Self-Centered President. Tina is the new president of “We Manage You,” a corporation
set up to manage physician practices. Tina has never been very concerned with minority
shareholders because she does not believe that they have any influence over the
company because they cannot even elect a director. She is told, however, that the
corporation has a practice of cumulative voting. An election is coming up in which 10
directors will be elected. Minority shareholders own 2,000 shares while majority
shareholders own 8,000 shares. Tina tells her vice president, George, that she wants to
ignore minority shareholders and focus her interests on majority shareholders and the
directors. She also tells George that she wants to be particularly conscientious toward
directors because the directors appoint officers, and she does not believe that she owes
any actual duties to shareholders. She further orders George to destroy some documents
subpoenaed in a criminal investigation against the company for illegal tax evasion.
When George protests, Tina tells him not to worry because officers cannot be held
responsible for criminal actions so long as the actions are done as part of the duties of
an officer. She explains to him that only the corporation can be charged with liability in
such cases. Is Tina accurate that she owes no duties to shareholders?
A. Yes, she is accurate because it is the directors who owe a duty to shareholders.
B. No, she is inaccurate because she owes a duty of care to shareholders although she
owes no other duties.
C. No, she is inaccurate because she owes a duty of loyalty to shareholders although she
owes no other duties.
D. No, she is inaccurate and owes both a duty of care and a duty of loyalty to
shareholders.
E. She is partially accurate. She owes both a duty of care and a duty of loyalty to
minority shareholders but no duties to majority shareholders because the law assumes
that they have the power to protect their own interests.
___________________ created the Public Company Accounting Oversight Board to
regulate public accounting firms.
A. The Sarbanes-Oxley Act of 2002
B. The Securities Acts Amendments of 1990
C. The Market Reform Act of 1990
D. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990
E. The National Securities Markets Improvement Act of 1996
If we consider what the world would be like if a decision is copied by everyone else, we
would be using which of the following ethical guidelines?
A. Golden Rule
B. Universalization Test
C. Public Disclosure
D. Relevant Disclosure
E. World Rule
Contracts containing conditions affecting the performance obligations of the parties are
called ______ contracts.
A. uncertain
B. conditional
C. unreasonable
D. voidable
E. void
________________ are securities which do not have to go through the registration
process.
A. Limited offers and intrastate issues
B. Intrastate issues and resale securities
C. Resales of securities and limited offers
D. Limited offers, intrastate issues, and resales of securities
E. Limited offers only
An error by one party about a material fact is known as a(n) _____ mistake.
A. unclear
B. mutual
C. unilateral
D. clear
E. single
Which of the following choices do states have regarding liability of third-party
beneficiaries of warranties?
A. That seller’s warranties extend to the buyer’s household members and guests only.
B. That seller’s warranties extend to any reasonable and foreseeable user only.
C. That seller’s warranties extend to anyone injured by the good only.
D. That seller’s warranties extend to the buyer’s household members and guests that
seller’s warranties extend to any reasonable and foreseeable user, and that seller’s
warranties extend to anyone injured by the good.
E. That seller’s warranties extend to the buyer’s household members and guests and that
seller’s warranties extend to any reasonable and foreseeable user, but not that seller’s
warranties extend to anyone injured by the good.
Which of the following types of paper require delivery and an endorsement by the
holder?
A. A bearer instrument.
B. A delivery instrument.
C. An order instrument.
D. A transfer instrument.
E. An acknowledgement instrument.
Which of the following are the two primary kinds of performance?
A. Partial and significant
B. Partial and complete
C. Partial and substantial
D. Complete and substantial
E. Complete and significant
Which of the following is(are) positive about arbitration?
A. Arbitrators are assigned so parties do not have to pick them.
B. Arbitration is less expensive generally than litigation.
C. Arbitrators are bound by the same rules as judges in applying precedent.
D. Arbitrators are assigned so parties do not have to pick them, and arbitration is
generally less expensive than litigation.
E. Arbitrators are assigned so parties do not have to pick them, arbitration is generally
less expensive than litigation, and arbitrators are bound by the same rules as judges in
applying precedent.
Which of the following was the result in Alexis Perez v. John Ashcroft, the case in the
text in which the plaintiff claimed that without formal rule making as required by law,
the Immigration and Naturalization Service wrongfully imposed a rule requiring that
applicants for visas to work in a professional capacity in a religious vocation have
formal religious training?
A. The court ruled that no formal rule making was required because the agency was
merely interpreting previously approved regulations.
B. The court ruled that no formal rule making was required because the Immigration
and Naturalization Service was exempt from the Administrative Procedures Act.
C. The court upheld the rule on the basis that as a potential immigrant, the plaintiff
lacked standing to sue.
D. The court struck the rule on the basis that the Immigration and Naturalization
Service lacked the authority to pass any rules whatsoever when First Amendment
freedom of religion rights were at issue.
E. The court struck the rule on the basis that all substantive rules adopted by an agency
creating law must be implemented through formal rule-making procedures.
Candy wants to start an Internet business. The Chinese government tells her that certain
items on her site are objectionable and illegal, and that if she wants to do business in
China, she must remove the objectionable material. Which of the following is true?
A. Candy is within her rights and should stand her ground. She is a U.S. citizen, and so
long as she obeys U.S. laws, she can do business in China.
B. Candy is within her rights only if she petitioned her state senator and obtained his or
her permission to proceed.
C. If Candy wants to do business in China, she must abide by Chinese law.
D. By international law, there is a set fee of $10,000 that Candy can pay if she wants to
obey only U.S. law. If she pays that amount, she can continue in China without any
modification.
E. By international law, there is a set fee of $5,000 that Candy can pay if she wants to
obey only U.S. law. If she pays that amount, she can continue in China without any
modification.
Which of the following is true regarding the implied warranty of fitness for a particular
purpose?
A. It applies in every case in which an express warranty is found.
B. It applies in every case in which an implied warranty of merchantability is found.
C. It applies in every case in which either an express warranty or an implied warranty of
merchantability is found.
D. It applies in every sales transaction involving a merchant.
E. None of these.
An agency agreement created for the agent’s benefit, not for the principal’s is an
_______________.
A. agency interest principle
B. agency coupled with an interest
C. agency benefit interest
D. agency compensation principle
E. agency entitlement principle
____________________ occurs when a group within a corporation, usually
management, buys all outstanding corporate stock held by the public.
A. An asset purchase
B. A leveraged buyout
C. A management buyout
D. A corporate buyout
E. An illegal buyout
Which of the following occurs in a CIF agreement?
A. Risk of loss occurs when goods are identified to the contract.
B. Risk of loss occurs when the goods are delivered to the buyer.
C. Risk of loss remains with the seller for 5 days after the sale.
D. Risk of loss remains with the seller for 5 days before the sale.
E. The seller puts the goods in possession of a carrier before the risk passes to the
buyer.
_____________________ allows the SEC to suspend securities trading if prices vary
excessively in a short time period.
A. The Sarbanes-Oxley Act of 2002
B. The Securities Acts Amendments of 1990
C. The Market Reform Act of 1990
D. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990
E. The National Securities Markets Improvement Act of 1996
Which of the following is needed in order for an assignment to be valid?
A. A UCC 2-301 Form.
B. A UCC 4-305 Form.
C. A Business 2-547 Form.
D. A Business 4-298 Form.
E. No form is required.
Which of the following are contracts that contain multiple parts that can each be
performed separately?
A. Independent contracts
B. Substantive contracts
C. Adhesion contracts
D. Justifiable contracts
E. Severable contracts
The Stolen Book. Betty tells Susan that Bob stole her business law book from her car.
The next day Susan confronts Bob and slaps him for stealing her book. Bob has Susan
arrested for slapping him. Susan sues Bob for damages in the amount of the book and
for maliciously having her arrested. Claiming that she lied, Bob sues Betty for
defamation. Bob is anxious to see Susan punished for slapping him. Which of the
following is true regarding action Bob can take?
A. Bob can hire his own lawyer to prosecute Susan and send her to jail but cannot bring
a civil action if he prosecutes criminally.
B. Bob’s privately-retained lawyer may not prosecute Susan alone but may insist on
jointly trying the criminal case with the government lawyer.
C. Bob can bring an additional civil action against Susan for slapping him only if he
loses the criminal case.
D. Bob can hire his own lawyer to prosecute Susan and send her to jail, and Bob can
also bring an additional civil action against Susan for slapping him.
E. Bob’s privately-retained lawyer may not prosecute Susan because that is the
government’s job, but the privately-retained lawyer can bring a civil action against
Susan.
As long as some of the duties under a contract have not yet been performed, the
contract is considered _____.
A. executory
B. executed
C. anticipatory
D. ended
E. stopped
A rule requiring that a contract that would normally fall under the statute of frauds and
need a writing if negotiated by the principal must be in writing even if negotiated by an
agent is called ________________________.
A. suretyship
B. an equal dignity rule
C. an admission
D. partial performance
E. promissory estoppel
Scuba Diving. Marcy invented a new type of mask for scuba divers that was not subject
to fogging. She agrees to allow Jenny to manufacture and sell the mask. She receives a
sum of money for every mask that Jenny sells. Marcy also entered into an agreement
with Frank to allow him to sell the masks but only if he also purchased non-patented
diving suits from Marcy. All parties proceeded to do very well with their sales.
Which of the following describes the agreement between Marcy and Frank?
A. It is a legal tying arrangement.
B. It is a legal cross-licensing agreement.
C. It is an illegal tying arrangement.
D. It is an illegal cross-licensing agreement.
E. It is both a legal tying and a legal cross-licensing agreement.
Which of the following is the legal process by which a transfer of property is made by a
governmental entity against the protest of the property owner pursuant to the takings
clause of the Fifth Amendment?
A. Allocation
B. Appropriation
C. Condemnation
D. Substitution
E. Publication
What is the term for the party to a contract who transfers her rights to a contract to a
third party?
A. Transferor
B. Transferee
C. Relator
D. Assignor
E. Assignee
Bruce runs back the odometer on his car to make it appear as if it had fewer miles.
Wally buys the car. When he checks back through past sale reports through his state’s
title office, Wally discovers that the car had fewer miles when Bruce sold it to him than
it had when a previous owner sold it to Bruce. In legal terms, in selling the car knowing
that he had tempered with the odometer, Bruce is said to have had _____.
A. rogue
B. corpulence
C. scienter
D. wrongness
E. inattentiveness
Assuming adoption of the UCC, which of the following is true regarding whether the
buyer and seller may negotiate a shorter time for the statute of limitations than that
allowed by the UCC?
A. The buyer and seller may not negotiate a shorter time for the statute of limitations
than that allowed by the UCC so long as the time period is not less than two years.
B. The buyer and seller may negotiate a shorter time for the statute of limitations than
that allowed by the UCC without any limits.
C. The buyer and seller may negotiate a shorter time for the statute of limitations than
that allowed by the UCC so long as the time period is not less than one year.
D. The buyer and seller may negotiate a shorter time for the statute of limitations than
that allowed by the UCC so long as the time period is not less than six months.
E. The buyer and seller may negotiate a shorter time for the statute of limitations than
that allowed by the UCC so long as the time period is not less than two years.
Which of the following is true regarding federal jurisdiction?
A. There is no exclusive federal jurisdiction in civil matters.
B. If a case falls within federal jurisdiction, it may not also fall within state jurisdiction.
C. Some cases fall within both federal jurisdiction and state jurisdiction, but there is no
exclusive federal court jurisdiction.
D. Some cases fall within both federal jurisdiction and state jurisdiction, but that only
occurs in criminal matters.
E. Some cases fall within both federal jurisdiction and state jurisdiction, but the federal
court system has exclusive jurisdiction over some cases.
The Securities and Exchange Commission is headed by how many individuals?
A. 50
B. 25
C. 20
D. 10
E. 5
Which of the following are rules of an agency that are policy expressions having the
effect of law?
A. Procedural
B. Interpretive
C. Legislative
D. Adjudicative
E. Judicial
Which of the following is false regarding rescinding a contract in the Philippines?
A. If consent is given through mistake, violence, intimidation, undue influence, or
fraud, contracts are valid until they are annulled.
B. The period in which to annul a contract for mistake, violence, intimidation, undue
influence, or fraud is four years.
C. In cases of intimidation, violence, or undue influence, the time period for annulling a
contract is measured from the time the defect in the assent ceases.
D. In cases of mistake or fraud, the time period for annulling a contract is measured
from the time of the discovery of the defect.
E. The law of the Philippines in regard to rescinding a contract for mistake, violence,
intimidation, undue influence, or fraud is typical to that of the U.S.
A _____ occurs whenever a party fails to perform her obligations under the contract.
A. mishap
B. misoccurrence
C. breach
D. misdeed
E. mistake
Which of the following was the result in Yan Ju Wang v. George Valverde, the case in
the text in which the plaintiff sued for a mandate compelling that the Department of
Motor Vehicles set aside its revocation of plaintiff’s noncommercial driver’s license
based on her allegedly cheating on an exam for a commercial driver’s license?
A. The court ruled that the agency lacked statutory authority to revoke the
noncommercial license.
B. The court ruled that the agency failed to provide a proper hearing prior to revoking
the noncommercial license.
C. The court ruled that the agency could not revoke the noncommercial license because
the plaintiff was not criminally prosecuted.
D. The court ruled that the agency could revoke the noncommercial license because the
plaintiff was criminally prosecuted.
E. The court ruled that the agency could revoke the noncommercial license because it
was granted the statutory authority to do so.