21.

The filing of a bankruptcy petition under Chapter 7 of the Federal Bankruptcy Code:

Select one:

a.

Terminates liens on exempt property.

b.

Terminates all security interests in property in the bankruptcy.

c.

Prevents the debtor from keeping monies earned after filing the bankruptcy petition

d.

Stops enforcement of judgment liens against property in the bankruptcy estate.

22.Mrs. Jones says to Todd, the son of her neighbor: "Todd, if you wash my car today, I will give you $5.00." Later that same day, while Mrs. Jones is out shopping with her husband, Todd sees Mrs. Jones's car in the driveway and washes it. This situation is an example of :

Select one:

a.

An implied contract.

b.

A typical bilateral contract

c.

A typical unilateral contract.

d.

None of the above are correct.

23.Which of the following is a possible "affirmative defense" to an action based on breach of contract?

Select one:

a.

Expiration of the statute of limitations.

b.

Duress

c.

Discharge of the claim through bankruptcy

d.

All of the above

24.

Robert executed a valid security agreement with First Time Bank covering Robert's new purchase of machinery and equipment for his new factory. However, First Time Bank failed to perfect (by filing or possession) its security interest in the equipment and machinery. Six months later, Robert defaults on the loan with First Time Bank. Robert did not sell the machinery or use it as collateral for another loan. Based solely upon the facts provided:

Select one:

a.

First Time Bank may not attempt to enforce its interest in the collateral because it failed to perfect.

b.

First Time Bank must first immediately file a financing statement to be able to proceed against Robert and repossess the collateral.

c.

First Time Bank's failure to perfect its security interest does not affect the validity of its interest in the collateral as against the debtor, Robert.

d.

Two of the above are correct.

e.

None of the above are correct.

25.

Sam went to Stable National Bank, borrowed $1,000, and granted a security interest in his sailboat to the bank. This security interest attached on March 1 and was perfected when the bank filed a financing statement on May 15. On April 12, Sam went to Solid National Bank, and borrowed $2,000 and granted a security interest on the same sailboat. Solid perfected its security interest by filing a financing statement on April 20. Sam defaulted on both loans in June, having paid off none of the principal on either loan. Both banks want to repossess the boat. If the boat can be sold for $1,200, how much of the $1,200 would each bank be entitled to receive?

Select one:

a.

Stable: $1,000 and Solid: $0

b.

Stable: $1,000 and Solid: $200

c.

Stable: $400 and Solid: $800

d.

Stable: $0 and Solid: $800

e.

Stable $0 and Solid: $1,200

26.

The limited liability of the shareholders of a corporation will most likely be disregarded if.

Select one:

a.

The shareholders lend money to the corporation.

b.

The shareholders undercapitalized the corporation when it was formed.

c.

A partnership incorporates it business solely to limit the liability of its partners.

d.

All of the above are correct.

e.

None of the above are correct.

27.

On May 2, 1990 SAFE BANK agreed to loan Tyler Corp. $500,000. Tyler signed a security agreement and financing statement covering its existing equipment. On May 4th, SAFE BANK properly filed the financing statement. On May 7, STATE BANK loaned Tyler $60,000 secured by the same equipment. STATE had notified SAFE on May 7 of its intention to make the loan. On that same day, Tyler Corp. signed a security agreement and financing statement covering the equipment, and received the money. On May 8, STATE properly filed the financing statement. On May 10, Tyler actually received the $500,000 from SAFE. If Tyler defaults on both loans, who will have a priority security interest in the equipment?

Select one:

a.

State because it was the first to perfect its security interest in the equipment.

b.

State because it had a purchase money security interest in the equipment and properly notified Safe prior to making the loan.

c.

Safe because it was the first to file.

d.

None of the above.

28. Patten bought a $10,000 car from the Evans Motor Company by making a $3,000 down payment and by signing a security agreement which required monthly payments for four years until the remaining $7,000 was paid off. After two years of making payments, Patten defaulted still owing $4,000. Evans gave Patten notice that it intended to repossess the car, did so, and subsequently sold it for $1,900 at a private sale. The expenses of the repossession and sale of the car amounted to $400 so that Evans credited Patten's account with $1,500. This left Patten owing Evans $2,500. Which, of the following statements is correct?

Select one:

a.

Evans can hold Patten for the $2,500 deficiency.

b.

The expenses of retaking and selling the collateral shouldn't have been credited to Patten's account. Thus, Patten was left owing only $2,100.

c.

Because the collateral was not sold at a public auction, the sale was not conducted in a "commercially reasonable manner" and therefore subject to challenge by Patten.

d.

All of the above are correct.

29. DEF Corp. has a board of 7 directors. The company president learns of a chance to acquire a related business and wants the board to consider and approve the deal. The president properly sends a notice to the directors of a special meeting to occur in three days, but not to director D. The meeting is attended by 4 tdirectors (but not D), two of them on Zoom. The 4 at the meeting all approve the acquisition. Is their action valid?

Select one:

a.

yes - notice was sufficient since it went to a majority of the board at least two days before the meeting date

b.

yes - because the quorum at a special meeting, unlike a regular meeting, is one-third of the board

c.

no - notice of a Special Meeting (but not a regular meeting) must be sent to each director, and the failure to send a notice to D in this case invalidates the meeting

d.

None of the above are correct

30.

Which of the following pretrial testimony is taken under oath, out of court, and may be used at trial:

Select one:

a.

Complaint

b.

Depositions

c.

Pleadings

d.

Demurrer

e.

All of the above

31.

On May 4, Clarence, a computer retailer, purchased 30 computers. This comprised Clarence's entire inventory and was financed under a security agreement with Dome Bank which gave the Bank a security interest in all computers on the premises, all future acquired computers, and the proceeds of sales. On May 8, Dome Bank properly filed a financing statement that adequately identified the collateral. On June 9, Clarence sold one computer to Anita for personal use and four computers to Green Co. for his business. If Clarence defaults on his loan to Dome Bank, which of the following statements is correct?

Select one:

a.

The computers sold to Anita will not be subject to Dome's security interest

b.

The computers sold to Green will be subject to Dome's security interest.

c.

The security interest does not include the proceeds from the sale of the computers to Anita, unless so stated in the financing statement.

d.

All of the above are correct.

32.Patrick offered to sell his house to Jarrod for $500,000. Jarrod was interested but did not wish to decide immediately so he asked Patrick if he would hold the offer open for thirty days in exchange for Five Thousand Dollars. Patrick agreed in writing.

Three days later Jarrod called Patrick and told him he doubted he would purchase the property because his family was not enthusiastic about moving, but he was still trying to convince them to relocate. The next week, Patrick sold the house to Nick.

Select one:

a.

Jarrod may no longer accept the offer because Patrick changed his position when he sold the house to Nick.

b.

Jarrod may no longer accept the offer because he rejected the offer when he indicated that he "doubted he would purchase the property".

c.

Jarrod still may accept the offer because his telephone conversation did not constitute a rejection and the option period has not expired.

d.

Jarrod still may accept the offer because a rejection never terminates the power of acceptance.

33.Which of the following statement(s) is/are correct regarding Limited Liability Companies ("LLC") in California?

Select one:

a.

They are often used by professionals, such as doctors and lawyers.

b.

Each member of a California LLC generally are not personally liable for the debts of the LLC.

c.

LLC's are taxed similar to a general partnership.

d.

Two of the above are correct.

34.DotBomb, Inc. is an online retail business through its website, DotBomb.com. In addition to its own sales of a wide range of retail products, DotBomb sells advertising space on its site. It does so through a team of in-house sales people, whom advertisers contact by calling a number on the "Contact Us" page of the website. In addition, DotBomb's sales people make cold calls to potential advertisers, which they can follow up with marketing materials including their business cards. Jenny, one of the firm's salespeople, recently scored a huge victory, selling a one-year advertising deal with AutoMax, the nationwide chain of auto dealerships. It is customary in the industry for contracts of this nature to be sold by salespeople without prior approval. However, subsequently her supervisor reminded her that under the firm's internal sales team handbook, contracts in excess of six months require approval by DotBomb's CEO.

Based on the foregoing information:

Select one:

a.

Jenny had expressed authority, so AutoMax will be able to enforce the contract against DotBomb.

b.

Jenny had apparent authority, so AutoMax will be able to enforce the contract against DotBomb.

c.

Jenny had no authority, so AutoMax willnot be able to enforce the contract against DotBomb.

d.

Jenny had implied authority, so AutoMax will be able to enforce the contract against DotBomb.

35.For federal income tax purposes, a general partnership is:

Select one:

a.

A taxable entity similar to a corporation and can utilize Special Allocations.

b.

May elect to be taxed under Subchapter S of the Internal Revenue Code.

c.

Considered to be a nontaxable entity, but must file an informational return

d.

None of the above are correct.

36.

GHI Corporation, a California corporation, has a six-person board. At a regular board meeting, only two directors attend. No notice was sent to any of the directors. The two attending call directors Alice and Bob and put them on a conference call. The four talk about the corporation buying Blackacre and then all agree to a resolution for GHI to buy Blackacre from Third Party. The Bylaws of GHI state that an action of the board requires the consent of a majority of the directors present at a meeting, and that a quorum is a majority of the authorized directors.

Select one:

a.

the purchase is authorized because a quorum was present and a majority of those present approved the action.

b.

the purchase is not authorized, since all real estate transactions require shareholder approval

c.

he purchase is not authorized because prior written notice must be sent to each director

d.

the purchase is not authorized because a quorum was not present at the board meeting

e.

Two of the above are correct.

37.

Which of the following could not become partners in a general partnership?

Select one:

a.

Jose, age 23, a citizen of Mexico

b.

The XYZ general partnership

c.

The JT Corporation

d.

Maria, age 16

e.

All of the above could become partners