Business Law
Final Test Solutions
Course Introduction
Business Law is a foundational course that introduces students to the legal principles and frameworks governing commercial activities. The course explores key topics such as contract law, agency, employment law, business organizations, intellectual property, and the regulatory environment affecting businesses. Through case studies and real-world examples, students learn to identify legal risks, understand the implications of legal decisions, and apply legal reasoning to business scenarios. This knowledge equips future professionals with the tools to navigate legal challenges, make informed decisions, and ensure compliance within various business 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
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Page 2
Chapter 1: The Nature and Sources of Law
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56 Verified Questions
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Sample Questions
Q1) Law is often defined as the body of principles that courts will enforce.
A)True
B)False
Answer: True
Q2) Rights guaranteed in the United States Constitution:
A) cannot be taken away by statutes or court decisions.
B) can be taken away by statutes.
C) can be taken away by court decisions.
D) can be taken away by local ordinances.
Answer: A
Q3) The United States Constitution provides that we have a right to be free from intrusions by others.
A)True
B)False
Answer: True
Q4) Court decisions and statutes can take away rights created by the United States Constitution.
A)True
B)False
Answer: False
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Chapter 2: The Court System and Dispute Resolution
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57 Verified Questions
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Sample Questions
Q1) The _____ rule(s) on the admissibility of evidence.
A) judge
B) jury
C) attorneys
D) court clerk
Answer: A
Q2) A motion for a directed verdict occurs immediately after the last pleading is filed.
A)True
B)False
Answer: False
Q3) An ombudsman:
A) is usually a government official.
B) is often appointed by a judge.
C) receives a large amount of judicial power.
D) none of the above.
Answer: A
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Page 4
Chapter 3: Business Ethics, Social Forces, and the Law
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52 Verified Questions
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Sample Questions
Q1) Evidence suggests that there may be relationships among ethical customer and employee relations and long-term ability to pay dividends.
A)True
B)False
Answer: True
Q2) The Blanchard and Peale three-part test for resolving ethical dilemmas consists of the following questions:
A) Is it legal? Is it ethical? Is it moral?
B) Is it legal? Is it balanced? How does it make me feel?
C) Is it ethical? Is it right? Does it pass the "front page of the newspaper" test?
D) Is it right? Is it balanced? Is it fair?
Answer: B
Q3) Legislation and government regulations typically are enacted in response to:
A) isolated but serious ethical transgressions by businesses.
B) ongoing technological changes that make it easier to circumvent old laws.
C) widespread abuses of gaps in existing laws that are fundamentally unfair.
D) changes in the availability of organizational resources.
Answer: C
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Chapter 4: The Constitution As the Foundation of the Legal Environment
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57 Verified Questions
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Sample Questions
Q1) The "living" Constitution has which of the following characteristics?
A) strong federal government
B) a strong president
C) diminution of state powers relative to those of the federal government
D) all of the above
Q2) All current rights against governmental intrusion are expressly stated in the Constitution.
A)True
B)False
Q3) Which of the following is not a true statement regarding the commerce clause?
A) If the federal government establishes safety device regulations for interstate carriers, a state cannot require different devices.
B) States may not use their tax power for the purpose of discriminating against interstate commerce.
C) The commerce clause empowers Congress to regulate interstate commerce, but not commerce with foreign nations.
D) A state cannot refuse to allow an interstate waste collector to conduct business within the state on the grounds that the state already has enough waste collectors.
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Chapter 5: Government Regulation of Competition and Prices
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Sample Questions
Q1) Government may:
A) prohibit false advertising and labeling.
B) enforce standards for health and purity for cosmetics, foods, and drugs.
C) engage in competition with private enterprise or own and operate an industry.
D) all of the above.
Q2) Under the Clayton Act, a divestiture order is:
A) notification from the Department of Justice that a merger is about to occur.
B) notification from the Department of Justice that a merger did not occur.
C) a decision by a court requiring a defendant to sell an enterprise.
D) an order by a court requiring an enterprise to dispose of its inventory.
Q3) When large-size enterprises plan to merge, they must give written notice to the Interstate Commerce Commission.
A)True
B)False
Q4) __________ power relates to a firm's ability to control price and exclude competitors.
A) Marketing
B) Market
C) Product
D) Production
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Chapter 6: Administrative Agencies
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58 Verified Questions
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Sample Questions
Q1) Concerning administrative investigations:
A) agencies are severely limited by the constitutional protection against unreasonable searches and seizures.
B) a search warrant is always required to search premises.
C) papers and records generally may be subpoenaed by an agency.
D) a person does not have constitutional protection against unreasonable searches and seizures.
Q2) Modern administrators cannot make laws, but they can argue persuasively before Congress for the passage of needed legislation.
A)True
B)False
Q3) A subpoena to testify or to produce records:
A) is prohibited by the constitutional guarantee against unreasonable searches and seizures.
B) is an illegal attempt to gain information by compulsion.
C) cannot be opposed on the grounds that such a request constitutes an unreasonable search and seizure.
D) must be approved by corporate officers to be effective.
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Chapter 7: The Legal Environment of International Trade
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Sample Questions
Q1) You plan to enter the export market with a new product that you have just developed. You feel that the product has great promise, but you are confused over whether you are required to obtain an export license. Further, your brother-in-law says that he knows someone in the Japanese government who could greatly assist you in your endeavors for a very modest fee. Discuss this situation.
Q2) The Foreign Corrupt Practices Act prohibits improper payments to influence foreign officials.
A)True
B)False
Q3) Since 1947 and the end of the World War II era, the goal of the GATT has been to restrict world trade.
A)True
B)False
Q4) Which country is NOT a part of The North American Free Trade Agreement (NAFTA)?
A) Mexico.
B) United States
C) Canada.
D) Greenland
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Chapter 8: Crimes
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Sample Questions
Q1) The unauthorized use of a computer belonging to someone else is:
A) a crime in all states.
B) a crime in some states.
C) not a crime in any state.
D) a crime under federal law only.
Q2) Corporations are entitled to Fifth Amendment protection.
A)True
B)False
Q3) Generally, misdemeanors are more serious than felonies.
A)True
B)False
Q4) The Fourth Amendment warrant requirement does not apply to businesses.
A)True
B)False
Q5) Embezzlement involves fraud.
A)True
B)False
Q6) For an act to be considered a crime, it is necessary that some person be harmed.
A)True
B)False
Page 10
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Chapter 9: Torts
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58 Verified Questions
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Sample Questions
Q1) A shopkeeper may lose the shopkeeper's privilege if:
A) the customer is kept an unreasonable amount of time.
B) the shopkeeper acted with reasonable suspicion.
C) the shopkeeper acted with -necessary force.
D) all of the above.
Q2) Concerning torts and crimes, choose the correct statement:
A) Every tort is a crime.
B) Every crime is a tort.
C) No crime is a tort.
D) A crime may also be a tort.
Q3) John owed Barney money. Barney called John's home several times per day for five weeks asking for repayment, with some of the calls coming after midnight. Barney might be liable for:
A) defamation.
B) wrongful interference with a contract.
C) intentional infliction of emotional distress.
D) trespass.
Q4) Truth is not a defense to defamation.
A)True
B)False
Page 11
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Chapter 10: Intellectual Property Rights
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Sample Questions
Q1) Generic terms that refer to a type or class of goods are never subject to trademark protection.
A)True
B)False
Q2) Although processes and machines are eligible for patent protection, manufactures and compositions of matter are not.
A)True
B)False
Q3) To prevail in an action for trade dress infringement, a plaintiff must prove that its trade dress is distinctive and nonfunctional and the defendant's trade dress is confusingly similar to the plaintiff's.
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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Sample Questions
Q1) The fact that information is distributed so quickly over the Internet leads to the conclusion that damages for defamation in cyberspace, in contrast to traditional settings for defamation, are potentially:
A) the same.
B) smaller.
C) greater.
D) non-existent.
Q2) Intellectual property rights, even in cyberspace, are protected for the sake of:
A) government regulation.
B) the integrity of contract law.
C) the wealthy.
D) innovation.
Q3) __________ refers to laws and precedent applicable to Internet transactions and communications.
A) Cyberlaw
B) Cyborglaw
C) Silicalaw
D) Simlaw
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Chapter 12: Nature and Classes of Contracts: Contracting
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53 Verified Questions
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Sample Questions
Q1) An express contract is one in which the agreement is shown by the acts and conduct of the parties.
A)True
B)False
Q2) 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.
Q3) A contract under which one or both parties have not yet fully performed is termed a(n):
A) void agreement.
B) executory contract.
C) executive contract.
D) executed contract.
Q4) A party to a contract may be:
A) an individual.
B) a partnership.
C) a corporation.
D) all of the above.
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Chapter 13: Formation of Contracts: Offer and Acceptance
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Sample Questions
Q1) An agreement is not too indefinite to be binding if a standard or formula is provided by which variable factors can be determined.
A)True B)False
Q2) At an auction sale, a statement made by the auctioneer to draw forth bids constitutes an offer.
A)True B)False
Q3) If an offer is indefinite or vague, no contract arises from an attempt to accept it.
A)True B)False
Q4) If not an offer, the first statement made by one of two persons is most properly termed a(n):
A) option.
B) acceptance.
C) invitation to negotiate.
D) contract.
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Chapter 14: Capacity and Genuine Assent
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44 Verified Questions
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Sample Questions
Q1) A contract obtained by physical duress is void.
A)True
B)False
Q2) Ordinarily, every party to a contract is presumed to have contractual capacity until the contrary is shown.
A)True
B)False
Q3) Discriminatory and punitive incapacities have largely disappeared.
A)True
B)False
Q4) An apparently voluntary agreement may in fact not be voluntary if:
A) undue influence is present.
B) physical duress is present.
C) economic duress is present.
D) all of the above.
Q5) Roberta, an educated person, purchased real estate from Maurice. Roberta did not read entirely the contract that she signed. As a result, she did not notice the provision in the contract about the interest imposed on the unpaid portion of the purchase price. She refused to pay the interest specified in the contract. Maurice sued her. Could he recover?
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Chapter 15: Consideration
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Sample Questions
Q1) Which of the following is not consideration for a present promise?
A) a return promise
B) forbearance
C) the promise to pay one's child support obligation, consistent with a pre-existing court order.
D) the performance of a requested act
Q2) Consideration always must be an act or the promise to perform an act.
A)True
B)False
Q3) The fact that the consideration supplied by one party is slight when compared with the burden undertaken by the other party is immaterial.
A)True
B)False
Q4) Forbearance may constitute consideration.
A)True
B)False
Q5) One promise may serve as consideration for many return promises.
A)True
B)False
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Chapter 16: Legality and Public Policy
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Sample Questions
Q1) Ordinarily, a court will not consider whether a contract is fair or unfair.
A)True
B)False
Q2) Art and Mary were good friends who went through high school and college together. Art eventually became a college philosophy professor and Mary went into the business world. Mary became a senior vice-president of a management firm and learned many of the company's trade secrets. Both Art and Mary signed one-year contracts with their respective employers. The contracts contained clauses that provided that they would not compete against their former employers for a period of one year after leaving their jobs. The area covered by the restrictions for both Art and Mary was a radius of 500 miles from the place of employment.
Both Art and Mary resigned and within two months took other jobs. Art went to work for another college 50 miles away, teaching philosophy. Mary took a job 75 miles from her former employment. Her new position was similar to her former job. The former employers sued to enforce the anticompetitive covenants in the original contracts. Discuss the probable outcome of the lawsuits.
Q3) Agreements not to compete are always void.
A)True
B)False
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Page 18
Chapter 17: Writing, Electronic Forms, and Interpretation of Contracts
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Sample Questions
Q1) 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
Q2) The parol evidence rule generally precludes testimony that would contradict a complete written contract.
A)True
B)False
Q3) A promise to pay a debt must be in writing if:
A) the debt is for more than $500.
B) the debt is now due and payable.
C) the promise is to pay the debt of another.
D) the debt owed is the promisor's.
Q4) An insurance company cannot refuse to pay the fire loss of the buyer of a house on the grounds that the sales contract for the house was not binding because it was not properly signed.
A)True
B)False
Page 19
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Chapter 18: Third Persons and Contracts
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Sample Questions
Q1) If there is a time limitation or any other restriction in a contract, a third-party beneficiary:
A) may ignore it.
B) may void it.
C) is bound thereby.
D) must consent to be bound thereby before it is effective.
Q2) In general, one may assign rights if that does not cause the obligor's duties to increase or change materially.
A)True
B)False
Q3) In a contract in which a tenant borrowed money from a bank for the purpose of adding a bathroom to her apartment, the landlord is:
A) a direct beneficiary.
B) in privity of contract with the tenant.
C) a third-party beneficiary.
D) an incidental beneficiary.
Q4) A subcontractor is a party to whom a general contractor delegates duties.
A)True
B)False
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Chapter 19: Discharge of Contracts
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Sample Questions
Q1) If the costs of performing a contract have risen so unexpectedly and dramatically that performance would result in a substantial loss, the contract may be discharged on the grounds of:
A) commercial impracticability.
B) commercial impossibility.
C) economic frustration.
D) economic stability.
Q2) 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.
Q3) Impossibility of performance applies when the debtor does not have sufficient funds to pay a debt.
A)True
B)False
Q4) An agreement that does not specify the time for performance is not binding because it is too indefinite.
A)True
B)False
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Chapter 20: Breach of Contract and Remedies
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Sample Questions
Q1) Punitive damages are generally recoverable in contract actions.
A)True
B)False
Q2) If one party to a contract breaks the contract, the other party generally is under a duty to stop any further performance to avoid sustaining greater damages.
A)True
B)False
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
Q4) An anticipatory repudiation must be clear, absolute, and unequivocal.
A)True
B)False
Q5) When one party breaks the contract, the contract is said to be breached. A)True
B)False
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Chapter 21: Personal Property and Bailments
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Sample Questions
Q1) Tom established a bank account for his daughter Mary under the Uniform Gifts to Minors Act. Tom named himself the custodian. Later, Tom had a serious disagreement with Mary and ordered the bank to transfer the money in that account to a similar account maintained in the same bank for Tom's son Ed. The bank must:
A) comply with Tom's order, because the custodian controls the account.
B) refuse Tom's order, because this would clearly not be for the benefit of Mary. C) comply with Tom's order, because Uniform Gifts to Minors accounts are not final. D) comply with Tom's order if Mary is at least 18 years of age at the time in question.
Q2) A custodian who holds money for the benefit of a minor under the Uniform Gifts to Minors Act may choose to use the money to send the minor to summer camp. A)True B)False
Q3) Joint tenancy and tenancy in common both feature the right of survivorship. A)True B)False
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Chapter 22: Legal Aspects of Supply Chain Management
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Sample Questions
Q1) Field warehousing is the storage of farm crops in the field where they have been grown.
A)True
B)False
Q2) The rights of a holder of a duly negotiated warehouse receipt are extinguished by the warehouser's surrender of goods to the depositor.
A)True
B)False
Q3) The storage of goods in a warehouse and the shipment of goods by a common carrier are examples of special bailments.
A)True
B)False
Q4) At common law, a hotelkeeper was absolutely liable for damage to, or loss of, a guest's property unless the hotelkeeper could show that the damage or loss was caused solely by an act of God, a public enemy, an act of a public authority, the inherent nature of the property, or the fault of the guest.
A)True
B)False
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24
Chapter 23: Nature and Form of Sales
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Sample Questions
Q1) A sales agreement that does not satisfy the statute of frauds is:
A) a quasi contract.
B) criminal.
C) unenforceable.
D) unlawful.
Q2) Gonzalez Manufacturing negotiated by telephone to purchase approximately $7,000 worth of digital video recorders from Video Imports. The final details were worked out by telephone calls on April 2nd. On April 4th, Video sent Gonzalez a confirmation of their telephone agreement, which included pertinent details. Meanwhile, on April 3rd, Gonzalez was offered a better deal than Video's and accepted it. Upon arrival of the confirmation on April 6th, Gonzalez ignored it and did nothing further until May 1st, the date before Video was to deliver. On May 1st, Gonzalez informed Video that their contract was an unenforceable oral contract and that delivery would not be accepted. When attempts to amicably settle the matter failed, Video sued Gonzalez for breach of contract. Decide.
Q3) A firm offer is effective only if the merchant receives consideration to keep the offer open.
A)True
B)False
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Page 25
Chapter 24: Title and Risk of Loss
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Sample Questions
Q1) In a __________, no sale takes place (meaning there is no transfer of title) until the buyer approves, or accepts, the goods.
A) conditional sale
B) contingency sale
C) sale or return
D) sale on approval
Q2) If partial damage or total destruction occurs after the risk of loss has passed to a buyer, it is the buyer's loss.
A)True
B)False
Q3) In a sale on approval, the buyer's approval may be shown by:
A) express words.
B) conduct.
C) lapse of time.
D) all of the above.
Q4) If a buyer purchases goods on approval, the buyer's creditors cannot reach such goods until there is an approval.
A)True
B)False
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Chapter 25: Product Liability: Warranties and Torts
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Sample Questions
Q1) A merchant has greater potential warranty liability than does a casual seller.
A)True
B)False
Q2) The warranty of merchantability guarantees that the:
A) party in question is a merchant.
B) product is fit for the ordinary purposes for which it is sold.
C) product will remain fit for its normal use for the applicable statute of limitations period.
D) product can be resold by the buyer if the buyer does not want to keep it.
Q3) The federal regulation of express warranties:
A) applies only to limited warranties.
B) applies to a seller who makes a written express warranty for a consumer product costing more than $10.
C) requires all express warranties to be full warranties.
D) requires an implied warranty to be designated as either full or limited.
Q4) The theories of product liability
A) are mutually exclusive.
B) are not mutually exclusive.
C) are set forth exclusively in the UCc.
D) are set forth exclusively in the common law.
Page 27
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Chapter 26: Obligations and Performance
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Sample Questions
Q1) Which of the following does not constitute an acceptance?
A) an express statement of approval by the buyer
B) the buyer's examination of the goods
C) the buyer's retention of goods for an unreasonable period of time
D) the buyer's modification of the goods
Q2) When a method of transportation called for by a contract becomes unavailable for any reason, the contract is automatically voided.
A)True
B)False
Q3) The UCC specifies the form that the assurance of performance is to take.
A)True
B)False
Q4) Upon a seller's tender of nonconforming goods and the buyer's rejection of them, the transaction has ended.
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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Sample Questions
Q1) In an action by a third party against the buyer that is based on the seller's breach of warranty, the buyer must give notice of the action to the seller.
A)True
B)False
Q2) An action for breach of warranty generally must be brought within three (3) years of the breach.
A)True B)False
Q3) A seller may not sue the buyer for the full purchase price if:
A) the goods are resold at one-third of the contract price.
B) the goods cannot be resold.
C) the goods have been accepted.
D) the goods have been damaged after the risk of loss passed to the buyer.
Q4) The giving of notice to a seller within a reasonable time after a breach of warranty has been discovered by the buyer is a condition precedent to a suit by the buyer for breach of warranty.
A)True
B)False
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Chapter 28: Kinds of Instruments, Parties, and Negotiability
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Sample Questions
Q1) The signature on an instrument must appear at the lower right-hand corner of the face of the instrument.
A)True
B)False
Q2) Which of the following factors is irrelevant in determining whether an instrument is negotiable?
A) the fact that it is in writing
B) the fact that it is notarized
C) the fact that it is unconditional
D) the fact that it calls for payment of a definite sum of money
Q3) When a drawee has signified in writing on a draft the willingness to make a specified payment, the drawee is called the acceptor.
A)True B)False
Q4) In a negotiable instrument, the promise or order to pay must be unconditional. A)True B)False
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Chapter 29: Transfers of Negotiable Instruments and Warranties
of Parties
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Sample Questions
Q1) When a special endorsement is made, the instrument becomes order paper and may be negotiated only by an endorsement and delivery.
A)True
B)False
Q2) It is worse for the holder to lose order paper than to lose bearer paper.
A)True
B)False
Q3) The transferee has only those rights that were possessed by the transferor of the note when a transfer of an instrument is made by:
A) an assignment.
B) a negotiation.
C) a sale.
D) a will.
Q4) Order paper is negotiated by the indorsement of the holder and delivery.
A)True
B)False
Q5) An instrument may be transferred by negotiation or by assignment.
A)True
B)False
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Chapter 30: Liability of the Parties Under Negotiable Instruments
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Q1) Which of the following will not be considered value in connection with determining holder in due course status?
A) performing the act for which the instrument was given
B) promising to perform an existing legal obligation
C) receiving the instrument as security for a loan
D) taking the instrument in payment of a debt
Q2) A holder who is neither a holder in due course nor a holder through a holder in due course is subject to every defense, just as though the instrument were not negotiable.
A)True
B)False
Q3) For the purposes of determining holder in due course status, the requirement of value is similar to consideration.
A)True
B)False
Q4) A holder of a negotiable instrument cannot be a holder in due course when the holder learns of a defense to payment after the acquisition of the instrument.
A)True
B)False
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Chapter 31: Checks and Funds Transfers
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Q1) Most states provide that if a dishonored check is not made good within a stated period of time, it will be presumed that the check was originally issued with the intent to defraud.
A)True
B)False
Q2) To be effective, checks must be executed on forms that are printed expressly for that purpose and issued by a bank or other financial institution.
A)True
B)False
Q3) A check is drawn on the assumption that the bank has sufficient funds in the drawer's account for payment.
A)True
B)False
Q4) An "encryption" warranty is a warranty made by any party who encodes electronic information on an instrument.
A)True
B)False
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Chapter 32: Nature of the Debtor-Creditor Relationship
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Q1) The issuer of a letter of credit can revoke or modify the letter at any time without the consent of the beneficiary, even if that right is not expressly reserved in the letter.
A)True
B)False
Q2) The use of letters of credit arose in international trade.
A)True
B)False
Q3) A surety primarily is liable; ordinarily, a guarantor is only secondarily liable.
A)True
B)False
Q4) If the creditor does not enforce the suretyship agreement within the time limits provided for such contract enforcement in the surety's jurisdiction, the obligation is forever discharged.
A)True
B)False
Q5) A letter of credit cannot extend for a period of more than five (5) years.
A)True
B)False
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Chapter 33: Consumer Protection
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Q1) Those who are liable for violations of consumer protection situations are persons or enterprises that regularly enter into the type of transaction in which the injured consumer was involved.
A)True
B)False
Q2) Peter applied for a loan at three banks. Peter's application was denied at the first two banks but finally was approved by the third institution. Peter believes that the first two banks denied his application because of his minority status. No explanation ever was provided by the banks denying Peter's request for funds. After obtaining the loan, Peter soon found himself unable to make the prescribed payments. Peter went into default, causing the bank to turn his case over to a collection agency. The collection agency called him "night and day" and were very abusive in their collection practices. Peter became quite distraught and unable to function at his job. As a result, Peter was soon fired. Peter asks for your advice regarding his legal rights. What is your response?
Q3) To be found guilty of violating a consumer protection statute or a deceptive trade practices act, a defendant must be proven guilty of fraud.
A)True
B)False
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Chapter 34: Secured Transactions in Personal Property
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Q1) Goods held for sale or lease are:
A) inventory.
B) equipment.
C) consumer goods.
D) none of the above.
Q2) A security interest that is effective against third persons as well as against the buyer is called a:
A) universal security interest.
B) prohibitive security interest.
C) perfected security interest.
D) protective security interest.
Q3) In most states, __________ provides that a security interest in a non-inventory motor vehicle must be noted on the vehicle title registration.
A) a non-Code statute
B) UCC Article 2
C) UCC Article 9
D) judicial precedent
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Chapter 35: Bankruptcy
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Q1) Which of the following debts is not dischargeable in bankruptcy?
A) judgments based on negligence
B) judgments based on breach of contract
C) judgments for willful and malicious injuries
D) judgments in which the creditors would receive no distribution
Q2) A court can dismiss an individual debtor's petition if the debtor does not satisfy the means test.
A)True
B)False
Q3) The holder of a claim that is the subject of a bona fide dispute may be counted as a petitioning creditor.
A)True
B)False
Q4) In a Chapter 11 rehabilitation plan, the debtor:
A) keeps all of the assets (both exempt and nonexempt).
B) remains in business.
C) makes a settlement that is acceptable to the majority of the creditors.
D) all of the above.
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Chapter 36: Insurance
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Q1) If a man names his wife as beneficiary of his life insurance and the two are thereafter divorced, the insurance policy:
A) is canceled automatically.
B) is not affected.
C) is divided into two policies on the life of each for one-half the amount of the original policy.
D) becomes the property of the former wife.
Q2) If an insurer denies liability for a loss, the insured or the beneficiary of the policy has the burden of proving that there was a loss that came within the coverage of the policy.
A)True
B)False
Q3) A contract of insurance is to be interpreted as it would be understood by a person with technical knowledge of the law or of insurance. A)True
B)False
Q4) A homeowner's policy commonly provides protection from losses caused by theft.
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) The intention to ratify an unauthorized act may be expressed by words or conduct.
A)True
B)False
Q3) A written authorization of agency is called a power of attorney.
A)True
B)False
Q4) 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) The rule of law imposing vicarious liability on an innocent employer for the wrong of an employee is known as the doctrine of respondeat superior.
A)True
B)False
Q2) Vicarious liability will not be imposed on a principal unless the agent was acting within the scope of the agent's authority.
A)True
B)False
Q3) When a tort or crime is committed by an employee:
A) the principal is vicariously liable.
B) the principal is not vicariously liable.
C) vicarious liability cannot be imposed on the employer because an employee is not an agent.
D) vicarious liability could be imposed on the employer if the act was committed within the course of employment.
Q4) The same rules of law govern the vicarious liability of principals and employers.
A)True
B)False
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Page 40
Chapter 39: Regulation of Employment
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Q1) Vesting refers to the ability of an employer to reclaim all of the funds it may have paid into a former employee's retirement fund upon that employee's decision to resign.
A)True
B)False
Q2) Under which circumstance will an employee not be entitled to Workers' Compensation benefits for an on-the-job injury?
A) an injury that is the result of an employee's own negligence
B) an injury that is the result of an employee's own gross negligence
C) an injury that is caused by a fellow employee
D) an injury that is the result of an employee's intoxication
Q3) In some states, a "service-letter" statute requires an employer on request to furnish a discharged employee with a letter stating the reason for the discharge.
A)True B)False
Q4) The duties of an employee are determined primarily by the contract of employment with the employer.
A)True
B)False
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Chapter 40: Equal Employment Opportunity Law
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Q1) Employers may avoid liability for "hostile work environment" sexual harassment by following a program that includes expressing strong disapproval of such conduct, advising employees how to inform the employer of complaints, and disciplining wrongdoers.
A)True
B)False
Q2) The Americans With Disabilities Act applies to private employers when:
A) they have federal contracts.
B) they have demonstrated past practices of discrimination.
C) they have fifteen (15) or more employees.
D) they have state contracts.
Q3) The Equal Pay Act prohibits variation in wage rates paid to men and women based solely on gender.
A)True
B)False
Q4) An affirmative action plan must not:
A) apply to unqualified workers.
B) favor women.
C) favor minorities.
D) respect the rights of non-minorities and men.
Page 42
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Chapter 41: Types of Business Organizations
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Q1) Government grants create:
A) sole proprietorships.
B) corporations.
C) partnerships.
D) unincorporated associations.
Q2) A partnership is dissolved by the death of a partner.
A)True
B)False
Q3) A rule requiring that a franchisor provide a disclosure statement to all prospective franchisees was adopted by the:
A) UCC.
B) Franchise Tax Board.
C) Securities and Exchange Commission.
D) Federal Trade Commission.
Q4) The process of incorporation involves the expenditure of funds for organizational expenses.
A)True
B)False
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Page 43
Chapter 42: Partnerships
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Q1) The assignee of a partner's interest in the partnership becomes a partner only with the consent of the other partners.
A)True
B)False
Q2) Persons who are not partners under appropriate circumstances may be held liable to third persons as though they were partners.
A)True
B)False
Q3) A partnership must have a name.
A)True
B)False
Q4) A partnership involves partners' contributions of capital, services, or a combination of these.
A)True
B)False
Q5) The mere fact that an enterprise is described as a partnership is not controlling or binding regarding its true business form.
A)True
B)False
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Chapter 43: LPs, LLCs, and LLPs
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Q1) A limited liability company may be classified as a partnership for tax purposes if:
A) such an election is made by "checking the box" for partnership tax treatment on the appropriate Internal Revenue Service form.
B) such an election is made in the operating agreement.
C) such an election is made in the articles of incorporation.
D) a majority of its members petition the Internal Revenue Service for partnership tax treatment.
Q2) It is possible for a limited partner to be subject to the debts of the firm if the limited partner participates in the control of the business.
A)True
B)False
Q3) A general partner within a limited partnership may be a corporation.
A)True
B)False
Q4) If a limited partnership certificate is never filed, all partners are treated as limited partners.
A)True
B)False
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45
Chapter 44: Corporate Formation
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Q1) The corporate form of business continues regardless of changes in stock ownership.
A)True
B)False
Q2) The rules and regulations enacted by a corporation to govern the affairs of the corporation and its shareholders, directors and officers are called:
A) articles of incorporation.
B) corporate management agreements.
C) bylaws.
D) articles of organization.
Q3) A corporation may exercise its power to borrow money by issuing bonds.
A)True
B)False
Q4) Stock that is reacquired by the corporation that issued it is commonly called "boomerang" stock.
A)True
B)False
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Chapter 45: Shareholder Rights in Corporations
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Q1) A shareholder has a right to inspect the books of the shareholder's corporation if:
A) the request is made in good faith.
B) the request is made with proper motives.
C) the inspection takes place at a reasonable time and place.
D) all of the above.
Q2) If a corporate stock has a par value, the person subscribing to the stock and acquiring it from the corporation must pay that par value amount.
A)True
B)False
Q3) Shares can exist for only as long as the shareholder is alive.
A)True
B)False
Q4) Shareholders have the right to bring a derivative action on behalf of a corporation that refuses to exercise its right to bring such action.
A)True
B)False
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Chapter 46: Securities Regulation
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Q1) Under Regulation D, Rules 505 and 506, sales may be made to how many accredited investors?
A) an unlimited number
B) fewer than fifty (50)
C) fewer than thirty-five (35)
D) three (3) whose net assets collectively total at least $100 million
Q2) The Litigation Reform Act of 1995 provides for proportionate liability, as opposed to joint and several liability, for defendants who are found not to have knowingly committed a violation of the security laws.
A)True
B)False
Q3) Law firms and public accounting firms that prepare fraudulent registration statements on behalf of clients are not subject to civil liability.
A)True
B)False
Q4) In every 10b-5 situation, the plaintiff must show "reliance" on the misrepresentation and a resulting injury.
A)True
B)False
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Chapter 47: Accountants Liability and Malpractice
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Q1) To ensure that audit partners do not become entrenched, Sarbanes-Oxley requires audit firms to change audit partners at least once every __________ years.
A) three (3)
B) five (5)
C) seven (7)
D) ten (10)
Q2) Third persons are prohibited from recovering from an accountant who commits fraud.
A)True
B)False
Q3) Sarbanes-Oxley would prohibit which of the following individuals from serving on an audit committee of the company's board?
A) a director who accepts consulting fees from the company
B) a director who is affiliated with the company
C) a director who is affiliated with a subsidiary of the company.
D) all of the above.
Q4) In many instances, malpractice is both a breach of contract and a tort.
A)True
B)False
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Chapter 48: Management of Corporations
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Q1) Ordinarily, action by shareholders has legal effect as a corporate act only if such action is taken at a regular or special meeting of the stockholders.
A)True
B)False
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) A promise that the grantor of an interest in land will execute any additional documents required to perfect the title of the grantee is known as a covenant: A) of seisin.
B) of further assurances. C) against encumbrances. D) of quiet enjoyment.
Q2) In general, any form of property that may be sold or conveyed may be mortgaged. A)True
B)False
Q3) Recording statutes provide that a person purchasing land from the last holder of record will take title free of any unrecorded claim to the land of which the purchaser does not have notice or knowledge.
A)True
B)False
Q4) A license is different from an easement in that it is a personal, revocable privilege to do something on the land of another.
A)True
B)False
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Chapter 50: Environmental Law and Land Use Controls
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Q1) 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?
Q2) Many federal statutes concerned with the environment authorize the Environmental Protection Agency (EPA) to adopt standards and regulations to carry out the provisions of the statutes.
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
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Page 52
Chapter 51: Leases
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Q1) Rent is automatically increased:
A) if the lessor makes expensive improvements to the property.
B) when the cost of living increases.
C) if the lease contains an escalation clause and the facts demonstrate that application of such a clause is appropriate
D) if the lessor's taxes on the rented property are increased.
Q2) Under the common law, the reason a landlord terminates a lease by notice is immaterial.
A)True
B)False
Q3) The rights and duties of the landlord and tenant are based on principles of real estate law and contract law.
A)True
B)False
Q4) In almost all states, a periodic tenancy is implied if the tenant, with the consent of the landlord, stays in possession of the property after a tenancy for years.
A)True
B)False
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Chapter 52: Decedents Estates and Trusts
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Q1) The judge, not the decedent, has the privilege of naming who is to administer the estate of a person who has died with a will.
A)True
B)False
Q2) A will may only be revoked by operation of law; it may not be revoked by act of the testator.
A)True
B)False
Q3) A beneficiary of personal property by will may be called a devisee.
A)True
B)False
Q4) Where a testatrix executes a will and later has a child:
A) the child is prohibited by law from receiving anything from the estate.
B) many states hold that the will of the testatrix is partially revoked by operation of law to provide a share to the after-born child.
C) a new will must be executed because the birth voids the original will.
D) the after-born child takes a share by escheat.
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