Business and Society Test Bank
Course Introduction
Business and Society explores the dynamic relationships between businesses, governments, and communities, emphasizing the ethical, social, and environmental implications of corporate decision-making. The course examines how organizations respond to societal expectations, including issues such as corporate social responsibility, stakeholder management, sustainable development, and regulatory frameworks. Throughout, students analyze real-world case studies to understand the roles that business leaders and firms play in shaping public policy, promoting social change, and addressing global challenges, preparing them to navigate complex ethical dilemmas and contribute positively to society.
Recommended Textbook
Business Law and the Legal Environment 21st Edition by David
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2751 Verified Questions
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Page 2
P. Twomey
Chapter 1: The Nature and Sources of Law
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56 Verified Questions
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Sample Questions
Q1) Those uniform state laws that have been adopted by individual states were first written by Congress.
A)True
B)False
Answer: False
Q2) Laws can be classified in terms of:
A) Roman and English law.
B) substantive and procedural law.
C) law and equity.
D) all of the above.
Answer: D
Q3) A constitution is a body of principles that establishes the structure of a government and the relationship of that government to the people who are governed.
A)True
B)False
Answer: True
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Page 3
Chapter 2: The Court System and Dispute Resolution
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Sample Questions
Q1) The United States Supreme Court can never function as a court of original jurisdiction.
A)True
B)False
Answer: False
Q2) A motion for a directed verdict is appropriate:
A) immediately after the pleadings are filed.
B) immediately after discovery is concluded.
C) immediately after the presentation of all evidence at trial.
D) on appeal.
Answer: C
Q3) Documents filed by both parties at the beginning of a lawsuit are called the pleadings.
A)True
B)False
Answer: True
Q4) The defendant in a civil case is the party who is suing.
A)True
B)False
Answer: False
Page 4
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Chapter 3: Business Ethics, Social Forces, and the Law
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52 Verified Questions
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Sample Questions
Q1) Economic growth tends to be fastest among developing countries where payments to key administrators can increase transaction efficiency.
A)True
B)False
Answer: False
Q2) Unwillingness of businesses to voluntarily improve the ethics of their practices has little practical effect on the regulatory environment.
A)True
B)False
Answer: False
Q3) The importance of trust as a fundamental principle underlying business transactions is illustrated by expectations that:
A) investors will be able to earn a return on their investments.
B) employees may be discharged at any time for any reason without notice.
C) litigation is inevitable because parties to agreements usually break promises.
D) insider trading proves that the economic system underlying business is flawed.
Answer: A
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Chapter 4: The Constitution As the Foundation of the Legal Environment
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Sample Questions
Q1) In a federal system, a central government is given power to act nationally, while states administer to local concerns.
A)True
B)False
Q2) The greatest changes to the written Constitution have been brought about by:
A) departure by treaty.
B) judicial interpretation.
C) the amending process.
D) political party action.
Q3) A school district supplied school bus service for all children 12 years of age or under who lived at least one mile from school. This service was provided for transportation to and from school. Joanna was a 13-year-old student who lived in that school district. Joanna's home was 1.2 miles from school. Her parents brought suit against the school district alleging that Joanna was entitled to school bus service and the failure to provide such service denied her the equal protection of the law. Discuss the probable outcome of the lawsuit.
Q4) "Preemption" means that the federal regulatory scheme is controlling. 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) The Federal Trade Commission has taken enforcement steps against refusals to sell, boycotts, market restrictions, disparagement of competitors' products, and unlawful methods of billing and collection.
A)True
B)False
Q2) Criminal penalties are possible under the Sherman Act.
A)True
B)False
Q3) A divestiture order is a decree ordering a defendant to dispose of excessive ownership or control of interests in competing enterprises.
A)True
B)False
Q4) What types of restraints of trade are unlawful?
A) Voluntary
B) Binding
C) Unreasonable.
D) Interbrand.
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Chapter 6: Administrative Agencies
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Sample Questions
Q1) The "public comment" period for proposed administrative agency rules must be at least __________ days.
A) 30
B) 60
C) 90
D) 120
Q2) If an agency causes a substantial loss to a business by enforcement of its laws, that business:
A) always may hold the agency liable for damages.
B) never can hold the agency liable for damages.
C) may seek damages if the agency acted in bad faith.
D) may seek damages if the agency complied with its own guidelines.
Q3) An administrative agency is barred from examining the records of a business enterprise by the constitutional guarantee against unreasonable searches and seizures.
A)True
B)False
Q4) Administrative agencies generally are not subject to the rules of evidence.
A)True
B)False
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Chapter 7: The Legal Environment of International Trade
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Sample Questions
Q1) You plan to enter the export market with a new product that you have just developed. You feel that the product has great promise, but you are confused over whether you are required to obtain an export license. Further, your brother-in-law says that he knows someone in the Japanese government who could greatly assist you in your endeavors for a very modest fee. Discuss this situation.
Q2) United States antitrust laws can protect United States exports.
A)True B)False
Q3) The Foreign Corrupt Practices Act prohibits improper payments to influence foreign officials.
A)True B)False
Q4) A direct sale to customers abroad by an American firm, with terms of payment commonly based on an irrevocable letter of credit, is an import sale.
A)True B)False
Q5) A societé anonyme is the European counterpart of a U.S. corporation.
A)True B)False
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Chapter 8: Crimes
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Sample Questions
Q1) Destroying information stored on a computer may be a crime.
A)True
B)False
Q2) Bribery is defined as:
A) giving money, property, or any benefit to a person to influence that person's judgment.
B) using one's position as a public official to make an illegal demand.
C) using one's position as a nonpublic official to make an illegal demand.
D) exerting improper political influence.
Q3) The unauthorized use of a computer belonging to someone else is:
A) a crime in all states.
B) a crime in some states.
C) not a crime in any state.
D) a crime under federal law only.
Q4) A person may be held criminally liable for acts committed by another.
A)True
B)False
Q5) For an act to be considered a crime, it is necessary that some person be harmed.
A)True
B)False
10
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Chapter 9: Torts
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Sample Questions
Q1) Professionals have a duty to perform their functions at the same level as would a reasonable person.
A)True
B)False
Q2) Oral or spoken defamation is:
A) slander.
B) libel.
C) privilege.
D) perjury.
Q3) A local newspaper devotes its New Year's Day issue to people who have performed heroically during the past year. One of the people included in the article was Janet, a local actress. Eight months earlier, a fire started in the theater while she was in the middle of a performance. Rather than running out, she stayed to help frightened members of the audience get out of the theater. The New Year's article stated that Janet had been unable to find work as an actress because of burns to her hands and feet and that, as a result, she owes a great deal of money. Janet sued the newspaper for invasion of privacy. Based on what you have learned in this chapter, how should the case be decided?
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Chapter 10: Intellectual Property Rights
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Sample Questions
Q1) All types of patents available under U.S. law are entitled to the same quality and duration of protection once initial filing is perfected with the Patent and Trademark Office in Washington, D.C.
A)True
B)False
Q2) Copyright of a "work made for hire" runs for the life of the creator of the work plus 50 years.
A)True
B)False
Q3) Owners of mask works are entitled to the exclusive right to reproduce and distribute their products under U.S. law for a period of:
A) 10 years.
B) 20 years.
C) 28 years.
D) the life of the creator plus 50 years.
Q4) The typical U.S. copyright now runs for 28 years, with a right of renewal for an additional 28 years.
A)True
B)False
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Chapter 11: Cyberlaw
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Sample Questions
Q1) Bon, located in Florida, desires to enter into a contract with Jon, a resident of Maine. Neither wishes to meet face-to-face, as both are busy with a variety of business interests. Instead, they wish to form a contract over the Internet. Would a contract formed over the Internet be valid?
Q2) Companies who have misrepresented the capabilities of their search engines or failed to disclose the methods whereby they give preference to certain links:
A) may be liable for fraud, but are not responsible for either rescission or damages.
B) may be liable for fraud, but if so are only responsible for rescission.
C) may be liable for fraud, but if so are only responsible for damages.
D) may be liable for fraud, and if so might be responsible for rescission or damages.
Q3) The taking of an image, likeness, or name for purposes of commercial advantage is protected by :
A) contract law.
B) tort law.
C) criminal law.
D) none of the above.
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Chapter 12: Nature and Classes of Contracts: Contracting on
the Internet
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Sample Questions
Q1) A reward offered to the public for the return of lost property is not considered an offer.
A)True
B)False
Q2) An obligation to pay for the reasonable value of services rendered when there is no contract would be called:
A) quasi-contractual.
B) quasi-enforceable.
C) semi-lawful.
D) valid.
Q3) When a contract sets a price for services rendered, a plaintiff cannot sue for reasonable value.
A)True
B)False
Q4) A contract of record arises when the accountant of one of the parties has made an entry of the contract in the business record of that party.
A)True
B)False
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Chapter 13: Formation of Contracts: Offer and Acceptance
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Sample Questions
Q1) An otherwise vague contract may be clarified by references in the contract to other documents or agreements.
A)True
B)False
Q2) If an offeree dies before the offer has been accepted, the offer:
A) may be rejected by the surviving spouse of the offeree.
B) may be accepted by the surviving spouse of the offeree.
C) is automatically revoked by the death of the offeree.
D) may be accepted by the guardian appointed for any minor children of the offeree.
Q3) The bid of each contractor for a job is considered an offer.
A)True
B)False
Q4) Generally, advertisements, catalog prices, and circulars are offers that can be accepted.
A)True B)False
Q5) An offer gives the offeror the power to bind the offeree by contract.
A)True
B)False
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Chapter 14: Capacity and Genuine Assent
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Sample Questions
Q1) Roberta, an educated person, purchased real estate from Maurice. Roberta did not read entirely the contract that she signed. As a result, she did not notice the provision in the contract about the interest imposed on the unpaid portion of the purchase price. She refused to pay the interest specified in the contract. Maurice sued her. Could he recover?
Q2) A contract obtained by physical duress is void.
A)True
B)False
Q3) Generally, when a person of legal age makes a contract with a minor, the contract is voidable by either party.
A)True
B)False
Q4) The obligation of a cosigner is discharged by:
A) the minority status of one of the parties.
B) the majority status of one of the parties.
C) the court's declaration of the contract's provision of necessaries.
D) the payment of the debt.
Q5) The "necessaries" of minors are precisely defined by law.
A)True
B)False
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Chapter 15: Consideration
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Sample Questions
Q1) Which of the following is not a necessary element of promissory estoppel?
A) The promisor and the promisee must engage in a bargained-for exchange.
B) The promisor must intend or should reasonably expect that the promisee will rely on the promise.
C) The promisee must in fact rely on the promise in some definite and substantial manner.
D) Enforcement of the promise is the only way to avoid injustice.
Q2) A promise to make a gift is enforceable.
A)True
B)False
Q3) Will the law enforce every promise?
A) Yes.
B) Yes, with or without consideration.
C) Generally yes, if consideration is given for the promise.
D) None of the above.
Q4) Consideration always must be an act or the promise to perform an act.
A)True
B)False
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Chapter 16: Legality and Public Policy
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Sample Questions
Q1) Which of the following is not an example of a state penalty for violating usury law?
A) restricting the lender to the recovery of the loan but no interest whatsoever
B) allowing the lender to recover the loan principal and interest up to the maximum contract rate
C) restricting the lender to the recovery of the loan plus seventy-fifty percent (75%) of the interest
D) requiring the lender to pay, as a penalty, double the interest the borrower paid on a usurious loan
Q2) To stabilize the industry, manufacturers of the same or similar products may agree that each will market its product in a specified geographic area of the country and will not market its product in the territory assigned to other manufacturers.
A)True
B)False
Q3) 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.
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18
Chapter 17: Writing, Electronic Forms, and Interpretation of Contracts
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Sample Questions
Q1) In the absence of a statute requiring a writing, a contract may be oral or written. A)True
B)False
Q2) When a contract falls within the statute of frauds, the signatures of both parties must be shown to the court.
A)True
B)False
Q3) Under the majority view, a contract that does not satisfy the statute of frauds is voidable.
A)True
B)False
Q4) An insurance company cannot refuse to pay the fire loss of the buyer of a house on the grounds that the sales contract for the house was not binding because it was not properly signed.
A)True
B)False
Q5) A writing required by the statute of frauds may be in any form.
A)True
B)False
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Chapter 18: Third Persons and Contracts
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Sample Questions
Q1) An obligor required to render a performance under a contract can transfer the duty to perform to another person whenever desired.
A)True
B)False
Q2) Persons who are not a party to a contract can never bring a suit based on that contract.
A)True
B)False
Q3) Which of the following is not a third-partybeneficiary contract?
A) a contract in which A hires B to give A's niece piano lessons
B) a contract to repair sewers in front of Macy's Department Store
C) a life insurance contract with a named beneficiary
D) a contract between X and Y for Y to install a new door on Z's home
Q4) Generally, an assignment may be in any form.
A)True B)False
Q5) The rights of a third-party beneficiary always can be destroyed without that beneficiary's consent.
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) Contracts may be discharged by the joint action of both contracting parties or, in some cases, by the action of one party alone.
A)True
B)False
Q3) A house-painting contract is discharged if continual rain makes it impossible to complete the painting by the time specified in the contract.
A)True
B)False
Q4) Through which of the following circumstances may a contract be discharged?
A) mutual cancellation
B) mutual rescission
C) accord and satisfaction
D) all of the above
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Chapter 20: Breach of Contract and Remedies
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Sample Questions
Q1) An anticipatory repudiation must be clear, absolute, and unequivocal.
A)True
B)False
Q2) If a plaintiff's loss involves damaged property, it is described as liquidated damages.
A)True
B)False
Q3) When a party waives compliance with one provision of a contract, the other party may thereafter ignore other provisions of that contract.
A)True
B)False
Q4) 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
Q5) An acceptance with a reservation of right must be in writing.
A)True
B)False
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Chapter 21: Personal Property and Bailments
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Sample Questions
Q1) The legal relation that arises when one person delivers possession of personal property to another under an express or implied agreement to return the property at a later date is called a:
A) tenancy agreement.
B) bailment.
C) rental agreement.
D) trust arrangement.
Q2) The legal concept of property is limited to tangible physical objects.
A)True
B)False
Q3) The finder of lost property is usually entitled to a judicially-determined reward for finding and caring for the property until the rightful owner reclaims it.
A)True
B)False
Q4) An ordinary gift made between two living persons is an inter vivos gift.
A)True
B)False
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Chapter 22: Legal Aspects of Supply Chain Management
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Sample Questions
Q1) The rights and duties of warehousers are regulated by the UCC.
A)True
B)False
Q2) A warehouser that holds itself out to serve the public generally without discrimination is called a(n):
A) public warehouser.
B) general warehouser.
C) nondiscriminatory warehouser.
D) ordinary warehouser.
Q3) To be engaged in warehousing, an enterprise must have appropriate storage buildings.
A)True
B)False
Q4) A sale by a factor can pass title to goods from the consignor to the purchaser.
A)True
B)False
Q5) A common carrier transporting goods under a COD shipment is liable if it takes a check in payment and the check bounces.
A)True
B)False
24
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Chapter 23: Nature and Form of Sales
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Sample Questions
Q1) Any modification of a sales contract must be supported by some form of consideration.
A)True
B)False
Q2) An offer to buy or sell goods may be accepted in any manner that is reasonable under the circumstances.
A)True B)False
Q3) A bailment is a special form of sale in which possession is transferred to a bailee.
A)True B)False
Q4) A bill of sale can be used as proof of an otherwise oral agreement.
A)True
B)False
Q5) A contract for the sale of goods is not enforceable unless the contract clearly expresses the price.
A)True B)False
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Chapter 24: Title and Risk of Loss
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Sample Questions
Q1) The expense and the risk of return in a sale or return situation is on the:
A) seller.
B) buyer.
C) lienholder.
D) secured creditor.
Q2) If a seller under a shipment contract sends nonconforming goods, the risk of loss in transit is on the buyer.
A)True
B)False
Q3) When negotiable documents of title to goods are sold, the risk of loss and the title to the goods pass to the buyer when the documents are delivered to the buyer.
A)True
B)False
Q4) If a contract contains a delivery term of FOB place of shipment, the seller's obligation under the contract is to deliver the goods to a carrier for shipment.
A)True
B)False
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Chapter 25: Product Liability: Warranties and Torts
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Sample Questions
Q1) In most instances, the mere fact that a sale was made gives rise to a(n):
A) express warranty.
B) limited warranty.
C) full warranty.
D) implied warranty.
Q2) If an express warranty is breached,
A) an action for breach of express warranty is the buyer's exclusive remedy.
B) the seller nevertheless has no warranty obligation if the buyer had the opportunity to inspect the goods before purchasing them.
C) the warrantor is liable, even if the seller or manufacturer who made the express warranty honestly believed that the warranty was true.
D) the seller is not liable for breach of one or more implied warranties.
Q3) The scope of warranties remains the same regardless of whether the seller is a merchant or a casual seller.
A)True
B)False
Q4) A seller's opinion cannot ordinarily be treated as a warranty.
A)True
B)False
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Chapter 26: Obligations and Performance
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Sample Questions
Q1) Unless otherwise agreed, the proper place for the delivery of goods is:
A) the buyer's place of business.
B) the seller's home.
C) a delivery service selected by the seller.
D) the seller's place of business.
Q2) If a person upon whom the assurance is demanded does not have a good reputation or economic position, a guarantee of performance or a pledge of security may be required.
A)True
B)False
Q3) Which of the following does not constitute an acceptance?
A) an express statement of approval by the buyer
B) the buyer's examination of the goods
C) the buyer's retention of goods for an unreasonable period of time
D) the buyer's modification of the goods
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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Chapter 27: Remedies for Breach of Sales Contracts
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Sample Questions
Q1) If a buyer rejects a tender of goods, the rejection must be made within ten days of tender. There is no requirement of notice to the seller of the choice made.
A)True
B)False
Q2) If goods are specially manufactured and the buyer refuses to take them, it is possible for the seller to recover as damages the full purchase price and keep the goods.
A)True
B)False
Q3) A buyer returning to the seller a raincoat that shrank in the rain is revoking acceptance.
A)True
B)False
Q4) If consumer goods are sold under a contract that excludes consequential damages, and the buyer is later physically injured because of a defect in the goods, the exclusion of consequential damages is prima facie unconscionable and is not binding.
A)True
B)False
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Chapter 28: Kinds of Instruments, Parties, and Negotiability
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Sample Questions
Q1) A payee is not liable on an instrument until the payee transfers the instrument to someone else.
A)True
B)False
Q2) If an order or promise is not for money, the instrument is not negotiable.
A)True
B)False
Q3) An instrument will be considered payable to order if:
A) it is payable to bearer or the order of bearer.
B) it is payable to cash.
C) the last or only indorsement is a blank indorsement.
D) none of the above
Q4) Both drafts and promissory notes may have the quality of negotiability.
A)True
B)False
Q5) Instruments are always negotiable.
A)True
B)False
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Page 30
Chapter 29: Transfers of Negotiable Instruments and
Warranties of Parties
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Sample Questions
Q1) An unqualified indorser who receives consideration for the indorsement impliedly warrants that:
A) the warrantor is a person entitled to enforce the instrument.
B) all signatures on the instrument are authentic and authorized.
C) the instrument has not been altered.
D) all of the above.
Q2) A restrictive indorsement reduces the risk of theft or unauthorized transfer by eliminating the bearer quality of a blank indorsement.
A)True
B)False
Q3) When a negotiable instrument is assigned, the transferee has the rights of the transferor.
A)True
B)False
Q4) If an instrument bears a restrictive endorsement, any further transfer or negotiation is effectively barred.
A)True
B)False
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Chapter 30: Liability of the Parties Under Negotiable Instruments
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Q1) Jones issued a check to Smith in return for Smith's promise to do work. Smith never did the promised work, but offered to buy goods from Gomez by endorsing the check to Gomez. Gomez had had no prior dealings with Jones or Smith, but accepted the check in payment. Gomez:
A) cannot be a holder in due course.
B) is considered an assignee of Smith's rights.
C) is a holder through a holder in due course.
D) is a holder in due course.
Q2) A holder can recover from any of the parties who are liable on the instrument, regardless of the order of the signatures on the instrument.
A)True
B)False
Q3) A holder having the rights of a holder in due course is subject to the defense of fraud in the inducement.
A)True
B)False
Q4) Incapacity cannot be raised as a defense against a holder in due course.
A)True
B)False
Page 32
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Chapter 31: Checks and Funds Transfers
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Q1) A forged endorsement must be reported to the bank within one year of the time that the bank statement is received.
A)True
B)False
Q2) Certification of a check at the request of a holder:
A) releases all prior secondary parties.
B) releases the drawer but not prior indorsers.
C) releases prior indorsers, but not the drawer.
D) does not release all prior secondary parties.
Q3) A bank is required to pay a check presented more than six months after its date.
A)True
B)False
Q4) If a bank improperly refuses to make payment of checks for which its customer has sufficient funds on deposit, it is liable to the drawer for damages sustained by the drawer in consequence of such dishonor.
A)True
B)False
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Chapter 32: Nature of the Debtor-Creditor Relationship
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Q1) A surety that has made payment of a claim for which it was liable as a surety is entitled to which of the following from the principal?
A) indemnity
B) exoneration
C) assignment
D) subrogation
Q2) A surety may be discharged if the creditor substitutes a different debtor.
A)True
B)False
Q3) Sound business practice dictates the use of written contracts for both suretyships and indemnities.
A)True
B)False
Q4) A surety may raise the defense of lack of capacity of parties, absence of consideration, fraud, or mistake.
A)True
B)False
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34
Chapter 33: Consumer Protection
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Q1) A finance company may reject an applicant for a loan on the grounds that the applicant is:
A) married.
B) sixty-five or older.
C) divorced.
D) none of the above.
Q2) When an enterprise has made false and deceptive statements in advertising, the FTC may require new advertising to correct the former statement so that consumers are aware of the truth. This corrective advertising required by the FTC is also called __________ advertising.
A) retractive
B) redactive
C) retroactive
D) refractive
Q3) The types of provisions that make contracts unconscionable include clauses that award excessive damages or the application of credit payments across purchases over time so that the consumer is never able to pay off any goods.
A)True
B)False
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Page 35
Chapter 34: Secured Transactions in Personal Property
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Q1) A security interest that is effective against third persons as well as against the buyer is called a:
A) universal security interest.
B) prohibitive security interest.
C) perfected security interest.
D) protective security interest.
Q2) Perfection can occur merely by possession of the collateral by the creditor.
A)True
B)False
Q3) When a security interest in property is inferior to other interests and claims to the property, it is said to be perfected.
A)True
B)False
Q4) A buyer in the ordinary course of business who purchases inventory goods from a debtor who had placed a security interest on those goods in favor of a creditor: A) is not subject to the security interest.
B) is not subject to the security interest unless it was perfected.
C) is not subject to the security interest unless the buyer was aware of it. D) is subject to the security interest.
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Chapter 35: Bankruptcy
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Q1) If the debtor is generally not paying debts as they become due, the debtor may be subject to an involuntary bankruptcy petition.
A)True
B)False
Q2) In a liquidation proceeding, the debtor's nonexempt assets are collected by the trustee representing the creditors.
A)True
B)False
Q3) In a Chapter 11 rehabilitation plan, the debtor:
A) keeps all of the assets (both exempt and nonexempt).
B) remains in business.
C) makes a settlement that is acceptable to the majority of the creditors.
D) all of the above.
Q4) A reorganization plan may, in certain instances, provide for the rejection of executory contracts or collective bargaining agreements.
A)True
B)False
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Chapter 36: Insurance
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Q1) For the purposes of Personal Auto Policy (PAP) coverage, an insured person "uses" an automobile by unloading groceries from the car while it is parked in the garage.
A)True
B)False
Q2) The coverage of the Personal Auto Policy (PAP) is limited to claims arising from the "use and operation" of an automobile.
A)True
B)False
Q3) A person who would suffer a direct pecuniary loss if a particular piece of property were destroyed has a(n):
A) contractual risk.
B) hazard.
C) underwriting.
D) insurable interest.
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) A __________ is authorized by the principal to handle a definite business transaction or to do a specific act.
A) special
B) general
C) secret
D) universal
Q2) A party working for and under the control of another and authorized to enter into contracts for that other person or entity is called an:
A) employee.
B) agent.
C) independent contractor.
D) attorney.
Q3) It is the duty of an agent to act with the care that:
A) the principal would exercise under the circumstances.
B) a reasonable principal would exercise under the circumstances.
C) a reasonable juror would exercise under the circumstances.
D) a reasonable person would exercise under the circumstances.
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Page 39
Chapter 38: Third Persons in Agency
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Q1) Agents are themselves liable for harm caused third persons by the agents' fraudulent, intentional, or negligent acts.
A)True
B)False
Q2) Agent's may intentionally make themselves liable on contracts with third persons.
A)True
B)False
Q3) Vicarious liability will not be imposed on a principal unless the agent was acting within the scope of the agent's authority.
A)True
B)False
Q4) In general, a principal is liable for crimes of the agent committed while acting within the scope of the agency, even if the principal did not authorize commission of the crimes.
A)True B)False
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Page 40
Chapter 39: Regulation of Employment
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Q1) Joe Swartz, an employee of Acme Company, worked for months during company time and used Acme's equipment to develop an idea that he had been nurturing. Finally, the idea came to fruition. Swartz's employer laid claim to the invention on the grounds that the firm's equipment had been utilized on company time. Swartz had obtained a patent on the invention and claimed that his employer had no rights to the invention at all. Who is right? How could an employer guard against such arguments in the future?
Q2) An employer has a "shop right" to use an invention of an employee without payment to the employee if the invention was made during working hours with the employer's material and equipment.
A)True
B)False
Q3) When an employer has a contract with an employee for the employee to work for a set period of time, which of the following would not justify discharging the employee?
A) financial hardship of the employer
B) nonperformance of duties by the employee
C) theft by the employee
D) possession of drugs by the employee
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Page 41
Chapter 40: Equal Employment Opportunity Law
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Q1) What is an employer defense to a disparate impact charge?
A) The employer did not intend to discriminate.
B) The employment practice is job-related and consistent with business practice.
C) The disparate impact was not the result of extreme recklessness or gross negligence on the part of the employer.
D) The practice is widespread and accepted in the industry.
Q2) Affirmative action is lawful only when it is designed to respond to a demonstrated and serious imbalance in the workplace, is flexible, is time-limited, applies only to qualified workers, and respects the rights of non-minorities and men.
A)True
B)False
Q3) Criteria used to make employment decisions that have a disparate impact on women, such as height requirements, must be job-related.
A)True
B)False
Q4) Pay raises based on seniority generally are considered lawful.
A)True
B)False
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Chapter 41: Types of Business Organizations
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Q1) In a joint venture, the parties:
A) combine their labor or property for a single undertaking and share profits and losses equally.
B) combine their labor or property for a continuing business and share profits and losses equally.
C) assume no personal liability beyond the risk of losing their initial investment.
D) none of the above.
Q2) Most courts hold that joint ventures are not subject to the same principles of law as partnerships.
A)True
B)False
Q3) The people in a corporation responsible for the management of the business are the:
A) partners.
B) shareholders.
C) directors.
D) licensees.
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Page 43
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) The burden of proving the existence of a partnership will always fall on one of the partners.
A)True
B)False
Q3) The assignee of a partner's interest in the partnership becomes a partner only with the consent of the other partners.
A)True
B)False
Q4) Regarding distribution of assets upon winding up a partnership, what is paid first?
A) debts to outside creditors
B) return of capital
C) debts of partners who are creditors
D) profits
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Chapter 43: LPs, LLCs, and LLPs
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Q1) A limited liability company:
A) always qualifies for partnership tax treatment.
B) never qualifies for partnership tax treatment.
C) may qualify for partnership tax treatment.
D) None of the above.
Q2) Limited partners may contribute cash or property as their capital contributions.
A)True
B)False
Q3) While most states have adopted limited liability company statutes, few states have created statutes allowing the formation of limited liability partnerships.
A)True
B)False
Q4) Under the Revised Uniform Limited Partnership Act:
A) the words "limited partnership" must appear without abbreviation in the firm name.
B) a limited partner may contribute services, cash or property to the limited partnership.
C) Both a. and b.
D) none of the above.
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Chapter 44: Corporate Formation
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Q1) Most states have a general corporation code, and anyone who satisfies code requirements and files the necessary papers with the government may automatically become a corporation.
A)True
B)False
Q2) Because nonprofit corporations have a more restricted range of powers than business corporations, actions not authorized by the charters of nonprofit corporations are more likely to be found ultra vires.
A)True
B)False
Q3) For the purpose of determining the right to bring a lawsuit in federal court, a corporation is a citizen of any state in which it has been incorporated and of the state where it has its principal place of business.
A)True
B)False
Q4) A holder of a single share of stock who objects to a merger has the power to stop the merger.
A)True
B)False
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Chapter 45: Shareholder Rights in Corporations
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Q1) Membership in a corporation is based on the ownership of one or more shares of stock of the corporation.
A)True
B)False
Q2) Which of the following is an effective means of notice to purchasers of shares that there are restrictions on the sale?
A) notation in the bylaws
B) resolution of the shareholders at a shareholders' meeting
C) notation on the stock certificate
D) resolution of the directors at a directors' meeting
Q3) A bona fide purchaser of stock is shielded from the claim that the transfer was made in violation of a transfer restriction that was unknown to the purchaser and that was not noted conspicuously on the certificate.
A)True
B)False
Q4) Ordinarily, each shareholder is entitled to one vote for each voting share.
A)True
B)False
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Chapter 46: Securities Regulation
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Q1) From the date of a company's filing a registration statement with the SEC to the date the registration becomes effective, at least 20 days must elapse.
A)True B)False
Q2) The Securities Act of 1933 deals with the original distribution of securities by the issuing corporations.
A)True B)False
Q3) No private or limited offerings of securities are exempt from the SEC registration requirements.
A)True B)False
Q4) Unlisted companies that have assets less than $10 million and fewer than 500 shareholders are subject to the reporting requirements of the Securities Exchange Act of 1934.
A)True B)False
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Chapter 47: Accountants Liability and Malpractice
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Q1) In many instances, malpractice is both a breach of contract and a tort.
A)True
B)False
Q2) Some courts have rejected the requirement of privity for malpractice and instead approach each situation on a case-by-case basis.
A)True
B)False
Q3) Professionals who fail to exercise normal care and skill in the performance of a contract for their services may be sued for a special type of breach described as:
A) sub par performance.
B) illegal practice.
C) malpractice.
D) competence reservation.
Q4) When the privity rule is applied, a bank lending money to the client of an accountant cannot sue the accountant for malpractice.
A)True
B)False
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Chapter 48: Management of Corporations
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Q1) During a special meeting of shareholders at which a quorum is present, action may always be taken by the shareholders on:
A) any matter affecting the welfare of the corporation.
B) the removal of one or more of the directors.
C) the determination of the price at which to sell the products manufactured by the corporation.
D) the subject specified in the notice of the meeting.
Q2) Under which of the following scenarios would a third person be able to successfully sue a corporate manager if the manger's advice to the corporation causes loss to the third person?
A) The manager's advice has resulted in the corporation's successful underselling of the third person's product.
B) The manager's advice has resulted in the corporation's breach of a contract with the third person under which the corporation was losing a substantial sum of money.
C) The manager's advice has resulted in the corporation's refusal to deal with the third person because the third person has not maintained the standards and quotas set by the corporation.
D) none of the above.
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Chapter 49: Real Property
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Q1) Frank has two interests in property. On property "X," Frank has a life estate measured by the life of his Uncle Sal. On property "Y," Frank has a fee simple estate. Frank wishes to transfer, upon his death, his interest in the two properties to his wife, Samantha. Prior to Frank's executing his will, Uncle Sal dies. Frank still wishes to will the properties to his wife, but he now is uncertain whether he has the right to do so. Can Frank will the two property interests to Samantha?
Q2) Property may be taken from its private owner and the title acquired by the taking government or public authority under the power of:
A) a restrictive covenant.
B) eminent domain.
C) an affirmative covenant.
D) restraint.
Q3) Which is <u>not</u> a correct statement about deeds?
A) The grantor must sign the deed.
B) A deed must be recorded to effectively pass title.
C) The fact that a deed is recorded provides notice to the world about who holds title.
D) A deed must be delivered to be effective.
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Page 51
Chapter 50: Environmental Law and Land Use Controls
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Q1) Which of the following statements is correct concerning restrictive covenants?
A) Restrictive covenants that have not been enforced or observed are nevertheless valid and enforceable.
B) Restrictive covenants take precedence over conflicting statutes.
C) Restrictive covenants generally impose some limitations on the landowner's use of the property.
D) If any uncertainty exists in the interpretation of a restrictive covenant, the covenant will be interpreted liberally in favor of the limited use of the land.
Q2) A right to a nonconforming use of land cannot be lost through abandonment.
A)True
B)False
Q3) The Noise Control Act sets the standards for lawn mowers, automobiles, and other devices often found in suburban neighborhoods.
A)True
B)False
Q4) Conduct that unreasonably interferes with the enjoyment of land is a nuisance.
A)True
B)False
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52
Chapter 51: Leases
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Q1) An act or omission of the landlord that substantially deprives the tenant of the use and enjoyment of the premises is a constructive eviction.
A)True
B)False
Q2) In a lease agreement, the person who owns the real property and permits the occupation of the premises is known as the __________, and the person who occupies the property is known as the __________.
A) lessor; lessee
B) lessee; lessor
C) grantor; grantee
D) grantee; grantor
Q3) In a residential lease, it is commonly held that there is an implied warranty of habitability.
A)True
B)False
Q4) When the time for payment of rent is not fixed by the lease, rent is generally held to be due in advance.
A)True
B)False
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Chapter 52: Decedents Estates and Trusts
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Q1) A holographic will is an unwitnessed will that is written by the testator entirely by hand.
A)True
B)False
Q2) Testate distribution describes the distribution that is made when the decedent leaves an invalid will.
A)True
B)False
Q3) To make a valid will, the testator must have testamentary capacity.
A)True
B)False
Q4) A will may be contested on grounds of:
A) lack of mental capacity of the testator.
B) undue influence, duress, or mistake.
C) forgery.
D) all of the above.
Q5) A will cannot be modified by merely crossing out a clause and writing in something new.
A)True
B)False
Page 54
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