By the concept of ____________, a transferee of a negotiable instrument can acquire
greater rights than the transferor had.
a. holder in due course
b. assignment
c. commercial utility
d. sight drafts
Relationships that may lead to a court’s careful scrutinization of contracts between the
parties to make sure undue influence was not present include all but:
a. agent and principal.
b. salesperson and customer.
c. parent and child.
d. doctor and patient.
Under the Fair Credit Billing Act, if a consumer reports an error in the amount on his
charge account bill, until the creditor responds, the creditor cannot:
a. take any action to collect the disputed amount.
b. restrict the use of an open-ended credit account because the disputed amount is
unpaid.
c. report the disputed amount as delinquent.
d. All of these are correct.
Which of the following is correct with regard to a contract entered into with a third
person by an agent of an undisclosed principal?
a. The agent has no liability to the third person if the agent has acted within the scope of
her authority.
b. The agent is personally liable upon the contract.
c. Under the Second Restatement, once the third person learns of the existence and
identity of the principal, that third person may hold both the principal and the agent to
the performance of the contract.
d. Under the Third Restatement, if the third party obtains a judgment against the
principal, the agent is discharged from liability to that third party.
Carolyn agrees to sell Marianne an antique handmade lace tablecloth for $1,500. When
Carolyn discovers that her cousin wants it too, she breaks the contract with Marianne.
Marianne can ask the court to order:
a. injunctive relief.
b. specific performance.
c. restitution.
d. equitable rescission.
Bill lends Harvey $1,500 and the loan is secured by Harvey’s furniture. If Bill files a
financing statement on June 30, 2009 how long will it be effective?
a. Until December 30, 2009.
b. Until June 30, 2014.
c. Until June 30, 2019, if a continuation statement is filed.
d. Both (b) and (c).
Losses due to computer crimes are estimated to be:
a. in the millions of dollars.
b. in the tens of billions of dollars.
c. in the trillions of dollars.
d. decreasing because of stricter security measures now in place.
The characteristics of a spendthrift trust include which of the following?
a. Spendthrift provisions are not valid in most states.
b. Creditors can never seize money from a spendthrift trust.
c. A settlor may provide, in a spendthrift trust, that the beneficiary cannot, by
assignment or otherwise, impair her rights to receive principal or income.
d. All of the above.
As the result of a seller’s breach, a buyer may ask for incidental damages. Incidental
damages include costs incurred in:
a. storing goods in a warehouse.
b. making calls to obtain replacement goods.
c. inspecting the goods.
d. All of the above.
Percy, age 17, purchased a used mobile home from a mobile home dealer for $20,000.
This price, however, is twice the reasonable value of that mobile home. One month
later, Percy wishes to disaffirm the contract. If the mobile home is considered a
necessary, then:
a. Percy can disaffirm the contract based on the wrongful act of the dealer.
b. Percy can disaffirm the contract because the minor can live in an apartment rather
than a mobile home.
c. Percy must keep the mobile home but is only liable for the reasonable value of the
mobile home.
d. Percy must keep the mobile home and abide by the original terms of the contract.
The safe harbor eliminates civil liability if a forward-looking statement is:
a. material.
b. made without actual knowledge that it was false or misleading.
c. unidentified as a forward-looking statement
d. All of the above.
In the In Re L. B. Trucking, Inc. case:
a. warranty provisions of the UCC did not apply because the sale of goods was merely
incidental to the service aspect of the contract.
b. Thomas’s statements were found by the court to be mere puffing or sales talk.
c. Southern States was found to have breached both express and implied warranties.
d. Durham did not rely on Thomas’s statements, so they could not be considered
warranties.
Under Chapter 7, the court will not grant the debtor a discharge if:
a. the debtor is not an individual.
b. the debtor has destroyed, concealed, or failed to keep records.
c. the debtor has transferred, removed, or concealed any of his property with intent to
defraud his creditors within 12 months before the filing of the bankruptcy petition.
d. All of the above.
For how long is a written stop payment order valid?
a. One month.
b. Six months.
c. One year.
d. Indefinitely.
The states may enact legislation concerning a subject in which there is a federal statute
if:
a. Congress has not clearly indicated that it intends to control that subject matter.
b. the states petition the Supreme Court for permission.
c. the state legislation falls within the “necessary and proper” clause.
d. the states reserve the right at the time the federal statute is enacted.
Which of the following is NOT an effective restrictive indorsement?
a. “Pay only Jane Doe.”
b. “For deposit.”
c. “Pay any bank.”
d. “For collection.”
A trustee has a duty to make proper allocation of benefits and burdens between income
beneficiaries and remaindermen. Which of the following statements is true concerning
this allocation?
a. Current expenses are chargeable to the remaindermen.
b. Extraordinary expenses are chargeable to the remaindermen.
c. Money paid for the use of trust property is chargeable to the remaindermen.
d. Any profit from the use of trust property is allocated to the remaindermen.
Under which ethical system would it be ethical to compel a few citizens to undergo
painful or fatal medical tests in order to develop cures for the rest of the world?
a. Utilitarianism.
b. Ethical fundamentalism.
c. Distributive justice.
d. Libertarianism.
Mark, a resident of Illinois, while driving on the freeway, hits Bill, a resident of
Wisconsin, and totally destroys Bill’s brand new vehicle. Bill may bring suit in federal
district court:
a. because of federal question jurisdiction.
b. because there is always federal jurisdiction if there is diversity of citizenship.
c. if the amount in controversy is over $75,000.
d. if the accident occurred outside of Illinois or Wisconsin.
Permissible lender’s expenses, which would NOT be considered in determining the rate
of interest under usury statutes, include all but which of the following?
a. Cost of title examination.
b. Reasonable cost of drawing up the necessary documents.
c. A charge to the borrower of $500 to investigate the borrower’s credit, when it actually
cost the lender $75.
d. All of the above charges would be considered in determining the rate of interest
under usury statutes.
Which of the following is the basic governing document of a corporation?
a. A subscription.
b. A charter, after filing.
c. The set of bylaws.
d. A certificate of authority.
Theodore, as treasurer of Komand Corporation, had the duty to invest corporate
earnings as he deemed best for the company. When Komand Corporation went public,
the new board decided that a committee of the officers would make such investment
decisions. If Theodore thereafter unilaterally contracted to purchase investment
securities with corporate earnings as he had done many times before, such contract
would be valid:
a. since Theodore would have express authority.
b. since Theodore had implied authority.
c. under apparent authority if the seller knew of Theodore’s past transactions.
d. because of ratification if the board did not know of his actions.
An undisclosed principal may result in which of the following?
a. Liability of the agent for any contract made on behalf of such a principal.
b. The agent’s being declared incompetent by a court of law.
c. A declaration order by the court for the principal to show a guarantee.
d. All of the above.
If a lawyer were being held liable for a misstatement in a registration statement, her
defense(s) would be:
a. she was only following directions.
b. she had reasonable grounds to believe and did believe her information was true.
c. she was not responsible for the portion that contained the misstatement.
d. Both (b) and (c).
Marge wishes to raise some money to begin mass producing her prize-winning jellies
and jams. She offers her neighbors a portion of her profits if they will put up $2,000
each towards her endeavor. Is their investment a ‘security”?
a. Yes, since Marge will do all the work.
b. Yes, because her neighbors will have a security interest in the jelly.
c. No, since the neighbors are putting no effort into it.
d. No, because Marge is not issuing stock certificates.
Ron says to Matt, “If you design and landscape my front lawn by the time I return from
Paris next month, I will pay you $5,000.” Matt does not respond but has the landscaping
done by the time Ron returns. This is an example of a unilateral contract.
Rich, a contractor, has a contract with Ron, a realtor, to construct a new condominium
complex. The contract provides that Rich must furnish a certificate of occupancy and
conformity with the local fire code before Ron has an obligation to pay. The furnishing
of the certificate is an implied-in-fact condition subsequent to the construction of the
building.
Under the common law, a landlord is under an obligation to provide or maintain the
premises in a livable condition.
Future goods can be the subject of a present sale.
“Actual malice” in defamation cases against the press requires a showing that a reporter
intentionally lied or recklessly disregarded the truth.
Claudia hires Greg to plant a tree in her yard. Greg discovers a bracelet buried in the
ground. Greg owns the bracelet since he is the finder.