CPCU 530 Study Questions

Some contracts are voidable, and some agreements are void because they are not contracts. When a contract is voidable, the right of avoidance is available only to Select one: A. An innocent or injured party. B. Parties in privity of the contract. C. The offeree of the contract. D. The offeror of the contract.

A. An innocent or injured party. The right of avoidance is available only to an innocent or injured party and not necessarily to the offerer, offeree or all parties privy to the contract.

Tenant Adam defaulted on his rent payments to landlord Leon. Adam left town and abandoned his personal property. Leon can treat Adam's abandoned property as an anticipatory breach Select one: A. And receive as damages the amount of the remaining rent payments. B. And invoke constructive eviction. C. But Leon cannot rent the property for at least 90 days subsequent to the property abandonment. D. But he has no recourse against Adam for rent payments.

A. And receive as damages the amount of the remaining rent payments. Incorrect. Leon may treat Adam's abandoned property as an anticipatory breach and receive the amount of the remaining rent payments as damages. Constructive eviction occurs when actions or inactions of a landlord prevent the tenant from enjoying a substantial or integral part of the premises. Leon retains his rights as landlord and may rent the property at will.

Antonia was a life tenant who occupied a house at 33 Main Street. Emil had a remainder interest in the property and planned to occupy it after Antonia's death. Antonia obtained property insurance covering the house, through Richley Insurance Co. The house was destroyed by fire during Antonia's life estate. Richley must pay the insurance policy proceeds to Select one: A. Antonia, because life tenants can recover the entire value of the property that they insure. B. Emil, under the doctrine of equitable conversion. C. Emil, because he will ultimately own the property. D. Antonia, since she occupied the house at the time of the fire.

A. Antonia, because life tenants can recover the entire value of the property that they insure. If property insured by a life tenant is destroyed, the life tenant can recover the entire value of the property, even if it exceeds the cash value of the life estate. Insurers often overlook this deviation from the principle of indemnity. Otherwise, they would be asserting a position inconsistent with having collected the premium that corresponds to the full value of the property.

Which one of the following parties is the holder of the warehouse receipt in a typical storage bailment? Select one: A. Bailor B. Bailee C. Carrier D. Warehouse operator

A. Bailor Bailor is the holder of the warehouse receipt in a typical storage bailment. A warehouse operator stores goods for hire. The storage arrangement is a bailment; the warehouse operator is the bailee; and the person/entity storing the goods is the bailor. Warehouse operators provide the goods' owner with a receipt that describes the amount, type, and condition of the goods and the conditions of storage. The receipt can be considered a document of title to the goods, which, if properly worded, becomes a negotiable instrument that can be traded, sold, swapped, or used as collateral for borrowing.

During Hurricane Katrina, Jancy Cajun Cooks was unable to ship out its famous spices to Taunton's Restaurant in Virginia. Which one of the following is an excuse for nonperformance of this sales contract? Select one: A. Failure of a presupposed condition B. Unavailability of agreed upon shipping C. Loss of goods by disaster D. Unforeseen disaster circumstances

A. Failure of a presupposed condition Impracticality because of a failure of a presupposed condition. A seller of goods need not complete the sale if the performance becomes commercially impracticable. A severe shortage of materials by a natural disaster can cause commercial impracticability.

The stockholders of BoxComp sued the former chief executive officer (CEO) over his alleged corruption. During the trial, the plaintiff stockholders called the defendant CEO's secretary to the stand to testify. The secretary testified that one of her friends told her that the CEO stole corporate money to gamble on horse races. The CEO's attorney's objection would be sustained on which one of the following grounds? Select one: A. Hearsay B. Irrelevant C. Immaterial D. Prejudicial

A. Hearsay Rules of evidence require evidence be relevant, material, and competent. They also prohibit hearsay, the admission at trial of out-of-court statements not made under oath by a person who is unavailable to testify. There are evidentiary exceptions to the hearsay rule.

InsurCo executives are concerned about some new legislation so they write to their state's department of insurance for guidance. The department writes back with advice about the new law. When an administrative agency clarifies statutes for regulated parties, it is writing which one of the following? Select one: A. Interpretive rule, and it is non-binding. B. Legislative rule, and it is non-binding. C. Legislative rule, and it is binding on the regulated parties. D. Interpretive rule, and it is binding on the regulated parties.

A. Interpretive rule, and it is non-binding. Incorrect. Interpretive rules interpret statutes and provide guidance for agency staff or regulated parties, but they are not binding on individuals.

IronCo was a security contractor that provided security specialists for corporations. Because of the nature of the business, IronCo executives were extremely concerned about trustworthiness. A high-ranking position opened up at IronCo, and in order to apply for the job, interviewers requested interviewees to take a polygraph test. The results of the test were used to determine who was most qualified for the job. The interviewer did not accept anyone who refused to take the test. Which one of the following best describes whether IronCo violated the Employee Polygraph Protection Act? Select one: A. IronCo cannot request or use polygraph tests and cannot test. B. The act does not prohibit the use of polygraphs on job applicants, only on current employees. C. IronCo cannot base employment decisions solely on the outcome of polygraph tests. D. The act does not apply to private-sector employers in an industry dealing with security.

A. IronCo cannot request or use polygraph tests and cannot test. The act bars most private-sector employers from requiring or even requesting lie detector tests.

Uniform Commercial Code (UCC) Article 7 concerns documents of title. Which one of the following is an element necessary for a document to be considered a title? Select one: A. It is a contract to ship or to store goods. B. It is in a tangible rather than an electronic format. C. It is negotiable as a type of commercial paper. D. It is created by a bailor as a receipt for goods received.

A. It is a contract to ship or to store goods. These elements are necessary for a document to be considered a title: it is a contract to ship or store the goods; it is created by the bailee (carrier or warehouse operator) as a receipt for goods received; and, if it is negotiable, it contains a statement that: the holder has the right to receive, hold, and dispose of both the goods and the document of title and that the purchaser of the title does so free of claims and defenses of prior parties.

John contracts with Rex to purchase three steel braces by April 5. In the contract, they agree that the amount of damages either of them would pay in the event of breach would be $50,000. The $50,000 is the result of their good faith effort to estimate actual damages that probably would result from a breach. These types of damages are known as Select one: A. Liquidated damages. B. Special damages. C. Punitive damages. D. Equitable remedies.

A. Liquidated damages. These liquidated damages are a reasonable estimation of actual damage in the event of breach or for negligence. Liquidated damages are a reasonable estimation of damages, agreed to by contracting parties and included in the contract, to be paid in the event of a breach or for negligence.

For an insurer to waive the insured's breach of condition under the insurer's policy, the insurer Select one: A. Must know of the breach of the condition. B. Need not know about the breach of the condition. C. Need not have any knowledge of the insured or any activity under the insured's policy. D. Must not know of the breach of the condition.

A. Must know of the breach of the condition. An insurer must know of a breach of condition under the policy before it can waive that condition. Once it has knowledge of a breach, the insurer must act immediately to avoid a waiver. Whether the insurer has waived a right depends on the facts of each case.

Jack was the defendant in a lawsuit against Emily. Emily's properly-formed complaint alleged that Jack made a series of embarrassing mistakes that led to the accidental destruction of Emily's boat. The way Jack remembers it, Emily sunk her own boat with her own incompetence. Jack disputes almost every one of Emily's allegations. Aside from voluntary dismissal by Emily, is there any way Jack can win the case before trial? Select one: A. No, because Jack disputes Emily's allegations. B. No, because a voluntary dismissal is the only way Jack can win before trial. C. Yes, a motion to dismiss for failure to state a claim. D. Yes, a motion for judgment on the pleadings.

A. No, because Jack disputes Emily's allegations. A motion to dismiss argues that the plaintiff has failed to state a claim upon which relief can be granted and a motion for judgment on the pleadings generally requires an admission of the other party's facts and allegations.

West Virginia's state legislature believed that the federal Occupational Safety and Health Act (OSH Act) was not serving the state's citizens very well, so the legislature decided to assume exclusive jurisdiction of employee health and safety conditions within the state. To do this, the legislature issued a statement of intent, signed by the governor, denying the applicability of the OSH Act within the state. The legislature then passed a series of laws that created job safety and health programs that were more effective than those developed by the OSH Act. At this point, the West Virginia legislature's attempt to assume exclusive jurisdiction over employee health and safety is Select one: A. Not possible because states cannot preempt the federal OSH Act with their employee health and safety statutes. B. Complete by creating laws that were at least as effective as those developed by the OSH Act. C. Competitive merely by issuing a statement of intent, signed by the governor. D. Incomplete because West Virginia still needs the approval of the Occupational Safety and Health Administration.

A. Not possible because states cannot preempt the federal OSH Act with their employee health and safety statutes. States may assume exclusive jurisdiction by developing and enforcing job safety programs that are at least as effective as OSHA's, and they need OSHA's permission.

In bailments for mutual benefit, the bailee can use the property Select one: A. Only as specified within the bailment agreement or contract. B. In any way that has reasonably been contemplated by the bailor. C. In any way that is necessary to accomplish the mutual goal, as long as the bailee uses reasonable care. D. Only to the extent necessary to preserve and protect it.

A. Only as specified within the bailment agreement or contract. In bailments for mutual benefit, the bailee can use the property only as specified within the bailment agreement or contract. For ex., a person who leases a car can use it only according to the lease agreement's terms.

A restaurant encouraged its servers to tell jokes to entertain the customers. The owners believed that their male servers were funnier, and consequently paid them more than the female servers. In fact, the male servers did perform with more skill than the female servers, but the owners did not actually base their wages on anything more complicated than the sex of the server. Which one of the following best explains whether the restaurant owners have violated the Equal Pay Act? Select one: A. Payment of different wage rates is not allowed if sex is the employer's real basis for the wage differential. B. The Equal Pay Act prohibits employers from paying different wage rates to different sexes for the same job, no matter the system implemented. C. The act only applies to race, not to sex or gender, which is covered by other civil rights acts. D. A wage differential is acceptable if it reflects the quality of work, regardless of the employer's actual reasons for setting wages.

A. Payment of different wage rates is not allowed if sex is the employer's real basis for the wage differential. A wage differential is only allowed when the employer's wage system is based on factors other than sex.

Ralph is the director of a fraternal organization that is a not-for-profit association. Ralph volunteers his time to manage the organization, and he is not paid a salary nor does he receive any type of non-monetary compensation. Which one of the following statements regarding Ralph's role as director of the fraternal association is true? Select one: A. Since Ralph receives no compensation, his standard of care owed to the association is less than that of a compensated corporate director. B. Ralph, as a member of the fraternal association, has no property rights in the association's assets. C. As an association director, Ralph has legal rights and duties that differ from those of a corporate director. D. Ralph cannot be sued by a member of the association but the fraternal association itself may be sued by a member who has suffered damage.

A. Since Ralph receives no compensation, his standard of care owed to the association is less than that of a compensated corporate director.

Which one of the following zoning exceptions would be needed to build a church in an area zoned for single family houses? Select one: A. Special B. Standard zoning C. Spot zoning D. Religious

A. Special Incorrect. A special zoning exception would be needed to build a church in an area zoned for single family houses. A special exception is a land use explicitly permitted by a zoning ordinance but subject to certain limitations.

To perfect a security interest in a negotiable instrument, one should Select one: A. Take actual possession of the instrument. B. Create a document of constructive notice. C. Negotiate a termination statement with the debtor. D. File a finance statement in the proper county office.

A. Take actual possession of the instrument. Transferring actual possession is the only way to perfect a security interest in a negotiable instrument, such as a bearer bond, because delivery transfers ownership

Joshua has received a final order from the Social Security Administration and would like to request a judicial review. Before a judicial review of the case can occur, Joshua must Select one: A. Take his case through all possible administrative procedures and appeals. B. Pay all court fees and penalties. C. Prove that the action was unconstitutional. D. Participate in alternative dispute resolution procedures.

A. Take his case through all possible administrative procedures and appeals. Before a judicial review of the case can occur, Joshua must take his case through all possible administrative procedures and appeals under the doctrine of exhaustion of administrative remedies.

Which one of the following statements correctly explains insurance regulation today? Select one: A. The McCarran-Ferguson Act largely permits the regulation of insurance companies to be carried out by individual states. B. The federal government cannot regulate insurance transactions because of the ruling in South-Eastern Underwriters Association, et al., (SEUA). C. The Sherman Antitrust Act is applicable to the business of insurance to the extent that such business is not regulated by federal law. D. The federal government cannot regulate insurance transactions because of the Supreme Court's ruling in Paul v. Virginia.

A. The McCarran-Ferguson Act largely permits the regulation of insurance companies to be carried out by individual states. The McCarran-Ferguson Act largely permits the regulation of insurance to be carried out by individual states. In 1869, Paul v. Virginia said states regulate insurance. In 1944, the SEUA case said no, regulating insurance is a federal power. Congress thought states do it best, so it delegated the authority to the states in the McCarran-Ferguson Act. The federal Sherman Antitrust Act applies to the extent that the states are not regulating the business of insurance.

In an attempt to improve school spirit, ABC College organized a "Dean Clown" initiative. If the whole student body finished the school year with sufficiently high grades, then the dean would dress like a clown for an entire semester. To affect this scheme, ABC College entered into a contract with the dean. Under the contract, ABC College promised to increase the dean's annual salary by two percent, and the dean promised to participate in the College's plan. The dean also agreed to forfeit his entire salary for five years if he breached the contract. But when the time came, the dean refused to play along and further refused to forfeit his salary. Which one of the following best describes the enforceability of this contract? Select one: A. The contract is enforceable except for the salary forfeiture provision, which is unconscionable. B. The agreement is completely unenforceable, because it is a wagering contract. C. The contract is an in pari delicto agreement, and, as such, is completely enforceable, because both parties are equally at fault. D. The agreement is completely unenforceable, because it was made for an unlawful purpose—that is, to commit a tort against the dean.

A. The contract is enforceable except for the salary forfeiture provision, which is unconscionable. The contract is enforceable except for the salary forfeiture provision, which is unconscionable. Courts do not enforce contracts containing provisions so harsh and unfair that they cause undue suffering to the party resisting performance.

Though the United States federal legislative branch is often said to be responsible for "creating" the law, the truth is that much of U.S. law is created by federal agencies. Which one of the following describes how the legislative delegation of rulemaking power to an administrative agency constitutional? Select one: A. The delegation must be carefully limited in scope, and rules made by the agency must be subject to judicial review.Correct. Administrative agencies are only constitutional if the legislation carefully defines the scope of the agency's power, the agency only operates within that scope, and the rules are subject to judicial review. B. All federal agencies are created by constitutional amendment. C. The U.S. Constitution explicitly mandates the creation of administrative agencies. D. Federal administrative agencies must be directly approved by the U.S. Supreme Court before they can create rules.

A. The delegation must be carefully limited in scope, and rules made by the agency must be subject to judicial review. Administrative agencies are only constitutional if the legislation carefully defines the scope of the agency's power, the agency only operates within that scope, and the rules are subject to judicial review.

The Jet Hotel had an old, dangerous boiler in the basement that was rarely used. The Occupational Health and Safety Administration (OSHA) had no safety standards for this particular boiler, but did have standards for similar pieces of equipment. The Jet Hotel's management took no steps to make the boiler safe. One day, the boiler exploded. No one was seriously hurt, but nine employees were treated with first aid. The management did not record these injuries or report the accident to OSHA. Which one of the following OSHA requirements or standards has the management violated? Select one: A. The general duty clause B. The reporting requirement C. The recordkeeping requirement D. The specific safety standard for boilers

A. The general duty clause

Mini-trials and summary mock jury trials are creative methods sometimes used to foster communication and settlement between opposing parties. Sometimes these proceedings offer advisory opinions. Which one of the following best explains how the parties can use these opinions? Select one: A. The opinions are only useful in terms of influencing negotiation between the parties. B. These opinions are final and valid since the parties agreed to use the mini-trial or summary mock jury trial. C. These opinions are binding only when the parties have a preexisting arbitration agreement. D. The opinions can be used as persuasive evidence for any future potential litigation.

A. The opinions are only useful in terms of influencing negotiation between the parties. Private mini-trials and court-sponsored mock summary jury trials can encourage negotiation and settlement, but are otherwise non-binding.

Which one of the following is the major power of legislative bodies in the United States? Select one: A. The power to enact laws B. The power to review court decisions C. The power to appoint judges D. The power to declare laws unconstitutional

A. The power to enact laws

On June 1, Tobias mailed a signed offer to Emilia to purchase her set of antique ivory forks. The offer stated that it was open for one week. Emilia received the offer on June 4, thought the price was fair, and signed her name on the offer to indicate her acceptance. On June 6, Emilia died. The executor of Emilia's estate found the offer with Emilia's signature of acceptance on June 7 and mailed it to Tobias that day. On June 8, a law went into effect that prohibited the sale of ivory in any form from that day forward. Tobias received the signed offer on June 10. Which one of the following best explains why Tobias and Emilia do not have an enforceable contract? Select one: A. Tobias's offer lapsed because Emilia did not communicate her acceptance before June 8. B. Tobias's offer lapsed because he did not receive Emilia's acceptance before June 8. C. Tobias's offer terminated as an operation of law upon the passage of the June 8 law. D. Tobias's offer terminated as an operation of law when the executor took charge of Tobias's estate.

A. Tobias's offer lapsed because Emilia did not communicate her acceptance before June 8. Tobias's offer lapsed because Emilia did not communicate her acceptance before June 8. An estate cannot accept the pre-death offer.

Which one of the following statements about state unfair trade practices acts is true? Select one: A. Unlike the Federal Trade Commission Act, many of the state unfair trade practices acts apply to insurance.Correct. Unlike the Federal Trade Commission Act, many of the state unfair trade practices acts apply to insurance. B. State unfair trade practices acts only regulate insurance practices that involve boycott, coercion, or intimidation. C. Very few state unfair trade practices acts follow the National Association of Insurance Commissioners' model Insurance Fair Trade Practices Act. D. Most state unfair trade practices acts remove consumer rights to sue businesses that the Federal Trade Commission Act provides.

A. Unlike the Federal Trade Commission Act, many of the state unfair trade practices acts apply to insurance.

Which one of the following most accurately explains the debtor's right to redeem collateral upon the debtor's default? Select one: A. When the collateral is in the possession of the defaulting debtor, the debtor can pay the amount of the debt that is in default plus reasonable expenses incurred by the secured party to redeem the collateral. B. When the collateral is in the possession of the foreclosing creditor, the debtor can pay the amount of the debt that is in default plus reasonable expenses incurred by the secured party to redeem the collateral. C. Upon default, the debtor must pay the entire remaining debt to redeem the collateral, but the debtor only has the right to redeem if the secured transaction expressly grants it to the debtor. D. Upon default, the debtor must pay the entire remaining debt to redeem the collateral, and the debtor always has the right to redeem under the Uniform Commercial Code (UCC).

A. When the collateral is in the possession of the defaulting debtor, the debtor can pay the amount of the debt that is in default plus reasonable expenses incurred by the secured party to redeem the collateral. When the collateral is in the possession of the defaulting debtor, the debtor can pay the amount of the debt that is in default plus reasonable expenses incurred by the secured party to redeem the collateral. The borrower doesn't have to repay the entire remaining debt, only the amount that is in default to bring the debt current.

Physician Betty administered medical services to stroke victim Karl who was unconscious. She provided medication and direction and followed all procedures. When Karl woke up, he refused other medical services and he also indicated that he could not be held liable for any expenses that he did not personally authorize or to which he did not consent. It is likely that Karl might be required to pay the reasonable value of the services received based on Select one: A. A unilateral contract. B. An implied-in-law contract. C. An executory contract. D. An implied-in-fact contract.

B. An implied-in-law contract. This is typical of an implied-in-law contract and not of an implied-in-fact, unilateral, or executory contract. If a doctor renders professional services to an unconscious person then the law might obligate the patient to pay for those services based on an implied-in-law contract, to avoid unjust enrichment.

Corporation X contracted to sell shares owned by a corporate director. Upon learning of the sale, the director asserted that the attempted contract was not within the corporate powers of Corporation X. The term most descriptive of this type of contract is which one of the following? Select one: A. A non-executory contract B. An ultra vires contract C. An implied-in-fact contract D. An option contract

B. An ultra vires contract It would be an ultra vires contract. Most states have abolished the defense of ultra vires, but courts often use the term when discussing corporate concepts in written decisions. Traditionally, an attempted contract that was not within corporate powers was voidable as an ultra vires contract, meaning a contract "beyond its power."

Public policy requires that the insured have an insurable interest in any property or life to be covered by the policy. A person has an insurable interest in property if its destruction would cause direct monetary loss. In order to be covered, this insurable interest must exist Select one: A. Prior to the loss. B. At the time of loss. C. When the loss is reported. D. When the property is acquired.

B. At the time of loss. The insurable interest must exist at the time of loss. (In property-casualty insurance, the insurable interest must exist at the time the loss occurs. In contrast, the insurable interest in a life must exist at the time the applicant obtains insurance coverage.)

Nancy suffered a loss and contacted her insurer, Autumn Co. Autumn Co. sent a nonwaiver agreement to Nancy's workplace, but she refused to sign. Autumn Co. then attempted to send a reservation of rights letter to Nancy's residence, but it accidentally sent the letter to the wrong address. Autumn Co. also sent a letter to Nancy's boyfriend, a third-party claimant, at his workplace. This jurisdiction did not require insurers to send reservation of rights letters to third-party claimants. Which one of the following correctly identifies whether Autumn Co. has effectively protected its rights? Select one: A. Autumn Co. has effectively protected its rights by notifying Nancy's boyfriend, even though it was not required by the jurisdiction. B. Autumn Co. has not effectively protected its rights because it cannot show that it communicated notice to the insured. C. Autumn Co. has effectively protected its rights because it acted in good faith and made every reasonable effort to contact the insured. D. Autumn Co. has effectively protected its rights because Nancy was put on notice by the nonwaiver agreement, even though she refused to sign it.

B. Autumn Co. has not effectively protected its rights because it cannot show that it communicated notice to the insured. Incorrect. Autumn Co. has not effectively protected its rights because it cannot show that it communicated notice to the insured. Had it sent the letter to the right address, it could have had a return receipt, and if by regular mail as well, a presumption of receipt.

Scott is presented as a witness for the plaintiff in a trail. Carla, the plaintiff, alleges that she was seriously injured when she was struck by a vehicle driven by Luke, who was under the influence of alcohol at the time. Scott testifies that Luke had been drinking heavily at happy hour on the day of the accident. Under cross-examination, Scott admits that he was not actually at the happy hour, but that a number of co-workers had told him about Luke's drinking that day. Scott's testimony may be challenged under which one of the following conditions under the rules of evidence? Select one: A. Material B. Competent C. Favorable D. Relevant

B. Competent Scott's testimony may be challenged on the basis of competence. He is repeating a statement (hearsay), but does not have personal knowledge of whether the statement is true.

Anna is the lawyer for the plaintiff in a jury trial. She is preparing her opening statement. Which one of the following correctly describes what Anna should do during her opening statement? Select one: A. During her opening statement, Anna should instruct the jury about any applicable laws. B. During her opening statement, Anna should present a summary of what she expects to prove. C. During her opening statement, Anna should challenge the testimony and evidence of the defendant. D. During her opening statement, Anna present a summary of all of the evidence that she plans to present.

B. During her opening statement, Anna should present a summary of what she expects to prove. During her opening statement, Anna should present a summary of what she expects to prove. She should summarize the evidence during her closing statement.

Aaron's vehicle was rear-ended by Kaito's vehicle, and Kaito was charged with driving too fast for conditions. Aaron agreed not to sue Kaito in exchange for a sum of money from Kaito's insurance company. This situation illustrates an example of Select one: A. Past consideration. B. Forbearance. C. Good consideration. D. Binding promise.

B. Forbearance. Forbearance is the giving up or the promise to give up a legal right and is sufficient to support a contract. Forbearance constitutes valuable consideration in this example.

Even though Sandy's original employment contract said that she was hired "at will," her boss, Melissa, made subsequent oral promises that Sandy would not be terminated without good cause. Which one of the following describes how, in most jurisdictions, if a court found that Melissa created an implied contract with Sandy by making these promises, Melissa's power to terminate Sandy would be affected? Select one: A. Melissa would be liable for wrongful discharge if she terminated Sandy without good cause. B. Melissa would be liable for breach of contract if she terminated Sandy without good cause. C. Melissa would still be free to terminate Sandy for any reason or no reason because of the employment-at-will doctrine. D. Melissa would still be free to terminate Sandy for any reason or no reason because of the employment contract.

B. Melissa would be liable for breach of contract if she terminated Sandy without good cause. Oral communications can create an implied contract not to discharge employees despite the existence of either the traditional doctrine of employment at will or a previous express, written employment agreement.

Merve filed for bankruptcy a few years ago. One of the debts included in her bankruptcy was a car loan financed by Lending Bank for $8,000. Which one of the following must Merve do to enforce a new promise to pay this debt and make payments once again on this contract? Select one: A. She must acknowledge the debt. B. No additional consideration is required. C. She must make no additional promises to pay. D. She must pay additional consideration.

B. No additional consideration is required. A new promise to pay a debt barred by bankruptcy is enforceable without any additional consideration.

In a class action lawsuit involving an insurer's claim practices, the court must consider the elements of Select one: A. Functionality, commonality, adequacy of representation, and number of plaintiffs. B. Numerosity, commonality, typicality, and adequacy of representation. C. Extent of harm, numerosity, commonality, and venue of plaintiffs. D. Intentionality, commonality, extent of harm, and venue of the defendant.

B. Numerosity, commonality, typicality, and adequacy of representation. In this type of a class action the court must consider the elements of numerosity, commonality, typicality, and adequacy of representation. The named parties must fairly and adequately protect the interests of unnamed class members.

All of the following debts are not dischargeable in bankruptcy, EXCEPT: Select one: A. Services obtained by fraud B. Payments owed on leases C. Most student loans D. Alimony

B. Payments owed on leases Incorrect. Payments owed on leases. The rest are not dischargeable.

transactions between agents or disclosed principals and third parties, the principals have Select one: A. Rights to be determined in court when damages are assessed. B. Rights against third parties to the same extent as if the principal conducted the transaction. C. No rights against third parties. D. Rights against third parties involved in the transaction.

B. Rights against third parties to the same extent as if the principal conducted the transaction. In transactions between agents and disclosed principals and third parties, the principals have rights against third parties to the same extent as if the principal conducted the transaction.

An insured is accusing Millstone Insurance of unethical claims handling practices. The Department of insurance (DOI) has issued a subpoena requiring Millstone Insurance to produce its records for this claim and documents on its claim handling procedures. Which one of the following types of subpoena is being used by the DOI? Select one: A. Self-incrimination subpoena B. Subpoena duces tecum C. Final order subpoena D. Subpoena ad testificandum

B. Subpoena duces tecum The DOI is using a subpoena duces tecum, which is subpoena to compel production of documents or records. A subpoena ad testificandum is a subpoena to compel a witness to testify.

Which one of the following reinforces the principle of indemnity? Select one: A. Valued policy B. Subrogation C. Special limits D. Replacement cost policy

B. Subrogation Subrogation provisions clarify that the insured cannot collect from both the insurer and the responsible party for more than the amount of the loss. The principle of indemnity means that insurance policies should provide a benefit no greater than the loss suffered by an insured. With a valued policy, an exception to the principle, the actual value of the loss does not matter and the recovery could be more than the insured item is worth. The remaining answer choices can be deduced as wrong. A replacement cost provision is an exception to the principle of indemnity as the insured can end up better off because the insured item is usually worth less (because of depreciation or wear and tear) than the cost to replace it. Limits are caps on what an insurer must pay.

Victoria dared her friend, Amy, to jump over a moving car on her bicycle. Amy agreed, and Victoria drove the car. It did not turn out well. The car was damaged, and Amy was injured. Amy's lawyer predicted that she would be found 50 percent at fault. Which one of the following comparative negligence rules would be most helpful to Amy's case if she decided to sue Victoria? Select one: A. The contributory negligence rule B. The 50 percent comparative negligence rule C. The 49 percent comparative negligence rule D. The slight versus gross rule

B. The 50 percent comparative negligence rule Incorrect. The 50 percent comparative negligence rule would be the most helpful to Amy's case if she decided to sue Victoria, because it would allow her to recover at least reduced damages up to the point at which the plaintiff's negligence constitutes not more than 50 percent of the total.

Which one of the following provisions of the U.S. Constitution gives the federal Congress the power to regulate insurers that conduct business in more than one state? Select one: A. The Equal Protection Clause B. The Commerce Clause C. The Necessary and Proper Clause D. The Due Process Clause

B. The Commerce Clause The Commerce Clause gives the federal Congress the power to regulate insurers that conduct business in more than one state. The Due Process Clause guarantees notice and a hearing before being deprived of certain rights. The Equal Protection Clause prohibits certain kinds of unfair discrimination. The Necessary and Proper Clause concerns congressional powers and is not addressed in this course.

Luke violated a new environmental statute in Massachusetts that prohibited the unsafe disposal of batteries. Because the statute was new, there was no precedent for violations of this particular law. Other, similar Massachusetts statutes prohibited the unsafe disposal of computers and lead-based paint, and there were prior cases that analyzed those laws. Both Rhode Island and Nevada had the same battery disposal statute as Massachusetts. These states each had precedential cases that analyzed violations of their own battery disposal law. Which one of the following correctly identifies the primary legal authority that the Massachusetts' court should rely upon when analyzing Luke's case? Select one: A. The court should rely on precedent from Rhode Island's battery disposal cases. B. The court should rely on prior cases that analyzed similar Massachusetts statutes, such as those that dealt with the disposal of computers and lead-based paint. C. Because there is no direct precedent, the court should rely only on the statute itself and general criminal law principles. D. The court should rely on precedent from Nevada's battery disposal cases.

B. The court should rely on prior cases that analyzed similar Massachusetts statutes, such as those that dealt with the disposal of computers and lead-based paint. Incorrect. The court should rely on prior cases that analyzed similar Massachusetts statutes, such as those that dealt with the disposal of computers and lead-based paint. Generally, this process is called synthesis.

The U.S. constitutional system is one of various checks and balances to governmental power. Which one of the following describes how the legislative branch checks the judicial branch? Select one: A. The legislative branch is responsible for developing and enforcing laws that the judicial branch creates with its decisions. B. The legislative branch has the power to approve or deny the executive appointment of judges, and it has the ability to pass constitutional laws that may negate judicial decisions. C. The legislative branch has the power to appoint judges and to amend the U.S. Constitution. D. The legislative branch has the power to recommend, approve, or veto judicial decisions.

B. The legislative branch has the power to approve or deny the executive appointment of judges, and it has the ability to pass constitutional laws that may negate judicial decisions. The legislative branch has the power to approve or deny the executive appointment of judges, and it has the ability to pass constitutional laws that may negate judicial decisions.

Generally, contract rules apply to contracts for the sale of goods but not in every respect. Which one of the following statements is true regarding contracts for the sale of goods? Select one: A. They do not require consideration to be valid. B. They do not need to state a price to be valid. C. The statute of frauds does not apply to such contracts. D. The defense of undue influence does not apply to such contracts.

B. They do not need to state a price to be valid. They do not need to state a price to be valid. The UCC says that a valid offer must be definitive enough that the parties understand their obligations. Even if one or more terms are left open, an offer can still be valid as long as the parties intended to form a contract and there is a reasonable way to calculate a remedy if the contract is breached. Under the UCC, a written contract doesn't need to detail all the terms, only the term relating to the quantity of goods for sale. Even if the quantity stated is inaccurate, the contract is still enforceable up to the quantity stated.

Any agreement entered into by an insane person is void. Which one of the following classes of insane people does the law recognize for purposes of contractual liability avoidance? Select one: A. Those judged insane by a physician B. Those adjudged insane by a court C. Those judged mentally incompetent by a physician D. Those judged temporarily insane

B. Those adjudged insane by a court A person can be adjudged or formally declared insane by a court. A court's adjudication is conclusive.

Anthony, Bob, and Mary got into a violent argument and accidentally destroyed Anthony's valuable vase, worth $10,000. Anthony was 20 percent at fault, Bob was 10 percent at fault, and Mary was 70 percent at fault. They are not in a combined fault state. In a lawsuit where Anthony is the plaintiff and Bob and Mary are defendants, which one of the following statements is true? A. Under the 49 percent rule, Mary would have to pay $7,000. B. Under the 49 percent rule, Mary would have to pay $8,000. C. Under the 50 percent rule, Bob and Mary would have to pay $4,000 each. D. Under the 50 percent rule, Bob and Mary would have to pay $10,000 total.

B. Under the 49 percent rule, Mary would have to pay $8,000. Under the 49 percent rule, Mary would have to pay $8,000. Because Anthony's percent of fault exceeds Bob's, he could not recover from Bob. Mary would be held responsible for 80 percent (100 percent, less Anthony's 20 percent).

A contract has been formed for the construction of a shopping mall. The company representing the shopping mall has made a payment of $10,000. Which one of the following is the type of consideration is this payment? Select one: A. Contract B. Valuable C. Cash D. Binding promise

B. Valuable This is a valuable consideration; necessary and sufficient to support a valid contract. Other types of consideration: forbearance, present consideration, future consideration, and binding promise (ex., a promisor's agreement to buy from the promisee all the coal the promisor requires during a specified period).

Under the NLRA rules, a union becomes the exclusive bargaining agent by which one of the following? Select one: A. When the union is selected as the appropriate representative by a local labor relations board. B. When the union is selected by a majority of the employees in a unit appropriate for such purposes. C. When the union is selected by a majority of similarly-skilled employees in a particular state. D. When the union is selected as the appropriate representative by the employers.

B. When the union is selected by a majority of the employees in a unit appropriate for such purposes. The National Labor Relations Act provides that a union becomes the exclusive bargaining agent when selected by a majority of the employees in a "unit appropriate for such purposes."

As applied to administrative agencies, appropriate notice under the Due Process Clause of the U.S. Constitution requires which one of the following? Select one: A. A list of the potential consequences of the adjudication, including consequences of ignoring the hearing B. An affirmative statement summarizing the official position of the administrative agency, including all facts and legal theories supporting the position C. A statement of the hearing time, place, and nature, the legal authority and jurisdiction, reference to the statute or rule involved and a short, clear statement of the matters at issue D. The name, office, and background of the hearing's adjudicator

C. A statement of the hearing time, place, and nature, the legal authority and jurisdiction, reference to the statute or rule involved and a short, clear statement of the matters at issue Appropriate notice requires a statement of the hearing time, place, nature, legal authority, jurisdiction, the relevant rule or statute, and a short, clear statement of the matters at issue.

Which one of the following best explains how a successful litigant enforces an arbitration award? Select one: A. The winning party can take the arbitrator's award directly to a sheriff to mandate compliance with the decision. B. An arbitrator cannot award money, but the decision can be used as persuasive evidence in a real court. C. An arbitrator's award is filed with the appropriate court and is as enforceable as any court judgment. D. The parties participating in the arbitration agree in a contract to comply with the arbitrator's decision.

C. An arbitrator's award is filed with the appropriate court and is as enforceable as any court judgment.

Which one of the following best explains how a successful litigant enforces an arbitration award? Select one: A. The winning party can take the arbitrator's award directly to a sheriff to mandate compliance with the decision. B. The parties participating in the arbitration agree in a contract to comply with the arbitrator's decision. C. An arbitrator's award is filed with the appropriate court and is as enforceable as any court judgment. D. An arbitrator cannot award money, but the decision can be used as persuasive evidence in a real court.

C. An arbitrator's award is filed with the appropriate court and is as enforceable as any court judgment. An arbitration award may be filed with the court and is as valid and enforceable as any court judgment.

Physician Betty administered medical services to stroke victim Karl who was unconscious. She provided medication and direction and followed all procedures. When Karl woke up, he refused other medical services and he also indicated that he could not be held liable for any expenses that he did not personally authorize or to which he did not consent. It is likely that Karl might be required to pay the reasonable value of the services received based on Select one: A. An implied-in-fact contract. B. A unilateral contract. C. An implied-in-law contract. D. An executory contract.

C. An implied-in-law contract. This is typical of an implied-in-law contract and not of an implied-in-fact, unilateral, or executory contract. If a doctor renders professional services to an unconscious person then the law might obligate the patient to pay for those services based on an implied-in-law contract, to avoid unjust enrichment.

Once an offer is terminated due to a lapse of time, any attempted acceptance Select one: A. Is invalid, and is not binding on the offeror or the offeree, and has no legal effect. B. Becomes a counteroffer, which the original offeror can accept, reject, or unilaterally modify. C. Becomes a counteroffer, which the original offeror can either accept or reject. D. Is valid, as long as it unconditionally and unequivocally accepts the terms of the original offer.

C. Becomes a counteroffer, which the original offeror can either accept or reject. Once an offer is terminated due to a lapse of time, any attempted acceptance becomes a counteroffer, which the original offeror can either accept or reject.

Sebastian attacked Aaron and stole his wallet, but a police officer caught Sebastian and arrested him. Aaron sued Sebastian for injuries that he had suffered during the mugging. Sebastian was required to respond to Aaron's complaint by December 10, but Sebastian made a motion before the court, which asked the judge for an extension. In the terms of the classifications of U.S. law, Sebastian's motion would be classified as Select one: A. Criminal and substantive. B. Criminal and procedural. C. Civil and procedural. D. Civil and substantive.

C. Civil and procedural. Sebastian's motion would be classified as civil (not criminal, but rather, provides remedies for breaches of duties) and procedural (rules for steps or processes).

During her closing arguments for the defense, attorney Gabriela noticed that several of the jurors were sleeping. Irritated, Gabriela began insulting the jurors and using vulgar language. The jurors woke up and began to argue and throw things at Gabriela, the judge, and other people in the court. The judge was appalled by Gabriela's lack of professionalism and ordered her to pay a fine while he considered how to handle the situation. Gabriela refused to pay the fine. Which one of the following actions would be appropriate for the judge to take? Select one: A. Issue a directed verdict, because the jury was misbehaving during the trial. B. Declare a nonsuit, because Gabriela did not comply with a court order. C. Declare a mistrial, because an extraordinary event has made the jury incapable of delivering an unbiased verdict. D. Issue a special verdict and find against the defense to punish Gabriela.

C. Declare a mistrial, because an extraordinary event has made the jury incapable of delivering an unbiased verdict. A mistrial is a tool a judge can use to take the fact-finding out of the hands of the jury in extreme situations.

Furkan, who was insured with Argot Insurance Company, ran a stop sign and hit Katie, injuring her severely. Katie sued Furkan and Argot Insurance Company jointly. This action is known as Select one: A. Tort action. B. Negligence action. C. Direct action, pursuant to statute. D. Negligence per se action.

C. Direct action, pursuant to statute. A law that permits a negligence victim to sue an insurer directly or to sue both the insurer and wrongdoer, is known as a direct-action statute.

Which one of the following statements correctly describes the effect of an agent's oral promise—made before or during the finalizing of a policy—to waive an insured's future breach of any policy condition? Select one: A. It is effective as a waiver due to the parol evidence rule B. It is effective as a waiver due to the doctrine of election C. It is ineffective due to the parol evidence rule D. It is ineffective because oral statements cannot result in a waiver

C. It is ineffective due to the parol evidence rule The parol evidence rule provides that oral evidence of agreements preceding or accompanying a written insurance policy cannot be used to prove a waiver. Thus, the agent's oral statements made at this time would not be admitted into evidence and thus would be ineffective as a waiver.

Tammy gave Bert a personal check for purchase of his car. Bert endorsed the check over to Larry in payment of a debt. Before Larry could cash it, Tammy stopped payment because Bert had misrepresented the condition of the vehicle. Neither Tammy nor Larry knew of the misrepresentation until after the check was endorsed over to Larry. Which one of the following describes Larry's rights with regard to this case? Select one: A. Larry must wait until Bert settles with Tammy before he can take legal action. B. Larry can sue Bert for the amount but has no claim against Tammy. C. Larry is entitled to the value of the check from Tammy because Tammy's defenses are not effective against him. D. Larry has no recourse against Tammy because she stopped payment on her check.

C. Larry is entitled to the value of the check from Tammy because Tammy's defenses are not effective against him. Larry is entitled to the value of the check from Tammy because Tammy's defenses are not effective against him as Larry is a holder in due course. In other words, Larry is free of the defenses Tammy has against a claim for payment by Bert.

If a third party's assumptions about an agent's authority are unreasonable and are not supported by facts, the insurer can Select one: A. Reject the agency relationship through the use of the parol evidence rule. B. Terminate the apparent agency relationship through the process of estoppel. C. Legally deny the existence of the agency relationship. D. Disavow the agency relationship through the use of a hold-harmless agreement or a waiver.

C. Legally deny the existence of the agency relationship. Incorrect. The insurer can legally deny the existence of the agency relationship. The insurer's acts alone create the apparent authority and therefore only the insurer can legally deny the existence of an agency relationship.

Jessica operates her architectural business out of her home. She obtains her business and personal insurance through Glaston Insurance Agency (GIA). Daniel, the agent at GIA, neglected to tell Jessica that professional liability coverage was excluded when she purchased the coverage for her business. When the deck on her house collapses, Lily files a suit against Jessica's architectural business. It is soon discovered that Jessica's coverage from GIA does not include professional liability coverage, and that Jessica does not have adequate funds to compensate Lily. Lily decides to file a suit against Daniel. Which one of the following statements is correct regarding Lily's right to sue Daniel? Select one: A. Because the circumstances involve professional liability exposures, most courts will interpret that Lily, as a third party, has the right to sue Daniel. B. Lily, as a third party, has the right to sue Daniel for his failure to transmit information properly. C. Lily was not a party to the Daniel and Jessica's producer-customer relationship, and therefore has no rights under the contract. D. As a third party, the only way that Lily can sue Daniel is by filing a joint suit with Jessica.

C. Lily was not a party to the Daniel and Jessica's producer-customer relationship, and therefore has no rights under the contract.

Is there any way that an offeree can accept a rejected offer to contract? Select one: A. No, the offeree can only invite the offeror to make the original offer again, at which point the offeree can once again either accept or reject the offer. C. No, a rejected offer is terminated and any attempt to accept the rejected offer is considered a new offer. D. Yes, provided that the original offer has not yet lapsed.

C. No, a rejected offer is terminated and any attempt to accept the rejected offer is considered a new offer. No, a rejected offer is terminated and any attempt to accept the rejected offer is considered a new offer. B. Yes, provided that the offeror did not rely on the offeree's rejection.

A complete contract of sale for real property usually includes which one of the following elements? Select one: A. Oral agreement B. Warranty deed C. Nonessential terms D. Definition of conditions

C. Nonessential terms Certain terms are nonessential but are usually covered in a complete contract of sale, such as time of closing and payment terms.

Ordinarily an illegal contract is void, and neither party can sue under the contract. Consequently, the parties to an illegal contract can neither recover damages for breach of contract Select one: A. Nor seek damages for unjust enrichment. B. Nor seek recovery for the completed performance they have made. C. Nor seek recovery for the partial performance they have made. D. Nor seek recovery for any damages

C. Nor seek recovery for the partial performance they have made. The parties to an illegal contract can neither recover damages for the breach of contract nor seek recovery for the value of any partial performance they have made. Although this rule can result in a wrongdoer's unjust enrichment, it deters parties from entering illegal contracts.

Which one of the following contractual rights are assignable without the obligor's consent? Select one: A. A right to collect a debt B. Damages for personal injury C. Personal rights and duties D. Contract restrictions

C. Personal rights and duties Ordinarily, any right to collect a debt is assignable because it is usually no more difficult for a debtor to pay the assignee the amount owed than it would have been to pay the original creditor.Damages for personal injury, personal rights and duties, and contract restrictions are not assignable without the obligor's consent.

Oliver contacted his insurance agent Maria about homeowners insurance. Oliver said: "I want homeowners insurance." Maria responded: "You got it." Which one of the following is the best statement of why no agreement to provide insurance was likely reached by the parties? Select one: A. The agreement was void as against public policy. B. There is no consideration supporting this agreement. C. The agreement was not sufficiently specific on key terms. D. Oral agreements to provide insurance are not enforceable.

C. The agreement was not sufficiently specific on key terms. To be effective, an agreement to insure, whether oral or written, must have certain key components, i.e., types of coverage sought, object or premises to be insured, amount of insurance, insured's name, and duration of coverage. These agreements are otherwise appropriate, whether oral or written.

Any contract allowing a lender more than the maximum legal interest is a usury contract and is therefore illegal. Which one of the following is true in most states if a lender is charging an illegally high rate of interest on a loan? Select one: A. The lender may not collect either the principal or the lost interest. B. The lender may collect the principal but is fined for usury action equal to the exorbitant rate of interest previously charged. C. The lender may collect the principal but is barred from collecting the interest. D. The lender may collect the principal and the lowest market interest rate.

C. The lender may collect the principal but is barred from collecting the interest. In most states, a lender who has charged an illegal rate is barred from collecting interest on the loan but can still obtain the principal amount loaned.

Carolina was a counterfeiter. She sought a property insurance policy on the warehouse where her counterfeiting operations took place, as well as a business interruption insurance policy on the operations themselves. Both Carolina and her insurance producer believed that these policies would be valid and enforceable. They also both incorrectly believed that the property insurance policy covered lightning strikes. Lightning was extremely rare in Carolina's area and had never caused damage to any buildings in the past. Which one of the following statements is true? Select one: A. The property policy is voidable by either party, and the business interruption policy is void. B. Both the property insurance policy and the business interruption policy are voidable by either party. C. The property policy is enforceable, and the business interruption policy is void. D. Both policies are void because they involve the coverage of illegal activities.

C. The property policy is enforceable, and the business interruption policy is void. The property policy is enforceable, and the business interruption policy is void. Insurance contracts must involve legal subject matter. But if the insurance is only incidental to an illegal purpose, then the contract is enforceable.

Which one of the following terms describes an insurer's agent whose authority is established and restricted by express agreement with the insurer? Select one: A. The soliciting agent B. The general agent C. The special agent D. The broker

C. The special agent A special agent's authority is established and restricted by express agreement with an insurer. The agency contract with the insurer creates and expressly restricts the special agent's powers.

Justine contracted to create Charlotte's wedding gown by next June. Later, Justine and Charlotte agreed that Tammy would make the gown, and Charlotte expressly released Justine from the original contract. Which one of the following statements is true? Select one: A. There was a discharge by performance. B. There was a personal satisfaction contract. C. There was an agreement to rescind. D. There was substantial performance of a contract.

C. There was an agreement to rescind.

Sarah sent auto mechanic Stan a letter stating she would pay him $500 to repair her car's transmission. Stan knew where Sarah lived and he stopped by her home and began the repairs. Sarah brought Stan a drink of water and left him to his work. In this situation, the contract between Sarah and Stan is Select one: A. Not valid because Stan's acceptance was not unconditional or unequivocal. B. Valid because Sarah is aware of Stan's activities and she does not withdraw her offer. C. Valid since Stan can choose to repair Sarah's car rather than to give a return promise. D. Not valid since Stan never expressed his acceptance of the contract terms orally or in writing.

C. Valid since Stan can choose to repair Sarah's car rather than to give a return promise. There is an offer and Stan's performance of the repair is his acceptance to terms mutually agreed upon. When it is unclear whether a contract is unilateral or bilateral, courts lean toward bilateral. While the usual response to a bilateral contract is a return promise, the offeree can choose to perform the act requested instead. (It could be argued that the contract is unilateral, in which case there is acceptance when repairs began. But Stan could not have been forced to accept/perform the contract if he did not want to.)

Which one of the following statements distinguishes estoppel from waiver? Select one: A. Parol evidence rule applies to estoppel and not waiver. B. Waiver defeats the inequitable intent of the waived party C. Waiver is contractual in nature and rests upon agreement between parties. D. Waiver is equitable in nature and arises from false representation.

C. Waiver is contractual in nature and rests upon agreement between parties. Waiver is contractual in nature and rests upon agreement between parties. Estoppel is equitable in nature and arises from a false representation. Estoppel defeats the inequitable intent of the estopped party. Waiver gives effect to the waiving party's intention. When proving estoppel, parol evidence is admissible (the opposite of the parol evidence rule, which excludes evidence).

The Twenty-sixth Amendment to the U.S. Constitution sets the minimum voting age at 18. Assume that, after the amendment was ratified, the U.S. Congress passed a law that prohibited the right to vote for anyone under the age of 21 who had not registered for military conscription. West Virginia likewise passed a law that limited the minimum voting age to 19 for all West Virginia citizens. The U.S. President then issued an Executive Order that forbade any person under the age of 20 with unpaid traffic tickets from voting. The earliest legal voting age for a West Virginia citizen with unpaid traffic tickets who had not registered for military conscription is Select one: A. 19. B. 20. C. 21. D. 18.

D. 18. The earliest legal voting age for a West Virginia citizen with unpaid traffic tickets who had not registered for military conscription is 18. Any law that violates the U.S. Constitution, whether state or federal, is void.

Doug owned a restaurant in Iowa. It is illegal to conduct any type of gambling activity in Iowa. However, business was slow and Doug replaced his restaurant furniture and fixtures with slot machines and poker tables. Doug enters into several contracts. Which one of the following is an example of a contract with a legal purpose? Select one: A. A contract for property insurance insuring Doug's building entered into after Doug intentionally burned down the building. B. A contract for property insurance insuring Doug's slot machines C. A contract for business income insurance covering any interruption in Doug's new business from a covered peril. D. A contract for life insurance on Doug's life for death by accident.

D. A contract for life insurance on Doug's life for death by accident. A legally binding contract would ordinarily not be valid if the formation or performance is illegal, such as the illegality of gambling at Doug's place of business. Parties to an illegal contract cannot recover damages or value for partial performance.

After receiving all pleadings, the defendant asserts that the plaintiff has failed to state a claim for which the court can grant relief. This action is Select one: A. A judgment of pleadings. B. A reply. C. A complaint. D. A motion to dismiss.

D. A motion to dismiss. A motion to dismiss occurs when, after all pleadings, a defendant asserts that the plaintiff has failed to state a claim for which the court can grant relief.

Which one of the following is an action causing harm that would most likely result in the application of the res ipsa loquitur doctrine? Select one: A. A drunk driver runs his car into a pedestrian. B. A tornado destroys a barn. C. An arson fire burns a warehouse to the ground. D. A roll of tar paper falls off a building at night and hits someone.

D. A roll of tar paper falls off a building at night and hits someone. Incorrect. A roll of tar paper falls off a building at night and hits someone. Res ipsa loquitur ("the thing speaks for itself") applies when an action or event causing injury is under the defendant's exclusive control and would not likely have happened if the defendant exercised appropriate care.

Tanya leased a building for use as a restaurant. In the process, she purchased and installed a removable pizza oven. At the end of the lease, Tanya's landlord told her the pizza oven was a property alteration because it was attached to real property and must stay with the building. In this situation the pizza oven is Select one: A. An improvement or betterment. B. A property alteration. C. A leasehold interest. D. A trade fixture.

D. A trade fixture. Incorrect. This is a trade fixture since Tanya can remove it. If it was an alteration or improvement or betterment it would become part of the leased structure.

At a jury trial, the judge instructs the jury about applicable laws. This should occur Select one: A. During the swearing-in of the jury. B. Prior to jury selection. C. Prior to the presentation of evidence. D. After closing arguments.

D. After closing arguments. The judge's instruction to the jury about applicable laws should occur after closing arguments.

Which one of the following statements regarding the elements of an offer to contract is true? Select one: A. An offer must state the time of performance to be valid. B. If the subject matter of an agreement is missing from an offer the court will imply it. C. A court will not determine the intent of the parties by implication. D. An offer where the parties to an agreement cannot be identified is invalid.

D. An offer where the parties to an agreement cannot be identified is invalid. Incorrect. An offer where the parties to an agreement cannot be identified is invalid. Inability to identify the parties to, or the subject matter of, an agreement, makes the offer indefinite and therefor impossible to accept.

Which one of the following most accurately describes the ability of an offeror to revoke an offer made to an individual offeree? Select one: A. An offeror can revoke an offer any time before acceptance, but must do so through the same means of communication used in making the original offer. B. An offeror can revoke an offer either by expressly refusing to abide by it or by making a new offer to the offeree. C. An offeror can revoke an offer by any reasonable means, at any time before the offeree completes performance of the contract. D. An offeror can revoke an offer any time before acceptance, but the revocation is effective only when communicated to the offeree and the offeree actually receives the communication.

D. An offeror can revoke an offer any time before acceptance, but the revocation is effective only when communicated to the offeree and the offeree actually receives the communication. An offeror can revoke an offer any time before acceptance, but the revocation is effective only when communicated to the offeree and the offeree actually receives the communication.

Bill, 62, felt that he suffered age discrimination at his job. Bill decided to go to the Equal Employment Opportunity Commission (EEOC) to complain. While the EEOC reviewed his complaint, Bill became impatient, and filed a lawsuit against his former employer in his state's court. Two months after Bill's lawsuit was filed, the EEOC issued Bill a right-to-sue letter. Which one of the following best describes the mistake(s) Bill made while pursuing his discrimination claim? Select one: A. Bill should have filed a complaint with the appropriate state agency before the EEOC. B. Bill should have proceeded with administrative enforcement while the EEOC reviewed his complaint, rather than going to state court. C. Bill was not old enough to file a complaint under the ADEA for age discrimination. D. Bill was not allowed to sue while the EEOC reviewed his complaint.

D. Bill was not allowed to sue while the EEOC reviewed his complaint. As a prerequisite to instituting a court suit, a person alleging age discrimination must file a charge either with an appropriate state agency or with the EEOC. The employee may not sue while this process continues.

There was a large unmarked sinkhole on Charlotte's property, a short distance from a public road. One evening, a police officer chased a mugger off the road and onto Charlotte's property. Both the officer and the mugger fell into the hole and were injured. Which one of the following best answers whether Charlotte is liable for the injuries to the police officer and/or to the mugger? Select one: A. Charlotte is liable to both the officer and the mugger, because she had a duty to avoid endangering travelers with an unguarded ditch.Incorrect. Charlotte is liable to the officer for the unguarded ditch, because the officer was a licensee, but she is not liable to the trespassing mugger. Firefighters and police officers are licensees when they enter property to perform their duties. B. Charlotte is not liable to either the officer or the mugger, because occupiers of land have no duty to correct defects abutting sidewalks or streets. C. Charlotte is not liable to the officer or the mugger, because they were both trespassers on her property. D. Charlotte is liable to the officer for the unguarded ditch, because the officer was a licensee, but she is not liable to the trespassing mugger.

D. Charlotte is liable to the officer for the unguarded ditch, because the officer was a licensee, but she is not liable to the trespassing mugger. Charlotte is liable to the officer for the unguarded ditch, because the officer was a licensee, but she is not liable to the trespassing mugger. Firefighters and police officers are licensees when they enter property to perform their duties.

Julian was driving his car along a mountain road with his friend Georgia in the passenger seat. Julian's car crashed into a car driven by Magnus. Julian, Georgia, and Magnus were injured. In the subsequent lawsuit brought by Georgia against Julian and Magnus, the court found that Magnus was 100 percent liable for the accident. Next, Magnus sued Julian and pled that Julian was negligently responsible for his injuries. Which one of the following doctrines bars Magnus' claims against Julian? Select one: A. Res judicata B. Special verdict C. Competence rule D. Collateral estoppel

D. Collateral estoppel Incorrect. Res judicata (also known as claim preclusion) bars parties from re-litigating an old claim. Collateral estoppel (also known as issue preclusion) bars parties from re-litigating an old issue.

A holder in due course is free of personal defenses. Which one of the following is one of those personal defenses? Select one: A. Incapacity of the drawer B. Duress C. Illegality D. Failure of consideration

D. Failure of consideration A holder in due course is free of personal defenses, such as lack or failure of consideration, misrepresentation, or fraud. But because real defenses go to the very existence of the obligation, a holder in due course can be subject to them. Examples of real defenses are the incapacity of the maker, drawee, or drawer; duress; illegality; and discharge in bankruptcy. So, or instance, the maker's insanity might negate the existence of the obligation in the first place.

Buyers and sellers have several options as to where goods will be delivered and which party bears the risk and expense of delivery used in marine insurance. Which one of the following best describes the FOB (free on board) vessel? Select one: A. Ownership passes from the seller to the buyer when the carrier delivers the goods to the buyer's premises. B. The seller is obligated to pay for the insurance and freight charges for the delivery to the buyer. C. The seller delivers goods to the carrier at the seller's risk and expense, and the ownership then shifts to the buyer. D. Goods are loaded on board the vessel at the seller's risk and expense, and then ownership passes to the buyer.

D. Goods are loaded on board the vessel at the seller's risk and expense, and then ownership passes to the buyer. Incorrect. Goods are loaded on board the vessel at the seller's risk and expense, and then ownership passes to the buyer.

Administrative agencies often promulgate legislative rules. Which one of the following best describes the primary elements of legislative rules? Select one: A. Legislative rules interpret statutes and provide guidance for agency staff or regulated parties. B. Legislative rules are passed directly by the state or federal congress and are enforced by the agency. C. Legislative rules are advisory notes written by agencies in an attempt to influence legislation. D. Legislative rules come from a statutory delegation of authority and have the same force as a law enacted by a legislature.

D. Legislative rules come from a statutory delegation of authority and have the same force as a law enacted by a legislature. Legislative rules are the primary tools of administrative agencies. The rules have the full force of law, as authorized by statutory delegation from Congress or the state legislature.

Which one of the following best explains why most advertisements are not legally enforceable offers? Select one: A. Most advertisements lack exact descriptions of the items to be bought or sold, the price, or the precise nature of the proposed contract. B. Most advertisements are not direct communications between an offeror and an offeree. C. Most advertisements fail to spell out the conditions of acceptance. D. Most advertisements express no present intent to contract with the viewer of the advertisement.

D. Most advertisements express no present intent to contract with the viewer of the advertisement. Incorrect. Most advertisements express no present intent to contract with the viewer of the advertisement.

Merve filed for bankruptcy a few years ago. One of the debts included in her bankruptcy was a car loan financed by Lending Bank for $8,000. Which one of the following must Merve do to enforce a new promise to pay this debt and make payments once again on this contract? Select one: A. She must pay additional consideration. B. She must acknowledge the debt. C. She must make no additional promises to pay. D. No additional consideration is required.

D. No additional consideration is required. A new promise to pay a debt barred by bankruptcy is enforceable without any additional consideration.

Brenda offered to sell her collection of gemstones to Jolene for $25,000, and Jolene told her brother Kevin about Brenda's offer. When Jolene died in an auto accident, Kevin, as executor of Jolene's estate, tried to accept Brenda's offer to sell the collection. Kevin's acceptance on behalf of the estate is Select one: A. Not enforceable because the acceptance must be unconditional and unequivocal. B. Enforceable because of Brenda's intent to contract with Jolene. C. Enforceable since Kevin did not deviate from the original terms of the offer. D. Not enforceable because the offeror has the right to choose with whom to contract.

D. Not enforceable because the offeror has the right to choose with whom to contract. Kevin's acceptance on behalf of the estate is not enforceable because the offeror has the right to choose with whom to contract.

Lucy rented an apartment to Daniel. The wiring in Daniel's apartment was faulty, and certain light switches, if operated with wet hands, could give off nasty electric shocks. Lucy knew about this condition, but did not tell Daniel about the light switches. Daniel suffered minor burns from a light switch. Which one of the following correctly identifies whether Lucy is liable for Daniel's injuries, at common law and under today's law? Select one: A. Not liable at common law, not liable under today's law B. Liable at common law, liable under today's law C. Liable at common law, not liable under today's law D. Not liable at common law, liable under today's law

D. Not liable at common law, liable under today's law Lucy is not liable at common law, but she is liable under today's law. A property owner who leased the property to another was not liable under common law for injuries resulting from the disrepair of the property or from other dangerous conditions, whether the condition resulted in injury to the tenant or to a third person. Today, an owner or landlord is liable when injury results from negligently made repairs or from a concealed danger on the premises that the owner knows about but that the tenant cannot know or easily discover by the use of ordinary care.

Ella's Heart Fund relied on donations to support her local heart clinic. Luke pledged $1,500 to the charitable organization. Luke did not honor the pledge. Which one of the following legal doctrines would courts apply if they decide to enforce the pledge? Select one: A. Gift allowances B. Promise to perform an existing obligation C. Bona fide dispute D. Promissory estoppel

D. Promissory estoppel Some courts apply the doctrine of promissory estoppel to charitable subscriptions on the basis that the organization has relied on the pledge to its detriment by undertaking projects the pledge would support and that injustice would result if the promise was not enforced. Promissory estoppel is sometimes described as a substitute for consideration (enforcement of a promise without consideration). In brief, promissory estoppel's elements are: a promise, justifiable reliance on the promise resulting in detriment, and only enforcement of the promise achieves justice.

Vicente filed a lawsuit against Albrecht Transit for negligence in an accident that caused a head injury. After the judgment rules against Vicente, he wanted to bring another lawsuit against Albrecht Transit for a back injury caused by the same accident. Which one of the following doctrines prevents Vicente from relitigating this case? Select one: A. Issue preclusion B. Collateral estoppel C. Nonsuit D. Res judicata

D. Res judicata The doctrine of res judicata prevents parties to a lawsuit on which a final judgment has been rendered from bringing a second lawsuit on the same claim or in related transactions.

Which one of the following types of verdict involves a jury answering specific questions posed by a judge? Select one: A. Directed verdict B. General verdict C. Guided verdict D. Special verdict

D. Special verdict A special verdict is reached by a jury that makes findings of facts by answering specific questions posed by the judge.

A warehouse operator may be liable for damage that stored goods sustain while under the operator's care. Uniform Commercial Code (UCC) Article 7 allows a warehouse operator to limit liability through Select one: A. A statement of ownership in the document of title. B. Purchased insurance coverage. C. Standard terms in UCC gap-filler provisions. D. Terms in the warehouse receipt or storage agreement.

D. Terms in the warehouse receipt or storage agreement. A warehouse operator can be held legally liable for loss to customer property caused by its own negligence. UCC Article 7 allows a warehouse operator to limit liability through terms in the warehouse receipt or storage agreement. For example, the warehouse receipt may specify an amount per article or item or per unit of weight.

Which one of the following is a necessary element for a document to be considered a title under Uniform Commercial Code (UCC) Article 7? Select one: A. The document gives the holder the right to receive, hold, and dispose of both the goods and the document of title itself. B. The document is a contract to ship, store, or dispose of goods. C. The document is negotiable. D. The document is created by the bailee as a receipt for goods received.

D. The document is created by the bailee as a receipt for goods received.

Which one of the following is the most important factor indicating whether a communication is an offer? Select one: A. The offeree's objective reaction to the offer B. The offeror's subjective intent C. The offeree's subjective intent D. The language that the offeror uses in the offer

D. The language that the offeror uses in the offer The language that the offeror uses in the offer is the most important factor indicating whether a communication is an offer. Without specific words of promise, the communication is only a general statement of intention or an invitation to an offer.

Any contract allowing a lender more than the maximum legal interest is a usury contract and is therefore illegal. Which one of the following is true in most states if a lender is charging an illegally high rate of interest on a loan? Select one: A. The lender may collect the principal but is fined for usury action equal to the exorbitant rate of interest previously charged. B. The lender may collect the principal and the lowest market interest rate. C. The lender may not collect either the principal or the lost interest. D. The lender may collect the principal but is barred from collecting the interest.

D. The lender may collect the principal but is barred from collecting the interest. In most states, a lender who has charged an illegal rate is barred from collecting interest on the loan but can still obtain the principal amount loaned

A trade acceptance is a A. Written promise to pay money on demand or at a definite future time. B. Paper containing an unconditional order by the drawer, requiring the drawee to pay a certain sum in money to the payee or bearer. C. Document issued by a financial institution acknowledging receipt of money and promising to repay it, with interest, at a specified time. D. Two-party draft used when a seller wants cash immediately but when the buyer cannot provide it until the goods are resold.

D. Two-party draft used when a seller wants cash immediately but when the buyer cannot provide it until the goods are resold. A trade acceptance is a two-party draft used when a seller wants cash immediately but when the buyer cannot provide it until the goods are resold. The seller (drawer) orders the buyer (drawee) to pay at some future time, with the seller named as the payee. The seller delivers the goods to the buyer and then sells the trade acceptance to another party at a discount to get immediate cash. The buyer resells the goods and then pays the new holder of the trade acceptance.