1) The federal criminal code lists more than four thousand criminal offenses, all of
which require a specific mental state.
2) In the context of Section 16(b) of the Securities Exchange Act of 1934, insiders
include officers, directors, and large stockholders of Section 12 corporations.
3) When an agreement is ambiguous as go whether it is a shipment or a destination
contract, courts will normally presume that it is a destination contract.
4) The state cannot dissolve a corporation under any circumstances.
5) It is presumed that a co-tenancy is a tenancy in common unless there is specific
language indicating the intent to establish a joint tenancy.
6) For a creditor to have an enforceable security interest, the debtor must have rights in
the collateral.
7) In general, it is sufficient to provide only the debtor’s trade name (or fictitious name)
in a financing statement for perfection.
8) To recover workers’ compensation, an employee must prove that an injury did not
occur on the job or in the course of employment.
9) Fact Pattern 22-B1
Economy Bank issues a letter of credit in favor of Finish & Refining Company, a U.S.
firm, to facilitate an international sales contract to buy resources from Global Mining,
Ltd., a British company.
Refer to Fact Pattern 22-B1. Economy Bank is bound to
a.make sure that the parties perform the contract.
b.verify with Finish & Refining that the transaction has been completed.
c.make payment when Global Mining presents the proper documents.
d.pay Global Mining whenever it asks to be paid.
10) Tropic Breeze Residences, Inc., owns apartment buildings. Umberto leases one of
Tropic Breeze’s apartments. Umberto’s transfer of his interest in the lease to Vito for a
period shorter than the lease term is
a.an assignment.
b.a license.
c.adverse possession.
d.a sublease.
11) Clark hires Dimitri to act as his agent to purchase Expo Sports Arena, Inc. Clark
tells Dimitri to reveal that he is buying the firm and its assets on behalf of a third party
and to tell the seller who that third party is. Clark is
a. a disclosed principal.
b. an apparent principal.
c. an undisclosed principal.
d. a partially disclosed principal.
12) Myles obtains a property insurance policy from Nova Insurance Company for
Myles’s restored 1957 Chevy. Nova can cancel the policy
a.if Myles increases the risk assumed by the Nova.
b.if Myles files a claim under the policy.
c.if Myles appears as a witness in a case brought against Nova.
d.under no circumstances.
13) Reno is the beneficiary of a life insurance policy on Sula’s life obtained from
Traditional Insurance Company. The underwriter of this policy is
a.Reno.
b.Sula.
c.Traditional Insurance.
d.the agent or broker through whom the policy was obtained.
14) 14.Sashacontracts to buy a franchise from TrustMe Financial Consultants Inc. The
contract is silent on the issue of territorial rights. When TrustMe allows a competing
franchise to be established near Sasha’soffice, she suffers a significant loss in profits.
This is most likely a violation of
a.no law.
b.the ban on certain types of anticompetitive agreements.
c.the Federal Trade Commission’s Franchise Rule.
d.the implied covenant of good faith and fair dealing.
15) 18.
Fact Pattern 16-B1
Alain and Brie sign a contract for the sale of Alain’s Coffee Caf© to Brie. The parties
intend their written contract to be a final statement of most, but not all, of the terms of
their agreement-Alain must first buy the building from Developed Commercial
Properties, Inc., after which Alain and Brie will negotiate a price.
Refer to Fact Pattern 16-B1. Brie later disputes some of the provisions of the deal with
Alain. If the dispute results in litigation, a court will most likely admit evidence of
additional terms that are
a.ambiguous.
b.consistent.
c.contradictory.
d.clear.
16) Flores forges Grendel’s signature on a check “payable to the order of Flores” drawn
on Grendel’s account in Harbortown Bank. Most likely, if the bank pays the check
a.the Federal Reserve will reimburse all parties for their costs.
b.Grendel and the bank will each suffer half of the amount of the loss.
c.Grendel will be liable for the amount.
d.the bank will have to recredit Grendel’s account.
17) On April 1 Richard arranges to buy a sixteen-speed bike from his neighbor Phil for
$500. Phil agrees to deliver the bike on May 1 . Richard writes a draft for $500 payable
to Phil on May 1 . In this situation, the draft is
a.acertificate of deposit.
b.atime draft.
c.asight draft.
d.apromissory note.
18) Amelia writes a check to Barry on her account at Community Savings Bank. The
bank dishonors the check even though Amelia has sufficient funds in her account. The
bank is
a.liable to Amelia.
b.liable to itself.
c.liable to the payee on Amelia’s next check.
d.not liable.
19) GR8 Stores, Inc., hires Haul-Way Company, a common carrier, to transport 500
Intelo Game consoles from San Diego to Phoenix. En route, a pothole causes the truck
to crash, damaging the goods. Liability for the damage most likely rests with
a.GR8 Stores and Haul-Way.
b.GR8 Stores only.
c.Haul-Way only.
d.Intelo only.
20) Stan, an air-conditioning and heating technician, files a suit against Temp-Set
Corporation, alleging that its thermostats are unreasonably dangerous due to the
possibility of electrical shock. Temp-Set’s best defense is most likely
a.assumption of risk.
b.knowledgeable user.
c.commonly known danger.
d.none of the choices.
21) Fine Food Company, Gourmet Cheeses, Inc., and Healthy Eats, Inc. agree to
exchange information and share advertising. This trade association is
a.a deal that neither restrains trade nor harms competition.
b.a legal restraint of trade.
c.a per se violation of antitrust law.
d.subject to analysis under the rule of reason.
22) Dane transfers a draft by signing it and delivering it to Ebony. Ebony is
a.an indorser.
b.an indorsee.
c.a promisee.
d.a promisor.
23) Char and Doug are officers of Eden Cruise & Travel Corporation. As corporate
officers, the rights of Char and Doug are
a.determined by their employment contracts.
b.specified in state corporation statutes.
c.the same as those of the directors.
d.the same as those of the shareholders.
24) One can join a partnership even if all other partners do not consent.
25) The element of bargained-for exchange distinguishes contracts from gifts.
26) A familiar example of an agent is the owner of a corporation.
27) Whether a contract’s limitation-of-liability clause will be enforced depends on the
type of breach that is excused by the provision.
28) The intent to associate is a key element of a partnership.
29) An Internet service provider (ISP) is not liable for copyright infringement by its
customer unless the ISP is aware of the subscriber ‘s violation.
30) Statutes of limitations in all states require a debtor to pay a debt within a specified
period of time.