1) the u.s. constitution recognizes the states power to make law in certain areas.
2) the agency relationship may be formed even if the parties do not subjectively intend
to create it.
3) jones purchased a second hand car from ralph with an assurance of no problems in
the car. jones will succeed in his claim under express warranty.
4) a foreign corporation must incorporate in each state in which it does intrastate
business.
5) the insurance relationship is contractual.
6) securities act rule 506 requires an issuer to sell to no more than 35 accredited
investors.
7) kevin offered to mow the lawn for his uncle jordans for $100. to his offer, uncle
jordan replied by saying i know youre taking advantage of me but i accept. uncle jordan
has indeed accepted the offer made by kevin.
8) the property held in trust is called the _____.
a.attachment
b.lien
c.corpus
d.accession
9) which of the following promises is subject to a strict performance standard? assume
that performance of the promise is not an express condition of the promisees duty to
perform.
a.a promise to build a road
b.a promise to paint a house
c.a promise to destroy a building
d.a promise to deliver a deed
10) what was the original purpose of staggered terms?
a.to permit continuity of management.
b.to help insurgent shareholders transform the management of the corporation.
c.to help minority shareholders exercise cumulative voting power.
d.to make it easier for the corporation to remove existing directors.
11) s agrees to sell b 10,000 widgets at a price of $1.00 per widget. after b breaches the
contract, s resells the widgets for $0.90 per widget. this costs s an additional $100 in
sales commissions. what amount can s recover from b?
a.nothing
b.$100
c.$1,100
d.$1,000
12) the statutory close corporation supplement to the mbca permits a corporation with
_____ shareholders to elect to become a close corporation.
a.fewer than 100
b.50 to 75
c.75 to 100
d.fewer than 50
13) abe and carlos want to form a general partnership. what must they do in order to
create this legal form of business?
a.they must get a partnership license from the secretary of state.
b.they must sign a written agreement and file it with the secretary of state.
c.they must first orally agree to become partners and then formulate a contract.
d.they can start a partnership without any formalities.
14) in case of conflict of ownership between employee and employer over a trade
secret, the employer is normally held to be the owner when:
a.the employee agreed to divulge or use trade secrets.
b.other employees had no contribution in the work.
c.the employee was hired to do work related to it.
d.the employee was not given adequate compensation for the work.
15) clint wrote a check to pay for his phone bill. the amount of the bill was $50. he
wrote out the words fifty dollars only but he also wrote $60 in the area for numbers. as
a result, the check:
a.is disqualified as a negotiable instrument.
b.qualifies as a negotiable instrument, and the payee can collect $50.
c.qualifies as a negotiable instrument, and the payee can collect $60.
d.is disqualified as a negotiable instrument, unless clints intent is ascertained.
16) bobs threat to breach an existing contract unless lauren makes another contract with
bob is considered:
a.an element of duress, because breach of an existing contract violates a criminal
statute.
b.an element of duress, depending mainly on the coerciveness of the threat.
c.not an element of duress, because it does not involve physical force.
d.not an element of duress, because breaking a contract normally does not violate a
criminal statute.
17) an administrative agency is most likely to use a subpoena to compel information
from:
a.public interest groups.
b.businesses subject to regulation.
c.customers or competitors.
d.other regulatory agencies.
18) when does an insurers contractual obligations to the insured commence?
a.when the insurance contract is drafted.
b.when the insurance application is dispatched.
c.when the insured receives the insurance application.
d.when the insurer accepts the insurance contract.
19) a gift causa mortis is a gift made in:
a.case of a birth.
b.anticipation of birth.
c.fear of death.
d.contemplation of death.
20) which of the following is correct concerning qualified opinions, disclaimers of
opinions, and unaudited financial statements?
a.when an auditor issues a qualified opinion regarding audited financial statements, the
auditor is relieved of responsibility for mistakes in financial statements only to the
extent the qualification is specifically expressed in the opinion letter.
b.an auditor who, due to the limited scope of an audit, disclaims any opinion as to the
ability of the financial statements to present the financial position of a company has no
liability for misstatements or omissions in the financial statements.
c.opinion letters stating that an auditor totally disclaims his/her liability for false and
misleading financial statements excuse an accountant from the duty to exercise ordinary
skill and care.
d.an auditor who prepares unaudited statements automatically creates a disclaimer as to
the accuracy of those statements.
21) which of the following distinguishes the restatement (third) from section 402a?
a.it covers design defects.
b.it covers manufacturing defects.
c.it does not require that the product be unreasonably dangerous.
d.it covers sellers engaged in selling the product that harmed the plaintiff.
22) how are limited liability companies (llcs) taxed?
a.they are always taxed the same as general partnerships.
b.they are always taxed the same as corporations.
c.they are taxed either as partnerships or as corporations, at the option of the llc.
d.they are taxed either as partnerships or sole proprietorships, at the option of the llc.
23) a third party is categorized as a donee beneficiary when:
a.the promisees primary purpose in contracting is to make a gift of the agreed-on
performance to the third party.
b.the benefit derived by the third party was merely an unintended by-product of a
contract that was created for the benefit of those who were parties to it.
c.he/she is unable to establish that the contract was made with the intent to benefit
him/her.
d.the promisors performance is intended to satisfy a legal duty that the promisee owes
to the third party.
24) melissas home is located in small and quiet neighborhood which has been declared
a residential area by the local zoning ordinances. she wants to convert her patio into a
small bakery for her neighbors who have often expressed their admiration for her
baking skills. does melissa have any solution?
a.yes, she can take permission for a variance.
b.yes, she can try for an amendment.
c.no, she cannot go against a zoning ordinance.
d.no, a residential zone can never be used for commercial purposes.
25) an exculpatory clause that protects a person from liability for fraud is:
a.valid but unenforceable.
b.valid if it is in writing.
c.against public policy.
d.valid if both parties agree.
26) ojay corp., a-c, inc., and kato co. are competitors in the production and sale of
knives. a year ago, the three firms agreed to share pricing information with each other
on a periodic basis. as a result of this agreed sharing of information, the three
companies regularly charge the same prices, including a minimum price that none of the
three goes below and a maximum price that none of the three goes above. a fourth
producer of knives, bronco co., the plaintiff in a sherman act section 1 files a lawsuit
against ojay, a-c, and kato. bronco claims in the lawsuit that the foregoing facts
constituted price-fixing and bronco suffered direct antitrust injury as a result. assuming
that bronco is a proper plaintiff, which of the following is an accurate analysis under
current antitrust law?
a.even if the defendants were involved only in conscious parallelism concerning pricing
policies, they will be held liable under section 1 because their behavior caused harm to
the plaintiff.
b.if the court believes that the evidence demonstrates an agreement to fix prices, it will
hold the defendants liable under section 1 regardless of the business justifications for
their agreement.
c.the defendants cannot be held liable under section 1, because the facts indicate that
they agreed to share pricing information without agreeing to fix prices or making any
agreement to that effect.
d.the defendants should succeed with an argument that they are not liable for any fixing
of maximum prices, because any such price-fixing would have finally benefited
consumers.
27)
28) the board of directors of laylow corporation issued 1,000 shares representing 10
percent of the corporation to don in exchange for an unsecured promissory note to pay
laylow $50,000 within the next 20 years. don is the son of charles, owner of 70 percent
of the shares of the corporation. the total book value of the corporation at the time
laylow issued the shares was $5,000,000. alan and bob, owners of 20 percent of the
total shares, discovered the transaction one month after it occurred. alan and bob sued
don on behalf of laylow corporation seeking to invalidate the transaction. should the
court invalidate it? discuss.
29) paul contracts to sell his home to dee for $100,000. the sale, which was negotiated
by a broker for two parties who never met, was set to close on september 1. on july 15,
paul discovers the identity of the buyer, and immediately writes dee to tell him that
theres no way hell ever sell his house to some hippy. must dee wait until september 1 to
sue paul for breach of contract?
30) fantase corporation has a union contract. to avoid the contract, the shareholders plan
to form a new corporation. they also elect to transfer their business interest to the new
corporation. is the new corporation liable to the employees for union contract?
31) discuss one criticism of the first-to-file policy.