1.             Carlton executed and delivered to Raymond a $1,000 negotiable note payable to Raymond or bearer.  Raymond then negotiated it to Fred and endorsed it on the back by merely signing his name.  Which of the following is a true statement?                 a.             The instrument is bearer paper, and Fred can convert it to order paper by writing “pay to the order of Fred” above Raymond’s signature.                 b.             Raymond’s endorsement was a special endorsement.                 c.             The instrument was initially bearer paper and cannot be converted to order paper.                 d.             Raymond’s endorsement was necessary to Fred’s qualification as a holder. 2.             Under the Secured Transactions Article of the UCC, which of the following remedies is available to a secured creditor when a debtor fails to make a payment when due?                                                                 Proceed                                 Obtain a General                                                 against the                            Judgment against Collateral__ the Debtor_                                 a.                             Yes                                                         Yes                         b.                             Yes                                                         No                 c.                             No                                                           No                 d.                             No                                                           Yes 3.             On July 27, 2011 Summerson sent Fallson a letter offering to sell Fallson a vacation home for $150,000.  On August 2, 2011 Fallson replied by mail agreeing to buy the home for $145,000.  Summerson did not reply to Fallson.  Do Summerson and Fallson have a binding contract?                                 a.             Yes, because Summerson’s silence is an implied acceptance of Fallson’s letter.                 b.             No, because Fallson failed to sign the letter that was sent by Fallson.                 c.             No, because Fallson’s letter was a counteroffer.                 d.             Yes, because Summerson’s offer was validly accepted. 4.             Cindy, Odsen Corp.’s agent, needs a written agency agreement to                 a.             Hire an attorney to collect a business debt owed Odsen.                 b.             Purchased an interest in undeveloped land for Odsen.                 c.             Retain an independent general contractor to renovate Odsen’s office building.                 d.             Enter into a series of sales contracts on Odsen’s behalf. 5.             A party who filed a financing statement covering inventory on April 1, 2010 would have a superior interest to which of the following parties?                 a.             A holder of a mechanic’s lien whose lien was filed on M.

1. 1. Carlton executed and delivered to Raymond a $1,000
negotiable note payable to Raymond or bearer. Raymond then
negotiated it to Fred and endorsed it on the back by merely
signing his name. Which of the following is a true statement?
a. The instrument is bearer paper, and Fred
can convert it to order paper by writing “pay to the order of
Fred” above Raymond’s signature.
b. Raymond’s endorsement was a special
endorsement.
c. The instrument was initially bearer paper
and cannot be converted to order paper.
d. Raymond’s endorsement was necessary to
Fred’s qualification as a holder.
2. Under the Secured Transactions Article of the UCC,
which of the following remedies is available to a secured
creditor when a debtor fails to make a payment when due?
Proceed
Obtain a General
against the
Judgment against
Collateral__
the Debtor_
a.
Yes Yes
b.
Yes No
c.
No No
d.

2. No Yes
3. On July 27, 2011 Summerson sent Fallson a letter
offering to sell Fallson a vacation home for $150,000. On
August 2, 2011 Fallson replied by mail agreeing to buy the
home for $145,000. Summerson did not reply to Fallson. Do
Summerson and Fallson have a binding contract?
a. Yes, because Summerson’s
silence is an implied acceptance of Fallson’s letter.
b. No, because Fallson failed to sign the
letter that was sent by Fallson.
c. No, because Fallson’s letter was a
counteroffer.
d. Yes, because Summerson’s offer was
validly accepted.
4. Cindy, Odsen Corp.’s agent, needs a written agency
agreement to
a. Hire an attorney to collect a business debt
owed Odsen.
b. Purchased an interest in undeveloped land
for Odsen.
c. Retain an independent general contractor
to renovate Odsen’s office building.
d. Enter into a series of sales contracts on
Odsen’s behalf.
5. A party who filed a financing statement covering
inventory on April 1, 2010 would have a superior interest to
which of the following parties?
a. A holder of a mechanic’s lien whose lien
was filed on March 15, 2010.
b. A judgment lien creditor who filed its
judgment on April 15, 2010.
c. A holder of a purchase money security
interest in after-acquired inventory filed on March 20, 2010.

3. d. A purchaser in the ordinary course of
business who purchased on April 10, 2010.
6. In determining whether the consideration requirement
to form a contract has been satisfied, the consideration
exchanged by the parties to the contract must be
a. Fair and reasonable under the
circumstances.
b. Legally sufficient.
c. Exchanged simultaneously by the parties.
d. Of approximately equal value.
7. Pavers Roadway, Inc., contracts with Best Building
Corporation to repave Best Building Corporation's parking lot.
The elements of a contract do not include
a. consideration.
b. contractual capacity.
c. legality.
d. practicality.
8. Holly writes a check on her account at
Investment Bank to Jerry to pay a debt. Jerry negotiates the
check by indorsement to Kelly, who negotiates the check by
indorsement to Lisa, who presents it for payment to Interstate
Bank. Holly is
a.
not liable for payment under any circumstances.
b.
primarily liable.
c.
secondarily liable.
d.
simultaneously liable.
9. Holly writes a check on her account at

4. Investment Bank to Jerry to pay a debt. Jerry negotiates the
check by indorsement to Kelly, who negotiates the check by
indorsement to Lisa, who presents it for payment to Interstate
Bank. If Investment Bank dishonors the check, Lisa can obtain
payment from Jerry
a.
if Lisa timely notifies Jerry.
b.
only if Holly refuses to pay the check.
c.
only if Holly and Kelly refuse to pay the check.
d.
under no circumstances.
10. Nora enters into a contract with Owen's Transport
Company for the delivery of a shipment of fresh produce. If
ambiguities appear in the contract, they will be construed
against
a. the party who drafted the contract.
b. the party with the greater bargaining
power.
c. the promisor.
d. the promisee.
11. On November 1, 2013, Ted sent by overnight mail a
letter to Zena in which Ted offered to sell a rare vase. The
offer requested that Zena’s respond by telegram and that the
response be sent on or before 5:00 p.m. on November 2, 2013.
On November 2, 2013 at 3:00 p.m., Zena sent an acceptance by
overnight mail. It did not reach Ted until November 5, 2013.
Ted refused to complete the sale to Zena. Is there an
enforceable contract?
a. No, because Zena did not
accept by telegram.

5. b. No, because the offer required
receipt of the acceptance within the time specified.
c. Yes, because the acceptance
was effective when sent.
d. Yes, because the acceptance
was made within the time specified.
12. Mary promises to pay her assistant Ned $10,000 in
consideration of the services he provided over the years. Mary
never pays Ned. Mary is
a. liable for payment of the $10,000.
b. liable only if Ned still works for Mary.
c. not liable, because the consideration is in
the past.
d. not liable, because the consideration was
unintentional.
13. Collection of EZ Sales Company's debt to First
Storage Corporation is barred by a statute of limitations. A new
promise by EZ to pay the debt
a. may become enforceable if payments are
made.
b. must be in writing.
c. requires consideration.
d. will not revive the obligation.
14. Auto Body Repair Shop (ABRS) promises to pay Ben
$1,000 a week to work for ABRS. Ben accepts and quits his job
with Car Care Service. ABRS fails to provide a job for Ben. Ben
has a cause of action based on
a. an illusory promise.
b. a release.
c. past consideration.
d. promissory estoppel.

6. 15. Pat, a world famous musician and composer, agrees to
give ten piano lessons to Quinn in exchange for $1,000. Pat's
attempt to delegate his contract to Ruth, an inexperienced
pianist, will probably be
a. permitted because contracts may be freely
delegated.
b. permitted because the contract is
concerned with music lessons.
c. prohibited because contracts may not be
freely delegated.
d. prohibited because Pat and Ruth have very
different skill levels.
16. Jill and Karl contract for the sale of Jill's horse for
$1,000. Unknown to either party, the horse has died. Karl is
a. entitled to another horse of equivalent value.
b. not required to pay due to the
mutual
mistake.
c. not required to pay due to the
unilateral
mistake.
d. required to pay because he assumed the risk the horse
might die.
17. Alpha Company offers to sell Beta, Inc., 1,000
computers for a $1 million, states that the offer will be open for
six days, and asks for a response by fax. On the fourth day, Beta
sends an acceptance to Alpha via the mail, which is received on

7. the sixth day. In this deal
a. a contract is formed.
b. no contract is formed, because Alpha
asked for a response by fax.
c. no contract is formed, because Alpha
received the acceptance late.
d. no contract is formed, because Beta sent
the acceptance late.
18. Holly writes a check on her account at Investment Bank to
Jerry to pay a debt. Jerry negotiates the check by indorsement to
Kelly, who negotiates the check by indorsement to Lisa, who
presents it for payment to Interstate Bank. If Investment Bank
dishonors the check, Lisa can obtain payment from Kelly
a.
if Lisa timely notifies Kelly.
b.
only if Holly refuses to pay the check.
c.
only if Holly and Jerry refuse to pay the check.
d.
under no circumstances.
19. Furnishings, Inc., agrees to lease a desk to Better
Resources, Inc. (BRI), which requests that the desk be left
outside City Warehouse for BRI to pick up. Before BRI
retrieves the desk, it is stolen. The loss is suffered by
a. A-1 Furnishings and BRI, but not City
Warehouse.
b. A-1 Furnishings, BRI, and City
Warehouse.

8. c. A-1 Furnishings only.
d. BRI only.
20. John, the secured party, perfects its security interest
by filing a financing statement. What is the effect of perfection
of John’s security interest?
a. The secured party has priority in the collateral over
most creditors who acquire a security interest in the same
collateral after the filing.
b. The security interest becomes enforceable against the
debtor.
c. The debtor is protected against all other parties who
acquire an interest in the collateral after the filing.
d. None of the above.
21. Ample Country Stables contracts to buy 1,000
horseshoes from Blacksmith, Inc., for $1 per shoe. When the
market price decreases to 50 cents per shoe, Ample refuses to
go through with the deal. Blacksmith can recover
a. $1,500.
b. $1,000.
c. $500.
d. 0.
22. Farm Equipment, Inc., makes farming machinery. Gail
discovers that her Farm Equipment tractor is defective and sues
the maker for product liability based on negligence. To win,
Gail must show that
a. Farm Equipment sold the tractor to Gail.
b. Gail knew and appreciated the risk caused
by the defect.
c. Gail suffered an injury caused by the
defect.
d. the "defect" was a commonly known

9. danger.
23. Ida signs a check payable to Jane and gives it to her.
Jane indorses the back, and transfers the check to Kyle. To
negotiate the check to Leo, Kyle must
a. indorse "Kyle" on the back and deliver the
check to Leo.
b. indorse "pay to the order of Leo [signed]
Kyle" on the back and deliver the check to Leo.
c. only deliver the check to Leo.
d. transfer the check through the drawee
bank.
24. Local Appliance Store, the secured party, sells a
refrigerator to John, a consumer, for the use of John’s family.
John signs a sales agreement, a loan note, and a security
agreement. Local Appliance Store fails to file either the security
agreement or a financing statement with the secretary of state.
Which of the following statements is accurate?
a. The secured party has priority in the collateral over
most creditors who subsequently acquire a security interest in
the same collateral.
b. The security interest is not enforceable against the
debtor.
c. The security interest is not enforceable against
subsequent creditors.
d. The assets subject to the security interest cannot
become part of the bankruptcy estate in the event the creditor
files an involuntary petition against the debtor.

10. 25. Ruth, a minor, charges groceries at
Sam's Mini-Mart. Two days later, Ruth disaffirms the purchase.
Ruth owes Sam's Mini Mart
a.
the reasonable value of the groceries.
b.
the retail value of the groceries.
c.
the wholesale value of the groceries.
d.
nothing.
26.
With regard to a prior perfected security interest in goods for
which a financing statement has been filed, which of the
following parties is most likely to have a superior interest in the
same collateral?
a. The trustee in bankruptcy of the debtor.
b. Lien creditors of the debtor.
c. A buyer of goods in the ordinary course of business.
d. A subsequent buyer of consumer goods who
purchased the goods from another consumer.
27. Beth is convicted of arson for burning down her
warehouse.. On an application for insurance from Cover-All
Insurance Company on a new building, in answer to a question
about prior convictions, Beth does not disclose her conviction.
This makes the contract
a.
binding because the omission is immaterial to Cover-All's
decision to issue coverage.

11. b.
binding due to Cover-All's failure to discover Beth's conviction.
c.
voidable by Beth because the omission is immaterial to Cover-
All's decision to issue coverage.
d.
voidable by Cover-All because the omission is material to its
decision to issue coverage.
Fact Pattern for Question 28
Fred enters into a contract under Gene's threats. Later, Fred
refuses to perform, claiming that he acted under duress.
28. Refer to Fact Pattern B. Gene sues to enforce the
contract. In order for Fred to establish duress, Gene must have
threatened
a. a civil suit.
b. a lost opportunity.
c. a social snubbing.
d. a wrongful act.
e. none of the above.
29. Century Properties. Inc., and Dandy Capital
Corporation enter into a contract for a sale of land. To be
enforceable, the contract must be in writing
a.

12. Only if the land is valued at $50 or more.
b.
Only if the land is valued at $500 or more.
c.
Only if the land is valued at $5,000 or more.
d.
In any case.
30. Timber Trees, Inc., and Land Corporation enter
into an oral contract for Timber Trees, Inc. to sell its lumber
mill to Land Corporation . Before Land Corporation takes
possession, this contract is enforceable by
a.
either party.
b.
neither party.
c.
Timber Trees only.
d.
Land Corporation only because only the buyer can get specific
performance.
31. Lola agrees to pay Mira's debt to New Sales
Corporation if Mira does not pay it. Lola does not get any
personal benefit for or from the agreement. To be enforceable
against Lola, the promise must be in writing
a.
if the debt is paid by Mira.

13. b.
if the debt is for at least $50.
c.
if the debt is for at least $500.
d.
in any case.
Fact Pattern for Question 32
Macro Marketing, Inc. (Macro), and National Food Corporation
(NFC) discuss the terms of a contract under which NFC is to
provide personal services to Macro. The next day, Macro faxes
NFC a memo on Macro's letterhead that summarizes the items
on which they agreed, including a two-year term. NFC
immediately begins to perform, but Macro refuses to pay. NFC
promptly institutes a law suit seeking damages.
32. Refer to Fact Pattern for question 32. The
contract between Macro and NFC is
a.
subject to the Statute of Frauds’ collateral-promise provision,
and is probably unenforceable.
b.
subject to the Statute of Frauds’ services rule, and is probably
enforceable.
c.
barred by the statute of limitations, and is therefore probably
unenforceable.
d.
subject to the Statute of Frauds’ one-year rule, and is probably
unenforceable.
Fact Pattern for Question 33

14. Jeff and Kris sign a written contract for the sale of Jeff's Koffee
Kiosk to Kris. The parties intend their written contract to be a
final statement of the terms of their agreement.
33. Refer to Fact Pattern for question 33. Kris later
disputes some of the provisions of the deal with Jeff. The
dispute results in litigation, and the court finds the terms of the
agreement are ambiguous. The court will most likely
a.
exclude evidence that buttresses the written terms.
b.
exclude evidence that contradicts the written terms.
c.
allow evidence that explains the terms.
d.
dismiss the action because there was a lack of mutual asset and
no contract was formed.
34. Tom dies owning stock as joint tenant with right of
survivorship with his son, having bank accounts in his name in
trust for his daughter, and owning real estate as tenants by the
entirety with his wife. The trustee of Tom’s revocable trust
holds title the rest of his assets. Under the terms of the
revocable trust, all assets of the trust will be distributed to
Tom’s son and daughter on Tom’s death. Tom’s wife, son and
daughter survive him. Under the terms of Tom’s will, Tom
leaves all of his property to his mother, who also survived him.
Tom died
a. intestate.
b. without any probate assets.
c. with a last will that will controls the disposition of

15. his assets.
d. None of the above.
35. Manny, as buyer, wants to transfer his rights
under a written real estate contract with Nila, as seller, to Opie.
To ensure that the transfer of rights is valid, Manny must
a.
have this right expressly stated in the contract.
b.
file a notice of assignment in the public records.
c.
have the contract recorded in the public records.
d.
none of the choices.
36. Rural Development Corporation (RDC) and Sid
enter into a contract for the clear-cutting of RDC's fifty-acre
tract for which RDC agrees to pay Sid. Sid is the owner of
Timber Logging Company. Sid transfers his duty to log the
tract under the contract to Timber Logging Company. Timber
Logging Company is
a.
a delegatee and is subject to the terms of the agreement between
RDC and Sid.
b.
a delagetee and is not entitled to collect under the contract from
RDC for services provided by Timber.
c.
an obligee and is not required to perform under the contract.
d.
a prohibitee.

16. 37. Mke, a physician, renders aid to Nancy, who is
injured and unconscious after an avalanche. Mike can recover
the cost of the aid from Nancy
a.
even if Nancy was not aware of the aid when it was given.
b.
only if Nancy recovers because of the aid.
c.
only if Noel was aware of the aid at the time it was given.
d.
under no circumstances.
38. Pat, a world famous musician, agrees to give ten piano
lessons to Quinn in exchange for $1,000. Pat's attempt to
transfer his contract duties to Ruth, an inexperienced pianist,
will probably be
a.
permitted because contracts may be freely delegated.
b.
prohibited in this case unless the contract expressly permits
delegation.
c.
permitted if the contract is silent on the issue.
d.
prohibited in any case.
39. Chaz and Dolly enter into a five year contract under
which Chaz agrees to provide maintenance services for Dolly's
Ski Resort. Chaz transfers his rights and obligations under the
contract to Mark. Mark

17. performs
under the contract, and Dolly is aware of the Mark’s
performance of the contract. However, Dolly refuses to pay
Mark. Assuming Mark’s services are properly performed and
Mark sues Dolly, Mark
a. will be successful in enforcing the contract if performance
depends on the personal skills or talents of the obligor.
b. will probably not be able to recover under the express
terms of the contract.
.
c. may be able to recover the value of his services.
d. may not recover.
40. On August 1, 2010 Delia and Edwin entered into an
agreement for Edwin to lease Delia’s country home for two
months during the following summer for $1000 per month.
Delia promised to vacate the property for Edwin by July 1,
2011 with the lease to begin on July 1, 2011. If these promises
are not in writing, they are most likely
a.
enforceable.
b.
unenforceable.
c.
voidable.
d.
none of the above.
41. To avoid liability for intentional injuries, Power
Corporation includes in its contracts an exculpatory clause. This

18. is
a.
enforceable if the other parties are protected from liability.
b.
enforceable if the other parties sign the contract.
c.
enforceable if the other parties have equal bargaining power.
d.
not enforceable.
42. MicroCorp hires Nick to work for one month at a weekly
salary of $400. A MicroCorp representative orally agrees two
weeks later to double Nick's salary. This agreement is
a.
enforceable because an employment contract is an adhesion
contract.
b.
enforceable because the parties have executed an accord and
satisfaction.
c.
unenforceable because Nick has incurred no additional
detriment in exchange for MicroCorp's promise.
d.
unenforceable because Nick's performance is uncertain.
43. Karen writes on a piece of paper, "I owe you $600,"
signs it, and gives it to Lou. This instrument

19. is
a.
Negotiable.
b.
nonnegotiable, because it does not recite any consideration.
c.
nonnegotiable, because it does not state any conditions to
payment.
d. none of the above.
44. Pam signs an instrument payable to the order of
Quick Credit, Inc., that allows a holder to demand payment of
the entire amount due, with interest, if Pam fails to make a
payment. This instrument is
a.
negotiable.
b.
nonnegotiable, because a holder can move up the payment date.
c.
nonnegotiable, because moving up the payment date is
conditional.
d.
nonnegotiable, because the exact payment date cannot be
determined from the face of the instrument.
45. Wyatt inherits a promissory note from Xena, his aunt.
Wyatt has no notice that the note has been dishonored or is
overdue. Wyatt has the rights of
a.
a holder and an HDC.
b.
a holder only.

20. c.
an HDC only.
d.
neither a holder nor an HDC.
46. Kettlecorn Investment Bank, Inc., and
Lone Bank are secured parties with security interests in
property owned by Metal Fabrication Corporation. Priority
between these security interests is generally determined by
a.
the amount of the claim.
b.
the custom in the trade.
c.
the time of perfection.
d.
the date of the loan.
47.
General Leasing Company (GLC) buys equipment for use as
inventory, borrowing $1,000,000 from Helpful Finance
Corporation (Helpful), with Helpful taking back a security
interest in the equipment. The next day, GLC borrows $500,000
from Interstate Bank (Interstate), which loan is also secured by
a security interest in the equipment. GLC defaults on both
loans. Suppose that two weeks after GLC takes possession of
the equipment, Helpful and Interstate file financing statements,
with Interstate filing first. In that circumstance, the party with
priority to the equipment is
a.
GLC.

21. b.
Helpful and Interstate proportionately.
c.
Helpful only.
d.
Interstate Bank only
48. Which is not allowed as a federal exemption under the
Federal Bankruptcy Code?
A.
A specified amount of equity in one motor vehicle.
B.
Unemployment compensation.
C.
A specified amount of value in books and tools of one’s trade.
D.
All of the above are allowed.
49. Under the liquidation provisions of Chapter 7 of the
Federal Bankruptcy Code, a debtor will be denied a discharge in
bankruptcy if the debtor
a.
Fails to list a creditor.
b.
Owes alimony or child support.

22. c.
Cannot pay administration expenses.
d.
Refuses to satisfactorily explain a loss of assets.
50. Which of the following transfers by a debtor, within 90
days prior to the filing for bankruptcy, could be set aside as a
preferential payment?
a.
Making a gift to charity.
b.
Paying a business utility bill.
c.
Borrowing money from a bank secured by a mortgage on the
debtor’s business property.
d.
Prepaying an installment loan on inventory.