Business and Commercial Law Exam Review
Course Introduction
Business and Commercial Law explores the legal principles and frameworks that govern business operations and commercial transactions. This course covers key topics such as contract law, agency, sale of goods, negotiable instruments, partnership, company law, and the regulatory environment affecting businesses. Students will gain an understanding of the legal rights and obligations of businesses, the processes for resolving commercial disputes, and the role of law in facilitating ethical and effective business practices. Through case studies and real-world applications, the course prepares students to recognize legal issues in business contexts and to make informed, legally compliant decisions.
Recommended Textbook
Business Law Text and Cases 13th Edition by ClarksonMiller
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51 Chapters
2140 Verified Questions
2140 Flashcards
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Page 2
Chapter 1: Law and Legal Reasoning
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42 Verified Questions
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Sample Questions
Q1) The Pennsylvania legislature enacts a state law that violates the U.S. Constitution. This law can be enforced by
A) no one.
B) the federal government only.
C) the state of Pennsylvania only.
D) the United States Supreme Court only.
Answer: A
Q2) Charles is a federal judge whose judicial decisions are part of case law, which does not include interpretations of
A) regulations created by administrative agencies.
B) constitutional provisions.
C) statutes enacted by legislatures.
D) sound bites in the media.
Answer: D
Q3) Common law is a term for the laws that are familiar to most of us.
A)True
B)False
Answer: False
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Chapter 2: Courts and Alternative Dispute Resolution
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Sample Questions
Q1) Mandatory arbitration clauses in employment contracts are generally enforceable.
A)True
B)False
Answer: True
Q2) In mediation, the mediator proposes a solution and makes a decision resolving the dispute.
A)True
B)False Answer: False
Q3) Litigation is the process of resolving a dispute through the court system.
A)True
B)False
Answer: True
Q4) The verdict in a summary jury trial is not binding.
A)True
B)False
Answer: True
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Chapter 3: Court Procedures
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Sample Questions
Q1) Refer to Fact Pattern 3-B1. If Enzo files a motion to dismiss, and the court grants it,
A) Destiny will be given time to file an amended complaint.
B) Destiny will have a judgment entered in her favor.
C) Enzo will be given time to file another response.
D) Enzo will have a judgment entered in his favor.
Answer: A
Q2) It is guaranteed that any judgment will be enforceable.
A)True
B)False
Answer: False
Q3) Hearsay evidence is what someone heard someone else say. A)True
B)False Answer: True
Q4) The use of additional evidence distinguishes the motion for summary judgment from the motion for judgment on the pleadings. A)True
B)False Answer: True
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Chapter 4: Business and the Constitution
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Sample Questions
Q1) Sustainable Products Corporation regularly expresses opinions on political issues. Under the First Amendment, corporate political speech is given A) discouraged.
B) forbidden.
C) protected.
D) required.
Q2) Coffee Klatch Party Group, a political organization, files a claim to challenge a Delaware statute that limits the liberty of all persons to broadcast "annoying" radio commercials. This claim is most likely based on the right to A) equal protection of the law.
B) privacy.
C) procedural due process.
D) substantive due process.
Q3) To obtain a search warrant, law enforcement officers must convince a judge that they have reasonable grounds to believe a search will reveal evidence of a specific illegality.
A)True
B)False
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6
Chapter 5: Business Ethics
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Sample Questions
Q1) In making business decisions, Ridgeline Utility Service Company and other corporations should strive to be "good citizens" by evaluating
A) the legal implications of each decision.
B) the public relations impact.
C) the safety risks for consumers and employees.
D) all of the choices.
Q2) The concept of corporate social responsibility is imposed on corporations by law.
A)True
B)False
Q3) Corporations can demonstrate corporate social responsibility by promoting goals that society deems worthwhile.
A)True
B)False
Q4) Ethics is as well defined as the law.
A)True
B)False
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Page 7
Chapter 6: Torts
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Sample Questions
Q1) Rafi, a van driver for Speedy Delivery Company, causes a multi-vehicle accident on a city street. Rafi and Speedy are liable to
A) all those who were injured.
B) only those who were uninsured.
C) only those whose injuries could have been reasonably foreseen.
D) only those whose vehicles were closest to Rafi's van.
Q2) Failure to live up to a standard of care may be an act or an omission.
A)True
B)False
Q3) Jayne develops a new color of lipstick. To market her lipstick, Jayne uses a computer design program to show a famous model using Jayne's lipstick. Jayne does not ask the model's permission. The model can sue Jayne for
A) battery.
B) fraudulent misrepresentation.
C) defamation.
D) appropriation.
Q4) For fraud to occur, seller's talk must be involved.
A)True B)False
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Chapter 7: Strict Liability and Strict Liability
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Sample Questions
Q1) Garage Magic, Inc., contracts for the sale of a certain number of garage door openers to Home & Yard Hardware stores. Ian buys one of openers. The applicable statute of limitations prescribes a period of four years. To bring a product liability claim against Garage Magic, Ian must file a suit within four years of
A) Ian's discovery of an injury caused by the opener.
B) Garage Magic's sale of the opener to Home & Yard.
C) Garage Magic's design of the opener.
D) Home & Yard's sale of the opener to Ian.
Q2) Sellers are required to take precautions against every conceivable misuse of a product.
A)True
B)False
Q3) A manufacturing defect is a departure from a product unit's design specifications that results in products that are physically flawed.
A)True
B)False
Q4) Statutes of repose places outer times limit on product liability actions.
A)True
B)False
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Chapter 8: Intellectual Property Rights
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Sample Questions
Q1) A license permits the use of another's intellectual property for certain purposes.
A)True
B)False
Q2) In 2014, Kelly writes Like the Wind, a novel about marathoners and ultramarathoners. Kelly does not register the work with the appropriate government office. Under federal copyright law, Kelly's work is protected
A) for ten years.
B) for twenty years.
C) for the life of the author plus seventy years.
D) forever.
Q3) In 2005, Recreation & Relaxation Corporation began making and selling all-terrain vehicles (ATVs) under the mark "R&R." Ten years later, recoveryandrehabilitation.com, Inc., a differ?ent company selling medical equipment and supplies, begins to use "R&R" as part of its URL and registers it as a domain name. Can Recreation & Relaxation stop recoveryandrehabilitation.com's use of "R&R"? If so, what must the ATV maker show?
Q4) Protection of trade secrets extends both to ideas and to their expression.
A)True
B)False
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Page 10
Chapter 9: Internet Law, Social Media, and Privacy
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Sample Questions
Q1) Emily and other users of Facebook and other social networking sites post messages, images, and other materials on these sites. Social media posts are routinely included in discovery in litigation to
A) establish a person's intent.
B) establish what a person knew at a particular time.
C) reduce damages awards.
D) all of the choices.
Q2) The law does not restrict the "fair use" of methods for the circumvention of encryption software or other technological antipiracy protection for educational and other noncommercial purposes.
A)True
B)False
Q3) Federal law permits the sending of unsolicited commercial e-mail and does not prohibit spamming activities.
A)True
B)False
Q4) Social media posts are routinely included in discovery in litigation.
A)True
B)False
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Chapter 10: Criminal Law and Cyber Crime
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Sample Questions
Q1) One element that normally must exist for a person to be convicted of a crime is the performance of a prohibited act.
A)True
B)False
Q2) In a criminal case, the state must prove its case by a preponderance of the evidence.
A)True
B)False
Q3) Maura enters a gas station and points a gun at the clerk Nate. She then forces Nate to open the cash register and give her all the money. Maura can be charged with A) burglary.
B) robbery.
C) larceny.
D) receiving stolen property.
Q4) The theft of trade secrets is a civil wrong but not a crime. A)True B)False
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Chapter 11: Nature and Terminology
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Sample Questions
Q1) Sales Marketing Corporation and Tech Support, Inc., negotiate a contract. If the contract has all of the elements necessary for one of the parties to enforce it in court, it is A) a valid contract.
B) a voidable contract.
C) a void contract.
D) an unenforceable contract.
Q2) Gilbert promises to buy Hadley's iPod for $75. Hadley is A) an offeree.
B) an offeror.
C) a promisee.
D) a promisor.
Q3) Avatar, Inc., agrees to deliver t-shirts emblazoned with video game characters for a certain price to Bling Bling Corporation. To consti?tute a contract, the terms of this deal
A) must all be express.
B) must all be implied.
C) may be express, implied, or a mixture of both.
D) may be express or implied, but not both.
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Chapter 12: Agreement in Traditional and E-Contracts
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Sample Questions
Q1) A statute or court decision that makes an offer illegal automatically terminates the offer
A)True
B)False
Q2) A request or invitation to negotiate is an offer.
A)True
B)False
Q3) Mark is creating Nu2U.com, a Web site through which he will enter into contracts over the Internet. Important terms to include in his offers include
A) provisions specifying the remedies if the contract is breached.
B) a detailed history of his business.
C) glowing reviews from former customers.
D) his educational background.
Q4) Liz offers to sell Max her iPad for $200. Max says, "Okay, but only if you include the case and other accessories." Max has
A) accepted the offer.
B) made a counteroffer without rejecting the offer.
C) rejected the offer and made a counteroffer.
D) rejected the offer without making a counteroffer.
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Chapter 13: Consideration
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Sample Questions
Q1) If a promise is made, it can be enforced.
A)True
B)False
Q2) Refer to Fact Pattern 13-B1. Quik and Rico's
A) may rescind their entire contract.
B) may rescind their contract to the extent that it is executory.
C) must perform their entire contract.
D) must perform the part of their contract that is executory.
Q3) While sailboarding, Jolene is injured when Kilroy carelessly crosses her path. Kilroy's insurance company offers Jolene $50,000 to release Kilroy from liability, and she accepts. Later, she learns that her injuries are more serious than she realized. The release is
A) enforceable.
B) unenforceable because Jolene's injuries are unforeseeably difficult.
C) unenforceable because Kilroy has a preexisting duty to pay.
D) unenforceable because the release is an illusory promise.
Q4) A covenant not to sue does not always bar further recovery.
A)True
B)False
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Chapter 14: Capacity and Legality
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Sample Questions
Q1) In some states, misrepresentation of age is enough to prevent disaffirmance.
A)True
B)False
Q2) An intoxicated person, after becoming sober, may ratify a contract expressly or impliedly.
A)True
B)False
Q3) A minor who enters into a contract for necessaries may disaffirm the contract but remains liable for the reasonable value of the goods.
A)True
B)False
Q4) In certain circumstances, bargains are so oppressive that the courts relieve innocent parties of part or all of their duties.
A)True
B)False
Q5) Clothing is a "necessary."
A)True
B)False
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Chapter 15: Mistakes, Fraud, and Voluntary Consent
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Sample Questions
Q1) Refer to Fact Pattern 15-B3. Under these circumstances, Colt's best course of action is most likely to
A) scam Birdie.
B) induce Birdie to give him the commission on her next sale.
C) recover damages or rescind the contract to buy the building.
D) sabotage Birdie's career with bad publicity.
Q2) Refer to Fact Pattern 15-B2. The parties' belief about the adjacency of the property is A) a bilateral mistake.
B) a fraudulent misrepresentation.
C) a unilateral mistake.
D) unconscionable.
Q3) A material fact is a fact that a reasonable person would consider important when determining his or her course of action.
A)True
B)False
Q4) Misrepresentation of a material fact cannot occur through conduct alone.
A)True
B)False
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17
Chapter 16: The Writing Requirement and Electronic Records
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Sample Questions
Q1) Unless a party against whom enforcement of an oral contract is sought admits under oath that a contract for sale was made, the contract will not be enforceable.
A)True
B)False
Q2) Hal's True Hardware Stores and Ideal Tools, Inc., sign a written con?tract for a sale of goods. To be enforceable, this written contract must include
A) a correct title, such as "Purchase Order" or "Sales Invoice."
B) a date, such as "October 2014" or "10/2014."
C) a quantity term, such as "50 hammers" or "100 boxes of assorted nails."
D) the parties' contact information.
Q3) Oral evidence of otherwise clear terms in a contract can be introduced at a trial to contradict those terms.
A)True
B)False
Q4) The writing requirement under the Statute of Frauds means that an agreement must be a formal written contract.
A)True
B)False
Page 18
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Chapter 17: Third Party Rights
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Sample Questions
Q1) Intended beneficiaries can sue to enforce a contract.
A)True
B)False
Q2) The rights of a third party bene?ficiary under a contract vest if the third party brings a lawsuit on the promise.
A)True
B)False
Q3) Refer to Fact Pattern 17-B1. Coastal Marina is
A) a delegatee.
B) an assignee.
C) an incidental beneficiary.
D) an intended beneficiary.
Q4) Julia, a world-famous chef, signs a contract to give lessons in French cooking to Kyle. Julia wants to transfer her duties under the con?tract to Leila, a short-order cook at Mom's Café. The transfer is
A) valid because the performance required is of a nonpersonal nature.
B) valid if Leila is a highly regarded short-order cook.
C) not valid because performance depends on Julia's personal skills.
D) not valid if Kyle does not hold Leila in high regard.
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Chapter 18: Performance and Discharge in Traditional
E-Contracts
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Sample Questions
Q1) To rescind a contract, the parties must make a second agreement that satisfies the legal requirements for a contract.
A)True
B)False
Q2) A contractual obligation may not be discharged through novation.
A)True
B)False
Q3) Bernadette enters into a contract to operate a Caramel Coffee franchise, which Caramel Coffee agrees to support as long as Bernadette maintains her business license. Caramel Coffee's duty to perform is
A) not a condition.
B) a condition precedent.
C) a concurrent condition.
D) a condition subsequent.
Q4) Performance can be accomplished by tender.
A)True B)False
Q5) Any breach allows the nonbreaching party to cancel the contract. A)True B)False
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Chapter 19: Breach of Contract and Remedies
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Sample Questions
Q1) Punitive damages generally are awarded in lawsuits for breach of contract. A)True
B)False
Q2) Bread & Bagels Bakery enters into a contract with Cineplex for discounted tickets for Bread & Bagels' employees. Cineplex breaches the contract and Bread & Bagels enters into a contract with DigiMovies for the same service at a lower price. Bread & Bagels might be awarded nominal damages to
A) establish, as a matter of principle, that Cineplex acted wrongfully.
B) provide Bread & Bagels with funds for a foreseeable loss beyond the contract.
C) provide Bread & Bagels with funds for its loss of the bargain.
D) punish Cineplex and set an example to deter others from similar acts.
Q3) Lunch Trucks, Inc., contracts to deliver and serve Meals Catering Service's products to its clients for $5,000 per event, payable in ad?vance. Meals Catering pays the money, but Lunch Trucks fails to perform. Can Meals Catering rescind the contract? Can Meals Catering also ob?tain restitution? What does it mean to "rescind" a contract? How is a contract rescinded? What is restitution? How is restitution accom?plished? Explain.
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Chapter 20: Formation of Sales and Lease Contracts
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Sample Questions
Q1) Toro, S.A., which is based in Mexico, enters into a contract for the purchase of portable livestock fencing from United Fencing Company, which is based in the United States. This contract is governed by A) Mexican law.
B) the provisions in the laws of both countries that are similar.
C) the Uniform Commercial Code.
D) the United Nations Convention on Contracts for the International Sale of Goods.
Q2) Nature's Products, Inc., sends its standard order form to Omni Distribution Corporation to evidence a sale of packing materials. Omni responds with its own standard purchase order form. Additional terms in the purchase order automatically become part of the contract unless
A) the terms materially alter the original contract.
B) the original offer expressly required acceptance of its terms.
C) the offeror objects to the new terms within a reasonable time.
D) any of the choices.
Q3) Goods associated with real estate often fall within the scope of Article 2.
A)True
B)False
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Chapter 21: Title, Risk, and Insurable Interest
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Q1) Megan, an agent for a department store, orders one hundred dresses from Sal's Clothing Shop for the Spring Blossom Sale. There is no specific agreement in the sale contract indicating when title will pass to the department store. The title will pass to the department store when
A) Megan signs the contract.
B) Megan and the Sal's Clothing Shop agent sign the contract.
C) Sal's Clothing Shop physically delivers the dresses to the department store.
D) Megan pays Sal's Clothing Shop for the dresses.
Q2) Moving & Storage Company holds goods for National Distribution Corporation, which contracts to sell them to Omni Stores, Inc. The goods are to be delivered without being moved and are represented by a negotiable bill of lading. The risk of loss passes to Omni Stores
A) if Moving & Storage refuses to honor the bill of lading.
B) if National Distribution gives the bill of lading to Moving & Storage.
C) if the goods are lost due to an "act of God."
D) when Omni Stores receives the bill of lading.
Q3) In a sale or return, a buyer has an option to return the goods and undo the sale.
A)True
B)False
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Page 23
Chapter 22: Performance Breach of Sales Lease Contracts
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Sample Questions
Q1) On May 1, Garage Prefabricators, Inc., agrees to sell four portable garages to Hiway Truck Service Center. Five days later, Hiway refuses delivery and cancels the contract.
Garage Prefabricators is enti?tled to
A) force Hiway to accept the garage.
B) recover any damages from Hiway but not resell the garage.
C) resell the garage and recover any damages from Hiway.
D) resell the garage but not recover any damages from Hiway.
Q2) Almond Farms contracts for the sale of a certain quantity of nuts to Bulk Natural Foods Stores. Almond Farms delivers nonconforming goods. Acceptance will be presumed unless Bulk Natural Foods rejects the goods
A) within a reasonable time after delivery.
B) within a reasonable time after ordering the goods.
C) within any time, since hunting rifles are not perishable.
D) before the last day of the current hunting season.
Q3) Refer to Fact Pattern 22-B1. In this letter of credit, the account party is A) Global Mining.
B) Finish & Refining.
C) Economy Bank.
D) Great Britain.
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Page 24
Chapter 23: Warranties
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Sample Questions
Q1) A seller who makes a statement that relates to the value or worth of the goods creates an express warranty.
A)True
B)False
Q2) Arnold buys a backhoe from Big Dig Equipment Inc. Arnold is unaware that Credit Collection Company holds a lien against the backhoe when he buys it. If Credit Collection repossesses the backhoe, Arnold can
A) recover from Big Dig for breach of warranty.
B) do nothing.
C) file criminal charges against Big Dig and Credit Collection.
D) recover damages from Credit Collection for breach of warranty.
Q3) Trucks & Trailers, Inc. (T&T), and United Delivery Service enter into a contract for a lease of trucks. T&T is a merchant who deals in goods of the kind leased. Under the UCC, an implied warranty of merchantability arises
A) automatically.
B) only if the lessee asks for such a warranty.
C) only if the lessor expresses such a warranty.
D) only in conjunction with sales contracts, not lease contracts.
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Chapter 24: International Law in a Global Economy
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Sample Questions
Q1) Big Deal! Marketing Company, a U.S. firm, signs a contract with Comercio Exterior, Ltd., a Chilean firm, to give Comercio the right to use Big Deal!'s animation techniques and characters in product promotions. This is
A) a distribution agreement.
B) a joint venture.
C) direct exporting.
D) licensing.
Q2) The International Court of Justice normally has authority to settle legal disputes only when nations voluntarily submit to its jurisdiction.
A)True
B)False
Q3) Mont Blanc S.A., a French firm, imports its goods into the United States and offers those goods for sale at "less than fair value." "Fair value" is the price of Mont Blanc's goods in
A) the European market.
B) France.
C) the United States.
D) the world market.
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Chapter 25: The Function Creation of Negotiable Instruments
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Q1) An extension clause allows a payee or other holder of a time instrument to demand payment of the entire amount due, with interest, if a certain event occurs.
A)True
B)False
Q2) With respect to negotiability, the location of a signature on a document is important.
A)True
B)False
Q3) Refer to Fact Pattern 25-1B. With respect to this instrument, Union Bank is
A) the drawee.
B) the indorser.
C) the maker.
D) the payee.
Q4) To obtain a business license, Bess writes a check to a certain state agency. Bess is A) the drawee.
B) the drawer.
C) the indorser.
D) the payee.
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Chapter 26: Transferability and Holder in Due Course
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Q1) Dirk transfers a note by signing it and delivering it to Edwina. Dirk is
A) an indorser.
B) an indorsee.
C) a promisee.
D) a promisor.
Q2) A holder takes an instrument for value if he or she inherits an instrument.
A)True
B)False
Q3) An instrument is dishonored when the party to whom the instrument is presented refuses to pay it.
A)True
B)False
Q4) An indorsement is a signature, with or without additional words or statements. A)True
B)False
Q5) A holder takes an instrument for value by promising to perform or give value in the future.
A)True
B)False
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Chapter 27: Liability, Defenses, and Discharge
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Q1) Fiona writes a check "pay to the order of Gerri" drawn on Fiona's account at Home State Bank. Gerri presents the check for payment to Home State, which ac?cepts it. Primarily liable on the check is
A) Fiona.
B) Gerri.
C) Home State.
D) none of the choices.
Q2) When there is a breach of an underlying contract for which an instrument was issued, the drawer of a check can order his or her bank to stop payment on the check.
A)True
B)False
Q3) Warranty liability arises only when a transferor indorses the instrument.
A)True
B)False
Q4) The completion of an originally incomplete instrument in an unauthor?ized manner is not a defense against payment on the instrument to an HDC.
A)True
B)False
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29
Chapter 28: Banking in the Digital Age
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Q1) Refer to Fact Pattern 28-1B. First Choice
A) is liable to Efficient Auto for the amount of the check.
B) must stop payment if First Choice has a reasonable time to act.
C) need not follow Dana's order because it was issued after the check.
D) need not follow Dana's order unless the check was certified.
Q2) A customer who fails to report a forged signature within thirty days from the date that the bank statement showing the item was made available for inspection loses the legal right to have the bank recredit his or her account.
A)True
B)False
Q3) Kenyon steals one of Lavender's checks and forges her signature. Lavender's bank, Metro Bank, pays the check. Lavender can recover from A) Kenyon, but not Metro Bank.
B) Metro Bank, which cannot recover from Kenyon.
C) Metro Bank, which can recover from Kenyon.
D) no one.
Q4) Check 21 requires banks to change their current check-collection practices.
A)True
B)False
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Chapter 29: Creditors Rights and Remedies
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Q1) Stanley's debt to Town Bank is past due. Town Bank obtains a judgment against Stanley to collect the debt, but he refuses to pay. Town Bank asks the court to order Stanley's employer to pay a portion of his paycheck to the bank. This is a request for
A) a mechanic's lien.
B) an order of garnishment.
C) an order that would violate most state laws.
D) a writ of attachment.
Q2) If a homeowner defaults, or fails to make the mortgage payments, the lender has the right to foreclose on the mortgaged property.
A)True
B)False
Q3) Portia owes Bon $500 on their roof repair contract, but refuses to pay. To collect, Bon files a me?chanic's lien. Under a mechanic's lien, security for the debt is repre?sented by A) Portia's personal property.
B) Portia's real estate.
C) the $500 owed under the contract.
D) the contract.
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Page 31
Chapter 30: Secured Transactions
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Q1) For a creditor to have an enforceable security interest, the debtor must have rights in the collateral.
A)True
B)False
Q2) City Bank's financing statement in collateral owned by Delta Waters Corporation will expire in less than a year. Filed timely, a continuation statement could extend the effectiveness of the financing statement for A) one year.
B) two years.
C) five years.
D) ten years.
Q3) On a debtor's default, he perfection of a security interest will not always protect a secured party against other third parties having claims to the collateral.
A)True
B)False
Q4) Perfection is usually accomplished without filing a financing statement. A)True
B)False
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Page 32
Chapter 31: Bankruptcy Law
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Q1) An involuntary bankruptcy occurs when the debtor forces his or her creditors into bankruptcy proceedings.
A)True
B)False
Q2) Patsy files a petition in bankruptcy. At the moment of filing
A) an automatic stay goes into effect.
B) Patsy's debts are discharged.
C) Patsy's petition is dismissed.
D) Patsy's property is distributed to her creditors.
Q3) Exceptions to the automatic stay include investigations by a securities regulatory agency, which can continue despite the suspension of other actions against a debtor the moment a bankruptcy petition is filed.
A)True
B)False
Q4) In a Chapter 13 case, after the debtor has completed all payments, the court grants a discharge of all debts provided for by the repayment plan.
A)True
B)False
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Page 33
Chapter 32: Agency Formation and Duties
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Q1) Ratification involves a question of intent, and intent can be expressed only by words.
A)True
B)False
Q2) An agency relationship created for a purpose that is contrary to public policy may still be enforceable.
A)True
B)False
Q3) Donato is Equipment Repair Service Company's chief executive officer. On Equipment Repair's behalf, Donato solicits business, hires and fires workers, and handles finances. Equipment Repair pays Donato varying amounts, depending on his "needs." Donato is most likely
A) a principal.
B) an employee.
C) an employer.
D) an independent contractor.
Q4) Employers can avoid certain tax liabilities by hiring independent contractors instead of employees.
A)True
B)False
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Chapter 33: Agency Liability and Termination
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Q1) Donald approves on behalf of Evelyn-but without authorization-a contract with Farouk to build a new silo. Evelyn does not ratify the contract. The deal with Farouk is
A) an enforceable contract with Donald.
B) a voidable contract.
C) an enforceable contract with Evelyn.
D) an unaccepted offer.
Q2) An executive officer of a corporation normally can conduct ordinary business transactions without obtaining written authority from the corporation.
A)True
B)False
Q3) A special power of attorney permits an agent to transact all business for a principal.
A)True
B)False
Q4) Under the doctrine of respondeat superior, a principal may be liable for any harm that his or her agent causes to a third party.
A)True
B)False
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Chapter 34: Employment, Immigration, and Labor Law
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Q1) The most common exception to the employment-at-will doctrine is made on the basis that the employer's reason for firing the employee violates fundamental common sense.
A)True
B)False
Q2) For a union election to be held, at least 30 percent of the workers to be represented must support a union or an election on unionization.
A)True
B)False
Q3) Children under fourteen years of age are not allowed to work.
A)True
B)False
Q4) It is not an unfair labor practice for an employer to contribute financial or other support to a labor organization.
A)True
B)False
Q5) An employer can voluntarily pay overtime to ineligible employees.
A)True
B)False
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Chapter 35: Employment Discrimination and Diversity
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Q1) Title VII of the Civil Rights Act of 1964 applies to employers with fifteen or less employees.
A)True
B)False
Q2) Refer to Fact Pattern 35-1B. Lomax believes that he has been discriminated against on the basis of his age. For the Age Dis?crimination in Employment Act of 1967 to apply
A) Kyla must be forty years of age or younger.
B) Kyla must be forty years of age or older.
C) Lomax must be forty years of age or older.
D) Lomax must have been MVMC's employee for at least forty years.
Q3) Title VII of the Civil Rights Act of 1964 prohibits job discrimination against majority group individuals, such as white males.
A)True
B)False
Q4) The distribution of promotions and other job benefits according to a seniority system is not normally a good defense to a suit for employment discrimination.
A)True
B)False
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Chapter 36: Sole Proprietorships and Franchises
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Q1) When a franchise agreement contains a notice-and-cure provision, a franchisee's breach of the duty of honesty and fidelity is not enough to allow the franchisor to terminate the franchise.
A)True
B)False
Q2) Some states require that a franchisor submit advertising aimed at pro?spective franchisees to the state for approval.
A)True
B)False
Q3) Haute Dogs, Inc., sells a franchise to Ilene's Cuisine, a lunch truck. Ilene's Cuisine is A) a franchisee.
B) a franchisor.
C) an agent.
D) a principal.
Q4) A franchisee is generally legally independent of the franchisor.
A)True
B)False
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Chapter 37: Partnerships and Limited Liability Partnerships
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Q1) After a partner dissociates from a continuing partnership, the partnership is no longer bound by the acts of the dissociated partner, even on a theory of apparent authority.
A)True
B)False
Q2) Nikki and Orlando are limited partners in Port City Exports, a lim?ited part?ner?ship.
To avoid personal liability for partnership obligations, they must not
A) acquire an interest in the firm.
B) contribute property to the firm.
C) engage in activities independent of the firm's business.
D) participate in the firm's management.
Q3) A majority of the states treat a partnership as an entity for most purposes.
A)True B)False
Q4) Devoting time, energy, and skill to partnership business is a partner's duty and is not a compensable service.
A)True
B)False
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Chapter 38: Other Organizational Forms for Small Businesses
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Q1) Gabriella is a beneficiary of a business trust. As a beneficiary, she is required to A) distribute the trust's profits.
B) assume responsibility for the trust's debts.
C) draft a written trust agreement.
D) none of the choices.
Q2) Arnie is a member of Bowling & Billiards, LLC, a limited liability company. Arnie can participate in the firm's management
A) only to the extent that he assumes liability for the firm's debts.
B) only to the extent of his investment in the firm.
C) to any extent.
D) to no extent.
Q3) A joint stock company is generally treated as a partnership.
A)True B)False
Q4) A limited liability company can be taxed as a partnership.
A)True
B)False
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Chapter 39: Corporate Formation and Financing
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Q1) Rhys owns Solar Fuel Corporation. Rhys uses Solar Fuel's funds to pay his personal expenses, creates Thermal Power Corporation to engage in the same business as Solar Fuel, transfers Solar Fuel's assets to Thermal Power, and petitions Solar Fuel into bankruptcy. This most likely warrants
A) a bonus to Rhys for financial maneuvers.
B) a discharge for Solar Fuel in bankruptcy.
C) a pierce of the corporate veil.
D) a review of Thermal Power's articles of incorporation.
Q2) In corporate law, acts of a corporation that are beyond its express or implied powers are de facto or de jure acts.
A)True
B)False
Q3) Orel incorporates his business as Posts & Wire Corporation in Texas. He and his group of shareholders intend to make a profit from their sales of fencing materials. Posts & Wire is
A) a nonprofit corporation.
B) not a corporation.
C) an alien corporation.
D) a private corporation.
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Page 41
Chapter 40: Corporate Directors, Officers, Shareholders
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Q1) Nelson is Organic Coffee Company's majority shareholder. Nelson decides to sell his Organic Coffee stock. The sale will be an effective transfer of the control of the company. Does Nelson owe a duty to Organic Coffee or its minority shareholders in this situation?
Q2) Dionne is an officer of Event Ticketing, Inc. As an officer, with respect to the corporation, Dionne is
A) a fiduciary.
B) a forum.
C) a proxy.
D) a quorum.
Q3) Dividends can be paid from the undistributed net profits earned by the corporation. A)True
B)False
Q4) Normally, a corporate board of directors appoints itself as the first board at the time the corporation is created.
A)True
B)False
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Chapter 41: Mergers and Takeovers
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Q1) Garden Supply Company and Home & Lawn Corporation plan to con?solidate. Most likely, the articles of consolidation will be filed with
A) the county recording office.
B) the local retailers' association.
C) the state's secretary of state.
D) the U.S. Department of Commerce.
Q2) Refer to Fact Pattern 41-2B. Quality Films issues shares that its shareholders can exchange for cash if a takeover is successful, intending to make Popular Movies's takeover attempt too expensive. This is a
A) crown jewel defense.
B) Pac-Man defense.
C) poison pill defense.
D) white knight defense.
Q3) A target corporation's attempted takeover of an acquiring corporation is referred to as the poison pill defense.
A)True
B)False
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Chapter 42: Securities Law Corporate Governance
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Q1) For civil sanctions to be imposed under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, the violator must not have had an intent to defraud or knowledge of his or her misconduct.
A)True
B)False
Q2) HVAC Heating & Air Conditioning, Inc., is a public company whose shares are traded in the public securities markets. Under the Sarbanes-Oxley Act of 2002, to ensure that HVAC's financial results are accurate and timely, the firm's senior officers must set up and maintain
A) internal "disclosure controls and procedures."
B) external "release and reveal timetables."
C) personal "peruse and review liability policies."
D) public "information and discussion forums."
Q3) Refer to Fact Pattern 42-1B. Under the Securities Ex?change Act of 1934, Geoff is most likely
A) liable for insider trading.
B) not liable because Geoff is only a tippee, not a tipper.
C) not liable because Geoff is too far down the chain of disclosure.
D) not liable because Geoff traded on the basis of a material fact.
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Page 44
Chapter 43: Administrative Agencies
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Q1) Armando is a witness in a contro?versy involving the U.S. Bureau of Tobacco and Firearms. Armando can be compelled to appear before an adminis?trative law judge if he is served with
A) an order for specific performance.
B) an executive order.
C) a subpoena.
D) a search warrant.
Q2) If a business firm refuses to comply with an agency's request to inspect facilities or business records, the agency must defer to the refusal.
A)True
B)False
Q3) Administrative agencies at various levels of government work together and share the responsibility of enforcing particular regulations.
A)True
B)False
Q4) Business has little incentive to try to influence the regulatory environment through lobbying.
A)True B)False
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Chapter 44: Consumer Law
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Q1) Insurance companies must spend at least 85 percent of all premium dollars from large employers on benefits and quality improvements.
A)True
B)False
Q2) SmartPhone Company's ad states that its product is "The Best that Money Can Buy."
Because of this ad, the Federal Trade Com?mission is most likely to issue
A) a cease-and-desist order.
B) a counteradvertising order.
C) a multiple product order.
D) none of the choices.
Q3) Advertising that appears to be based on factual evidence will not be deemed deceptive even if it is not reasonably supported by evidence.
A)True
B)False
Q4) Credit can be denied solely on the basis of race.
A)True
B)False
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Chapter 45: Environmental Law and Sustainability
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Q1) National effluent (pollution) standards are set by the Environmental Protection Agency for each industry.
A)True
B)False
Q2) Condos & Course Development, Inc., fills a wetlands area that it owns without a permit from the U.S. Army Corps of Engineers. Condos & Course Development plan to build a golf course and residences on the site. Under the Clean Water Act, this is most likely
A) a violation.
B) not a violation because a permit is not needed to fill wetlands.
C) not a violation because the area was filled before construction.
D) not a violation because there was no discharge of pollution.
Q3) Grease & Lubricants Inc. makes its products without required pollution control technology, causing a discharge of oily waste into the nearby Holly Lake. This activity can re?sult in
A) a criminal fine or imprisonment only.
B) a criminal fine, imprisonment, or an injunction only.
C) a criminal fine, imprisonment, an injunction, or damages.
D) an injunction only.
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Page 47
Chapter 46: Antitrust Law
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Q1) A seller is prohibited from making an exclusive-dealing contract if the effect is to tend to create a monopoly.
A)True B)False
Q2) U.S. antitrust laws may be applied to protect foreign consumers and competitors from violations committed by U.S. business firms.
A)True B)False
Q3) A seller is prohibited from charging different prices to competing buyers for identical goods or services.
A)True
B)False
Q4) Any activity that substantially affects interstate commerce falls outside the scope of antitrust laws.
A)True B)False
Q5) Market power is the ability of a firm to enter a given market.
A)True B)False
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Chapter 47: Professional Liability and Accountability
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Q1) Rochelle, an accountant, enters into a contract to provide services to Sky Transport Inc. Rochelle does not finish the work within the contract's deadline. Sky Transport pays a penalty for the missed deadline and hires Turbo to complete the job. Rochelle is most likely liable for A) nothing.
B) Sky Transport's penalty and the cost to hire Turbo.
C) Sky Transport's penalty only.
D) the cost to hire Turbo only.
Q2) Miriam is an accountant. Natalie is an attorney. Which professional is most re?stricted from disclosing her or his client's communication?
Q3) Traditionally, a professional owed a duty only to those with whom the professional had a direct contractual relationship.
A)True B)False
Q4) An accountant's liability under the Securities Act of 1933 re?quires privity of contract with the purchaser of a security.
A)True
B)False
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Chapter 48: Personal Property and Bailments
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Q1) Warehouse companies are not liable for loss or damage to property resulting from negligence.
A)True
B)False
Q2) James works at Kay's Breakfast Café. After work, in the parking lot, James finds a diamond ring lost by Lani. Title to the ring is possessed by A) James.
B) Kay's.
C) Lani.
D) the state.
Q3) Mallory's sister Naomi gives Mallory a leather working kit for Christmas. Mallory uses the kit to make a saddle. Mallory's acquisition of the saddle is by A) gift.
B) accession.
C) confusion.
D) production.
Q4) A bailee must exercise reasonable care in preserving the bailed property.
A)True
B)False
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Chapter 49: Real Property Landlord-Tenant Law
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Q1) Franz owns GuestHouse Hotel. His ownership rights include the right to sell or give away the property without restriction, as well as the right to com?mit waste, if he chooses. Franz's ownership interest is
A) a fee simple absolute.
B) a profit.
C) a life estate.
D) the power of eminent domain.
Q2) Mix-It Concrete Company has the right to enter Nim's land and remove the rock from Nim's quarry. This is
A) the power of eminent domain.
B) a license.
C) an easement.
D) a profit.
Q3) The protection of an individual's right to his or her property has become one of our most important rights.
A)True
B)False
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Chapter 50: Insurance
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Q1) Reno is the beneficiary of a life insurance policy on Sula's life obtained from Traditional Insurance Company. The underwriter of this policy is
A) Reno.
B) Sula.
C) Traditional Insurance.
D) the agent or broker through whom the policy was obtained.
Q2) Myles obtains a property insurance policy from Nova Insurance Company for Myles's restored 1957 Chevy. Nova can cancel the policy
A) if Myles increases the risk assumed by the Nova.
B) if Myles files a claim under the policy.
C) if Myles appears as a witness in a case brought against Nova.
D) under no circumstances.
Q3) Grid Tool Company makes and sells tools and other hardware supplies. To cover injuries to consumers if the products prove de?fective, Grid Tool should obtain
A) disability insurance.
B) health insurance.
C) liability insurance.
D) life insurance.
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Chapter 51: Wills and Trusts
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Q1) An executor is a personal representative named in a will.
A)True
B)False
Q2) The testator's signature must appear on the will.
A)True
B)False
Q3) Finnegan dies without a will, with no surviving spouse or child. Finnegan's survivors in?clude his grandson Gallagher, his niece Hailey, and his cousin Innis. In most states, his estate would pass to A) Gallagher.
B) Hailey.
C) Innis.
D) the state.
Q4) A "living will" is a will drafted and executed during a decedent's life.
A)True
B)False
Q5) The property of a decedent escheats to his or her designated heirs.
A)True
B)False
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