Michelson was chairman of the board and chief executive officer of a computer
manufacturing firm. When considering whether to purchase CompuPrint, the
manufacturer of computer printers, Michelson examined CompuPrint’s financial
records, consulted with legal and financial experts, and conducted an in-depth study of
the marketplace and decided that it would be profitable for his corporation to purchase
CompuPrint. If CompuPrint turns out to be a poor investment and a court hears a case
challenging Michelson’s decision, the court will most likely judge his conduct under
the:
A. business judgment rule.
B. insider trading rule.
C. fairness rule.
D. shareholder protection rule..
The Panon Corporation is incorporated in Tennessee. Its principal place of business is
located in Massachusetts. As a result, the Panon Corporation is;
A. considered a citizen of only Massachusetts.
B. considered a citizen of only Tennessee.
C. not considered a citizen of either Massachusetts or Tennessee.
D. considered a citizen of both Massachusetts and Tennessee.
Which of the following is an equitable remedy under contract law?
A. Injunction
B. Monetary damages
C. Human servitude
D. Specific damages
Packers, Inc., bought a new kind of refrigeration system from Coolit for storage of its
meats. As part of the contract, Coolit delivered the refrigeration system to the Packers
plant, installed it, set its temperature, and then monitored it for several hours to make
sure it worked. Packers, Inc., received title to the refrigeration system when:
A. the system was delivered to the plant.
B. it paid for the system prior to its delivery.
C. the system was delivered, installed, and tested.
D. it signed the sales contract.
Morgan, a resident of New York, had an antique car collection garaged in New Jersey.
The car titles were kept in a safety deposit box of a bank in Delaware. If Morgan dies
intestate, the law of which state will determine the ownership of the cars?
A. New Jersey
B. New York
C. Delaware
D. New Jersey, New York, and Delaware
A _____ is a mistake made by only one of the contracting parties and does not offer
sufficient grounds for rescission or renegotiation.
A. Unilateral mistake
B. Mutual mistake
C. Binding mistake
D. Bilateral mistake
Jeanie, a prosecutor, agrees with Martin not to prosecute Martin’s son for drunk driving
in exchange for Martin employing her in his law firm two years after the drunken
driving charge is dismissed. This is a(n):
A. nondisclosure agreement.
B. usurious agreement.
C. agreement to escape liability.
D. agreement to obstruct justice.
Joe pays for his food at the drive-thru window as he receives it. The payment and the
receipt are _____ conditions.
A. precedent
B. concurrent
C. subsequent
D. spontaneous
The first bank to which an item is transferred for collection is called a(n) _____ bank.
A. local
B. remitting
C. depositary
D. intermediary
Bill has a $500,000 life insurance policy naming his minor children as beneficiaries.
However, Bill and his business partner, Marcy, are convicted for fraudulent business
transactions. Will Bill’s children be able to collect the life insurance proceeds?
A. No, policies often do not cover the insured when he/she violates the law.
B. Yes, as it would not be against public policy for beneficiaries to receive insurance
proceeds in such a case.
C. Yes, but not entirely. They will be given an allowance for necessaries with the
balance going to Marcy’s heirs.
D. No, all the proceeds will go to a state administrated crime victims’ fund.
Henry owns a movie production house which is represented by a law firm. He also
owns a shipping agency which is represented by Chase. The agency relationship
between Henry and Chase will be terminated by the bankruptcy of which of the
parties?
A. The bankruptcy of Henry will terminate the agency relationship.
B. The bankruptcy of the law firm will terminate the agency relationship.
C. Both Henry and Chase must be bankrupt to terminate the agency.
D. The bankruptcy of the movie production house will terminate the agency
relationship.
The theory of _____ argues that each of us can judge a person’s ethical decisions only
by initially placing ourselves in the other person’s place.
A. ethical relativism
B. situational ethics
C. social ethics
D. ethical realism
Which of the following cannot be upheld by a court of law because of some rule of
law?
A. Unenforceable contract
B. Valid contract
C. Voidable contract
D. Void contract
Phil finds the keys of a car on a table in a restaurant. The keys are likely to be:
A. lost.
B. abandoned.
C. stolen.
D. misplaced.
Tom and Nancy enter into a written contract for the sale of a dollhouse that Tom will
custom-make. In the contract, they agree that Nancy will pay $350 if she breaks the
contract. This sum of money is known as:
A. mitigation of damages.
B. speculative damages.
C. equitable remedy.
D. liquidated damages.
Maria has a periodic tenancy with Apartment Enterprises in which rent is paid every
two months. She informs Apartment Enterprises one month before she moves but
Apartment insists that it is entitled to two months’ notice. Who is correct?
A. Maria, because one month is reasonable notice.
B. Apartment, because at least one payment period is required.
C. Maria, because in a periodic tenancy no notice is required to end it.
D. Apartment, because two months is the typical statutory notice required.
While looking for apartments, Brittany finds one that she likes. The building manager
agrees to an option contract in which he will hold the apartment for Brittany for four
days in return for $100. At the end of the fourth day, Brittany finds another apartment
that she likes better and signs a lease with its building manager. Because Brittany’s
contract with the original building manager is an option contract, the building manager:
A. is under no legal obligation to return more than $50 to Brittany.
B. is under legal obligation to return Brittany’s $100 payment.
C. is under legal obligation to return half of Brittany’s $100 payment.
D. is under no legal obligation to return Brittany’s $100 payment.
In a written contract, Hogan agrees to sell Jason kitchen cabinets and to deliver them
before December 21. On October 17, Hogan tells Jason that he will not sell him the
cabinets. Which of the following can Jason do in this situation?
A. He can sue Hogan for breach of contract, but must wait until December 21 to do so.
B. He can sue Hogan for breach of contract immediately.
C. He can sue Hogan for breach of contract if he is unable to find another vendor by
December 21.
D. He cannot sue Hogan for breach of contract, since Hogan served an advanced notice
to Jason.
The _____ reads that the Congress is empowered to lay and collect taxes, duties,
imposts, and excises, to pay the debts.
A. necessary and proper clause
B. general welfare clause
C. commerce clause
D. supremacy clause
Carlos instructs his sales agent, Edgar, not to sell on credit to Andrew because Carlos
has experienced problems collecting from Andrew for prior purchases. Edgar sells on
credit to Andrew, who pays properly. Has Edgar violated any obligation to Carlos?
A. He has not violated any obligation since Andrew paid properly.
B. He has violated the duty to exercise reasonable judgment.
C. He has not violated any obligation since Edgar did not evaluate Andrew’s credit
worthiness correctly.
D. He has violated the duty to obey all instructions of the principal.
Gabriel applies for a home loan and, Mark signs the agreement promising to pay off the
debt in case Gabriel fails to do so. In this case Mark is:
A. the cosigner.
B. the oblige.
C. the obligor.
D. the assignor.
Which of the following is true about the legality of an agreement?
A. An agreement is not divisible if the legal part of a contract can be removed from the
illegal part without changing the nature of the contract.
B. The court will not enforce any agreement or contract that is either fully or partially
illegal.
C. An agreement can sometimes be partly legal and partly illegal.
D. A court has to enforce both the illegal and the legal part of the contract.
Aqua LLC is a member-managed LLC. Andrew, a member, agrees to resolve a dispute
with a customer by submitting the claim to binding arbitration. This action by Andrew:
A. binds Aqua.
B. is not binding on Aqua.
C. bindsAqua if the claim is under $1,000.
D. is not binding on Aqua until approved by the court.
Tom is a potential investor in Delta Co. Tom should receive a:
A. contract summary.
B. prospectus.
C. closing settlement statement.
D. registration statement.
Lori went into an electronics store that had a sign posted on the wall declaring “All
sales final!” She told the salesperson that she was looking for a radio headset that she
could wear while working out in her health club. The salesperson selected a headset and
told Lori that it would get good reception even in her fitness center. When Lori tried to
use the headset the next day, she found that she could not get any stations and only
heard static. Which of the following is true of this situation?
A. Lori will be unable to return the headset because the store’s policy said “All sales
final!” at the time of the purchase.
B. Lori may not be able to claim a refund since the headset will be declared as
merchantable.
C. Lori can claim a refund on the basis of an implied warranty of fitness for a particular
purpose created by the salesperson.
D. Lori can claim a refund from the store based on limited warranty that is practiced in
the electronics industry.
Which of the following developed the Revised Uniform Partnership Act?
A. National Conference of Commissioners on Uniform State Laws
B. American Bar Association
C. NCCUSL and the American Bar Association
D. NLRB and NCCUSL
Which of the following elements of a contract require an offeror to make a valid offer to
enter a contract in terms that are clear and ambiguous and communicated to the offeree,
and the offer has been properly made by the offeror and accepted properly by the
offeree.
A. Legality
B. Capacity
C. Consideration
D. Mutual Assent
A(n) _____ is a transfer of an interest in property for the purpose of creating a security
for a debt.
A. mortgage
B. secured loan
C. security interest
D. unsecured loan
A defense that may not be used against a holder in due course of a negotiable
instrument is a:
A. limited defense.
B. personal defense.
C. real defense.
D. secondary defense.
Janice requires information about the voting rights of members of Titan, LLC. Which
document will contain this information?
A. Articles of incorporation
B. Articles of organization
C. Bylaws
D. Operating agreement
