Isidro issued a negotiable promissory note to his attorney in return for the attorney’s
promise to perform legal services. The attorney never rendered the legal services but
quickly negotiated the note to Anna, a holder in due course. Anna and Mark were
involved in business negotiations and Anna offered to purchase a car from Mark. She
offered as part payment for the car the note issued by Isidro. By coincidence, Mark
knew both Isidro and the attorney and the facts concerning the note and the
unperformed legal services. Despite this, Mark accepted a negotiation of the note from
Anna. Isidro refused to pay the note and Mark eventually sued Isidro to collect. What is
the probable outcome?
Which of the following statements regarding the Foreign Corrupt Practices Act is true?
a. It applies only to foreign officials in this country.
b. It applies only to foreign officials outside this country.
c. It applies only to “grease” payments.
d. None of the above statements is true.
Customers are precluded from asserting unauthorized signatures or alterations if they do
not report them within __________ from the time the bank statement is received.
a. fourteen (14) days
b. forty (40) days
c. six (6) months
d. one (1) year
Each limited partner in a limited partnership is entitled to which of the following?
a. A share of the profits.
b. The right to sue the general partner to protect the limited partners€ interest.
c. Both a. and b.
d. Neither a. nor b.
The substitution of an old contract for a new one that replaces an obligation or a party
for another is a:
a. novation.
b. warranty.
c. assignment.
d. delegation of duties.
If an involuntary bankruptcy petition is dismissed other than by consent of all
petitioning creditors and the debtor, the court may award which of the following to the
debtor?
a. Costs
b. Reasonable attorney fees
c. Damages
d. All of the above
In general, a mortgagor is under a duty to:
a. make improvements to the mortgaged property.
b. insure the property.
c. pay taxes and assessments on the property.
d. reimburse the mortgagee for expenditures made by the mortgagee for valuable and
lasting improvements.
To bring a tort action for malpractice, a plaintiff must show that the defendant’s breach
was at least:
a. intentional.
b. negligent.
c. reckless.
d. fraudulent.
The right to performance under a contract can be assigned:
a. if the burden of performance is not materially increased.
b. if the contract requires the performance of personal services.
c. if the contract provides for the extension of credit.
d. all of the above.
Claims for wages, salaries, or commissions have priority in the payment of unsecured
debts over:
a. costs and expenses of the administration of the bankruptcy case.
b. claims arising in the ordinary course of business after commencement of the case.
c. claims arising for contributions to employee benefit plans.
d. all of the above.
Which is not a true statement about a warehouser?
a. A warehouser is a bailee.
b. A warehouser may issue a negotiable or nonnegotiable receipt.
c. A warehouser is an insurer of the goods.
d. A warehouser is liable for damaged goods if damage is caused by the warehouser’s
negligence.
The failure to have a license will not render agreements void if the license:
a. is based on formal education
b. is required for engaging in a particular business or trade
c. is a regulatory license
d. is readily obtainable by anyone who offers payment of a required fee
A principal is liable for crimes of an agent:
a. if committed at the principal€s direction.
b. if the agent is an employee and sells liquor to a minor without permission.
c. if the agent in the course of employment violates environmental protection laws.
d. all of the above.
Which of the following statements regarding limited partnerships is true?
a. The words limited partnership or simply LP must appear in the firm€s name.
b. General partners cannot avoid personal liability by incorporating.
c. Limited partners can lose their liability limitation if they participate in the control of
the business.
d. All of the statements are true.
If a buyer procures the same or similar goods as those involved in the sales contract
breached by the seller, the buyer:
a. loses all rights to prosecute for breach.
b. is said to have validated the seller’s action.
c. is said to have covered.
d. is also in breach.
A transfer of possession, but not title, is called:
a. a bailment.
b. an option to purchase.
c. a gift
d. all of the above.
The Lanham Act grants protection for:
a. marks.
b. patents.
c. copyrights.
d. trade secrets.
Taylor, a securities lawyer for a major Wall Street law firm, worked on numerous
successful takeover bids of companies listed on the New York Stock Exchange. Prior to
the public announcement of the takeover bids, Taylor provided information to Rogers
(his stockbroker) and to Price (his mistress) about certain planned takeover bids on
which he had provided legal services. Rogers, who was aware of the relationship
between Taylor and Price, made purchases of the target companies on Rogers’ and
Price’s behalf, netting them more than a million dollars in profits each. The SEC brings
an action against Taylor, Rogers, and Price under Rule 10b-5 and the Insider Trading
Sanctions Act of 1984. Taylor defends that he is an outsider not subject to the 1984 law
and Rule 10b-5, and that he received no personal benefit. Rogers and Price defend that
they were merely acting on stock market tips received from a person who did not
personally benefit from the disclosure. Decide.
Different rules of law govern the vicarious liability of principals and employers.
A note or memorandum does not have to contain all the essential terms of the contract
to be valid.
Statutes are the only source of law.
If a person upon whom the assurance is demanded does not have a good reputation or
economic position, a guarantee of performance or a pledge of security may be required.
For business crimes, managers cannot be held criminally responsible for the conduct of
their employees.
One of the characteristics of the €living€ Constitution is limited government.
State laws that attempt to indemnify corporate directors against personal monetary
liability for gross negligence are void as contrary to public policy.
New York follows the €contact€ rule in determining when third persons can sue
accountants for negligence.