Business Law
Final Test Solutions
Course Introduction
Business Law is an essential course that introduces students to the legal principles and frameworks governing commercial transactions and business organizations. The course covers topics such as contract law, agency, sales, negotiable instruments, property, and corporate governance, as well as the regulatory environment affecting business operations. Through case studies and real-world examples, students explore how law influences business decision-making, ethical responsibilities, and dispute resolution. By the end of the course, students will have a foundational understanding of legal concepts relevant to business and be equipped to recognize potential legal issues in the commercial world.
Recommended Textbook
Essentials of Business Law 4th Edition by Jeffrey F. Beatty
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34 Chapters
1548 Verified Questions
1548 Flashcards
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Chapter 1: Introduction to Law
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Sample Questions
Q1) Explain the origins of equity and its place in contemporary American law.
Answer: Historically,in England,judges would at times refuse to hear a case,ruling that there was no legal basis for the claim.the injured party might then take the case to the Chancellor,whose status in the king's council gave him unique,flexible powers.the Chancellor was to accomplish what "good conscience" required,or what was fair and equitable.today,judges in the United States still exercise equity powers.Only a judge can exercise equitable powers because,historically,there was no jury involved in the Chancery court.An injunction is an example of an equitable remedy.
Q2) A rule that establishes how a juror may be refused is a rule of:
A)substantive law.
B)administrative law.
C)procedural law.
D)common law.
Answer: C
Q3) The Constitution ensures that the states retain all power not given to the national government.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Business Ethics and Social Responsibility
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Sample Questions
Q1) Ethics is the study of how people should act.
A)True
B)False Answer: True
Q2) Generally,ethical managers have happier,more satisfying lives.
A)True
B)False Answer: True
Q3) Does ethical behavior maximize profitability?
A)Yes, there is concrete evidence that ethical behavior maximizes profitability.
B)No, there is concrete evidence that unethical companies outperform ethical companies.
C)Although there is no guarantee that ethical behavior pays in the short or long run, there is evidence that the ethical company is more likely to win financially.
D)There is strong evidence that ethical behavior pays financially in the long run, but not in the short run.
Answer: C
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Chapter 3: Dispute Resolution
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Sample Questions
Q1) Under diversity of citizenship,a federal court may have jurisdiction only if a federal question is involved.
A)True
B)False
Answer: False
Q2) In Jones v.Clinton,the court held:
A)Paula Jones did not demonstrate the essential elements for her claim.
B)Paula Jones was entitled to a summary judgment.
C)public policy required that the case be dismissed because of the President's governmental position.
D)President Clinton failed to comply with a discovery order.
Answer: A
Q3) Generally,mandatory arbitration provisions in a contract are valid.
A)True
B)False
Answer: True
Q4) Summary judgment is appropriate when essential facts are disputed.
A)True
B)False
Answer: False
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Chapter 4: Common Law, statutory Law, and Administrative Law
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Sample Questions
Q1) TECO Coal Corporation mines and ships more than six million tons of coal annually.TECO is comprehensively regulated by the U.S.Bureau of Mines.The U.S.Bureau of Mines may conduct a surprise inspection of one of TECO's mines:
A)only if it has a search warrant.
B)only if it has a subpoena.
C)only if it has reason to believe a violation of a regulation has occurred.
D)without a search warrant to ensure safety.
Q2) The Environmental Protection Agency was investigating whether Exgrow,Inc.violated the Clean Air Act.Exgrow refused to give the EPA its computerized reports concerning pollution.To get the reports,EPA should use:
A)a stare decisis.
B)a de novo decision.
C)a subpoena duces tecum.
D)a writ of certiorari.
Q3) Discuss the four most important limitations on the power of federal administrative agencies.
Q4) Statutory law is a minor source of US law.
A)True
B)False
Page 6
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Chapter 5: Constitutional Law
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Sample Questions
Q1) The 14 Amendment's Equal Protection Clause "strict scrutiny" test will be used when the legislation:
A)affects an economic interest.
B)affects a person's right to drive.
C)differentiates on the basis of race.
D)affects a person's right to drink alcoholic beverages.
Q2) The issue of the constitutional protections afforded flag burning was addressed in:
A)Texas v.Johnson.
B)United States v.Lopez.
C)Marbury v.Madison.
D)Palmore v.Sidoti.
Q3) If Oregon passed a statute that prohibited liquor stores from engaging in any kind of advertising,that statute would be:
A)valid as an exercise of police power.
B)valid, as alcohol is illegal for minors.
C)invalid as a violation of the Commerce Clause.
D)invalid as an unreasonable restriction of free speech.
Q4) Discuss the Miller test to determine if a creative work is obscene.
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Page 7
Chapter 6: Torts
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Sample Questions
Q1) A tort is a violation of a duty imposed by the criminal law.
A)True
B)False
Q2) A business will incur strict liability for damages resulting from:
A)using harmful chemicals.
B)operating explosives.
C)bringing dangerous substances onto property.
D)a defective product manufactured or sold by the business.
E)All of the above.
Q3) A sports fan,injured by a hockey puck that flew into the stands during an NHL game,would be subject to the defense of assumption of the risk if she files suit to recover for her injuries.
A)True
B)False
Q4) Punitive damages are intended to punish the defendant for conduct that is extreme and outrageous.
A)True
B)False
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Chapter 7: Crime
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Sample Questions
Q1) A successful insanity defense:
A)results in the defendant's being back on the streets within a much shorter time than if the defendant were convicted and sent to prison.
B)is used in about ten percent of all criminal cases.
C)is a favorite outcome for juries since they ordinarily dislike convicting felons and sending them to prison.
D)results in a "not guilty" verdict, even if the prosecution proves the defendant committed the criminal act.
Q2) Congress revised and reauthorized the Patriot Act,but the revised national security letter provisions were found unconstitutional by a federal court.
A)True
B)False
Q3) A crime is a violation of statutory law.
A)True
B)False
Q4) Entrapment can be a defense to a criminal act.
A)True
B)False
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Page 9
Chapter 8: International Law
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Sample Questions
Q1) Which of the following is considered a nontariff barrier?
A)a dumping duty.
B)a quota.
C)a countervailing duty.
D)all of the above
Q2) MicroWare is a U.S.company based in Utah.It is negotiating to sell $4 million worth of computer goods to a French company,Baranger.MicroWare's attorney suggests that payment be by a letter of credit.What is a letter of credit and why does MicroWare's attorney recommend payment by letter of credit?
Q3) Laney,Inc.is interested in expanding its business overseas by licensing its intellectual property rights to a German company.Discuss the precautions to take and risks to be aware of before making the decision to enter into a licensing agreement.
Q4) MagNet is a U.S.company based in Utah.It is negotiating to sell $4 million worth of computer goods to a French company,Lassart.Lassart is insisting that the contract be governed by the CISG.What is the requirement for the CISG to apply and what are some of the primary differences between the UCC and the CISG?
Q5) Explain the origin and purpose of the World Trade Organization.
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Page 10
Chapter 9: Introduction to Contracts
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Sample Questions
Q1) A valid contract can legally be voided by either party.
A)True
B)False
Q2) Strawly Corp.wants to sell land which has toxic waste underground.It may shift all the responsibility for environmental cleanup to the buyer by including such a provision in the sales contract.
A)True
B)False
Q3) Dawn and Isaac sign a contract in which Dawn agrees to deliver 8 bags of flour in exchange for Isaac's promise to pay $25 per bag.Dawn delivers the flour.Isaac pays for the goods.This contract is fully executory.
A)True
B)False
Q4) The elements of a contract are agreement,consideration,legality,and capacity.
A)True
B)False
Q5) Unilateral contracts are usually considered illegal.
A)True
B)False
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Chapter 10: Agreement
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Sample Questions
Q1) If the offer does not specify a type of acceptance,the offeree may accept in any reasonable manner and medium.
A)True
B)False
Q2) A seller's form clearly states no warranty is included.The buyer's form states that the seller warrants the goods for one year.In this case:
A)no contract can be created.
B)the warranty term is a "different term," and the majority of states hold that a contract can be formed but the contradictory terms cancel each other out.
C)the warranty term is an "additional term" that becomes part of the contract in most states.
D)the warranty term is a "different term," which in most states becomes part of the contract unless the seller promptly objects.
Q3) Under the UCC,the mirror image rule applies strictly.
A)True
B)False
Q4) Discuss the circumstances under which an offer would be terminated by law and give examples.
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Chapter 11: Consideration
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Sample Questions
Q1) Mid-American Oil had a contract with NSB Company to supply 1,000 gallons of oil by September 1.The contract contained a provision which required all modifications to be written and signed by the company presidents.In early August,an executive of Mid-American talked with the purchasing agent of NSB who orally agreed to two shipments of oil; one in September and the second one in December.By September 30,when only 500 gallons had been delivered,NSB sued.The likely outcome of this lawsuit is:
A)NSB wins because the modification was not supported by new consideration. B)NSB wins because the modification has to be in writing.
C)Mid-American Oil wins because the UCC governs this case and no new consideration is required.
D)Mid-American Oil wins because new consideration was present.
Q2) Discuss the concept of consideration.
Q3) Zoe hired Shiny Pool Co.to install a swimming pool on her property for $13,000.They both thought the soil and subsoil were normal for the area,but after they started digging,Shiny found a layer of rock that required them to rent a special piece of equipment from a drilling company.Two extra days of work were going to be necessary.Shiny demanded an extra $4,000 to complete the job.Discuss whether Zoe is liable for the additional $4,000.
Q4) What two exceptions did the UCC create for accord and satisfaction check cases?
Page 13
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Chapter 12: Legality
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Sample Questions
Q1) Virginia borrowed money from G & L Lending at 35% interest per year.The state maximum interest rate is 20% per year.Virginia defaulted on the loan.What amount can G& L collect from Virginia?
A)G & L will be able to collect the principal plus 20% interest per year.
B)G & L will be able to collect the principal but not any interest.
C)G & L will not be able to collect either the principal or interest.
D)All of the above may be correct.The answer depends on the particular state law.
Q2) In the case of Worldwide Insurance v.Klopp,the Supreme Court of Delaware found that:
A)a contract provision requiring arbitration and then permitting appeal by either party was void as unconscionable.
B)the contract provision requiring arbitration was clear, unambiguous, and fair to both parties.
C)the arbitration clause in Klopp's auto insurance contract was valid because it furthered the state policy favoring the use of arbitration to resolve disputes.
D)the automobile insurance policy was governed by UCC, Article 3.
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Page 14
Chapter 13: Capacity and Consent
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Sample Questions
Q1) Discuss the concept of a "material fact" in fraud situations.
Q2) Which of the following is most likely to constitute fraud?
A)A false prediction that a painting's value will rise.
B)A false statement that a used car is "the best deal in town."
C)A false statement that a $30,000 car attracts members of the opposite sex.
D)Silence as to a toxic waste problem on real property that the buyer would not reasonably find.
Q3) A minor is someone under the age of 18.
A)True
B)False
Q4) Mentally infirm Sasha contracts to purchase a piano for $2,500 in 60 monthly installment payments.Six months later she tries to void the contract on grounds of mental impairment.A court will:
A)normally void the contract without requiring anything further on Sasha's part.
B)normally void the contract but will require Sasha to return the piano.
C)ordinarily not void the contract unless Sasha had a court-appointed guardian at the time she entered into the contract.
D)not void the contract unless Sasha agrees to have the court appoint a guardian for her.
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Chapter 14: Written Contracts
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Sample Questions
Q1) Jennifer has been wanting to purchase Wayne's first edition of her favorite book for a few years.Wayne has been reluctant to sell it.One evening he said to Jennifer,"Okay,I'll sell the book for $750." Jennifer replied,"Great.I accept." The agreement was not reduced to writing,but Wayne and Jennifer did shake hands.Two days later,Jennifer sent Wayne a letter outlining the terms of the agreement,and stating that she would deliver $750 cash according to the agreement before the end of the week.The letter was signed,"Best regards,Jennifer." Later,Jennifer had second thoughts - $750 was quite an amount - and refused to go through with the purchase.Nothing had been exchanged at this point.What can Wayne do?
A)He cannot enforce the contract against Jennifer because he did not sign the letter.
B)He cannot enforce the contract against Amy because the contract was not reduced to writing whereas it was for over $500.
C)He can enforce the contract against Jennifer because the signed letter satisfies the statute of frauds.
D)He can enforce the contract because, as neither of them is a merchant, the statute of frauds doesn't apply.
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Chapter 15: Third Parties
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Sample Questions
Q1) Tyron purchased a vacant lot and entered into a contract with BZ Inc.to construct a shopping center on the site.Douglas heard about this contract and built a restaurant on an adjoining piece of property because of the planned shopping center.Tyron was unable to raise the necessary capital and was unable to perform the contract with BZ,Inc.Douglas sued Tyron for breach of contract as a third party beneficiary.Douglas will probably:
A)win as a third party creditor beneficiary.
B)win as a third party donee beneficiary.
C)lose as a third party incidental beneficiary.
D)lose as a third party creditor beneficiary.
Q2) A rock group assigns its payment under a performance contract to the Costume Shop,a business that has supplied the group with outrageous stage outfits,and to which the group owes a great sum of money.This is:
A)a valid assignment because of the rule of freedom to contract.
B)a valid assignment because this is a simple transfer of the right to receive money.
C)an invalid assignment because it increases the burden of the payor.
D)an invalid assignment because this is a personal service contract.
Q3) Discuss the potential liability differences between a delegation and a novation.
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17
Chapter 16: Performance and Discharge
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Q1) Ben enters into an agreement with Betsy to buy her lake cabin provided his application for a mortgage is approved.This is a:
A)concurrent condition.
B)condition subsequent.
C)condition precedent.
D)time of the essence clause.
Q2) A time of the essence clause simply means that the parties included in their contract a date for performance.
A)True
B)False
Q3) A court may never discharge a party who has not performed.
A)True
B)False
Q4) Identify four factors courts consider in deciding commercial impracticability and frustration of purpose claims.
Q5) What does the term "substantial performance" mean? What factors are generally considered when determining whether one of the parties has substantially performed?
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Chapter 17: Remedies
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Q1) The case Toscano v.Greene Music is an example of when reliance damages may be awarded..
A)True
B)False
Q2) Costs to rent a vehicle for a short period of time after an auto dealer fails to deliver a purchased vehicle would be:
A)compensatory damages.
B)incidental damages.
C)consequential damages.
D)punitive damages.
Q3) The first step a court takes in choosing a remedy is to determine:
A)what interest it is trying to protect.
B)if the damages can be quantified with reasonable certainty.
C)if punitive damages should be awarded.
D)whether the injured party mitigated its damages.
Q4) Specific performance is available when the subject matter of the contract is unique.
A)True
B)False
Q5) Discuss the remedy of specific performance.
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Chapter 18: Introduction to Sales
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Sample Questions
Q1) The stated purpose(s)of Article 2 of the UCC is/are:
A)to simplify the law governing sales.
B)to permit the continued development of business practices through custom and usage.
C)to make the laws governing sales uniform among the various states.
D)All of the above are correct.
Q2) In a "mixed contract," one involving a sale of both goods and services,the court will:
A)apply the UCC to the provisions of the contract involving the sale of goods and the common law to the provisions involving the sale of services.
B)apply the lex mercatoria to the contract.
C)first determine the dominant purpose of the contract.If the sale of goods dominates the contract, then the court will apply the law of the UCC, Article 2.If the sale of services dominates the contract, the court will apply the common law.
D)apply UCC Article 2A.
Q3) The UCC imposes a duty of good faith in the performance of all contracts.
A)True
B)False
Q4) Discuss open price under the UCC.
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Page 20
Chapter 19: Ownership and Risk
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Q1) Explain the concept and significance of identification of goods.Discuss how identification takes place.
Q2) Rayco entered into a contract to buy Chia Pets from We Grow 'Em.The contract specified that the shipment would be "F.O.B.destination; title to pass on the date of shipment." The goods were destroyed in transit to Rayco.Rayco argues that the loss is We Grow 'Em's.Analyze the situation and determine who is liable for the loss.
Q3) If Terrill steals a digital camera and sells it to Samuel,Samuel will get a valid title as long as he can prove he gave value for the camera and acted in good faith.
A)True
B)False
Q4) In the case of Lindholm v.Brant,the court ruled:
A)Brant could not be a BIOC because he did not act in good faith.
B)Brant could not be a BIOC since he knew the painting had been stolen.
C)Brant was a BIOC, entitled to keep the painting in question.
D)that whether Brant was a BIOC was irrelevant as the title to the painting was void.
Q5) Discuss the concept of insurable interests.
Q6) Discuss the concept of entrustment.
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Page 21
Chapter 20: Warranties and Product Liability
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Q1) Which of the following warranties provides that the goods will be fit for the ordinary purposes for which they are used?
A)Express.
B)Merchantability.
C)Fitness for a particular purpose.
D)Title.
Q2) Henry,a tomato producer,purchases 15 gallons of a new herbicide from GardenWorld to get rid of weeds.Henry bought the herbicide without consultation with GardenWorld for suggestions.Although Henry correctly knew that any herbicide would kill the weeds in his garden,after he sprayed the new herbicide,he realized that it did not kill the weeds.The weeds even seemed to grow! Did GardenWorld breach a warranty?
A)Yes, the implied warranty of fitness for a particular purpose.
B)Yes, an express warranty.
C)Yes, the implied warranty of merchantability.
D)No, as Henry did not consult with the merchant.
Q3) Express warranties must be in writing.
A)True
B)False
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Chapter 21: Performance and Remedies
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Q1) Identify six possible remedies for a seller when the buyer breaches a contract.
Q2) Assume that Sherrie's Cherries contracts with Dessert World to sell and ship 600 pounds of cherries in three equal installments of 200 pounds each.If the first installment arrives with 5 pounds of spoilage,then Dessert World may:
A)reject the installment shipment because of the perfect tender rule.
B)not reject the installment if those in the food industry expect a small percentage of spoilage with fresh fruits or vegetables.
C)reject the entire contract.
D)declare a breach and "cover."
Q3) The Lile v.Kiesel case addressed the issue of:
A)cover.
B)rejection.
C)revocation.
D)all of the above.
Q4) The Hessler v.Crystal Lake Chrysler-Plymouth,Inc.case addressed the issue of:
A)the buyer's right to cover.
B)the seller's right to resell.
C)the seller's right to cure.
D)the buyer's right to inspect the goods.
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Chapter 22: Creating a Negotiable Instrument
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Q1) On March 1 Donna wrote a check for $296 to Sun Services.When will the check be overdue? What is the effect of the check's being overdue? What is the effect if the check is stamped "Insufficient Funds" by Donna's bank?
Q2) Personal and real defenses are valid against an ordinary holder,only real defenses can be used against a holder in due course.
A)True
B)False
Q3) Tim wrote a negotiable note.Subsequently,Tim's debts were discharged in bankruptcy.If a holder in due course presents the note for payment,Tim does not have to pay.
A)True
B)False
Q4) Discuss the effect on an instrument of: (a)contradictory amounts between the numerals and amount written in words on a check; (b)the interest rate left blank on a promissory note; and (c)contradictory terms that are typed onto a promissory note and terms that are preprinted on the note form.
Q5) Forgery is a valid defense against a holder in due course.
A)True
B)False
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Chapter 23: Liability for Negotiable Instruments
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Q1) In the case of In re Couchot,the court held that Kathy Couchot:
A)is liable to Star Bank only for the consideration she directly received from the loan.
B)was not liable for the note, since there was a material alteration.
C)must pay the note since she signed as an accommodation party.
D)fraudulently altered the note.
Q2) The Gulf States Section,PGA,Inc.v.Whitney National Bank of New Orleans case addressed liability on a negotiable instrument:
A)based on fraud.
B)based on negligence.
C)as an accommodation party.
D)as a signer.
Q3) Generally,indorsers are not liable under signature liability if:
A)they write the words "without recourse" next to their signatures on the instrument.
B)they are not the drawee.
C)a check is presented for payment within 30 days after the indorsement.
D)all of the above.
Q4) Discuss the difference between the impostor rule and the fictitious payee rule.
Q5) List the warranties a transferor of a negotiable instrument makes.
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Chapter 24: Liability for Negotiable Instruments: Banks and Their Customers
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Q1) Bob stole a check from the back of his girlfriend's checkbook.Bob completed the check for $500 and signed his girlfriend's name.Great State Bank paid the check.Which statement is correct?
A)The bank must recredit the customer's account.
B)The customer bears the loss.
C)The bank and customer equally share the loss.
D)The Federal Reserve Bank bears the loss.
Q2) Russell recently moved and is considering opening a checking account at Mountain Ridge Bank.Under the UCC and/or the Truth in Savings Act,the bank is required to:
A)provide Russell with a monthly statement of his checking account transactions.
B)include Russell's canceled checks with his monthly statement.
C)keep legible copies of Russell's canceled checks on hand for ten years and provide copies to him within a reasonable time at his request if the bank does not return his canceled checks to him.
D)disclose, before Russell opens an account, the interest rate on the account, any requirements such as minimum account balance and initial deposit he must meet to earn that interest rate, and any fees or penalties imposed by the bank.
Q3) Discuss a bank's liability for both stale checks and post-dated checks.
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Chapter 25: Secured Transactions
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Q1) Danson Corp.sends 15 snow blowers by rail to Gene Hardware.To show where the goods will be shipped and who gets them when they arrive,Danson will obtain ____,which can be used as collateral in a secured transaction.
A)a warehouse receipt.
B)chattel paper.
C)a bill of lading.
D)a certificate of deposit.
Q2) Country Bank,located in Indiana,loaned Chmelik $5,000 and obtained a security interest in a copyright Chmelik owns.Chmelik lives in Illinois,but works in Indiana.In order to perfect its interest,Country Bank files a financing statement in Indiana.The financing statement provides Chmelik's correct name,his business address,and a reasonable description of the copyright used as collateral.Is the financing statement sufficient?
A)Yes, it meets the UCC requirements for contents and filing.
B)No, if the debtor is an individual, the secured party must file in the state of the debtor's principal residence, which in this case would be Illinois.
C)No, the contents of the financing statement are incomplete.
D)Both b and c are correct.
Q3) Discuss the concept of software under Article 9.
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27
Chapter 26: Bankruptcy
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Q1) A Chapter 7 debtor's agreement to pay a creditor on a debt after receiving a discharge in bankruptcy is called a:
A)voidable preference.
B)reaffirmation.
C)payment plan.
D)all of the above terms refer to the same concept.
Q2) The goal of Chapter 11is to shut down the business and distribute its assets to creditors.
A)True
B)False
Q3) In the In Re Fox case,the court:
A)decided that Fox's plan of reorganization was not feasible.
B)imposed a cramdown.
C)refused to impose a cramdown.
D)refused to discharge Fox's income tax debt.
Q4) The Bankruptcy Code has two main goals: rehabilitation and liquidation.
A)True
B)False
Q5) What is a voidable preference? What requirements must be met in order for a preference to be voided?
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Chapter 27: Agency
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Q1) Discuss the principal's remedies when the agent breaches a duty.
Q2) Mrs.O'Leary hired Jenna to sell her house in Michigan.She executed a power of attorney in favor of Jenna authorizing her to do "anything and everything associated with the sale of real estate,acting as a prudent person." On May 30,Jenna finalized a deal with Brandon for the purchase of the house.Brandon and Jenna signed the real estate contract that day.Jenna learned the next day that Mrs.O'Leary had died May 29.The contract is:
A)void since the agency terminated May 29.
B)valid since the agency's purpose was achieved before Jenna was notified of Mrs.O'Leary's death.
C)voidable at the option of Mrs.O'Leary's estate.
D)voidable at the option of Brandon.
Q3) According to the Otsuka v.Polo Ralph Lauren Corporation case,not all employees owe a duty of loyalty to their employer.
A)True
B)False
Q4) An agent must obey any and all instructions of the principal.
A)True
B)False
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Chapter 28: Employment Law
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Q1) Whistleblowers are employees who disclose illegal behavior on the part of their employers.
A)True
B)False
Q2) Orson was fired from his job behind the ticket counter at the airport.He was loudly told to put his personal belongings into a plastic bag and was led out by security guards in front of his co-workers and customers.His supervisor told him not to return.Orson's employer faces potential liability for:
A)intentional infliction of emotional distress.
B)whistleblowing.
C)defamation.
D)violation of the FLSA.
Q3) Wrongful discharge prohibits an employer from firing a worker for a bad reason.
A)True
B)False
Q4) The National Relations Labor Act of 1935 is also known as the:
A)Wagner Act.
B)Taft-Hartley Act.
C)Robinson-Patman Act.
D)Freedom to Work Act.
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Chapter 29: Starting a Business: Llcs and Other Options
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Q1) Guy and Peggy bought a racehorse together,agreeing to share all expenses and split profits equally.There was no agreement as to the duration of the partnership.After two racing seasons,Peggy decided she was tired of the business and left the partnership.Is Guy correct in claiming Peggy's leaving was wrongful?
A)Yes, Peggy was legally required to secure Guy's permission before leaving the partnership.
B)Yes, Peggy had a legal duty to stay in the partnership unless she had a better reason for leaving, such as impossibility of continuation.
C)Yes, Peggy had a legal duty to stay in the partnership until a new partner could be found.
D)No, in a partnership at will, a partner has the right to leave the partnership at any time.
Q2) In the Marsh v.Gentry case,the court ruled that by buying partnership property without letting his partner know,he violated his fiduciary duty.
A)True
B)False
Q3) What are the advantages of electing Subchapter S status? What are the requirements?
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Chapter 30: Corporations
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Q1) The Brooks v.Becker case addressed the issue of liability of promoters priot to the formation of the corporation.
A)True
B)False
Q2) Discuss how a corporation is terminated.
Q3) Owners of preferred stock typically have a preference in liquidation.
A)True
B)False
Q4) Fashions,Inc.has 52 shareholders.There is no shareholder agreement concerning the board of directors.The company is subject to the Model Act.How many directors is Fashions,Inc.required to have?
A)None.
B)One.
C)Two.
D)Five.
Q5) Identify four circumstances that might persuade a court to pierce the corporate veil.
Q6) What is the business judgment rule and what is its purpose?
Q7) Discuss how the Sarbanes-Oxley Act affects Haletronne Co.,a publicly traded corporation.
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Chapter 31: Securities Regulation
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Q1) The Securities Act of 1933 established the Securities and Exchange Commission.
A)True
B)False
Q2) The Stonebridge Investment Partners,LLC v.Scientific-Atlanta,Inc.case discusses liability under Section 10(b)of the 1934 Act.
A)True
B)False
Q3) Section 10(b)of the 1934 act prohibits fraud in connection with the purchase and sale of any security as long as the latter is registered under the Act.
A)True
B)False
Q4) Securities offered and sold entirely within one state by a corporation of that state are exempt from registration.
A)True
B)False
Q5) The Supreme Court's decision United States v.O'Hagan was about insider trading.
A)True
B)False
Q6) Define a direct public offering.What are its advantages?
Page 33
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Chapter 32: Property
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Q1) Juan has the right to walk (or drive)across his neighbor's property to reach the highway.Juan's right is referred to a license.
A)True
B)False
Q2) Sandra and Joe own a hobby farm as tenants in common.They also own a vacation home as joint tenants.What is the difference between the tenancy in common and joint tenancy?
Q3) The case Mishkin v.Young addressed the issue of:
A)revocation of a nonpossessory interest in land.
B)the landlord's liability in case of violation of his duty to return the tenant's security deposit.
C)the tenant's duty to use the premises properly.
D)the creation of an easement.
Q4) The bank who lends money in exchange for a mortgage on the borrower's house is considered to be the:
A)mortgagee.
B)mortgagor.
C)profitor.
D)profitee.
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Chapter 33: Cyberlaw
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Q1) The privacy of e-mail is regulated by:
A)the federal ECPA.
B)the European Directive..
C)COPPA
D)All of the above.
Q2) Explain the difference between an ISP and a Web host,and discuss whether they are treated alike under the Communications Decency Act (CDA).
Q3) The U.S.Department of Commerce reached agreement with the European Union on "safe harbor" principles with which most U.S.companies have complied.
A)True
B)False
Q4) Online auctions:
A)are the major source of consumer complaints about online fraud.
B)involve approximately $1 million worth of goods annually.
C)allow people to bid on their own goods.
D)allow owners of goods to cross-bid with a group of other sellers.
Q5) Discuss common abuses that occur with auctions on the Internet and how these abuses are being addressed.
Q6) Discuss the European Directive on the protection of personal Data.
Page 35
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Chapter 34: Intellectual Property
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Q1) International copyright protection:
A)is automatic for works created in member countries of the Berne Convention.
B)is granted for the life of the author plus 70 years under the Berne Convention.
C)is not yet available for computer programs.
D)lacks any enforcement capability for overseas infringement of works authored in the United States.
Q2) Victoria registered a trademark under the Lanham Act.Six years later Don noticed Victoria's trademark and filed a lawsuit to enjoin her from using it.He proved he had registered the mark in several states more than ten years before Victoria obtained her trademark.Will Don prevail?
A)Yes.Victoria should have conducted a better search of trademarks registered under state laws.
B)Yes.Federal law specifically states a federal trademark is not valid for any lawful owner of the same mark under state law.
C)No.Don will not prevail and Victoria can continue to use the mark because of the time involved.
D)None of the above.
Q3) Briefly discuss a patent,copyright,and trademark.
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