BUL 5810 Study Guide

To fully compensate plaintiffs in breach of contract cases, courts always award punitive damages commensurate with the losses the plaintiffs have suffered.

False

To satisfy the statute of frauds, the person who wants to bring the lawsuit must sign a memorandum.

False

UCC "Election of Remedies" rules would require the aggrieved party to choose one remedy he wants to pursue and forego the others.

False

Under the Code an oral contract for specially manufactured goods costing $500 is enforceable even if the seller has not begun their manufacture.

False

Under the RUPA, a partnership agreement may be written or oral, but not implied.

False

Under the RUPA, upon dissolution, the partnership must be liquidated.

False

Under the UCC, an acceptance must always be identical to an offer for a valid contract to be formed. (A) True (B) False

False

Under the UPA, if a partner makes a loan to the partnership, he will be in the same position as other creditors who are not partners in requesting repayment upon dissolution.

False

Under the common law, a partnership is generally considered to be a legal entity rather than an aggregate of individuals.

False

Upon dissolution, unlike a general partner, a limited partner can get his capital back before general creditors are paid.

False

When a court interprets an ambiguous contract, usage of the trade will take precedence over express terms in the contract.

False

The Model Business Corporation Act has been adopted by all of the states in the United States, thereby making state incorporation statutes uniform throughout the United States.

FALSE

The Model Business Corporation Act provides for small, closely held corporations to be organized and creates Subchapter S corporations with special benefits.

FALSE

The board of directors of Z & X Corporation declared cash dividends of $5 per share. If these dividends are not paid, a shareholder can bring suit to require payment.

FALSE

The difference between common and preferred stock is that the latter is a debt instrument, whereas the former represents an equity interest in the company.

FALSE

The federal government allows the states to regulate corporate stock, since corporations are state-created entities.

FALSE

Under the RMBCA, a newly formed corporation need not hold an organizational meeting.

FALSE

Under the RMBCA, a pre-incorporation subscription may be revoked at any time without the consent of the subscribers.

FALSE

When a shareholder sells the stock of the corporation, the ownership of the corporation changes, and a new corporation is formed.

FALSE

"Blue laws" usually apply to contracts of necessity and charity.

False

"I promise to pay you $100 if you will promise to fix my car next month." This is an offer for a unilateral contract.

False

A breach of contract always discharges the injured party from performance under the contract.

False

A change in Sal's financial condition, making it impossible for him to fulfill a contractual obligation, would be considered objective impossibility, which would discharge his contractual duty.

False

A collateral promise is an undertaking to be primarily liable for the principal debtor's debt.

False

A contract cannot be formed unless it is clear the exact moment at which it was made. (A) True (B) False

False

A contract for the sale of a copyright is governed by Article 2 of the Uniform Commercial Code.

False

A contract to commit a tort will be enforced by the courts.

False

A contract to sell five acres of land is governed by Article 2 of the UCC.

False

A contract to sell life insurance is covered by Article 2 of the Uniform Commercial Code.

False

A general partnership may be formed for a charitable purpose.

False

A liquidated debt is an obligation the existence or amount of which is in dispute.

False

A mental illness or defect of one of the parties to a contract automatically makes a contract void.

False

A minor can ratify part of a contract and disaffirm another part of it.

False

A negotiable instrument, such as a check, is not a formal contract.

False

A novation is an agreement between two parties to have one substitute for the other in a contract.

False

A partner who does not have actual authority to order a fax machine for the partnership office probably does not have apparent authority either.

False

A person who has made a financially unsound contract may be relieved from performance under the doctrine of commercial impracticability.

False

A quasi contract is another name for an oral contract.

False

A unilateral mistake of fact is typically grounds for avoiding a contract.

False

ABC Corp. is building a new office tower. Ace Plumbing Supplies refuses to provide plumbing materials on credit to the plumbing subcontractor on the building. ABC promises Ace that it will pay for the materials if the subcontractor does not. ABC's promise is unenforceable unless in writing.

False

All 50 states, either by statute or court ruling, recognize a duty on the part of a minor to make restitution to the seller upon disaffirmance of a contract.

False

All furniture, television sets, and appliances purchased by a minor for her apartment would be considered necessaries.

False

All states agree that a minor who has fraudulently misrepresented her age when entering into a contract has no power to disaffirm the contract.

False

Although a contract to purchase an undeveloped lot must be in writing to be enforceable, a contract to run power lines over someone else's lot need not be.

False

An action to recover damages for breach of contract may be maintained only if the plaintiff has sustained or can prove an injury or loss resulting from the breach.

False

An agreement required to be written under the statute of frauds must be signed at the bottom and notarized.

False

An agreement to sell the entire production of a particular plant to a particular purchaser is a requirements contract.

False

An arm's-length transaction is one in which the parties owe each other special duties.

False

An auctioneer is free to withdraw the goods from sale if the sale is advertised or announced in explicit terms to be without reserve.

False

An auctioneer is the offeror and each bid is a counteroffer until a final bid is accepted. (A) True (B) False

False

An example of language creating a suretyship as meant under the statute of frauds would be the following: "If my business partner does not write out the check for the supply bill for our company, I will."

False

An exclusive dealing contract is one type of contract which is illusory because it lacks consideration.

False

An implied-in-fact condition and constructive condition are the same.

False

An offer is an indefinite proposal made by one person to another

False

An offer must be in one particular form to have legal effect. (A) True (B) False

False

Ann makes a material misrepresentation of fact to Brian, and based upon the misrepresentation, Brian enters into a contract. Ann now thinks that the contract is not fair to her. This contract is voidable at Ann's option.

False

At common law, a valid contract may not be entered into on Sunday.

False

Bargains are illegal if they involve a crime or tort but not if they are merely against public policy.

False

Beth, at age 17, sells an antique pin she inherited. Even if the buyer resells the pin to someone who did not know that it was purchased from a minor, Beth can recover the pin from the third person if she changes her mind about wanting to sell it.

False

Bob sends Fred a letter offering to sell Fred his car for $2,500. Fred writes back that he'll take it. They now must get together and write a memorandum because it is a sale of goods for over $500.

False

Breach of a contractual promise and failure of a condition have fundamentally the same effect.

False

Brent loans Manuel $1,600 on his oral promise to repay the loan in three annual installments. Most courts would hold Manuel's promise is unenforceable under the one-year provision of the statute of frauds.

False

Brysen sells bikes at a local discount store. To encourage Cole to buy a more expensive model than he originally contemplated, Brysen tells Cole, "This is the most awesome bike you can buy at this price. You can expect lots of riding pleasure." Based on this statement Cole buys the bike. A week later, before his bike is fully paid for, Cole sees a far superior bike for a lower price at another store. Cole can avoid his contract with Brysen because of fraudulent misrepresentation.

False

Common law relating to the formation of contracts has little relevance in the business world today.

False

Consideration can be valid regardless of whether the parties intend an exchange.

False

Consideration has only one basic element, which is a bargained-for exchange.

False

Contracts are primarily governed by the Uniform Commercial Code.

False

Contracts generally require adequacy of consideration where the consideration given by both parties is of fair value and equitable.

False

Costs incurred to acquire a nondelivered performance from some other source are consequential damages.

False

Courts of equity will enforce specific performance of contracts for personal service.

False

Courts require that for a contract to be unenforceable based on unconscionability, both substantive and procedural unconscionability must be equally present.

False

Courts require that for a contract to be unenforceable based on unconscionability, both substantive and procedural unconscionability must be equally present.

False

Creation of a limited partnership requires more formalities than formation of a general partnership.

False

Dana gives care to Marnie's dog, Molly when Dana finds Molly ill on the side of the road. Marnie promises to reimburse Dana for the cost of treating Molly. Marnie's promise is binding, because there is a bargained-for-exchange.

False

If a promisor intends her promise as a joke, whether or not the promisee as a reasonable person should understand it to be such, the promise is not an offer. (A) True (B) False

False

If an offer states that a reply must be received by a certain date, the contract is formed at the time the offeree sends or dispatches the acceptance. (A) True (B) False

False

If no time limit is stated, an offer will not terminate until both parties agree. (A) True (B) False

False

If the act or threat would affect a person of average strength and intelligence, then and only then will the act constitute duress

False

If the parties to a contract stipulate an amount that will be paid in the event of a breach (a liquidated damages clause), the courts will always enforce it.

False

If there is a novation, the original promisor remains liable to the original promisee if the new promisor fails to perform.

False

In a contract to sell necessaries to a minor, these goods and services are limited to medical care, food, and shelter.

False

In all substituted contracts there must be an agreement among three parties where a new promise is substituted for an existing promise or a new promisor is substituted for an existing promisor.

False

In all types of business entities, the owners can fully share in the management and control of the business.

False

In an employment agreement with Karl, Arnold promises to work for Karl for the rest of his life. This promise must be in writing to be enforceable.

False

Regulation of gambling is solely under federal jurisdiction, through Congressional legislation and U.S. court enforcement.

False

Rescinding an executory bilateral contract does not qualify as consideration.

False

Ricardo posts a sign in his neighborhood offering $50 for the return of his German Shepherd. Alicia, who knows nothing of the reward, finds the dog and returns it to Ricardo. Alicia is entitled to the reward. (A) True (B) False

False

Robert and Bella entered into a bilateral contract. If they agree to a rescission of the contract while it is executory, there is a lack of consideration for the rescission.

False

Ron offers to sell Pete his stamp collection. Pete gives Ron $10 to induce him to keep his offer open for a week. If Ron decides on day four of the week that he really does not want to sell to Pete, he can revoke his offer without fear of a breach of contract lawsuit being filed against him. (A) True (B) False

False

Sandy's private secretary promises to keep the contents of a letter she typed secret if Sandy will give her the next day off with pay. If the secretary takes the day off, Sandy has to pay her for the day.

False

Sean had two beers and felt tipsy. He made a deal with Yoko to buy her stereo. He can avoid the contract because of lack of capacity.

False

Sharing of gross returns establishes a partnership.

False

Silence can never be an acceptance. (A) True (B) False

False

Social coercion to enter into a contract cannot be a basis for avoidance of the contract.

False

Specific performance is the usual remedy for breach of contract.

False

The test under the one-year provision of the statute of frauds is based on the likelihood that the contract will be completed within one year.

False

The trustee of a trust does not owe a fiduciary duty to the beneficiary of that trust.

False

The trustees are generally not personally liable for the debts of a business trust.

False

The word "parol" literally means release.

False

There are two principal types of contracts: commercial contracts between a business and a customer and personal contracts between two individuals.

False

There is no necessity to distinguish language which constitutes an offer from that which merely solicits or invites offers. (A) True (B) False

False

There is only one way to completely and legally discharge a contract.

False

"Doing business" within a particular state will subject a foreign corporation to the litigation, regulation, and taxation of that state.

TRUE

"Piercing the corporate veil" will result in personal liability of shareholders.

TRUE

A company may not initially issue all the shares authorized by the corporate charter. It can hold back shares.

TRUE

A corporate bond creates a debtor-creditor relationship between the corporation and the holder of the security.

TRUE

A corporation has perpetual existence unless otherwise stated in its articles of incorporation.

TRUE

A corporation must keep its funds separate from those of its shareholders.

TRUE

A creditor of a limited partner may obtain a charging order against the limited partner's interest in the partnership, thereby becoming an assignee of the partnership interest.

TRUE

A limited liability company is a form of unincorporated business association that blends the advantages of both general and limited partnerships, because all its members may have limited liability and all may participate in management and control without loss of limited liability.

TRUE

A nonprofit corporation may make a profit, but it may not be distributed to members, directors, or officers.

TRUE

After the coronation of Edward VII did not take place on the scheduled date and parties who had entered into contracts in anticipation of the event filed numerous suits, the doctrine of frustration of purpose was added to the law of contracts.

True

Consideration exchanged for a promise does not require both legal detriment to the promisee and legal benefit to the promisor.

True

Contracts binding without consideration include promises to pay debts barred by a statute of limitations and debts discharged in bankruptcy.

True

Cora and Bruce have an executory contract for the sale of some goods. Cora files for bankruptcy and is then discharged by the bankruptcy court. Cora has no obligation to perform under the contract.

True

Courts treat contracts of incompetents and intoxicated persons essentially the same, except they are stricter with intoxicated persons because of intoxication's voluntary nature.

True

Courts will usually uphold a liquidated damage clause that represents a reasonable approximation of the damages where the actual amount would be very difficult to determine.

True

Deanna, an attorney, has a personal injury case which is set for trial next week. She needs a good doctor to testify on behalf of her client, so she contacts Dr. Dogood who agrees to testify on behalf of Deanna's client at the trial. In return for Dr. Dogood's testimony, Deanna agrees to pay Dr. Dogood $10,000 if they win the case, and $5,000 if they lose. Dr. Dogood agrees. The agreement between Deanna and Dr. Dogood is unenforceable.

True

Death or insanity of either the offeror or the offeree ordinarily terminates the offer. (A) True (B) False

True

Discharge by performance is the most frequent method of discharging a contractual duty.

True

Each party to a contract must intentionally exchange a legal benefit or incur a legal detriment as an inducement to the other party to make a return exchange.

True

Edie says to Jeff, "If you will mow my lawn, I will give you fifteen dollars." Under these facts, no contract is formed until Jeff finishes mowing the lawn.

True

Even if a party has the power to avoid a contract for lack of capacity, duress, or undue influence, the party will lose that power by affirming the contract.

True

For a misrepresentation to be material, it must be likely to induce a reasonable person to manifest assent or the maker must know that it would be likely to induce the recipient to do so

True

Fran negligently drove her truck through Nick's fence, causing damage. If she promises to pay Nick $1,500 if he does not bring a lawsuit against her, Nick accepts and forms a unilateral contract by not filing suit. His forbearance is consideration.

True

General partnerships are frequently used in finance, accounting, real estate, and law.

True

If Marc signs an employment contract for one year but is fired without cause after two months and spends $500 in reasonable fees trying to find a comparable job, he may recover $500 in incidental damages.

True

Jim promises to marry Cynda if she will buy him a new Ferrari for his birthday. This promise must be in writing to be enforceable.

True

Substituted contracts immediately discharge the duties of the original contract.

True

Under the RUPA, a partner's duty not to compete terminates upon dissociation, and the dissociated partner may immediately engage in a competitive business without further consent.

True

Under the RUPA, dissociation of a partner results in dissolution only in limited circumstances.

True

Under the RUPA, no person may become a member of a partnership without the consent of all the partners.

True

Under the common law, in order to be enforceable, a modification of an existing contract must be supported by mutual consideration.

True

Undue influence is the taking of unfair advantage of a person by reason of a dominant position based upon a confidential relationship.

True

What is considered "partnership property" is determined primarily by the partners' intentions.

True

When a bid is made at an auction, it can be revoked if the auctioneer has not yet accepted the bid because the auctioneer has the power of acceptance. (A) True (B) False

True

When a breach of contract occurs, the nonbreaching party is required to take reasonable steps to lessen or mitigate the damages that he may sustain.

True

Where a contract is unenforceable because of the statute of frauds, a party may recover the benefits conferred on the other party in reliance on the contract.

True

Where a stipulation in restraint of trade is a part of the contract for the sale of a business, it may be valid if the restraint is within reasonable limitations to protect the business's goodwill.

True

Yasmin agrees to a three-year employment contract with State University as long as they become accredited after one year. This contract contains a "condition subsequent."

True

Zach owns property that he believes is worth $400,000. Chloe knows that there is gold on the property and offers Zach $500,000 for it. She says she would like to live in the country. Zach then asks her if she thinks there might be valuable minerals on the land. Chloe laughs and says she doubts that very much, so Zach sells her the farm for $500,000. Zach later realizes that the land was worth more than he was paid. Chloe's statement to Zach was a misrepresentation requisite for fraud.

True

the parol evidence rule only applies to written contracts.

True

The certificate of limited partnership need not be amended if a new general partner is admitted.

false

Under all LLC statutes, a unanimous vote of the members must be obtained to approve a merger.

false

Under the RUPA, dissolution is the equivalent of termination of a partnership.

false

Under the RUPA, if a partner is dissociated from a partnership without resulting in dissolution, the business may choose whether to purchase the dissociated partner's interest in the partnership.

false

Under the UPA, in order to avoid liability, only constructive notice of a dissolution is required to be given to third parties who had no knowledge of the partnership before its dissolution.

false

Under the UPA, upon dissolution of a partnership, apparent authority terminates although actual authority generally continues.

false

Where the UPA is controlling, Lynette, expelled from the YLC Partnership pursuant to a provision in the partnership agreement, can now force liquidation of the partnership.

false

If the partnership is bound by a contract, then each general partner has unlimited personal liability for that obligation.

true

In some corporations, only the shareholders are taxed; in others, both the corporation as an entity is taxed and the shareholders are taxed as well.

true

It remains unclear under the law whether a limited partner's fiduciary duty is to his general partners or to the limited partnership.

true

Judson is a limited partner in a limited partnership. Judson does not have the right to dissolve the partnership except by decree of a court.

true

Under the UPA, any suit in contract against the partners must name all of them as defendants

true

Unless otherwise provided in the LLC's operating agreement, a member may assign his financial interest in the LLC without dissolving the LLC.

true

Skylar, an antique dealer, intentionally represents the value of an antique chest of drawers as $6,000 when she has reason to know the value is considerably less. Margaret agrees to buy it for $5,500. It is actually worth $2,500. In a state that uses the "benefit-of-the-bargain" rule, Margaret's damage award would be: (A) $3,500. (B) $3,000. (C) $500. (D) $2,500.

(A) $3,500.

General Widget partnership assets amount to $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 for inventory. What will Gene get in distribution, assuming there is no agreement on the distribution of profits? (A) $7,000 (B) $5,000 (C) $8,000 (D) $11,000

(A) $7,000

Ava says to Donell, "If I decide to buy a tablet next month, I will buy it from you." This is an example of: (A) an illusory promise. (B) past consideration. (C) the pre-existing duty rule. (D) good consideration.

(A) an illusory promise.

The Code greatly alters the common law doctrine of material breach by adopting what is known as the: (A) perfect tender rule. (B) anticipatory repudiation rule. (C) prevention of performance rule. (D) discharge by operation of rule law.

(A) perfect tender rule.

A distinguishing characteristic of a business trust is that: (A) the trust estate is devoted to the conduct of a business. (B) each beneficiary must have the consent of all the other beneficiaries in order to sell or transfer his interest in the trust. (C) the trustees and beneficiaries share the functions of management and control. (D) the trust can be established with no formality.

(A) the trust estate is devoted to the conduct of a bus

Phoenix Corporation purchases 1,000 shares of its own stock from Stewart, a shareholder, at a price of $50 a share. These shares will be known as: (A) treasury shares. (B) preemptive shares. (C) preferred stock. (D) no par stock.

(A) treasury shares.

Sales of personal property are governed by Article ____ of the Uniform Commercial Code (UCC). (A) 1 (B) 2 (C) 3 (D) None of these

(B) 2

Which of the following is an exception to the suretyship provision requirement under the statute of frauds? (A) A collateral promise made to the creditor (B) A promise, the leading object of which is to obtain an economic benefit for oneself (C) A collateral promise where there are three parties and two contracts involved (D) A promise by an executor to pay the debts of the decedent from the executor's own funds

(B) A promise, the leading object of which is to obtain an economic benefit for oneself

Article 2 of the Uniform Commercial Code deals with what type of property? (A) Real (B) Personal (C) Intangible (D) Business

(B) Personal

The Ajax Corporation issues bonds that pay a minimum of 6% interest but that can pay more if corporate earnings reach certain specified levels. In lieu of payment under this bond, a holder may exchange it for stock of the corporation. This bond would be a: (A) callable income bond. (B) convertible participating bond. (C) convertible unsecured bond. (D) convertible secured bond.

(B) convertible participating bond.

Which of the following need NOT be proved in order to establish the defense of economic duress? (A) That one side involuntarily accepted the terms of another. (B) That circumstances permitted no other alternative. (C) That one party explicitly made an economic threat. (D) That the circumstances leading up to the contract were the result of coercive threats or acts of the opposite party.

(C) That one party explicitly made an economic threat.

The UCC provides that if a court as a matter of law finds a contract for the sale of goods or a clause of such a contract to have been unconscionable at the time it was made, the court may: (A) refuse to enforce the contract. (B) enforce the part of the contract that is not unconscionable. (C) limit the application of any unconscionable clause in order to avoid an unconscionable result. (D) All of these.

(D) All of these.

Which of the following is not a characteristics of a corporation? (A) It has perpetual existence. (B) It is a legal entity of its own. (C) It is able to be sued and to sue. (D) It is usually managed by its shareholders.

(D) It is usually managed by its shareholders.

Eight businessmen decide to form a limited partnership to operate an office complex. This business must be formed in accordance with the: (A) common law of partnerships. (B) Uniform Commercial Code. (C) Federal Partnership Act. (D) Limited Partnership Act.

(D) Limited Partnership Act.

A partner who has no right to participate in control of the business and who has limited liability is a: (A) general partner. (B) nominal partner. (C) secret partner. (D) limited partner.

(D) limited partner.

Elvis makes an offer to Miguel, but before Miguel can accept, the state supreme court decides a case that makes the offer illegal. The court decision: (A) automatically terminates the offer. (B) has no effect on the offer. (C) acts as a condition on the offer. (D) acts as a rejection of the offer by the offeree.

A) automatically terminates the offer.

Caroline signs a contract to work as a sales rep for Incellmed Corporation for a period of two years. This contract is governed by: (A) Article 2 of the UCC. (B) state common law. (C) federal statute. (D) the law of quasi contract.

B - state common law

The expectation interest is protected by the contract remedy of: (A) restitution. (B) compensatory damages. (C) reliance damages. (D) All of these.

B compensatory damages

An offer to purchase capital stock in a corporation yet to be formed is made by a(n): (A) promoter. (B) subscriber. (C) incorporator. (D) subsidiary.

B) subscriber.

"Blue sky laws" are federal laws that regulate corporate stock issuance and sale.

FALSE

A bondholder generally takes more of a risk than a shareholder of a corporation.

FALSE

A corporation can be formed in the State of New York by complying with New York statutes or with the Federal Model Corporation Act.

FALSE

A corporation has no constitutional protection against unreasonable searches and seizures.

FALSE

The modern approach follows the common law rule in holding that a corporation cannot commit a criminal act.

FALSE

The most restrictive test for the issuance of dividends by a corporation is the net assets test.

FALSE

The shareholders normally determine the price for which shares will be issued.

FALSE

Treasury shares are shares that have been authorized but have not yet been issued.

FALSE

A joint venture is necessarily of short duration.

False

All written contracts are considered to be formal contracts.

False

An implied contract is not an enforceable contract

False

One party's unauthorized alteration of any of the material terms in a written contract discharges the entire contract.

True

Shareholders have residual authority over increases in the amount of authorized capital stock.

tRUE

mental condition that impairs a person's ability to act in a reasonable manner is one type of mental incompetence.

tRUE

All 50 states have adopted the Revised Uniform Partnership Act.

false

An oral promise by a limited partner to contribute to the limited partnership is enforceable.

false

Corporations today outnumber unincorporated business associations.

false

If the partnership agreement does not specify when a limited partner may withdraw or specify a definite time for the limited partnership's dissolution, a limited partner may withdraw upon giving at least one month's written notice to each general partner.

false

In a partnership of Holly, Dolly & Molly, Holly commits fraud which creates a $9,000 liability to the partnership. If the three partners share profits and losses equally, Holly's liability to the partnership for her fraudulent act is $3,000.

false

Limited partnerships are the same as limited liability partnerships.

false

Maizie is admitted as a partner to the existing Greene Ridge Partnership in June of 2018. Unless she signs an agreement to the contrary, she will be personally liable on all partnership obligations, including one incurred in December of 2017.

false

Respondeat superior has no application to situations where a partner commits a tort, because only the partner, and not the partnership, is liable.

false

Statutes or the common law impose duties of good faith and fair dealing on all members of an LLC whether the LLC is manager managed or member managed.

false

The 2001 revision of the RULPA has been adopted by at least 40 states.

false

The RULPA requires that the limited partnership certificate list the capital contribution of each general and limited partner.

false

The RUPA authorizes the optional, central filing of a statement of partnership authority specifying the names of partners authorized to execute instruments transferring the partnership's real property. A filed statement is effective for six-year, renewable terms.

false

The UPA codified all of the common law causes of dissolution of a partnership.

false

Foreign limited partnerships do not have to operate in another country.

true

Which of the following is least likely to be classified as a necessary for which a minor will be held liable on a contract? (A) A camera (B) School supplies (C) Boots for a snowy climate (D) An automobile

(A) A camera

Which of the following would be admissible under the parol evidence rule? Assume the written contract was made on June 1, 2018, and that it is an integrated document. (A) A letter dated July 9, 2018, reciting agreement to new delivery terms (B) A chart showing the dates for delivery written on August 16, 2018 (C) A copy of two letters while the parties were in the negotiation stage of their contract which showed agreement to a term not included in the June 1, 2018 contract (D) A copy of common carrier rules on the duty of delivery persons for uncrating merchandise, which is dated December 1, 2006

(A) A letter dated July 9, 2018, reciting agreement to new delivery terms

Which of the following is enforceable without consideration? (A) A new promise to pay a debt barred by the statute of limitations. (B) An illusory promise. (C) Under the common law, a promise made to satisfy a preexisting moral obligation. (D) A promise by a father to pay someone for rendering emergency services to his injured son before the father had arrived at the accident scene.

(A) A new promise to pay a debt barred by the statute of limitations.

Which of the following is true of dissociation? (A) A partner has the power to dissociate at any time by expressing the intent to withdraw from the partnership. (B) Which dissociations are wrongful are set forth by statute and cannot be modified by the partnership agreement. (C) The partnership agreement cannot modify the effects of wrongful dissociation. (D) All of the common law causes of dissociation are also causes under the RUPA.

(A) A partner has the power to dissociate at any time by expressing the intent to withdraw from the partnership.

Arthur, Betty, and Clara each inherit an undivided one-third of an apartment complex. Instead of selling it, they decide to continue to operate it for the next few years as a sideline to their other occupations just to see if they can earn some extra money. What are they? (A) A partnership (B) Co-owners only (C) A corporation (D) Tenants in common

(A) A partnership

Which of the following are the two basic elements to consideration? (A) Bargained-for exchange and legal sufficiency (B) Legal detriment and legal benefit (C) Legal sufficiency and legal adequacy (D) Promise and forbearance

(A) Bargained-for exchange and legal sufficiency

Carlos ordered an aluminum storm door for $249.99. Before it was delivered, the same store from which he ordered the door ran an ad in the paper for the same storm door at $179.99. Carlos calls the store and demands the advertised price. If the store agrees: (A) Carlos must pay $179.99. (B) Carlos must pay $249.99. (C) there is no contract. (D) there is a contract for the reasonable value of the door.

(A) Carlos must pay $179.99

Carlos ordered an aluminum storm door for $249.99. Before it was delivered, the same store from which he ordered the door ran an ad in the paper for the same storm door at $179.99. Carlos calls the store and demands the advertised price. If the store agrees: (A) Carlos must pay $179.99. (B) Carlos must pay $249.99. (C) there is no contract. (D) there is a contract for the reasonable value of the door.

(A) Carlos must pay $179.99.

Under the UPA, which of the following acts does not bind the partnership unless authorized by all of the partners? (A) Confessing judgment in a claim against the partnership (B) Use of partnership property for partnership business (C) Acting as an agent for the partnership (D) Selling goods in the ordinary course of the partnership business

(A) Confessing judgment in a claim against the partnership

Leonard offers to sell his diamond ring to Emily. If Diane overhears the offer and says, "I accept the offer": (A) Diane cannot accept the offer, because it wasn't made to her. (B) this is a valid acceptance. (C) the offer has not been communicated to the offeree. (D) this is an invitation seeking offers and not an offer.

(A) Diane cannot accept the offer, because it wasn't made to her.

Donald, a minor, makes a contract with Albert, an adult, to buy a computer. One week later, Donald has his eighteenth birthday. If shortly thereafter Donald tells Albert he will pick up the computer the next week: (A) Donald has expressly ratified the contract. (B) the contract must be renegotiated, because Donald was a minor when it was made. (C) Donald can change his mind and avoid the contract, because it was made when he was a minor. (D) the contract is void ab initio, because Donald was a minor at the time it was made.

(A) Donald has expressly ratified the contract.

If Edd contributed $1,000 as a limited partner and signed a certificate of limited partnership, but the certificate was filed in the wrong office: (A) Edd may avoid liability as a general partner if he withdraws from the business and quickly renounces future profits. (B) Edd is not a partner at all and may withdraw his contribution. (C) Edd is a general partner for all purposes. (D) Edd may become a limited partner by quickly filing an affidavit stating he was not responsible for the erroneous filing.

(A) Edd may avoid liability as a general partner if he withdraws from the business and quickly renounces future profits.

Stewart entered into a contract with Will to have Will build a 10-unit apartment complex on Elm Street in Randolph County. Unknown to both parties, this land had recently been rezoned and only single-unit dwellings can be constructed. (A) This is a mistake of law. (B) This is a mutual mistake of fact. (C) Stewart is obligated to buy land elsewhere and have the complex constructed on property zoned for apartments. (D) Will is liable to Stewart since Will is a contractor

(A) This is a mistake of law.

Gerard, an adult, contracts with Communiserve to purchase, in installments over a period of five years, a very large quantity of services that he will probably never need. Although Gerard understands what he is doing when he enters the contract, he has a mental condition that impairs his ability to act in a reasonable and rational way. Under the Restatement: (A) Gerard's contract is voidable at his option while it is entirely executory. (B) Gerard cannot avoid the contract if Communiserve had no reason to suspect Gerard's incompetency. (C) Gerard cannot avoid the contract if the terms are fair. (D) Gerard can only avoid the contract if the terms are grossly unfair.

(A) Gerard's contract is voidable at his option while it is entirely executory.

Stan purchased 400 pairs of gloves from Isaac at a contract price of $800. Fifty of the gloves were defective, and a dispute arose as to the amount due and owing under the contract. Stan refuses to pay the $800, and Isaac is threatening to sue. Which of the following is correct with regard to this transaction? (A) If Isaac agrees to accept $600 to settle the dispute and Stan agrees to pay that amount, the substitute agreement is enforceable. (B) If Isaac agrees to accept $600 to settle the dispute and Stan pays that amount, Isaac can still sue for the balance of $200 and will win the lawsuit. (C) Stan is under a pre-existing legal obligation to pay the $800. (D) Stan must return the defective gloves to Isaac, who must replace them. Then, Stan must pay the $800.

(A) If Isaac agrees to accept $600 to settle the dispute and Stan agrees to pay that amount, the substitute agreement is enforceable.

defective, and a dispute arose as to the amount due and owing under the contract. Stan refuses to pay the $800, and Isaac is threatening to sue. Which of the following is correct with regard to this transaction? (A) If Isaac agrees to accept $600 to settle the dispute and Stan agrees to pay that amount, the substitute agreement is enforceable. (B) If Isaac agrees to accept $600 to settle the dispute and Stan pays that amount, Isaac can still sue for the balance of $200 and will win the lawsuit. (C) Stan is under a pre-existing legal obligation to pay the $800. (D) Stan must return the defective gloves to Isaac, who must replace them. Then, Stan must pay the $800.

(A) If Isaac agrees to accept $600 to settle the dispute and Stan agrees to pay that amount, the substitute agreement is enforceable.

In which of the following situations will a court grant specific performance? (A) In a case involving breach of contract for the sale of real property or rare goods. (B) In contracts for personal services. (C) Where goods have been identified to the contract. (D) Where goods are mixed with other goods of the same type.

(A) In a case involving breach of contract for the sale of real property or rare goods.

If Jana, a minor, transfers property to Scott and Scott sells the property to a good faith purchaser for value before Jana avoids the transfer: (A) Jana loses the right to recover the property if the transfer involved goods. (B) Jana can recover the property as long as the property was a sale of goods. (C) Jana can recover the property whether it was real or personal property. (D) the good faith purchaser of goods for value receives a voidable title.

(A) Jana loses the right to recover the property if the transfer involved goods.

Nolan is driving a truck delivering goods for his partnership when he negligently backs into a customer's new car. The customer sues the partnership and recovers $6,000 in damages. What liability do the other partners have for Nolan's actions? (A) Joint and several liability (B) Individual liability but not joint liability (C) Liability based on their capital contributions (D) No liability

(A) Joint and several liability

Chad has offered to take Miles into his accounting firm as a partner upon payment of $5,000 cash. In response, Miles says, "I'll give you $3,000 cash now and I will pay you the remainder in two months after I see whether things are working out as a partnership." In this case: (A) Miles has made a counteroffer; hence there is no contract. (B) Miles has rejected the terms of the original offer, but there is still a contract. (C) Chad is a merchant making a firm offer under Article 2 of the UCC. Hence there is a contract. (D) any indefinite provisions in the contract between Chad and Miles will be supplied by Article 2 of the UCC.

(A) Miles has made a counteroffer; hence there is no contract.

Louis agreed to provide all the apples that Cindy's Cider Mill will need at $5 per bushel unless weather conditions require additional labor to be hired. The rate would then be $5.50 per bushel. A freeze warning required Louis to hire 100 additional overtime workers, raising the cost per bushel to $6.75. Louis wants to get out of his contract. Can he? (A) No, the parties expected the hardship and provided for it in their contract (B) No, there is no hardship (C) Yes, the contract is impracticable (D) Yes, the freeze is a supervening event

(A) No, the parties expected the hardship and provided for it in their contract

Patrick agrees to sell two different goods to his friend Ron, a retailer. One item is legal, and one item is illegal. The contract price is $2,000. In this case: (A) Patrick may not recover payment for either of the items, or in some cases, he may recover for the legal item, but not for the illegal item. (B) Patrick may only recover for the legal item, and he may not recover for the illegal item. (C) the contract is unconscionable under the UCC. (D) Patrick may not recover payment for either of the items.

(A) Patrick may not recover payment for either of the items, or in some cases, he may recover for the legal item, but not for the illegal item.

Ralph sold a motel to Steve by stating that he had paid $250,000 for it and that his net average annual profit from the business has been $40,000. In reality he paid $100,000 for the motel and has earned a net average annual profit of only $30,000. Steve made no attempt to verify the statements until after the transaction was completed. In this case: (A) Ralph has committed fraudulent misrepresentation and the contract is voidable at Steve's option. (B) Steve is bound by the contract, because he failed to verify the statements which were made to him. (C) the contract is not voidable, but Steve may sue for damages. (D) the contract is automatically void.

(A) Ralph has committed fraudulent misrepresentation and the contract is voidable at Steve's option

A valid offer may be in the form of an act for a promise, which is an offer to enter into an inverted unilateral contract. (A) True (B) False

(A) True

An offer must be communicated to the offeree in order for the offer to be effective. (A) True (B) False

(A) True

Shannon has just become a partner in A & R Accounting Partnership. Her capital contribution is $10,000, which she paid from her savings. Which of the following is correct with respect to Shannon's liability for partnership obligations? (A) Shannon has unlimited personal liability for all partnership obligations that occur after she became a partner; she has liability to the extent of her capital contribution for obligations that existed at the time she became a partner. (B) Shannon has unlimited personal liability for all partnership debts regardless of whether they were incurred before or after she became a partner. (C) Shannon has no liability for partnership debts that existed at the time of her admission as a partner. (D) Shannon is liable only to the extent of her capital contribution for partnership debts that occur after her admission as a partner.

(A) Shannon has unlimited personal liability for all partnership obligations that occur after she became a partner; she has liability to the extent of her capital contribution for obligations that existed at the time she became a partner. (

Juliet transfers property to Balcony, Inc. that she claims is valued at $5,000. The directors determine that the property is adequate to be exchanged for $5,000 worth of Balcony, Inc. stock. Later it is discovered that the property's true value is $2,000. Under the RMBCA, which is true regarding Juliet's liability? (A) She has none, since the directors' determination of adequacy of consideration was conclusive. (B) She is liable to the creditors of the corporation for the $3,000. (C) She is liable to the corporation for $3,000. (D) She is liable to both the corporation and its creditors for $3,000.

(A) She has none, since the directors' determination of adequacy of consideration was conclusive.

Which of the following is untrue regarding professional corporations? (A) State statutes permitting professional corporations all apply only to specified professions. (B) All states have statutes which permit the practice of professions by duly licensed individuals in the corporate form. (C) There is a supplement to the MBCA which deals with professional corporations. (D) Professionals may avoid personal liability for corporate debts by incorporating.

(A) State statutes permitting professional corporations all apply only to specified professions.

Clark and David are partners. Clark has contributed $25,000. David has contributed only his time and skill. On dissolution, after all firm debts are paid, $20,000 in assets remains. Which of the following is NOT correct? (A) The $20,000 remaining after payment is profit that will be equally divided. (B) The partnership has sustained a loss of $5,000. (C) David is not entitled to any part of the $20,000. (D) David has no obligation to reimburse Clark for any loss.

(A) The $20,000 remaining after payment is profit that will be equally divided.

Destruction of the subject matter has what effect on the offer? (A) The offer is terminated. (B) The offer is delayed until additional subject matter can be located. (C) This creates an impossibility of fact that does not terminate the offer. (D) The offer is merely delayed under the "Hardship Rule."

(A) The offer is terminated.

Which of the following is correct regarding a two-for-one stock split? (A) The purpose of the split may be to increase the number of potential stockholders. (B) The purpose of the split is to make a distribution to the stockholders. (C) After the split, each stockholder will have greater ownership interest in the corporation. (D) The value of each share of stock will increase as a result of the split.

(A) The purpose of the split may be to increase the number of potential stockholders.

Which of the following is not a right conferred on the owner of an equity security? (A) The right to title to a proportionate share of the corporation's property (B) The right to participate in control of the corporation (C) The right to participate in the earnings of the corporation (D) The right to participate in the residual assets of the corporation upon dissolution

(A) The right to title to a proportionate share of the corporation's property

Markell Inc. issued stock options. Which of the following is not true? (A) The shareholders determine the terms upon which the stock options are issued, their form and content, and the consideration for which the shares are to be issued. (B) A stock warrant is a type of stock option that is freely transferable and that typically has a longer term than a stock right. (C) Markell Inc. may use stock options or warrants in its incentive compensation plans for the directors and officers of the company. (D) Markell Inc. may use stock options to help in raising capital for the business by making one class of securities more attractive by including in it the right to purchase shares in another class

(A) The shareholders determine the terms upon which the stock options are issued, their form and content, and the consideration for which the shares are to be issued.

Jack has been in the business of selling carpeting for 20 years. He calls Barb, who is opening another branch of her furniture stores, and offers to sell her 100 yards of carpet at $12 per square yard. Barb agrees and sends back the following letter confirming the deal: Dear Jack: As we discussed on the phone January 3, we accept your offer of 100 yards of Saxony "heather blue" carpeting at the price of $12 per square yard. We also reserve the right to purchase any additional yardage we need to carpet our other showroom facilities at the same rate for one year from that date. Very truly yours, Barb Which of the following is true? (A) There is a contract for only 100 yards of carpeting. (B) There is a contract for 100 yards plus the additional yardage. (C) There is no contract since Barb made a counteroffer. (D) There is no contract because the additional term is too uncertain to become a contract term.

(A) There is a contract for only 100 yards of carpeting.

Assume an offeree mails a rejection to the offeror on November 1. This rejection arrives at the offeror's place of business on November 5. In the meantime, on November 4, the offeree sends the offeror an acceptance that arrives November 6. Which of the following statements correctly describes the situation? (A) There was no contract because when an acceptance follows a prior rejection, the first communication to be received by the offeror is the effective one. (B) There was a contract since the acceptance was mailed prior to the time the rejection was received. (C) There was no contract because the rejection was mailed first. (D) There was no contract because the acceptance was mailed more than three days subsequent to the rejection.

(A) There was no contract because when an acceptance follows a prior rejection, the first communication to be received by the offeror is the effective one.

A power of avoidance held by a party may be lost if: (A) the contract is affirmed. (B) there are unreasonable delays in exercising the power. (C) the rights of third parties intervene. (D) All of these.

(D) All of these.

Tim, who is a minor, enters into a contract with Violet, who is an adult. Which of the following is correct? (A) Violet may not disaffirm the contract. (B) Violet may disaffirm the contract at any time. (C) Violet may disaffirm the contract when Tim becomes an adult. (D) Tim may ratify the contract at any time during his minority.

(A) Violet may not disaffirm the contract.

Wes, who is an art collector, offered to buy a print from Le Monde Gallery. Le Monde balked at the price, sending Wes a letter of rejection. That day it discovered that the print was not as highly valued as originally thought. Le Monde immediately telephoned Wes to accept his offer. Is there a contract? (A) Yes, since the acceptance was received before the rejection (B) No, because the rejection was effective upon dispatch (C) No, because the rejection terminated the offer (D) Yes, because the acceptance is always effective upon dispatch

(A) Yes, since the acceptance was received before the rejection

When a limited partnership dissolves and winding up commences: (A) a certificate of cancellation must be filed. (B) the state automatically cancels the certificate of limited partnership. (C) all general and limited partners can be involved in the winding up process. (D) a court must decree that the partnership is terminated.

(A) a certificate of cancellation must be filed.

A(n) ____ is a contract between a promisee and a promisor by which the promisee agrees to accept and the promisor agrees to render a substituted performance in satisfaction of an existing contractual duty. (A) accord (B) mutual rescission (C) material alteration (D) novation

(A) accord

William has a contract to build a new office building for Angela. The contract contains a provision requiring William to furnish a certificate of occupancy from the building inspector before Angela is required to pay. This provision is: (A) an express condition. (B) an implied-in-fact condition. (C) an implied-in-law condition. (D) a condition subsequent.

(A) an express condition.

Ava says to Donell, "If I decide to buy a tablet next month, I will buy it from you." This is an example of: (A) an illusory promise. (B) past consideration. (C) the pre-existing duty rule. (D) good consideration.

(A) an illusory promise.

The way parties usually show mutual assent is by: (A) an offer by words or conduct and an acceptance by words or conduct. (B) a proposal in words and an acceptance in words. (C) an act exchanged for an act. (D) an offer and a counteroffer.

(A) an offer by words or conduct and an acceptance by words or conduct.

Refusal of a tender of performance by one party to a bilateral contract will: (A) be treated as a repudiation, excusing the tendering party from further duty of performance under the contract. (B) not discharge either party from further duty of performance under the contract. (C) be considered a condition subsequent. (D) None of these.

(A) be treated as a repudiation, excusing the tendering party from further duty of performance under the contract.

The majority of states follow the ____ rule in awarding damages for fraud. (A) benefit-of-the-bargain (B) out-of-pocket (C) liquidated (D) restitution

(A) benefit-of-the-bargain

State laws regulating the issuance and sale of corporate shares of stock and other securities, typically with provisions prohibiting fraud in the sale of securities are called: (A) blue-sky laws. (B) Securities and Exchange Commission Acts. (C) model investment securities acts. (D) stock warrant laws.

(A) blue-sky laws.

Brightstone Co. and Allsale Co. enter an oral contract providing Allsale will provide 100 dozen 3" toy racecars at $50 per dozen to Brightstone. Brightstone faxes a letter to Allsale acknowledging the agreement, but stating only the quantity, not the price. Allsale: (A) cannot raise the defense of the statute of frauds if Allsale did not object to the letter within ten days after receiving it. (B) cannot raise the defense of the statute of frauds since it is a merchant. (C) can raise the defense of the statute of frauds since the oral agreement was for the sale of goods with a price of $500 or more. (D) can raise the defense of the statute of frauds since the writing did not contain all the material terms of the agreement.

(A) cannot raise the defense of the statute of frauds if Allsale did not object to the letter within ten days after receiving it

Jill contracted to purchase Kevin's automobile under the belief that she could sell it at a profit to Linda, but after Jill bought the car, she found out that Linda isn't interested in buying it. Jill: (A) cannot void the contract with Kevin. (B) can rescind the agreement with Kevin. (C) could rescind the agreement with Kevin if she was mistaken in her estimate of the value of the auto. (D) can sue Linda for detrimental reliance.

(A) cannot void the contract with Kevin.

Contract damages that put the injured party in as good a position as if the other party had performed are: (A) compensatory damages. (B) incidental damages. (C) consequential damages. (D) liquidated damages.

(A) compensatory damages.

Under the UCC, a(n) ____ is a sequence of previous conduct between the parties to an agreement which may be fairly regarded as establishing a common basis of understanding for interpreting their conduct under the contract. (A) course of dealing (B) usage of trade (C) course of performance (D) integrated document

(A) course of dealing

Kimberly contributed $50,000 as a limited partner in a limited partnership. Upon dissolution of the partnership, the priorities in distributing the assets are to: (A) creditors of the partnership, partners and ex-partners in satisfaction of liabilities for unpaid distributions, partners for return of contributions, and to partners for their partnership interests in the proportions in which they share in distributions. (B) creditors of the partnership, partners for return of contributions, partners and ex-partners in satisfaction of liabilities for unpaid distributions, and partners for their partnership interests in equal shares. (C) creditors of the partnership, partners for their partnership interests, partners for return of contributions to the partnership, and ex-partners for liability for unpaid distributions. (D) partners for return of contributions, outside creditors of the partnership, partners for their partnership interests, and partners and ex-partners for unpaid distributions.

(A) creditors of the partnership, partners and ex-partners in satisfaction of liabilities for unpaid distributions, partners for return of contributions, and to partners for their partnership interests in the proportions in which they share in distributions.

Miller has a contract to sell 1,000 bushels of wheat to a bakery. The wheat is stored in a grain elevator and has become infested with insects. Miller is: (A) discharged from performance because of impossibility if he doesn't have other wheat to substitute. (B) discharged because of frustration. (C) not discharged, but must substitute wheat or pay damages to the bakery for breach of contract. (D) discharged if he can prove that he did not cause the damages to his wheat.

(A) discharged from performance because of impossibility if he doesn't have other wheat to substitute.

A number of states have enacted statutes exempting the following types of lenders from their usury laws: (A) eligible lenders of installment loans. (B) lenders for large consumer loans. (C) lenders of unsubsidized educational loans. (D) None of these. Only certain types of transactions rather than types of lenders are exempted.

(A) eligible lenders of installment loans.

In states that have adopted it, the Uniform Electronic Transactions Act: (A) encourages and gives full effect to electronic contracts. (B) gives full effect to emergency transactions. (C) supplements and covers all of the UCC. (D) covers wills, codicils, and testamentary trusts.

(A) encourages and gives full effect to electronic contracts. (

A promoter is personally liable on contracts made by him in the name of the unformed corporation: (A) even if the corporation adopts the contract. (B) only until the corporation is formed. (C) if the promoter, the third party, and the corporation enter into a novation substituting the corporation for the promoter. (D) only if the corporation is never formed.

(A) even if the corporation adopts the contract.

. A(n) ____ contract is one in which the parties have manifested their agreement by oral or written language, or both. (A) express (B) implied (C) executory (D) formal

(A) express

Sixteen-year-old Laura's disaffirmance of a contract: (A) for a sale of land by her is not effective until after she reaches the age of majority. (B) is only effective if expressed in words in the particular form required by statute. (C) can only be effective if she is an "emancipated" minor. (D) must take place after she reaches the age of majority, regardless of the type of contract, since only then does she have capacity.

(A) for a sale of land by her is not effective until after she reaches the age of majority.

Maxine offered to sell her video camera to Tom for $200 and also stated to Tom, "I will give you two weeks to accept my offer." One week later Tom learned that Maxine had sold the video camera to Cindy. Maxine: (A) has revoked her offer to Tom. (B) must sell Tom a video camera for $200 because she made a firm offer to him. (C) must get the camera back from Cindy if Tom accepts within two weeks. (D) Both (b) and (c) are appropriate alternatives in this case.

(A) has revoked her offer to Tom.

An express condition is usually preceded by such words as: (A) if. (B) because. (C) how. (D) All of these

(A) if.

David enters into a contract to give Edward the right of first refusal to purchase a tract of land owned by David. David subsequently offers the land to Fred without first offering it to Edward. An appropriate remedy for Edward to seek would be: (A) injunction. (B) liquidated damages. (C) reformation. (D) punitive damages.

(A) injunction.

Tyrell has a tax service and accounting business in Redwood City. He decides to move to Center City, which is 150 miles away and sells his accounting practice to Able and Baker, a CPA firm. In the sales contract, he agrees that he will refrain from practicing accounting anywhere within a 20-mile radius of Redwood City for a period of two years. However, on weekends he returns to his house in Redwood City, and when clients call him, he meets with them in his home. The sales agreement: (A) is being violated by Tyrell. (B) is invalid, because it is an illegal restraint of trade. (C) is illegal, because it is a violation of public policy. (D) will be divided into an enforceable, valid portion and an unenforceable, invalid portion, which is the time provision, because the two-year period is too long.

(A) is being violated by Tyrell.

A partnership interest: (A) is personal property that may be assigned without dissolving the limited partnership. (B) may be assigned to a person who then becomes a partner. (C) may not be assigned without dissolving the limited partnership. (D) may not be assigned unless this right is specifically provided for in the partnership agreement.

(A) is personal property that may be assigned without dissolving the limited partnership.

Andrew owns a store in Polk County. His trade extends throughout River City, but not beyond the county limits. He sells his store to Betty and, as part of the transaction, agrees not to engage in the same business anywhere in River City for a period of five years. The agreement: (A) is reasonable regarding the geographic restraint. (B) is unreasonable. (C) unduly interferes with the interest of the public. (D) is reasonable only if the agreement was made without duress.

(A) is reasonable regarding the geographic restraint.

Andrew owns a store in Polk County. His trade extends throughout River City, but not beyond the county limits. He sells his store to Betty and, as part of the transaction, agrees not to engage in the same business anywhere within the state for a period of three years. The agreement: (A) is reasonable. (B) is unreasonable, but enforceable since Andrew agreed to it. (C) unduly interferes with the interests of the public. (D) is reasonable, but only if Betty paid Andrew enough for the store to compensate him for lost business for three years.

(A) is reasonable regarding the geographic restraint.

The requirement of legally sufficient consideration: (A) is that the parties have agreed to an exchange and it imposed a legal detriment upon the promisee or conferred a legal benefit upon the promisor. (B) has nothing to do with the legal value of what is exchanged. (C) means the subject matter that the parties agree to exchange has to have the same value. (D) is the same as the requirement of adequacy of consideration.

(A) is that the parties have agreed to an exchange and it imposed a legal detriment upon the promisee or conferred a legal benefit upon the promisor.

A misrepresentation is material if: (A) it would likely induce a reasonable person to enter into a transaction. (B) it changes the price paid by the buyer. (C) it is made knowingly. (D) All of these.

(A) it would likely induce a reasonable person to enter into a transaction.

The RUPA provides that partners are ____ liable on all contract obligations of the partnership. (A) jointly and severally (B) strictly (C) not (D) partially

(A) jointly and severally

A general partnership that, by making the statutorily required filing, limits the liability of its partners for some or all of the partnership's obligations is a: (A) limited liability partnership. (B) limited liability company. (C) limited liability limited partnership. (D) limited partnership.

(A) limited liability partnership.

Henry hires Ace Roofing to put a new roof on his house. When Ace comes, Henry refuses to let them on the roof, saying that he has a headache and doesn't want to listen to pounding. The next day, Henry still has a headache and he refuses to allow them on the roof. The day after, the baby is sleeping and Henry refuses to allow them to work. After four weeks of this, Ace: (A) may be discharged, but Henry is not. (B) may be discharged, and so would Henry. (C) can sue for damages, but must perform when Henry is ready. (D) has no choice but to keep coming back each day until Henry is ready.

(A) may be discharged, but Henry is not.

Robert is 17 years old. He lies to Bouyers Auto in order to induce it to sell him a new pickup. Bouyers falls for this lie and sells him the pickup. In most jurisdictions, Robert: (A) may disaffirm and get his money back. (B) may not disaffirm since he lied. (C) must restore Bouyers to its position before contracting with him. (D) will receive his money less depreciation.

(A) may disaffirm and get his money back.

The Rogers family has always wanted to buy the beautiful house at the top of the hill. The owners of the house, the Thompsons, decided to sell and called Mr. Rogers. Before he could get back in touch with Mr. Thompson, Mr. Rogers suffered a heart attack and died. Mr. Rogers' adult daughter, to whom the Thompsons had not spoken, still wants the house. She may: (A) not accept since the offer is terminated. (B) not accept because she does not have the capacity. (C) accept since the contract offer is assignable. (D) accept since the offer cannot be revoked without notice.

(A) not accept since the offer is terminated.

On November 1, Paula and Mia enter into a contract where both parties are obligated to perform on December 31. On December 1, Paula tells Mia, "I cannot and do not plan to perform my duties in our contract." This statement is a(n) :(A) material alteration. (B) anticipatory repudiation. (C) nonmaterial breach since the statement is made before December 31. (D) accord.

(B) anticipatory repudiation.`

Juan, a partner in the Bell Partnership, in violation of a specific term in the partnership agreement restricting the extension of credit of more than $5,000 without the written consent of all the partners, extends credit of $6,500 to Brittany. Juan has violated the duty of: (A) obedience, and he can be held personally liable to his partners for any unpaid portion of the $6,500. (B) obedience, but he cannot be held personally liable for the unpaid portion of the debt. (C) care because he owed the partnership a duty to act in good faith. (D) loyalty, and he is therefore personally liable to the partnership for $6,500.

(A) obedience, and he can be held personally liable to his partners for any unpaid portion of the $6,500.

. Tommy's parents died in a plane crash and he went to live with his guardian, Aunt Rose. Rose had a very small house and did not have a separate bedroom and bath for 12-year-old Tommy. She and Tommy decided to use some of his inheritance to pay for an addition to the house. He had some shares of stock transferred into Rose's name so that she could sell them when the money was due to be paid. The stock transfers are: (A) presumed voidable unless Rose can show no unfair advantage was taken. (B) presumed valid unless it can be proven that Tommy was taken advantage of. (C) null and void because of undue influence. (D) presumed void because of duress

(A) presumed voidable unless Rose can show no unfair advantage was taken.(

Custom Sales and Rentals uses a four-page contract with important contract terms buried in the fine print. This is an example of: (A) procedural unconscionability. (B) a reasonable, legal business practice. (C) a "Blue law." (D) substantive unconscionability.

(A) procedural unconscionability.

William recently sold his successful business to Janice. The contract for the sale contained an unreasonable restriction that did not allow William to open a similar business for fifteen years. In this instance, the courts would likely: (A) reform the contract to make it reasonable and enforceable. (B) require the parties to draft a new contract. (C) enforce the contract as it is written. (D) void the contract on grounds of unconscionability.

(A) reform the contract to make it reasonable and enforceable.

Participating stock will: (A) share with common stock any additional dividends after preferred and common stockholders receive their normal dividends. (B) accumulate dividends that will be paid later. (C) participate in earnings only to the extent that all other classes do. (D) participate in earnings to the same extent as common stock.

(A) share with common stock any additional dividends after preferred and common stockholders receive their normal dividends.

Bartow signed a contract to coach baseball for Washington High for a period of three years. After two years he is offered and accepts an assistant coach position at State University. Contract law will not allow Washington High to ask for: (A) specific performance. (B) payment of compensatory damages. (C) an injunction. (D) liquidated damages.

(A) specific performance.

Contracts are governed primarily by: (A) state common law. (B) federal common law. (C) statutory law. (D) federal case law.

(A) state common law.

Under the RUPA, a partner's dissociation: (A) terminates the partner's right to participate in the management and conduct of the partnership business. (B) eliminates that partner's right to participate in winding up the partnership. (C) does not terminate the duty not to compete with the partnership until the process of winding up the partnership has been completed. (D) terminates that partner's duty to account to the firm for any fees received on behalf of the partnership.

(A) terminates the partner's right to participate in the management and conduct of the partnership business.

Barbara, a wealthy widow, promises the pastor of her church that she will donate $20,000 to the church to help pay off its mortgage if the stewardship committee can obtain enough pledges for the balance of the $80,000 mortgage. Other pledges are obtained to pay off the mortgage, but now Barbara has changed her mind and plans to take an around-the-world cruise instead. In this case: (A) the doctrine of promissory estoppel can be applied. (B) the promise to pay $20,000 is a promise to give a gift and is therefore not enforceable. (C) under the Restatement, Barbara's promise is enforceable only if it is in writing. (D) Barbara's promise is not enforceable because the church did not give consideration.

(A) the doctrine of promissory estoppel can be applied.

The principal legal duties imposed upon partners in their relations with one another include: (A) the fiduciary duty or the duty of loyalty. (B) the duty to compensate other partners for their time and efforts spent on partnership business. (C) a duty to devote full time and expertise to the partnership. (D) a duty to vote for candidates that will help the business.

(A) the fiduciary duty or the duty of loyalty.

Hannah, as a joke, offers to sell her violin to Mike. Her statement would have legal effect if: (A) the intended jest is so successful that Mike as a reasonable person under the circumstances believes the joke is an offer and he accepts. (B) Hannah's intent, determined subjectively, is to enter a contract. (C) Hannah's intent, determined objectively, is not to enter a contract. (D) Mike did not, but should have realized that Hannah was not serious.

(A) the intended jest is so successful that Mike as a reasonable person under the circumstances believes the joke is an offer and he accepts.

While a limited partnership interest is transferable, the transferee will become a limited partner if: (A) the other members consent. (B) he has paid fair market value. (C) he has also donated services. (D) he has consented to the organizational character.

(A) the other members consent.

3,000. After drilling 100 feet, William strikes solid granite rock. He talks to John and explains that this is highly unusual for the area and could not have been anticipated at the time of entering into the contract. He offers to get a special drill, but says it will cost him more money, so that he will be unable to complete the project for the agreed price. Because John is anxious to have the well, he agrees to pay William an additional $1,000 to complete the job. However, once the well is finished, he changes his mind and now says he will pay only the originally agreed-upon amount. In this case: (A) the parties have agreed to a substitute contract which discharges the original contract. John is obligated to pay the additional $1,000. (B) the substitute contract is binding under the UCC because there is the payment of additional money. (C) William is in breach of contract. John need not pay any additional money. (D) William is under a pre-existing moral duty to perform at the originally agreed-upon price.

(A) the parties have agreed to a substitute contract which discharges the original contract. John is obligated to pay the additional $1,000.

William agrees to drill a well up to 200 feet deep for John's rural cabin. The contract price is $3,000. After drilling 100 feet, William strikes solid granite rock. He talks to John and explains that this is highly unusual for the area and could not have been anticipated at the time of entering into the contract. He offers to get a special drill, but says it will cost him more money, so that he will be unable to complete the project for the agreed price. Because John is anxious to have the well, he agrees to pay William an additional $1,000 to complete the job. However, once the well is finished, he changes his mind and now says he will pay only the originally agreed-upon amount. In this case: (A) the parties have agreed to a substitute contract which discharges the original contract. John is obligated to pay the additional $1,000. (B) the substitute contract is binding under the UCC because there is the payment of additional money. (C) William is in breach of contract. John need not pay any additional money. (D) William is under a pre-existing moral duty to perform at the originally agreed-upon price.

(A) the parties have agreed to a substitute contract which discharges the original contract. John is obligated to pay the additional $1,000.(

A court would be likely to enforce an illegal contract: (A) under certain circumstances in which the aggrieved party was unaware of the illegality. (B) where, although the contract is unconscionable, there is only procedural unconscionability. (C) where the agreement is with an unlicensed attorney. (D) under no circumstances.

(A) under certain circumstances in which the aggrieved party was unaware of the illegality.

Sage offers to pay Allison $450 if Allison will paint her apartment while she is out of town on vacation for two weeks. Allison makes no promise but tells Sage that she will think about it. While Sage is out of town, Allison paints the apartment. This is best described as a(n): (A) unilateral contract. (B) quasi contract. (C) implied in fact contract. (D) bilateral contract.

(A) unilateral contract.

Lynn, a tailor, agrees to sew a pair of drapes for Zach's living room. Zach promises to pay Lynn $300. Lynn completes the drapes using material selected by Zach, but Zach is not satisfied and refuses to pay for them. In this case: (A) whether Zach will have to pay for the drapes depends upon whether as a reasonable man he ought to be satisfied. (B) the standard applied here is a subjective standard of satisfaction. (C) the doctrine of frustration of purpose applies. (D) the condition of satisfaction is an express condition.

(A) whether Zach will have to pay for the drapes depends upon whether as a reasonable man he ought to be satisfied.

What Article of the UCC governs sales of goods? (A) 1 (B) 2 (C) 3 (D) None of these.

(B) 2

Max buys shares of newly issued Zamex Corporation stock for $10 per share and pays $1,000 cash, a car worth $2,000, and a promissory note for $5,000. Under traditional corporate law, followed in about half of the states, how many shares of stock could Max validly buy? (A) 100 (B) 300 (C) 800 (D) 600

(B) 300

Which of the following is/are correct with regard to conditions subsequent? (A) Conditions subsequent are quite common in contracts. (B) A "sale or return" contract is an example of a contract with a condition subsequent. (C) A condition subsequent must occur before performance is due under a contract. (D) All of these are correct.

(B) A "sale or return" contract is an example of a contract with a condition subsequent.

Which of the following is correct with regard to a contract? (A) All contracts must be in writing. (B) A person who deposits money in a bank account has entered into a contract with the bank. (C) A contract may be for a tortious purpose. (D) To be valid, a contract must be bilateral and cannot be unilateral.

(B) A person who deposits money in a bank account has entered into a contract with the bank.

44. Which of the following would generally be considered to be a revenue-raising licensing law? (A) A statute requiring that doctors be licensed (B) A statute requiring that salespeople be licensed, but not establishing any educational or training requirements (C) A statute requiring public school teachers to be licensed (D) A statute that requires insurance agents to pass a test before selling insurance in a state

(B) A statute requiring that salespeople be licensed, but not establishing any educational or training requirements

Which of the following would generally be considered to be a revenue-raising licensing law? (A) A statute requiring that doctors be licensed (B) A statute requiring that salespeople be licensed, but not establishing any educational or training requirements (C) A statute requiring public school teachers to be licensed (D) A statute that requires insurance agents to pass a test before selling insurance in a state

(B) A statute requiring that salespeople be licensed, but not establishing any educational or training requirements

Which of the following would most likely be enforceable? (A) An agreement supported by past consideration (B) A substitute agreement to settle an undisputed debt (C) A debt agreed to seven years ago in a state where the statute of limitations is six years (D) A promise following the rendering of emergency services that is not supported by new consideration

(B) A substitute agreement to settle an undisputed debt

contract by which of the following is void? (A) A fourteen-year-old girl. (B) A thirty-six-year-old man under a court-ordered guardianship for mental incompetency. (C) A thirty-year-old woman who, because of intoxication, is unable to understand the nature and consequences of signing the contract. (D) A twenty-five-year-old woman who is unable to understand the nature and effect of signing a contract because of a mental illness.

(B) A thirty-six-year-old man under a court-ordered guardianship for mental incompetency.

Which of the following is an informal contract? (A) A letter of credit. (B) A written contract for the sale of a 5-acre tract of land. (C) A check. (D) A recognizance.

(B) A written contract for the sale of a 5-acre tract of land.

In which of the following situations would the persons be partners? (A) Aisha and Brantley jointly own shares of the capital stock of a corporation, have a joint bank account, and have purchased real estate as tenants in common. They share the dividends on the stock, the interest on the bank account, and the net proceeds from the lease of the real estate. (B) Aisha and Brantley buy and sell real estate continuously over a five-year period, conducting a business of trading in real estate. They do not consider themselves partners. (C) Aisha, Brantley, and Chenille each inherit an undivided one-third interest in a restaurant and decide to sell it because the market is such that they are assured a good price. (D) Aisha and Chenille take care of each other's children while the other is working.

(B) Aisha and Brantley buy and sell real estate continuously over a five-year period, conducting a business of trading in real estate. They do not consider themselves partners.

Bart sends Carla an offer by express mail. Carla receives it at 10 a.m. on Tuesday. At 11 a.m. on Tuesday, Carla delivers an acceptance to Federal Express, but due to an error, the letter is not sent out by the company until Wednesday at 8 a.m. At what time does the law consider the acceptance to be effective? (A) At 10 a.m. on Tuesday (B) At 11 a.m. on Tuesday (C) At 8 a.m. on Wednesday (D) At the time Bart receives the letter

(B) At 11 a.m. on Tuesday

Unless otherwise agreed, under RULPA, a limited partner is entitled to repayment of his capital contribution under which of the following conditions? (A) Before general partners are repaid their capital contributions (B) At the same time and on a pro rata basis with the general partners (C) Only after general partners have been repaid their capital contributions (D) None of these.

(B) At the same time and on a pro rata basis with the general partners

Blake tries to sell his classic car to Victoria for $12,000. Blake tells Victoria, "I paid $12,000 for the car in 1978 and it's worth twice that today." Blake really paid $8,000 for the car in 1978. If Victoria buys the car, basing her decision on Blake's statement, which of the following correctly states the situation? (A) Blake's statements amount to puffing only. (B) Blake's statements provide grounds to set the contract aside. (C) Blake's statements are actionable only if negligently made. (D) Blake's statements amount to fraud in the execution.

(B) Blake's statements provide grounds to set the contract aside.

Blevins, Inc. calls the Widget Corporation of America to order 400 widgets at $2 a widget. Widget accepts the oral order and then sends out an order confirmation form, with the pre-printed name Widget Corporation of America on the top of the form. The form states that an order has been received for "300" widgets and that it will be filled promptly. In this case: (A) the order acceptance form fails to meet the writing requirement in the UCC, because it isn't signed. (B) Blevins can enforce the contract for 300 widgets, but not for 400 widgets. (C) if Blevins signs and returns the form, it will be able to sue for the extra 100 widgets later. (D) the contract is enforceable for 400 widgets, because it has been partially performed.

(B) Blevins can enforce the contract for 300 widgets, but not for 400 widgets.

Which of the following is NOT an element of fraud? (A) Material misrepresentation (B) Competent parties (C) Knowledge of falsity (D) Justifiable reliance

(B) Competent parties

Which of the following expresses the right one has to choose her partners? (A) Partnership by estoppel (B) Delectus personae (C) Entity theory (D) Fiduciary relationship

(B) Delectus personae

Which of the following is NOT an advantage of a partnership? (A) Partners' income taxes may be less than the income taxes would be on a corporation. (B) Each partner has limited liability. (C) It is possible to bring together more managerial skills than in a sole proprietorship. (D) It is possible to bring together more capital than in a sole proprietorship.

(B) Each partner has limited liability.

An advertisement is usually an offer to sell. (A) True (B) False

(B) False

An offer is effective as soon as it is dispatched. (A) True (B) False

(B) False

Which of the following results in a void, rather than voidable, agreement? (A) Duress by improper threat (B) Fraud in the execution (C) Fraud in the inducement (D) Undue influence

(B) Fraud in the execution

Which of the following would ordinarily be a basis for making a contract void for mutual mistake? (A) Market conditions (B) Genuineness of the source of the subject matter of the contract (C) The financial situation of the parties (D) All of these.

(B) Genuineness of the source of the subject matter of the contract

Which of the following is true of limited liability companies? (A) Most states limit the duration of LLCs. (B) In most states, LLCs must file annual reports with the state. (C) The contribution of a member to a limited liability company must be cash or property. (D) A written operating agreement governing all of the relations between members is required in all states.

(B) In most states, LLCs must file annual reports with the state.

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.

(B) In whether they represent an ownership interest.

Which of the following is correct with regard to "par value"? (A) It indicates the worth of the stock at issue. (B) It is the minimum price at which the corporation may sell the stock at issuance. (C) It represents the maximum price at which the stock may be sold at issuance. (D) It represents the amount for which the stock must be traded.

(B) It is the minimum price at which the corporation may sell the stock at issuance.

Kyle wants to buy a six-passenger car. The salesperson tells him that the two-seat sports car Kyle sees on the car lot would be just perfect for six people. Kyle test drives the car and then buys it. In this case: (A) Kyle has a valid cause of action for fraud. (B) Kyle was not justified in relying upon the salesperson's representation that the car would seat six people. (C) the element of scienter is missing. (D) the salesperson is a fiduciary

(B) Kyle was not justified in relying upon the salesperson's representation that the car would seat six people.

Which of the following is characteristic of contract law during the twentieth century compared with contract law in the nineteenth century? (A) Privity of contract gained in importance. (B) Many of the formalities of contract formation were relaxed. (C) Contract liability is absolute and escape from liability, once assumed, is rare. (D) There is a narrower view of contract damages

(B) Many of the formalities of contract formation were relaxed.

Meg has contracted to paint a portrait of Julio, but dies before completing the portrait. Which of the following is correct? (A) Meg's executor must find a capable artist to complete the work to Julio's satisfaction. (B) Meg's contractual duty is discharged due to objective impossibility. (C) A novation must be entered between Julio and a third person in order to discharge Meg's duty under the contract. (D) Meg's contractual duty is discharged due to subjective impossibility.

(B) Meg's contractual duty is discharged due to objective impossibility.

Hafsa and Nicholai form a limited liability company to conduct a particular business activity for profit. Which of the following is not true? (A) The articles of organization must be filed in a designated state office. (B) No particular form of organization is required. (C) The company name must include the words "limited liability company" or "limited company" or the abbreviation "LLC" or "LC." (D) The contribution of a member may be a promissory note.

(B) No particular form of organization is required.

Barry's Sport Shop calls Champs Tee Shirt Company to order 200 designer tee shirts at $2 per shirt. The next day, Barry decides he can easily sell 100 more. Before the order is filled, he calls to change the order to 300 tee shirts. Champs sends 200. Can Barry force Champs to send the additional 100? (A) No, because there is no consideration for the extra 100 shirts (B) No, because Barry does not have a writing signed by Champs Tee Shirts (C) Yes, because this is a subsequent modification of the original contract (D) Yes, because Champs Tee Shirts is a merchant within the meaning of Article 2 of the UCC

(B) No, because Barry does not have a writing signed by Champs Tee Shirts

If a foreign corporation wishes to avoid transacting business in Arkansas, it would be careful NOT to do which of the following? (A) Own a piece of real estate in Arkansas on which it may build in the future (B) Own a building in Arkansas in which to warehouse stock (C) Maintain a bank account in Arkansas (D) Allowing its product to be transported on Arkansas state highways on the way to another state.

(B) Own a building in Arkansas in which to warehouse stock

Which of the following would have priority in distributing limited partnership assets? (A) Return of a general partner's capital contribution (B) Repayment of a loan by a limited partner to the partnership (C) Return of a limited partner's capital contribution (D) Payment of profits of the limited partner

(B) Repayment of a loan by a limited partner to the partnership

Which of the following is a contract with a condition subsequent? (A) Rhonda enters into a contract to buy a new car conditional upon her getting a loan from her bank. (B) Roger bought a DVD player, but he may return it within ten days and get all of his money back. (C) Both of these are examples of a condition subsequent. (D) Neither of these is an example of a condition subsequent.

(B) Roger bought a DVD player, but he may return it within ten days and get all of his money back.

Brian makes a material misrepresentation of fact regarding his horse to Rosalind while out riding one day. Later that day, Rosalind makes an offer to buy the horse. Brain accepts without correcting his earlier misrepresentation of fact. In this case: (A) Brian may avoid the contract. (B) Rosalind may avoid the contract. (C) either or both Brian or Rosalind may avoid the contract. (D) neither Brian nor Rosalind may avoid the contract.

(B) Rosalind may avoid the contract.

Which of the following is untrue with regard to the interpretation of contracts? (A) Express terms prevail over course of performance, and course of performance prevails over course of dealing. (B) Technical terms will always be given technical meaning even where a different intent is manifested by the parties. (C) Handwritten or typed terms are given greater weight than preprinted terms. (D) All writings that are part of the same transaction are interpreted together.

(B) Technical terms will always be given technical meaning even where a different intent is manifested by the parties.

Which of the following is true of a partner's fiduciary duty? (A) The RUPA's provision regarding the fiduciary duty is not exclusive, but leaves further development of the fiduciary duty of partners to the common law of agency. (B) The RUPA provides that a partner does not violate the duty of loyalty merely because the partner's conduct furthers the partner's own interest. (C) The fiduciary duty extends to the formation of the partnership, even when the parties are negotiating at arm's length. (D) The duty not to compete continues for a reasonable time after dissociation.

(B) The RUPA provides that a partner does not violate the duty of loyalty merely because the partner's conduct furthers the partner's own interest.

Under the UCC statute of frauds, which of the following terms must be included in a writing in order to satisfy the writing requirement? (A) The price of the goods (B) The quantity of the goods (C) The signatures and names of the buyer and the seller (D) The time and place for delivery

(B) The quantity of the goods

Which of the following contracts is covered by Article 2 of the Uniform Commercial Code? (A) The sale of a house (B) The sale of a new car (C) An employment agreement (D) A sale of automobile insurance

(B) The sale of a new car

A collection agency threatened to sue Martha for the unpaid hospital bills from her heart operation. She signed a promissory note at a high but not illegal rate of interest. What result? (A) The note is valid because she signed it. (B) The threat to bring a civil suit to collect money owed is permissible. (C) The note is invalid because she signed under duress. (D) The note is invalid because the agency put her under undue pressure

(B) The threat to bring a civil suit to collect money owed is permissible.

Alice offers to sell her computer, monitor, and printer to Bradley for $300. Bradley says he will accept provided that Alice includes her word processing software. What is the status of their discussions? (A) There is a valid contract for the computer, the monitor, the printer, and the software. (B) There is no contract, because Bradley has made a counteroffer. (C) There is no contract, because the time for delivery has not been decided. (D) There is no contract, because the offer has been revoked by the offeror.

(B) There is no contract, because Bradley has made a counteroffer.

Promissory estoppel is a contractual doctrine that includes the following considerations: (A) The courts use the doctrine of promissory estoppel to enforce unilateral promises. (B) Under this doctrine the promisor reasonably expects that the promisee, in reliance on the promise, will be induced by the nature of the promise to take action or refrain from taking action and the promisee does so. (C) The courts will not, under any circumstance, enforce promises that do not include all four of the elements of contract. (D) None of these apply to promissory estoppel.

(B) Under this doctrine the promisor reasonably expects that the promisee, in reliance on the promise, will be induced by the nature of the promise to take action or refrain from taking action and the promisee does so.

Which of the following is not true regarding the contracts of incompetent persons? (A) An incompetent person is liable for necessaries. (B) Unlike a minor, an incompetent person can never ratify a contract. (C) To avoid a contract, a person need not be permanently incompetent. (D) A person is competent unless he is unable to understand the nature and effect of his act.

(B) Unlike a minor, an incompetent person can never ratify a contract.

In which of the following situations would a minor be unable to disaffirm a contract which he had made? (A) Upon restoring the consideration received in a situation involving a fully executed contract (B) Where the minor wishes to affirm part of a contract and disaffirm another part of the same contract (C) During the time of his minority or for a reasonable time thereafter (D) None of these.

(B) Where the minor wishes to affirm part of a contract and disaffirm another part of the same contract

Don has an employment contract with Dunkirk Ice Cream. He sells ice cream and novelty ice cream products. He has nine children and doesn't make enough money, so he decides to see if another dairy will hire him, too. "After all," he reasons, "most stores carry four or five different brands." His employment contract prohibits him from competing. If Don sells for another dairy in addition to Dunkirk, will he be in trouble under his contract? (A) No, it is unenforceable as against public policy. (B) Yes, it is likely to be enforceable during employment. (C) No, the prohibition against competing is enforceable only after he quits Dunkirk. (D) A court would have to rule on the enforceability of the covenant not to compete since courts are reluctant to enforce such covenants during a period of employment.

(B) Yes, it is likely to be enforceable during employment.

Gary mails an offer to Brian on June 15. Brian receives the offer on June 16. Gary mails a revocation of the offer on June 17. Brian mails a letter of acceptance on June 18 and Gary receives the acceptance on June 20. Brian receives the revocation on June 19. Was a contract formed? (A) Yes, on June 16 (B) Yes, on June 18 (C) Yes, on June 20 (D) No, the offer was revoked before acceptance

(B) Yes, on June 18

The president of Hi-Glow Cosmetics sends his top chemist to Hi-Glow's competitor's labs to steal its formula for shiny lipstick. The chemist gets caught and is sent to jail. Can Hi-Glow be found to be criminally liable? (A) Yes, under the theory of ultra vires (B) Yes, since the president authorized the crime (C) No, because a corporation acts through the board of directors (D) No, because a corporation can't go to jail

(B) Yes, since the president authorized the crime

Lynn offers to sell his house to Dennis for $95,000. Dennis responds, "I will pay you $95,000 if you will paint the second floor." This response could best be described as: (A) an acceptance. (B) a counteroffer. (C) a rejection. (D) an invitation.

(B) a counteroffer.

Janet promises Eli $4,000 for one of his original paintings on the condition that she receive $1 million from her mother's will. Janet has made: (A) an illusory promise. (B) a legally sufficient promise unless Janet knew at the time she made the promise that she could not inherit the $1 million. (C) a conditional promise which is not sufficient to form consideration. (D) a legally inadequate promise, and the courts will therefore not enforce it.

(B) a legally sufficient promise unless Janet knew at the time she made the promise that she could

Janet promises Eli $4,000 for one of his original paintings on the condition that she receive $1 million from her mother's will. Janet has made: (A) an illusory promise. (B) a legally sufficient promise unless Janet knew at the time she made the promise that she could not inherit the $1 million. (C) a conditional promise which is not sufficient to form consideration. (D) a legally inadequate promise, and the courts will therefore not enforce it.

(B) a legally sufficient promise unless Janet knew at the time she made the promise that she could not inherit the $1 million.

With regard to a limited partner's capital contribution to the limited partnership: (A) the limited partner can only contribute cash. (B) a promise by a limited partner to contribute to the limited partnership is not enforceable unless it is in a signed writing. (C) if the partner fails to make a promised capital contribution, the limited partnership has no power to hold the partner liable. (D) All of these.

(B) a promise by a limited partner to contribute to the limited partnership is not enforceable unless it is in a signed writing.

Actionable fraud would be likely to be based on falsity of: (A) a car owner's statement that, "This car is the best buy you will find." (B) a realtor's statement that, "The contractor used 25-year warranted shingles on the roof." (C) an art dealer's statement that, "This painting will increase in value." (D) a stockbroker's statement that, "This stock should double in price within six months."

(B) a realtor's statement that, "The contractor used 25-year warranted shingles on the roof."

An agreement of a seller to supply a buyer with all of the buyer's requirements for certain goods is known as: (A) an output contract. (B) a requirements contract. (C) a firm offer. (D) promissory estoppel.

(B) a requirements contract.

In determining the meaning of a contract under the UCC, which of the following will have first priority? (A) Course of performance (B) Course of dealing (C) Usage of trade (D) Express terms

(D) Express terms

Non-compete agreements drafted for employees of Internet companies: (A) are interpreted no differently in terms of standards of reasonableness than are agreements for other types of companies. (B) are subject to larger geographic restrictions than for other types of companies. (C) are subject to longer periods of reasonable duration. (D) are irrelevant.

(B) are subject to larger geographic restrictions than for other types of companies.

A contract in which both parties exchange promises is a: (A) voidable contract. (B) bilateral contract. (C) unilateral contract. (D) quasi contract

(B) bilateral contract.

Elmer wrote a letter to his friend Fred offering to sell Fred an 80-acre farm for $400,000. After mailing the letter, Elmer learns that the farm is actually worth $500,000 and changes his mind about selling. Elmer: (A) has made a firm offer to Fred which cannot be revoked. (B) can revoke his offer at any time before acceptance, because there is no consideration to keep the offer open. (C) must keep the offer open, because this is an option contract. (D) is prohibited from revoking his offer to Fred under the doctrine of promissory estoppel.

(B) can revoke his offer at any time before acceptance, because there is no consideration to keep the offer open

A contract contains the provision, "Walter Hamilton promises to pay Faye Weeks $1,600 for a 2012 V-6 motor provided that Phelps' Garage approves the quality of the motor." This provision: (A) makes the contract unenforceable since Walter's promise is illusory. (B) creates an express condition which must be met before Walter's duty to pay arises. (C) cannot create an express condition because it lacks the necessary words "on condition that." (D) is not valid since it makes Walter's duty to pay dependent upon the opinion of a third party.

(B) creates an express condition which must be met before Walter's duty to pay arises.

Contracts induced by threats of ____ are voidable, regardless of whether the coerced party has committed an unlawful act. (A) civil prosecution (B) criminal prosecution (C) tortious conduct (D) physical force

(B) criminal prosecution

A corporation formed in substantial compliance with the incorporation statute and the required organizational procedures is a: (A) de facto corporation. (B) de jure corporation. (C) corporation by estoppel. (D) private corporation.

(B) de jure corporation.

Ann, a minor, disaffirmed her agreement to buy $127 worth of cosmetics from Facial Glo Company. She had used up all the eye shadows, lipsticks, and powders. The general rule is that she may: (A) disaffirm, but she must pay the asking price of the cosmetics used. (B) disaffirm, but she has to return the makeup that is not used up. (C) not disaffirm without paying the value of used makeup. (D) not disaffirm because she has used the goods.

(B) disaffirm, but she has to return the makeup that is not used up.

The exercise of the power to avoid a contract is known as: (A) ratification. (B) disaffirmance. (C) ab initio. (D) restitution.

(B) disaffirmance.

An offer under Article 2 of the UCC that is irrevocable even though no consideration is given to keep it open is known as a(n): (A) option. (B) firm offer. (C) requirements contract. (D) output contract.

(B) firm offer.

Jane, Kelly, and Lois are partners in an accounting firm, but Jane intends to retire and withdraw from the partnership at the end of the year. Under the RUPA, Jane is liable to the firm's creditors: (A) only for all debts incurred prior to her retirement. (B) for a partnership obligation incurred within two years after her dissociation if at the time of entering into the transaction the other party reasonably believed Jane was then a partner, did not have notice of Jane's dissociation, and is not deemed to have had constructive notice of the dissociation. (C) for an amount not to exceed her partnership interest on the day of her retirement. (D) until the day of her retirement when she will be absolved of all liability.

(B) for a partnership obligation incurred within two years after her dissociation if at the time of entering into the transaction the other party reasonably believed Jane was then a partner, did not have notice of Jane's dissociation, and is not deemed to have had constructive notice of the dissociation.

Unless one of the parties contractually assumes the risk, the ____ discharges a contract if supervening circumstances make fulfillment of the purpose which both parties had in mind impossible. (A) bankruptcy law (B) frustration of purpose doctrine (C) perfect tender rule (D) subjective impossibility doctrine

(B) frustration of purpose doctrine

Abe is involved in an automobile accident and is injured. While he is unconscious, the police call an ambulance which takes him to a hospital. Abe is treated at the hospital and released a day later. The hospital sends him a bill for $2,400, which Abe refuses to pay, claiming it is too high and he never consented to the treatment because he was unconscious. Abe: (A) has entered into a unilateral contract with the hospital and therefore will have to pay the bill. (B) has a quasi-contractual agreement with the hospital. (C) has entered into an implied in fact contract with the hospital. (D) and the hospital have entered into a bilateral contract, the terms of which require that he pay the bill.

(B) has a quasi-contractual agreement with the hospital.

Theresa is a travel agent at the Fly Away Travel Agency. She has signed an agreement with her employer which prohibits her from working in any similar business in any town within a 100-mile radius of where she works. If she wants to quit her job and go to work for another travel agency, it is likely that: (A) a court would uphold these restrictions. (B) if no trade secrets are involved, and she has no dominion over customers, a court would rule the restrictions to be invalid. (C) if the period of time of the agreement is under five years, it will be upheld by the court. (D) a court would rule the restrictions invalid unless her work is done predominantly online.

(B) if no trade secrets are involved, and she has no dominion over customers, a court would rule the restrictions to be invalid.

The person who signs and files the articles of incorporation is the: (A) promoter. (B) incorporator. (C) subscriber. (D) majority stockholder.

(B) incorporator.

Humberto writes to Stan asking if Stan will buy his cultivator for $600. Humberto's question: (A) if answered in the affirmative by Stan, creates a contract. (B) indicates merely a willingness to enter into negotiation rather than a willingness to enter into a contract. (C) is a definite and certain offer communicated to an offeree. (D) is subject to the mirror image rule.

(B) indicates merely a willingness to enter into negotiation rather than a willingness to enter into a contract.

Where a partner acts without either actual or apparent authority, the partnership: (A) is bound under all circumstances, since the partner is an agent of the partnership. (B) is bound only if it ratifies the act. (C) is bound only if the third person did not know the partner was acting on behalf of the partnership. (D) cannot be bound.

(B) is bound only if it ratifies the act.

Brooklyn and Doug make a contract for Brooklyn to manufacture five leather sofas of a specified design. Prior to their manufacture, the factory is destroyed in an accidental fire that is no one's fault. The sofas are available from other sources. Brooklyn: (A) must supply the sofas, even if she must buy them elsewhere. (B) is discharged from her duty to deliver the sofas by the destruction of the factory. (C) has materially breached the contract if she fails to deliver the sofas. (D) must return any money paid by Doug.

(B) is discharged from her duty to deliver the sofas by the destruction of the factory.

Co-ownership of the means or instrumentality of accomplishing a single business transaction or a limited series of transactions ordinarily results in a: (A) partnership. (B) joint venture. (C) corporation. (D) R & D partnership.

(B) joint venture.

Linnea contracts to buy Harriette's farm for $300,000 and puts $20,000 down. Then Linnea learns she is allergic to hay and repudiates the contract. If Harriette can sell the farm one month later for $290,000, she may: (A) keep Linnea's $20,000. (B) keep $10,000 of Linnea's down payment. (C) not keep any of the down payment money. (D) sue for specific performance.

(B) keep $10,000 of Linnea's down payment.

A(n) ____ is an unincorporated business association that provides limited liability to all of its owners and permits all of its owners to participate in the management of the business. (A) limited partnership (B) limited liability company (C) general partnership (D) association of fiduciaries

(B) limited liability company

A limited partner's financial obligation to the partnership may be increased if the: (A) limited partner acts as agent for a competing partnership. (B) limited partner takes active part in the management of the partnership. (C) another limited partner is added to the partnership. (D) All of these are true.

(B) limited partner takes active part in the management of the partnership.

When the articles provide a ____, preferred stock has priority over common stock to the extent the articles state after a corporation is dissolved and when assets are distributed. (A) stock right (B) liquidation preference (C) dividend preference (D) preemptive right

(B) liquidation preference

A share dividend: (A) is a type of distribution. (B) makes no difference in the assets of the corporation or in the shareholder's relative interest in the net worth of the corporation. (C) is also known as a property dividend. (D) All of these.

(B) makes no difference in the assets of the corporation or in the shareholder's relative interest in the net worth of the corporation.

In order to form a contract, the parties must: (A) manifest their agreement subjectively. (B) manifest their agreement objectively. (C) indicate solely through written word their intent. (D) create a formal document called a contract.

(B) manifest their agreement objectively.

Kline, Finkel, and Martinez have been partners for years, but a court is now dividing the assets and liabilities of the partnership separate from the assets and liabilities of the individual partners. This process is called: (A) liquidation. (B) marshaling assets. (C) winding up. (D) dissolution of the partnership.

(B) marshaling assets.

To be effective, notice of revocation of an offer: (A) must be communicated directly to the offeree before the offeree has accepted. (B) may be communicated indirectly to the offeree through a third person. (C) must be dispatched before the offeree accepts; when notice actually reaches the offeree is not important. (D) is not addressed in the Restatement.

(B) may be communicated indirectly to the offeree through a third person.

Doug obtains an exclusive franchise to sell widgets for the Acme Widget Company. The exclusive franchise covers the entire State of Wisconsin for a period of three years. In this case: (A) Acme is obligated to use its best efforts to supply the goods only if this clause appears in the written franchise agreement. (B) according to the UCC, unless otherwise agreed, Doug must use his best efforts to promote the sale of the widgets in his territory. (C) under the UCC, such an agreement lacks consideration. (D) consideration is not required because this is a moral obligation.

(B) must be adequate.

Wayne helped Hank study all night for an important exam. After Hank got an "A" on the exam, he told Wayne, "I will give you $10 for helping me get a good grade." Wayne said, "Thanks, I'll take it." There is: (A) no contract because there is no mutual assent. (B) no contract because there is no valid consideration. (C) no contract because $10 is reasonably inadequate consideration. (D) a contract with sufficient consideration.

(B) no contract because there is no valid consideration.

Under the UPA, which of the following liabilities of a partnership has the highest priority for payment out of partnership assets? Amounts owing to: (A) partners for loans and advances (B) nonpartner creditors (C) partners for profits (D) partners for capital

(B) nonpartner creditors

Chuck, Bob, and Bert form CB&B Partnership to run a specialty grocery store. Bert is the day-t- -day manager of the store, Bob buys the groceries, and Chuck does all the administrative work. Bob decides he would like a new car to drive to visit prospective wholesalers. He makes a contract with Big Ben Motors in the name of CB&B without consulting Chuck and Bert. The partnership is: (A) bound by Bob's actual implied authority to buy a car. (B) not bound because buying a car is outside the scope of the partnership business. (C) bound by Bob's ostensible authority to buy a car. (D) bound by Bob's apparent authority to buy a car.

(B) not bound because buying a car is outside the scope of the partnership business.

Randy, a minor, buys a new four-wheel drive truck from the Jones Dealership. Randy sells this truck to his cousin, Steve, who is an adult. Steve conveys this vehicle to Arthur. Arthur does not personally know Steve or Randy. Randy may: (A) recover the vehicle from Arthur. (B) not recover the vehicle from Arthur. (C) hold Steve liable in tort. (D) recover the reasonable value of the vehicle from Arthur but not the vehicle itself.

(B) not recover the vehicle from Arthur.

A corporation is considered a citizen: (A) under the Fourteenth Amendment's "privileges or immunities" clause. (B) of the state of its incorporation or where it has its principal office. (C) of all states where it does business. (D) All of these statements are true.

(B) of the state of its incorporation or where it has its principal office.

Howard needs a truck to pull a 2,000-pound trailer. Gordon tells Howard, "My truck will pull a 2,000-pound trailer with ease." Relying on Gordon's statement, Howard buys the truck, but it will not pull a 2,000-pound trailer. If Gordon did not intend to deceive and Howard sues for nonfraudulent misrepresentation, he can recover: (A) punitive damages, but not out-of-pocket damages. (B) out-of-pocket and consequential damages, but not punitive damages. (C) out-of-pocket damages plus punitive damages. (D) nominal damages, because Howard should have known the capacity of the truck.

(B) out-of-pocket and consequential damages, but not punitive damages.

A fiduciary is a: (A) person in a subservient position. (B) person who owes a duty of trust, confidence, and loyalty to another. (C) form of formal conduct. (D) person of equal power and control

(B) person who owes a duty of trust, confidence, and loyalty to another.

Any property other than an interest in real property is: (A) goods. (B) personal property. (C) tangible property. (D) intangible property.

(B) personal property.

E-Sign regulations state that consumers must: (A) evidence their consent on paper to conducting transactions with electronic records after being informed of the types of hardware and software required. (B) receive a "clear and conspicuous" statement informing them of their right to withdraw consent to receiving electronic records. (C) receive a "clear and conspicuous" statement informing them of their right to have the record provided only in electronic form. (D) All of these.

(B) receive a "clear and conspicuous" statement informing them of their right to withdraw consent to receiving electronic records.

The process whereby a court "rewrites" or "corrects" a written contract to make it conform to the true intentions of the parties is: (A) injunction. (B) reformation. (C) specific performance. (D) rescission.

(B) reformation.

A purchaser's agreement to buy from a particular seller all the materials of a particular kind he needs is a(n) ____ contract. (A) illusory (B) requirements (C) output (D) exclusive dealing

(B) requirements

A purchaser's agreement to buy from a particular seller all the materials of a particular kind he needs is a(n) ____ contract. (A) illusory (B) requirements (C) output (D) exclusive dealing

(B) requirements

The return to the aggrieved party of the consideration, or its value, which he gave to the other party is: (A) injunction. (B) restitution. (C) specific performance. (D) reformation.

(B) restitution.

The State of Florida enters into a contract with Treasure Salvors governing the salvage of a Spanish galleon that sunk in the 1600s. Under the terms of the contract, the salvagers agree to relinquish 25% of the items recovered to the State of Florida in return for the right to salvage on state lands. At the time the parties enter into the contract, they both believe that the seabed where the ship lies is state land. Subsequently, the United States Supreme Court holds that the continental shelf on which the ship rests has never been owned by Florida. The salvagers sue to rescind the contract. The contract: (A) cannot be rescinded. (B) should be avoided because the parties made a mutual mistake. (C) should be enforced because, although there is a mutual mistake, it is not material. (D) will be enforceable because the United States government will automatically step into the shoes of the State of Florida

(B) should be avoided because the parties made a mutual mistake.

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) nominal damages. (B) specific performance. (C) restitution. (D) equitable rescission.

(B) specific performance.

Fay, age 17, ordered a pair of skis on the installment plan. She paid $20 every month until she turned 18, the age of majority. The next day, she sold them to Sharon and disaffirmed the contract. Fay is: (A) still liable since she had to disaffirm before her 18th birthday. (B) still liable because selling the skis amounts to a ratification. (C) not liable because she disaffirmed the contract. (D) not liable because skis are not necessaries.

(B) still liable because selling the skis amounts to a ratification.

If the issued and outstanding shares are broken up into a greater number of shares, each representing a proportionately smaller interest in the corporation, this is known as a: (A) property dividend. (B) stock split. (C) stock dividend. (D) liquidating dividend.

(B) stock split.

Alex wants to submit a bid on a city sewer project. He computes the cost, but mistakenly omits the cost of one item. Accordingly, he submits a bid of $430,000 to the city. The next highest bid is $675,000, and the rest of the bids are even higher. The city is happy to have such a low bid, so it accepts Alex's bid and awards him the contract for the job, even though the city engineer is of the opinion the job cannot be done for less than $650,000. In this case: (A) Alex must perform for the agreed upon price because he has made a unilateral mistake. (B) the city was aware of or should have been aware of Alex's mistake. When it accepted the bid with knowledge of Alex's mistake, the city sought to take an unconscionable advantage of Alex's error. (C) the city must allow Alex to revise his bid to include the cost of the omitted item. (D) Alex will be paid the fair market price according to the UCC for his work

(B) the city was aware of or should have been aware of Alex's mistake. When it accepted the bid with knowledge of Alex's mistake, the city sought to take an unconscionable advantage of Alex's error.

Mary agrees to sew Georgia's prom dress for $50 plus costs. Georgia decides that she wants ruffles around the neck and calls Mary who says it will now cost $60. When Mary finishes the dress (with ruffles), Georgia must pay: (A) $50, since that is the original agreement. (B) $50, since a modification must be in writing. (C) $60, since the modified agreement is supported by additional consideration. (D) $60, since any subsequent agreement is enforceable.

(C) $60, since the modified agreement is supported by additional consideration.

Shirley hears about a reward being offered by the local television station for information leading to the arrest and conviction of a local rapist. She supplies the requested information, and the suspect is then arrested and convicted. In this case: (A) Shirley cannot collect the money unless the offer was specifically made to her by the station. (B) the offer by the television station was an offer made to the general public to enter into a unilateral contract, which offer Shirley has accepted. (C) because Shirley failed to notify the station of her intention to supply the information before actually doing so, she has not accepted their offer. (D) Shirley was just doing her duty as a citizen and has no right to the payment of any money.

(B) the offer by the television station was an offer made to the general public to enter into a unilateral contract, which offer Shirley has accepted.

If an offer asks for acceptance by mail and the offeree faxes his acceptance: (A) there is no contract, and the offer is revoked. (B) there is a contract if the acceptance is actually received within the time the authorized means would have arrived. (C) the acceptance is merely a counteroffer. (D) there is a contract, but only if the offeree calls the offeror and gets permission to fax the acceptance.

(B) there is a contract if the acceptance is actually received within the time the authorized means would have arrived.

A postincorporation subscription is: (A) like a preincorporation subscription in that the subscriber may withdraw the offer to enter into the subscription any time before the corporation accepts it. (B) treated as a contract between the subscriber and the corporation. (C) not recognized under the RMBCA. (D) defined under the RMBCA as a contract between all subscribers

(B) treated as a contract between the subscriber and the corporation.

The law generally restricts the time within which an action can be brought by either party to a contract." This statement is: (A) false. (B) true, because of statutes of limitation. (C) true, because of the law of repudiation. (D) true, because of covenants not to sue.

(B) true, because of statutes of limitation.

Sarah is working hard on the mayoral campaign of Timothy. She thinks that just a few more votes could win the election, so she promises to pay her friend Violet $50 to register and vote. Violet does so, but Timothy loses the election, and Sarah now refuses to pay. The agreement is: (A) enforceable. (B) unenforceable and opposed to public policy. (C) one to obstruct the administration of justice. (D) an unconscionable contract covered by the UCC.

(B) unenforceable and opposed to public policy.

Under the UCC, a(n) ____ is a practice or method of dealing, regularly observed and followed in a place or vocation or trade. (A) course of dealing (B) usage of trade (C) course of performance (D) integrated document

(B) usage of trade

Steven intentionally makes a material misrepresentation of fact regarding his motorcycle to Thelma who agrees to buy the motorcycle based upon the misrepresentation. This contract is: (A) void. (B) voidable. (C) executed. (D) unenforceable.

(B) voidable.

Which of the following would be considered to be a misrepresentation of a material fact for purposes of establishing fraud in the inducement? (A) A statement of judgment of value, such as "This is the best car in town for the money." (B) "This style of jacket is going to be the most popular style next year." (C) "This car has a new radiator." (D) "In my opinion, this is the best buy for the money."

(C) "This car has a new radiator."

If 100 shares of $50 par value stock were issued at $75 per share, how much would constitute capital surplus? (A) $750 (B) $7,500 (C) $2,500 (D) $5,000

(C) $2,500

A ____ is an unincorporated business association consisting of at least one general partner and at least one limited partner. (A) joint venture (B) limited liability company (C) limited liability partnership (D) limited partnership

(D) limited partnership

Which of the following is correct regarding the characteristics of a corporation? (A) A corporation is considered a person within the meaning of the Eighth Amendment. (B) The Fifth Amendment provisions against self-incrimination protect a corporation. (C) A corporation is protected by the Fourth Amendment's provision against unreasonable searches and seizures. (D) A corporation is taxed like a partnership.

(C) A corporation is protected by the Fourth Amendment's provision against unreasonable searches and seizures.

Restitution is available in which of these situations? (A) A wholly executory contract which has been dismissed due to impossibility. (B) A wholly executory contract which has been dismissed due to illegality. (C) A partially performed contract that has been dismissed due to frustration of purpose. (D) Restitution is available in all of these situations.

(C) A partially performed contract that has been dismissed due to frustration of purpose.

Which of the following would NOT be a merchant under Article 2 of the UCC? (A) The owner of a hardware store which sells paint (B) A car mechanic who fixes used cars and sells them in his spare time (C) A person who inherits three speedboats and wants to sell them to buy a car (D) None of these are merchants.

(C) A person who inherits three speedboats and wants to sell them to buy a car

The City of Chicago would best be described as which of the following? (A) A corporation formed pursuant to the Model Business Corporation Act (B) A close corporation (C) A public corporation (D) A domestic corporation

(C) A public corporation

Which of the following is NOT always necessary in order for a valid contract to be formed? (A) Mutual assent (B) Legality of purpose (C) A writing (D) Competent parties

(C) A writing

Which of the following would be the most convincing evidence of a partnership? (A) An agreement to share in the management of a business (B) Agreements to share gross returns (C) An agreement to share losses (D) An agreement to pay a firm manager a percentage of the profits for his salary

(C) An agreement to share losses

In general, which of the following will not terminate an offer? (A) The death of the offeree (B) The death of the offeror (C) An inquiry by the offeree as to size or materials (D) An acceptance that adds a material term

(C) An inquiry by the offeree as to size or materials

A bank robbery has occurred, and the banker's association has offered a $1,000 reward for information leading to the arrest and conviction of the robber. Several people are claiming to be entitled to the money. Which of them is eligible? (A) The employees of the bank (B) An on-duty sheriff's deputy in the county where the arrest occurred (C) An off-duty deputy sheriff from a county other than the one where the arrest occurred (D) None of these are eligible.

(C) An off-duty deputy sheriff from a county other than the one where the arrest occurred

Sam, the owner of a toy store, dies unexpectedly at the age of 56. His lifelong business associate, Paul, is appointed the administrator of the estate. Sam had a personal debt of $8,000 which he owed to Art's Appliance Store. Paul says to Art, "If there isn't enough money in the estate, I'll personally see that the bill is paid." Which of the following is correct? (A) The oral statement is enforceable because Paul is the administrator. (B) An oral statement such as this is not enforceable because it is outside the statute of frauds. (C) An oral statement such as this is not enforceable because this promise is within the statute of frauds. (D) The oral statement is enforceable because it is a collateral promise.

(C) An oral statement such as this is not enforceable because this promise is within the statute of frauds.

Claudia sells her highly successful hair salon to Carl. In the sales contract, Claudia agrees never to open a hair salon in the state. Which of the following best describes this contract clause? (A) Void as an illegal primary restraint (B) Valid as a reasonable restraint on trade (C) An unenforceable restraint of trade contrary to public policy (D) Binding as fair protection

(C) An unenforceable restraint of trade contrary to public policy

Andrew agrees to paint Betty's house for $500. Two days after he starts the job, he decides that $500 isn't enough money. He refuses to finish the job unless Betty agrees to pay him $100 more. What law applies to this fact situation? (A) The acceptance of additional money to settle a disputed claim is supported by consideration. (B) A past obligation is sufficient consideration for a new promise. (C) Andrew gives no additional consideration in return for modification of a preexisting contract. (D) Betty has made a promise in exchange for a forbearance.

(C) Andrew gives no additional consideration in return for modification of a preexisting contract.

The statute which contains the rules applicable to investment securities transfers is: (A) the Securities and Exchange Commission Act. (B) Article 2 of the UCC. (C) Article 8 of the UCC. (D) the Model Business Corporation Act.

(C) Article 8 of the UCC.

The Revised Act permits a corporation to purchase, redeem, or otherwise acquire its own shares unless: (A) the corporation's total assets after the distribution would be less than the sum of its total liabilities and the maximum amount that would be payable for all outstanding shares having preferential rights in liquidation. (B) the corporation would be unable to pay its debts as they became due in the usual course of its business. (C) Both of these. (D) None of these.

(C) Both of these.

What is the principal source for corporate financing? (A) Debt (B) Equity investment securities (C) Both of these. (D) None of these.

(C) Both of these.

Conditions may be classified: (A) by how they are imposed. (B) by when they affect a duty of performance. (C) Both of these; they are not mutually exclusive. (D) Neither of these.

(C) Both of these; they are not mutually exclusive.

Which of the following does not exemplify a relationship that typically leads to scrutiny of a contract for undue influence? (A) Wife and husband (B) Clergy and parishioner (C) Brother and sister (D) Parent and child

(C) Brother and sister

Terry and Ernest agree to become partners in advertising and promoting the Midway Fair to be held three years hence. If they agree orally, will the partnership agreement be enforceable? (A) Yes, since no writing is required (B) Yes, as long as a division of profits is achieved (C) No, because the venture cannot be performed within one year (D) No, due to arguments about terms

(C) No, because the venture cannot be performed within one year

Darla offers to pay Edward $6,000 for Edward's car, provided that Darla receives that much from her uncle's estate, which is currently being probated. She expects to know for sure how much she will receive within a week or so. In this case: (A) this is an illusory contract, because Darla doesn't know whether she will receive the money for sure. (B) the consideration of the promise of $6,000 is insufficient because it is subject to a condition. (C) Darla's conditional promise is sufficient consideration unless Darla knows she cannot receive at least $6,000 from her uncle's estate. (D) There is no consideration.

(C) Darla's conditional promise is sufficient consideration unless Darla knows she cannot receive at least $6,000 from her uncle's estate.

Which of the following is correct regarding a foreign corporation? (A) A foreign corporation is incorporated in a foreign country. (B) A foreign corporation may not do business, except for acts in interstate commerce, in any state other than the state of its incorporation. (C) Doing or transacting business within a particular state makes a foreign corporation subject to local litigation, regulation, and taxation. (D) All of these are correct.

(C) Doing or transacting business within a particular state makes a foreign corporation subject to local litigation, regulation, and taxation.

The statute enacted by Congress which makes electronic records and signatures valid and enforceable for many transactions affecting interstate or foreign commerce is the: (A) UETA. (B) UCC, Article 2E. (C) Electronic Signatures in Global and National Commerce Act. (D) Interstate and Foreign Commerce Electronic Transactions Act.

(C) Electronic Signatures in Global and National Commerce Act.

Which of the following is not generally required in order to have a valid contract? (A) Mutual assent (B) A lawful purpose (C) Fairness of the bargain (D) Parties who have contractual capacity

(C) Fairness of the bargain

Which of the following promises in consideration of marriage would be outside the statute of frauds? (A) In consideration of Joan's promising to marry him, Levi promises to pay her an allowance and to give her all of his property upon his death. (B) Sebastian and Ronda mutually agree that their marriage shall not affect the existing property rights of the other. (C) Felipe and Siena mutually promise to marry each other in a formal ceremony on June 23. (D) Mary Alice promises to release a money judgment against Steven in consideration of his marrying her.

(C) Felipe and Siena mutually promise to marry each other in a formal ceremony on June 23.

Which of the following will support a contract? (A) An illusory promise (B) Past consideration (C) Forbearance to do an act (D) A pre-existing public obligation

(C) Forbearance to do an act

In which of the following situations will a smaller sum be unable to discharge a larger debt? (A) If the smaller sum is paid before the due date of the larger debt. (B) If an additional article or service is given together with the payment of the smaller sum. (C) If the smaller sum is paid when the larger sum would ordinarily be due, but the debtor is on the verge of insolvency. (D) A smaller sum is never able to discharge a larger debt.

(C) If the smaller sum is paid when the larger sum would ordinarily be due, but the debtor is on the verge of insolvency.

Claire opened Claire's Beauty Parlor in her home. She solicited funds to begin the business from Jack, who was led to believe that the business was incorporated. Claire had, in fact, never filed the papers. One day, Claire fell asleep while giving a customer a permanent and the solution caused her customer severe burns. The customer sued the Beauty Parlor for $500,000, an amount enormously in excess of the business assets. Under the RMBCA, what would be the result? (A) Claire and Jack would not be personally liable. (B) Claire would not be personally liable, but Jack would. (C) Jack would not be personally liable, but Claire would. (D) Both would be personally liable since there was no corporation formed.

(C) Jack would not be personally liable, but Claire would.

The case in which the court held that a newspaper advertisement was an offer because it contained a promise of performance in definite terms in return for a requested act was: (A) Catamount Slate Products, Inc. v. Sheldon. (B) Newman v. Schiff. (C) Lefkowitz v. Great Minneapolis Surplus Store, Inc. (D) Osprey L.L.C. v. Kelly-Moore Paint Co., Inc

(C) Lefkowitz v. Great Minneapolis Surplus Store, Inc.

Nell gives Al $50 in return for Al's promise to defame Sara. Nell hopes to ruin Sara's chances at a promotion. Nell finds out that Al did not hold up his end of the agreement. Which of the following statements is true? (A) Nell can get the money back from Al through litigation. (B) Nell can get the money back and force Al to do as he promised. (C) Legally, Nell can neither get the money back nor force Al to do as he promised. (D) Nell can force Al to act through an appeal to the courts, but Al gets to keep the $50.

(C) Legally, Nell can neither get the money back nor force Al to do as he promised.

Nell gives Al $50 in return for Al's promise to defame Sara. Nell hopes to ruin Sara's chances at a promotion. Nell finds out that Al did not hold up his end of the agreement. Which of the following statements is true? (A) Nell can get the money back from Al through litigation. (B) Nell can get the money back and force Al to do as he promised. (C) Legally, Nell can neither get the money back nor force Al to do as he promised. (D) Nell can force Al to act through an appeal to the courts, but Al gets to keep the $50.

(C) Legally, Nell can neither get the money back nor force Al to do as he promised.(

Russell promises Marty $1,500 if he will completely landscape Russell's yard. Which of the following would discharge Russell's obligations to pay under this contract? (A) Marty leaves a one-foot strip of land barren. (B) Marty doesn't begin work on the landscaping until after he finishes two other jobs. (C) Marty doesn't plant any flowers, shrubs, or grasses. (D) Russell isn't satisfied with Marty's design.

(C) Marty doesn't plant any flowers, shrubs, or grasses.

Which of the following requires consideration in order to be binding upon the parties? (A) A written promise by a merchant to keep an offer to buy goods open for 14 days (B) Material modification of a sale of goods contract under Article 2 of the UCC (C) Material alteration of a personal service contract (D) Settlement of a disputed debt

(C) Material alteration of a personal service contract

Which of the following run the day-to-day operations of a corporation? (A) Shareholders (B) Board of directors (C) Officers (D) Subscribers

(C) Officers

Which of the following is untrue of a limited partnership? (A) Limited partnerships must be formed under a state statute. (B) Limited partners cannot ordinarily be named in the partnership business name. (C) Partners in limited partnerships must contribute services to the partnership. (D) Limited partners are generally not responsible for the debts of the partnership beyond their investment.

(C) Partners in limited partnerships must contribute services to the partnership.

Percy, age 17, purchased a used mobile home from a mobile home dealer for $20,000. This price, however, was twice the reasonable value of the 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 may 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.

(C) Percy may keep the mobile home but is only liable for the reasonable value of the mobile home.

Master Ink owns all the stock of Prime Pen Co. A Prime Pen employee commits a tort for which the employer is liable. The suit results in a judgment for $1 million against Prime Pen. Prime Pen assets total $650,000, but Master Ink's assets are in the millions. In which of the following situations would the judgment have to be paid by Master Ink? (A) The Master Ink board of directors is exactly the same as Prime Pen's. (B) The president of Master Ink is also the vice president of Prime Pen. (C) Prime Pen's income and Master Ink's income is held in one account. (D) None of these.

(C) Prime Pen's income and Master Ink's income is held in one account.

Which of the following generally is not grounds for discharge of a contract by operation of law? (A) Objective impossibility (B) Subsequent illegality (C) Running of the statute of limitations (D) Bankruptcy

(C) Running of the statute of limitations

Which of the following is untrue regarding closely held corporations? (A) Most corporations in the U.S. are closely held. (B) In most states, closely held corporations are subject to the general incorporation statute governing all corporations. (C) Shareholders usually have little voice in the management and control of the business. (D) Some states have enacted special legislation to accommodate the needs of closely held corporations.

(C) Shareholders usually have little voice in the management and control of the business.

When an injured party is required to elect remedies, which of the following would be mutually exclusive? (A) Restitution and liquidated damages (B) Specific performance and compensation for incidental damages (C) Specific performance and restitution (D) Incidental and consequential damages

(C) Specific performance and restitution

Which of the following determines when to declare dividends and in what amount? (A) The stockholders (B) The officers of the corporation (C) The board of directors (D) The state in which the corporation was chartered

(C) The board of directors

What is another name for the main purpose doctrine? (A) The collateral promise rule (B) The possibility test (C) The leading object rule (D) The suretyship provision

(C) The leading object rule

Which of the following need NOT be included in the certificate filed by a limited partnership under the RULPA? (A) The name of the limited partnership (B) The name and address of the agent for service of process (C) The names of each of the limited partners (D) The name and business address of each general partner

(C) The names of each of the limited partners

Under the RMBCA, the articles of incorporation must include all EXCEPT which one of the following? (A) The number of authorized shares (B) The name of the registered agent (C) The names of the initial shareholders (D) The address of each incorporator

(C) The names of the initial shareholders

The parol evidence rule does not apply to: (A) a typographical error that obviously does not represent the agreement of the parties. (B) evidence showing one of the parties to the contract lacks contractual capacity. (C) The parol evidence rule does not apply to the evidence in either of these situations. (D) The parol evidence rule applies to the evidence in both of these situations.

(C) The parol evidence rule does not apply to the evidence in either of these situations.

Which of the following need NOT be contained in a memorandum, which satisfies the general statute of frauds writing requirement? (A) The names of the parties to the contract (B) The signature of the party being sued (C) The signature of the party suing (D) The subject matter and essential terms of the unperformed promises

(C) The signature of the party suing

The Oak Grove Partnership decided it would buy personal computers for use by each partner. Cromwell, a partner, had an ownership interest in a computer store. He thought he could get the computers for the partnership at the best price because of his inside position, and he told his partners at Oak Grove about his position. He did obtain eight computers for $150 over manufacturer's price, which was $250 less per computer than the next lowest bid. What consequence? (A) There was a sale, but no profit to the computer store. (B) There was a sale, but the computer store would only receive a percentage of the profit equal to Cromwell's ownership interest in the store and the partnership would receive the balance. (C) There was a sale, and the computer store would receive the profit of $150 per computer. (D) There would be no sale, because Cromwell had an interest in both businesses.

(C) There was a sale, and the computer store would receive the profit of $150 per computer.

Which of the following statements is most accurate concerning charitable subscription promises? (A) They are generally not enforceable. (B) The courts equate them with gifts. (C) They are generally enforceable if there is reliance by the charity. (D) The Restatement uses a strict reliance requirement in relation to charitable subscriptions.

(C) They are generally enforceable if there is reliance by the charity.

A judicial lien against a partner's transferable interest in a partnership is known as a(n): (A) legal aggregate. (B) delegation of assets. (C) charging order. (D) assignment.

(C) charging order.

Under the UCC, ____ refers to the manner and extent to which the respective parties to a contract have accepted successive tenders of performance by the other party without objection. (A) course of dealing (B) usage of trade (C) course of performance (D) integrated document

(C) course of performance

Marilyn contracted with Bravo Builders to build an addition to her house for $15,000. After digging the foundation, Bravo decides that it will take more work and more concrete than it had originally thought and that it will need to charge an additional $5,000 for the job. Assuming Marilyn agrees, which of the following is correct? (A) Marilyn will have to pay $20,000. (B) This is a contract under seal which is enforceable. (C) This is a modification of a preexisting contract, which under common law must be supported by additional consideration on the part of Bravo Builders. (D) This is the settlement of a disputed debt that requires no additional consideration on the part of Bravo Builders.

(C) This is a modification of a preexisting contract, which under common law must be supported by additional consideration on the part of Bravo Builders.

David, a partner in the Tri-State Express Mail delivery partnership, negligently drove his delivery truck onto the curb during a rush-hour package delivery. Marlene was injured. Against whom can Marlene collect? (A) Only David (B) Only Tri-State Express Mail Partnership (C) Tri-State Express Mail Partnership or any partner (D) Only the other partners

(C) Tri-State Express Mail Partnership or any partner

Absent an agreement otherwise, upon dissolution, a partner is entitled to which of the following after payment of partnership creditors? (A) A share of profits in proportion to capital contribution (B) A share of profits based on the degree of participation in management (C) Under the UPA, repayment of his capital contribution during the winding up of the firm (D) The UPA requires that the partners have an agreement or else they must seek a court order distributing the remaining assets

(C) Under the UPA, repayment of his capital contribution during the winding up of the firm

Sue owes $5,000 to the First National Bank for a student loan which will come due on January 1 next year. She has been offered a two-year graduate fellowship, but she will not be able to pay the loan back if she accepts the fellowship. The bank manager tells Sue that if she pays $3,000 now, they will forgive the loan. Should Sue accept the offer? (A) No, because the bank can still sue for the remaining $2,000 (B) No, because the manager's promise is not binding on the bank (C) Yes, because the early payment of the loan is consideration that makes the bank's promise binding (D) Yes, because the bank must do whatever the manager says

(C) Yes, because the early payment of the loan is consideration that makes the bank's promise binding

On March 1, Sara, a student, received a telephone call from ComputerChip, Inc. offering her a job for one year beginning on June 15, after completion of the school year. According to the personnel manager, she will have to move to California and be ready to start work at 8:00 a.m. on June 15. Should Sara ask for a letter confirming the telephone conversation if she accepts the offer immediately? (A) Yes, because the job offer is a collateral promise (B) Yes, because the job offer is covered by the parol evidence rule (C) Yes, because the job offer is for longer than one year from March 1 (D) No, because the job offer is for one year from June 15

(C) Yes, because the job offer is for longer than one year from March 1

The 2001 revision of the RULPA provides that, when a limited partnership is a limited liability limited partnership,: (A) a general partner is personally liable for a contractual obligation. (B) a general partner is personally liable for an obligation arising from a tort. (C) a contractual obligation or an obligation arising from a tort is solely the obligation of the limited partnership. (D) a contractual obligation or an obligation arising from a tort is the joint and several obligation of the limited partnership and the general partners.

(C) a contractual obligation or an obligation arising from a tort is solely the obligation of the limited partnership.

According to the Restatement, manifesting an intention to act or an intention to refrain from acting in a specified manner is considered to be: (A) an implied in fact contract. (B) an express contract. (C) a promise. (D) a quasi contract.

(C) a promise

If dividends are not declared for five years, but the company has accumulated earnings each year, the shareholders may: (A) petition the court of law for redress. (B) override the board with a two-thirds vote. (C) ask for an injunction requiring a dividend to be declared. (D) do nothing but sell their stock.

(C) ask for an injunction requiring a dividend to be declared.

Bonds subject to a redemption provision which permits the corporation to redeem or pay off all, or a part, of the issue before maturity at a specified redemption price are known as ____ bonds. (A) secured (B) income (C) callable (D) convertible

(C) callable

A contract contains a provision that states it will be effective for a "year." The plaintiff in a lawsuit claims that a "year" is obviously 12 months. The defendant claims that the contract meant a 10-month school year. Parol evidence: (A) cannot be used to explain the term, because the plain meaning of a "year" is 12 months. (B) cannot be used to explain the term, because it is an integrated document. (C) can be used to clarify the parties' intent because in this contract the term "year" is ambiguous. (D) cannot be used, because the contract contains an express term that could have been changed by the parties prior to the contract's execution.

(C) can be used to clarify the parties' intent because in this contract the term "year" is ambiguous.

Albert found a stone in his yard and took it to Bob, a jeweler, for evaluation. Although Bob knew what the stone was, he told Albert that he wasn't sure as to the nature of the stone, but that he thought it was a topaz. Bob then offered to buy the stone for $25 and Albert agreed. Later Albert found out the stone was an uncut diamond worth about $700. The sale: (A) was a valid contract that should be enforced by the law. (B) can be voided based upon fraud in the execution. (C) can be voided based upon fraud in the inducement. (D) can be voided based upon mistake as to the identity of the subject matter

(C) can be voided based upon fraud in the inducement.

. Eliza was an antique expert. She went to a party at Johanna's house and saw a magnificent Queen Anne table out on the back porch. She asked Johanna about it and was told it was in the way so they were going to store it in the barn. Eliza offered to buy it from her for $200. The next week, Johanna saw it in Eliza's store on sale for $3,000. Johanna: (A) can get the table back because of fraudulent concealment of the value. (B) can get the true value, because it would not be fair otherwise. (C) cannot rescind the contract because Eliza did not have a duty to tell her the value of the table. (D) cannot rescind the contract because she did not rely on Eliza to give her a fair price

(C) cannot rescind the contract because Eliza did not have a duty to tell her the value of the table.

Janice contracts to sell a certain tract of land to Anthony for $5,000, but the contract does not state a time for delivery of the deed and payment of the price. In this situation: (A) the contract will be considered void for lack of essential terms. (B) the law will imply that the respective performances are independent of each other and may occur whenever "reasonable under the circumstances." (C) courts will treat the promises to deliver the deed and to pay the $5,000 as mutually dependent. Anthony's duty to pay is conditioned upon Janice's delivery of the deed and Janice's duty to deliver the deed is conditioned upon Anthony's payment or tender of $5,000 to Janice. (D) Janice's duty to deliver the deed and Anthony's duty to pay the $5,000 are "implied-in-fact" conditions.

(C) courts will treat the promises to deliver the deed and to pay the $5,000 as mutually dependent. Anthony's duty to pay is conditioned upon Janice's delivery of the deed and Janice's duty to deliver the deed is conditioned upon Anthony's payment or tender of $5,000 to Janice.

Percy buys stock in Kinollo Corporation that pays dividends of $5 per share before dividends are paid on other stock of Kinollo. If the dividends are not paid in any given year, the dividends for that year must be paid when the company next declares dividends, until fully paid. Percy's dividends per year will not exceed $5 per share. Percy's stock is: (A) cumulative common stock. (B) noncumulative preferred stock. (C) cumulative preferred stock. (D) participating preferred stock.

(C) cumulative preferred stock.

Actual authority terminates upon: (A) physical destruction of partnership papers. (B) illness of one of the partners. (C) dissolution of the partnership. (D) traveling to a foreign country.

(C) dissolution of the partnership.

Sam wants to sell his Golden Retriever to Jordan. Sam tells Jordan that the dog is three years old and that he will point, back, and retrieve. Although the dog is three years old and will point at birds, he will not back (honor another dog's point) or retrieve. Jordan relies on these statements and purchases the bird dog. The buyer has most probably been a victim of: (A) duress. (B) undue influence. (C) fraud in the inducement. (D) fraud in the execution.

(C) fraud in the inducement.

Under the RUPA, a partner must manage the partnership affairs without ____ negligence to avoid violation of the duty of care. (A) ordinary (B) culpable (C) gross (D) any

(C) gross

Anna by mistake delivers to Bob a plain, unaddressed envelope containing $50 intended for Cora. Bob: (A) can keep the money. (B) is under a contractual obligation to return the money. (C) has a quasi-contractual obligation to return the money. (D) has an implied in fact obligation to return the money.

(C) has a quasi-contractual obligation to return the money.

A promise against public policy: (A) can be contractual. (B) is enforceable if the parties have capacity and mutual assent and they exchange consideration. (C) has no legal remedy available for breach. (D) must be in writing to be enforceable.

(C) has no legal remedy available for breach.

Phil, a tax accountant, promises to do Marge's individual federal, state, local, and gift taxes for the year. He completes all but the gift taxes. Under the substantial performance doctrine, Marge will: (A) not have to pay Phil. (B) not have to accept the work. (C) have to pay Phil for all but the gift taxes. (D) have to pay Phil the contract price

(C) have to pay Phil for all but the gift taxes.

The most popular and widely used unincorporated business form that provides limited liability for its members is the: (A) limited partnership. (B) limited liability partnership. (C) limited liability company. (D) limited liability limited partnership.

(C) limited liability company.

Hadley Homes, a building contractor and Wesley have a contract, which calls for Hadley to build a 4-bedroom house with the completion of it by June 15. If the house is not completed by that date, the contract calls for Hadley to pay $100 per day in damages. The $100 per day is: (A) punitive damages. (B) nominal damages. (C) liquidated damages. (D) an illegal penalty.

(C) liquidated damages.

A partner: (A) cannot be held criminally liable for the crimes of his partners. (B) has joint and several liability with his partners for contracts entered and for torts and crimes committed by other partners. (C) may be criminally liable for the crimes of his partners if he authorized the acts. (D) who commits a tort is liable to the third party only through the partnership entity.

(C) may be criminally liable for the crimes of his partners if he authorized the acts.

Consideration: (A) must be given by the promisee to the promisor. (B) must be adequate. (C) may be given to the promisor or to some other person by the promisee or by some other person. (D) need not be equal between the parties, but must be proportionate.

(C) may be given to the promisor or to some other person by the promisee or by some other person.

Cheryl, age 16, ordered a new dress to wear to the school prom. She has contracted to pay $500 when the dress arrives. Before the dress arrives, Cheryl decides that the dress is too expensive. If she now wishes to cancel the order, Cheryl: (A) must pay $500 for the dress because the dress was specially ordered for Cheryl. (B) must pay $500 for the dress because clothing is classified as a necessity. (C) may disaffirm this executory contract. (D) must accept the dress and pay the reasonable value of the dress.

(C) may disaffirm this executory contract.

Marilyn read an ad in the school newspaper offering a thousand dollar swimming scholarship to anyone who could swim 500 laps in the school pool. Marilyn called the advertiser and began swimming. She has reached lap number 460; she feels great and is sure she can make it all the way. The advertiser: (A) may revoke the offer since there has not yet been an acceptance. (B) may not revoke the offer since Marilyn has already accepted it. (C) must permit Marilyn the opportunity to finish her attempt to swim the 500 laps, or pay damages if he interferes with the completion of the laps. (D) must pay Marilyn $920, because she has performed 92% of the offer

(C) must permit Marilyn the opportunity to finish her attempt to swim the 500 laps, or pay damages if he interferes with the completion of the laps.

Before granting an injunction enjoining a former employee from competing in a described territory, the courts insist that the employer demonstrate that the restriction is: (A) exculpatory. (B) conscionable. (C) necessary to protect the employer's legitimate interest. (D) in compliance with the state's Blue Law.

(C) necessary to protect the employer's legitimate interest.

A small damage amount fixed without regard to the amount of loss is known as: (A) reliance damages. (B) out-of-pocket damages. (C) nominal damages. (D) incidental damages.

(C) nominal damages.

A(n) ____ is a substituted contract that involves an agreement among three parties to substitute a new promisee in place of an existing promisee, or to replace an existing promisor with a new one. (A) accord (B) satisfaction (C) novation (D) mutual rescission

(C) novation

A(n) ____ imposes partnership duties and liabilities upon a nonpartner who has either represented himself or consented to be represented as a partner. (A) fiduciary proceeding (B) delectus personae (C) partnership by estoppel (D) accounting

(C) partnership by estoppel

Damages for reliance include expenses for: (A) lost profits. (B) injury to the person. (C) preparing to perform. (D) punishment of the breaching party.

(C) preparing to perform.

A(n) ____ is a measure designed to protect the public from unqualified practitioners. (A) exculpatory clause (B) revenue license (C) regulatory license (D) usury statute

(C) regulatory license

A ____ is an offeree's refusal to accept an offer. (A) revocation. (B) counteroffer (C) rejection (D) statutory irrevocability

(C) rejection

If Class A preferred shares provide only for a cumulative dividend of $3 per share, upon liquidation Class A Preferred will: (A) receive $3 per share more than common shares. (B) receive 103% of common shares. (C) share equally with common shares. (D) be subordinated to the rights of common shares

(C) share equally with common shares.

Miller made a contract to sell his condominium to Jefferson for $80,000. Two days later Miller changed his mind after discovering that he could have sold the property to another buyer for an additional $20,000. Jefferson sues and asks the court to have the property conveyed to him at the price of $80,000. Jefferson is seeking: (A) restitution. (B) punitive damages. (C) specific performance. (D) valid tender.

(C) specific performance

John operates a small repair business and is in desperate need of a certain type of building material. He obtains the material from a large corporation, but is charged a grossly unreasonable price and is forced to buy other material he does not need. In view of the buyer's unequal bargaining power and unreasonable terms of the contract, this may be a case of: (A) in para delicto. (B) partial illegality. (C) substantive unconscionability. (D) procedural unconscionability.

(C) substantive unconscionability.

material. He obtains the material from a large corporation, but is charged a grossly unreasonable price and is forced to buy other material he does not need. In view of the buyer's unequal bargaining power and unreasonable terms of the contract, this may be a case of: (A) in para delicto. (B) partial illegality. (C) substantive unconscionability. (D) procedural unconscionability.

(C) substantive unconscionability.

Michelle's Boutique places an ad in the Sunday paper for beautiful, top-of-the-line designer suits for $3.00 each. Irene sees the ad in the paper and goes to the store to stock up on business suits for her new job. Michelle apologizes for the misprint. Irene has just finished a class in contract law and insists that the store sell her five suits for $15.00. Irene threatens to sue Michelle for breach of contract. In this case: (A) Irene will win if she sues because this is a valid contract. (B) the ad in the newspaper is an offer to sell. (C) the ad in the newspaper is a solicitation seeking offers, but is not an offer to sell; therefore, Irene will not be able to successfully sue for breach of contract. (D) None of these.

(C) the ad in the newspaper is a solicitation seeking offers, but is not an offer to sell; therefore, Irene will not be able to successfully sue for breach of contract.

Carl and Rob are both engaged in road construction work. They know that several jobs are going to be up for public bids, and agree between themselves that Carl will bid on one job and Rob will bid on the other, so that they both have work for the summer. When the bids are opened, Carl realizes that Rob has bid on both jobs. Rob is awarded both contracts. If Carl now wants to sue Rob for breach of contract: (A) Carl would probably win on the basis of promissory estoppel since he has detrimentally relied upon Rob's representation that he would not bid. (B) the court will likely award Carl damages since Carl is less at fault than Rob. (C) the agreement is in violation of public policy and will not be enforced by the courts. (D) the agreement obstructs the administration of justice and will not be enforced by the courts.

(C) the agreement is in violation of public policy and will not be enforced by the courts.

The majority of courts view a stock subscription as merely an offer that cannot be accepted until: (A) the corporation enters a novation with the subscriber. (B) the promoter signs in the name of the corporation. (C) the corporation comes into existence. (D) there is a written agreement.

(C) the corporation comes into existence.

Tolkien Corporation, incorporated in Delaware, opens a warehouse in a western state from which it ships goods. If Tolkien does not have a certificate of authority to do business within the western state: (A) it will face no sanctions or penalties. (B) the corporation will be shut down. (C) the corporation's officers and directors may be held personally liable on contracts made within the state. (D) Any of these may happen.

(C) the corporation's officers and directors may be held personally liable on contracts made within the state.

In most states, whether the time within which a minor disaffirms a contract constitutes a reasonable time is determined by: (A) state statute. (B) the UCC. (C) the facts and circumstances of the case. (D) common law, without regard to the unique facts of the case at hand.

(C) the facts and circumstances of the case.

If a partner's act is not apparently for carrying on in the ordinary course the partnership business: (A) the partnership is bound anyway because a partner always has authority to bind the partnership. (B) the partner is necessarily acting without authority. (C) the partnership is bound only where the partner has actual authority. (D) the third person dealing with the partner becomes liable along with the partner.

(C) the partnership is bound only where the partner has actual authority.

Fred is a concert violinist who is scheduled to perform at Carnegie Hall for the first time. He buys what he is told is a Stradivarius violin from a well-known, reputable dealer in quality violins, and he pays the going rate for a Stradivarius. He later learns the violin is an imitation, although it is such a good imitation that even the dealer thought it was authentic. In this case: (A) Fred has made a unilateral mistake and cannot avoid the contract. (B) the dealer has committed fraud in the inducement. (C) the sale is voidable by the purchaser for mutual mistake. (D) the sale is voidable, because the dealer has made a fraudulent misrepresentation.

(C) the sale is voidable by the purchaser for mutual mistake.

Whether a corporation is a de facto corporation may be challenged by: (A) an individual. (B) another corporation. (C) the state. (D) Any of these.

(C) the state.

The UCC provides that a merchant is bound to keep a written offer open for a stated period but no longer than: (A) ten days. (B) two months. (C) three months. (D) a reasonable time.

(C) three months.

Contract law: (A) has seen little change during the nineteenth and twentieth centuries. (B) has experienced an expansion of the absolute freedom of contract during the twentieth century. (C) today usually recognizes contractual obligations whenever the parties manifest an intent to be bound. (D) requires privity between parties seeking to enforce contractual rights.

(C) today usually recognizes contractual obligations whenever the parties manifest an intent to be bound.

Andrew owns a store in Polk County. His trade extends throughout River City, but not beyond the county limits. He sells his store to Betty and, as part of the transaction, agrees not to engage in the same business anywhere in River City for a period of five years. The agreement: (A) is reasonable regarding the geographic restraint. (B) is unreasonable. (C) unduly interferes with the interest of the public. (D) is reasonable only if the agreement was made without duress.

(C) unduly interferes with the interest of the public.

Andrew owns a store in Polk County. His trade extends throughout River City, but not beyond the county limits. He sells his store to Betty and, as part of the transaction, agrees not to engage in the same business anywhere within the state for a period of three years. The agreement: (A) is reasonable. (B) is unreasonable, but enforceable since Andrew agreed to it. (C) unduly interferes with the interests of the public. (D) is reasonable, but only if Betty paid Andrew enough for the store to compensate him for lost business for three years.

(C) unduly interferes with the interests of the public.

Under the UPA, dissolution by operation of law occurs: (A) if a partner has been adjudicated mentally incompetent. (B) when a partner has engaged in conduct prejudicial to the business. (C) upon the bankruptcy of a partner. (D) when the business can be carried on only at a loss.

(C) upon the bankruptcy of a partner.

Anna is 88 years old and under the legal guardianship of her daughter. One day Anna receives a telephone call from a health insurance salesman and purchases a $400-a-month Medigap insurance policy. This contract is: (A) valid. (B) voidable. (C) void. (D) voidable only at the option of Anna.

(C) void.

R&R, Inc. entered into a contract with Scott, an agent, under the terms of which Scott would receive $20,000 if he stole trade secrets from the leading competitor of R&R. Scott performed his end of the agreement by delivering the trade secrets. If R&R now refuses to pay Scott for his services, Scott: (A) may recover based upon the express contract of the parties. (B) may recover based upon a quasi-contractual theory in order to prevent the unjust enrichment of R&R. (C) will be unable to recover, because this is an illegal contract. (D) will be able to recover based upon promissory estoppel, because he has detrimentally relied upon the promises made by R&R.

(C) will be unable to recover, because this is an illegal contract.

Roberts, Smith, and Tomas have been partners for ten years. The partners, however, are now collecting debts, converting assets to cash, paying creditors, and distributing remaining assets to each partner. Roberts, Smith, and Tomas are engaged in: (A) dissolution. (B) reformation. (C) winding up. (D) marshaling assets.

(C) winding up.

Winstead Co. is authorized by its articles of incorporation to sell 50,000 shares of stock. The company: (A) may not sell 55,000 shares under any circumstances. (B) must sell the number of shares authorized by its articles of incorporation. (C) would issue void securities for any shares the company purports to sell over the 50,000. (D) must repay, with interest from the date of purchase, any purchaser of shares over 50,000.

(C) would issue void securities for any shares the company purports to sell over the 50,000.

Which of the following is correct regarding the fiduciary duties in a limited partnership? (A) The general partner has a fiduciary duty to the limited partners. (B) Judicial authority seems to suggest that the limited partner has no fiduciary duty to the partnership. (C) The fiduciary duty of the general partner is extremely important to the interests of the limited partners, because they have no ability to manage or control the partnership business. (D) All of these are correct.

(D) All of these are correct.

Which of the following would most probably be considered a valid offer? (A) "Would you like to buy this?" (B) "I'd give $50 for a cold glass of water." (C) "Special sale on DVRs today - $200 each." (D) "$100 reward for return of lost white-gold, men's wedding band inscribed with initials 'TEA' to Tony Adams, 350 Main Street, Peoria."

(D) "$100 reward for return of lost white-gold, men's wedding band inscribed with initials 'TEA' to Tony Adams, 350 Main Street, Peoria."

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) $11,000 (C) $8,000 (D) $7,000

(D) $7,000

When was the ReRULPA amended as part of the Harmonization of Business Entities Act? (A) 1976 (B) 1985 and 2001 (C) 2001 (D) 2011 and 2013

(D) 2011 and 2013

Which of the following would NOT require a writing under the statute of frauds? (A) The buyer of a five-acre lot pays the $40,000 purchase price, thus fully performing his obligation (B) A renter agrees to rent a building for a 5-year period (C) A contractor enters into an agreement for an easement across adjoining land to run cables (D) A landscaper agrees to landscape the lot surrounding an office building

(D) A landscaper agrees to landscape the lot surrounding an office building

Which of the following names would NOT be permitted under most general incorporation statutes? (A) Acme Ltd. (B) Acme Co. (C) Acme Inc. (D) Acme

(D) Acme

Albert read Gem City's ad in the local newspaper advertising a one-quarter carat diamond ring for $89. Albert rushed to the store to buy the ring, only to be told by the salesperson that the ad was a misprint and the price should have been $289. Albert gave the salesperson $89 plus sales tax and demanded the ring. In this case: (A) the ad is a firm offer by the merchant, and the ring must be sold for $89. (B) the ad is a contract and the store must abide by terms stated in the contract. (C) the store must accept the price stated in the ad, but only if Albert has a copy of the ad with him. (D) Albert is merely making an offer to Gem City to buy the ring for $89 plus sales tax.

(D) Albert is merely making an offer to Gem City to buy the ring for $89 plus sales tax.

Contract law is significant in that it is basic to other fields of law such as: (A) sales of personal property. (B) commercial paper. (C) secured transactions. (D) All of these.

(D) All of these

Express contracts and implied contracts are: (A) both genuine contracts. (B) equally enforceable. (C) voidable for lack of capacity. (D) All of these

(D) All of these

Which is an irrevocable offer? (A) A bid to construct a bridge for the city (B) An offer to buy stock in the ABC Corporation once it is formed (C) A unilateral offer to pay John $30 to mow your lawn at the point that he has completed half the job and indicates he wishes to finish (D) All of these

(D) All of these

Which of the following may influence a promoter to choose to incorporate in a particular state? (A) Its restrictions on dividend payments (B) Its tax on corporate earnings (C) The rights granted to shareholders (D) All of these

(D) All of these

Which of the following is correct with regard to common stock? (A) The Revised Act has eliminated the terms "preferred" and "common." (B) Common stock does not have any special contract rights or preferences. (C) Common stock generally bears the greatest risk of loss in the event of the failure of the enterprise. (D) All of these are correct with regard to common stock.

(D) All of these are correct with regard to common stock.

A foreign limited liability company: (A) is governed by the laws of the state in which it is organized. (B) is considered "foreign" in any state other than the one in which it was formed. (C) must register with the Secretary of State before transacting business in that state. (D) All of these are correct.

(D) All of these are correct.

Drew, Elmer, and Frank are partners in the DEF partnership. The partnership is being dissolved. It has $200,000 in cash assets and it owes $410,000 to creditors. Profits and losses of the partners are shared equally, although Drew contributed $100,000 in capital; Elmer contributed $50,000 in capital; and Frank contributed $25,000 in capital. Which of the following is correct with regard to the responsibility of each partner? (A) Each partner is responsible for $70,000 of the money owed to creditors. (B) Elmer will have to contribute additional capital in order to settle the partnership affairs. (C) Drew will have to contribute additional capital in order to settle the partnership affairs. (D) All of these are correct.

(D) All of these are correct.

In some states, preemptive rights do not apply to: (A) the reissue of previously issued shares. (B) shares issued for noncash consideration. (C) shares issued in connection with a merger. (D) All of these are correct.

(D) All of these are correct.

Which of the following is correct with regard to counteroffers? (A) A counteroffer operates as a rejection of the original offer. (B) A conditional acceptance is a common type of counteroffer. (C) The receipt of a counteroffer terminates the original offer. (D) All of these are correct.

(D) All of these are correct.

Which of the following is correct with respect to election of remedies? (A) The Code rejects any doctrine of election of remedies; its remedies are cumulative. (B) The remedy of specific performance is inconsistent with that of restitution. (C) A person who seeks an injunction may also seek incidental damages for the breach. (D) All of these are correct.

(D) All of these are correct.

Which of the following is true with respect to a defective formation of a limited partnership? (A) The formation is defective if the certificate filed does not substantially meet statutory requirements. (B) It jeopardizes the limited liability of a limited partner. (C) The 1985 RULPA reduces the risk of a limited partner for defective formation. (D) All of these are correct.

(D) All of these are correct.

Which of the following gratuitous promises is/are enforceable by statute? (A) A good-faith contract modification in a contract for the sale of goods (B) A written offer signed by a merchant to buy or sell goods that assures it will be kept open for one month (C) A renunciation of a claim in a written waiver that is signed and delivered by the aggrieved party when the contract involves a sale of goods (D) All of these are enforceable by statute.

(D) All of these are enforceable by statute.

The UPA grants each partner the right to an account whenever: (A) his partners wrongfully exclude him from the partnership business. (B) a partner makes a profit in violation of his fiduciary duty. (C) circumstances render it just and reasonable. (D) All of these are reasons a partner may demand an account.

(D) All of these are reasons a parter may demand an account.

In which of the following situations is restitution available as a remedy? (A) As an alternative remedy for a party injured by breach (B) For a party in default (C) For a party who may not enforce the contract because of the statute of frauds (D) All of these are situations where restitution is available.

(D) All of these are situations where restitution is available.

The bylaws of the corporation: (A) are adopted as one of the first items of business at the organizational meeting held promptly after incorporation. (B) may contain any provision for managing the business not inconsistent with law or the charter. (C) may be repealed by the board of directors. (D) All of these are true.

(D) All of these are true.

Which of the following is true regarding an insolvent partnership under the UPA? (A) Any partner who pays an amount in excess of his proper share of the losses has a right of contribution against the partners who have not paid their share. (B) The partners must contribute their respective share to the losses in order to pay creditors. (C) If one of the partners is out of the jurisdiction and refuses to contribute, the other parties must contribute the additional amount necessary to pay the firm's liabilities in the relative proportions in which they share the profits. (D) All of these are true.

(D) All of these are true.

Which of the following is true with regard to an exculpatory clause? (A) An exculpatory clause excuses one party from liability for her own tortious conduct. (B) Where one party has a superior bargaining position that has enabled him to impose an exculpatory clause upon the other, the courts are inclined to nullify the provision. (C) An exculpatory clause may be unenforceable for unconscionability. (D) All of these are true.

(D) All of these are true.

A distribution in a partnership may be: (A) a payment made to compensate a partner for services rendered to the partnership. (B) a division of profits. (C) repayment of a loan to a partner. (D) All of these are types of distributions in partnerships.

(D) All of these are types of distributions in partnerships.

Which of the following is not a general corporate power typically granted by incorporation statutes, including the RMBCA? (A) To have a corporate seal (B) To own and vote shares of other entities (C) To make donations for charitable or educational purposes (D) All of these are typical corporate powers.

(D) All of these are typical corporate powers.

Which of the following may be used to redress the ultra vires acts committed by a corporation? (A) A proceeding by shareholders to enjoin furthers such acts (B) A shareholder derivative suit against the directors or officers for exceeding their authority (C) A proceeding by the Attorney General of the state to enjoin the corporation from the transaction of unauthorized business (D) All of these may be used.

(D) All of these may be used.

Which of the following can meet the scienter requirement to establish fraud in the inducement? (A) Actual knowledge (B) Lack of belief in the statement's truthfulness (C) Reckless indifference as to a statement's truthfulness (D) All of these meet the requirement.

(D) All of these meet the requirement.

Under the UPA, which of the following requires the unanimous consent of the partners? (A) Confession of judgment (B) Disposing of the goodwill of the business (C) Submission of a partnership claim to arbitration (D) All of these require the unanimous consent of the partners.

(D) All of these require the unanimous consent of the partners.

In deciding whether property owned by a partner before formation of the partnership and used in the business is a capital contribution that belongs to the firm, a court will consider which of the following? (A) Whether the property was improved with partnership funds (B) Whether the property was carried on the books of the partnership as an asset (C) Admissions or declarations of the partners (D) All of these would be considered.

(D) All of these would be considered.

Which of the following would be considered a material breach of a contract? (A) Partial performance that omits some essential part of the contract. (B) Delivery of 50 chairs in a contract that calls for 100 chairs. (C) An intentional breach of the contract. (D) All of these would be material breaches.

(D) All of these would be material breaches.

Which of the following would most likely be a merchant with respect to the goods in question under the UCC definition? (A) Amy is an authorized IBM computer dealer. (B) Brian employs two salesmen to sell his homemade furniture. (C) Clarence has a store in which he sells used lawn mowers. (D) All of these would be merchants

(D) All of these would be merchants

A distribution may be in the form of: (A) declaration or payment of a dividend. (B) a purchase, redemption, or other acquisition of shares. (C) a distribution of indebtedness. (D) All of these.

(D) All of these.

A shareholder's obligation to repay an illegally declared dividend depends on: (A) the shareholder's good or bad faith in accepting the dividend. (B) the solvency or insolvency of the corporation and, in some instances, special statutory provisions. (C) the shareholder's knowledge of the facts. (D) All of these.

(D) All of these.

Contracts that are implied in law: (A) are obligations imposed by law on grounds of justice and equity. (B) are intended to prevent unjust enrichment. (C) do not rest upon the assent of the contracting parties. (D) All of these.

(D) All of these.

Jared threatens to hit Kingston on the head with a golf club unless Kingston signs a contract agreeing to pay Jared $900 for a wristwatch. If, because of the threat, Kingston signs the contract: (A) the contract is voidable at Kingston's option. (B) Jared has committed physical duress against Kingston. (C) this is an example of economic duress. (D) All of these.

(D) All of these.

Justin contracted with Kevin to serve as a guide for Kevin on his three-day rafting trip to Colorado. The contract was made on April 15 with the trip to begin on June 15. On May 15, Kevin notified Justin that he had changed his mind and would not be taking the trip. He also refused to pay Justin any compensation. In this case: (A) because the contract is executory, Justin has suffered no damages, and Kevin has no obligation to pay any compensation. (B) Kevin has anticipatorily repudiated the contract and is liable to Justin for damages. (C) Justin is discharged from his duty to serve as guide, but he must wait until after June 15 to bring suit against Kevin. (D) All of these.

(D) All of these.

Ken promises not to foreclose on a mortgage that he holds on an office complex that Christopher owns. In reliance on this promise, Christopher expends $200,000 to remodel the complex. Which of the following is correct with regard to Ken's promise? (A) Ken's promise not to foreclose is unsupported by consideration. (B) Ken's promise is noncontractual. (C) Ken's promise will be enforced against him based upon the doctrine of promissory estoppel. (D) All of these.

(D) All of these.

Numerous states impose no limit on the rate of interest that may be charged on: (A) loans to corporations. (B) credit card transactions. (C) loans made by certain designated types of lenders. (D) All of these.

(D) All of these.

Ratification can occur in which of the following ways? (A) Through express language (B) As implied from conduct (C) Through failure to make a timely disaffirmance (D) All of these.

(D) All of these.

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.

(D) All of these.

The remedies of damages and rescission are available for: (A) fraudulent misrepresentation. (B) negligent misrepresentation. (C) innocent misrepresentation. (D) All of these.

(D) All of these.

Under the RUPA, a loan from a partner to the partnership is treated the same as loans of a person not a partner, subject to: (A) fraudulent transfer law. (B) the law of avoidable preferences under the Bankruptcy Act. (C) general debtor-creditor law. (D) All of these.

(D) All of these.

What do shares of equity securities confer on their owner in regard to interest in the corporation? (A) Right to participate in control (B) Right to participate in earnings of the corporation (C) Right to participate in residual assets of the corporation upon dissolution (D) All of these.

(D) All of these.

Which of the following is correct with regard to an enforceable restraint of trade? (A) The restraint should be no more extensive than is required to protect a specified property interest. (B) Restraints typically arise in connection with the sale of a business. (C) A typical restraint is a covenant not to compete. (D) All of these.

(D) All of these.

Which of the following would be a valid ratification? Two weeks after his eighteenth birthday, Jerry: (A) sells the motorcycle he contracted to buy when he was seventeen. (B) calls the bank to assure them that he will continue making payments on the loan agreement he signed a month before his eighteenth birthday. (C) makes a payment on the installment contract he signed a month before. (D) All of these.

(D) All of these.

Which of the following would be considered a valid and legally enforceable agreement? (A) An agreement to pay a legislator to vote for a particular bill (B) An agreement under which Arthur agrees to pay Barbara $3,000 to disparage the product of Arthur's competitor (C) An agreement by the seller of a service station not to enter the service station business in Ohio for a period of 30 years after the sale of his business (D) An agreement by a car salesman not to sell automobiles or automobile parts in Marin County for a period of one year after terminating his employment

(D) An agreement by a car salesman not to sell automobiles or automobile parts in Marin County for a period of one year after terminating his employment

Which of the following is the correct definition for a partnership? (A) An association of two or more persons with one or more general partners and one or more limited partners (B) A legal entity ordinarily consisting of an association of numerous individuals (C) An association of two or more persons to carry on as co-tenants in business (D) An association of two or more persons to carry on as co-owners a business for profit

(D) An association of two or more persons to carry on as co-owners a business for profit

Enzo and Watson Partnership agrees to hire an "errand runner" 20 hours per week for the summer. Alan Watson, a partner, interviews a college student and decides to offer her the job. But she says she needs a 40-hour-a-week job, so Alan agrees to make it 40 hours. What result? (A) Enzo and Watson Partnership is not bound to hire her. (B) Alan is personally bound to pay her for 20 hours per week. (C) Alan is personally bound to pay her for 40 hours per week. (D) Enzo and Watson Partnership is bound to pay her for 40 hours per week.

(D) Enzo and Watson Partnership is bound to pay her for 40 hours per week.

Tate enters into a contract with Smith under the terms of which Smith is to pay Tate $7,000 and Tate is to build a garage, repair a boat, and build a doghouse. If the doghouse has not yet been built, which term describes the type of contract in existence? (A) Quasi contract (B) Executed contract (C) Illusory contract (D) Executory contract

(D) Executory contract

In which of the following ways is a general partner the same as a limited partner in a limited partnership? (A) Right of management and control (B) Liability to creditors of the partnership (C) Duty of care to the other partners and to the partnership (D) General partners differ from limited partners in all of these ways.

(D) General partners differ from limited partners in all of these ways.

Busby contracts to build a house for Clara. Busby finishes approximately half of the house and quits. Clara files suit against Busby. Which remedy is not available to her? (A) Compensatory damages (B) Specific performance (C) Special damages (D) Incidental damages

(D) Incidental damages

Jason's mother would like him to go to college, so in June he enrolls at State University. He also quits his job and tells his mother his plans to continue taking classes. His mother says, "I'm so happy that you are going to college that I want to pay for your books." Jason then sends her a bill for $485. Which of the following is true regarding his mother's promise? (A) It is enforceable, because Jason returned to college. (B) It is enforceable, because Jason is giving up the right to do something else. (C) It is unenforceable, because it is a unilateral contract. (D) It is unenforceable, because Jason had already enrolled in school and there is no consideration

(D) It is unenforceable, because Jason had already enrolled in school and there is no consideration

Jason's mother would like him to go to college, so in June he enrolls at State University. He also quits his job and tells his mother his plans to continue taking classes. His mother says, "I'm so happy that you are going to college that I want to pay for your books." Jason then sends her a bill for $485. Which of the following is true regarding his mother's promise? (A) It is enforceable, because Jason returned to college. (B) It is enforceable, because Jason is giving up the right to do something else. (C) It is unenforceable, because it is a unilateral contract. (D) It is unenforceable, because Jason had already enrolled in school and there is no consideration.

(D) It is unenforceable, because Jason had already enrolled in school and there is no consideration.

Which of the following is not true regarding a partnership name? (A) The name selected may not be the same as or deceptively similar to the name of any other existing business. (B) It may be a fictitious name. (C) It may not be likely to indicate to the public that it is a corporation. (D) It may not be the name of any one of the partners.

(D) It may not be the name of any one of the partner

Arden, a representative of McHenry, told Reilley, "If you will buy a lot and build a building in River City, we will give you a franchise." Reilley bought the lot and built the building as instructed, only to discover that McHenry had awarded the franchise to someone else. McHenry claims no liability to Reilley since there was no consideration. Which statement is most accurate? (A) McHenry is not liable to Reilley since there is no consideration. (B) McHenry is not liable to Reilley since there is past consideration. (C) McHenry is liable to Reilley since adequate consideration is given by both parties. (D) McHenry is liable to Reilley based on the concept of promissory estoppel.

(D) McHenry is liable to Reilley based on the concept of promissory estoppel.

Reilley wants to open a McHenry Roast Chicken franchise in her hometown of Manchester. Arden, a representative of McHenry, told Reilley, "If you will buy a lot and build a building in River City, we will give you a franchise." Reilley bought the lot and built the building as instructed, only to discover that McHenry had awarded the franchise to someone else. McHenry claims no liability to Reilley since there was no consideration. Which statement is most accurate? (A) McHenry is not liable to Reilley since there is no consideration. (B) McHenry is not liable to Reilley since there is past consideration. (C) McHenry is liable to Reilley since adequate consideration is given by both parties. (D) McHenry is liable to Reilley based on the concept of promissory estoppel.

(D) McHenry is liable to Reilley based on the concept of promissory estoppel.

Which of the following promises does not have to be evidenced by writing in order to be enforceable? (A) Jerry's agreement with Monique to buy her condominium for $200,000 (B) Stewart's promise to work for Austin for a two-year period (C) Christopher's promise to Midwest Credit Union that he will make payments on his son's truck if his son does not pay (D) Mindy's agreement with Chelsea to buy her bike for $400

(D) Mindy's agreement with Chelsea to buy her bike for $400

In which of the following situations will the inference of the existence of a partnership be drawn from the receipt of profits of a business? (A) Where payments of a debt are made to a creditor in installments from the profits of the partnership (B) Where wages are paid to an employee who is not also an owner (C) Where an annuity is paid to the widow of a deceased partner from partnership profits (D) Neither the creditor, the employee, nor the widow in these situations will be considered a partner under the guidelines in the RUPA.

(D) Neither the creditor, the employee, nor the widow in these situations will be considered a partner under the guidelines in the RUPA.

Sue, Barb, and Carlotta agree to put in $1,000 each to set up a shelter for lost animals. They each work two days a week. Donations fund the day-to-day operations. Do they have a partnership? (A) Yes, since each has control of the operation (B) Yes, because they are all co-equals in ownership of the shelter (C) No, because they have made no formal agreement (D) No, because there is no business for profit

(D) No, because there is no business for profit

Todd, a minor, rents an automobile from Rosa, an adult. Todd damages the vehicle when he negligently backs into a pole. Under the majority view, can Rosa recover damages from Todd? (A) Yes, Todd breached his duty to exercise reasonable care and diligence to protect the automobile. (B) Yes, although Todd is a minor, it is well settled that minors are generally liable for their torts. (C) No, minors generally cannot be held liable for their torts. (D) No, his contractual immunity protects him from legal action by Rosa.

(D) No, his contractual immunity protects him from legal action by Rosa.

Chloe, age 16, sold Mark, age 22, the briefcase she got for her birthday. Mark's father liked it and bought it from him. If Chloe decides to disaffirm the contract, will Mark's father have to return the briefcase to her? (A) Yes, the briefcase is not a necessary. (B) Yes, if Mark's father still has it. (C) No, her contract was with Mark and he cannot return goods he does not have. (D) No, if Mark's father bought it without knowing that Chloe was a minor.

(D) No, if Mark's father bought it without knowing that Chloe was a minor.

Marilyn, George, and Christine pool their money to buy land for a vegetable garden. They plan to sell the produce at a roadside stand that summer. Are they partners? (A) Yes, since they co-own the land (B) No, because they each control the use of the land (C) Yes, because if there's a loss in the land's value, they will all share that loss (D) No, they are merely joint venturers

(D) No, they are merely joint venturers

Garrett ordered 100 pieces of 2 × 6 lumber from his supplier and paid upon delivery. Later, when he unpacked the lumber, he discovered that the supplier had delivered 2 × 4 lumber. After being notified, the supplier picked up the lumber, apologized, and gave Garrett his money back. The response the supplier made to rectify the breach is: (A) an injunction. (B) mitigation. (C) liquidation of damages. (D) None of these

(D) None of these

Under the RUPA, a partner who does not have actual authority from all of the partners may still bind the partnership by: (A) executing a contract of suretyship in the partnership name. (B) paying an individual partner's debts out of partnership assets. (C) selling partnership property which is not held for sale in the usual course of business. (D) None of these actions allow the partner to bind the partnership.

(D) None of these actions allow the partner to bind the partnership.

Which of the following would lack the capacity to become a partner? (A) A business trust (B) A retired person over 74 (C) A corporation (D) None of these lack capacity; any of them could become a partner.

(D) None of these lack capacity; any of them could become a partner.

Allen owns 500 of the 5,000 shares outstanding of General Myopics. GM plans to issue 600 new shares. If Allen has preemptive rights, he may buy: (A) all 600 shares before anyone else. (B) 600 shares at the same price he paid for the other stock. (C) 6 shares at a discount of 10%. (D) None of these.

(D) None of these.

Registration of a foreign limited partnership is required in order to: (A) go into business in another country. (B) defend the partnership in court. (C) collect contributions from foreign investors. (D) None of these.

(D) None of these.

Requirements for a memorandum that satisfies the statute of frauds include that the writing: (A) must be a single document. (B) must exist at the time of the litigation. (C) needs to be notarized. (D) None of these.

(D) None of these.

White, Gray, and Greene enter into a contract to form a partnership, but the contract says nothing about the sharing of profits and losses. Which of the following will take place? (A) Profits and losses will be shared in a ratio based on the dollar amount of their capital investments. (B) Profits will be shared equally; losses will be absorbed based on dollar amount of capital investment. (C) Profits will be based on amount of time each partner spends working for the firm; losses will be shared equally. (D) Profits and losses will be shared equally.

(D) Profits and losses will be shared equally.

Restitution is available when: (A) Elizabeth agrees to sell an acre of land to Vanessa, and after Vanessa makes a partial payment Elizabeth wrongfully refuses to transfer title. (B) Lawrence makes an oral contract to provide physical training for Lee for fourteen months and Lee discharges Lawrence after six months. (C) Gilbert uses undue influence to induce Cynthia to sell him an antique chair for $10. (D) Restitution is available in all of these cases.

(D) Restitution is available in all of these cases.

Under which of the following provisions of the U.S. Constitution is a corporation not a "person"? (A) The Fifth Amendment's Due Process Clause (B) The Fourteenth Amendment's Due Process Clause (C) The Fourteenth Amendment's Equal Protection Clause (D) The Fifth Amendment's clause protecting against self-incrimination

(D) The Fifth Amendment's clause protecting against self-incrimination

Which of the following is incorrect with regard to treasury shares? (A) No dividends may be paid on treasury shares. (B) They are issued but not outstanding. (C) A corporation may sell treasury shares for any amount the board of directors determines, even if the shares have a par value that is more than the sale price. (D) The concept of treasury stock was created by the MBCA and is carried forward in the RMBCA.

(D) The concept of treasury stock was created by the MBCA and is carried forward in the RMBCA.

Under the RUPA, in which of the following situations may a court order dissolution upon application by a partner? (A) A partner files a petition for personal bankruptcy. (B) A definite term for the partnership has expired. (C) An event makes it unlawful to continue substantially all of the partnership's business. (D) The court finds the economic purpose of the partnership is likely to be unreasonably frustrated.

(D) The court finds the economic purpose of the partnership is likely to be unreasonably frustrated.

Jesse makes an offer to Ike, and Ike accepts; then the state legislature passes a law that makes performance of the contract illegal. What is the effect of the new statute on the contract? (A) The contract is severed; any portions that are legal must still be performed and any portions that have been made illegal must not be performed. (B) The statute has no effect on the contract. (C) The statute acts as a condition on the contract. (D) The statute discharges the obligations of both parties under the contract.

(D) The statute discharges the obligations of both parties under the contract.

When a minor falsely advises the other party that he is of the age of majority and based upon that misrepresentation, the other party in good faith enters into a contract with the minor: (A) the minor has lost his right to disaffirm the contract because of the misrepresentation. (B) the adult party can recover damages from the minor in tort. (C) the minor is required to restore the other party to the position occupied before the making of the contract. (D) There is no uniform rule. States differ, and depending upon the state, any of these could be correct.

(D) There is no uniform rule. States differ, and depending upon the state, any of these could be correct.

Which of the following is not true of promoters of a corporation? (A) They arrange for capital and financing to start a corporation. (B) They assemble the necessary assets to start a corporation. (C) They attend to the actual legal formation of a corporation. (D) They continue to solicit capital whenever needed after incorporation.

(D) They continue to solicit capital whenever needed after incorporation.

James offers to sell four acres of land to Jennifer for $8,000 and further offers to keep the offer open for one month if Jennifer will pay him $100 for the privilege. Jennifer pays James $100. Which statement describes the payment of $100? (A) An implied in fact contract has been formed. (B) A unilateral contract has been formed. (C) This is a formal contract. (D) This is an option contract.

(D) This is an option contract.

The RUPA treats a partnership as a legal entity in all but which of the following respects? (A) Title to partnership property (B) Continuity of existence (C) Legal actions by and against the partnership (D) Unlimited liability for partnership obligations

(D) Unlimited liability for partnership obligations

When does acceptance of an offer to enter into a unilateral contract generally occur? (A) Upon notice of intent to accept by the offeree. (B) Upon full performance by the offeror with the intention of accepting. (C) Upon commencement of performance by the offeree. (D) Upon full performance by the offeree with the intention of accepting

(D) Upon full performance by the offeree with the intention of accepting

Aunt Ellie promises her 21-year-old nephew, Robbie, that she will pay him $100 if he quits smoking for a month. If Robbie does, is there a binding contract? (A) No, because Robbie gave no benefit to Aunt Ellie (B) No, because Robbie did not suffer any detriment (C) Yes, because stopping smoking will benefit Robbie's health (D) Yes, because Robbie gave up a legal right

(D) Yes, because Robbie gave up a legal right

Steven has a typed copy of a contract, which he would like to have Thomas sign. Thomas, who needs glasses to read typing, doesn't want to sign until he has read the document, but Steven convinces Thomas to sign it anyway, because it is a "standard" contract for this type of situation. Is the contract which Thomas signed binding upon him? (A) No, because he did not read it (B) No, because he entered into it based upon fraud in the execution (C) Yes, because he has made a unilateral mistake of law (D) Yes, because he was negligent in not ascertaining its contents

(D) Yes, because he was negligent in not ascertaining its contents

If no time is specified for the acceptance of an offer, the offer terminates after: (A) 24 hours. (B) 48 hours. (C) two weeks. (D) a reasonable period of time.

(D) a reasonable period of time.

Under the common law, the ____ must be the mirror image of the ____. (A) contract, consideration (B) contract, offer (C) offer, acceptance (D) acceptance, offer

(D) acceptance, offer

A partner has ____ authority to hire and fire employees whose services are necessary to carry on the business of the partnership. (A) no (B) limited (C) apparent (D) actual implied

(D) actual implied

A contract prepared on a standard form and offering terms on a take-it-or-leave-it basis is called: (A) exculpatory. (B) a usurious contract. (C) an illegal restraint of trade. (D) an adhesion contract.

(D) an adhesion contract.

Gail sent a letter of acceptance to an offer that has expired. Gail has made: (A) a contract. (B) a rejection. (C) a revocation. (D) an offer.

(D) an offer.

An offer need not take any particular form to have legal validity. To be effective, however, it must: (A) be spoken directly to the offeree. (B) always contain the price of the product or service offered. (C) always contain the place of delivery. (D) be communicated to the offeree

(D) be communicated to the offeree

Doug obtains an exclusive franchise to sell widgets for the Acme Widget Company. The exclusive franchise covers the entire State of Wisconsin for a period of three years. In this case: (A) Acme is obligated to use its best efforts to supply the goods only if this clause appears in the written franchise agreement. (B) according to the UCC, unless otherwise agreed, Doug must use his best efforts to promote the sale of the widgets in his territory. (C) under the UCC, such an agreement lacks consideration. (D) consideration is not required because this is a moral obligation.

(D) consideration is not required because this is a moral obligation.

E-Sign: (A) preempts the Uniform Electronic Transactions Act. (B) requires persons to agree to use or accept electronic records or electronic signatures, provided they are informed of the types of hardware and software required and they have the required equipment. (C) defines the included transactions narrowly. (D) ensures that the electronic form of Internet and e-mail agreements will not make them unenforceable because of the statute of frauds.

(D) ensures that the electronic form of Internet and e-mail agreements will not make them unenforceable because of the statute of frauds.

One of the changes in contract law between the nineteenth century and the twentieth century is that in more recent times: (A) contractual liability, once assumed, can rarely be escaped. (B) contract damages are viewed more narrowly and equitable remedies are no longer available. (C) privity of contract is required. (D) intended third-party beneficiaries may sue in their own right.

(D) intended third-party beneficiaries may sue in their own right.

An ad in a newspaper or a circular describing goods and stating prices would generally be considered a(n): (A) firm offer if made by a merchant. (B) offer if made by a merchant, but not a firm offer. (C) offer irrespective of who made the offer. (D) invitation to buyers to make an offer to buy goods

(D) invitation to buyers to make an offer to buy goods

Redemption is not permitted if the corporation: (A) asks for an injunction. (B) would reduce its total assets below the stated capital amount by the redemption. (C) has outstanding treasury shares. (D) is likely to be rendered insolvent by the redemption.

(D) is likely to be rendered insolvent by the redemption.

Colleen is admitted to the partnership of Elmore & Monticello and makes an initial capital contribution of $10,000. Two years later, when liabilities of the partnership exceed its assets by $20,000, the firm is dissolved. Paul had loaned the firm $5,000 six months before Colleen was admitted; Scott had loaned the firm $8,000 three months after Colleen was admitted. Colleen has: (A) no liability to Scott. (B) liability to Paul and Scott only to the extent of her capital contribution. (C) no liability to Paul. (D) liability to Paul to the extent of her capital contribution and is personally liable to Scott.

(D) liability to Paul to the extent of her capital contribution and is personally liable to Scott.

Steve purchases a four-wheel drive truck from Belk Auto Sales. Steve is only 17 years of age. He wrecks the vehicle and attempts to disaffirm the contract and have Belk repay him all that he has paid. In the majority of jurisdictions, Steve: (A) would be out of luck. (B) must have the truck repaired. (C) will receive his money less the depreciation in value of the vehicle. (D) may simply return the vehicle and get his money.

(D) may simply return the vehicle and get his money.

When both parties misunderstand the same set of facts relating to a basic assumption on which a contract is made, it is termed: (A) rescissionary mistake. (B) unilateral mistake. (C) mistake of law. (D) mutual mistake.

(D) mutual mistake.

Harry bought preferred noncumulative stock on which there were no dividends declared for the year. The dividends that were not declared for the year will: (A) be paid the next year. (B) be paid upon the next declaration of dividends. (C) be paid out of the common stock dividend fund. (D) not be paid.

(D) not be paid.

Harry said to Marge, "I have a ring once owned by Marilyn Monroe. Would you like to buy it for $500?" Marge pays for the ring, but the next day a friend tells her that Harry had recently purchased the ring at a local department store. Marge enjoys wearing the ring and wears it constantly for twelve months. Finally, she goes to Harry and says, "Here is the ring you lied about. Give me my $500." Most likely Marge will: (A) get her money back since Harry's representation was fraudulent. (B) not get her money back since she should have investigated the facts about the ring more carefully. (C) get her money back since she is a good faith purchaser of merchandise. (D) not get her money back since she has affirmed the contract by taking an unduly long time to disaffirm.

(D) not get her money back since she has affirmed the contract by taking an unduly long time to disaffirm.

Charles Bonney, the sole stockholder of Kid Corporation, wrongfully used the corporation to avoid a personal liability. A court's disregard of the corporate entity to hold Bonney personally liable is called: (A) limited liability. (B) ultra vires. (C) diversity of interest. (D) piercing the corporate veil.

(D) piercing the corporate veil.

An obligation imposed by law where there has been no agreement or expression of assent by word or act on the part of either party involved is a(n): (A) implied in fact contract. (B) express contract. (C) void contract. (D) quasi contract.

(D) quasi contract.

According to the UCC, an enforceable agreement involving the transfer of title of goods from a seller to a buyer for a price is called a(n): (A) commercial contract. (B) express contract. (C) formal contract. (D) sale.

(D) sale.

Bill recently borrowed $50 from Ricardo for a couple of weeks. Bill, still short of cash, tells Ricardo, "I will wash and wax your car in exchange for the $50 I owe you." Ricardo tells Bill, "OK, that's great!" Ricardo's performance of his new duty will be a(n): (A) accord. (B) novation. (C) rescission. (D) satisfaction.

(D) satisfaction.

Equitable remedies will not be granted where: (A) the terms of the contract are fair. (B) the consideration is adequate. (C) the terms of the contract are sufficiently certain. (D) the contract is tainted with fraud, duress, undue influence, mistake, or unfair practices.

(D) the contract is tainted with fraud, duress, undue influence, mistake, or unfair practices.

A tailor agrees to sew a suit for Bryan, who promises in return to pay $1,200 for the suit if he is satisfied with it. The tailor completes the suit, which fits Bryan perfectly. Nevertheless, he says that he is not satisfied and refuses to accept or pay for it. Bryan is honest in his dissatisfaction, but gives no reasonable objections. In this case: (A) Bryan must pay for the suit even if he is dissatisfied. (B) this is an illusory contract, because only the tailor is bound. (C) Bryan's approval is an objective standard. (D) the tailor has no recourse, because he agreed to the subjective standard.

(D) the tailor has no recourse, because he agreed to the subjective standard.

Under the RMBCA, if the charter states that "the corporation elects to have preemptive rights," shareholders have preemptive rights with respect to: (A) shares issued as compensation to directors, officers, and employees. (B) shares issued within six months of incorporation. (C) shares issued for consideration other than money. (D) unissued shares.

(D) unissued shares.

Most states have statutes requiring which of the following contracts to be evidenced by a writing to be enforceable? (A) Contracts to make wills. (B) Contracts for the sale of securities. (C) Contracts for the sale of personal property for more than $5,000. (D) Contracts creating certain types of security interests. (E) All of these.

(E) All of these.

Wanda at age 17 purchased an expensive stereo system from Stereo Sales. If Wanda wishes to ratify this contract, Wanda: (A) must reach the age of majority and ratify the contract as a whole. (B) may do so by express notification at any time before reaching the age of majority. (C) may at any time keep the stereo but avoid any remaining debt owed on the stereo. (D) may do so at any time by express or implied action before or after reaching the age of majority.

A) must reach the age of majority and ratify the contract as a whole.

The test for duress is objective and the act must be classified as a tort or a crime in order to be wrongful.

False

Tamara makes a $15,000 investment in a debenture issued by Sherman Company. Tamara is now a secured creditor of Sherman Company.

FALSE

Quasi contract is another name for a contract that is implied in fact.

False

Tavin, employed by Moreba Corporation, fraudulently represents Moreba's product while attempting to make a sale. Tavin, but not Moreba Corporation, may be found liable for fraud.

FALSE

A contract was made for 125 bales of cotton to arrive on a ship named "Peerless" from Bombay. Unbeknownst to either party to the contract, there were two ships named "Peerless," both of which were sailing from Bombay. One sailed in October and the other in December. The buyer had in mind the ship sailing in October, but the seller had in mind the ship sailing in December. Each party held his belief in good faith. The goods failed to arrive on time. If the buyer sues for breach of contract: (A) the seller must pay damages because the seller breached. (B) the seller is guilty of fraud in the inducement for failing to disclose to the buyer which ship would contain the goods. (C) no contract exists due to mutual mistake of fact as to the existence or identity of the subject matter of the contract. (D) All of these.

C) no contract exists due to mutual mistake of fact as to the existence or identity of the subject

. A party to a contract may be able to avoid the contract if: (A) there is a mutual mistake, and the party undertook to bear the risk by conscious allocation. (B) there is a unilateral mistake, and the party undertook to bear the risk by conscious ignorance. (C) there was a mistake and the mistaken party was at fault in not discovering the problem before making the contract. (D) None of these

C) there was a mistake and the mistaken party was at fault in not discovering the problem before making the contract.

The MBCA, RMBCA, and statutes of many states permit corporations to redeem both preferred and common stock.

FALSE

Before granting an injunction enjoining a former employee from competing in a described territory, the courts insist that the employer demonstrate that the restriction is: (A) exculpatory. (B) conscionable. (C) necessary to protect the employer's legitimate interest. (D) in compliance with the state's Blue Law.

C) necessary to protect the employer's legitimate interest.

Lee has been declared incompetent by the court and is under the care of his sister. Without his sister's knowledge, Lee rents the 30,000-seat civic center for his birthday party. Lee's contract to rent the civic center is best described as a: (A) valid contract. (B) voidable contract. (C) void contract. (D) quasi contract.

C void contract

If untrue, which of the following would probably be considered a misrepresentation of a material fact? (A) "This is the one that I think is the best buy." (B) "This is the best computer on the market." (C) "This car has new brakes." (D) "These tires will wear like iron."

C) "This car has new brakes."

Which of the following would always be considered to be contrary to public policy? (A) A contract which contains a covenant not to compete (B) A contract offered on a take-it-or-leave-it basis (C) An agreement to pay someone to make false, negative statements about a competitor's product (D) An agreement which contains an exculpatory clause

C) An agreement to pay someone to make false, negative statements about a competitor's product

The Oak Grove Partnership decided it would buy personal computers for use by each partner. Unknown to the other partners, Cromwell, a partner, had an ownership interest in a computer store and thought he could get the computers for the partnership at the best price because of his inside position. He did, in fact, obtain eight computers at only $150 above the manufacturer's price, which was $250 less than the next lowest bid for each computer. What consequence? (A) Because Cromwell did not tell his partners of his inside position with the computer store, there will be no sale. (B) Since Cromwell obtained the lowest price available, the deal will go through. (C) Cromwell will have to give his part of the sales profits to the partnership. (D) Cromwell will have to rescind the contract and go with the next highest bidder.

C) Cromwell will have to give his part of the sales profits to the partnership.

In which of the following situations will a smaller sum be unable to discharge a larger debt? (A) If the smaller sum is paid before the due date of the larger debt. (B) If an additional article or service is given together with the payment of the smaller sum. (C) If the smaller sum is paid when the larger sum would ordinarily be due, but the debtor is on the verge of insolvency. (D) A smaller sum is never able to discharge a larger debt.

C) If the smaller sum is paid when the larger sum would ordinarily be due, but the debtor is on the verge of insolvency.

A valid contract may be unenforceable for which reason(s)? (A) Failure to satisfy the Statute of Frauds (B) Running of the Statute of Limitations (C) Lack of capacity (D) All of these reasons

C) Lack of capacity

Which of the following is not true regarding the contracts of intoxicated persons? (A) If an intoxicated person is unable to understand the nature and consequences of his act, then the contract is voidable. (B) The effect of intoxication is generally the same as that given to contracts that are voidable because of incompetency. (C) Slight intoxication will destroy one's contractual capacity. (D) Contracts made while a person is too intoxicated to act in a reasonable manner may be ratified when the intoxicated person regains his capacity.

C) Slight intoxication will destroy one's contractual capacity.

Under the parol evidence rule, which of the following types of evidence may be used to vary or contradict the written agreement? (A) Prior oral or written agreements (B) Contemporaneous oral or written agreements (C) Subsequent oral or written agreements modifying the original agreement (D) None of these.

C) Subsequent oral or written agreements modifying the original agreement

The Uniform Commercial Code would be applied in which of the following situations? (A) A contract for landscape services (B) A contract for sale of patent rights (C) A contract for the purchase of farmland (D) A contract to buy living room furniture

D A contract to buy living room furniture

Numerous states impose no limit on the rate of interest that may be charged on: (A) loans to corporations. (B) credit card transactions. (C) loans made by certain designated types of lenders. (D) All of these.

D All of these

Chris receives a printed form in the mail from Wyandott Heating indicating that he has placed a telephone order for a $600 heater. He doesn't recall placing the order. Which of the following is correct? (A) Wyandott can hold Chris to the order. (B) Chris can hold Wyandott to the order. (C) Neither party is bound, because there is no signed writing. (D) Chris is bound if he makes no objection within 10 days.

D Chris is bound if he makes no objection within 10 days

A corporation is considered to be a person within the Fifth Amendment's clause that protects a person against self-incrimination.

FALSE

A corporation owned by one person is treated under the law as that person.

FALSE

A corporation whose principal place of business operation is Florida must be incorporated in Florida.

FALSE

A director who is a member of the board that declares an illegal dividend is not personally liable to the company for the amount that is illegal.

FALSE

A publicly held corporation is one that is both (a) owned by at least 50 shareholders and (b) required to register under the Federal Securities and Exchange Act of 1934.

FALSE

A secured bond is enforceable by a lien upon specific property rather than against the general assets of the corporation.

FALSE

A shareholder of one-third of all the stock in a corporation would be entitled to one-third of all corporate assets of an ongoing company.

FALSE

An investor has the right to transfer investment securities by sale, but not by gift or pledge.

FALSE

Debentures are the same as indentures.

FALSE

Dividends paid in stock of the corporation have virtually the same legal significance as cash or property dividends.

FALSE

If shares are issued with no par value, the entire price must be allocated to stated capital.

FALSE

In corporations, the managers are necessarily owners.

FALSE

Income bonds bear a fixed interest rate.

FALSE

Once the amount of shares that a corporation is authorized to issue has been specified in the charter, it cannot be changed, so the charter commonly specifies more shares than are to be issued initially.

FALSE

RULPA requires a lesser duty of care by a general partner to a general partnership than that owed by a general partner to a limited partnership.

FALSE

Shareholders do not have limited liability for corporate debts.

FALSE

Which of the following is false with respect to the distribution of assets following dissolution of a limited liability company? (A) Most statutes provide default rules for distributing the assets. (B) Generally, assets are distributed first to creditors, including members and managers who are creditors, except with respect to liabilities or distributions. (C) Generally, assets are distributed to members and former members in satisfaction of liabilities for unpaid distributions after distributions are made to creditors, including members and managers who are creditors. (D) Generally, assets are distributed first to creditors who are not members or managers.

D) Generally, assets are distributed first to creditors who are not members or managers.

Hunter recently purchased 1,000 shares of Forrest Corporation stock, but now receives additional 100 shares of Forrest stock, which represent a ratable distribution of additional shares by the corporation. Hunter's receipt of additional shares is a: (A) property dividend. (B) liquidated dividend. (C) convertible dividend. (D) stock dividend.

D) stock dividend.

Darrell goes to lunch with an office equipment salesman. After drinking two beers and eating a Reuben sandwich, Darrell signs a contract to purchase a $1200 machine for the office. Two hours later, he has second thoughts and decides a different machine might be a better buy, so he calls the salesman and wants to disaffirm the contract based upon intoxication. Darrell can avoid the contract on this basis.

False

Delany owes Carl a past-due undisputed debt of $500. Delany sees Carl in a bar and pays him $400. Carl then says to Delany, "Forget about the other $100 you owe me. I'm glad to get the $400." Carl's promise to discharge the remainder of the debt is binding.

False

Delay will have no effect on a party to a contract's power of avoidance.

False

Disaffirmance may be express, but it may not be implied.

False

During the twentieth century it became harder to enter into a contract as well as to get out of one.

False

Edmund, an engineer, is working on a new design for some highly technical equipment which Techgo, Inc. hopes to market within the next five years. The employment agreement between Edmund and Techgo, Inc. states that Edmund will not go to work for another company in the same business for a period of two years after termination of his employment with Techgo, Inc. This agreement is void and unenforceable, because it would make it difficult for Edmund to find other employment.

False

Emancipated minors have no ability to avoid contracts based upon their minority.

False

Equitable remedies are available any time the plaintiff chooses them over money damages.

False

Equitable remedies result in monetary awards to the plaintiff.

False

Finn is currently enrolled in law school. He expects to graduate and take the bar exam in order to be able to practice law. Before Finn becomes a lawyer, he promises to represent his friend, Landon, in a breach of contract action if Landon will pay him 25% of the settlement. Finn negotiates and the case settles for $50,000. Landon refuses to pay Finn. Finn then graduates and attempts to sue Landon. Finn has a legal right to enforce the agreement.

False

For a misrepresentation to be actionable as fraud in the inducement, it must be a misrepresentation of an opinion.

False

For a misrepresentation to be fraud in the inducement, it need not be material.

False

Forrest has a contract with Denzel to construct a new condominium complex. The contract provides that Forrest must furnish a certificate of occupancy and conformity with the local fire code before Denzel has an obligation to pay. The furnishing of the certificate is an implied in fact condition subsequent to the construction of the building.

False

Fraud in the inducement will render an agreement void.

False

Generally, whether or not the parties deal at arm's length does not affect whether silence alone amounts to fraud.

False

George offered to paint Catherine's barn for $4,000. Catherine said she would accept the offer if George would paint the woodshed, too. At this point, they have made a valid and enforceable contract. (A) True (B) False

False

Historically, courts held that representations of law were statements of fact, but the present trend is to recognize that they have only the effect of statements of opinion.

False

Hugh recently purchased a motorcycle for $4,000 but has had extensive problems starting the motor. In disgust at not being able to start the motorcycle, Hugh shouts to his friends, "Any of you want to buy this thing for $20?" A contract will be formed if a friend gives Hugh a twenty-dollar bill.

False

If Bill tells Sara that he will give her two days to decide if she wants to buy his car, he cannot sell it to anyone else during that time. (A) True (B) False

False

If Thomas seemingly offers to sell to Raquel his Toro lawnmower but he intends to offer and believes he is offering her his Murray mower, and she accepts the offer, reasonably believing it was for the Toro, no contract has been formed because there is no mutual assent.

False

If Walter agrees to sell to Caleb all of the tomatoes he wants at $25 a bushel, there is a valid contract with valid consideration.

False

If a contract is not clearly unilateral or bilateral, the courts presume that the parties intended a unilateral contract.

False

If a liquidated damage provision is found to be unenforceable, the injured party loses any remedy for breach of contract.

False

If a partnership is a debtor under the Bankruptcy Code and partnership property is insufficient to pay all the claims against the partnership, the trustee in bankruptcy must first seek recovery of the deficiency from the estates of the bankrupt partners, and then may seek recovery from general partners who are not bankrupt.

False

In an output contract, the seller can operate a factory on a 24-hour-a-day schedule and insist that the buyer take all of the output when that buyer had operated only eight hours a day at the time the contract was made and the buyer had knowledge of the eight-hour-a-day operating schedule. (A) True (B) False

False

In general, a minor may only disaffirm a contract after he has reached the age of majority.

False

In general, if a minor lies about her age in order to induce the seller to contract with her, she cannot disaffirm that contract.

False

In most states, a contract under seal is binding without consideration.

False

In relation to damages, the test of foreseeability is subjective

False

In settling a liquidated debt, payment of a smaller amount before the due date would constitute consideration, but paying a lesser amount on the due date at an agreed-upon different place of payment would not be legally sufficient consideration.

False

Jerry received a bill for $300 from Johnson for a tune-up Johnson had performed on Jerry's car. Jerry called Johnson and told him, "The car runs no better now than before the tune-up. I am sending you $100 and no more." Johnson received the $100 check which was marked "paid in full" and cashed it. Jerry is still liable to Johnson for $200.

False

Jessica at the age of 15 entered into a contract to sell five acres of land to her uncle. She may disaffirm this contract at any time before reaching her majority.

False

Kris, age 17, who looks 18 or older, makes a contract to buy a car from Maisie, an adult. Maisie finds out Kris's age. Maisie may avoid the contract even if Kris did not misrepresent her age.

False

Legal detriment means the obtaining by the promisor of that which he had no prior legal right to obtain.

False

Legal sufficiency of consideration and adequacy of consideration are virtually synonymous terms.

False

Like general partnerships, limited partnerships are statutory creations that did not exist at common law.

False

Liquidated damages are an equitable remedy.

False

Lost profits can never be recovered as damages since they are speculative and cannot be established with reasonable certainty.

False

Lou and David have an executory contract that is supposed to be performed on June 1. On May 1, David indicates that he has no intention of performing the contract as agreed. Lou must wait until June 1 before he can pursue any remedies for breach of contract against David.

False

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.

False

Maria posted several signs in the neighborhood offering $50 for the return of her lost cat. Dave calls to get a description of the cat and tells Maria, "I'll look for your cat." A contract is formed by Dave's call to Maria

False

Marjorie has been cared for by her family physician for 35 years. She decides to assume the mortgage on his new clinic. The contract is automatically invalid because of undue influence. (A) True (B) False

False

Maximum rates of interest that are permitted under usury statutes are uniform from state to state.

False

Mistake by failure to read a document is grounds to void a contract.

False

Most states allow a party who has been induced to enter into a contract by fraud to recover only "out-of-pocket" damages equal to the difference between the value received and the value given.

False

Noncompete agreements for Internet-based jobs have the same limitations in determining what is reasonable as to time and place restrictions as other types of jobs.

False

On March 20, Gordon orally agrees to work for Carrham, Inc. for a period of one year commencing on June 1. No writing is necessary here, because the contract can be performed within one year

False

Past actions that were not bargained for by the parties can become valid consideration for a contract.

False

Pat told her friends that her car got 35 miles to the gallon in the city when in reality it only got 20 miles per gallon. When Pat decides to sell the car and one of her friends decides to buy it, Pat is under no duty to tell the correct figure unless asked.

False

Stuart promises to act as a guide and fishing instructor on a trip for a group of visiting dignitaries. The dignitaries agree to pay him $200 for his services. Stuart completes his duties, but when they discover that Stuart does not have a fishing license, they refuse to pay him. The agreement between Stuart and the dignitaries is an illegal one, which is not enforceable

False

Stuart promises to act as a guide and fishing instructor on a trip for a group of visiting dignitaries. The dignitaries agree to pay him $200 for his services. Stuart completes his duties, but when they discover that Stuart does not have a fishing license, they refuse to pay him. The agreement between Stuart and the dignitaries is an illegal one, which is not enforceable.

False

The "perfect tender rule" would allow a buyer to keep merchandise that deviates from the contract without having to perform himself.

False

The Abbot Corporation contracts with the Baker Corporation to sell to Baker its entire production. After signing the agreement, Abbot can increase its production from one shift to two shifts and Baker will have to buy all of the doubled production.

False

The Code and the Restatement both contain definitions of what constitutes "unconscionable" conduct.

False

The Code and the Restatement have no provisions for discharge of contractual duties in cases involving commercial impracticability.

False

The Code's firm offer rule applies only to offers in writing that are made by a merchant offeror. (A) True (B) False

False

The English statute of frauds and the Code's provision differ in language but have the same basic legal effect: an oral contract for certain identified situations is void.

False

The Restatement and the Code have made the traditional test of objective impossibility more stringent by requiring that the performance must be actually or literally impossible.

False

The UCC and the Restatement make no provision for supplying terms omitted by the parties' contract. (A) True (B) False

False

The UCC is substantially the same as the common law with regard to the doctrine of material breach of contract.

False

The UCC requires that all contracts for the sale of goods must be in writing.

False

The UPA was amended in 2016 as part of the Bring Harmony to Business Act.

False

The basic remedy for misrepresentation is restitution.

False

The common law "mirror image" rule applies to an offer and the acceptance of that offer in a contract for the sale of goods. (A) True (B) False

False

The computation of time for the one-year provision of the statute of frauds starts when the agreement is made, not when the performance is to begin.

False

The courts will enforce an agreement declared illegal by statute.

False

The difference between fraud and misrepresentation is that fraud involves malice while nonfraudulent misrepresentation is always innocent.

False

The law applies a subjective standard of intent in determining whether there was the requisite intent to enter into a contract. (A) True (B) False

False

The newly formed Tavin and Shane Partnership cannot commence business until it meets its state's required minimum amount of capitalization.

False

The parol evidence rule applies to partially written agreements.

False

The parol evidence rule is an exclusionary rule of evidence.

False

The parol evidence rule prohibits introduction of all evidence that would result in modifying written contracts.

False

The performance of a pre-existing contractual duty which is neither doubtful nor the subject of an honest dispute is legally sufficient consideration to support a second contract.

False

The proportion in which partners bear losses depends upon their relative capital contributions.

False

The statute of frauds generally requires that both parties sign the writing.

False

The statute of frauds prohibits fraud in the inducement of a contract.

False

The statute of frauds requires all contracts that can be fully performed within one year of their making to be in writing or proper electronic form.

False

The suretyship provision has been interpreted to include promises made to a debtor.

False

The term "public policy" is precisely and narrowly defined in the Restatement

False

The term "public policy" is precisely and narrowly defined in the Restatement.

False

Yukino pays $500 toward the purchase of a boat from Tyler. Although their agreement for the sale of the boat for $2,200 is oral, courts agree that her part payment and its acceptance by Tyler make the contract enforceable.

False

Zach owns property that he believes is worth $400,000. Chloe knows that there is gold on the property and offers Zach $500,000 for it. Zach accepts and sells the property to Chloe. Zach later realizes that the property was worth more than $500,000. Zach can have the contract avoided based upon fraud.

False

"Capital surplus" would be credited with the excess received over par value for par value shares issued by the corporation.

TRUE

A partner may not receive a distribution from a limited partnership unless the remaining assets are deemed sufficient to pay partnership liabilities other than liabilities to partners on account of their partnership interests.

TRUE

A suit may be brought by the state to challenge the existence of a de facto corporation in a quo warranto action.

TRUE

All states except one have adopted either the 1976 or 1985 RULPA.

TRUE

All states impose the equity insolvency test, which prohibits the payment of any dividend or other distribution when the corporation is insolvent or would become so through the payment of the dividend or distribution.

TRUE

Although, in general, internal affairs of foreign corporations are not regulated by the state, at least a few states, including New York, regulate such matters of those corporations that conduct a majority of their business in the state but are incorporated elsewhere.

TRUE

Article 8 of the UCC contains rules applicable to transfers of investment securities.

TRUE

Dunbar Corp. is a debtor in relation to Martina, who is the holder of an income bond issued by Dunbar.

TRUE

Earned surplus would include undistributed net profits, income, gains and losses from the date of incorporation.

TRUE

Even if it has been lawfully and properly declared, a stock dividend may be revoked unless it has been actually distributed.

TRUE

False statements in a certificate of limited partnership or in an amendment to the certificate that cause loss to third parties who rely on the statements may result in liability for the general partners.

TRUE

If a "liquidation preference" is provided, preferred stock usually has priority over common stock.

TRUE

If an act is ultra vires, it is beyond the legal authority of the corporation.

TRUE

In many states, the services of the incorporators are perfunctory and short-lived.

TRUE

In states where limited liability limited partnerships (LLLPs) are available, a limited partnership may register as an LLLP without having to form a new organization.

TRUE

In the absence of contractual restrictions, shares in a corporation may be transferred by sale, gift, or pledge.

TRUE

In the majority of states, even non-voting shares may vote on fundamental changes that affect that class of shares.

TRUE

Preemptive rights are shareholders' rights to purchase a proportionate part of a new issue of stock.

TRUE

Promoters have a fiduciary duty to the corporation.

TRUE

Redemption of shares generally results in an increase of treasury stock.

TRUE

The "corporate veil" is most likely to be pierced in the case of closely held corporations and in parent-subsidiary relationships.

TRUE

The Internal Revenue Service allows taxation of certain corporations to be similar to that of partnerships.

TRUE

The RMBCA has adopted a net assets test for the issuance of dividends.

TRUE

The Revised Act does not consider a stock dividend issued by a corporation to its stockholders a distribution.

TRUE

The Revised Act provides that only one person need act as the incorporator, though more may do so.

TRUE

The Revised Model Business Corporation Act has been adopted at least in part by more than half of the states.

TRUE

The board of directors may issue bonds without the authorization or consent of the shareholders.

TRUE

The business corporation is a key institution not only in the American economy but also in the world power structure.

TRUE

The doctrine of corporation by estoppel is distinct from that of corporation de facto; estoppel does not create a corporation.

TRUE

The earned surplus test does not permit capital surplus to be used for the payment of dividends.

TRUE

Two principal sources for corporate financing are debt and equity investment securities.

TRUE

Under the Model Act, the bylaws may contain any provision for managing the business and regulating the affairs of the corporation as long as it is not contrary to or inconsistent with the law or articles of incorporation.

TRUE

Under the RMBCA, a corporation can act as an incorporator of another corporation.

TRUE

Under the RMBCA, the filing of the articles of incorporation by the Secretary of State is conclusive proof that the incorporators have satisfied all conditions precedent to incorporation so that a shareholder or creditor would be unable to challenge the existence of the corporation.

TRUE

Under the majority rule, an unsuspecting shareholder who receives an illegal dividend from a solvent corporation cannot be compelled to refund the dividend.

TRUE

With respect to liability for improper dividends, a non-breaching director and an innocent shareholder are both protected from liability due to their good faith.

TRUE

Zeron Corporation is incorporated in West Virginia. It now wants to open a retail outlet in Kentucky. Zeron must obtain a certificate of authority allowing it to do business in Kentucky.

TRUE

A valid contract is one that meets all of the requirements of a binding contract.

True

According to the UCC, only a merchant can make a firm offer to a buyer.

True

"Discharge" has to do with the termination of contractual duties.

True

. Physical compulsion and improper threats are the two basic types of duress. (A) True (B) False

True

. Rescission is usually permitted where the parties to a contract are both mistaken about a material fact.

True

A basic element of fraud is a false representation or a misrepresentation.

True

A condition may be inserted into a contract to terminate the duty to perform.

True

A conditional promise is a promise the performance of which depends upon the happening or nonhappening of an event not certain to occur.

True

A contract exists when an offer has been accepted. (A) True (B) False

True

A contract may condition the duty to accept and pay for the performance of the other party upon the approval of a third party.

True

A covenant not to compete is a type of restraint of trade that courts today will enforce under certain circumstances.

True

A famous decision involving mistake as to the meaning of contract terms is Raffles v. Wichelhaus, a case involving two ships with the same name which were confused by the two parties to the contract.

True

A few states provide by statute that the parties need to provide no new consideration when modifying any contract.

True

A liquidated damage is a provision by which the parties agree in advance to the damages to be paid in the event of breach.

True

A material breach by the seller will discharge the buyer from his obligations under a contract.

True

A modification of a preexisting contract occurs when the parties agree to change one or more of its terms and, under the common law, must be supported by mutual consideration to be enforceable.

True

A non contractual promise may be enforceable where there has been justifiable reliance on the promise.

True

A partnership name may be the name of all the partners, some of them or any one of them.

True

A party to a contract may be entitled to relief even if he is contributorily negligent in relying on a fraudulent misrepresentation.

True

A party to a contract that is unenforceable because of the statute of frauds may be able to recover in restitution the benefits conferred on the other party in reliance on the unenforceable contract.

True

A person taking a prescription medication that alters mental capacity will be treated the same as incompetent under the cognitive ability test

True

A person under guardianship by court order has no contracutal capacity.

True

A seller's promise to service a sewing machine free for the next 90 days when she has no intention of doing so is actionable as a false representation of a fact if the other elements of fraud are present

True

A sole proprietorship is formed without any formality, is not a separate taxable entity, is dissolved upon death of the owner, and has unlimited liability for the owner.

True

A unilateral contract may consist of a promise exchanged for an act or forbearance.

True

A usage of trade is a practice or method of dealing, regularly observed and followed in a place, vocation, or trade.

True

Alice makes a material misrepresentation of fact to Lila, and based upon the misrepresentation, Lila enters into a contract. Lila now realizes she was deceived and wants to get out of the contract. This contract is voidable at Lila's option.

True

Although wagering is generally illegal, some states permit certain kinds of regulated gambling, especially wagering conducted by governmental agencies.

True

Amendments to Article 2 of the UCC were promulgated in 2003 to reflect developments in the law and business practices and to accommodate electronic commerce.

True

An accord and satisfaction discharges an existing debt.

True

An act that is contrary to public policy or is morally reprehensible may constitute duress.

True

An adhesion contract is offered on a "take-it-or-leave-it" basis.

True

An agreement in connection with the sale of a business that prohibits the seller from engaging in the same or a similar business for a period of twenty-five years would be unreasonable.

True

An agreement to refrain from a particular trade, profession, or business is enforceable if two requirements are met: that it protects a property interest of the promisee and that the restraint is no more extensive than is reasonably necessary to protect that interest.

True

An automobile may be considered a necessary item for a minor.

True

An exculpatory clause attempts to excuse one from liability for her own tortious conduct.

True

An exculpatory clause excusing a party from liability for harm caused by reckless conduct will generally make a contract unenforceable as a violation of public policy.

True

An illusory promise has the form of a promise but imposes no real obligation.

True

An implied in fact contract is formed by the conduct.

True

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.

True

An injured party may seek reimbursement for foreseeable loss caused by her reliance on the contract.

True

An intentional breach of contract is generally held to be material.

True

An intoxicated person must have been so intoxicated as to have been unable to understand the consequences of his actions or have been unable to act in a reasonable manner in order to avoid a contract.

True

An obligee's promise to accept a stated performance in satisfaction of the obligor's existing contractual duty creates an accord.

True

An offer can be communicated by words or by conduct. (A) True (B) False

True

Article 2 of the Uniform Commercial Codes does not apply to the sale of services.

True

As a general rule, illegal contracts are unenforceable and neither

True

As a general rule, illegal contracts are unenforceable and neither party can successfully sue the other for breach or recover for any performance rendered. (A) True (B) False

True

At common law, a minor was a person who was under twenty-one years of age.

True

At its discretion, a court may grant the equitable remedy of injunction against breach of a contractual duty where damages would be inadequate.

True

Because the statute of frauds does not apply expressly to a contract for the formation of a partnership, usually no writing is required to create the relationship.

True

Belinda has a household insurance policy, which requires her to notify the insurance company within thirty days of any loss before she is eligible to receive payment for her loss. The notification requirement is a condition precedent to the insurance company's obligation to perform, even though the notification must occur subsequent to the loss.

True

Both the Code and the Restatement provide that, unless the offer or circumstances indicate otherwise, an authorized means of accepting an offer is any reasonable means of communication. (A) True (B) False

True

By the majority view, a minor need only return any property he has received from the other party if the minor wishes to disaffirm the contract. He has no duty to return the property in the same condition in which he received it.

True

Compensatory damages protect the injured party's expectation interest

True

Concurrent conditions occur when mutual duties of performance are to take place simultaneously.

True

Consequential damages include lost profits and injury to person or property resulting from defective performance.

True

Consideration does not require an actual benefit to both sides of an agreement.

True

If a confidential relationship exists between parties to a contract, the law presumes that undue influence exists if it appears that the dominant party has gained at the other party's expense, but the presumption can be rebutted by evidence that it was not exercised.

True

If a person is adjudicated insane and placed in care of a guardian, that person's contracts are void.

True

If a person is unable to understand the nature and effect of entering into a contract, he or she can avoid it.

True

If a person who has been declared incompetent by the courts enters into an agreement, that agreement is void, because it does not meet all the requirements of a binding contract.

True

If a promise is illusory, there is no mutuality of obligation.

True

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.

True

If an agreement is not voluntary and knowing, it will be either void or voidable. (A) True (B) False

True

If an offeror makes an offer to an offeree by letter and it is lost in the mail, no legally sufficient offer has been made. (A) True (B) False

True

If no specific agreement exists, the partners bear losses in the same proportion in which they share profits.

True

If the offer specifies it MUST be accepted by telegram, a letter will not be a valid means of acceptance.

True

In a bilateral contract, if one party is not bound, neither party is bound.

True

In a unilateral contract, a promise is exchanged for an act or forbearance to act.

True

In cases where one party to an illegal agreement is less at fault than the other, he will be allowed to recover payments made or property transferred.

True

In general, an acceptance is effective upon dispatch. (A) True (B) False

True

In general, minors have liability for their torts

True

In interpreting a contract, terms which have been separately negotiated are given priority over standardized, pre-printed terms.

True

In most, if not all, cases where there is a legal detriment to the promisee, there is also a legal benefit to the promisor.

True

In order to induce a car dealer to sell her son a car on credit, Mary promises that she will pay for the son's car if the son defaults on his monthly payments to the dealership. Mary's promise must be in writing or have a sufficient electronic record.

True

In some states a promise under seal is binding without consideration

True

In some states, minors are liable for contracts involving bank accounts and student loans and cannot avoid these contracts even though they can avoid other types of contracts.

True

Income from some types of business entities is taxed twice.

True

Intoxicated persons are liable in quasi contract for necessaries purchased during their incapacity.

True

John is 17 years old and earns extra money by repairing cars. Nathan, who is 21, brings his car to John for repairs, and John ruins the brake system of the car, because of his inexperience. If Nathan sues John for negligence in performing the auto repair contract, in most states John will have no liability, because the tort of negligence and the auto repair contract are connected.

True

Lorna is given papers to sign by a catering company for the food, service, and decorations at a wedding. Underneath the invoices are a carbon and a contract of sale for a portion of the failing catering business. As Lorna signs the papers, her signature is applied to the sales contract. This is a void contract because it was entered by fraud in the execution.

True

Malaki has a contract to purchase a new smartphone. The law governing this contract is Article 2 of the UCC.

True

Many states impose no limit on the rate of interest which may be charged on loans to corporations.

True

Marie owes Nathan $800 and the parties agree that Marie will paint Nathan's house in satisfaction of the debt. The debt is not discharged until Marie performs the substituted agreement by painting Nathan's house.

True

Mike, the owner of a yogurt shop, orders 500 quarts of yogurt from his supplier. Nothing, however, is said by either party about the price or method of payment. The supplier ships the yogurt as ordered. Since this is a contract implied in fact, Mike must pay his supplier for the yogurt.

True

Monetary damages are the most frequently granted remedy for breach of contrac

True

Most courts consider a merger clause to be conclusive proof of an integrated contract.

True

Most types of contracts are valid without being written.

True

Nonfraudulent representation is made without scienter.

True

On June 1, a civic club made an offer of $500 to a beer distributor to have six kegs delivered to the city park for a July 4th fund-raising event. On June 30, the city passed a new law prohibiting consumption of alcohol in the city park. The civic club's offer is terminated on June 30.

True

On Tuesday morning Juan sends a letter to Arlene rejecting her offer, but later the same day Juan changes his mind and sends a letter of acceptance to Arlene. The letter of acceptance will be effective only if it is received by Arlene before she receives the rejection.

True

One type of restraint of trade is a covenant not to compete.

True

Otherwise illusory promises may be transformed by some courts into actual promises by implying an obligation of good faith and fair dealing.

True

Partners may elect to have the partnership not be a separate taxable entity, so that only the partners are taxed.

True

Payton promises to sell to Candice an automobile for $12,000, for which Candice promises $12,000. A bilateral contract exists.

True

Persons who lack mental capacity at the time they enter into a contract may avoid liability under the agreement.

True

Ratification makes a contract void from the beginning

True

Ratification need not be express; it may be implied from the minor's conduct.

True

Ratification of a contract, once effected, is final and cannot be withdrawn

True

Restitution can be obtained where a voidable contract is avoided.

True

Restitution involves a return of consideration or its value to the aggrieved party.

True

Restitution is available as an alternative remedy for a party's repudiation of the contract.

True

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.

True

Sally goes away to college at 17, lives on her own, and pays her own rent and electric bills. If she makes a contract to buy a television set, in most jurisdicitions, she may assert her minority status and set aside the contract

True

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.

True

Seventeen-year-old Teresa wants to disaffirm her student loan agreements. Most states will not allow her to avoid such contracts.

True

Specific lender usury statutes rather than the general usury statute generally apply to real estate mortgages and small consumer loans.

True

The Code has changed the common law rule regarding modification of a preexisting contract by providing that a contract for the sale of goods can be effectively modified by the parties without new consideration, provided they intend to do so and act in good faith.

True

The RUPA abolishes the marshaling of assets doctrine.

True

The Restatement defines a contract as "a promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty."

True

The Restatement is not law, but is highly persuasive in the courts.

True

The Restatement of Restitution provides that a person who renders more advanced performance under a contract that is dismissed for impossibility is entitled to restitution.

True

The Restatement provides that a promise following the rendering of emergency services is binding even if not supported by consideration if necessary to prevent injustice.

True

The UCC permits an oral agreement for the sale of goods to be enforced against a party who admits to the contract in court, even though the statute of frauds requires the agreement to be in writing.

True

The adequacy of consideration, while not important to the existence of consideration, may be relevant to the availability of certain defenses or remedies

True

The central idea behind consideration is that the parties have intentionally entered into a bargained-for exchange with one another and have given each other something in exchange for a promise or performance.

True

The courts readily enforce a covenant not to compete during the period of employment.

True

The difference between an express contract and an implied in fact contract is the manner in which assent is manifested.

True

The doctrine of necessaries applies in the same way to minors and mental incompetents.

True

The element of exchange is absent where a promise is given for an act that has already been done.

True

The executor-administrator provision applies to promises of an executor of a decedent's will to the decedent's creditors.

True

The form of business association known as a partnership can be traced to ancient Babylonia and classical Greece and was used in England during the Middle Ages.

True

The law assumes that respective performances under a contract are concurrent conditions, unless there is an agreement to the contrary.

True

The main purpose doctrine is an exception developed by the courts to the suretyship provision.

True

The most common application of the doctrine of promissory estoppel is to charitable subscriptions, such as pledges to churches, memorials, college buildings, and hospitals.

True

The most uncommon type of duress involves the use of physical compulsion.

True

The panel evidence rule would allow evidence to be introduced to explain what the parties meant by a particular technical term in the agreement.

True

The parol evidence rule applies only to integrated contracts, meaning those in which the parties have assented to the written agreement as the statement of the complete agreement between them.

True

The parol evidence rule does not prevent the use of evidence that a party would like to use to establish the defense of fraud, duress, or undue influence.

True

The parties to a contract may modify the agreement with no additional consideration by simply substituting a new contract.

True

The person to whom an offer is made is an offeree. (A) True (B) False

True

The purpose of reliance damages is to place the injured party in a position as good as he would have held had there been no contract.

True

The statute of frauds does not prevent the performance of oral contracts if the parties are willing to perform.

True

The suretyship provision rule within the statute of frauds applies to cases involving one party's promising to perform the duty of another party to yet a third party.

True

The term "past consideration" is not really consideration at all because the law will not find a contract where there is no bargained-for-exchange.

True

The test under the one-year provision of the statute of frauds is whether the terms of the contract make it possible for performance to occur within one year.

True

The usual means of enforcing an agreement prohibiting an employee from competing in a described territory for a stated period of time is by injunction.

True

The usual method of showing the mutual assent necessary to create a contract is by offer and acceptance.

True

There are two distinct types of fraud

True

There are two principal types of contracts: commercial contracts between a business and a customer and personal contracts between two individuals.

True

To obtain relief for negligent or innocent misrepresentation, all the remaining elements of fraud must be present and the misrepresentation must be material.

True

To sustain a case of fraud in the inducement, the injured party must prove that he actually relied upon the false representation.

True

Tori and Margaret agree to form a partnership. The partnership contract between Tori and Margaret does not have to be in writing in order to be enforceable in the courts.

True

A stock split results in a larger proportion of corporate ownership by the shareholder.

fALSE

Under the Statutory Close Corporation Supplement to the MBCA, a close corporation must have bylaws on file with the Office of the Secretary of State or some other public office.

fALSE

A corporation may not be a partner in a partnership.

false

A general partner, but not a limited partner, may be either a secured or unsecured creditor of the partnership with the same rights as a person who is not a partner.

false

A limited partner has limited access to the books and records of the partnership.

false

A limited partner may vote on the sale of all of the assets of the limited partnership or a change in the nature of the business without being deemed to have taken part in control of the business.

false

A limited partnership agreement may not provide that limited partners have the right to vote on matters as a separate class from the general partners.

false

A member of a limited liability company has a property interest in the property owned by the LLC.

false

A partner cannot assign his interest in the partnership without dissolving the partnership.

false

A partner's liability for partnership debts is limited to his capital contribution.

false

A partner's notification of a fact relating to the partnership is not effective against the other partners until the relevant fact is entered on the minutes at the next partnership meeting.

false

A retiring partner cannot be discharged from existing liabilities of the partnership except by payment.

false

After the formation of a limited partnership, the admission of additional general partners can only be accomplished with the written consent of all partners.

false

A "person" for purposes of a limited partnership can be a corporation.

true

A limited liability company (LLC) provides limited liability to all of its owners and permits all of its owners to participate in management.

true

A limited partner will not lose his limited status if he votes on an amendment to the partnership agreement allowing a new business venture.

true

A limited partnership is a partnership formed by two or more persons under the laws of a state and having one or more general partners and one or more limited partners.

true

A person, who represents himself to third persons as being a partner, when in fact he is not, may have the liability of a partner.

true

Adrianne may form a limited liability company by filing articles of organization in a designated state office, even if she is the only member of the company.

true

All states have authorized the formation of limited liability companies

true

Clara types a letter to David setting forth the terms of their contract that falls within the statute of frauds. At the end of the letter, she types her name but does not sign her signature to it. If David wants to use the letter to satisfy the writing requirement, he may do so.

true

Dale falsely tells Glenna that he is a partner in Huntsman Appraisers. Glenna casually repeats this information to Kash, who sells office equipment on credit to Huntsman in reliance on the statement. Kash cannot hold Dale liable because he was not justified in relying on the representation made privately by Dale to Glenna, which Dale did not consent to have repeated.

true

Once a partner becomes entitled to a distribution, he has the status of a creditor with respect to that distribution.

true

One of the most appealing features of a limited partnership is the limited personal liability it offers to limited partners.

true

Ownership interests in manager-operated LLCs are considered to be securities.

true

RULPA was revised in 2001 and the revision was named the ReRULPA

true

The RULPA recognizes the right of a limited partner to bring an action on the behalf of a limited partnership to recover a judgment in its favor if the general partners having authority to do so have refused to bring the action.

true

The RUPA abolishes the dual priority rule.

true

The best and most reliable tool for preserving a partnership business after dissolution is through a continuation agreement.

true

The causes of dissolution and the priorities in the distribution of assets for a limited partnership are not the same as those of a general partnership.

true

The choice of the most appropriate form of business enterprise cannot be determined without considering the particular circumstances of the owners.

true

The doctrine of marshaling of assets is an equitable doctrine.

true

The law of partnership is very similar to the law of agency.

true

The liability of partners for a tort or breach of trust committed by any partner is unlimited, personal liability.

true

The process of liquidation of a partnership is also known as "winding up."

true

Unanimous written consent of all partners is necessary to add new limited partners to a limited partnership.

true

Under the RULPA, a limited partnership may not use a name that is deceptively similar to that of any corporation or other limited partnership.

true

Under the RUPA, a dissociated partner is not liable for a partnership obligation incurred more than two years after dissociation.

true

Under the RUPA, during winding up, the partnership must apply its assets first to discharge the obligations of partners who are creditors on parity with other creditors, subject to any other laws.

true

Under the UPA, after all the partnership's creditors have been paid, each partner is entitled to repayment of his capital contribution upon termination of the firm.

true