2024 – 1 Adam is president of Well Inc The board of directors instructs Bob not to borrow

1. Adam is president of Well, Inc. The board of directors instructs Bob not to borrow any money on behalf of the corporation. Bob does so anyway, and the corporation lacks income and assets to pay the debt. Bob will be personally liable for the debt under the

A. actual authority rule.
B. fairness rule.
C. business judgment rule.
D. corporate opportunity doctrine

2. 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. if his damages are extraordinary.
D. under no circumstances.

3. 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. an appellate court.
B. constitutionality of a statute, administrative regulation, or executive action.
C. common law.
D. judicial interpretation of a statute with ambiguous and unclear language.

4. 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 only if the case involves violation of a federal law.
B. Vicki can’t sue Will in Tennessee federal court because Will isn’t a resident.
C. Vicki may sue Will in Tennessee federal court, no matter the amount of her damages.
D. Vicki may sue Will in Tennessee federal court if her damages are greater than $75,000.

5. If a writ of certiorari is issued by the U.S. Supreme Court, which of the following is true?

A. The case will be reversed.
B. The case involves the U.S. Constitution.
C. The lower courts haven’t been able to agree on issues involved in the case.
D. The U.S. Supreme Court has agreed to hear the case.

6. Which type of ADR involves time limits on presentations?

A. Summary jury trials
B. Med-arb
C. Mediation
D. Early neutral evaluation

7. An advantage of ADR is that it

A. saves time and money.
B. improves the discovery process.
C. effectively handles constitutional law.
D. promotes the development of the law.

8. 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. general
C. subject matter
D. personal

9. 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. science court.
C. arbitration.
D. med-arb.

10. 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. Mediation
B. ADR contract clause
C. Private civil trial
D. Binding arbitration

11. 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. preemption.
B. devolution.
C. judicial review.
D. the federal register.

12. Carl was arrested under a New Jersey statute that made it a crime to be persistently unemployed. Carl argues that a similar statute was declared unconstitutional by the California state court, so the New Jersey state court is required to declare New Jersey’s statute unconstitutional. Carl is wrong because

A. more than one court has to rule a certain way before precedent is established.
B. state courts aren’t bound by precedent.
C. only federal courts can create binding precedent.
D. out-of-state cases aren’t binding precedent in state courts.

13. 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 small-claims lawsuit.
B. in state court.
C. in federal court.
D. a class action lawsuit.

14. John sues Sally under a statute that has ambiguous language. Which of the following is true?

A. John will have to find a different legal basis for his claim.
B. A legislative body will have to clarify the statute before the court can apply it to John’s case.
C. The statute is invalid because of the ambiguous language.
D. The court will interpret the statute to resolve the ambiguity.

15. 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. partnering.
B. summary jury trial.
C. private civil trial.
D. science court.

16. The National Conference of Commissioners on Uniform State Laws developed a revised version of the UCC. Joe learned of this and, relying on one of the changes, acted in a way that was prohibited under the former version but permitted under the revised version. As a result, Joe was sued for his action. Both parties live in Joe’s state, which is also where the transaction took place. Whether Joe wins or loses depends on

A. which version of the UCC has been adopted by the legislature in Joe’s state.
B. whether members of the commission that drafted the revision were from Joe’s state.
C. which party stands to gain the most from the lawsuit.
D. which version of the UCC the judge thinks is most equitable.

17. Antonio’s attorney proves that there’s no issue of any material fact, and the attorney would like to ask the court for an immediate judgment favorable to Antonio. Antonio’s attorney should file a/an

A. summary judgment motion.
B. injunction.
C. writ of execution.
D. answer.

18. 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. Files the complaint with the court
D. Commences an action involving a criminal matter

19. April’s attorney informs her that they’ve been served with interrogatories. Which of the following is true?

A. April will be required to submit to a physical examination.
B. April will have to answer questions under oath about the case.
C. April will be required to make oral statements in front of a court stenographer.
D. April’s attorney will have to answer questions under oath about the case.

20. Ben sues Fiona. The court that initially tries the case necessarily will not have __________ jurisdiction.

A. personal
B. appellate
C. subject matter
D. original

21. Company A, Inc., and Company B, Inc., are merging. Which of the following statements regarding this merger is true?

A. Neither company will exist after the merger.
B. One of the two companies will exist after the merger.
C. A newly created third company will exist after the merger.
D. Both companies will exist after the merger.

22. A shareholder’s preemptive rights refers to a right to

A. purchase a proportionate share of every new share offering by the company.
B. share in any profits insiders made from insider trading.
C. preempt the board of director’s decisions if they’re not supported by a majority of shareholders.
D. receive dividends out of profits before profits are used for any other purpose.

23. 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. partnership.
B. limited liability company.
C. sole proprietorship.
D. corporation.

24. 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. Debenture bonds
B. Preferred stock
C. Common stock
D. Convertible bonds

25. 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. her duty of obedience.
B. the actual authority rule.
C. the fairness rule.
D. her duty of due diligence.

26. The primary difference between general partnerships and limited partnerships is the limiting of the

A. number of partners.
B. number of agents.
C. partners’ liability.
D. partners’ profit.

27. 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. One company disappears, and the other company carries on with both businesses.
D. Both companies join and carry on business under a new name.

28. 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. Asset acquisition
B. Consolidation
C. Merger
D. Takeover bid

29. Sidney and Nikki are law partners in a general partnership. Nikki decides to take a position at another law firm. Nikki notifies Sidney that she’s leaving the partnership. This set of facts constitutes a dissociation and dissolution by

A. operation of law.
B. judicial decree.
C. consent.
D. act of a partner.

30. Herbie owns a pizza parlor in New York. Herbie didn’t file any documents to create the business entity, he makes all the business decisions, and he retains all profit after overhead is paid. Herbie owns a

A. corporation
B. partnership.
C. limited liability company.
D. sole proprietorship.

31. 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 corporation by estoppel exists.
B. Steve is wrong; a de facto corporation exists.
C. Steve is wrong; a de jure corporation exists.
D. Steve is correct; no corporation exists.

32. 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. should benefit from the fairness rule.
B. violated his duty of due diligence to the corporation.
C. violated his duty of loyalty to the corporation.
D. should benefit from the business judgment rule.

33. Sal is a shareholder in XYZ Corporation. XYZ Corporation made defective products, and many individuals have filed lawsuits due to the defects. As a shareholder, Sal may

A. be held personally liable only if the plaintiffs name Sal as a defendant.
B. be held personally liable only if the corporation was aware of the defects.
C. not be held personally liable for the defects.
D. be held personally liable for the defects.

34. 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. business judgment rule.
B. insider trading rule.
C. corporate opportunity doctrine.
D. fairness rule.

35. Which of the following types of company offers protection for personal liability?

A. Limited liability partnership
B. Term partnership
C. General partnership
D. Sole proprietorship

36. 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. insider trading rule.
B. corporate opportunity doctrine.
C. fairness rule.
D. business judgment rule.

37. In a general partnership, management decisions are made by

A. majority vote, with partners votes weighted in proportion to the interest owned.
B. majority vote, with each partner having an equal vote.
C. unanimous vote in all business decisions.
D. two-thirds votes of the partners.

38. If a regulation affecting corporations is federal, the authority for that regulation likely derives from

A. the Supremacy Clause.
B. police power.
C. executive orders.
D. the Commerce Clause.

39. Todd wants to start a business, but he wants to make sure that he has absolute control. Which business form would you recommend?

A. Limited liability company
B. General partnership
C. Sole proprietorship
D. Limited partnership

40. Doug’s complaint asks for an injunction. Which of the following is true?

A. Doug has suffered great harm.
B. Doug seeks an equitable remedy.
C. Doug seeks money damages.
D. Money would be an adequate remedy.