A[n] _______________ arises when a person acknowledges in court that he or she will
perform some specified act or will pay a price upon failure to do so.
A. Contract under seal
B. Voidable contract
C. Recognizance
D. Implied-in-fact
E. Informal contract
While driving her car down the street, Susan sees a child playing near the road with no
adult around. Which of the following is true?
A. Because the law holds that every U.S. citizen holds the duty to help a stranger in
peril, she must come to the child’s assistance.
B. She must come to the child’s assistance only because a child is involved.
C. She has no duty to render assistance to the child.
D. She must render assistance to the child only if she can do so without peril to herself.
E. She must render assistance to the child only if she is acquainted with the child’s
parents.
“Hot Dress.” Doreen writes a check for a dress to Hot Dresses Inc., a small specialty
shop whose shares are owned primarily by Betty. Betty decided to go on an extended
European vacation and temporarily closed down the shop the day after Doreen wrote
the check. When Betty returned, she had a number of other things to do and did not take
Doreen’s check and some other checks to the bank for three months. Betty was
independently wealthy and only ran the shop as a hobby, so she had not been in need of
funds. When Betty finally took Doreen’s check to the bank, Betty requested that her
bank, ABC Bank, deposit the check into her account. When ABC Bank, however,
requested payment from Doreen’s bank, XYZ Bank, the check was dishonored because
of insufficient funds in Doreen’s account. Although Betty did not particularly need the
funds, she did not like to feel as if she had been cheated; therefore, she demanded that
Doreen make the check good.
Who is the drawee of the check Doreen presented to Hot Dresses Inc.,?
A. Doreen
B. Hot Dresses Inc.
C. Betty, as primary owner of Hot Dresses Inc.
D. Doreen’s bank
E. Betty’s bank
“Saturday Auction.” Barry, an auctioneer, held an auction on a Saturday morning. At the
beginning of the auction, Barry announced that the auction was being held without
reserve. Helen, Mary, and Chris were all in attendance. Helen saw an old cash register
with a stuck drawer that she thought would look great in her den. The auctioneer put the
cash register up for sale noting that the drawer was stuck but that it could probably be
fixed with little effort. Helen bought it for $20. When she got it home, she discovered
that it actually contained $5,000. Unfortunately, Helen had a teenage son named Tad
who started bragging to his friends about the family’s good fortune. Barry heard about
what had happened and sued Helen for return of the $5,000. At the same auction, Mary
saw a great deal on a used table. She bid $20 on it. No one else bid anything. Barry
announced that $20 was clearly insufficient for the table, that it was worth much more
than that, and that he was taking it out of the auction. Chris started bidding on a
diamond ring for his girlfriend. He bid $2,000. Just as Barry was getting ready to say
“Sold,” Chris looked over at his girlfriend, decided that he was not sure about marriage,
and leaped up yelling “I revoke.” Barry, however, immediately after, yelled “Sold.”
Barry sues Chris attempting to obtain the money for the engagement ring. Barry also
sues Helen seeking to recover the $5,000 contained in the stuck drawer. Mary sues
Barry attempting to obtain possession of the table.
In the lawsuit in which Barry sues Helen for return of the $5,000, which of the
following is the most likely result?
A. Barry will win because when an auction is held without reserve, the auctioneer is
entitled to repossess any item at will.
B. Barry will lose only because he was not the actual seller. He was only selling at
auction for someone else. The seller, however, would win in an action against Helen.
C. Barry would win because Helen made an insufficient offer.
D. Helen will win only if she can show that Barry had knowledge that cash was in the
drawer before he sold it.
E. Helen will win because the auction was without reserve, and she properly bid on and
bought the cash register with everyone knowing that the cash drawer was stuck.
A[n] ______ trust is created by a court when an express trust fails and the court can
imply a trust from certain behavior.
A. Real
B. Constructive
C. Resulting
D. Validating
E. Actual
Transfer of property is initiated by the ______ of the deed.
A. Acknowledgement
B. Execution
C. Registration
D. Sealing
E. Expressing
Which type of legal system exists in North Korea?
A. Civil legal system
B. Common law legal system
C. Socialist legal system
D. Islamic legal system
E. Asian legal system
Which of the following is false regarding actions that may be taken while an automatic
stay is in effect in a Chapter 7 proceeding?
A. Creditors cannot attempt to repossess property during bankruptcy proceedings.
B. A creditor who received a judgment against a debtor prior to the bankruptcy filing
may not act to enforce the judgment.
C. Legal actions to collect child support payments are subject to the stay.
D. The court may exclude secured creditors from the stay if they petition the court to
show that they do not have adequate protection under the stay.
E. If the debtor was a debtor in a bankruptcy case that was dismissed within a year of
the current bankruptcy case filing, the stay automatically terminates 30 days after the
current filing.
Which of the following is a person who has a duty to act primarily for another person’s
benefit?
A. Principal
B. Employer
C. Fiduciary
D. Trustor
E. Benefitor
Which of the following is false regarding the liability of directors and officers for
criminal behavior in the U.S.?
A. Directors and officers can be held personally responsible for their own crimes.
B. Directors and officers can be held personally responsible for the crimes of other
employees within the organization when they have failed to adequately supervise the
employee’s behavior.
C. According to the responsible person doctrine, an officer can be held criminally liable
for conduct of an employee if the court determines that a responsible person would
have known about and could have prevented the illegal activity.
D. Directors and officers who use insider information to trade the corporation’s stock
for a profit can be held liable for breaching their fiduciary duty.
E. A court may not find a corporate officer criminally liable for conduct of an employee
unless the officer profited personally from the illegal activity.
If a contract does not provide for arbitration, parties may submit a specific dispute
involving a contractual provision to arbitration through the use of a ______.
A. Binding arbitration clause
B. Submission agreement
C. Binding mediatory clause
D. Suggested ADR resolution clause
E. The parties may not submit a specific dispute to arbitration if the contract does not
provide for arbitration
“Fast Food Dilemma.” Richard, who just started at his new job as an assistant manager
at a fast-food restaurant, wants to make a good impression. He thinks that things are
going great. On only the second day on the job, however, he sees his boss Jill, the
manager, slink out of the restaurant with a big box of hamburger that she puts in her car.
Jill then speeds away. Richard is fairly certain that Jill did not pay for the hamburger.
Richard asks advice of his best friend, Bruce; his girlfriend, Sally; his sister, Jenny; and
his dad, Frank. Bruce says that there are no real objective standards and that Richard
should just decide what is best for him. Sally says that Richard should focus on the
consequences and focus on the greatest benefit to all involved. She believes that it will
do no real harm for Richard to keep his mouth shut because the fast-food restaurant is
making plenty of money and probably does not pay Jill enough anyway. Plus, getting in
trouble with Jill could cause problems at work, and if Richard loses his job, Richard and
Sally might have to put off their marriage. Jenny says that on balance the rule producing
the greatest good would be to tell Jill because stealing does not generally produce the
greatest satisfaction. Richard’s dad says that as a matter of principle Richard should tell
Jill because stealing is simply wrong.
Which of the following theories most accurately fits the advice given by Sally?
A. Deontology
B. Act utilitarianism
C. Rule utilitarianism
D. Ethical relativism
E. Virtue ethics
“Machine Malfunction.” Bruno, the president of a health club operation called ABC
Health Club, convinced the board of directors to approve a large purchase of a type of
fitness machine called “Perfect Body.” Bruno had carefully investigated the machine
and did a presentation to the board on its purported benefits. Unfortunately, after the
purchase, it was announced that “Perfect Body” was actually a very dangerous machine
that should not be used. The manufacturer of “Perfect Body” went bankrupt, and ABC
lost $200,000 on the purchase of the machines. The shareholders are furious and want
to sue Bruno and the directors. In an attempt to appease her, the board of directors
agrees to allow Frances, the ring leader of the shareholders, to purchase stock of the
company at below its fair market value. Frances purchases a considerable amount of
stock on that basis, but says that the shareholders plan to continue with an action
against Bruno and the board members.
Under which of the following should Bruno and the board of directors defend
themselves in an action brought by shareholders for harming the corporation?
A. The superior judgment rule.
B. The research and investigation rule.
C. The business judgment rule.
D. The rule of corporate integrity.
E. There is no defense.
Which of the following is false regarding evictions in Japan?
A. Before the year 2000, evictions were extremely uncommon in Japan because of laws
intended to protect tenants. These laws provided automatic renewals of leases for
tenants.
B. In 2000, with the passing of the Law on the Promotion of Supply of Good Quality
Housing, automatic renewals of lease agreements became less common.
C. Most homes are still rented using what is called futsu shakuya keiyaku, which is a
type of lease that does not have a fixed termination date.
D. Because most homes are rented without a fixed termination date, it is less common
for landlords in Japan to engage in eviction.
E. When there is a conflict between a landlord and tenant, the landlord is likely to sue
the tenant and take the tenant to court because Japanese courts tend to find in favor of
landlords rather than tenants.
What is the effect of an issuer forgetting to write the date on a check?
A. The payee may write in the date consistent with the intent of the issuer, but must put
a notation on the check to the effect that it was altered.
B. The payee may write in the date consistent with the intent of the issuer and may
transfer the check to a holder in due course.
C. The payee may write in the date consistent with the intent of the issuer, but may not
transfer the check to a holder in due course.
D. The check is no good, cannot be completed by anyone, and should be destroyed.
E. The check is good only if the payee can get in touch with the issuer and have the
issuer fill in the appropriate date.
F. The check should be delivered to the issuer’s bank for insertion of a proper date after
confirmation of available funds.
Which of the following was the result in Colette Bohatch v. Butler & Binion, the case
presenting the question of whether the fiduciary relationship between law partners gives
rise to a duty not to expel a partner who reports suspected overbilling by another
partner?
A. That prohibiting expulsion of a partner who reports suspected overbilling is
necessary to encourage compliance with rules of professional conduct.
B. That expelling a partner who reports suspected overbilling by another partner is not a
tort even if the reporting partner had an ethical duty to report the violation.
C. That only if it is judicially determined that overbilling by a partner indeed occurred
is a partnership prohibited from expelling a partner who reported the overbilling.
D. That expelling a partner who reports suspected overbilling by another partner is not a
tort even if the reporting partner had an ethical duty to report the violation but that the
reporting partner must be given at least 30 days prior to the expulsion.
E. That expelling a partner who reports suspected overbilling by another partner is not a
tort even if the reporting partner had an ethical duty to report the violation but that the
reporting partner must be given at least 6 months prior to the expulsion.
Which of the following holds that a person may be deemed not guilty by reason of
insanity, even if he or she knew that a criminal act was wrong, as long as the defendant
was driven to commit the crime from some urge resulting from a mental deficiency the
defendant could not resist?
A. The irresistible impulse test.
B. The involuntary act.
C. The substantial capacity test.
D. The duress defense.
E. The necessity defense.
“Carpet Woes.” Beau went shopping at ABC Carpet. He saw some carpet he liked but
could not make up his mind. The manager at ABC Carpet wrote down the proposed
purchase price for him along with a statement that the price would be good for three
months. Two months later Beau went back to ABC Carpet to purchase the carpet.
Unfortunately, the price had gone up. Beau showed the manager his writing and
guaranteed price, but the manager said that the offer was no longer good. Although he
had to pay more than the ABC manager had initially promised, Beau proceeded to
purchase his carpet from XYZ carpet, and he also contracted with XYZ to do the
installation. Unfortunately, Beau almost immediately started to have problems with the
carpet. Beau told the sales manager for XYZ Carpet that he was planning on bring suit
for breach of warranty. The sales manager, however, told him that breach of warranty
provisions only applied to sales of goods and that the carpet purchase was for
installation, a service.
Which of the following is true in most states regarding whether the UCC applies to the
contract Beau had with XYZ Carpet?
A. Common law will be applied, not the UCC, because the contract was mixed.
B. The UCC will be applied, not common law, because the contract was mixed.
C. The court will apply the predominant-purpose test to determine whether the
predominant purpose of the contract was the sale of goods in which case the UCC
would apply.
D. The court will apply the service-warranty test to determine whether the predominant
purpose of the contract was the provision of a service in which case the UCC would
apply.
E. The court will apply the service-warranty test to determine whether the predominant
purpose of the contract was the sale of goods in which case the UCC would apply.
To use common law language a[n] ______ is a material term of the sale or lease
contract.
A. Express warranty
B. Implied warranty
C. Acknowledged warranty
D. Claimed warranty
E. Consequential warranty
Which of the following is a not a type of lease that may be created?
A. Definite-term
B. Period-tenancy
C. Tenancy-at-will
D. Absolute tenancy
E. Tenancy at sufferance
Which of the following types of endorsements attempt to either limit the transferability
of the instrument or control the manner of payment under the instrument?
A. Blank qualified.
B. Special qualified.
C. Restrictive.
D. Conditional.
E. Trust.
Which of the following consists of an offer by one party and an acceptance of the terms
by another party?
A. Legal object
B. Agreement
C. Coherence
D. Alliance
E. Concurrence
Which of the following is true when an instrument fails to meet the technical
requirements necessary to qualify as a negotiable instrument?
A. The instrument is still enforced as a negotiable instrument if it has been transferred
to a holder in due course.
B. The instrument is still enforced as a negotiable instrument if it has been accepted by
a bank.
C. The instrument is still enforced as a negotiable instrument if the holder can establish
detrimental reliance based on a reasonable belief that the instrument qualified as a
negotiable instrument.
D. The instrument is may qualify as an enforceable contract.
E. The instrument is null and void and of no use to the holder.
“Animal Care.” Susan, a licensed veterinarian, was recently elected to the U.S. Senate.
Susan is very concerned about the lack of care for homeless cats and dogs. She
proposes legislation that citizens of all states be taxed sufficiently to provide for no-kill
animal shelters that citizens in states with higher than average incomes be taxed at a
higher rate than citizens of other states. She also proposed that federal funds for state
highways be denied to any state that fails to provide assistance to low income citizens
in covering pet vaccinations. Bill, another new senator, tells Susan that, apart from the
mandated federal income tax, Congress lacks the authority to tax states because the
U.S. Constitution expressly reserves that right to the states. Sam, another senator, tells
Susan that Congress has no authority to link highway funds or any other funds with
social welfare objectives. Ellen, a clerk in the Senate, tells Susan that Congress is
absolutely prohibited from taxing residents of one state at a higher rate than citizens of
another state.
Which amendment provides that the government cannot infringe on citizens’ right to
bear arms?
A. First
B. Second
C. Fifth
D. Sixth
E. None
“Green Trees.” Wally, the president of Green Corporation, a company that provides
landscaping services, wanted his corporation to purchase Tree Corporation, another
corporation providing landscaping services. The board of Tree Corporation, however,
did not wish to sell. The board of Green Corporation decided to buy any or all of Tree
Corporation’s stock in order to gain control of Tree Corporation. The management of
Tree Corporation and its board strongly objected to the attempt by Green Corporation to
take over the company. Green Corporation offered to purchase stock held by
shareholders of Tree Corporation at a price substantially above the current market value
of the stock. When that strategy was not wholly successful, Green Corporation offered
to give shareholders of Tree Corporation stock in Green Corporation in return for their
stock in Tree Corporation.
By offering to purchase the stock of Tree Corporation at a price above its current
market value, Green Corporation made a[n] ____.
A. Cash purchase offer
B. Above market offer
C. Substantial offer
D. Hostile offer
E. Tender offer
Which of the following was the result on appeal in the case of Stephen Labatt Porter v.
Black Warrior Farms L.L.C., the case in the text involving whether a gift was made
when prior to going on a cruise, a mother sent money to her son for investment, said in
a letter to him that he should keep the money if anything happened to her, returned from
the cruise, and died at a later date?
A. The court ruled that a gift causa mortis was made because she died before requesting
the return of the money and that the money therefore belonged to the son.
B. The court ruled that a gift causa mortis was made because the mother intended that
the son keep the money if anything happened to her before or after the trip and that the
money therefore belonged to the son.
C. The court ruled that a valid inter vivos gift was made because the mother never
requested the return of the money and that the money therefore belonged to the son.
D. The court ruled than a valid inter vivos gift was made because the mother meant for
the son to invest the money for her, retaining it if she died, and that the money therefore
belonged to the son.
E. The court ruled that neither a valid causa mortis nor a valid inter vivos gift was made
and that the funds were properly deducted from any distribution to the son or his heirs.
Which of the following is false regarding a tenant’s use of rented premises?
A. A tenant is responsible for carpet that becomes worn.
B. A tenant is responsible for negligent damages to an apartment.
C. A tenant has a duty not to commit waste.
D. A tenant had a duty not to cause substantial injury to the landlord’s property.
E. A tenant may not cut down trees in the yard of rental property.
“Exercise Heat.” Harold rented space for his health club operation from Holly. Holly
and Harold have an ongoing dispute regarding the air conditioning. Harold wants a new
unit because he says that old one needs too many repairs, but Holly says that the old
unit is fine. One day after a particularly heated dispute, Harold comes to work to find
that the aerobics room and one weight lifting room, areas with air conditioning
problems, have been padlocked. Harold is furious and calls Holly who tells him that if
the areas are so bad, then he should just stay out. Harold immediately rents different
space in an adjoining building and moves his health club.
Which of the following is the proper term for the action Holly took in locking Harold
out of the areas?
A. Reasonable action
B. Full eviction
C. Partial eviction
D. Constructive eviction
E. True eviction
“Overextended Debtor.” For his home, Dennis purchased a big screen television from
ABC Electronics and financed the purchase through ABC Electronics. Later, because
Dennis had bought a boat, a new car, an expensive engagement ring for his girlfriend,
and some other items, he was unable to continue making payments on the television.
The manager from ABC Electronics called 60 days after the sale and asked Dennis to
return the television. Dennis refused on the basis that ABC Electronics never perfected
its interest in the television. He also explained that he had later granted a secured
interest in the television along with his other goods to XYZ Credit in return for a loan.
No financing statement was filed on behalf of ABC Electronics although XYZ Credit,
with no knowledge of any interest of ABC Electronics, did file a financing statement.
Which of the following is the term for the type of agreement Dennis had with ABC
Electronics?
A. A pledged money interest.
B. A collateralized interest.
C. A purchase-money security interest.
D. A security perfection interest.
E. A cash deferred security interest.
“Consumer Debt.” Mona had not been keeping up with her spending and bought several
expensive items. She had numerous credit cards and some unsecured loans. She had a
total of 14 creditors. All her debt was consumer debt, and Mona really wished that she
had not put all those new clothes on her credit card. Although Mona was struggling, she
did not want to file for bankruptcy because she did not want a bad credit score. Three of
her credit card companies, however, who had unsecured claims against her totaling
$14,500, signed and filed an involuntary bankruptcy petition against her under Chapter
7. Mona is unsure about how to proceed. While she is several months behind on a
number of payments, including alimony payments she believes were unfairly awarded
to her ex-husband, she does not particularly want to go bankrupt. She believe that the
creditors have been unfair in not allowing her additional time in which to pay. On the
other hand, she would really like to be rid of her excessive debt and stop collection
efforts on the part of her ex-husband.
Assuming that Mona does not object to the bankruptcy proceeding, what is the next step
that should occur?
A. The court should appoint a temporary trustee.
B. The court should appoint a trustee.
C. The court should enter an order of relief.
D. The court should hold a creditor’s meeting.
E. The court should determine if any claims have priority.
Which of the following is false regarding termination of agency in the Netherlands?
A. The agent is entitled to compensation if his or her duties are concluded within a
reasonable time after termination.
B. Compensation is due if the agent received the orders for a certain action before the
termination of the contract.
C. The agent is entitled to goodwill compensation in certain situations.
D. An agent is not entitled to additional compensation based on bringing the principal
new customers or because agreements with clients obtained by the agent remain
profitable.
E. There are requirements on the agent in regard to time limits in filing for certain
compensation.
Real defenses apply to ____, whereas personal defenses do not apply to ____.
A. All parties; holders in due course.
B. Holders; holders in due course.
C. Holders; holders.
D. All parties; holders.
E. All parties; endorsers.
Which of the following is true regarding types of electronic fund systems?
A. Automated teller machines, pay-by-telephone systems, point-of-sale systems, and
direct deposits are all types of electronic fund systems.
B. An automated teller machine is a type of electronic fund system; but pay by
telephone systems, point-of-sale systems, and direct deposits are not types of electronic
fund systems.
C. Automated teller machines and pay-by-telephone systems are types of electronic
fund systems; but point-of-sale systems, and direct deposit systems are not types of
electronic fund systems.
D. Automated teller machines and point-of-sale systems are types of electronic fund
systems; but neither a direct deposit system nor a pay-by-telephone system is a type of
electronic fund system.
E. Automated teller machines, point-of-sale systems, and direct deposits are all types of
electronic fund systems; but a pay-by-telephone system is not a type of electronic fund
system.
Which of the following is true regarding the person to benefit from a bailment?
A. A bailment may benefit a bailor.
B. A bailment may benefit a bailee.
C. A bailment may benefit either a bailor or a bailee, or both.
D. A bailment may benefit a bailee only if an employer-employee relationship is
involved.
E. A bailment may benefit a bailee only if the bailee owed a preexisting debt to the
bailor.
A[n] ______ party signs an instrument to provide credit for another party that has also
signed the instrument.
A. Agreeable
B. Accommodation
C. Agent
D. Principle
E. Promisor