only enforce a criminal
penalty if human health or national security is involved.
E. Fluffy Shampoo is incorrect, and criminal penalties may be imposed assuming
statutory authority exists for the agency to do so.
Owners of _______________ enjoy preferences with respect to assets and dividends.
A. acknowledged
B. complex
C. simple
D. preferred
E. common
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. Which of the following is true regarding
Billy’s claim that he had no duty to pick up the paint cans?
A. Billy is correct because he had validly delegated that duty to Richard.
B. Billy is incorrect because the job was a personal service, and he had no right to
assign either rights or duties under the contract.
C. Billy is incorrect but only because the job was for under $1,000.
D. Billy is correct only because Richard properly painted the house and was, therefore,
responsible for ancillaries. If Richard had improperly painted the house, Billy would
have had remaining duties.
E. Billy is incorrect because his delegation did not affect his obligation to Jan.
ABC Corporation suffered damages when a supplier failed to deliver as agreed. The
president of ABC did not institute suit as Garrett, a major shareholder, believed was
proper. Garrett complained to the board of directors, but they refused to do anything.
Which of the following is an option to Garrett in regard to a lawsuit against the
supplier?
A. A shareholder’s derivative suit
B. A shareholder’s direct suit
C. A consolidation suit
D. A mandated suit
E. None of these because as a shareholder, Garrett has no right to insist on litigation
Puppy Woes. Sam promised to sell Linda a Welsh Corgi puppy for $300 but backed out
of the deal. Linda sued Sam in state court for breach of contract. Linda asked for a jury
in her complaint. During jury selection, one juror, Ann, said that they did not think they
could be fair to Linda because Linda did not appear to be a dog lover. Linda asked that
Ann not hear the case, and the judge excused Ann. Linda also decided that another
juror, Sandy, looked at her in a grumpy manner so she asked the judge to excuse that
juror from serving. The judge did so. After the jury was chosen, Linda made a statement
to the jury, as did Sam. Linda then called to the witness stand a friend of hers, Brenda,
who heard the discussion held between Linda and Sam regarding the purchase of the
puppy. Brenda testified under questioning by Linda that she heard Linda say that she
would pay $300 for the puppy and that she also heard Sam say that he would sell the
dog for that amount. Unfortunately for Linda, Brenda also testified in response to
questioning by Sam that Sam distinctly told Linda that he would only sell the puppy to
her if Linda came with cash for the puppy within seven days. Linda did not show up
with the money for ten days and Sam had already sold the dog to someone else. The
judge ruled in favor of Sam. The questioning of Brenda by Sam is called ______.
A. counter-examination
B. analysis examination
C. trick examination
D. direct examination
E. cross-examination
_______________ is a federal law regulating the payment of wages and overtime.
A. The Fair Pay Act
B. The Fair Labor Standards Act
C. The Regulatory Wage Act
D. The Subsistence Pay Act
E. The Legal Pay Act
Claims to Funds. Paul had a great job as a bank executive. Unfortunately, his bank
came under scrutiny by federal regulators and while Paul had done nothing illegal, he
ended up being fired. Unfortunately for Paul, he had a number of debts. Among his
assets were a house worth $250,000 on which he owed $150,000 to a bank that held a
security interest; three vehicles; an expensive watch worth $5,000; and $120,000 in an
Individual Retirement Account “IRA”. He owed $900 per month in child support to his
ex-wife Suzy and was behind on payments in the amount of $1,800. He also owed
$2,000 in wages consisting of four months of back pay to Bob who took care of Paul’s
landscaping needs and swimming pool care. Unable to find a job and believing that he
had no other option, Paul filed for Chapter 7 bankruptcy. All debtors angrily demanded
payment from liquidation of Paul’s assets. Paul, on the other hand, claims that he needs
all the above-mentioned assets and that he should not have to give up anything. Only
federal bankruptcy exemptions apply to Paul’s case. Which of the following parties has
first claim to proceeds from the house?
A. The bank with the security interest.
B. Suzy.
C. Sam.
D. Suzy and Sam with each having a 50% interest.
E. The bank, Suzy, and Sam with each having a 1/3 interest.
Bank Robbery. Victor robbed Safe Bank of a significant sum of cash. Safe Bank offered
a reward of $10,000 for 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. Which of the following is true regarding the offer of
the reward?
A. It pertained to a bilateral contract that could be accepted only with consideration
consisting of a promise.
B. It pertained to a bilateral contract that could be accepted only with consideration
consisting of performance.
C. It pertained to a bilateral contract that could be accepted with consideration
consisting of a promise performance.
D. It pertained to a unilateral contract that could be accepted with consideration
consisting of a promise.
E. It pertained to a unilateral contract that could be accepted with consideration
consisting of performance.
Which of the following is the making of an entry into the books of a bank or
corporation that is designed to represent the existence of funds that do not exist?
A. False entries
B. Defalcation
C. False pretenses
D. Ponzi scheme
E. Pretexting
Which of the following criteria must be satisfied in order for a patent, other than a
design patent, to be granted?
A. The object of the patent must be novel.
B. The object of the patent must be useful.
C. The object of the patent must be nonobvious.
D. The object of the patent must be novel but it does not have to be nonobvious.
E. The object of the patent must be novel, useful, and nonobvious.
Once an issuer files a registration statement and prospectus, the ______ period begins.
A. advertising
B. post-filing
C. waiting
D. approval
E. prospectus
Which of the following is, in effect, not a contract at all?
A. A voidable contract.
B. An executory contract.
C. An implied contract.
D. An executed contract.
E. A void contract.
Which of the following is an example of the imposition of strict liability?
A. A robber pulls a gun to rob a bank teller.
B. A burglar breaks into a home to steal jewelry.
C. A business sells cigarettes to a minor.
D. A minor shoplifts in a department store.
E. An adult shoplifts in a department store.
In which of the following are two or more corporations combined with neither of the
original corporations continuing to exist legally?
A. A merger
B. A consolidation
C. A combination
D. An alteration
E. A reorganization
An interest in personal property or fixtures which secures payment or performance of
an obligation is a called a(n) ____________________.
A. approved interest
B. secured interest
C. secured transaction
D. debt transaction
E. security agreement
A(n) _______________ announces a forthcoming sale of securities during the waiting
period though a brief advertisement.
A. proxy advertisement
B. special offering
C. unsolicited advertisement
D. tombstone advertisement
E. None of these because no ads may be issued during the waiting period
Insurance. Susan, a trained nurse, was recently elected to the U.S. Senate. Susan is very
concerned about the lack of insurance for many children and also working adults who
cannot afford the insurance premiums. She proposes legislation that states are taxed
sufficiently to provide health insurance coverage to children and that federal funds for
state highways are denied to any state that does not also provide insurance coverage for
uninsured adults. She also proposed that states with citizens earning higher than average
incomes be taxed at a higher rate than other states. Bill, a senator, tells Susan that
Congress lacks the authority to tax in this manner because the U.S. Constitution
expressly reserves that right to the states. Ellen, another senator, tells Susan that
Congress has no authority to link highway funds or any other funds with social welfare
objectives. Sam, an administrative assistant, tells Susan that Congress is prohibited
from taxing residents of one state at a higher rate than citizens of another state. Which
of the following is true regarding Ellen’s statement?
A. Ellen is correct.
B. Ellen is correct only if the state is making efforts to put social programs into effect
and is not acting unreasonably in refusing to provide needed services.
C. Ellen is partially correct in that Congress has no authority to link highway funds with
social services, but any other funds may be linked to social services by executive order.
D. Ellen is partially correct in that Congress has no authority to link highway funds
with social services, but other funds may be linked to social services by an act of
Congress.
E. Ellen is incorrect.
______________________ references the liability of corporations for torts and crimes
committed by their agents during the scope of their employment.
A. Stare decisis
B. Res ipsa loquitur
C. Respondeat superior
D. Absoluta respond
E. None of these
Which of the following is false regarding a partnership?
A. It is easy to create.
B. Income of the business is personal income.
C. Business losses can be deducted from taxes.
D. Each partner is considered an agent of the partnership.
E. In most cases partners do not have personal liability for losses.
If an instrument is silent as to the time of payment, which of the following is assumed
by UCC Section 3-108(a)?
A. That it is a demand instrument
B. That it is a time instrument
C. That it is a void instrument
D. That it is a voidable instrument
E. That it is a nonnegotiable instrument
Adult siblings, John, Sam, and Andy, are in disagreement over how to split the proceeds
of a piece of land left to them by a rich uncle who recently died. The uncle was a
resident of Georgia, and the land is in Georgia; but neither John, Sam, nor Andy live
there. Which of the following is true regarding jurisdiction over the dispute?
A. A court in Georgia would not have jurisdiction. The case would have to be brought
in a state in which at least one of the brothers lives.
B. A court in Georgia would have in rem jurisdiction over the dispute.
C. A court in Georgia would have in personam jurisdiction over the dispute.
D. A court in Georgia would have jurisdiction over the dispute only if all brothers
signed a consent form agreeing to bring the case in Georgia.
E. A court in Georgia would have original jurisdiction, but appellate jurisdiction would
be in a state in which at least one of the brothers lives.
_____ is an individual who applies to the state for incorporation on behalf of a
corporation.
A. A promoter
B. An incorporator
C. A facilitator
D. An obtainer
E. A certification analyst
The person or party that holds the interest in the secured property is the ___________.
A. debtor
B. transaction party
C. approved party
D. secured party
E. attached party
When a party’s liability for a negotiable instrument is terminated, this party’s liability
has been _____.
A. terminated
B. released
C. discharged
D. abrogated
E. delivered
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 was
also committed 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, however, 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 products 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. Which of the following is the
minimal standard that a business must meet in a consideration of business ethics?
A. Decisions must be legal.
B. Decisions must meet the criteria of a follower of the WPH Framework for Business
Ethics.
C. Decisions must meet the requirements of the most important stakeholders.
D. Decisions must receive a majority vote of acceptance by employees.
E. Both that decisions must be legal and that decisions receive a majority vote of
acceptance by employees.
Harry accepts Frank’s offer to sell a used car for $2,000. At what point is there a binding
contract?
A. When the agreement is made.
B. When the money is paid.
C. When the car is delivered.
D. Ten days after the car is delivered and approved.
E. Twenty days after the car is delivered and approved.