Business and Commercial Transactions
Pre-Test Questions
Course Introduction
This course provides a comprehensive overview of the legal principles and frameworks governing business and commercial transactions. Topics include the formation and operation of contracts, the Uniform Commercial Code (UCC), payment systems, secured transactions, negotiable instruments, and the rights and obligations of parties in sales of goods. Students will also examine key aspects of commercial law such as warranties, remedies, and the roles of third parties. Through case studies and practical examples, the course equips students with the foundational knowledge required to navigate and analyze complex business transactions in both domestic and international contexts.
Recommended Textbook
Business Law Principles for Todays Commercial Environment 4th Edition by David P. Twomey
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52 Chapters
2754 Verified Questions
2754 Flashcards
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Chapter 1: The Nature and Sources of Law
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Sample Questions
Q1) Rights always stand alone,without any duties.
A)True
B)False
Answer: False
Q2) Treaties made by the United States are not deemed part of the law.
A)True
B)False
Answer: False
Q3) The right of privacy does not apply to intrusions into our privacy by means of new technology.
A)True
B)False
Answer: False
Q4) Law consists of:
A)principles that govern conduct.
B)mere guidelines.
C)arbitrary rules.
D)none of the above.
Answer: A
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Chapter 2: The Court System and Dispute Resolution
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Sample Questions
Q1) Chandra sues Martin for breach of contract.Both parties have completed discovery.Chandra now wants her attorney to file a motion to have the judge rule in her favor without having to proceed further.Chandra does not know whether the motion to dismiss or the motion for a summary judgment is proper.Which motion is proper and why?
Answer: As between the motion to dismiss and the motion for summary judgment,Chandra's attorney should file a motion for summary judgment,since the parties are beyond the pleadings stage of litigation,and since they have completed discovery. Using evidence gathered during discovery,such as affidavits and/or deposition testimony,Chandra's attorney could argue that there are no material issues of fact disputed by the parties,and that Chandra is entitled to judgment as a matter of law.
Q2) State supreme courts generally hear all cases appealed to them.
A)True
B)False
Answer: False
Q3) The defendant in a civil case is the party who is suing.
A)True
B)False
Answer: False
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Chapter 3: Business Ethics, social Forces, and the Law
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Sample Questions
Q1) Under United States law,the legal owner (titleholder)of property is free to engage in any use of the property that he or she may desire.
A)True
B)False
Answer: False
Q2) In applying the stakeholder model of business ethics,only the interests of important constituencies affected by an action need to be satisfied.
A)True
B)False
Answer: False
Q3) Despite the importance of ethical behavior for business success,few Fortune 500 companies have codes of ethics to resolve ethical dilemmas.
A)True
B)False
Answer: False
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Chapter 4: The Constitution As the Foundation of the Legal Environment
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Sample Questions
Q1) The commerce clause of the Constitution:
A)prohibits the U.S.government from engaging in interstate commerce.
B)prohibits the U.S.government from regulating interstate commerce.
C)has been expanded by Supreme Court interpretations to give the U.S.government the power to regulate the general welfare of the nation.
D)was declared unconstitutional in 1937.
Q2) Which of the following is not characteristic of the "living" Constitution?
A)strong government
B)strong President
C)administrative agencies
D)states' powers equal to federal powers
Q3) Under the U.S.Constitution:
A)"persons" are expressly protected.
B)particular rights of "persons" are expressly protected.
C)certain rights of "persons" have been implied by the Supreme Court.
D) both b and
Q4) When it comes to the constitution,stability is more important than flexibility.
A)True
B)False
Page 6
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Chapter 5: Government Regulation of Competition and Prices
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Sample Questions
Q1) Freezo Refrigerators are sold by various retailers. Most of the same retailers also sell Icy Refrigerators. The Freezo brand outsells Icy in some stores,but not in others.Freezo has decided to offer secret bonuses and discounts to retailers where the sale of Freezo Refrigerators lags behind the sale of Icy Refrigerators. Freezo sees this action as an advertising ploy to increase market share. Retail stores where Freezo is number one are not eligible for any of these bonuses and discounts. Discuss the implications of Freezo's advertising plan.
Q2) The Sherman Act does not prohibit:
A)a company from engaging in purposeful conduct to exclude competitors.
B)a seller from dominating a market because of superior product or business.
C)competitors from agreeing not to deal with certain buyers.
D)all of the above.
Q3) The Sherman Act applies only to buying and selling activities,not manufacturing and production activities.
A)True
B)False
Q4) A "suggested retail price" is not a violation of the antitrust laws.
A)True
B)False
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Chapter 6: Administrative Agencies
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Sample Questions
Q1) Until proven valid,a rule adopted by an administrative agency is considered invalid by the courts.
A)True
B)False
Q2) The authority of an agency is limited to the technology in existence at the time the agency was created.
A)True
B)False
Q3) The Sunshine Act requires most meetings of major administrative agencies to be open to the public.
A)True
B)False
Q4) An administrative agency:
A)is not empowered to act as a court with regard to its own regulations.
B)acts as a specialized court of limited jurisdiction.
C)can hear complaints only in the presence of a jury.
D)cannot impose penalties for violation of its regulations.
Q5) The Freedom of Information Act provides access to any information upon request. A)True
B)False
Page 8
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Chapter 7: The Legal Environment of International Trade
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Sample Questions
Q1) Which of the following statements is true regarding the World Trade Organization (WTO)?
A)The WTO has been in place since 1947.
B)The WTO coordinates its activities with GATT.
C)It provides a dispute settlement body to promote the resolution of trade disputes.
D)It has the ability to impose criminal penalties.
Q2) A societé anonyme is the European counterpart of a U.S.corporation.
A)True
B)False
Q3) The Export-Import Bank (EX-IM Bank)is an international agency.
A)True
B)False
Q4) The United Nations Conventions on Contracts for the International Sale of Goods (CISG)sets forth uniform rules to govern international sales contracts.
A)True
B)False
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Chapter 8: Crimes
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Sample Questions
Q1) The criminal law of all states is the same because all states have adopted a uniform criminal code.
A)True
B)False
Q2) Which of the following statements is true?
A)Felonies are punishable by a minimum of six months in prison.
B)Felonies involve white-collar crimes only.
C)Felonies are more serious than misdemeanors.
D)All of the above.
Q3) Which of the following statements regarding the Foreign Corrupt Practices Act is true?
A)It applies only to foreign officials in this country.
B)It applies only to foreign officials outside this country.
C)It applies only to "grease" payments.
D)None of the above statements is true.
Q4) The Fourth Amendment warrant requirement does not apply to businesses.
A)True
B)False
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Page 10
Chapter 9: Torts
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Sample Questions
Q1) An absolute privilege is available as a defense to slander liability when:
A)the statement is made to only a few people.
B)libel exists.
C)a witness testifies in a court proceeding.
D)no intent to harm is present.
Q2) John was driving his car in a careless way,failing to drive as a reasonably prudent person would under the driving conditions.Ramona was crossing the street in a careless way,failing to cross as a reasonably prudent person would.John struck and injured Ramona with the car John was driving.At trial,it was determined that John was 80 percent at fault and that Ramona was 20 percent at fault.The injuries sustained amounted to $100,000.Explain how much,if any,recovery Ramona would receive in a state that applies the contributory negligence rule.Do the same thing for a state that applies the comparative negligence rule.
Q3) Governments are generally immune from tort liability.
A)True
B)False
Q4) The media enjoy a qualified privilege for stories that turn out to be false.
A)True
B)False
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Chapter 10: Intellectual Property Rights
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Sample Questions
Q1) To prevail in an action for trade dress infringement,a plaintiff must prove that its trade dress is distinctive and nonfunctional and the defendant's trade dress is confusingly similar to the plaintiff's.
A)True
B)False
Q2) It is important to protect trade dress against adoption by a competitor because such adoption can:
A)deceive purchasers into believing they have obtained a comparable product.
B)dilute the originator's resource investment in its product appearance.
C)usurp the business goodwill of the developer of the trade dress.
D)all of the above.
Q3) When secret information is shared or communicated for a special purpose and the person receiving the information knows it is not to be made known,it loses the protection it had while secret.
A)True
B)False
Q4) Trademarks and service marks are recorded with the Register of Copyrights.
A)True
B)False
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Chapter 11: Cyberlaw
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Sample Questions
Q1) Cleaning up your name on Google using one of several services is a good way to eliminate any suspicions perspective or current employers may have about you.
A)True
B)False
Q2) The term "cyberspace" describes the World Wide Web and Internet communication.
A)True
B)False
Q3) Employers are required to give notice to employees that they will monitor their employees' e-mail.
A)True
B)False
Q4) Web site operators are free to plant "cookies" on computers with no fear of action for breach of unauthorized access or privacy.
A)True
B)False
Q5) The distinction between offer and acceptance is no longer relevant in cyberlaw.
A)True
B)False
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Chapter 12: Nature and Classes of Contracts: Contracting
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Sample Questions
Q1) The law requires parties to be fair and reasonable in the making of a contract.
A)True
B)False
Q2) Whenever a person receives a benefit for which payment has not been made,there is an unjust enrichment and the value of such benefit must be paid to the person conferring the benefit.
A)True
B)False
Q3) Negotiable instruments are:
A)formal contracts.
B)informal contracts.
C)option contracts.
D)first-refusal agreements.
Q4) A void contract is one that is otherwise valid but may be rejected or set aside by one of the parties.
A)True
B)False
Q5) Quasi contracts are contracts.
A)True
B)False
Page 14
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Chapter 13: Formation of Contracts: Offer and Acceptance
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Sample Questions
Q1) A said to B,"I'll give you $100 for that bracelet." B replied,"$135." A said,"No thanks." B then said that B accepted the $100,but A was no longer interested and said there was no contract.B insists there is a contract.Result?
A)A's offer of $100 was open and accepted by B,thereby forming a contract.
B)B's counteroffer of $135 terminated A's offer of $100.
C)B's statement,"$135" was a negotiating statement that did not terminate A's original offer of $100.
D)A's offer of $100 was irrevocable.
Q2) If an offeree accepts an offer before it is effectively revoked:
A)a void contract is formed.
B)a voidable contract is formed.
C)an unenforceable contract is formed.
D)a valid contract is formed.
Q3) If not an offer,the first statement made by one of two persons is most properly termed a(n):
A)option.
B)acceptance.
C)invitation to negotiate.
D)contract.
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Page 15
Chapter 14: Capacity and Genuine Assent
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Sample Questions
Q1) A person lacks contractual capacity if:
A)the person is a chronic alcoholic.
B)the person is a drug addict.
C)because of mental impairment,the person does not comprehend that a contract is being made or understand its consequences.
D)all of the above.
Q2) Jack sells Jim a used car that Jack falsely described as having been driven only 12,000 miles.Fraud has occurred if:
A)Jim bought the car solely because of its color.
B)Jim knew that the mileage was more than 12,000 miles.
C)Jim relied upon Jack's statement.
D)Jack is a merchant.
Q3) The maximum amount of time that a minor has to disaffirm a contract is:
A)one year from the date of the agreement.
B)30 days from learning of his or her right to disaffirm.
C)the age of majority.
D)a reasonable period of time after reaching the age of majority.
Q4) Certain persons cannot make contracts that will bind them.
A)True
B)False
Page 16
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Chapter 15: Consideration
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Sample Questions
Q1) A promise that in fact does not impose any obligation on the promisor is known as an elusive promise.
A)True B)False
Q2) In a composition of creditors,the various creditors of a single debtor mutually agree to accept a fractional part of their claims in full satisfaction of the claims.
A)True B)False
Q3) Will the law enforce every promise?
A)Yes,in all cases.
B)Yes,with or without consideration.
C)Generally yes,if consideration is given for the promise.
D)Yes,but only if there is no consideration.
Q4) A promise to make a gift is enforceable.
A)True B)False
Q5) A binding contract cannot contain a cancellation provision. A)True B)False
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Chapter 16: Legality and Public Policy
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Sample
Questions
Q1) An illegal provision in a contract:
A)causes the entire contract to be voidable.
B)causes the entire contract to be rescinded.
C)can be ignored by the parties in their performance of the remaining provisions of the contract,assuming that the remaining portions of the contract can stand on their own.
D)can be ignored by the parties,because an illegal provision in a contract is not deemed substantial.
Q2) An agreement to restrain trade may be void on the grounds that it is:
A)fraudulent.
B)contrary to public policy.
C)illegal lobbying.
D)unfair to merchants.
Q3) Even if part of a contract is illegal,the court may enforce a divisible,legal part of the contract.
A)True
B)False
Q4) Agreements not to compete are always void.
A)True
B)False
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Chapter 17: Writing, electronic Forms, and Interpretation of Contracts
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Sample Questions
Q1) A note or memorandum does not have to contain all the essential terms of the contract to be valid.
A)True
B)False
Q2) When a person has performed services under an oral contract that cannot be enforced because of the statute of frauds,such person:
A)can recover the agreed payment for the services because a refusal to make payment would be a breach of the contract.
B)can recover the reasonable value of the services because there is a quasi-contractual duty to pay for the benefit received from such services.
C)cannot recover the value of the services because they were rendered under a unilateral mistake of law.
D)can have the party receiving the services arrested for obtaining property by false pretenses.
Q3) If a contract is unclear,it will be interpreted against the party who drafted it.
A)True
B)False
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Page 19
Chapter 18: Third Persons and Contracts
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Sample Questions
Q1) The right to performance under a contract can be assigned:
A)if the burden of performance is not materially increased.
B)if the contract requires the performance of personal services.
C)if the contract provides for the extension of credit.
D)all of the above.
Q2) An assignee of a contract can bring suit on the contract only in the name of the assignor.
A)True
B)False
Q3) The assignments of the right to money always gives the assignee the right to collect and keep the funds.
A)True
B)False
Q4) If the obligor is notified in any manner that there has been an assignment and that any money due must be paid to the assignee,the obligor's obligation can be discharged only by making payment to the assignee.
A)True
B)False
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Chapter 19: Discharge of Contracts
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Sample Questions
Q1) When a debtor makes a payment to a creditor specifying how it should be applied,the creditor must apply the payment:
A)as directed by the debtor.
B)to the oldest outstanding debt.
C)to the most recent outstanding debt.
D)to the largest outstanding debt.
Q2) The parties may decide that their contract is not the one they want.They may then replace it with another contract.If they do,the original contract is discharged by
A)solution
B)elocution
C)retribution
D)substitution
Q3) When a building contractor has substantially performed a contract to construct a building,the contractor is entitled to recover the full contract price.
A)True
B)False
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Chapter 20: Breach of Contract and Remedies
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Sample Questions
Q1) When a party expressly declares that performance will not be made when required,this declaration is a(n):
A)anticipatory repudiation.
B)injunction.
C)negotiating technique.
D)waiver of breach.
Q2) An injured party who rescinds a contract after having performed services may recover the reasonable value of the performance rendered under restitutionary or quasi-contractual damages.
A)True
B)False
Q3) Which is NOT a correct statement concerning a liquidated damages clause?
A)If the clause is enforced,the injured party can collect no more than the amount specified.
B)If the clause is enforced,the injured party has a choice between compensatory damages or liquidated damages.
C)It must be possible to determine actual damages.
D)The amount of liquidated damages are established by the parties to the contract.
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22
Chapter 21: Personal Property and Bailments
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Sample Questions
Q1) A third person to whom a joint tenant's interest is transferred becomes a:
A)joint tenant.
B)cotenant.
C)tenant in common.
D)tenant by the entirety.
Q2) At common law,a tenancy by entirety or a tenancy by the entireties is created when property is transferred to both husband and wife.
A)True
B)False
Q3) If a bailment is for the sole benefit of the bailee,the bailor has no obligation to inform the bailee of known defects.
A)True
B)False
Q4) The person who turns over the possession of bailed property is the bailor,and the person who accepts possession is the bailee.
A)True
B)False
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Chapter 22: Legal Aspects of Supply Chain Management
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Sample Questions
Q1) A common carrier transporting goods under a COD shipment may:
A)make delivery without first obtaining payment.
B)not make delivery without first receiving payment.
C)accept a check as payment and have no liability.
D)not avoid liability without a signed release.
Q2) A public warehouser has a specific lien against the goods stored for reasonable costs incurred from the storage.
A)True
B)False
Q3) A common carrier must:
A)receive and carry proper and lawful goods of all persons who offer them for shipment.
B)furnish adequate facilities.
C)follow the instructions of the shipper.
D)all of the above.
Q4) A transferee of a nonnegotiable warehouse receipt acquires only the title and rights that the transferor had actual authority to transfer.
A)True
B)False
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24
Chapter 23: Nature and Form of Sales
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Sample Questions
Q1) All goods other than those existing and owned by a seller at the time of a transaction are called:
A)existing goods.
B)tangible goods.
C)future goods.
D)intangible goods.
Q2) The UCC permits a court to refuse to enforce a sales contract that it finds to be unconscionable.
A)True
B)False
Q3) The CISG:
A)governs all contracts between parties in countries that have ratified it.
B)applies only to goods bought for personal,family or household uses.
C)applies to contracts in which the predominant part of the obligation is the supply of labor or other services.
D)none of the above.
Q4) The provisions of Article 6 concerning bulk transfers are designed to protect creditors.
A)True
B)False
Page 25
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Chapter 24: Title and Risk of Loss
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Q1) Anne Robertson obtained telescopes from the See-Well Optics Company at dealer prices on the pretense of being a dealer in optical equipment.See-Well later determined that Robertson was not,had never been,and did not plan to be a dealer in optics.By the time these facts emerged,Robertson had succeeded in selling the telescopes to several individuals located throughout the country.These buyers had responded to advertisements placed by Robertson,who again had represented herself as a dealer in optical equipment.The buyers had purchased the telescopes in good faith at prices consistent with comparable equipment.See-Well located these buyers and demanded that the telescopes be returned as property obtained through fraud.Do the buyers of these telescopes have to return their purchases?
Q2) Future goods can be identified before they are manufactured.
A)True
B)False
Q3) In a __________,no sale takes place (meaning there is no transfer of title)until the buyer accepts the goods.
A)conditional sale
B)contingency sale
C)sale or return
D)sale on approval
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Page 26
Chapter 25: Product Liability: Warranties and Torts
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Q1) An exclusion of warranties made in the manner specified by the Uniform Commercial Code is not unconscionable.
A)True
B)False
Q2) If an express warranty is breached:
A)the warrantor is not liable if due care was exercised in the manufacture or handling of the product
B)the seller has no warranty obligation if the buyer had the opportunity to inspect the goods before purchasing them.
C)the warrantor is not liable if (s)he honestly believed that the warranty was true. D)the warrantor is always liable.
Q3) A full warranty allows the seller to require the buyer to assume the shipping cost of returning the good(s)for repair.
A)True
B)False
Q4) A merchant has greater potential warranty liability than does a casual seller.
A)True
B)False
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Chapter 26: Obligations and Performance
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Q1) A buyer has the right to accept some commercial units of a shipment and reject other commercial units.
A)True
B)False
Q2) When goods are shipped COD:
A)the buyer always has the right to examine them before making payment.
B)the underlying contract must specify when the buyer may inspect the goods.
C)the buyer has no right to examine the goods until payment is made.
D)the buyer gives up all rights to inspection of the goods.
Q3) A party to a sales contract may demand at any time that the other party provide adequate assurance of performance.
A)True
B)False
Q4) If adequate assurance of performance is not given within five (5)business days from the time of the demand for assurance,the demanding party may treat the contract as repudiated.
A)True
B)False
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28
Chapter 27: Remedies for Breach of Sales Contracts
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Q1) In the absence of a liquidated damages clause and in the absence of proof of greater damages,the seller's damages are computed as
A)25% of the purchase price or $500,whichever is less.
B)25% of the purchase price or $500,whichever is greater.
C)20% of the purchase price or $500,whichever is greater.
D)20% of the purchase price or $500,whichever is less.
Q2) A buyer seeking damages because of a breach of the sales contract must give the seller notice of the breach within a reasonable time after the buyer discovers or should have discovered it.
A)True
B)False
Q3) Proof of substantial impairment of the value of a contract to the buyer is required to justify revocation of acceptance.
A)True
B)False
Q4) When a buyer materially breaches a contract,the seller may cancel it.
A)True
B)False
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Chapter 28: Kinds of Instruments, parties, and Negotiability
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Q1) To be negotiable,an instrument must:
A)be in writing.
B)be signed by the maker or the drawer.
C)contain a promise or order to pay.
D)all of the above.
Q2) The drawee on a check is a bank.
A)True
B)False
Q3) The party who writes or creates a promissory note is called the:
A)payee.
B)drawee.
C)drawer.
D)maker.
Q4) The signature on an instrument must appear at the lower right-hand corner of the face of the instrument.
A)True
B)False
Q5) If an order or promise is not for money,the instrument is not negotiable.
A)True
B)False
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Chapter 29: Transfers of Negotiable Instruments and Warranties
of Parties
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Q1) Thomas,the holder of a check,presents it to the drawee bank for payment.If Thomas indorses the check,Thomas warrants that the account of the drawer in the drawee bank contains funds sufficient to cover the check.
A)True
B)False
Q2) Negotiation of bearer paper requires:
A)delivery only.
B)indorsement only.
C)both indorsement and delivery.
D)neither indorsement nor delivery.
Q3) A payee or indorsee whose name is misspelled may indorse the wrong name,the correct name,or both.
A)True
B)False
Q4) A qualified indorsement is given by using the phrase __________.
A)"as is"
B)"without recourse"
C)"with all faults"
D)"buyer beware"
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Chapter 30: Liability of the Parties Under Negotiable Instruments
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Q1) Fraud in the inducement is a:
A)limited defense not available against a holder in due course.
B)universal defense available against all holders.
C)limited defense available against all holders.
D)universal defense not available against a holder in due course.
Q2) A taker of an instrument who is a holder in due course at the time of the transfer but who thereafter learns of a defense:
A)becomes a holder through a holder in due course.
B)becomes an ordinary holder.
C)remains a holder in due course.
D)becomes an assignee.
Q3) The primary party on a note or certificate of deposit is the drawer.
A)True
B)False
Q4) Value is similar to consideration..
A)True
B)False
Q5) Illegality,such as a note for gambling,is a universal defense.
A)True
B)False
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Chapter 31: Checks and Funds Transfers
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Q1) A bank's customer whose signature has been forged may be barred from holding the bank liable if the customer's negligence substantially contributed to the making of the forgery.
A)True
B)False
Q2) A bank always is liable for making payments on a postdated check.
A)True
B)False
Q3) The drawee of a check is always a bank.
A)True
B)False
Q4) A bank must be given a reasonable amount of time to put a stop payment order into effect.
A)True
B)False
Q5) A forged indorsement must be reported within:
A)forty (40)days.
B)six (6)months.
C)one (1)year.
D)three (3)years.
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Chapter 32: Nature of the Debtor-Creditor Relationship
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Q1) A letter of credit must be in writing and signed by the issuer.
A)True
B)False
Q2) The issuer of a letter of credit can revoke or modify the letter at any time without the consent of the beneficiary,even if that right is not expressly reserved in the letter.
A)True
B)False
Q3) Consideration is not required to establish or modify a letter of credit.
A)True
B)False
Q4) Contribution is the right of a co-obligator to demand that other obligator(s)pay their fair share of the debt.
A)True
B)False
Q5) A letter of credit:
A)cannot last for more than five years.
B)may be in either oral or written form.
C)can only be issued by a bank.
D)must be in writing and signed by the issuer.
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Chapter 33: Consumer Protection
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Q1) A sale of goods or services for $25 or more made to a buyer at home may be set aside within __________ days.
A)three (3)business
B)three (3)calendar
C)five (5)business
D)five (5)calendar
Q2) The Fair Credit Reporting Act applies to:
A)consumer credit.
B)commercial credit.
C)business credit.
D)all of the above.
Q3) Odometer fraud laws:
A)impose the same standards on both private sellers and auto dealers.
B)allows the buyer to collect twice the actual loss from the fraud.
C)limits the total loss the buyer can collect to $1,500.
D)all of the above.
Q4) The CARD Act substantially restricts the solicitation of credit card accounts for those under the age of 18.
A)True
B)False
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Chapter 34: Secured Transactions in Personal Property
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Q1) Under Revised UCC Article 9,a debtor may authorize a financing statement by acquiring the collateral that is subject to the security agreement.
A)True
B)False
Q2) The perfection obtained by filing a financing statement lasts for __________.
A)five (5)years,and is renewable.
B)five (5)years,and is non-renewable.
C)ten (10)years,and is renewable.
D)ten (10)years,and is non-renewable.
Q3) When a state statute requires a security interest in a motor vehicle to be noted on the certificate of title,the security interest is perfected:
A)by the certificate notation,when a non-inventory motor vehicle is involved.
B)by filing under the UCC,regardless of how the vehicle is classified.
C)by filing under the UCC,when the motor vehicle is inventory.
D)either by the certificate notation or by a UCC filing,depending on how the state statute defines the term motor vehicle.
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Chapter 35: Bankruptcy
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Q1) The creditors of Sara Delano have petitioned for involuntary bankruptcy proceedings against her.Delano has been consistently late in paying her obligations for the past year.Two months before the petition was filed,a custodian was appointed to protect Delano's property.In her statement contesting the bankruptcy petition,Delano pointed out that she had dealt in good faith and could not be shown to be guilty of any act of misconduct.In addition,she cited her willingness to allow a custodian to be appointed as an indication of her intention to avoid bankruptcy and honor her obligations.Can she prevail?
Q2) If an involuntary bankruptcy petition is dismissed other than by consent of all petitioning creditors and the debtor,the court may award which of the following to the debtor?
A)Costs
B)Reasonable attorney fees
C)Damages
D)All of the above
Q3) Jurisdiction over bankruptcy proceedings is vested in the federal district courts.
A)True
B)False
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Chapter 36: Insurance
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Q1) The fact that a partnership is terminated after a life insurance policy is obtained by one partner on another invalidates the policy.
A)True
B)False
Q2) Part of every whole life insurance premium covers the cost of insurance.The remainder of the premium is devoted to the investment component of the policy,which builds up over time to its:
A)reimbursement point.
B)cash surrender value.
C)culmination value.
D)return point.
Q3) Under no-fault insurance,an insurer is obligated to pay an injured person without regard to whose fault caused the harm.
A)True
B)False
Q4) An insurance broker generally is an independent contractor who is not employed by any one insurance company.
A)True
B)False
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Chapter 37: Agency
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Q1) John's son was not his agent but contracted to purchase a computer in the name of John.When John learned of this,John sternly rebuked his son but continued to use the computer for several weeks.After losing interest in the computer,John offered to return it,saying that the purchase was unauthorized.John:
A)is not liable on the purchase.
B)expressly ratified the purchase.
C)is liable because all children have the apparent authority to contract for their parents.
D)ratified the purchase by John's conduct.
Q2) Ames,an agent for Baker Antiques,had the authority to purchase early 20th-century American furniture costing a maximum of $1,500 per piece.Ames bought a 19th-century French desk for $3,000 from Carter.Baker was furious when she saw the desk,and she fired Ames.Nevertheless,she put the desk on display in the shop with a $5,000 price tag.When the best offer she got for the desk was $2,500,Baker returned the desk to Carter.Baker told Carter that Ames had exceeded his authority in purchasing the desk,and she demanded that Carter refund the $3,000 that Ames had paid for the desk.Will Carter have to do so?
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Chapter 38: Third Persons in Agency
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Q1) Agent's may intentionally make themselves liable on contracts with third persons.
A)True
B)False
Q2) In which of the following scenarios is the agent exposed to the greatest risk of liability?
A)disclosed principal and authorized contract
B)undisclosed principal and authorized contract
C)partially disclosed principal and authorized contract
D)authorized receipt of money from third person remitted to disclosed principal
Q3) The employer of a salesperson:
A)is only bound by a contract if the employee is acting as a soliciting agent.
B)is not bound by a contract if the employee is acting as a contracting agent.
C)is not bound by a contract until the contract is accepted.
D)is always bound by contracts made by all employee salespersons.
Q4) Apparent authority has the same effect as:
A)undisclosed authority.
B)actual authority.
C)partially disclosed authority.
D)none of the above.
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Chapter 39: Regulation of Employment
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Q1) An employment contract of indefinite duration is:
A)terminable at will by the employer.
B)terminable at will by the employee.
C)both a.and b.
D)invalid.
Q2) Sarbanes-Oxley (SOX)allows whistleblowers who are retaliated against an immediate lawsuit in federal district court.
A)True
B)False
Q3) The rights of an employee with respect to compensation are governed in general by the same principles that apply to the compensation of an agent.
A)True
B)False
Q4) The rights of an employee to be compensated are governed primarily by the same principles that apply to the compensation of a(n):
A)partner.
B)stockholder.
C)agent.
D)independent contractor.
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Chapter 40: Equal Employment Opportunity Law
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Q1) According to the EEOC,claims for retaliation may only be filed under Title VII.
A)True
B)False
Q2) The Americans With Disabilities Act applies to private employers when:
A)they have federal contracts.
B)they have demonstrated past practices of discrimination.
C)they have fifteen (15)or more employees.
D)they have state contracts.
Q3) Unless justified by business necessity,physical standards such as height requirements that tend to exclude people of certain national origins violate Title VII.
A)True
B)False
Q4) Title VII does not protect members of all nationalities from employment discrimination.
A)True
B)False
Q5) To be lawful,affirmative action must be time-limited . A)True
B)False
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Chapter 41: Types of Business Organizations
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Q1) A limited liability partnership:
A)is taxed like a corporation.
B)provides limited liability for all partners.
C)shields innocent partners from personal liability beyond their investment.
D)All of the above.
Q2) Partnership agreements allow individuals to conduct their business without the requirement of a formal organizational structure.
A)True
B)False
Q3) A sole proprietorship is taxed:
A)only on a personal.
B)only on the corporate level.
C)on a personal and a corporate level.
D)none of the above.
Q4) A franchise agreement in which the franchisor grants the franchisee authority to manufacture and sell products under the trademark(s)of the franchisor is known as a manufacturing or processing franchise.
A)True B)False
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Chapter 42: Partnerships
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Q1) A partner is considered an employee of the partnership when doing work that would ordinarily be done by an employee.
A)True
B)False
Q2) Which of the following will not result in dissolution of the partnership by court decree?
A)A partner becomes incapable of performing the terms of the partnership agreement
B)A partner persistently or willfully acts in such a way that it is not reasonably practicable to carry on the partnership business
C)The withdrawal of a partner.
D)All of the above.
Q3) A third person should recognize that a partner has limited or no authority if:
A)the partner seeks to act for the partnership concerning a matter not within the usual business of the firm.
B)the third person knows that the partnership has been terminated.
C)the partner seeks to pay a personal obligation by issuing a promissory note in the name of the firm.
D)all of the above.
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Chapter 43: LPs, LLCs, and LLPs
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Q1) A general partner within a limited partnership may be a corporation.
A)True
B)False
Q2) It is expected that in the future,the limited liability company will in many instances replace which of the following forms of business ownership?
A)the general partnership
B)the limited partnership
C)the close corporation
D)all of the above
Q3) Limited liability is not a feature of general partnership law.
A)True
B)False
Q4) If a limited partnership certificate is never filed,all partners are treated as limited partners.
A)True B)False
Q5) A limited liability company may be managed directly by the owners.
A)True
B)False
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Chapter 44: Corporate Formation
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Q1) Where a corporation is properly formed,it is called a corporation:
A)di giorno.
B)de facto.
C)de jure.
D)by estoppel.
Q2) The Miller family,who operates a musical instrument manufacturing concern,has decided to incorporate.The three (3)members of the Miller family,Mary,Mark and Sue,would like to become a corporation and obtain limited liability; however,taxation at the corporate level would be very costly for them.If possible,Mary Miller would rather be taxed as a partnership.Mark Miller is worried about the additional paperwork and meetings that incorporation would surely bring.Sue Miller does not want a large board of directors to be formed.Sue fears that the board would somehow detract from the family goals and orientation the business has always enjoyed.In light of these concerns,is there a corporate form that would better suit the Miller family?
Q3) Subchapter S corporations have the benefits of limited liability as in partnerships and are taxed as corporations.
A)True
B)False
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Chapter 45: Shareholder Rights in Corporations
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Q1) When the corporation has the right to sue its directors,officers,or third persons for damages caused by them to the corporation or for breach of contract,one (1)or more shareholders may bring such action if the corporation refuses to do so.This is known as a __________ action.
A)primary
B)derivative
C)deferential
D)preemptive
Q2) A shareholder can give a proxy to vote shares only to another shareholder.
A)True
B)False
Q3) The net assets of a corporation may be referred to as: A)debentures. B)stock.
C)capital.
D)bonds.
Q4) A contract for the sale of shares must be evidenced in writing.
A)True B)False
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Chapter 46: Securities Regulation
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Q1) The Litigation Reform Act of 1995 was passed because of:
A)congressional concern over an excess of frivolous private securities lawsuits.
B)the financial burdens placed on accountants and other professional advisors due to an excess of frivolous private securities lawsuits.
C)concern that the investors in a class action lawsuit have their interests fairly represented.
D)all of the above.
Q2) Exchanges,brokers,and dealers who deal in the securities traded in interstate commerce or on any national security exchange must register with the SEC unless exempted by it.
A)True
B)False
Q3) Under the Litigation Reform Act of 1995,issuers of forward-looking statements that were not knowingly false when made have a safe harbor from related lawsuits if appropriate cautionary language was included.
A)True
B)False
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Chapter 47: Accountants Liability and Malpractice
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Q1) The contact rule applies in which of the following states?
A)Alabama
B)Indiana
C)New York
D)All of the above
Q2) In an action for breach of contract,the statute of limitations runs from the date on which the harm is discovered.
A)True
B)False
Q3) To ensure that audit partners do not become entrenched,Sarbanes-Oxley requires audit firms to change audit partners at least once every __________ years.
A)three (3)
B)five (5)
C)seven (7)
D)ten (10)
Q4) An accountant may be liable for malpractice if the accountant fails to detect signs that an employee of the client is embezzling.
A)True
B)False
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Chapter 48: Management of Corporations
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Q1) Officers and directors may be criminally liable for failure to prevent the commission of a crime if they are found to be the "responsible corporate officers."
A)True
B)False
Q2) The Sarbanes-Oxley Act prohibits all corporate loans to directors and executive officers unless:
A)the company is in the consumer credit business.
B)the loan is to relocate as part of an employment contract.
C)the loan is made to purchase securities.
D)none of the above as all loans are prohibited.
Q3) What is not part of the presumptions of the business judgment rule concerning directors?
A)that the decision they reached was profitable to the corporation
B)that they acted on an informed basis
C)that they acted in good faith
D)that they acted in the honest belief that the action taken was in the best interest of the corporation
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Chapter 49: Real Property
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Q1) Title to land may be acquired by adverse possession.
A)True
B)False
Q2) Small children are afforded additional protection against the trespass rule through the "attractive nuisance" doctrine.
A)True
B)False
Q3) A promise that the grantor of an interest in land will execute any additional documents required to perfect the title of the grantee is known as a covenant:
A)of seisin.
B)of further assurances.
C)against encumbrances.
D)of quiet enjoyment.
Q4) The rights of the mortgagor after default include the right to obtain a stay of foreclosure to prevent undue hardship and a right of redemption.
A)True
B)False
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Chapter 50: Environmental Law and Land Use Controls
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Q1) Which federal agency is most often authorized to adopt standards and regulations to carry out the provisions of environmental statutes?
A)FTC
B)ICC
C)EPA
D)SEC
Q2) It is probable that a zoning variance would be granted:
A)even though many of the neighboring property owners object.
B)on the grounds of hardship,regardless of who created the hardship.
C)to an outside advertiser to build a billboard.
D)when the desired use of the land is in harmony with the general nature of the surrounding areas.
Q3) A nonconforming use:
A)that is discontinued for a period of less than thirty (30)days may be resumed.
B)has a right to continue for only five (5)years.
C)has a constitutionally-protected right to continue.
D)that continues for more than one (1)year cannot be lost by abandonment.
Q4) Nuisances may be classified as either private nuisances or public nuisances.
A)True
B)False
Page 52
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Chapter 51: Leases
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Q1) Arnold Properties,Inc.entered into a lease agreement with Janet for a residential house.Janet made four (4)subsequent monthly payments.At the end of the four (4)months,Janet learned that she was to be transferred to a new job in another state.Janet approached her landlord and explained her situation.The landlord was unsympathetic and refused to release Janet from her rent.The landlord insisted on enforcement of rental payment for the duration of the lease,which was for one (1)year.Janet had not provided for a release in her lease to cover the possibility of a job transfer.Must Janet pay for the remaining eight (8)months of rent even if she is not in physical possession of the property?
Q2) Making improvements is a duty that falls on the tenant.
A)True
B)False
Q3) A lease provision requiring a tenant to obey regulations that may be subsequently adopted by the landlord is void because it is unconscionable.
A)True
B)False
Q4) Inference occurs when a landlord prevents a tenant from accessing the property.
A)True
B)False
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Chapter 52: Decedents Estates and Trusts
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Q1) A trustee is not permitted to profit personally from the position of trustee,other than to receive the compensation allowed by contract or law.
A)True
B)False
Q2) A holographic will is an unwitnessed will that is written by the testator entirely by hand.
A)True B)False
Q3) In order for a trust to be created,who must be able to hold legal title?
A)the beneficiary only
B)the trustee only
C)either the beneficiary or the trustee
D)both the beneficiary and the trustee
Q4) Where a testatrix executes a will and later has a child:
A)the child is prohibited by law from receiving anything from the estate.
B)many states hold that the will of the testatrix is partially revoked by operation of law to provide a share to the after-born child.
C)a new will must be executed because the birth voids the original will.
D)the after-born child takes a share by escheat.
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