1. Ben sues Fiona. The court that initially tries the case necessarily will not have __________ jurisdiction. A. original B. personal C. subject matter D. appellate 2. Donovan, like thousands of other people, was injured by an over-the-counter cold medicine that caused his hair to fall out. Even though his hair has grown back, he wants to sue. His lawyer advises that doing so would be expensive and not cost-effective, given the small amount of damage that temporary hair loss caused Donovan and other people like him. Donovan and others in his situation can make a lawsuit cost effective by filing A. a class action lawsuit. B. in state court. C. in federal court. D. a small-claims lawsuit. 3. Miguel, an Idaho resident, sues Kurt, an Alabama resident, in Idaho state court. Miguel's lawyer warns Miguel that the Idaho court may be unable to exercise authority over Kurt. This suggests that there may be a problem obtaining __________ jurisdiction. A. original B. personal C. general D. subject matter 4. John sues Sally under a statute that has ambiguous language. Which of the following is true? A. The court will interpret the statute to resolve the ambiguity. B. John will have to find a different legal basis for his claim. C. A legislative body will have to clarify the statute before the court can apply it to John's case. D. The statute is invalid because of the ambiguous language. 5. Paula's lawyer originally filed in suit in Florida state court. Stephanie, the defendant, would prefer that the case be heard in federal court. To have the case heard in federal court, Stephanie must prove federal subject matter jurisdiction and file a A. writ of certiorari. B. summary judgment motion. C. motion of demurrer. D. motion to remove. 6. Rights of citizens are most likely to be found in which provisions of the U.S. Constitution? A. Article 3 B. Article 1 C. Article 6 D. The amendments 7. George and Tanya are in a legal dispute. However, they're friends, and they would like to control the outcome of the case rather than letting a judge or other third-party decide it. What is their best ADR option? A. Private civil trial B. Mediation C. Binding arbitration D. ADR contract clause 8. Will, an Idaho resident, was driving in Tennessee and struck Vicki, a Tennessee resident. Which of the following is true? A. Vicki may sue Will in Tennessee federal court if her damages are greater than $75,000. B. Vicki may sue Will in Tennessee federal court, no matter the amount of her damages. C. Vicki may sue Will in Tennessee federal court only if the case involves violation of a federal law. D. Vicki can't sue Will in Tennessee federal court because Will isn't a resident. 9. Gary sues Dennis, relying on a state law. Dennis defends himself based on a federal law involving the same subject. If Dennis wins, it will be because of A. devolution. B. the federal register. C. preemption. D. judicial review. 10. Phillip and Lori have a two-car accident in Tennessee. Both of them reside in Tennessee. Phillip will be able to sue Lori in Tennessee federal court A. if his damages exceed $75,000. B. if the case involves application of federal law. C. under no circumstances. D. if his damages are extraordinary. 11. Rosa sues her neighbor. Rosa's lawyer relies on persuasive precedent. Which of the following statements is true? A. The court must follow the precedent because it's binding. B. The court is free to follow or ignore the persuasive precedent. C. The court must overturn the precedent because it's not binding. D. The court should disregard the precedent unless it's from a U.S. Supreme Court case. 12. Big Factory, Inc., and Save the Environment, an environmental group, have a dispute over whether making Big Factory, Inc., use certain expensive antipollution devices would contribute significantly to improving air quality. A type of ADR especially suited to this dispute is A. private civil trial. B. partnering. C. science court. D. summary jury trial. 13. Vera runs a cosmetics company. A federal agency is considering adopting a rule that would adversely affect Vera's business. Vera may have input on the agency's decision if the agency uses the ADR technique called A. negotiated rule making. B. med-arb. C. arbitration. D. science court. 14. What does a process server do? A. Gives the complaint and summons to the defendant B. Causes a summons to be issued to the defendant C. Commences an action involving a criminal matter D. Files the complaint with the court 15. April's attorney informs her that they've been served with interrogatories. Which of the following is true? A. April will have to answer questions under oath about the case. B. April will be required to make oral statements in front of a court stenographer. C. April will be required to submit to a physical examination. D. April's attorney will have to answer questions under oath about the case. 16. An advantage of ADR is that it A. effectively handles constitutional law. B. saves time and money. C. promotes the development of the law. D. improves the discovery process. 17. Lynn's attorney advises Lynn to resolve a case using med-arb. If Lynn and the defendant agree to use med-arb, this means A. Lynn is risking that some issues in the case will be decided by an arbitrator. B. all issues will be decided by an arbitrator. C. the case involves medical malpractice. D. the case won't have an outcome unless Lynn and the defendant both agree. End of exam 18. Karen sues Ted, claiming that under an interpretation of law given in a previously decided case, Karen should win. If so, on which of the following concepts is Karen relying? A. Stare decisis B. Devolution doctrine C. Preemption D. Judicial review 19. Doug's complaint asks for an injunction. Which of the following is true? A. Money would be an adequate remedy. B. Doug seeks an equitable remedy. C. Doug seeks money damages. D. Doug has suffered great harm. 20. Rachel's lawyer tells her that to resolve her case, the court will have to engage in judicial review. This means that the case involves A. judicial interpretation of a statute with ambiguous and unclear language. B. common law. C. constitutionality of a statute, administrative regulation, or executive action. D. an appellate court. 1. Sharon purchased $1,000 of ABC Company stock. In effect, Sharon A. purchased a seat on the board for the company. B. purchased an ownership interest in the company. C. loaned money to the company. D. borrowed money from the company. 2. Crawford, Inc., wants to acquire the assets of Toxic Waste, Inc., but Toxic Waste won't sell. Toxic Waste is a publicly held company with widely dispersed share ownership. What technique can Crawford use to accomplish its goal? A. Takeover bid B. Merger C. Asset acquisition D. Consolidation 3. Tom is president of Big Drug, Inc. Tom receives a phone call from a federal agency informing him that a new drug owned by Big Drug will be approved for sale to the public. Tom knows that this drug will be very popular and will cause a significant increase in the company's profits. Tom quickly purchases as much Big Drug stock as he can afford. Then, when the federal agency formally announces approval of the drug, Big Drug stock triples in value, and Tom becomes rich. Tom has violated the A. fairness rule. B. corporate opportunity doctrine. C. insider trading rule. D. business judgment rule. 4. Under the Revised Uniform Partnership Act, A. the partnership is an aggregate rather than an entity in its own right. B. partners don't have transferable economic interests. C. partners are co-owners of partnership property. D. partnership property is owned by the partnership. 5. Brenda is on the board of directors for Money Company. Brenda rarely attends board meetings and doesn't pay attention when she does attend. Brenda usually votes like her friend Sadie, who is also on the board. Brenda voted for some proposals that harmed the company. Brenda likely violated A. the actual authority rule. B. her duty of obedience. C. her duty of due diligence. D. the fairness rule. 6. Taylor serves on the board of directors for Cabby Company. Taylor owns a lot of vacant land, which she tried to sell unsuccessfully for two years. Taylor convinced the board of directors to purchase 1,000 acres of her land for a price well over what the land is worth. This action may violate the __________ rule. A. actual authority B. business judgment C. fairness D. insider trading 7. Melanie and Clay are partners in a law firm that's a general partnership. Melanie fails to respond to a lawsuit against a client in time, and the client is found liable on a $1 million verdict. The client files a lawsuit suit against Melanie and Clay. Which of the following statements about this set of facts is true? A. Only Melanie can be held liable because Clay wasn't involved with the case. B. Either Melanie or Clay may be held jointly and severally liable. C. Only Melanie can be held liable because she committed the wrong. D. Only the partnership can be held liable; Melanie and Clay aren't personally liable. 8. Ken is the president of a large energy company. Company executives approached Ken about purchasing some smaller companies to expand the business. Ken read the reports explaining the potential risk and return of the investment, and he decided the purchase appeared to be a good investment. Unfortunately, Ken was wrong, and the purchase caused the company to lose millions of dollars. Based on these facts, Ken A. violated his duty of loyalty to the corporation. B. should benefit from the fairness rule. C. violated his duty of due diligence to the corporation. D. should benefit from the business judgment rule. 9. Robert owns shares in Products, Inc., and suspects that Zach, one of the directors of the company, has been stealing corporate assets. Robert complains to the corporation, but no action is taken. Robert should file a A. direct suit against Products, Inc. B. direct suit against Zach. C. derivative suit against Products, Inc., on his own behalf. D. derivative suit against Zach on behalf of Products, Inc. 10. The right to notice of a plant closing or massive layoffs due to sale of a business is derived from the A. Employee Retirement Income Security Act. B. Hart-Scott-Rodino Antitrust Act. C. Worker Adjustment and Retraining Notification Act. D. Antitrust Procedures and Penalties Act. 11. Bob is the CEO of Realty, Inc., a company that purchases and develops property for shopping centers. Bob learns that certain real estate, which would be excellent for a shopping center, is about to go up for sale. Bob purchases the property himself without telling anyone at the corporation. Bob has violated the A. insider trading rule. B. business judgment rule. C. corporate opportunity doctrine. D. fairness rule. 12. Todd wants to start a business, but he wants to make sure that he has absolute control. Which business form would you recommend? A. General partnership B. Limited liability company C. Limited partnership D. Sole proprietorship 13. The difference between a limited partnership and a registered limited liability partnership (RLLP) is that A. all partners have limited liability in a limited partnership, but not in an RLLP. B. an RLLP can have secret partners, while a limited partnership can't. C. all partners have limited liability in an RLLP, but not in a limited partnership. D. a limited partnership can have secret partners, while an RLLP can't. 14. If a regulation affecting corporations is federal, the authority for that regulation likely derives from A. the Commerce Clause. B. the Supremacy Clause. C. executive orders. D. police power. 15. Steve decides to incorporate his business, but he thinks it's too expensive to hire an attorney to advise him of the requirements. Steve merely changes the name on the sign outside from Steve's to Steve, Inc. One of Steve's customers brings suit against Steve, Inc., based on an allegedly defective product sold through his business. Steve defends on the basis that Steve, Inc., doesn't exist. Which of the following statements about this set of facts is true? A. Steve is wrong; a de jure corporation exists. B. Steve is wrong; a corporation by estoppel exists. C. Steve is correct; no corporation exists. D. Steve is wrong; a de facto corporation exists. 16. Stuart and Cole enter a business venture in which they both agree to contribute funds, money, and time to a sporting goods store. Furthermore, the two agree to equally split all profits. Stuart and Cole have entered into a A. corporation. B. sole proprietorship. C. partnership. D. limited liability company. 17. Tricia purchases securities from a company from which she is ensured ownership and priority as to payment of dividends and distribution of assets on dissolution. What type of securities did Tricia purchase? A. Convertible bonds B. Common stock C. Debenture bonds D. Preferred stock 18. An advantage of an S corporation is that shareholders can avoid A. estoppel. B. bylaws. C. insider trading. D. double taxation. 19. Company I, Inc., and Company II, Inc., are consolidating. Which of the following statements regarding this consolidation is true? A. Both companies disappear and stop carrying on business. B. Both companies continue and carry on business as usual. C. Both companies join and carry on business under a new name. D. One company disappears, and the other company carries on with both businesses. 20. A shareholder's preemptive rights refers to a right to A. preempt the board of director's decisions if they're not supported by a majority of shareholders. B. receive dividends out of profits before profits are used for any other purpose. C. share in any profits insiders made from insider trading. D. purchase a proportionate share of every new share offering by the company. 1. Tom is selling his motorcycle to Carl. Tom tells Carl that the motorcycle runs perfectly, though he knows that the motorcycle leaks oil. Carl purchases the motorcycle and discovers the problem. Which of the following is true? A. Tom committed fraud in the inception. B. Tom committed active fraud. C. Tom hasn't committed fraud. D. Tom committed passive fraud. 2. Josh runs over Barbara's dog. Barbara promises not to sue Josh if he pays her $200. Josh pays $200. Then Barbara sues, claiming an agreement not to sue doesn't constitute consideration. Which of the following is true? A. Agreement not to sue is consideration. B. Agreement not to sue is consideration only if it approximates what a court would have awarded. C. Agreement not to sue isn't consideration. D. Such contracts violate public policy and therefore are unenforceable. 3. Lance e-mails Fred, offering to buy his motorcycle for $750. Fred replies, agreeing. Later, Fred declines to honor the agreement, claiming that e-mail agreements aren't enforceable. In both the initial e-mail and the reply Lance and Fred typed their names. Which of the following is true? A. There's no contract because the e-mails weren't witnessed. B. There's no contract because contracts must have hand-written signatures to be enforceable. C. There's no contract because e-mail agreements aren't enforceable. D. The e-mails constitute a contract if Lance and Fred have agreed that electronic signatures can be used to create the agreement. 4. Angela, age 14, contracts to purchase medicine from the pharmacy. She and the pharmacist both know that she needs this medicine to live and that it's not being provided to her by anyone else. Which of the following is true? A. Angela can avoid the contract on grounds of lack of capacity. B. The contract can be avoided by Angela on grounds of duress. C. The pharmacist can enforce the contract. D. The contract is against public policy. 5. Tyler offers to dance naked on Main Street if Corey will mow Tyler's yard. Corey mows Tyler's yard. Which of the following statements is not potential grounds for setting aside the contract? A. Inadequacy of consideration B. Illegality of consideration C. All of the above are potential grounds for setting aside the contract D. Lack of serious intent to contract 6. Jacques offers to paint Alisha's house for $100. Before Alisha responds, Jacques dies. Which of the following statements is true? A. There's no contract because Alisha failed to accept Jacques's offer before he died. B. Jacques's offer has been revoked. C. A representative of Jacques's estate must find someone to paint Alisha's house. D. A representative of Jacques's estate must paint Alisha's house for $100. 7. Regan marries at age 17. Then, she enters into a contract with Art to purchase an automobile for $10,000. She later changes her mind and wants to void the contract. Which of the following is true? A. Regan can void the contract because she is a minor. B. Regan can void the contract because she is married. C. Regan can't void the contract because she is married. D. Regan can't void the contract because she is over 15. 8. On the Internet, Sara came across a software package she wanted to download. To download the software, she had to read a disclaimer and click an "I Agree" button. Sara didn't bother to read the contents of the "Agreement and Warranties" disclaimer, but she clicked "I Agree." The software caused her computer to crash. Sara filed suit against the company that ran the Web site, and the company's defense is that the "Agreement and Warranties" disclaimer to which Sara agreed disclaimed any responsibility for such occurrences. The most likely result is that Sara will A. lose her lawsuit because the disclaimer will be enforced. B. win her lawsuit because she didn't the read disclaimer. C. win her lawsuit because disclaimers aren't enforceable. D. lose her lawsuit because she didn't read the disclaimer, which isn't enforceable. 9. Jackie tells a group of friends that she plans to sell her home. Meg asks how much Jackie hopes to get for the house, and Jackie replies, "$50,000." Meg says, "I accept your offer. I'll purchase your house for $50,000." No contract exists because A. the terms of the offer aren't reasonably certain. B. the offer isn't properly communicated. C. Jackie's statements are merely preliminary negotiations. D. Jackie doesn't seriously intend to enter a contract. 10. Eric, a 17-year-old, signs a contract with the armed services to enlist. Later, Eric changes his mind and wants out of the contract. Can he void the contract based on incapacity to contract? A. Yes, after he turns 18 B. Yes C. No D. In some states 11. Which of the following is a necessary element both for fraud and for misrepresentation? A. A hidden problem B. A fiduciary relationship C. The intent to deceive D. A false statement 12. Madison enters into a contract with a DVD club to purchase four DVDs during the coming year. The agreement provided that she would receive an advertisement listing the main selections, which would be sent to her automatically, unless she sent a reply to stop the shipment. The DVD club sent the first month's advertisement and Madison did nothing. When Madison later received the main selection for that month she complained that she hadn't accepted it. Must Madison pay for it? A. No, because Madison didn't specifically order the goods. B. Yes, because her silence in this case constituted acceptance. C. Yes, because the price is fair. D. No, because her silence in this case didn't constitute acceptance. 13. Dave is declared insane and committed to an asylum. Dave escapes and goes to a car dealership, where he enters into a contract with Larry to buy a sports car. Which of the following statements is true? A. To void the contract, Dave must prove he is insane. B. Because Dave is legally insane, the contract is void. C. Only Dave can void the contract. D. Only Larry can void the contract. 14. Carrie decides to offer Shelley the opportunity to purchase her motorcycle for just $500. Carrie told Jim, a mutual friend of Shelley and her, that she intended to make the offer. Later, Carrie changes her mind. Shelley approaches Carrie and says she accepts the offer. No contract was formed most likely because A. Carrie never communicated the offer to Shelley. B. Carrie didn't possess a serious, objective intention. C. Jim was acting as an agent for Shelley without telling Carrie. D. the terms of the offer weren't definite enough to form a contract. 15. Camille and Paul go to a bar, and Camille has too much to drink. Camille agrees to paint Paul's house for an agreed-on price. Camille sobers up the next day and decides she wants out of the contract. Which of the following provide Camille with the best argument for getting out of the contract? A. Camille's intoxication deprived her of the ability to understand she was entering into a contract. B. Emotional duress C. Camille's judgment was impaired by the alcohol. D. The contract price is too low. 16. Larry thinks the necklace owned by Samantha is worth a million dollars. Larry offers a million dollars to Samantha for the necklace, and she accepts. Later, Larry has the necklace appraised and learns it's worth only $10,000. Which of the following is true? A. Larry can't have the contract set aside on grounds of mistake. B. Samantha has the right to rescind the contract and have the necklace returned. C. Larry can have the contract set aside on grounds of mistake. D. Larry can have the contract set aside on grounds of capacity. 17. Juan thinks he would like to purchase Tara's house, but doesn't know whether he will be able to save enough money for a down payment on a loan. Juan agrees to give Tara $5,000 for the option to purchase her house for $150,000 sometime within the next five years. Juan and Tara reduce their agreement to writing, sign it, and Juan gives Tara $5,000. Two years later, Juan wins the lottery and now is financially able to purchase Tara's house. However, that same day Juan receives a letter from Tara revoking her offer to sell for $50,000. Which of the following is true? A. Tara's revocation isn't effective. B. Tara's revocation is effective as long as she refunds the $5,000. C. Tara's revocation is effective. D. Juan can't complain because he failed to accept Tara's offer before it was revoked. 18. Delivery of unordered merchandize is considered A. a contract to purchase unless the recipient contacts the sender to reject the merchandize. B. an offer to sell. C. performance of a contract. D. a contract to purchase if the items aren't returned. 19. Ken threatens to tell everyone that Bob is a child molester unless Bob agrees to enter into a contract with Ken. Bob agrees and signs the contract. If Bob later challenges the contract, what are the best grounds for doing so? A. Emotional distress B. Economic duress C. Fraud D. Misrepresentation 20. Carlos promises to pay $100 for someone to paint his house. Timothy hears about the offer and paints Carlos's house on 123 Oak Street. However, Carlos intended that his other house, at 456 Maple Street, be the one to be painted and refuses to pay Timothy, claiming that there's no contract because they never discussed which house would be painted. If Carlos has a legal right to payment, it's most likely based on A. express contract. B. implied-in-law contract. C. fraud. D. implied-in-fact contract. 1. Tom and Zeke go out to a restaurant for dinner. Tom orders a steak, and Zeke orders lasagna. After they've finished eating, they pay their bill. Assuming all parties performed in the order they were required to under this contract, which of the following is true? A. Service and payment were conditions concurrent. B. Payment was a condition precedent to service. C. Service was a condition precedent to payment. D. There was no contract. 2. Jordan is charged with a crime, and Jeff is chosen to be on the jury. Jordan offers to pay Jeff $500 if he votes not guilty. Jeff does so, but Jordan refuses to pay. Jeff sues Jordan for breach of contract. Jeff will A. lose because the contract is usurious. B. win because Jordan materially breached. C. win because of the statute of frauds. D. lose because the contract is against public policy. 3. Tom and Zeke enter into a contract for Tom to paint Zeke's house for $1,000. The contract doesn't specify a time for performance by Tom. Six years later, Tom shows up with a bucket of paint, paints the house, and demands payment. Which of the following is true? A. Tom couldn't have breached the contract because the contract didn't specify a time for performance, and he did do the painting work. B. The contract violates the statute of frauds. C. Tom breached the contract because he didn't perform within a reasonable time. D. The contract was unenforceable because it didn't specify a time for performance. 4. Will contracts with Grace to sell her 100 lamps for $1,000. Will breaches his contractual duty to deliver the lamps, and Grace buys 100 lamps for $2,000 from another dealer. Grace sues Will for breach of contract. She will most likely receive what type of damages? A. Compensatory damages in the amount of $2,000 B. Consequential damages of $3,000 C. Compensatory damages in the amount of $1,000 D. Nominal damages of $100 5. Jack and Jane formed a contract in which Jack agreed to sell Jane a large amount of apples. Jack knew that Jane planned to resell the apples at the farmers' market the following weekend. Jack failed to deliver the apples as promised. Jane will most likely be able to recover A. both nominal and punitive damages. B. both compensatory and consequential damages. C. punitive damages only. D. compensatory damages only. 6. Which of the following is an example of discharge by impossibility? A. Jason agrees to paint Sheila's house for $1,000. Sheila changes her mind and asks Jason not to paint. Jason agrees. B. Jason agrees to paint Sheila's house for $1,000. Before Jason can paint, Sheila's house burns down. C. Jason agrees to paint Sheila's house for $1,000. Sheila later tells Jason that she won't pay him. As a result, Jason decides not to paint. D. Jason agrees to paint Sheila's house for $1,000. Jason paints, but before Sheila pays him, she files bankruptcy. As a result, Jason doesn't get paid. 7. Sara purchases life insurance on her own life and makes her husband, Dean, the beneficiary. Sara dies. Dean applies to the insurance company for payment of the proceeds. The insurance company denies payment, pointing out that Dean didn't sign the contract and therefore doesn't have privity of contract. Dean is A. not entitled to the proceeds because he doesn't have privity of contract. B. entitled to the proceeds as an intended beneficiary. C. entitled to the proceeds because he was married to Sara. D. entitled to the proceeds as an incidental beneficiary. 8. Samantha is employed by Creative Card Company. After five years of terrific employee reviews, Samantha is terminated with no notice. She feels it's because of her advancing age, as she just turned 50. Samantha sues Creative Card Company for wrongful termination. The lawsuit takes four years before it's finally litigated. During this time, Samantha sits at home, turning down job offers from several employers. Samantha wins her lawsuit, but she receives substantially less in damages than she was seeking. What is the likely reason for this? A. The unavailability of equitable remedies B. Lack of punitive damages C. The failure to mitigate damages D. The establishment of a quasi contract 9. Bella and Connie are struggling to find jobs. They decide they want to open a child daycare center together. They see a house in the perfect neighborhood with a "For Sale by Owner." They talk to the owner, reach an agreement, and shake hands. Just before the closing on the house, at which they'll take ownership of the house, the owner decides not to sell to Bella and Connie. They tell the owner they're going to sue him for breach of contract. Bella and Connie most likely A. will win because the owner breached his agreement to sell them the house. B. won't win because they shouldn't have entered into an oral contract to buy the house. C. will win because the owner shouldn't have entered into a contract with them if he wasn't sure he wanted to sell the house. D. won't win because they can find another house that will work just as well. 10. Jessica orally agrees that she will sell 400 pairs of flip-flops to a customer for $600. This agreement is A. unenforceable because of the statute of frauds. B. unenforceable because all necessary elements aren't met. C. unenforceable because of the parol evidence rule. D. enforceable because all necessary elements are met. 11. Coretta and Mary find a property to purchase. They sign a written agreement that states the agreed-on price, closing date, and items that are to stay in the house. They forget to include the washer and dryer in the agreement, but the seller tells them he will leave them if they want them. Right before closing, they walk through the property and find that the washer and dryer have been removed. They purchase the property and sue the seller for not leaving the washer and dryer. Coretta and Mary most likely A. won't win based on the statute of limitations. B. will win based on the seller's representation when they looked at the property. C. won't win based on the statute of frauds. D. won't win based on the parol evidence rule. 12. Robert contracts to paint Jake's house for $500. Robert then asks Elmer to perform the painting work for him. Elmer does a bad job, and Jake wants to sue for breach of contact. Which of the following is true? A. Robert isn't responsible if he gave Jake notice of the delegation. B. Robert is responsible for the breach of the contract. C. Elmer, but not Robert, is responsible for the breach. D. Robert is responsible for the breach of the contract only if there has been a novation. 13. On June 29, Henry contracts to purchase American flags, which Henry intends to sell at the annual Fourth of July fireworks event, from Liz. The contract doesn't specify a delivery date. Liz delivers the flags on July 7. Henry sues for breach of contract. Which of the following will most likely happen? A. Henry will win because of the equal dignities rule. B. Liz will win because the contract didn't specify a delivery date. C. Henry will win because of the standard construction rule. D. Liz will win because she delivered within a reasonable time. 14. Danielle purchases life insurance on her own life with Big Life Insurance and makes her husband, Walter, the beneficiary. Which of the following statements is true? A. Walter is a donee beneficiary. B. Big Life Insurance is a creditor beneficiary. C. Danielle is an intended third-party beneficiary. D. Danielle is a donee beneficiary. 15. Horatio agrees to paint Stella's house for $1,000. Horatio fails to paint, and Stella hires Winston to paint the house for $1,000. Stella sues Horatio for breach of contract. Stella likely will receive __________ damages. A. liquidated B. punitive C. nominal D. consequential 16. Paul enters into a contract with Harry. Paul agrees to put a new roof on Harry's house, and Harry agrees to pay Paul $5,000. Paul is late on a payment to Sam's Supply House and tells Sam's Supply House that he will pay when he receives money from Harry. Sam's Supply House has heard this from Paul before and didn't receive money. To ensure Paul pays his payment from the money Harry pays him, Sam's Supply House can A. tell Harry that Paul is indebted to Sam's Supply House, which automatically makes them a creditor beneficiary entitled to the payment. B. require an accord and satisfaction be entered into. C. have Paul assign his interests under the contract with Harry to Sam's Supply House. D. have Harry assign his interests under the contract with Paul to Sam's Supply House. 17. Which of the following is an example of discharge by operation of law? A. Xavier agrees to paint Rita's house for $1,000. Rita later tells Xavier that she won't pay him. As a result, Xavier decides not to paint. B. Xavier agrees to paint Rita's house for $1,000. Before Xavier can paint, Rita's house burns down. C. Xavier agrees to paint Rita's house for $1,000. Rita changes her mind and asks Xavier not to paint. Xavier agrees. D. Xavier agrees to paint Rita's house for $1,000. Xavier paints, but before Rita pays him, she files bankruptcy. As a result, Xavier doesn't get paid. 18. Candice hires Otto to work as a tax preparer in Candice's tax return business. The employment contract restricts the ability of Otto to set up a competing business or engage in tax preparation services if Otto leaves Candice's employ. Otto discovers he likes this kind of work and wants to set up his own tax return business. He asks you whether the restrictions in his contract with Candice will be enforceable. You should tell him that A. restrictive covenants regarding future employment will be enforceable if they're reasonable. B. restrictive covenants regarding future employment will be enforceable if the value of the consideration given for the covenant equals the value of the income loss that would be caused by enforcing the agreement. C. any restriction regarding employment will be enforceable as long as there was adequate consideration. D. any restriction regarding employment is unenforceable as against public policy. 19. Collin purchases a house, using a loan from Big Bank. As a condition of the loan, Big Bank requires that Collin purchase life insurance payable to Big Bank, to the extent of the outstanding mortgage, if Collin dies before fully paying the mortgage. Big Bank is A. an incidental beneficiary but not a donee beneficiary. B. an intended beneficiary but not a donee beneficiary. C. a creditor beneficiary but not a donee beneficiary. D. both a creditor beneficiary and a donee beneficiary. 20. Stan contracts to sell his house to Bonnie for $150,000. Stan then finds a buyer who will pay $200,000 and tells Bonnie he won't perform. Bonnie wants to make Stan honor his contract. The remedy she should seek is A. compensatory damages. B. punitive damages. C. specific performance. D. consequential damages. 1. Polly hires Nick to sell her house and gives him power of attorney that authorizes him to do, but the power of attorney says nothing about price. Polly tells Nick to take nothing less than $200,000. Lola offers Nick $195,000 for the house, and Nick accepts. Zeke violated his duty of A. account. B. loyalty. C. due diligence. D. obedience. 2. Tony tries to start a union at Big Tech, Inc. His employer learns of his attempt to organize a union and fires him. Big Tech's actions A. constitute an unfair labor practice. B. are permitted if the state has adopted right-to-work legislation. C. are permitted. D. are permitted if they first give Bob notice forbidding the union. 3. The union at Big Tech goes on strike. The president can petition the attorney general to seek an injunction stopping the strike for 60 days if the A. strike would endanger the nation’s health or safety. B. strike would result in large losses to the company. C. demands of the union are unreasonable. D. union failed to give 60 days’ notice of its intent to strike. 4. Irene hires Mark to do work for her. In the course of performing that work, Mark causes injury to a third party. Which of the following statements is true? A. Irene is liable for the injury whether Mark is an employee or an independent contractor. B. If Mark is an employee, Irene is liable for the injury. C. Irene isn't liable for the injury whether Mark is an employee or an independent contractor. D. If Mark is an independent contractor, Irene is liable for the injury. 5. Molly borrowed $5,000 from Larry and, as collateral, gave him jewelry and authority to sell the jewelry if she defaulted. Afterward, Molly had second thoughts and revoked the agency. Which of the following statements is true? A. Molly can terminate the agency based on impossibility of performance. B. Molly can't terminate the agency unless she claims bankruptcy. C. Molly can terminate the agency if she paid the loan. D. Molly can't terminate the agency unless Larry sold the jewelry. 6. Lee hires Zeke to sell her house. She tells Zeke to ask for $200,000, but says she will take $175,000. Zeke's friend Victor asks Zeke about the house, and Zeke tells him that Lee will take $175,000. Victor offers $175,000, and Zeke accepts. Zeke violated his duty of A. loyalty. B. due diligence. C. account. D. obedience. 7. Phil receives a job offer from Big Tech, Inc., in a letter that states, "If you leave your current position and join us, we will employ you for the next five years as our company expands." Phil takes the job, and he is fired after six months even though his work was satisfactory. If Phil sues and wins, the most likely reason is A. promissory estoppels. B. the state's right-to-work law. C. the employment at-will doctrine. D. express contract. 8. Bob's company was found in violation of OSHA. The violation likely relates to A. workers' compensation. B. racial discrimination. C. failure to pay overtime. D. workplace safety. 9. Bob works for the government and belongs to a union. Bob's union goes on strike. Which of the following statements is true? A. If the strike is lawful, Bob must not be a federal employee. B. The strike is unlawful because only nongovernment employees can strike. C. If the strike is lawful, Bob must be a federal employee. D. The strike is lawful because only government employees can strike. 10. Javier gives written authorization to Tamara to sell his house. Javier dies on the October 4. On October 8, Tamara enters into a written contract on behalf of Javier to sell the house to Trudy for $100,000. Before Tamara entered into the contract, she showed the written authorization to Trudy. Javier's estate is A. not liable. B. obligated to sell for $100,000 because Tamara had express authority. C. liable if Tamara knew Javier was deceased at the time of the contract. D. liable if the price is fair. 11. Tim hires Brett to mow his yard once a week, using the mower stored in Tim's garage. Tim then gives the mower to his brother Ed, who lives in another town. Brett complains to Tim, pointing out that Brett won't incur expense to rent a mower to perform the contract. Tim says Brett is being uncooperative. Which of the following statements is legally true? A. Tim violated his duty of cooperation. B. Brett violated his duty of cooperation. C. Tim violated his duty of loyalty. D. Brett violated his duty of loyalty. 12. Sally works for Big Tech, Inc. One day, the boss calls her into his office and says, "Women just don't get tech. You're fired." Sally sues. In the course of the litigation, the company discovers that Sally was pilfering paper from the company storage, and under the employee handbook, this is grounds for termination. Sally's discharge is A. not wrongful because gender is a bona fide job qualification for working in tech. B. wrongful because evidence can't be used in a gender discrimination case. C. not wrongful because the employer discovered evidence that justifies the firing. D. wrongful because the employer intended to fire her based on gender. 13. David gives Ethel power of attorney. David then has a nervous breakdown and becomes insane. Ethel has the authority to act on David's behalf A. only until Tom regains his sanity. B. by necessity. C. if the power of attorney is a durable power of attorney. D. with regard to personal property but not real property. 14. Samantha hires Zack, a real estate agent, to sell her home. Samantha then goes sailing. While she is gone, the pipes in her house burst. The agent discovers this, is unable to reach Samantha, and hires a plumber to fix the pipes. The plumber sends the bill to Samantha. If Samantha has to pay, it's most likely based on agency by A. implication. B. necessity. C. estoppels. D. appointment. 15. Cara's boss sends her nude photos of himself. She complains that it's sexual harassment. The boss says that it's not sexual harassment because he didn't ask her for sexual favors. The boss's actions A. constitute quid pro quo sexual harassment. B. constitute sexual harassment because he created a hostile work environment. C. don't constitute sexual harassment because he didn't ask for sexual favors. D. don't constitute sexual harassment because he didn't create a hostile work environment. 16. Jane works for Big Business, Inc., as a sales representative. The boss decides to fire her because she isn't a Mets fan. The boss can A. not fire Jane if here work was satisfactory. B. fire Jane. C. not fire Jane if she agrees to become a Mets fan. D. not fire Jane because of the Civil Rights Act of 1964. 17. Sandy works as a clerk in Big Department Store. After she finishes work one day, she heads out to her car in the parking lot to drive home. There, she sees Petra, someone she detests. Sandy and Petra argue, and Sandy punches Petra in the nose, causing an injury. Which of the following statements is true? A. Neither Sandy nor Big Department Store are liable for Petra's injury. B. Both Sandy and Big Department Store are liable for Petra's injury. C. Only Sandy is liable for Petra's injury. D. Only Big Department Store is liable for Petra's injury. 18. Eric has gradually been losing his eyesight, which has adversely affected his work. When the boss fires Eric, she tells him that she's letting him go because he can't see anymore. Eric's discharge is A. not wrongful because it didn't involve a hiring decision. B. wrongful if the employer can make a reasonable accommodation for his disability. C. wrongful because once hired, employees can't be discharged due to disability. D. not wrongful if he can't perform the job without reasonable accommodations by the employer. 19. Ted is a janitor at Big Deal, Inc. One night, Ted is cleaning the boss's office and sits in the boss's chair. At that moment, a salesman walks in, thinks Ted is a manager, and offers to sell Big Deal, Inc., 700 widgets for $100 each. Ted thinks this sounds like a good deal, assumes the boss will be pleased, and signs the contract as an agent for Big Deal, Inc. The boss discovers this deal the next day and is angry because widgets cost $27 each. If Big Deal is obligated under the agreement, it's based on __________ authority. A. apparent B. implied C. actual D. express 20. Carter wants to impress his boss, Marco. Carter approaches one of Marco's potential clients and negotiates a contract with the client on Marco's behalf. The client agrees and signs the contract. Marco, however, doesn't know about Carter's negotiation. Carter lacks the authority to negotiate on Marco's behalf. When Marco finds out, he is so pleased about the contract that he overlooks Carter's actions and tells Carter he did an excellent job landing the client. This forms an agency by A. operation of law. B. agreement. C. ratification. D. estoppel.
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