Business Ethics and Law
Exam Materials
Course Introduction
Business Ethics and Law explores the ethical and legal principles that guide decision-making processes within organizations. The course examines foundational concepts of moral philosophy, ethical reasoning, and the legal environment affecting business operations. Students analyze real-world case studies involving topics such as corporate social responsibility, workplace discrimination, intellectual property, contract law, and regulatory compliance. By integrating ethical frameworks with legal standards, students develop critical thinking skills for resolving dilemmas and promoting integrity and accountability in professional settings.
Recommended Textbook
Business Law Principles for Todays Commercial Environment 5th Edition by Twomey
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51 Chapters
2716 Verified Questions
2716 Flashcards
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Page 2
Chapter 1: The Nature and Sources of Law
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Sample Questions
Q1) A right can exist:
A) by itself.
B) only if created by a court.
C) only if there is a corresponding duty.
D) only under local law.
Answer: C
Q2) The law often works to cause our society to operate in a very inefficient manner.
A)True
B)False
Answer: False
Q3) The Securities Exchange Commission creates
A) case precedent.
B) statutory law.
C) Constitutional law.
D) administrative regulations.
Answer: D
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Page 3
Chapter 2: The Court System and Dispute Resolution
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Sample Questions
Q1) The decision of an association tribunal is binding on both the association member and the consumer.
A)True
B)False
Answer: False
Q2) When arbitration is mandatory under a statute,the losing party generally can appeal from such arbitration to a court.
A)True
B)False Answer: True
Q3) Documents filed by both parties at the beginning of a lawsuit are called the pleadings.
A)True
B)False Answer: True
Q4) A judge rules on the admissibility of evidence presented in the trial.
A)True
B)False Answer: True
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Chapter 3: Business Ethics, Social Forces and the Law
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Sample Questions
Q1) Maintaining confidentiality is an ethical issue for both employees and company management.
A)True
B)False
Answer: True
Q2) Moral relativists believe that ethical decisions will differ based on circumstances.
A)True
B)False Answer: True
Q3) Ethics is a philosophical concept that deals with values related to the nature of human conduct.
A)True
B)False Answer: True
Q4) Civil disobedience is the remedy natural law proponents use to change positive laws.
A)True
B)False Answer: True
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Chapter 4: The Constitution as the Foundation of the Legal Environment
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Sample Questions
Q1) Until 1937,the Supreme Court held that the Commerce Clause gave Congress the power to regulate only interstate commerce,such as an interstate telegraph message.
A)True
B)False
Q2) The privileges and immunities clause means that if a business owner moves from California to Texas,she can engage in the same business.
A)True
B)False
Q3) Federal judges of the United States:
A) are appointed by the President, with the approval of the Senate.
B) are appointed by the Senate, with the approval of the President.
C) cannot be impeached.
D) are elected by the public.
Q4) Federal supremacy refers to:
A) the power of the President.
B) the power of the Supreme Court to make decisions.
C) the power of the federal government to legislate in certain areas.
D) the power of the federal government to declare war.
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Chapter 5: Government Regulation of Competition and Prices
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Sample Questions
Q1) Governments may regulate prices but not credit terms.
A)True
B)False
Q2) An agreement between real estate brokers to never charge a commission less than 6% is not an example of price fixing.
A)True
B)False
Q3) 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.
Q4) The Robinson-Patman Act guarantees a seller the right to refuse to deal with anyone for any reason or purpose.
A)True
B)False
Page 7
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Chapter 6: Administrative Agencies
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Sample Questions
Q1) A federal agency planning to adopt a new regulation must give public notice of such intent and then hold a hearing at which members of the public may express their views and make suggestions.
A)True
B)False
Q2) The term "exhaustion of administrative remedies" means that:
A) parties to an agency action must be diligent in pursuing their case.
B) parties to an administrative action must take their appeal to a court of law.
C) parties to an administrative action can appeal only after the agency has made a final decision.
D) administrative agencies tend to work very hard.
Q3) A significant difference between an administrative agency hearing and a court hearing is that:
A) a binding decision can only be made by an agency.
B) there is no right of trial by jury before an agency.
C) a court hearing allows no public intervention.
D) a court can enforce its decision.
Q4) An administrative agency cannot hold a hearing without a jury.
A)True
B)False
Page 8
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Chapter 7: Crimes
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Sample Questions
Q1) Money __________ involves the knowing and willful participation in a financial transaction involving unlawful proceeds when the transaction is designed to conceal or disguise the source of the funds.
A) ironing
B) vacuuming
C) laundering
D) cooking
Q2) Computer crimes include:
A) theft of hardware.
B) theft of software.
C) intentional damage to information stored on a computer.
D) All of these.
Q3) When a defendant is convicted of a crime,the court may also declare that the defendant's rights in any property used or gained from the crime be confiscated.This is known as __________.
A) forfeiture
B) reversion
C) subversion
D) divestiture
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Page 9
Chapter 8: 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) Assault is the intentional,wrongful touching of another person without that person's consent.
A)True
B)False
Q3) The same action can have both civil and criminal liability.
A)True
B)False
Q4) When contributory negligence is proven,damages awarded are reduced based on the plaintiff's degree of fault but the plaintiff can still recover some damages.
A)True
B)False
Q5) Product disparagement is a form of defamation.
A)True
B)False
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Chapter 9: Intellectual Property Rights and the Internet
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Sample Questions
Q1) An owner of a copyright may license some of his or her rights to another in exchange for royalty payments.
A)True
B)False
Q2) Once approved by the U.S.Patent and Trademark Office,a patent is presumed valid after a public comment period of 90 days.
A)True
B)False
Q3) To be patentable,an invention must be new and not obvious to a person of ordinary knowledge and skill in the art or technology to which the invention is related.
A)True
B)False
Q4) A copyright owner may prohibit even limited use of copyrighted material if it is used for parody or criticism.
A)True
B)False
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11
Chapter 10: The Legal Environmental of International Trade
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Sample Questions
Q1) Which of the following is NOT a nontariff barrier?
A) government subsidies
B) import quotas
C) complex custom procedures
D) an import or export duty or tax placed on goods as they move in or out of a country
Q2) The provisions of the United Nations Convention on Contracts for the International Sale of Goods (CISG)have been strongly influenced by:
A) the GATT's most-favored nation clause.
B) the European Economic Community's Treaty of Rome.
C) the Uniform Commercial Code.
D) the success of the Organization of Petroleum Exporting Companies.
Q3) Under the act-of-state doctrine,the courts of one country will not sit in judgment of the acts of the government of another country conducted within its own territory.
A)True
B)False
Q4) The use of import quotas represents the most common form of tariff barrier.
A)True
B)False
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Chapter 11: Nature and Classes of Contracts: Contracting
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Sample Questions
Q1) A contract requires:
A) an offer.
B) an acceptance.
C) both an offer and an acceptance.
D) an agreement manifested by the written or spoken words of the parties.
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) A contract is a(n)________ agreement for which the _______.:
A) promissory, parties make mutual promises.
B) multi-party, law gives a remedy.
C) obligation, obligor promises to pay the obligee.
D) legally binding, law gives a remedy.
Q4) The subject matter of a contract can never relate to the performance of personal services.
A)True
B)False
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Chapter 12: Formation of Contracts: Offer and Acceptance
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Sample Questions
Q1) If no time is stated for the duration of an offer,it continues indefinitely if the offer relates to durable goods or land.
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) If an offer does not state how long it shall remain open,it remains open for ten days.
A)True
B)False
Q4) An offer gives the offeror the power to bind the offeree by contract.
A)True
B)False
Q5) An output contract is too vague to be a legally-enforceable agreement.
A)True
B)False
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Page 14
Chapter 13: Capacity and Genuine Assent
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Sample Questions
Q1) In which of the following cases is a contract between A and B binding?
A) A makes a mistake of material fact, and the mistake is unknown by B.
B) A and B make the same mistake of material fact.
C) A recklessly but honestly misrepresents a material fact.
D) A innocently misrepresents a material fact.
Q2) Jose visited a garage sale and found a baseball card collection which he believed was worth over $1,000.He bought the collection for $50.00 from Wanda.Later Jose discovered the collection was essentially worthless and demands his money back from Wanda.Must Wanda refund Jose's money?
A) No, the contract is enforceable because Jose was operating under a unilateral mistake and Wanda did not know the value of the cards.
B) Yes, the contract is enforceable because Jose made a unilateral mistake of fact.
C) Yes, the contract is enforceable because of mutual mistake of fact.
D) No, the contract is enforceable because of mutual mistake of value.
Q3) Certain persons cannot make contracts that will bind them.
A)True
B)False
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Page 15
Chapter 14: Consideration
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Sample Questions
Q1) A(n)_______ is a promise that depends on the occurrence of a specified condition in order for the promise to be binding.
A) cancellation provision.
B) preexisting legal obligation.
C) conditional promise.
D) good-faith adjustment.
Q2) Which of the following is not consideration for a present promise?
A) a good faith adjustment
B) compromise and release of claims
C) the promise to pay one's child support obligation, consistent with a pre-existing court order.
D) the performance of a requested act
Q3) The fact that the consideration supplied by one party is slight when compared with the burden undertaken by the other party is immaterial.
A)True
B)False
Q4) An illusory promise creates a bilateral contract.
A)True
B)False
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Chapter 15: Legality and Public Policy
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Sample Questions
Q1) If a contract can be interpreted in two ways,one legal and the other illegal,the court will assume that the legal meaning was intended unless the contrary is clearly indicated.
A)True
B)False
Q2) Which of the following is not illegal?
A) an office football "pool" with a cash entry fee and cash prize
B) a raffle with an entry fee to win a car
C) a "giveaway" to every tenth person who buys meat at a butcher shop
D) a "giveaway" to every tenth person entering a department store
Q3) An agreement to slander a third person would not be enforceable because slander is a(n):
A) crime.
B) civil wrong.
C) infringement of privacy.
D) restraint against trade.
Q4) Substantive unconscionability has to do with matters of freedom of assent.
A)True
B)False
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17
Chapter 16: Writing, Electronic Forms, and Interpretation of Contracts
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Sample Questions
Q1) The statute of frauds applies to promises to answer for another party's debt,but does not apply to a promise to answer for another party's default.
A)True
B)False
Q2) Parol evidence is not admissible to show fraud,duress or mistake.
A)True
B)False
Q3) Suzy Anders enters into an oral contract to purchase a tract of land from Bill Hermes.The land is considered worthless,but Anders feels that she has discovered a possible usage that would drastically increase the value of the land.To assure herself of the potential value of the land,Anders orally hires an attorney to investigate the title and records associated with the land in question.Before gaining any information from her attorney,Anders orally contracts with a builder to construct a huge building on the site.Because of the size of the project,a completion time is difficult to predict.Anders now discovers that the land is indeed useless,a fact that she obtains through information from her attorney.?Anders now refuses to honor her contracts with Hermes,her attorney,and the builder.Must Anders honor her contractual agreements?
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Page 18
Chapter 17: Third Persons and Contracts
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Sample Questions
Q1) An assignee of a contract can bring suit on the contract only in the name of the assignor.
A)True
B)False
Q2) Janet Jones sold the assets and liabilities of her coin-operated laundry to Kevin Katz for $10,000.The assets of the business included all of the washers and dryers.The liabilities included the amounts still owing on seven new dryers,which had been purchased recently from Dryer Company under an installment contract.Katz agreed to make the installment payments on the new dryers as they came due.After Katz failed to make an installment payment when it was due,Dryer Company sued Jones.Jones claimed she no longer was liable.How will the court decide?
Q3) When a buyer assigns the right to goods under a contract,the buyer's liability to make payment to the seller is:
A) transferred to the third party.
B) terminated.
C) still in effect.
D) shared equally with the third party.
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Page 19
Chapter 18: Discharge of Contracts
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Sample Questions
Q1) 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
Q2) 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
Q3) An offer to perform is known as a(n)__________.
A) rendering
B) offering
C) tinder
D) tender
Q4) By operation of law,a party can be discharged in bankruptcy from debts.
A)True
B)False
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Chapter 19: Breach of Contract and Remedies
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Sample Questions
Q1) The party that breaks a contract may be required to pay damages to the other party to compensate for:
A) losses that could have been avoided by hiring someone else to perform the contract.
B) emotional disturbance caused by the breach of contract.
C) a heart attack induced by the emotional disturbance caused by the breach of contract.
D) damages resulting necessarily and directly from the breach of contract.
Q2) A provision stipulating the amount of money damages to be paid in the event of default or breach of contract is known as a __________ damages clause.
A) nominal
B) contract
C) liquidated
D) breach
Q3) An injured party that does not suffer an actual loss from the breach of a contract is entitled to consequential damages.
A)True
B)False
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Chapter 20: Personal Property and Bailments
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Sample Questions
Q1) Warren brought his television in for repairs.After Warren left the store,gunmen came in to rob the proprietor.As they ran out,Warren's television was knocked over and destroyed.Warren demanded that the proprietor of the store compensate him for the fair market value of the television.The bailee:
A) is liable, since the goods were not returned to Warren in proper condition.
B) is liable, since the bailee did not prevent the gunmen from damaging the television. C) is not liable, since this was a mutual-benefit bailment.
D) is not liable, since the damage was caused by the criminal act of a third party.
Q2) A person becomes a(n)__________ at the moment of taking possession of abandoned personal property.
A) bailor
B) bailee
C) constructive bailee
D) owner
Q3) The intent to make a gift requires an intent to transfer title at that time.
A)True
B)False
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Chapter 21: Legal Aspects of Supply Chain Management
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Sample Questions
Q1) A factor is a special type of bailee.
A)True
B)False
Q2) To be engaged in warehousing,an enterprise must have appropriate storage buildings.
A)True
B)False
Q3) A(n)______is owned and operated by the shipper.
A) common carrier
B) public carrier
C) contract carrier
D) private carrier
Q4) Field warehousing is the storage of farm crops in the field where they have been grown.
A)True
B)False
Q5) Warehouse receipts and bills of lading are both considered documents of title.
A)True
B)False
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Chapter 22: Nature and Form of Sales
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Sample Questions
Q1) A writing that is offered to satisfy the statute of frauds must have been written for that purpose.
A)True
B)False
Q2) Any modification of a sales contract between merchants must be supported by some form of consideration.
A)True
B)False
Q3) The CISG governs all contracts between parties in the countries that have ratified it.
A)True
B)False
Q4) Carol,who is planning to move out of town,offers to sell her sofa to her friend Betty for $750.Betty says,"I'll take it,and I would like you to throw in the coffee table along with it."
Under Article 2 of the UCC,Carol and Betty have:
A) no contract, because of the mirror image rule.
B) no contract because Carol did not accept Betty's counteroffer.
C) a contract for both the sofa and coffee table.
D) a contract for the sofa only.
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Page 24
Chapter 23: Title and Risk of Loss
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Sample Questions
Q1) In a sale on approval,the buyer's approval must be demonstrated by express words.
A)True
B)False
Q2) Fungible goods are always homogeneous.
A)True
B)False
Q3) If a contract contains a delivery term of __________,the seller's responsibility is to get the goods to the buyer.
A) FOB place of shipment
B) FOB place of destination
C) CIF place of shipment
D) CIF place of destination
Q4) Supply chain management refers to the management issues of risk and title as goods flow through commerce.
A)True
B)False
Q5) Under a CF contract,the cost of shipment is included in the contract price.
A)True
B)False
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Chapter 24: Product Liability: Warranties and Torts
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Sample Questions
Q1) How do the warranty provisions under the CISG compare to the provisions of the UCC?
A) In most instances, the standards are the same.
B) In all instances, the standards are the same.
C) The CISG standards are stricter when compared to the UCC standards.
D) The standards are completely different.
Q2) An examination of goods excludes any implied warranty with respect to a defect that:
A) is apparent after a reasonable examination is made.
B) will not be apparent without chemical analysis.
C) will not be apparent until the goods are processed or used in manufacturing.
D) is unknown to all parties and is not detectable by reasonable examination.
Q3) Any warranty that does not provide the complete protection of a full warranty is called a warranty in breach.
A)True
B)False
Q4) Plaintiffs suing for damages caused by a defective product are limited to claims against the manufacturer(s)of such goods.
A)True
B)False
Page 26
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Chapter 25: Obligations and Performance
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Q1) The seller's right to cure a defective tender means that the seller will be given a second chance to make a proper tender of conforming goods.
A)True
B)False
Q2) A non-repudiating party has the right to require a guarantee of performance or a pledge of security.
A)True
B)False
Q3) When a contract to sell identified goods does not specify a place of delivery,the goods are considered delivered at the seller's place of business.
A)True
B)False
Q4) Which method of payment gives the buyer credit by postponing the time for payment?
A) a promissory note
B) a check
C) a draft
D) a certified check
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Chapter 26: Remedies for Breach of Sales Contracts
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Q1) If a seller elects to resell the goods remaining in the seller's possession after the buyer breaks the contract,the seller:
A) must always give notice of the sale to the original buyer.
B) is never required to give notice of the sale to the original buyer.
C) is required to follow strict standards in the resale of the goods.
D) is not required to give notice of the sale to the original buyer when the goods are perishable.
Q2) Suppose NovaTek sells $10,000 worth of goods to BestGear on credit and ships the products.During shipment NovaTek discovers BestGear is insolvent.NovaTek can stop shipment of the product if BestGear has not provided assurances.
A)True
B)False
Q3) A defrauded buyer may avoid the contract and recover damages. A)True
B)False
Q4) Consumer protection law prohibits the waiver of defenses in consumer contracts. A)True
B)False
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Page 28
Chapter 27: Kinds of Negotiable Instruments and Negotiability
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Q1) Any of the following constitutes a signature as an element of negotiability,except:
A) the use of initials.
B) a mark.
C) a trade name.
D) all of these.
Q2) Negotiability is the characteristic that distinguishes commercial paper and instruments from ordinary contracts.
A)True
B)False
Q3) A person who becomes a party to an instrument to add strength to the instrument for the benefit of another party to the instrument is called a:
A) benefactor.
B) secondary obligor.
C) collateral obligor.
D) contingent beneficiary.
Q4) A check that is postdated ceases to be order paper.
A)True
B)False
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Chapter 28: Transfers of Negotiable Instruments and
Warranties of Parties
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Q1) The words "without recourse" on an indorsement means the indorser is:
A) liable personally but not other parties.
B) not liable for any problems associated with the instrument.
C) not liable if the instrument is dishonored.
D) liable for only up to fifty per cent of the loss.
Q2) Order paper is negotiated by the indorsement of the holder only.
A)True
B)False
Q3) If an instrument is payable to bearer,it can be negotiated by transfer of possession alone.
A)True
B)False
Q4) Negotiation of order paper requires:
A) delivery only.
B) indorsement only.
C) both indorsement and delivery.
D) neither indorsement nor delivery.
Q5) An instrument may be transferred only by negotiation.
A)True
B)False
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Chapter 29: Liability of the Parties Under Negotiable Instruments
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Q1) A person who acquires a negotiable instrument with notice of a defense:
A) has acted in bad faith.
B) has acted illegally.
C) cannot be a holder in due course.
D) has taken unfair advantage of the maker.
Q2) To have the status of a holder in due course,a person must first be a holder.
A)True
B)False
Q3) The primary party on a certificate of deposit is the drawer.
A)True
B)False
Q4) Illegality,such as a note for gambling,is a universal defense.
A)True
B)False
Q5) A holder who is neither a holder in due course nor a holder through a holder in due course is subject to every defense,just as though the instrument were not negotiable.
A)True
B)False
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Chapter 30: Checks and Funds Transfers
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Q1) 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.
Q2) A tender occurs when the holder of a check or other consumer transaction authorization demands payment.
A)True
B)False
Q3) A forged endorsement must be reported within one year of the time that the bank statement is received.
A)True
B)False
Q4) A consumer who notifies the issuer of an EFT card within two (2)days after learning of a loss or theft of the card can be held to a maximum liability of $500 for unauthorized use of the card; failure to notify within this time will increase the consumer's liability for losses to a maximum of $5,000.
A)True
B)False
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Chapter 31: Nature of the Debtor Creditor Relationship
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Q1) In a letter of credit the beneficiary is the drawer of the drafts that will be drawn under the letter of credit.
A)True
B)False
Q2) An absolute guaranty creates the same obligation as a suretyship.
A)True
B)False
Q3) Deirdre read that bids were being solicited for the construction of an apartment tower.Deirdre submitted the lowest bid and was offered the contract contingent on her providing acceptable sureties in the amount of $1 million.Because Deirdre never had done work on this scale,it was virtually impossible for her to obtain the appropriate sureties.She convinced Reassuring Sureties,Inc.to issue the necessary commitment by misrepresenting that she was a famous builder in Canada.As the work progressed,it seemed to be going well and Deirdre was asked to make the project 52 stories instead of 50 stories,which was the original contract height.She agreed to this change.?After the work was completed,many breaches of contract on the part of Deirdre became evident.Reassuring Sureties was sued for a $500,000 loss.Reassuring Sureties defended on the grounds of fraud and material change in the contract.Decide.
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Chapter 32: Consumer Protection
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Q1) Consumer protection laws,which commonly regulate the form of consumer contracts,provide that back-page disclaimers are void if the front page of a contract does not call attention to the presence of the terms on the back page.
A)True
B)False
Q2) The Fair Credit Reporting Act applies to:
A) consumer credit.
B) commercial credit.
C) business credit.
D) international sales contracts.
Q3) The owner of a lost credit card is:
A) liable for all purchases made by its finder if the card was lost through negligence.
B) not liable for any purchases if the card was lost despite the exercise of reasonable care by the cardholder.
C) liable for all purchases if the card originally had been sent to the cardholder without any prior request and never was used by such holder.
D) not liable for more than $50 for the unauthorized use of the card.
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34
Chapter 33: Secured Transactions in Personal Property
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Q1) What is the purpose of a financing statement?
A) to meet UCC accounting requirements under Article 9
B) to create a security interest
C) to amend a security agreement
D) to alert third persons that a creditor has a security interest in the collateral described
Q2) Field warehousing is an example of perfection by the mere by possession of the collateral.
A)True
B)False
Q3) An interest in personal property or fixtures that secures payment or performance of an obligation is called a(n): ______.
A) guaranty holding.
B) security interest.
C) guaranty interest.
D) good-faith guaranty.
Q4) Collateral may change its form and character during the course of a security agreement.
A)True B)False
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Chapter 34: Bankruptcy
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Q1) Under the Bankruptcy Reform Act,the "mansion loophole" increases the homestead exemption for debtors.
A)True
B)False
Q2) After all the creditors have been paid by the trustee,any balance is turned over to the debtor.
A)True
B)False
Q3) None of the following transfers may be set aside as preferences by the bankruptcy trustee except for: ______.
A) transactions for present consideration
B) payments in the debtor's ordinary course of business
C) payments of a debtor's utility bill
D) payments to a debtor's relative
Q4) In aChapter 7 bankruptcy,the debtor's nonexempt assets are liquidated to pay debts.
A)True
B)False
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Page 36
Chapter 35: Insurance
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Q1) Paul purchased a house and also purchased fire insurance coverage on the house.The policy contained an 80 percent coinsurance clause.Paul maintained coverage in the amount of $150,000 and the value of the house was $250,000.A fire caused a loss of $100,000.Paul will collect:
A) the full $100,000, because he had coverage for $150,000.
B) only part of the $100,000 loss, because he failed to maintain coverage at 80 percent of the value of the house.
C) nothing, because he failed to maintain coverage at 80 percent of the value of the house.
D) 80 percent of $250,000, or $200,000.
Q2) A coinsurance clause provides that after the lapse of a specified time the insurer cannot dispute the policy on the ground of misrepresentation or fraud of the insured or similar wrongful conduct.
A)True
B)False
Q3) The coverage of the personal auto policy is limited to claims arising from the "use and operation" of an automobile.
A)True
B)False
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Page 37
Chapter 36: Agency
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Q1) A __________ agent 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) The scope of an agent's authority is always known by the third party.
A)True
B)False
Q3) The third person who desires to bind the principal because of the act of an alleged agent has the burden of proving that the latter person was in fact the authorized agent of the principal and possessed the authority to do the act in question.
A)True
B)False
Q4) An employer does not have control over the performance of the work done by an independent contractor.
A)True
B)False
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Page 38
Chapter 37: Third Persons in Agency
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Q1) The fact that a tort or crime is committed by an employee imposes vicarious liability on an employer.
A)True B)False
Q2) The principal is bound by knowledge but not by notice of any fact that is acquired by an agent while acting within the scope of actual or apparent authority.
A)True B)False
Q3) A third person dealing with the agent of a disclosed principal ordinarily intends to make a contract with the principal,not the agent.
A)True
B)False
Q4) Hiring an individual with a criminal record is conclusive proof that the employer is liable for the tort of negligent hiring.
A)True B)False
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Page 39
Chapter 38: Regulation of Employment
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Q1) The Immigration and Naturalization Act (INA)sets forth criminal and civil penalties against employers who knowingly hire illegal aliens.
A)True
B)False
Q2) Algonquin Industries was a small business that hired mostly recent immigrants to the United States and paid them a minimum wage.The business prospered and people began to come around to organize the workers into a union.Officials of Algonquin spoke against the advisability of joining the union.Finally,a date for a certification vote was set.In the days leading up to the vote,Algonquin officials began to intimate that those workers who voted against the union would receive overtime opportunities "as they became available." A charge has been brought that this is an unfair labor practice.Decide.
Q3) In a collective bargaining contract,the parties are generally not free to make an employment contract on any terms that they wish.
A)True
B)False
Q4) A person cannot be both an employee and an agent for a party at the same time.
A)True
B)False
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Chapter 39: Equal Employment Opportunity Law
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Q1) The Pregnancy Discrimination Act does not:
A) require employers to treat pregnancy as other disabilities are treated.
B) require women disabled by pregnancy to be provided with the same benefits as other disabled workers.
C) require an employer to provide paid sick leave benefits to pregnant women if it does not provide them to other disabled workers.
D) prevent termination because of pregnancy
Q2) Cameo Industries desired a workplace free from all forms of sexual harassment.Accordingly,Cameo developed guidelines for its workers that specifically forbade sexual harassment.The guidelines gave examples of conduct that would not be tolerated,provided penalties,designated a company official as the proper person to whom complaints should be brought,investigated complaints thoroughly,and maintained an educational policy designed to remind employees of the policy.?Maureen,a Cameo Industries employee,made a complaint of sexual harassment,charging that her supervisor had demanded sexual favors.An investigation was performed and the charge was substantiated.The supervisor was warned not to continue this conduct,but it happened again.The supervisor was again issued a warning.Finally,Maureen brought a court action against the supervisor and Cameo.Cameo defended on the ground that it had done all in its power to rectify the situation.Decide.
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Page 41
Chapter 40: Types of Business Organizations
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Q1) The principal forms of business organization are: ______.
A) sole proprietorships, joint ventures, and corporations.
B) unincorporated associations, partnerships, and corporations.
C) unincorporated associations, limited partnerships, and corporations.
D) sole proprietorships, partnerships, and corporations.
Q2) The FRC has adopted a franchise disclosure rule that requires franchisors to give prospective franchisees a full disclosure statement thirty (30)days before a franchisee signs a contract or pays any money for a franchise.
A)True
B)False
Q3) Who serve as agents of the corporation and run the "day-to-day" operations of the business?
A) officers
B) directors
C) shareholders
D) employees
Q4) A franchisee cannot be a corporation.
A)True
B)False
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Chapter 41: Partnerships
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Q1) All of the following result in the automatic dissolution of the partnership by law,except: ______.
A) the expulsion of a partner.
B) the bankruptcy of the partnership or of one of the partners.
C) the death of a partner.
D) an event that make the partnership's business illegal.
Q2) When a partnership is dissolved by a partner's bankruptcy,notice:
A) is not required.
B) must be given to the other partners only.
C) must be given to third persons only.
D) must be given to both other partners and third persons.
Q3) In determining the rights of partner Dewey in the firm of Dewey,Cheatham,and Howe,the most important reference point is: ______.
A) the Uniform Partnership Act.
B) the partnership agreement.
C) the sworn testimony of Cheatham and Howe.
D) the customs and traditions of similar partnerships.
Q4) The sharing of gross returns shows no significant evidence of a partnership.
A)True
B)False
Page 43
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Chapter 42: LPs, LLCs, and LLPs
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Q1) A limited partner can never lose money.
A)True
B)False
Q2) A limited liability company: ______.
A) is the same type of business entity as a "Subchapter S" corporation.
B) has no restriction on the number of owners.
C) is taxed in a manner similar to that of a corporation.
D) has unlimited life regardless of what happens with any individual member.
Q3) In a limited partnership,limited partners are not responsible for the debts of the firm if they engage in management activities.
A)True
B)False
Q4) Under the RULPA,a limited partner may contribute: ______.
A) cash only.
B) property only.
C) services only.
D) cash, property, and services.
Q5) Limited partners are personally liable for debts of the business.
A)True
B)False
44
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Chapter 43: 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) Under recent statutes,the articles of incorporation must contain all of the following except the: ______.
A) name of the corporation.
B) name and address of each incorporator.
C) purpose for which the corporation is organized.
D) number of shares the corporation is authorized to issue.
Q3) A corporation is ______ on a contract made by its ______ for its benefit unless the corporation accepts the contract's benefits.
A) liable, promoters
B) not liable, promoters.
C) not liable, CEO.
D) ultra vires, promoters.
Q4) Shareholders are absolutely immune from corporate liabilities.
A)True
B)False
Page 45
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Chapter 44: Shareholder Rights in Corporations
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Q1) If Bruce signs an agreement to purchase Joe's shares in ABCo.the stock sales contract is called an indenture.
A)True
B)False
Q2) Shares may be issued with: ______.
A) no rights to dividends or profits.
B) no par value.
C) have a fractional interest in the total property of the corporation no book value.
D) specific interest in corporate property.
Q3) Capital stock refers to the value received by the corporation for its outstanding stock.
A)True
B)False
Q4) As an owner of the corporation,a shareholder always has the right to inspect the books of the corporation for any purpose,regardless of whether the inspection is related to the shareholder's interest as a shareholder.
A)True
B)False
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Chapter 45: Securities Regulation
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Q1) A registration statement sets forth the key information contained in the prospectus.
A)True
B)False
Q2) State blue sky laws typically deal with fraud and licensing.
A)True
B)False
Q3) A __________ insider is someone retained by the corporation for professional services,such as an attorney,accountant,or investment banker.
A) professional
B) corporate
C) temporary
D) virtual
Q4) Companies whose securities are listed on a national securities exchange and unlisted companies with assets in excess of $10 million and 500 or more shareholders are exempt from the reporting requirements of the Securities Exchange Act of 1934.
A)True
B)False
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Chapter 46: Accountants' Liability and Malpractice
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Q1) Under the flexible rule some courts have rejected the requirement of privity for malpractice and approach each situation on a case-by-case basis.
A)True
B)False
Q2) 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 known as: ______.
A) sub par performance.
B) illegal practice.
C) malpractice.
D) competence reservation.
Q3) Misrepresentation: ______.
A) is the same as fraud.
B) is a false statement of fact made with the intent to deceive.
C) is a false statement of fact made without any intent to deceive.
D) can be used as a limitation to excuse an accountant from liability.
Q4) A client may only recover tort damages from an accountant for ordinary negligence.
A)True
B)False
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Chapter 47: Management of Corporations
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Q1) If an officer diverts a corporate opportunity,the corporation may recover from the officer:
A) triple damages for breach of a fiduciary duty.
B) the profits of which the corporation has been deprived.
C) past wages for the time period in question.
D) any and all funds used to divert the corporate opportunity.
Q2) Ping was the president and chairman of the board of directors of Oh Imports,Inc.Ping was also a major shareholder.Acting as president,Ping negotiated a series of contracts that caused the corporation serious economic losses.In this role,Ping failed to exercise the care of a reasonably prudent person acting in similar circumstances.When substantial economic losses began to pile up,Ping insisted that the corporation breach a contract with Ory in favor of a larger contract that was later entered into with Magnificent Enterprises.Ping hoped to reverse Oh's economic fortunes through this contract with Magnificent,but the attempt failed.Oh then became insolvent.Ultimately,the corporation failed.Two law-suits were initiated against Ping.In the first,a creditor of Oh who never was paid because the business failed sued Ping alleging that the negligence of Ping had caused Oh to fail to pay the creditor what was owed.The second lawsuit instituted by Ory claimed damages from Ping because Ping caused Oh to breach its contract with Ory.Decide both lawsuits.
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Page 49
Chapter 48: Real Property
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Q1) In a mortgage assumption,both the original mortgagor and the transferee are liable,and the property is subject to foreclosure by the mortgagee in the event the payments are not made.
A)True
B)False
Q2) A condominium and a cooperative are essentially the same.
A)True
B)False
Q3) A __________ is a combination of co-ownership and individual ownership.
A) cooperative
B) residential lease
C) commercial lease
D) condominium
Q4) Personal property that has become a fixture no longer exists as personal property.
A)True
B)False
Q5) An unrecorded mortgage is not valid and binding between the parties.
A)True
B)False
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Chapter 49: Environmental Law and Land Use Controls
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Q1) Peter has been subjected to an unreasonable amount of noise from his neighbor,who constantly plays his stereo at full volume.Peter is angry about his neighbor,but he is even angrier about the excessive pollution being emitted by a local factory that burns old tires in direct violation of a state statute prohibiting such conduct.Do the acts of Peter's neighbor and the factory constitute nuisances? If they do,give Peter assistance on any possible courses of action to eliminate the problems.
Q2) A right to a nonconforming use of land cannot be lost through abandonment.
A)True B)False
Q3) Megan owns a manufacturing business in a nonattainment area under federal air pollution law.She wishes to triple the size of the manufacturing operation using land she just purchased next to her current location.What must Megan demonstrate in order to secure a permit to operate in the nonattainment area?
Q4) States that do not meet federal standards under The Clean Air Act are classified as nonattainment areas.
A)True B)False
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Chapter 50: Leases
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Q1) Renewal provisions in a lease are strictly construed against the tenant.
A)True
B)False
Q2) If a tenant fails to pay rent on time the landlord: __________.
A) has an automatic lien on the tenant's personal property for the money due.
B) has the right to lock the tenant out of the property.
C) may take legal steps to evict the tenant.
D) may use the security deposit to pay the tenant's rent.
Q3) A tenancy at will exists when a tenant has a lease with an indefinite duration and pays annual,monthly,or weekly rent.
A)True
B)False
Q4) A tenancy for an indefinite time period that may be terminated at any time by landlord or tenant is called a tenancy: __________.
A) at will.
B) for years.
C) at sufferance.
D) from year to year.
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Chapter 51: Decedents' Estates and Trusts
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Q1) A will may be contested on any of the following grounds except: __________.
A) lack of mental capacity of the testator.
B) undue influence, duress, or mistake.
C) forgery.
D) appointment of a personal representative.
Q2) A trust may be terminated by its own terms.
A)True
B)False
Q3) A trust can be terminated in any of the following manners,except: _______.
A) by its own terms
B) by impossibility of attaining the object of the trust
C) by revocation of the trust by the settlor
D) by a money judgment against the trustee
Q4) A written will must be signed by the testator at the bottom or end of the will.
A)True
B)False
Q5) The beneficiaries of a decedent are paid prior to debts.
A)True
B)False
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