Business Law
Exam Materials
Course Introduction
Business Law is an essential course that explores the fundamental legal principles and frameworks that govern commercial activities. Students will gain an understanding of contracts, agency, partnerships, corporations, property law, and the regulatory environment affecting businesses. The course emphasizes the role of law in facilitating fair, ethical, and efficient business transactions, with practical applications to real-world scenarios. By the end, learners will be equipped to identify legal risks, comply with relevant regulations, and make informed decisions in commercial contexts.
Recommended Textbook
Business Law and the Legal Environment 21st Edition by David P. Twomey
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52 Chapters
2751 Verified Questions
2751 Flashcards
Source URL: https://quizplus.com/study-set/2008
Page 2
Chapter 1: The Nature and Sources of Law
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56 Verified Questions
56 Flashcards
Source URL: https://quizplus.com/quiz/39898
Sample Questions
Q1) The right of privacy does not apply to intrusions into our privacy by means of new technology.
A)True
B)False
Answer: False
Q2) Sheriff Jane desires to search your home. What law requires that the sheriff obtain a search warrant?
A) the Fourth Amendment of the United States Constitution
B) the Equal Protection Clause
C) state statute
D) local uniform police ordinances
Answer: A
Q3) The group of time-honored rules that courts have used to solve similar problems for decades is called stare decisis.
A)True
B)False
Answer: True
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Page 3
Chapter 2: The Court System and Dispute Resolution
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57 Verified Questions
57 Flashcards
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Sample Questions
Q1) The answer to the complaint is filed by the:
A) defendant.
B) moving party.
C) plaintiff.
D) none of the above.
Answer: A
Q2) Documents filed by both parties at the beginning of a lawsuit are called the pleadings.
A)True
B)False
Answer: True
Q3) A motion to dismiss a lawsuit on the basis that, even if everything in the complaint were true, the plaintiff would not be entitled to relief is called a motion:
A) to compel
B) to dismiss
C) for summary judgment
D) none of the above
Answer: B
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4
Chapter 3: Business Ethics, Social Forces, and the Law
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52 Verified Questions
52 Flashcards
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Sample Questions
Q1) Regulation of the Federal Reserve system, negotiable instruments, and installment credit transactions are designed largely to facilitate trade.
A)True
B)False
Answer: True
Q2) Differences among businesses preclude the development of any universal categories of ethical behavior.
A)True
B)False
Answer: False
Q3) Both freedom from political domination and freedom from economic domination are personal rights protected under United States law.
A)True
B)False
Answer: True
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Page 5
Chapter 4: The Constitution As the Foundation of the Legal Environment
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57 Verified Questions
57 Flashcards
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Sample Questions
Q1) The U.S. Constitution:
A) is unwritten.
B) was brought over from England in its entirety.
C) is a written document that specifies the structures and powers of the federal government.
D) prohibits the states from having their own constitutions.
Q2) Ex post facto laws can be adopted by either states or the national government.
A)True
B)False
Q3) The due process clause limits both governmental and private action.
A)True
B)False
Q4) The greatest change to the Constitution has been made by the United States Supreme Court through interpretation.
A)True
B)False
Q5) The Constitution prohibits discrimination based on reasonable classification. A)True
B)False
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Chapter 5: Government Regulation of Competition and Prices
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48 Verified Questions
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Sample Questions
Q1) __________ laws seek to guard against unfairness in corporate takeover situations.
A) Interceder
B) Invader
C) Raider
D) Takeover
Q2) The Federal Trade Commission administers the law prohibiting unfair methods of competition.
A)True
B)False
Q3) Governments may own factories and may compete with privately-owned businesses.
A)True
B)False
Q4) The United States Supreme Court generally has held that an agreement creating the power to monopolize interstate commerce should not automatically be condemned as an unlawful restraint of interstate commerce.
A)True
B)False
Page 7
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Chapter 6: Administrative Agencies
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58 Verified Questions
58 Flashcards
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Sample Questions
Q1) Decisions made by agencies are more likely to be reversed than to be accepted by the court on appeal.
A)True B)False
Q2) In an emergency, an administrative agency can act beyond the scope of the statute that created it.
A)True B)False
Q3) 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.
Q4) The most recent addition to the American governmental structure is the: A) executive branch.
B) administrative agency.
C) judicial branch.
D) legislative branch.
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Chapter 7: The Legal Environment of International Trade
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57 Verified Questions
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Sample Questions
Q1) The SEC has accused the Acme Company of fraud in connection with the sale of its securities to American citizens. Although the firm is American-owned, it is located in Switzerland. All of the accounts and business records of the firm are in several Swiss banks. The SEC has been actively pursuing the case, although it has not been able to provide a great deal of hope for those victimized by the fraud. What factors are probably hindering the SEC, and how might this be handled?
Q2) The interests of the less-developed nations of the world are represented by the UNCTAD.
A)True
B)False
Q3) The transfer of technology rights in a product to allow another firm in a foreign country to produce a product in return for royalties or other specified payments is called: A) exporting.
B) licensing.
C) agency representation.
D) subsidiary sales.
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9
Chapter 8: Crimes
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Sample Questions
Q1) The Fifth Amendment to the United States Constitution's protection against self-incrimination applies to:
A) individuals only.
B) corporations only.
C) both individuals and corporations.
D) individuals, but only in their official capacity within a business.
Q2) White-collar crimes generally involve violence.
A)True
B)False
Q3) The Foreign Corrupt Practices Act does not prohibit facilitation payments.
A)True
B)False
Q4) The criminal law of all states is the same because all states have adopted a uniform criminal code.
A)True
B)False
Q5) An innocent person convicted of a crime is never able to receive compensation for the wrong.
A)True
B)False
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Chapter 9: Torts
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58 Verified Questions
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Sample Questions
Q1) Where the lawsuit is based on negligence, the defendant has the burden of proving himself or herself free of negligence.
A)True
B)False
Q2) "Tort" comes from the Latin term "tortus," which means "crooked, dubious, or twisted."
A)True
B)False
Q3) The use of someone's car without that person's permission is a trespass to personal property.
A)True
B)False
Q4) What form of tort liability was developed to provide guaranteed protection for those who are injured by conduct the law deems both serious and inexcusable?
A) strict liability
B) negligence
C) both a. and b.
D) neither a. nor b.
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Chapter 10: Intellectual Property Rights
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52 Verified Questions
52 Flashcards
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Sample
Questions
Q1) Herman Corporation is engaged in preparing a marketing campaign consisting of electronic and print images. Drawings and photographs for the campaign are coming from a variety of sources, including popular magazines, international newspapers, and web sources. The marketing vice president asserts that the company may use the images under the fair use doctrine. What factors should be considered in the application of the fair use doctrine?
Q2) Computer programs are subject to protection in the U.S. under:
A) copyright laws.
B) patent laws.
C) trade secret laws.
D) all of the above.
Q3) Trade dress refers to the packaging look and overall image of a product.
A)True
B)False
Q4) A copyright prevents the copying of an idea.
A)True
B)False
Q5) Computer programs are subject to copyright protection.
A)True
B)False
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Chapter 11: Cyberlaw
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52 Verified Questions
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Sample Questions
Q1) Identity theft is a type of Internet fraud.
A)True
B)False
Q2) The Internet has facilitated access to capital markets.
A)True
B)False
Q3) Describe the rights of employers to monitor the e-mail of employees who are using their employers' email system.
A) Employers may monitor employees' e-mails, but only if the employees have consented.
B) Employers may monitor employees' e-mails, regardless of whether employees have consented.
C) Employers may monitor employees' e-mails, but only if notice is given.
D) Employers may not monitor employees' e-mails.
Q4) The Fourth Amendment protection applies to homes, but not to information stored on computers.
A)True
B)False
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Page 13
Chapter 12: Nature and Classes of Contracts: Contracting
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53 Verified Questions
53 Flashcards
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Sample Questions
Q1) The main thrust of the quasi contract is to:
A) encourage the making of written contracts.
B) prevent enrichment.
C) compensate those who voluntarily help others.
D) prevent unjust enrichment.
Q2) A person who makes a promise is the promisor, while a person to whom the promise is made is the promisee.
A)True
B)False
Q3) A bilateral contract consists of a:
A) promise for an act.
B) promise for refraining from acting.
C) promise for a promise.
D) promise to contract.
Q4) Because transfer of value is essential to a valid contract, contracts cannot arise in the performance of personal services.
A)True
B)False
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Chapter 13: Formation of Contracts: Offer and Acceptance
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53 Verified Questions
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Sample Questions
Q1) Acceptance of an offer to form a unilateral contract need not be communicated to the offeror to be effective.
A)True
B)False
Q2) An offer is terminated upon rejection by the offeree unless:
A) the period of time for which the offeror agreed to keep the offer open has not yet expired.
B) the offeror renews the offer.
C) the offeree revokes the rejection.
D) the offeree makes a counteroffer.
Q3) On April 15, Morgan sent a letter to Clark offering to sell her business to Clark for $200,000. The offer stated that it would expire on May 1. On April 30, Morgan sent another letter to Clark that stated that she was withdrawing the offer. Clark received that letter on May 1. Also on April 30, Clark sent a letter to Morgan accepting the offer. Morgan received that letter of acceptance on May 1. Morgan refused to sell the business to Clark, claiming that no contract had been formed. Clark brought suit to enforce the contract against Morgan. Based on what you have learned in this chapter, decide the probable outcome of the case.
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Chapter 14: Capacity and Genuine Assent
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44 Verified Questions
44 Flashcards
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Sample Questions
Q1) Contractual capacity is the ability to:
A) read and write.
B) sign a written contract.
C) understand that a contract is being made and to understand its general nature.
D) understand the legal meaning of the contract being made.
Q2) A claim of undue influence will be unsuccessful unless the contracting parties have a close relationship of trust.
A)True
B)False
Q3) In order for fraud liability to arise, the listener must actually rely on the false statement of fact.
A)True
B)False
Q4) Discriminatory and punitive incapacities have largely disappeared.
A)True
B)False
Q5) Certain persons cannot make contracts that will bind them.
A)True
B)False
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Chapter 15: Consideration
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49 Verified Questions
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Sample Questions
Q1) A promise to make a gift is enforceable.
A)True
B)False
Q2) Charitable subscriptions by which individuals make pledges to finance the construction of a college building, a church or another structure for charitable purposes are binding to the extent that the donor should have reasonably realized that the charity was relying on the promise in undertaking the building program.
A)True
B)False
Q3) Dave Tompkins was up late one night watching a television campaign for a charitable organization. The organization was seeking donations in order to construct a new building that would serve as the organization's headquarters. One of Tomkins' favorite performers appeared to promote the campaign, and this prompted Dave to telephone in a pledge. Tomkins pledged $10,000 to the charity and, feeling good about his action, finally went to sleep. The next morning, Tomkins regretted making the pledge because its enforcement would cause great personal financial hardship. Will the charity be able to legally enforce the pledge Tomkins made? If so, why might the charity choose not to enforce a lawful pledge?
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Chapter 16: Legality and Public Policy
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Sample Questions
Q1) Sam Wilson often goes to the horse races, participates in his state's lottery, and invests heavily in the stock of major U.S. companies. At work, Wilson is approached by his coworkers and asked to participate in a football pool. "It's totally based upon skill," his friends claim. In addition, Wilson's philanthropic club is holding a raffle in which an individual could win a new car. Are these activities gambling and therefore illegal activities?
Q2) Which of the following agreements represent(s) an unreasonable restraint of trade?
A) a combination to create a monopoly
B) an agreement to obtain a "corner" on a market
C) an association of merchants to increase prices
D) all of the above
Q3) When a nationally-known neurosurgeon in Chicago, Illinois sells her practice, the contract may specify that the seller will not practice within a 100-mile radius of Chicago for one year.
A)True
B)False
Q4) Agreements not to compete are always void.
A)True
B)False
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Chapter 17: Writing, Electronic Forms, and Interpretation of Contracts
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59 Verified Questions
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Sample Questions
Q1) When a contract falls within the statute of frauds, the signatures of both parties must be shown to the court.
A)True
B)False
Q2) When a person has performed services under an oral contract that cannot be enforced because of the statute of frauds, such person:
A) can recover the agreed payment for the services because a refusal to make payment would be a breach of the contract.
B) can recover the reasonable value of the services because there is a quasi-contractual duty to pay for the benefit received from such services.
C) cannot recover the value of the services because they were rendered under a unilateral mistake of law.
D) can have the party receiving the services arrested for obtaining property by false pretenses.
Q3) Customs and trade usage can override the express provisions of a contract.
A)True
B)False
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Page 19
Chapter 18: Third Persons and Contracts
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Sample Questions
Q1) The rights of a third-party beneficiary always can be destroyed without that beneficiary's consent.
A)True
B)False
Q2) An incidental beneficiary is the same thing as a third-party beneficiary.
A)True
B)False
Q3) An assignee's rights are the same as those that had been possessed by the assignor.
A)True
B)False
Q4) Generally, only the parties to a contract may sue on it.
A)True
B)False
Q5) The making of an assignment __________ the assignor of any obligation of the contract.
A) relieves B) conditionally relieves C) does not relieve D) discharges
Page 20
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Chapter 19: Discharge of Contracts
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Sample Questions
Q1) If no time period for performance is specified in a contract:
A) the contract is unenforceable.
B) time shall be of the essence.
C) a reasonable time for performance will be implied.
D) the time for performance will be ignored by the courts.
Q2) The time for performance is typically essential in a contract for the sale of perishable property.
A)True
B)False
Q3) When a second contract is made between two parties:
A) the first contract between the parties is cancelled.
B) the second contract immediately and automatically displaces the first.
C) the intent of the parties will control the legal effect of the agreement.
D) the modifying contract must be in writing.
Q4) A contract provision requiring that suit be brought within one (1) year does not violate public policy, although the statute of limitations would allow two (2) years in the absence of such a contract limitation.
A)True
B)False
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Chapter 20: Breach of Contract and Remedies
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Sample Questions
Q1) 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
Q2) Contract provisions that limit the remedies of the parties are generally unenforceable.
A)True
B)False
Q3) Which is not a correct statement concerning rescission of a contract?
A) The breach must be material.
B) The injured party who rescinds may recover money paid under the contract.
C) The contract remains in effect after the rescission.
D) Rescission is the undoing of the contract.
Q4) A party injured by the other party's anticipatory repudiation of a contract has the right to bring suit at the time of the repudiation, and before the date on which performance is due.
A)True
B)False
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Chapter 21: Personal Property and Bailments
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Sample Questions
Q1) A bailment:
A) cannot be based on an oral agreement.
B) can involve real or personal property.
C) requires that title be passed to the bailee.
D) transfers possession to the bailee.
Q2) An ordinary gift made between two living persons is an inter vivos gift.
A)True
B)False
Q3) When a person rents space in a locker or building under an agreement that gives the renter the exclusive right to use that space, the placing of goods by the renter in that space creates a bailment.
A)True
B)False
Q4) The Uniform Anatomical Gift Act permits persons sixteen (16) years of age or older to make gifts of their bodies or any parts thereof.
A)True
B)False
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Chapter 22: Legal Aspects of Supply Chain Management
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Sample Questions
Q1) A bill of lading that consigns the goods "to bearer" is called a:
A) nonnegotiable bill of lading.
B) straight bill of lading.
C) negotiable bill of lading.
D) common bill of lading.
Q2) Jeff purchased in good faith a warehouse receipt for 1,000 pairs of running shoes without notice of any defense to it, for value, and in the regular course of his business. Unknown to Jeff, the goods had been stolen from Jane and delivered to the warehouse that issued the receipt purchased by Jeff. Which of the following statements is true?
A) Jeff holds a duly negotiated document of title and is not subject to Jane's title.
B) Jane is entitled to the goods and will prevail over Jeff.
C) Jeff is not a holder of a duly negotiated document.
D) Jane cannot recover the goods but can sue the warehouse for conversion.
Q3) A warehouser is an insurer of goods.
A)True
B)False
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Chapter 23: Nature and Form of Sales
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Sample Questions
Q1) A bailment is a special form of sale in which possession is transferred to a bailee.
A)True
B)False
Q2) The provisions of Article 6 concerning bulk transfers are designed to protect creditors.
A)True
B)False
Q3) A merchant is about to transfer his entire inventory as part of an annual clearance action. This transfer is called a bulk transfer.
A)True
B)False
Q4) An illegal sale:
A) can be enforced if the illegality is unknown to the buyer.
B) is unenforceable.
C) qualifies as a bailment.
D) qualifies as a conditional sale.
Q5) The parol evidence rule does not apply to the sale of goods.
A)True
B)False
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Chapter 24: Title and Risk of Loss
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Sample Questions
Q1) When a person picks out a specific necktie and purchases it, the transaction involves identified goods.
A)True
B)False
Q2) In a contract for FOB place of shipment, the risk of loss passes to the buyer at the same time as title does: when the goods are delivered to the carrier, that is, at the time and place of shipment.
A)True
B)False
Q3) __________ reserve auctions are those in which the goods must be sold regardless of whether the auctioneer is satisfied with the levels of the bids.
A) With
B) Without
C) Unqualified
D) Unrestricted
Q4) COD is a shipping term that requires the buyer to pay in order to gain physical possession of the goods.
A)True
B)False
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Chapter 25: Product Liability: Warranties and Torts
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Sample Questions
Q1) Whenever a sale of goods is made, certain warranties are implied unless they are expressly excluded.
A)True
B)False
Q2) In applying the "foreign substance/natural substance" liability test in the sale of food or drink, courts hold that there is liability if the seller does not deliver to the buyer goods of the character that the buyer reasonably expected.
A)True
B)False
Q3) If the theory of privity of contract still applied, it would be difficult for purchasers injured by defective goods to sue manufacturers.
A)True
B)False
Q4) No law requires a seller to make an express warranty.
A)True
B)False
Q5) To recover liability, the plaintiff must show the defendant was negligent.
A)True
B)False
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Chapter 26: Obligations and Performance
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Sample Questions
Q1) The duty of a seller to deliver imposes the obligation of:
A) making the goods available to the buyer.
B) transporting the goods to the business address of the buyer.
C) delivering the goods to a carrier for shipment to the buyer.
D) tendering the goods at the buyer's residence if the buyer has no place of business.
Q2) Unless otherwise agreed by the parties, payment by a buyer requires payment either in cash or by certified check.
A)True
B)False
Q3) A buyer always has a right to examine the goods to determine if, in fact, the goods conform to the contract.
A)True
B)False
Q4) A party to a sales contract may demand at any time that the other party provide adequate assurance of performance.
A)True
B)False
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28
Chapter 27: Remedies for Breach of Sales Contracts
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Sample Questions
Q1) When a buyer has breached the contract by failing to accept conforming goods, the seller may sue the buyer for the full purchase price if the goods cannot be resold by the seller.
A)True
B)False
Q2) Proof of substantial impairment of the value of a contract to the buyer is required to justify revocation of acceptance.
A)True
B)False
Q3) In the absence of a liquidated damages clause and in the absence of proof of greater damages, the seller's damages are computed as
A) 25% of the purchase price or $500, whichever is less.
B) 25% of the purchase price or $500, whichever is greater.
C) 20% of the purchase price or $500, whichever is greater.
D) 20% of the purchase price or $500, whichever is less.
Q4) When a buyer wrongfully rejects goods, the seller may cancel the contract.
A)True
B)False
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Chapter 28: Kinds of Instruments, Parties, and Negotiability
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Sample Questions
Q1) A(n) __________ instrument's terms are enforceable, but the instrument is treated simply as a contract governed by contract law.
A) nonnegotiable
B) negotiable
C) accommodation
D) secondary
Q2) In a negotiable instrument, the promise or order to pay must be unconditional.
A)True
B)False
Q3) Which of the following factors do not affect negotiability of an instrument?
A) a provision specifying the collateral that secures the debt
B) the antedating of the instrument
C) the omission of a date of execution
D) none of the above affect negotiability
Q4) Revised UCC Article 3 refers to which of the following parties as secondary obligors?
A) drawers
B) indorsers
C) accommodation parties
D) all of the above
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Chapter 29: Transfers of Negotiable Instruments and Warranties
of Parties
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Sample Questions
Q1) An endorsement is restrictive when:
A) the paper is "for deposit only."
B) the paper is being negotiated for collection.
C) the paper is being conditionally negotiated.
D) all of the above.
Q2) To enforce an implied warranty of an indorser, the party claiming under the warranty must give the indorser notice of the breach within fourteen (14) days after the claimant learns or has reason to know of the breach and the identity of the indorser.
A)True
B)False
Q3) A forged or unauthorized endorsement is by definition:
A) an endorsement of the person by whom it appears to have been made.
B) no endorsement of the person by whom it appears to have been made.
C) binding on the party who refuses to ratify the instrument.
D) incapable of being ratified.
Q4) Order paper can be converted into bearer paper by the holder's blank endorsement.
A)True
B)False
Page 31
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Chapter 30: Liability of the Parties Under Negotiable Instruments
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Q1) Mabel issues a negotiable promissory note to the order of Rachel. Rachel endorses the note to Batton, who takes it as a holder in due course. Batton gives the note to his brother, Albert, as a gift. In this situation:
A) Albert will acquire Batton's rights.
B) Albert is a holder in due course.
C) Batton can sue only on the instrument if he took it before maturity.
D) none of the above.
Q2) Under the "close-connection" doctrine, a holder has taken so many instruments from its transferor or is so closely connected with the transferor that any knowledge the transferor has is deemed transferred to the holder, preventing holder in due course status.
A)True
B)False
Q3) Which of the following parties will recover in a lawsuit if no defense is raised?
A) only a holder in due course
B) only a holder through a holder in due course
C) only an ordinary holder
D) any holder or assignee
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Chapter 31: Checks and Funds Transfers
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Q1) A check may be certified by a bank on request of the drawer or the holder.
A)True
B)False
Q2) When a bank certifies a check, the amount involved in the certification will be retained in the depositor's account until payment of the certified check.
A)True
B)False
Q3) 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
Q4) A check is a particular kind of draft.
A)True
B)False
Q5) The act of stopping payment on a check imposes no liability on the depositor.
A)True
B)False
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Chapter 32: Nature of the Debtor-Creditor Relationship
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Q1) An issuer has an obligation to honor drafts under a letter of credit if the conditions specified in the letter have been satisfied. This obligation includes the bank's obligation to assure that the goods sold by the seller in fact conform to the contract.
A)True
B)False
Q2) Sureties have no rights to protect them from loss, to obtain their discharge because of the conduct of others that would be harmful to them, or to recover money that they were required to pay because of the debtor's breach.
A)True
B)False
Q3) The creditor first must proceed against the debtor before suing the surety.
A)True
B)False
Q4) Suretyship and guaranty transactions have the common feature of a promise to answer for the debt or default of another.
A)True
B)False
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Chapter 33: Consumer Protection
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Q1) The Fair Credit Reporting Act applies only to consumer credit.
A)True
B)False
Q2) If you allow another person to use your credit card but the person uses the card for a purpose other than the one you specified:
A) an unauthorized usage has occurred.
B) an authorized usage has occurred.
C) you will not be responsible for more than $50 of the amount charged.
D) both a and c
Q3) A consumer claiming that there has been a violation of a consumer protection statute has the burden of proving that the statutory definition of "consumer" has been satisfied.
A)True
B)False
Q4) 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.
Page 35
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Chapter 34: Secured Transactions in Personal Property
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Q1) Which is not an element of attachment?
A) the filing of a financing statement
B) a security agreement
C) value received by the debtor
D) the debtor has rights in the collateral
Q2) For a security interest to attach, the creditor must file a financing statement.
A)True
B)False
Q3) Compulsory resale of collateral is not recognized by the Uniform Commercial Code.
A)True
B)False
Q4) The perfection obtained by filing a financing statement lasts for __________.
A) five (5) years, and is renewable.
B) five (5) years, and is non-renewable.
C) ten (10) years, and is renewable.
D) ten (10) years, and is non-renewable.
Q5) Consumer goods are not subject to perfection of a security interest.
A)True
B)False
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Chapter 35: Bankruptcy
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Q1) A debtor is presumed to be insolvent on and during what number of days immediately preceding the date of the filing of a bankruptcy petition?
A) 30
B) 60
C) 90
D) 120
Q2) Chapter 7 is:
A) a liquidation proceeding.
B) a reorganization proceeding.
C) an extended time payment plan.
D) always an involuntary proceeding.
Q3) The filing of a voluntary, but not an involuntary, petition operates as an automatic stay.
A)True
B)False
Q4) Confirmation of an extended time payment plan releases a debtor from liability for all debts that would be discharged by an ordinary bankruptcy discharge.
A)True
B)False
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Chapter 36: Insurance
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Q1) A homeowner's policy commonly provides protection from losses caused by theft.
A)True
B)False
Q2) 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.
Q3) A person has an insurable interest in property if destruction of that property would cause a monetary or pecuniary loss to that person.
A)True
B)False
Q4) 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
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Chapter 37: Agency
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Q1) Which of the following is not a condition necessary for ratification?
A) The agent must have purported to act on behalf of or as an agent for the identified principal.
B) The third party benefiting from the ratification must give consideration for the ratification.
C) The principal must have been capable of authorizing the act both at the time of the act and at the time it was ratified.
D) The principal must have full knowledge of all material facts.
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) A "right to control" test determines whether an individual is an agent, an employee, or an independent contractor.
A)True
B)False
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Chapter 38: Third Persons in Agency
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Q1) Even after there is an effective ratification, the original action of an agent still is treated as unauthorized.
A)True B)False
Q2) An employer is clearly liable for any intentional, unprovoked assault committed by an employee on a third person.
A)True B)False
Q3) The liability of an agent to a third person depends on the existence of authority and the manner of executing the contract.
A)True
B)False
Q4) 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
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Chapter 39: Regulation of Employment
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Q1) The rights of an employee to be compensated are governed primarily by the same principles that apply to the compensation of a(n):
A) partner.
B) stockholder.
C) agent.
D) court-appointed trustee.
Q2) "Right-to-know" laws in some states guarantee employees the right to know if there are hazardous substances in their workplaces.
A)True
B)False
Q3) Under the common law, an employer is under a duty to furnish an employee with a sufficient number of competent fellow employees for the work involved.
A)True
B)False
Q4) The Immigration and Naturalization Act (INA) sets forth criminal and civil penalties against employers who knowingly hire illegal aliens.
A)True
B)False
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Chapter 40: Equal Employment Opportunity Law
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Q1) When an employer intentionally treats some employees less favorably than others, the legal theory that applies is:
A) disparate impact.
B) affirmative action.
C) reverse discrimination.
D) disparate treatment.
Q2) Hostile work environment sexual harassment:
A) cannot be created by unwelcome sexual flirtation and propositions.
B) cannot result in an injunction being granted against offensive conduct.
C) occurs when a supervisor's conduct does not affect an employee's economic benefits, but causes anxiety and "poisons" the work environment for the employee.
D) can result in the court ordering the business to be sold, upon proper notice, at a publicly-held auction.
Q3) Title VII of the Civil Rights Act of 1964, as amended, is the principal law regulating equal employment opportunities.
A)True
B)False
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Chapter 41: Types of Business Organizations
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Q1) A major disadvantage of the sole proprietorship is:
A) no organizational fees.
B) the sole proprietor obtains all of the profits.
C) the sole proprietor is personally liable for the debts of the sole proprietorship.
D) the sole proprietor is free to make all business decisions concerning operation of the sole proprietorship.
Q2) If the negligence of the franchisee causes harm to a third person, the franchisor is not liable because the franchisee is an independent contractor.
A)True
B)False
Q3) A franchisor is the person to whom the franchise is granted.
A)True
B)False
Q4) Partnership agreements must always be in writing.
A)True
B)False
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Chapter 42: Partnerships
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Q1) A partner admitted as a partner into an existing partnership has unlimited liability for all obligations of the partnership arising before such admission.
A)True
B)False
Q2) Partners hold title to firm property by:
A) tenancy in partnership.
B) tenancy in common.
C) joint tenancy.
D) none of the above.
Q3) When dissolution has been caused by operation of law, notice of such dissolution must be given to third persons.
A)True
B)False
Q4) The sharing of profits and losses is conclusive evidence of partnership.
A)True
B)False
Q5) Partnership property is only that property contributed by the partners.
A)True
B)False
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Chapter 43: LPs, LLCs, and LLPs
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Q1) If a limited partnership certificate is never filed, all partners are treated as limited partners.
A)True
B)False
Q2) Under the Revised Uniform Limited Partnership Act, limited partners may engage in certain "safe harbor" activities without losing their protection from liability. These activities include being a contractor for, or an agent or employee of, the limited partnership or of a general partner.
A)True
B)False
Q3) The spread of limited liability corporation statutes resulted from:
A) a United States Supreme Court decision.
B) an Internal Revenue Service ruling.
C) a Wyoming Supreme Court decision.
D) a Securities and Exchange Commission ruling.
Q4) A limited liability company may hold property in its own name.
A)True
B)False
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Page 45
Chapter 44: Corporate Formation
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Questions
Q1) In states that have adopted the Revised Model Business Corporation Act, the secretary of state may commence proceedings to administratively dissolve a corporation under all but which of the following circumstances?
A) the corporation adopts more than one business purpose.
B) the corporation does not pay franchise taxes within sixty (60) days after they are due
C) the corporation does not file its annual report within sixty (60) days after it is due.
D) the corporation is without a registered agent or registered office for sixty (60) days or more.
Q2) A quasi-public corporation is one that is organized for charitable or benevolent purposes.
A)True
B)False
Q3) Where a corporation is properly formed, it is called a corporation:
A) di giorno.
B) de facto.
C) de jure.
D) by estoppel.
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Chapter 45: Shareholder Rights in Corporations
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Q1) Preferred stock cannot have priority over common stock with respect to dividends.
A)True
B)False
Q2) Preferred stock is ordinarily nonvoting stock.
A)True
B)False
Q3) If a share certificate is lost, destroyed, or stolen, the ownership of the shareholder is destroyed.
A)True
B)False
Q4) A shareholder has:
A) an absolute right to dividends.
B) a right to dividends when declared.
C) a right to insist that dividends be declared.
D) to share equally all dividends with fellow shareholders.
Q5) 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) Mark Hubbard has been very successful in the cattle business over a number of years. Hubbard has decided to establish a cattle program as an investment tool. He will purchase cattle with investors' money and then provide medical care, feed, and transportation on a service contract basis. The profits then will be divided proportionately among the investors. An investment company, Money Ventures, Inc., is interested in the entire offering of Hubbard's cattle program. Hubbard is unsure as to whether the securities acts apply to him. In addition, he wonders whether his venture, as structured, is exempt if the activity is within the securities acts. Should Hubbard be concerned?
Q2) State laws designed to protect the public from the sale of worthless stocks and bonds are known as "clear sky" laws.
A)True
B)False
Q3) The Market Reform Act of 1990 empowers the SEC to suspend all trading when markets are excessively volatile.
A)True
B)False
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Chapter 47: Accountants Liability and Malpractice
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Q1) An accountant may be liable for malpractice if the accountant fails to inform a client of the tax consequences associated with selling a business.
A)True B)False
Q2) Under the "known-user" rule, it is sufficient if a user is a member of a known class, even if the identity of the particular user is not known to the accountant.
A)True B)False
Q3) To bring a tort action for malpractice, a plaintiff must show that the defendant's breach was at least:
A) intentional.
B) negligent.
C) reckless. D) fraudulent.
Q4) Accountants are equally liable to interlopers and rightful third parties. A)True B)False
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Chapter 48: Management of Corporations
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Q1) Officers that cause a corporation to break a contract with third party are liable to the third party even if they acted in good faith to advance the interests of the corporation.
A)True
B)False
Q2) Officers and directors may be criminally liable for failure to prevent the commission of a crime if they are found to be the "responsible corporate officers."
A)True
B)False
Q3) A corporation may be convicted of a criminal offense if it is shown beyond a reasonable doubt that the offense was committed by its agent acting within the scope of the agent's authority.
A)True
B)False
Q4) Directors are usually allowed to vote by proxy.
A)True
B)False
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Page 50
Chapter 49: Real Property
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Q1) 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.
Q2) Personal property that is attached to the earth or placed in a building in such a way or under such circumstances that it is deemed part of the real property is called a(n): A) asset.
B) estate.
C) easement.
D) fixture.
Q3) Title to land may be acquired by adverse possession.
A)True
B)False
Q4) The fact that an item may be unplugged conclusively indicates that the item is not a fixture.
A)True
B)False
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Chapter 50: Environmental Law and Land Use Controls
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Q1) A nuisance:
A) is created by every interference that has an effect on others.
B) is established when the plaintiff shows harm as the result of the defendant's conduct.
C) arises only by an interference that is great enough to be condemned as unreasonable.
D) cannot arise from a lawful activity or business that is conducted in a lawful manner.
Q2) "Superfund" is another name for a hazardous waste fund.
A)True
B)False
Q3) A civil nuisance may be terminated by abatement or closure by government authority, while a criminal nuisance is not subject to such action.
A)True
B)False
Q4) Nuisances may be classified as either private nuisances or public nuisances.
A)True
B)False
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Chapter 51: Leases
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Q1) A lease is the relationship by which one person is in lawful possession of real property owned by another.
A)True
B)False
Q2) A tenant in possession has control of the property and is therefore liable when the tenant's failure to use due care under the circumstances causes harm to licensees or invitees.
A)True
B)False
Q3) Under the modern view, a residential lease:
A) must contain an escalation clause.
B) includes an implied warranty of habitability.
C) must be a tenancy for years.
D) cannot be a tenancy at will.
Q4) A tenancy for years terminates at the expiration of the specified term, regardless of whether one party gives the other any notice of termination.
A)True
B)False
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Chapter 52: Decedents Estates and Trusts
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Q1) When distributees stand in different degrees of relationship:
A) distribution is made per stirpes.
B) distribution is made per capita.
C) a distribution cannot be made without the consent of the state.
D) none of the above.
Q2) When specifically bequeathed property is sold or given away by the testator prior to death, the bequest is considered "redeemed."
A)True
B)False
Q3) A bequest of a pearl necklace is a:
A) general legacy.
B) specific legacy.
C) specific ademption.
D) residuary ademption.
Q4) Statutes often require that the attestation of witnesses be made in the presence of the testator and in the presence of each other.
A)True
B)False
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