Business Law
Final Exam
Course Introduction
Business Law is a comprehensive course that explores the legal principles and regulations governing the world of commerce and trade. The course covers topics such as contract law, agency relationships, business organizations, intellectual property, and employment law. Students also examine the legal environment influencing business decisions, the ethical considerations in legal contexts, and the impact of laws on business operations. Through case studies and real-world examples, the course equips students with the foundational knowledge necessary to understand and navigate the legal challenges faced by businesses in today's dynamic market.
Recommended Textbook
Andersons Business Law and the Legal Environment 22nd Edition by David P. Twomey
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52 Chapters
2754 Verified Questions
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Page 2
Chapter 1: The Nature and Sources of Law
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Sample Questions
Q1) Rights always stand alone,without any duties.
A)True
B)False
Answer: False
Q2) Substantive law:
A) specifies the steps to follow to enforce legal rights.
B) concerns equitable relief only.
C) creates,defines,and regulates rights and liabilities.
D) draws solely on English legal principles.
Answer: C
Q3) Within each state in the United States,only one constitution is in force.
A)True
B)False
Answer: False
Q4) Administrative regulations:
A) are essentially industry advisories.
B) are case-law precedents.
C) generally have the force of statute.
D) are Constitutional principles.
Answer: C
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Chapter 2: The Court System and Dispute Resolution
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Sample Questions
Q1) A court is a tribunal established by:
A) the parties to a lawsuit.
B) the government.
C) the parties to a contract.
D) none of the above.
Answer: B
Q2) Arbitration procedures occur in a court of law.
A)True
B)False
Answer: False
Q3) The power of a court to decide certain types of cases is called jurisdiction.
A)True
B)False
Answer: True
Q4) The answer to the complaint is filed by the:
A) defendant.
B) prosecutor .
C) plaintiff.
D) judge.
Answer: A
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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) Ethics is a philosophical concept that deals with values related to the nature of human conduct.
A)True
B)False
Answer: True
Q3) Ethical violations can cause lasting detriment to a company's ability to do business through impacts on the company's reputation.
A)True
B)False
Answer: True
Q4) Moral relativists believe that ethical decisions will differ based on circumstances.
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) The "living" Constitution has which of the following characteristics?
A) strong federal government
B) strong president
C) various administrative agencies with significant power
D) all of the above
Q2) The equal protection clause:
A) requires all persons to be treated equally even if reasonable grounds for different classifications exist.
B) allows laws that discriminate on the basis of moral standards.
C) requires that a statute be sustained unless it is clearly arbitrary or capricious.
D) allows laws that discriminate on the basis of cultural patterns.
Q3) The legislative branch of government has the function of:
A) making laws.
B) executing the laws.
C) interpreting the laws.
D) all of the above.
Q4) The living Constitution has as a characteristic a strong president.
A)True
B)False
6
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Chapter 5: Government Regulation of Competition and Prices
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Sample Questions
Q1) The Robinson-Patman Act guarantees a seller the right to refuse to deal with anyone for any reason or purpose.
A)True
B)False
Q2) Quickness Computer,Inc.is a manufacturer of computers.A Hollywood star indicated on national television that Quickness was his favorite computer.Buoyed by this comment,sales of Quickness computers surged.Since demand outpaced supply,Quickness decided to sell no more computers unless an accompanying software package was purchased.A competitor informed the Office of the Attorney General of this policy,asserting it was illegal.Decide.
Q3) Price discrimination is not permitted even when it can be justified on the basis of a difference in grade,quality,or quantity.
A)True
B)False
Q4) A person who is harmed by a conspiracy that violates the Sherman Antitrust Act may sue the wrongdoers for four times the actual damages.
A)True
B)False
Page 7
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Chapter 6: Administrative Agencies
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Sample
Questions
Q1) Wilma was an employee of the Electric Storage Battery Company.She was fired.She claimed that she was fired because she was a member of a labor union.The employer asserted that she was fired because she was a poor worker.Wilma filed an unfair labor practice complaint with the National Labor Relations Board.Its examiner held a hearing at which evidence was presented showing that Wilma was a poor worker.Other evidence presented showed that the employer was opposed to labor unions.The Board decided to believe Wilma's witnesses and concluded that she had been fired because she belonged to the union.Can the employer appeal this decision?
Q2) The "public comment" period for proposed administrative agency rules must be at least __________ days.
A) 30
B) 60
C) 90
D) 120
Q3) Within the area in which the administrative agency is authorized to make decisions,the agency can be regarded as a specialized court or court of limited jurisdiction.
A)True
B)False
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Page 8
Chapter 7: The Legal Environment of International Trade
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Sample Questions
Q1) Which of the following statements is true regarding the World Trade Organization (WTO)?
A) The WTO has been in place since 1947.
B) The WTO coordinates its activities with GATT.
C) It provides a dispute settlement body to promote the resolution of trade disputes.
D) It has the ability to impose criminal penalties.
Q2) The Ex-IM Bank:
A) helps U.S.manufacturers export goods by provides loan guarantees.
B) receives funding from the U.S.Treasury to help sustain its operations.
C) has a financing cap of $100 billion.
D) all of the above.
Q3) 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.
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Chapter 8: Crimes
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Sample Questions
Q1) Larceny is best defined as the taking of personal property from the presence of the victim by the use of force or fear.
A)True
B)False
Q2) "Mental state" does not require an awareness of guilt.
A)True
B)False
Q3) It is not necessary that some person be harmed for an act to be considered a crime.
A)True
B)False
Q4) Under the Sarbanes-Oxley (SOX)obstruction of justice provision,auditors must retain working papers related to a client's audit for at least:
A) 3 years.
B) 5 years.
C) 10 years.
D) 20 years.
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Chapter 9: Torts
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Sample Questions
Q1) Truth is not a defense to defamation.
A)True
B)False
Q2) Torts are classified as:
A) intentional only.
B) negligence only.
C) strict liability only.
D) intentional,negligence,and strict liability.
Q3) In order to establish the tort of false imprisonment,a person must show imprisonment for:
A) any amount of time.
B) at least one minute.
C) at least ten minutes
D) at least one hour.
Q4) Oral or spoken defamation is:
A) slander.
B) libel.
C) privilege.
D) perjury.
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Chapter 10: Intellectual Property Rights
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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) Written computer programs are not given the same protection as other copyrighted material.
A)True
B)False
Q3) A copyright prevents the copying of an idea.
A)True
B)False
Q4) Three types of patents available under U.S.law are:
A) utility,product,design.
B) design,packaging,invention.
C) design,plant,utility.
D) utility,regulatory,common law.
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Page 12
Chapter 11: Cyberlaw
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Sample Questions
Q1) The distinction between offer and acceptance is no longer relevant in cyberlaw.
A)True
B)False
Q2) The key to being able to have Internet Service Providers (ISPs)release identities of those who post statements on the Internet is whether the posters were engaged in illegal or harmful activities.
A)True
B)False
Q3) The tort of invasion of privacy has some application to cyberspace communication.
A)True
B)False
Q4) Sales tax on Internet sales:
A) is never collected.
B) is always collected.
C) is collected if the seller has a physical presence in the state of sale.
D) follow the same rules for sales tax collected in brick and mortar stores.
Q5) The term "cyberspace" describes the World Wide Web and Internet communication. A)True B)False
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Chapter 12: Nature and Classes of Contracts: Contracting
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Sample Questions
Q1) A contract never can be both executory and unilateral.
A)True
B)False
Q2) The effect of an implied contract is not the same as the effect of an express contract.
A)True
B)False
Q3) The elements of a contract include all of the following except:
A) an agreement.
B) two or more competent parties.
C) consideration.
D) an illegal purpose.
Q4) An obligation to pay for the reasonable value of services rendered when there is no contract would be called:
A) quasi-contractual.
B) quasi-enforceable.
C) semi-lawful.
D) valid.
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Chapter 13: Formation of Contracts: Offer and Acceptance
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Sample Questions
Q1) The willingness of an offeror to enter into a contractual agreement regarding a particular subject is expressed by a(n):
A) offer.
B) acceptance.
C) contract.
D) agreement.
Q2) A customer went into a store and saw a beautiful leather jacket bearing a price tag of $29.The customer handed the cashier a $50 bill and said,"I accept.We have a deal." The cashier then noticed the price tag and told the customer an error had been made and that the price was $229.In this case:
A) the customer validly accepted the store's offer.
B) the price tag was a firm offer.
C) no contract was formed because the customer's offer was refused.
D) the customer is the offeree.
Q3) Contract terms may not be implied from conduct.
A)True
B)False
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Chapter 14: Capacity and Genuine Assent
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Sample Questions
Q1) Jack sells Jim a used car that Jack falsely described as having been driven only 12,000 miles.Fraud has occurred if:
A) Jim bought the car solely because of its color.
B) Jim knew that the mileage was more than 12,000 miles.
C) Jim relied upon Jack's statement.
D) Jack is a merchant.
Q2) At common law,a minor cannot be held contractually liable for his or her necessary medical expenses when the parent is unable or unwilling to pay.
A)True
B)False
Q3) A claim of undue influence will be unsuccessful unless the contracting parties have a close relationship of trust.
A)True
B)False
Q4) Ratification consists of any words or conduct of a former minor manifesting an intent to be bound by the terms of a contract made while a minor.
A)True
B)False
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Chapter 15: Consideration
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Sample Questions
Q1) Gerwin's daughter Mary was seeking a position as an associate attorney with Baker,Charles & Dixon,a large metropolitan law firm.The firm,after several meetings with Mary over a two-month period,made Mary an offer of employment on January 15.Mary accepted the offer that day and immediately left for Cape Cod to celebrate without telling Gerwin or anyone else about her new job.
On January 17,two days after Mary had accepted the offer,Gerwin sent Baker,Charles & Dixon a letter in which she offered to give Baker all of her legal business (approximately $40,000 per year)if the law firm would hire Mary.The law firm accepted.
After Gerwin learned that Mary already had been hired by Baker,Charles & Dixon,Gerwin refused to transfer her business to the law firm.The law firm has brought suit against Gerwin on the grounds that a valid contract exists between them.How will the case be decided?
Q2) A promise to make a gift is enforceable.
A)True
B)False
Q3) An illusory promise creates a bilateral contract.
A)True
B)False
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Page 17
Chapter 16: Legality and Public Policy
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Sample Questions
Q1) Which of the following types of contracts might be unenforceable as contrary to public policy?
A) a contract that is contrary to the protection of the public welfare,health,or safety
B) a contract that is contrary to the protection of the person
C) a contract that is contrary to the protection of recognized social institutions
D) all of the above
Q2) Companywide standardized form contracts imposed on a "take-it-or-leave it" basis by a party with superior bargaining strength are called contracts of collusion.
A)True
B)False
Q3) In every contract there exists an expressed covenant of good faith and fair dealing.
A)True
B)False
Q4) Ordinarily,a court will not consider whether a contract is fair or unfair.
A)True
B)False
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Chapter 17: Writing, Electronic Forms, and Interpretation of Contracts
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Sample Questions
Q1) An oral contract containing a promise by an executor to pay estate debts from estate funds is:
A) binding.
B) voidable by the executor or administrator.
C) enforceable against the executor only if the executor signs written proof of the agreement.
D) enforceable against the other contracting party only if that party signs a written agreement.
Q2) An oral contract can be enforced when it relates to:
A) the purchase of a television set for $200.
B) the sale of an interest in land for $400.
C) managing a factory for five years.
D) a promise to answer for the debt of another.
Q3) Parol evidence is not admissible to show fraud,duress or mistake.
A)True
B)False
Q4) An oral agreement to supply a line of credit for two (2)years cannot be enforced because of the statute of frauds.
A)True
B)False
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Chapter 18: Third Persons and Contracts
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Sample Questions
Q1) The right to performance under a contract can be assigned:
A) if the burden of performance is not materially increased.
B) if the contract requires the performance of personal services.
C) if the contract provides for the extension of credit.
D) all of the above.
Q2) The substitution of an old contract for a new one that replaces an obligation or a party for another is a:
A) novation.
B) warranty.
C) assignment.
D) delegation of duties.
Q3) An assignee of a contract can bring suit on the contract only in the name of the assignor.
A)True
B)False
Q4) Under the UCC,an assignment of all the assignor's rights under a contract generally is held to be both an assignment of rights and a delegation of duties.
A)True
B)False
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Chapter 19: Discharge of Contracts
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Q1) A seller's inability to obtain from any supplier the goods called for by the contract generally discharges the contract for impossibility of performance.
A)True
B)False
Q2) The phrase "time is of the essence" means that:
A) the court is in a hurry to dispose of the case.
B) performance under the contract at the times specified in the contract is vital or essential.
C) the contract expressly states that time is of the essence.
D) the price stated in the contract is subject to change without notice.
Q3) A contract to build a house is deemed performed when:
A) there has been substantial performance of the contract.
B) the house is approved by the city housing inspectors.
C) the house is approved by the owner's architect.
D) the house is approved by the owner.
Q4) In a mutual rescission,both parties,acting in good faith,renew their commitment to perform all obligations set forth in their original agreement.
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) A landlord who continuously accepts late rental payments without collecting the late fee provided in the lease:
A) waives the late fee.
B) will collect the late fee at a later date.
C) is ignorant of the late fee.
D) allows the tenant to repudiate the lease.
Q3) 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
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22
Chapter 21: Personal Property and Bailments
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Sample Questions
Q1) In common usage today,there is no distinction between real and personal property.
A)True
B)False
Q2) A bailee's interest in the bailed property can be characterized as:
A) ownership.
B) a fractional proprietary interest.
C) possession.
D) constructive ownership.
Q3) The bailor must both inform the bailee of known defects and make a reasonable investigation to discover defects in a:
A)mutual benefit bailment.
B) Bailment for the sole benefit of the bailee.
C) both a.and b.
D) neither a.nor b.
Q4) Title to abandoned property may be acquired by the first person who obtains possession and control of it.
A)True
B)False
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Chapter 22: Legal Aspects of Supply Chain Management
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Q1) The common law rights and duties of a warehouser,in the absence of modifying statutes,are for the most part those of a bailee in:
A) a bailment for the sole benefit of the bailee.
B) an ordinary mutual-benefit bailment.
C) a bailment for the sole benefit of the bailor.
D) none of the above.
Q2) Bills of lading for intrastate shipments are governed by the UCC,while those for interstate shipments are regulated by the Federal Bills of Lading Act.
A)True
B)False
Q3) A warehouser that holds itself out to serve the public generally without discrimination is called a(n):
A) public warehouser.
B) general warehouser.
C) nondiscriminatory warehouser.
D) ordinary warehouser.
Q4) 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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Q1) The term "course of dealing" refers to the language and customs of an industry.
A)True
B)False
Q2) UCC Article 2 applies not only to contracts for the sale of familiar items of personal property,such as automobiles or chairs,but also to the transfer of commodities,such as oil,gasoline,milk,and grain.
A)True
B)False
Q3) An agreement to periodically deliver home-heating oil to a residential customer that does not indicate the duration of the contract
A) is enforceable for a reasonable period of time.
B) lasts for one delivery only.
C) is not a legally-enforceable contract.
D) constitutes a bulk transfer.
Q4) A sales agreement that does not satisfy the statute of frauds is:
A) a quasi contract.
B) criminal.
C) unenforceable.
D) unlawful.
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Chapter 24: Title and Risk of Loss
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Q1) If an owner has acted in a way that misleads others,the owner may be __________from asserting ownership.
A) estopped
B) voided
C) breached
D) identified
Q2) A sale or return is a completed sale with an option for the buyer to return the goods.
A)True
B)False
Q3) A bailee can pass good title to a good-faith purchaser,even when the sale was not authorized by the owner and the bailee has no title to the goods but is in the business of selling those particular types of goods.
A)True B)False
Q4) In a self-service store a sale cannot occur until the goods are paid for. A)True
B)False
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26
Chapter 25: Product Liability: Warranties and Torts
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Sample Questions
Q1) Strict tort liability is applied:
A) independently of the UCC.
B) without regard to privity of contract.
C) despite negligence on the part of the plaintiff.
D) all of the above.
Q2) A warranty is limited if:
A) only the original buyer is covered by the warranty.
B) the buyer must pay any cost for repair or replacement of a defective product.
C) it covers only part of the product purchased.
D) all of the above.
Q3) Plaintiffs suing for damages caused by a defective product are limited to taking action only against the manufacturer(s)of such goods.
A)True
B)False
Q4) If there is a written contract,a disclaimer of the implied warranty of merchantability must be conspicuous.
A)True
B)False
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Chapter 26: Obligations and Performance
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Q1) The UCC does not specify the form that the assurance of performance is to take.
A)True
B)False
Q2) The standard for commercial impracticability is:
A) hypothetical.
B) conjectural.
C) objective.
D) subjective.
Q3) Upon a seller's tender of nonconforming goods and the buyer's rejection of them,the transaction has ended.
A)True
B)False
Q4) 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
Q5) A buyer has a right to insist that all the goods be delivered at one time.
A)True
B)False
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Chapter 27: Remedies for Breach of Sales Contracts
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Q1) A buyer returning to the seller a raincoat that shrank in the rain is revoking acceptance.
A)True
B)False
Q2) In the case of a breach of warranties,the buyer:
A) should not notify the seller.
B) is required to notify the seller.
C) does not have the option to resell the goods.
D) is not able to recover consequential damages.
Q3) When a plaintiff sues on the basis of strict tort liability,the action is subject to:
A) the UCC statute of limitations.
B) the appropriate state's tort statute of limitations.
C) no statute of limitations.
D) FTC approval.
Q4) A buyer who cancels a sales contract because the seller fails to deliver the goods is entitled to recover as much of the purchase price as had been paid.
A)True
B)False
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29
Chapter 28: Kinds of Instruments, parties, and Negotiability
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Q1) 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.
Q2) A check that is postdated ceases to be order paper.
A)True
B)False
Q3) An instrument is order paper if:
A) it is payable to bearer or the order of bearer.
B) it is payable to cash.
C) the last or only indorsement is a blank indorsement.
D) none of the above.
Q4) Instruments are negotiable when they contain the terms required by contract law. A)True B)False
Q5) If an instrument states no time for payment,the note is payable on demand. A)True B)False
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Chapter 29: Transfers of Negotiable Instruments and
Warranties of Parties
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Q1) The warranties made by an unqualified indorser guarantee that payment of the instrument will be made.
A)True
B)False
Q2) An instrument may be transferred by negotiation or by assignment.
A)True
B)False
Q3) The warranty liability of a qualified indorser is the same as that of an unqualified indorser.
A)True
B)False
Q4) A __________ indorsement consists of the signature of the indorser and words specifying the person to whom the indorser makes the instrument payable.
A) qualified
B) restrictive
C) special D) blank
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Chapter 30: Liability of the Parties Under Negotiable Instruments
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Q1) Bill decided that it was time to remodel his home.Among the features that Bill had included in his remodeling plan was the addition of several very large picture windows.Because of the great expense of the windows,Bill financed the cost through the issuance of a promissory note.The manufacturer of the windows sold the promissory note to a bank.Just after the promissory note matured,the windows began to leak badly.Bill refused to pay on his promissory note and brought action against the manufacturer for breach of contract.Will the bank recover on the promissory note?
Q2) Manuel sued Patricia on a promissory note.Patricia admitted signing the note,but raised the defense that Manuel was not a holder in due course.Can Manuel recover without proving that he is a holder in due course?
Q3) The primary party on a draft is the drawee,assuming that the drawee has accepted the draft.
A)True
B)False
Q4) A holder through a holder in due course is subject to limited defenses.
A)True
B)False
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Chapter 31: Checks and Funds Transfers
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Q1) Miriam issued two checks.The first check was made payable to her neighbor for a used car that the neighbor sold to Miriam.The second check was a rent payment to Miriam's landlord for the current month's rent. The car was purchased on the basis of the neighbor's written assurance that the car had only 38,000 miles of use.After Miriam took possession of the car,Miriam's mechanic checked the vehicle and substantiated that the odometer had been turned back.The car had actually been used for 79,000 miles.Miriam stopped payment on the check and offered to return the car.Meanwhile,the neighbor had purchased a computer and had negotiated Miriam's check to the vendor in payment.Discouraged by the problems with the car,Miriam decided to take a vacation.She issued a written stop payment to her bank on the rent check because she intended to use this money for the vacation.Although the drawee bank had ample time to act,it made an error and paid the rent check instead of stopping payment.Two lawsuits resulted.In the first,the vendor of the computer sued Miriam on the check.In the second,Miriam sued her bank for paying over her timely stop payment order.Decide both cases.
Q2) A tender occurs when the holder of a check or other consumer transaction authorization demands payment. A)True B)False
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Page 33
Chapter 32: Nature of the Debtor-Creditor Relationship
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Q1) Suretyship and guaranty transactions have the common feature of a promise to answer for the debt or default of another.
A)True
B)False
Q2) Exoneration is an agreement that a party shall not be liable for loss.
A)True
B)False
Q3) A surety is liable from the moment of default whereas a guarantor is ordinarily only liable if the creditor cannot collect from the principal debtor.
A)True
B)False
Q4) Suretyship is a pledge to pay one's own debts and obligations. A)True
B)False
Q5) A guaranty of payment creates a(n):
A) contract of surety.
B) contract of credit.
C) letter of credit.
D) absolute guaranty.
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Chapter 33: Consumer Protection
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Q1) 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.
Q2) Predatory lending is a practice on the part of the subprime lending market whereby lenders take advantage of less sophisticated consumers or those who are desperate for funds by using the lenders' superior bargaining positions to obtain credit terms that go well beyond compensating them for their risk.
A)True
B)False
Q3) Automobile lemon laws protect only persons buying automobiles for personal,family,or household use.
A)True
B)False
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Chapter 34: Secured Transactions in Personal Property
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Q1) Creditors receive an automatic 30-day temporary perfection in negotiable instruments taken as collateral.
A)True
B)False
Q2) A security interest is a property right that enables the creditor to take possession of the property if the debtor does not pay the amount owed.
A)True
B)False
Q3) Perfection of a security interest takes place:
A) upon the creditor's possession of the collateral.
B) upon attachment in the case of a purchase money security interest in consumer goods.
C) upon the filing of a financing statement.
D) all of the above.
Q4) The property that is subject to the security interest is called collateral. A)True B)False
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Chapter 35: Bankruptcy
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Q1) The filing of an involuntary bankruptcy case petition results in an order of relief.
A)True
B)False
Q2) Debtor's exemptions are provided under federal law and thus are the same in each state.
A)True
B)False
Q3) A debtor may recover damages against any creditor who filed a bankruptcy petition in bad faith.
A)True
B)False
Q4) If there are twelve (12)or more creditors,at least __________ of those creditors whose unsecured and undisputed claims total __________ or more must sign the involuntary petition.
A) one (1);$14,425
B) three (3);$14,425
C) one (1);$15,575
D) three (3);$15,575
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Page 37
Chapter 36: Insurance
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Q1) The effectiveness of an exception to coverage is limited by:
A) strictly interpreting the exception to coverage against the insurer.
B) placing on the insurer the burden of proving that the exception applies.
C) both a.and b.
D) neither a.nor b. ,since exceptions to coverage are not generally permissible.
Q2) To collect on property insurance,an insurable interest in the property must exist at the time that the loss is suffered.
A)True
B)False
Q3) An application for insurance:
A) may be oral.
B) generally is attached to the policy and becomes a part of the insurance contract.
C) must be prepared by an attorney.
D) has no binding effect on the applicant.
Q4) A person who obtains life insurance generally can only name a beneficiary that has an insurable interest in the life of the insured.
A)True
B)False
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Chapter 37: Agency
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Q1) A written authorization of agency is called a power of attorney.
A)True
B)False
Q2) An agent is distinguished from an ordinary employee in that employees are hired to represent the employer in dealings with third persons.
A)True
B)False
Q3) If a principal terminates an agency without giving notice of the termination to third persons,the agent may retain the power to make contracts that will bind the principal and third persons.
A)True
B)False
Q4) An agency may arise by appointment,conduct,ratification,or operation of law.
A)True
B)False
Q5) The burden of proving the existence of an agency relationship rests on the person who seeks to benefit by such proof.
A)True
B)False
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Chapter 38: Third Persons in Agency
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Q1) Payment to an authorized agent is:
A) payment to the principal only if the agent remits the payment.
B) payment to the principal if the third person informs the principal.
C) payment to the principal,provided the agent does not misappropriate the payment.
D) payment to the principal.
Q2) A customer who has given a purchase order to a salesperson is not bound by any contract until the employer of the salesperson accepts the order.
A)True
B)False
Q3) John Smyth is an agent for L.T.Adams.To avoid becoming a party to any contract that Smyth signs for Adams,Smyth should sign in which of the following ways?
A) John Smyth,agent
B) John Smyth,for the principal
C) John Smith,as agent for the principal
D) L.T.Adams,per John Smyth
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Chapter 39: Regulation of Employment
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Q1) Which of the following groups may legally be paid less than minimum wage?
A) Full time college students
B) Individuals with impaired productive capacity due to mental disability
C) Both a.and b.
D) Neither a.nor b.
Q2) An employee is hired to work under the control of the employer and the employer-employee relationship requires the consent of both parties.
A)True
B)False
Q3) Under the employment-at-will doctrine,the employer has historically been allowed to terminate the employment contract at any time for any reason or for no reason.
A)True
B)False
Q4) An employment contract always will state a time or duration for the contract's applicability.
A)True
B)False
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Chapter 40: Equal Employment Opportunity Law
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Q1) Equal employment opportunity laws provide protection for minorities and women,but the disabled are not within the protection of the laws.
A)True
B)False
Q2) A seniority system is unlawful if:
A) workers with longer years of service are laid off last.
B) a union did not agree to the policy.
C) it results from an intention to discriminate.
D) workers with longer years of service are predominantly from one race.
Q3) Criteria used to make employment decisions that have a disparate impact on women,such as height requirements,must be job-related.
A)True
B)False
Q4) The Equal Employment Opportunity Commission (EEOC)establishes equal employment opportunity policy under the laws that it administers.
A)True
B)False
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Page 42
Chapter 41: Types of Business Organizations
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Q1) An unincorporated association:
A) cannot sue in its own name.
B) cannot be sued in its own name.
C) does not have any legal existence apart from the members who compose it.
D) all of the above.
Q2) A corporation is a separate legal entity capable of owning property,contracting,and being sued in its own name.
A)True
B)False
Q3) Most courts hold that joint ventures are not subject to the same principles of law as partnerships.
A)True
B)False
Q4) Government grants create:
A) sole proprietorships.
B) corporations.
C) partnerships.
D) unincorporated associations.
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Chapter 42: Partnerships
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Q1) When a partner disassociates with a partnership:
A) the partnership is no longer bound by acts of that partner,whether or not a notice is filed.
B) the disassociated partner is prohibited from competing with the partnership for a period of one year.
C) the disassociated partner may be liable for damages for breach of contract. D) none of the above.
Q2) A partnership may occur even though the parties did not label their relationship a partnership.
A)True
B)False
Q3) The vested rights of partners are not extinguished by dissolving the firm,and the existing liabilities remain.
A)True
B)False
Q4) A partnership involves partners' contributions of capital,services,or a combination of these.
A)True B)False
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Chapter 43: LPs, LLCs, and LLPs
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Q1) Limited liability is not a feature of general partnership law.
A)True
B)False
Q2) All owners of a limited liability company are known as officers.
A)True
B)False
Q3) When no limited partnership certificate is filed,what is the result?
A) Only limited partners are fully liable.
B) Only general partners are fully liable.
C) Limited partners retain their limited liability.
D) Both general and limited partners are fully liable.
Q4) A limited liability company pays federal income tax.
A)True
B)False
Q5) A limited liability partnership protects partners from liability for the wrongful acts of those whom they directly supervise and control.
A)True B)False
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Chapter 44: Corporate Formation
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Q1) _________ of a corporation may occur when management is deadlocked and the deadlock cannot be broken by the shareholders.
A) Bankruptcy
B) Consolidation
C) Reinstatement
D) Judicial dissolution
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.
Q4) When two corporations merge:
A) their separate existences cease,and a new corporation is formed.
B) one of the corporations absorbs the other.
C) each corporation's stockholders keep their original shares of stock
D) a new charter is needed.
Page 46
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Chapter 45: Shareholder Rights in Corporations
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Q1) Pursuant to the __________ theory,when a corporation is so dominated and controlled by shareholders,officers,and/or directors that the separate personalities of the individuals and the corporation no longer exist and there is a wrongful use of that control,the courts will disregard the corporate entity so as not to sanction a fraud or injustice.
A) alter ego
B) altered states
C) puppeteer
D) invisible hand
Q2) Preferred stock is ordinarily nonvoting stock.
A)True
B)False
Q3) The two most common instruments used to provide the capital structure of a corporation are stocks and bonds.
A)True
B)False
Q4) A shareholder can give a proxy to vote shares only to another shareholder.
A)True
B)False
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Chapter 46: Securities Regulation
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Q1) In every 10b-5 situation,the plaintiff must show "reliance" on the misrepresentation and a resulting injury.
A)True
B)False
Q2) An investment contract exists if which of the following elements are present?
A) an investment of money
B) a common enterprise
C) an expectation of future profits
D) all of the above
Q3) The SEC requires that annual shareholder reports be submitted to shareholders in any proxy solicitation on behalf of management.
A)True
B)False
Q4) Unlisted companies that have assets less than $10 million and fewer than 500 shareholders are subject to the reporting requirements of the Securities Exchange Act of 1934.
A)True
B)False
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Page 48
Chapter 47: Accountants Liability and Malpractice
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Q1) To help eliminate conflicts of interest,Sarbanes-Oxley prohibits certain activities by audit firms for their audit clients,including:
A) the design and implementation of financial information systems.
B) actuarial services.
C) management functions and human resources.
D) all of the above.
Q2) Any disclaimer by an accountant that excludes liability for malpractice based on negligence is void.
A)True
B)False
Q3) Malpractice is both a form of negligence and a tort.
A)True
B)False
Q4) 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
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Chapter 48: Management of Corporations
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Q1) What is not part of the presumptions of the business judgment rule concerning directors?
A) that the decision they reached was profitable to the corporation
B) that they acted on an informed basis
C) that they acted in good faith
D) that they acted in the honest belief that the action taken was in the best interest of the corporation
Q2) Under which of the following scenarios would a third person be able to successfully sue a corporate manager if the manger's advice to the corporation causes loss to the third person?
A) The manager's advice has resulted in the corporation's successful underselling of the third person's product.
B) The manager's advice has resulted in the corporation's breach of a contract with the third person under which the corporation was losing a substantial sum of money.
C) The manager's advice has resulted in the corporation's refusal to deal with the third person because the third person has not maintained the standards and quotas set by the corporation.
D) none of the above.
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Chapter 49: Real Property
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Q1) Which of the following can constitute an effective delivery of a deed?
A) a physical delivery
B) a symbolic delivery
C) a constructive delivery
D) all of the above
Q2) A guarantee that the grantor owns the estate conveyed is called a covenant:
A) of right to convey.
B) against encumbrances.
C) of quiet enjoyment.
D) of seisin.
Q3) What type of deed merely transfers whatever interest,if any,the grantor may have in the property,without specifying that interest in any way?
A) common law
B) statutory
C) quitclaim
D) warranty
Q4) An unrecorded mortgage is not valid and binding between the parties.
A)True
B)False
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Chapter 50: Environmental Law and Land Use Controls
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Q1) Public zoning and restrictive covenants in deeds have a similar purpose,but each has a different source of authority.
A)True
B)False
Q2) The Jarvis family owned its land for more than 150 years.The Jarvis family traditionally farmed the land and for that purpose maintained farm animals.As years passed,most of the surrounding farms were sold by the owners and the area turned out to be a close-in suburb of a major city.A zoning ordinance was passed that prohibited maintaining a barn or farmyard animals on the land.The Jarvis family was advised that they were unaffected by this ordinance because theirs would be considered a nonconforming use.The members of the Jarvis family lost interest in farming and sold off all their animals.Seven (7)years later,a family member desired to raise a few pigs on the property.Angry neighbors asserted that the family has lost the right to do so.What is your opinion?
Q3) Planting trees or erecting a fence,although otherwise lawful,constitutes a public nuisance when it creates a traffic hazard by obscuring an intersection.
A)True
B)False
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Chapter 51: Leases
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Q1) Many states provide that a lease for a term exceeding __________ must be in writing.
A) three (3)months
B) six (6)months
C) one (1)year
D) three (3)years
Q2) In a lease agreement,the person who owns the real property and permits the occupation of the premises is known as the __________,and the person who occupies the property is known as the __________.
A) lessor;lessee
B) lessee;lessor
C) grantor;grantee
D) grantee;grantor
Q3) Ordinarily,the landlord is not liable to the tenant for crimes committed on the premises by third persons,such as when a third person enters the premises and commits larceny or murder.
A)True
B)False
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53
Chapter 52: Decedents Estates and Trusts
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Q1) A trustee can delegate the performance of personal duties.
A)True
B)False
Q2) When a testator provides for a bequest of his gold watch to his nephew,but the gold watch is not owned by the testator at the time of death:
A) the nephew is entitled to an equivalent amount of cash.
B) the executor must purchase a similar gold watch for the nephew if funds are available.
C) the bequest to the nephew fails by ademption.
D) all legacies in the estate abate to provide funds to purchase a gold watch for the nephew.
Q3) Generally,the right to make a will is limited to persons 18 or older.
A)True
B)False
Q4) A trust may be terminated by its own terms.
A)True
B)False
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54