Scienter is the element of fraud that requires that the person who makes the
misrepresentation knows that it is false or has reckless indifference as to its truthfulness.
a. True
b. False
Scott buys a television from Joe’s TV Store, giving Joe a check for $550. Joe uses a
special indorsement and negotiates the check to Tom. Tom carefully changes the
amount to read $1550 and loses the check on the way to the bank. Harry picks it up and
tries to cash it. What will he get?
a. Scott will have to pay him $550.
b. Joe will have to pay him $550.
c. Tom will have to pay him $1550.
d. No one will have to pay Harry.
Anita is hired to manage an unincorporated dress boutique owned by Betty. The two
agree that Anita will receive one-third of the net profits, which amount is to be paid to
her on a monthly basis.
a. Is Anita a partner? Explain.
b. If the boutique has a loss instead of a profit, would Anita have to share the loss?
Explain.
The UCC and the Restatement make no provision for supplying terms omitted by the
parties’ contract.
a. True
b. False
Dunbar Corp. is a debtor in relation to Martina, who is the holder of an income bond
issued by Dunbar.
a. True
b. False
If a witness dies prior to the death of the testator, his signature is not counted as a
witness unless proof of his handwriting is submitted.
a. True
b. False
The Supreme Court interprets the Commerce Clause:
a. narrowly.
b. as granting virtually complete power to Congress to regulate the economy.
c. as restricting Congress to the coining of money and taxation.
d. as granting Congress the power to take property under eminent domain.
If a minor principal disaffirms a contract and returns the consideration, the surety is
discharged.
a. True
b. False
If a seller occupies a fiduciary relationship with the buyer and fails to make full
disclosure to the buyer, then the latter will be able to avoid the transaction.
a. True
b. False
Which of the following would NOT be included in the powers of the federal
government?
a. Power to tax a product produced and consumed exclusively in Alaska.
b. Power to grant government contracts to minority corporations.
c. Power to condemn a building to make way for an interstate highway.
d. Power to tax only incomes above $6,000.
Lydia makes a contract to purchase a used car on her seventeenth birthday. Six months
later, her ratification of the contract can be effectively implied by her continuing
payments.
a. True
b. False
The Star General Partnership had assets worth $34,000 after liquidation. Frank, Gene,
and Hank, equal partners, each contributed $3,000 into the capital pool at the inception
of the business. Gene later loaned the business $5,000. They owe $23,000 to creditors.
What will Gene get in distribution, assuming there is no agreement on the distribution
of profits?
a. $5,000
b. $7,000
c. $8,000
d. $11,000
The federal courts and the state courts can have concurrent jurisdiction over the same
case.
a. True
b. False
The Restatement and the UCC are both currently authoritative sources of contract law.
a. True
b. False
An incompetent person who lacks understanding of a contract and its consequences can
avoid it even if the other party had no reason to know of the incompetent’s mental
condition.
a. True
b. False
When may a trustee not avoid a transfer?
a. When such payment is of a debt incurred in the ordinary course of business or
financial affairs of the debtor and the transferee
b. When such payment is not made in the ordinary course of business or financial
affairs of the debtor and transferee
c. When the transfer is made according to extraordinary business terms
d. When the transfer is made for new value.
A totten trust is revocable by the creator.
a. True
b. False
Barbara owes Arturo $2,000. On July 1, Arturo assigns the debt to Charles. Thereafter
on July 15, Arturo assigns the same right to Dennis, who in good faith gives value for it
and knows nothing about the first assignee. Dennis immediately notifies Barbara of the
assignment. Under:
a. all of the rules, Charles has priority since he was the first assignee in time.
b. the majority rule, Dennis has priority.
c. the English Rule, Dennis has priority.
d. the English Rule, Charles has priority.
In which of the following ways do debt and equity securities necessarily differ?
a. In their characteristic of being sources for corporate financing.
b. In whether they represent an ownership interest.
c. Voting rights.
d. Debt and equity securities do not differ in any of these ways.
Landlords can evict a tenant if:
a. the tenant fails to pay the rent.
b. the lease expires and the tenant refuses to move out.
c. the tenant keeps a pet in violation of the lease and refuses to get rid of it.
d. All of these.
In an action for damages in a private nuisance suit, the plaintiff is required to prove that
the defendant’s conduct is unreasonable.
a. True
b. False
The three distinct and independent branches of the United States government are:
a. the executive branch, the House of Representatives, and the U.S. Senate.
b. the federal judiciary, the House of Representatives, and the U.S. Senate.
c. the federal judiciary, the Congress, and the executive branch.
d. the state government, the Congress, and the executive branch.
The UCC Battle of the Forms rule:
a. changes the mirror image rule.
b. may yield different results depending on whether the parties are merchants.
c. may result in formation of a contract different from the terms of the offer.
d. All of these.
Types of securities that are exempt from registration under the federal securities laws
include:
a. securities of domestic banks.
b. securities of a charitable organization.
c. bonds issued by a city.
d. All of these are exempt.
Under federal law, employers may require any employee to undergo a lie detector test.
a. True
b. False
Identify each of the following corporations by type.
a. Dr. Smith and Dr. Jones are medical doctors who practice together. They incorporate
theirmedical practice so that they can offer themselves and their employees better
employment benefits.
b. A group of concerned citizens obtains a corporate charter from the state to form a
local WaterPlanning and Management Corporation that is authorized to do water
planning on a local level, to grant permits for such purposes as the installation of
ditches, and to encourage good water
usage practices in their jurisdictional area.
c.Agatha and Betty, who are sisters, form a corporation in which they are the sole
shareholders. They plan to operate a large retail store that sells collectibles. Agatha is
the president and Bettyis the chairperson of the board of directors.
d. Shelby and Trent form a corporation to prevent spouse and child abuse. The
corporation operates a shelter for battered women and homeless children.
e. Zebron Corporation is incorporated in the State of West Virginia. It decides to expand
itsbusiness to Kentucky. What type of corporation is it in West Virginia? What type of
corporation is it in Kentucky
While certain debts of an individual are not dischargeable under Chapters 7, 11, and 12,
all debts are dischargeable under Chapter 13’s “hardship discharge” provisions.
a. True
b. False
Identification may be made by either the seller or the buyer.
a. True
b. False
What sort of liability does an accountant have under the Securities Exchange Act of
1934?
a. Civil liability where there is scienter
b. Criminal liability where there is a willful violation
c. Both of these are correct.
d. Neither of these is correct.
If X Co. agrees with S Co. that X will not sell beer in Wisconsin if S will not sell beer
in Colorado, under the
Sherman Act, this is:
a. no violation.
b. a perseillegal horizontal price fixing agreement.
c. a perse illegal horizontal market allocation.
d. a perse illegal horizontal tying agreement.
If a raccoon gets loose from a cage and harms someone, the owner can escape liability
by showing that he took great care to keep the animal confined.
a. True
b. False