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- December 12, 2024
Question 01
What is the term used to describe a mistake made by both parties in a contract about the same material fact?
a) Unilateral mistake
b) Bilateral mistake
c) Mutual rescission
d) Novation
Answer: b) Bilateral mistake
Explanation: A bilateral mistake occurs when both parties are mistaken about the same material fact.
Question 02
Which of the following acts as a suspension of most litigation and actions by creditors against the debtor in bankruptcy?
a) Automatic stay
b) Bankruptcy trustee
c) Discharge in bankruptcy
d) Reaffirmation agreement
Answer: a) Automatic stay
Explanation: The automatic stay is a suspension of almost all litigation and actions by creditors against the debtor in bankruptcy.
Question 03
What type of corporation is organized under the laws of a foreign country but conducts business in the United States?
a) Domestic corporation
b) Foreign corporation
c) Alien corporation
d) Public corporation
Answer: c) Alien corporation
Explanation: An alien corporation is formed in another country but does business in the United States.
Question 04
What is the primary function of the “commerce clause” in the U.S. Constitution?
a) Regulates contracts between private parties
b) Prevents unreasonable searches and seizures
c) Gives Congress the power to regulate interstate commerce
d) Allows states to impose taxes on imported goods
Answer: c) Gives Congress the power to regulate interstate commerce
Explanation: The commerce clause grants Congress the authority to regulate commerce between states.
Question 05
What is the legal term for the act of transferring the right to possession of goods, such as through a warehouse receipt?
a) Bailment
b) Tender of delivery
c) Shipment contract
d) Document of title
Answer: d) Document of title
Explanation: A document of title is a legal instrument that gives the right to possession of goods, often used in business transactions.
Question 06
What does the term “IRAC” stand for in legal reasoning?
a) Issue, Reason, Application, Conclusion
b) Issue, Rule, Application, Conclusion
c) Identify, Reason, Apply, Conclusion
d) Identify, Rule, Argument, Conclusion
Answer: b) Issue, Rule, Application, Conclusion
Explanation: IRAC stands for Issue, Rule, Application, and Conclusion, a method used in legal reasoning.
Question 07
In partnership law, what term is used to describe a joint surety who shares liability with another surety?
a) Guarantor
b) Co-sureties
c) Limited partner
d) General partner
Answer: b) Co-sureties
Explanation: Co-sureties are joint sureties who share liability for the payment of a debt.
Question 08
Which document is filed with a state official to form a limited partnership?
a) Articles of incorporation
b) Certificate of limited partnership
c) Articles of partnership
d) Operating agreement
Answer: b) Certificate of limited partnership
Explanation: The certificate of limited partnership is the document that must be filed with a state official to form a limited partnership.
Question 09
What doctrine relieves a party from contract performance when it becomes impossible due to unforeseen events?
a) Impossibility of performance
b) Force majeure
c) Commercial impracticability
d) Mutual rescission
Answer: a) Impossibility of performance
Explanation: The impossibility of performance doctrine relieves a party from contract obligations when unforeseen events make performance impossible.
Question 10
In bankruptcy, what is the release of a debtor from all dischargeable debts called?
a) Discharge in bankruptcy
b) Reaffirmation
c) Automatic stay
d) Bankruptcy discharge agreement
Answer: a) Discharge in bankruptcy
Explanation: A discharge in bankruptcy releases the debtor from most debts, freeing them from liability.
Question 11
Which of the following describes an agreement formed between a debtor and creditors to accept a lesser sum than owed?
a) Accord and satisfaction
b) Discharge agreement
c) Creditors’ composition agreement
d) Settlement agreement
Answer: c) Creditors' composition agreement
Explanation: A creditors' composition agreement is where creditors agree to accept a lesser amount than owed in full satisfaction of the debt.
Question 12
What is the legal term for the act of seizing property to satisfy a debt prior to securing a judgment?
a) Foreclosure
b) Garnishment
c) Attachment
d) Replevin
Answer: c) Attachment
Explanation: Attachment is a court-ordered seizure of property before a judgment is secured for a past-due debt.
Question 13
A trustee in bankruptcy proceedings is responsible for:
a) Filing bankruptcy petitions
b) Managing the debtor’s funds
c) Writing bankruptcy laws
d) Discharging debts
Answer: b) Managing the debtor’s funds
Explanation: A bankruptcy trustee is appointed by the court to manage the debtor's funds in a bankruptcy case.
Question 14
What is the term used when one party unlawfully pressures another to perform an act they otherwise wouldn’t?
a) Fraudulent misrepresentation
b) Duress
c) Undue influence
d) Breach of contract
Answer: b) Duress
Explanation: Duress occurs when unlawful pressure causes someone to act in a way they otherwise would not.
Question 15
What happens when a partnership undergoes dissociation?
a) The partnership is automatically dissolved
b) The partner continues with reduced liability
c) The partner is bought out, and the partnership may continue
d) The partnership must immediately file for bankruptcy
Answer: c) The partner is bought out, and the partnership may continue
Explanation: In dissociation, a partner is bought out, and the partnership may continue without that partner.
Question 16
What term refers to the act of mixing funds or goods so they no longer have separate identities?
a) Commingling
b) Consolidation
c) Aggregation
d) Merging
Answer: a) Commingling
Explanation: Commingling occurs when funds or goods are mixed together so thoroughly that they lose their separate identities.
Question 17
Which type of business entity offers the limited liability of a corporation and the tax advantages of a partnership?
a) S corporation
b) Sole proprietorship
c) General partnership
d) Limited liability company (LLC)
Answer: d) Limited liability company (LLC)
Explanation: A limited liability company (LLC) combines the limited liability of a corporation with the tax advantages of a partnership.
Question 18
In the context of bankruptcy, which document initiates bankruptcy proceedings?
a) Bankruptcy petition
b) Order for relief
c) Reaffirmation agreement
d) Discharge in bankruptcy
Answer: a) Bankruptcy petition
Explanation: A bankruptcy petition is filed with the court to initiate bankruptcy proceedings.
Question 19
What is the term for the process by which a partnership’s assets are collected, liquidated, and distributed?
a) Liquidation
b) Dissolution
c) Winding up
d) Reorganization
Answer: c) Winding up
Explanation: Winding up is the process of collecting, liquidating, and distributing the assets of a partnership or corporation after dissolution.
Question 20
Which of the following terms describes the ability to protect goods or property through insurance against damage or loss?
a) Insurable interest
b) Bailment
c) Attachment
d) Lien
Answer: a) Insurable interest
Explanation: Insurable interest refers to the substantial property interest in goods sufficient to permit a party to insure them against damage or loss.