Business Law
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Course Introduction
Business Law explores the fundamental principles and practices governing the legal environment in which businesses operate. This course covers topics such as contract law, agency relationships, sales of goods, commercial paper, employment law, and the formation and dissolution of business entities like partnerships and corporations. Students will learn how legal issues affect business decision-making, understand the regulatory framework for different industries, and develop the ability to identify and analyze legal risks and obligations in commercial activity. The course equips learners with the tools to make informed and ethical business choices while adhering to relevant laws and regulations.
Recommended Textbook Law for Business 11th Edition by A.
James Barnes
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Page 2
Chapter 1: Law, Legal Reasoning, and the Legal Profession
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Q1) Civil law arises when courts are called upon to resolve disputes for which there is no statute or other sources of law to establish rules.
A)True
B)False
Answer: False
Q2) The use of lawyers by business managers to help them plan avoidance of business emergencies and to help them comply with the rapidly growing mass of legal rules imposed on business operations by government bodies is called as:
A)common law.
B)preventive law.
C)criminal law.
D)substantive law.
Answer: B
Q3) Local legislation regulating zoning and noise levels are examples of:
A)ordinances.
B)treaties.
C)administrative rules.
D)administrative decisions.
Answer: A
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Page 3
Chapter 2: Dispute Settlement
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Q1) What is the legal standard for granting a motion to dismiss? What purpose does this motion serve?
Answer: The legal standard for granting a motion to dismiss is that the facts stated in the plaintiff's complaint are not legally sufficient to state a cause of action; that is,even if the facts alleged can be proved,there is no legal remedy for the type of injury alleged.The purpose that the motion to dismiss serves is that if the plaintiff has no case,it would be wasteful for the case to continue.The court would save time and the defendant would save unnecessary expenses.
Q2) Under what conditions can one or more members of a class be sued as representative of a class? What type of lawsuit can their claims be consolidated into? Answer: Lawsuits can have more than one plaintiff and/or defendant.Sometimes,when a defendant's actions have injured many plaintiffs,their claims may be consolidated into a class action lawsuit.One or more members of a class may sue or be sued as representative of a class if:a.the class is so numerous that joinder of all members is impracticableb.there are questions of law or fact common to the classc.the claims or defenses of the representative parties are typical of the claims or defenses of the classd.the representative parties will fairly and adequately protect the interests of the class
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Chapter 3: Business Ethics and Corporate Social Responsibility
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Q1) Critics claim that allocational efficiency is not society's only goal and that sometimes it must be sacrificed for other social concerns.
A)True
B)False
Answer: True
Q2) The Sarbanes-Oxley Act requires that:
A)public corporations disclose whether they have adopted a code of ethics for senior financial officers.
B)private corporations report any change in their code of ethics.
C)privately traded corporations have board audit committees comprising only of dependent directors.
D)special committees of the board be assigned to special areas of concern.
Answer: A
Q3) A teleological theory based on the laissez-faire theory is:
A)act utilitarianism.
B)profit maximization.
C)rule utilitarianism.
D)difference principle.
Answer: B
Page 5
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Chapter 4: Business and the Constitution
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Q1) One of the factors considered in determining the state statute to be constitutional and allow the states to regulate aspects of interstate commerce that have not been preempted by the federal government is that the state statute must:
A)not further a legitimate local interest.
B)not discriminate in favor of local interests and against out-of-state interests.
C)allow only direct,not incidental,regulation of interstate commerce.
D)impose costs on interstate commerce that are more excessive than necessary to bring about the state interests.
Q2) The retail price of wine in Kansas was consistently higher than the price of wine in bordering states.As a result,Kansas residents living in border areas frequently crossed state lines to purchase wine at lower prices.Accordingly,Kansas enacted a statute that required out-of-state shippers of wine to affirm that their posted prices for products sold to Kansas wholesalers,as of the moment of posting,was no higher than the prices at which those products were sold in the bordering states.Does the statute violate the Commerce Clause?
Q3) When is strict scrutiny analysis triggered?
Q4) Briefly discuss the constitutional safeguards of "pure" or political speech.
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6
Chapter 5: Crimes
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Q1) Mrs.Medea killed her illegitimate child and buried it in her backyard,soon after giving birth to it in 1952.Thirty-seven years later,in September 1989,Medea called Captain Erebus Ereshkigal of the New York Police Department and blurted out the story over the telephone before Ereshkigal could utter a single word.She then told him that voices from her backyard told her to confess to the crime.Medea told the police where to dig,and they unearthed a metal box containing the skeletal remains of a baby in her yard.Which of the following is a true statement?
A)The remains cannot be used in evidence against Medea because this would violate her Fifth Amendment privilege against self-incrimination.
B)The remains can be used in evidence against Medea because this would not violate her Fifth Amendment privilege against self-incrimination.
C)The remains cannot be used in evidence against Medea because Erebus did not inform her of her right to remain silent before she told him her story.
D)The remains can be used in evidence against Medea because they are not incriminating to her.
Q2) Define crimes,and differentiate between felonies and misdemeanors,mentioning the penalties by which each is punishable.
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Page 7
Chapter 6: Intentional Torts
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Q1) This is a common defense to the tort of malicious prosecution.
A)Improper purpose
B)Lack of capacity
C)Probable cause
D)Inducing a breach of contract
Q2) Compensatory damages are also known as:
A)actual damages.
B)punitive damages.
C)nominal damages.
D)statutory damages.
Q3) Which of the following is an example of interference with economic relations?
A)Trespass
B)False imprisonment
C)Disparagement
D)Defamation
Q4) Explain the tort of battery.
Q5) Truth is not a defense to a defamation action.
A)True
B)False
Q6) Explain the difference between defamation and disparagement.
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Chapter 7: Negligence and Strict Liability
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Q1) In an act of recklessness,Robert bets his friends that he can drive down a crowded street blindfolded,and ends up striking Tom.Under which of the following circumstances would Tom be barred any recovery from Robert?
A)If Tom had not looked before stepping into Robert's path.
B)If Tom had bet Robert's friends he could run in front of Robert without being hit.
C)If the court had declared Robert' act a foreseeable risk.
D)If Tom had the last clear chance to stay on the curb instead of stepping onto the street.
Q2) Which of the following is true about the doctrine of res ipsa loquitur?
A)It is one of the basic principles of the causation of negligence.
B)It puts the burden on the plaintiff to show that the injury was not caused by his or her negligence.
C)It is applicable to cases where the defendant has exclusive control of the thing that caused the injury,and is reluctant to disclose facts that prove liability.
D)It offers protection to those who are injured while making a reasonable attempt to rescue someone endangered by the negligent person's act.
Q3) What is the main difference between recklessness and negligence?
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Chapter 8: Licensing and Intellectual Property
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Q1) Which of the following statements is true for the confidentiality clause?
A)It restricts the licensor's right to disclose trade secrets after the licensing agreement has ended.
B)During a licensing agreement,it permits the licensor to limit the number of people with whom the licensee may share the technology.
C)It restricts the licensee's right to disclose the information only when the licensed technology is not a trade secret.
D)Prior to licensing,it does not allow potential licensees to inspect the technology the licensor is providing.
Q2) A trade secret is also called ____.
A)performance standard
B)contributory copyright
C)compilation of information
D)propriety information
Q3) What are technology transfer agreements?
Q4) How can a plaintiff recover for trademark infringement?
Q5) Briefly explain the three distinct time frames when secrecy provisions under the confidentiality clause of licensing agreements may be utilized.
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Chapter 9: The Nature and Origins of Contracts
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Q1) Explain the differences and similarities of the categories used to classify contracts by their enforceability: valid,unenforceable,voidable,void.
Q2) Unlike contractual liability under the traditional bargain theory,liability under the doctrine of promissory estoppel is based on reliance.
A)True
B)False
Q3) CISG applies to any party,be it a merchant or a nonmerchant.
A)True
B)False
Q4) Which of the following is correct regarding the definition of "Merchant" by UCC?
A)It sometimes imposes a higher standard of behavior on merchants than non-merchants.
B)It always imposes the same standards on merchants and non-merchants.
C)It regards everyone covered by the UCC as a merchant.
D)It deals only with nonprofessional sellers.
Q5) Freedom of contract is a notion that has emerged only in the last twenty years.
A)True
B)False
Q6) What is a quasi-contract?
Page 11
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Chapter 10: Creating a Contract: Offers
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Q1) The general rule is that an offeror cannot revoke an offer at any time prior to acceptance if he has promised not to revoke for a stated period of time.
A)True
B)False
Q2) In an auction:
A)acceptance occurs when an offeror makes the highest bid.
B)bidders are treated as offerors,making offers the seller is free to accept or reject.
C)an item cannot be withdrawn from sale prior to acceptance.
D)the seller is required to accept the final offer when the auction is advertised as being "with reserve."
Q3) The timing of prior dealings is relevant when determining a reasonable time for acceptance,if the parties have dealt with each other on a regular basis.
A)True
B)False
Q4) How do courts deal with the situation in which an offeror tries to revoke an offer for a unilateral contract after the offeree has begun acceptance,but before he has completely accepted the offer?
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Chapter 11: Creating a Contract: Acceptances
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Q1) An acceptance is not effective upon dispatch by the offeree if the offer is sent by a stipulated means.
A)True
B)False
Q2) According to the UCC's rule,when forms are not exchanged:
A)acceptance cannot materially vary from the offer.
B)acceptance can have terms additional to the offer.
C)differing terms must be included as a part of the contract.
D)though the acceptance varies from the offer,it cannot be considered as a rejection.
Q3) Explain the similarity and difference between click-on and browse-wrap contracts.
Q4) Explain the idea of "stipulation" and the effect it has on a contract.
Q5) In a unilateral contract,the offer is accepted when:
A)the offeror verbalizes his assent.
B)the offeree attempts to perform the act.
C)the offeror puts across his promise in writing.
D)the offeree performs the requested act.
Q6) Explain the UCC's "battle of the forms" rule.
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Page 13
Chapter 12: Consideration
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Q1) _____ is the legal term for settling a disputed claim.
A)Accord and satisfaction
B)Forbearance
C)Compositions
D)Promissory estoppel
Q2) Abel had grown tired of working on the family farm and was considering moving away.However,his parents told him "If you'll stay and help us,we'll leave you the farm when we die." As a result,Abel decided to stay on the farm and worked there for the next twenty years.However,when his parents finally died Abel learned that they had left the farm to his brother,Mark.Abel filed suit against his parents' estate to enforce their promise of leaving him the farm.Which of the following is a true statement?
A)Abel gave no consideration for his parents' promise to leave him the farm,so their promise is not enforceable against the estate.
B)The work that Abel did on the farm before his parents made their promise is sufficient consideration to make their promise enforceable.
C)Abel's parents' promise is not enforceable because it was illusory.
D)Abel's parents' promise is enforceable under a promissory estoppel theory.
Q3) Explain with an example how promissory estoppel affects consideration?
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Chapter 13: Capacity to Contract
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Q1) Minors' contracts are not voidable.
A)True
B)False
Q2) Why do the courts require minors to pay the reasonable value of necessaries they receive under a contract they are permitted to disaffirm?
Q3) Minors are entitled to the return of their property given as consideration,even if that property is possessed by a third party at the time of disaffirmance.
A)True
B)False
Q4) Which of the following is true for a contract made by a minor?
A)It is voidable.
B)It cannot be disaffirmed during minority.
C)It is barred from ratification.
D)A minor's capacity to contract is never presumed.
Q5) Minors are generally held liable on a quasi contract basis for the reasonable value of necessaries furnished to them.
A)True B)False
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Chapter 14: Voluntary Consent
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Q1) "One who waits too long to complain has indicated satisfaction with the agreement despite the initial lack of true consent" is the idea behind the doctrine of:
A)ratification.
B)forbearance.
C)rescission.
D)emancipation.
Q2) Mutual mistakes may arise:
A)only when parties unintentionally use terms in their contract that are ambiguous. B)only when parties are mistaken about the subject matter of their agreement.
C)when parties intentionally use terms in their contracts that are ambiguous which leads to mistaken notions regarding the subject matter of the agreement.
D)when there is unintentional usage of ambiguous terms in the agreement and when the matter of the agreement is not properly understood by either party.
Q3) Undue influence renders a contract voidable and is a ground for rescission.
A)True
B)False
Q4) Why do courts require justifiable reliance in misrepresentation and fraud?
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16
Chapter 15: Illegality
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Q1) Rent control laws have been implemented to limit the exercise of unequal bargaining power.
A)True
B)False
Q2) The courts have no power over unconscionable contracts.
A)True
B)False
Q3) Mayor Magnus wants to recruit a Harvard economist,Milton,to be the Chief Developer for the Small Town's economic development division.The legal cap on the job of Chief Developer is $60,000.Mayor Magnus offers Milton $100,000.The contract is:
A)unconscionable based on unequal bargaining power.
B)injurious to public service.
C)exculpatory.
D)enforceable.
Q4) Adhesion contracts fall under:
A)contracts from unequal bargains.
B)contracts injurious to public service.
C)contracts to influence fiduciaries.
D)contracts in restraint of trade.
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Chapter 16: The Form and Meaning of Contracts
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Q1) If one of the parties drafted the contract,ambiguities are resolved against that party in interpreting it.
A)True
B)False
Q2) The student formerly known as Jim prefers to sign his name with the symbol "$." When signing his lease,he indicated his intent to be bound by placing a "$" on the lease's signature line.This satisfies the statute of frauds' writing requirement.
A)True
B)False
Q3) Leroy writes a letter that said,"I agree to sell to Jay 5 modern art paintings" and he signs the letter.What happens according to the code if Jay is a merchant and he receives this writing from Leroy and does not object in writing within 10 days after receiving it?
A)Jay would have a good statute of fraud defense as he has not signed the contract.
B)Jay loses his statute of fraud defense.
C)It will be considered as a void contract.
D)Leroy will be prevented by the statute of frauds to take the case to the court.
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Page 18
Chapter 17: Third Parties Contract Rights
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Q1) Assignments of future wages are not effective because:
A)they involve personal relationships.
B)they are contrary to public policy.
C)they materially alter the duties of the promisor.
D)they involve personal rights.
Q2) An assignor who assigns the contract will be relieved of the duty to perform to the other party on the original contract when:
A)the assignee gives notice to the other party.
B)there has been a novation of the original contract.
C)the assignee contracts to successfully perform the duties.
D)the contract of assignment explicitly states that the assignor is no longer liable to the other party.
Q3) The promisor who delegates duties is ______ to the promisee if the party to whom the duties were delegated fails to satisfactorily perform them.
A)liable
B)not liable
C)liable for novation
D)liable to the assignee and not
Q4) What is an implied guarantee?
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Chapter 18: Performance and Remedies
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Q1) Promisors in complete performance contracts who do not completely perform can always recover the contract price.
A)True
B)False
Q2) The doctrine of substantial performance applies when a promisor willfully fails to completely perform.
A)True
B)False
Q3) The word "Mitigate" denotes:
A)a legal scandal in the early 1970's which established remedies for breaches made in bad faith.
B)a legal term which means to reduce,avoid,or minimize.
C)a legal term which means to sue or take to trial.
D)a legal term which means to recover damages for injuries that could have been avoided.
Q4) Explain destruction of subject matter as an excuse for nonperformance with an example.Under what circumstance will it not be used as an excuse for nonperformance?
Q5) Fully explain the concept of substantial performance.
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Chapter 19: Formation and Terms of Sales Contracts
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Q1) Under Article 2 of the UCC,in which of the following cases is the seller a "merchant"?
A)Barbara,an accountant,sells her car to her nephew.
B)Ted,a veterinarian,sells his tractor to his neighbor.
C)Tec-E,a software company,contracts to sell a database program to a local NPO.
D)Tom,a used-car dealer,sells his microwave to Gary.
Q2) When,at the time of contracting,the goods are in the hands of a third-party bailee and are covered by a document of title,the risk passes to the buyer when he/she:
A)takes possession of the goods.
B)receives the document of title.
C)acknowledges the right to possession.
D)indulges in a breach of contract.
Q3) Article 2 of the UCC does not apply to the sale of real estate.
A)True
B)False
Q4) Weddings R Us,an event management company,brought suit against Smith to recover the contracted price for the performance of a full wedding,including the providing of a three-layer wedding cake.Should the court apply Article 2 of the UCC to this contract?
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Chapter 20: Warranties and Product Liability
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Q1) Which of the following implied warranties addresses the status of the ownership of goods?
A)Title
B)Merchantability
C)Fitness
D)Description
Q2) A statute of repose bars the bringing of a tort-based product liability suit:
A)usually after 10 years from the date the product is first sold to a user.
B)usually after five years from the date the product is first sold to a user.
C)usually after 20 years from the date the product is first sold to a user.
D)usually after 50 years from the date the product is first sold to a user.
Q3) When a seller uses descriptive terms and the buyer takes them into consideration when making the purchase,the seller has nonetheless made no warranty that the goods she delivers will meet the description.
A)True
B)False
Q4) The warranty of fitness for a particular purpose applies only to merchants.
A)True
B)False
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Chapter 21: Performance of Sales Contracts
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Q1) Can a buyer reject goods for nonconformity in contracts that call for delivery of the goods in separate installments? If yes,under what circumstances can he reject such goods?
Q2) By accepting goods,the buyer forfeits remedies against the seller for any nonconformities in the goods.
A)True
B)False
Q3) Which of the following holds true of revocation of acceptance by the buyer?
A)He/she can revoke acceptance when the nonconformity substantially impairs the value of the goods.
B)He/she cannot revoke if the buyer accepted the goods because of assurances by the seller.
C)He/she can revoke acceptance even after accepting goods with the knowledge of the nonconformity.
D)He/she after revoking acceptance will not have the same rights and duties with regard to goods involved as they had rejected them.
Q4) Goods may be delivered in installments,even if not stated so in the contract.
A)True
B)False
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Chapter 22: Remedies for Breach of Sales Contracts
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Q1) Based on the difference between the contract price and the market price,a seller may recover damages from a breach of contract when the goods are:
A)in the buyer's possession.
B)in the seller's possession.
C)in transit via airplane.
D)in transit via sea.
Q2) In which of the following ways can a seller breach a contract?
A)By entrusting goods are in buyer's possession.
B)By delivering goods that do not conform to the contract.
C)By repudiating a contract.
D)By indicating an intention to fulfill the obligations under the contract.
Q3) _____ includes storage charges and sales commissions.
A)Consequential damages
B)Incidental damages
C)Liquidated damages
D)Unconscionable damages
Q4) Under the UCC,list five remedies available to a buyer when the seller has breached a contract.
Q5) Name the most common ways a buyer may breach a contract.
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Chapter 23: The Agency Relationship-Creation, Duties, and Termination
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Q1) Independent contractors:
A)are under the control of their employer/principal as to both the objective of their work and the means used to achieve it.
B)are under the control of their principals as to the result that is to be achieved,but not as to the means used to accomplish that result.
C)do not maintain their own inventory of goods; instead,they take orders on behalf of their principal.
D)just bring the parties together rather than actually negotiating a contract of sale.
Q2) When one party exercises the power to terminate in violation of the right to terminate,the other party:
A)is left without a remedy.
B)may recover monetary damages in a breach of contract suit.
C)may recover specific performance.
D)may recover punitive damages in a breach of fiduciary duty.
Q3) An agent may deposit funds of the principal in her personal account.
A)True
B)False
Q4) What does the agent's duty of loyalty mean?
Page 25
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Chapter 24: Liability of Principals and Agents to Third Parties
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Q1) Wheelz retained Doug,an attorney,to repossess several utility trailers,giving him the authority to take whatever steps were necessary to recover the trailers.Doug hired Randy RepoMan to locate the equipment.After orally reporting to Doug that he had found the trailers in Iowa,Doug instructed RepoMan to have them towed to Nebraska.RepoMan hired Ted's Towing to carry out the request.Ted's stored the trailers on its lot in Omaha,Nebraska,and RepoMan notified Doug of this fact.When Ted's was not paid,it sued Wheelz for its towing and storage services,arguing that RepoMan was a subagent capable of binding Wheelz to the towing and storage contract.Discuss.
Q2) For ratification to be effective:
A)the principal cannot be disclosed to the third person.
B)the agent or purported agent must have acted on behalf of the principal.
C)the principal must have had capacity to do the act only at the time of ratification.
D)it is necessary that the principal fully understand the legal significance of all material facts.
Q3) Briefly describe the doctrine of respondeat superior.
Q4) Explain the concept of apparent authority.
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Page 26
Chapter 25: Employment Laws
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Q1) A "yellow-dog contract":
A)required an employee to remain a member of the union at all times in order to remain employed.
B)was widely used by employers to encourage the formation of unions.
C)required a worker taking a job to promise not to join a union.
D)specified that a worker's employment will not be affected by his union membership.
Q2) The FLSA requires:
A)covered employers to pay their professional staff time and a half for hours worked in excess of 45 in one week.
B)covered employers to pay their employees a minimum hourly wage.
C)covered employers to pay their employees double time.
D)covered employers to pay employees of both sexes equally for jobs that require equal skill,effort,and responsibility.
Q3) The Equal Employment Opportunity Commission:
A)permits mandatory binding arbitration as a condition of employment.
B)can initiate action under Title VII on its own.
C)is not supportive of alternative dispute resolution.
D)is based on the laissez-faire values of the 19<sup>th</sup> century.
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Chapter 26: Which Form of Business Organization
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Q1) If the business involves little risk or the owners have few other assets,limited liability should be given little weight.
A)True
B)False
Q2) What are some of the strategies a corporation can employ to minimize taxation disadvantages?
Q3) Which of the following is true for the dissolution of an LLC?
A)The remaining members cannot avoid liquidation even by unanimously agreeing to continue the business operations.
B)Dissolution can only be caused by bankruptcy.
C)The LLC must be set up so that it can be easily dissolved.
D)The act of dissolution terminates the LLC's business.
Q4) From a risk standpoint,a shareholder or limited partner is better off than a general partner.
A)True B)False
Q5) A corporation will be dissolved upon the death or insolvency of a shareholder. A)True
B)False
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Chapter 27: Partnerships
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Q1) The partnership is liable for torts committed by any partner of the firm while engaged in partnership business under the doctrine of:
A)estoppel.
B)respondeat superior.
C)caveat emptor.
D)ultra vires.
Q2) The final act of winding up a dissolved partnership is the distribution of assets. A)True
B)False
Q3) A partner who wrongfully dissociates:
A)loses the right to demand a dissolution.
B)can participate in the winding up process.
C)must not be paid the value of his interest for the breach,if the firm continues.
D)can ask the court to appoint a receiver on his behalf.
Q4) No express agreement is needed to create a partnership. A)True
B)False
Q5) Describe limited partnerships.
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Chapter 28: Formation and Termination of Corporations
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Q1) Massachusetts courts require that the parties expressly create a(n)_____ before a corporation can be held liable for preincorporation contracts.
A)adoption agreement
B)novation
C)incorporation regulation
D)operating agreement
Q2) In a de jure corporation:
A)the promoters have substantially complied with all mandatory provisions.
B)the promoters have only complied with directory provisions.
C)the business intends to be treated as a corporation.
D)the omission of directory provisions will destroy the enterprise's corporate identity.
Q3) In a de facto corporation,the promoters substantially complied with all mandatory provisions.
A)True
B)False
Q4) What must be included in the articles of incorporation according to the MBCA?
Q5) Explain the promoters' liability to third parties before the corporation is formed.
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Chapter 29: Management of the Corporate Business
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Q1) The _____ binds the corporation on receipts,checks,and endorsements.
A)chairman
B)vice president
C)corporate secretary
D)treasurer
Q2) Who keeps the minutes of meetings of the shareholders and directors,and other general corporate records such as stockholder records?
A)Corporate secretary
B)Treasurer
C)Vice president
D)Chairman
Q3) What is generally required for any fundamental changes in the corporation?
A)Novation
B)Referendum
C)Board initiative
D)Prudent person standard
Q4) Discuss how a director protects herself from potential liability by exercising her right to dissent.
Q5) What are the duties of directors and officers of a corporation?
Q6) What is the meaning of ex officio authority?
Page 31
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Chapter 30: Financing the Corporation and the Role of the Shareholders
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Q1) If a corporation has only one type of stock,it is:
A)common stock.
B)preferred stock.
C)cumulative stock.
D)convertible stock.
Q2) The value assigned to shares in the articles of incorporation is referred to as:
A)stated value.
B)par value.
C)fair value.
D)capital surplus.
Q3) Acme Corp.made a public offering of its shares.Stein bought 100 shares at $10 each.Three months later,Acme announced that it planned to merge with another company.Under the terms of the merger,Acme shareholders would receive $14 per share,which was $1 more than the market price on the day prior to the announcement.Acme's shareholders approved the merger.Stein did not vote for or against the merger,but he turned in his shares and received $14 for each share.Stein later argued Acme's directors acted improperly in approving the merger.He also believed the price he and other shareholders received was grossly inadequate.Will Stein be able to enforce his appraisal rights?
Q4) When is a shareholder permitted to sue as a representative of a corporation?
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Chapter 31: Securities Regulation
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Q1) Section 11 of the 1933 Act is considered a radical liability section because the defendant has the burden of proving that he exercised due diligence.
A)True
B)False
Q2) Which of the following is a feature of the Securities Exchange Act of 1934 but not the Act of 1933?
A)It has several sections prohibiting fraud in securities transactions.
B)The 1934 Act requires additional information in the registration statement.
C)It has registration provisions for issuance of securities.
D)The 1934 Act requires periodic disclosure by issuers with publicly held equity securities.
Q3) Identify the statement which is true of Rule 10b-5.
A)Securities need not be registered under the 1933 Act or the 1934 Act for Rule 10b-5 to apply.
B)The rule applies only to transactions executed on a securities exchange.
C)The rule applies only to face-to-face transactions.
D)A misstatement or omission of material fact,scienter,and reliance are not elements of Rule 10b-5.
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Chapter 32: Legal Liability of Accountants
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Q1) After an audit,an accountant certifies the financial statement by issuing a(n):
A)certificate of audit.
B)opinion letter.
C)memorandum.
D)amicus brief.
Q2) The party asserting the work product privilege bears the burden of establishing that the documents he seeks to protect were prepared in anticipation of litigation.
A)True
B)False
Q3) An accountant is not required to reimburse a client for a penalty imposed for late filing if the delay is caused by the accountant.
A)True
B)False
Q4) An accountant's liability to third persons for negligence is generally barred by the privity doctrine unless the accountant should have foreseen that the third party would rely on the audit.
A)True
B)False
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Chapter 33: Personal Property and Bailments
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Q1) Which of these actions are applicable under the Uniform Gifts to Minors Act?
A)Adults are prohibited from making gifts of unregistered securities to minors.
B)Adults can make a gift of money to minors by depositing the money with a bank in an account in the donor's name.
C)Gifts of registered securities can be made by merely delivering the securities to a bank trustee.
D)Gifts of unregistered securities can be made by registering the securities in the name of another adult.
Q2) When Martha of Martha's Homemade Pies gives a freshly baked apple-cinnamon double-crust pie to her sales clerk to put in the window case for display,the clerk:
A)has possession of the pie.
B)has custody of the pie.
C)is a bailee to Martha.
D)has ownership of the pie.
Q3) What are the differences between a gift inter vivos and a gift causa mortis?
Q4) If Megan hires Pablo to paint her portrait,Megan is the owner of the painting.
A)True
B)False
Q5) Define a bailment and discuss its essential terms.
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Chapter 34: Real Property
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Q1) An oral contract for the sale of real estate is generally enforceable under the statute of frauds.
A)True
B)False
Q2) A warranty deed:
A)conveys title and guarantees to make good any defects in the title.
B)can only be a deed of specific warranty.
C)is used to cure technical defect in the chain of title to property.
D)conveys to the grantee whatever title the grantor has at the time the deed is executed.
Q3) A conveyance of real property also transfers the fixtures associated with that property,even if the fixtures are not specifically mentioned.
A)True
B)False
Q4) Many courts have now extended the implied warranty of habitability made by builder-vendors to include subsequent purchasers.
A)True
B)False
Q5) Describe the purpose of the Fair Housing Act.
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Chapter 35: Landlord and Tenant
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Q1) A _____ occurs when property is leased for an indefinite period of time and either party may choose to conclude the tenancy at any time.
A)tenancy at will
B)tenancy at sufferance
C)periodic tenancy
D)tenancy for a term
Q2) Which of the following is true for current trends in landlord's tort liabilities?
A)The landlord will have liability only under standard housing codes and not under the implied warranty of habitability.
B)The landlord will be not liable for lack of reasonable care in their maintenance of the leased property.
C)The landlord will not be liable to protect tenants from substantial risks of harm created by other tenants.
D)The landlord will have liability for defects that he/she had reasonable opportunities to repair,but didn't.
Q3) Explain the difference between an "assignment" and a "sublet."
Q4) Define "tenancy for a term" and show how it differs from "periodic tenancy".
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Chapter 36: Estates and Trusts
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Q1) In the states that recognize holographic wills,such wills will be valid:
A)if they do not evidence testamentary intent.
B)if they are in the handwriting of the testator.
C)if only the material portions in the will are typed.
D)if they are typed and evidence testamentary intent.
Q2) Which of the following is true of a joint will?
A)Whether a joint will is revocable depends only on the language of the will.
B)The mere fact that a joint will has been executed creates the presumption of a contract not to revoke the will.
C)Underlying a joint will is an agreement on a common plan.
D)A testator who has made a joint will cannot change the will later under any circumstances.
Q3) When a person dies intestate,the property the person owns:
A)is distributed to the people designated as the intestate's heirs.
B)will be distributed according to the law of the state in which the person is domiciled.
C)escheats to the state.
D)will go to the biological children,not the adopted children.
Q4) Describe the responsibilities of personal representative in the administration of an estate.
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Chapter 37: Insurance
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Q1) Simons purchased a home for $120,000,insuring it for $120,000 with Mutual Life.She later purchased a $60,000 policy from Equitable.The home was totally destroyed by fire while it still had a fair market value of $120,000 and the losses amounted to $30,000.Under these circumstances,which of the following statements is true?
A)Simons can claim the damages only from Mutual Life as its policy amount is greater. B)She cannot claim insurance from either as policies with pro rata clauses cover only partial losses.
C)Simons can recover $180,000-the total of both policies,as part of his insurance contract.
D)Simons cannot claim more than $60,000 from Equitable.
Q2) As a general rule,if an applicant suffers a loss after applying but before the insurer formally accepts the application:
A)the insurer must cover the loss.
B)the applicant and the insured must share the loss.
C)the applicant must bear the loss.
D)the insurer must cover the loss only if there is no binder.
Q3) Why are property insurance policies generally nonassignable?
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Page 39
Chapter 38: Negotiable Instruments
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Q1) If an instrument satisfies the formal requirements of writing,signature,unconditional order to pay,and pay ability on demand:
A)it is negotiable even though it is void or unenforceable for other reasons.
B)it cannot be held by a holder in due course.
C)validity of the instrument is automatically conferred.
D)it is not negotiable if it is uncollectible for other reasons.
Q2) A draft is a form of commercial paper that involves a promise to pay money.
A)True
B)False
Q3) An instrument that meets all of the formal requirements is not a negotiable instrument if it is unenforceable or uncollectible for other reasons.
A)True
B)False
Q4) An instrument can be made payable to two or more payees.
A)True
B)False
Q5) John borrowed money from Alvin to buy school supplies.He drew up and signed the following promissory note,"IOU,Alvin Anderson,the sum of $20 for value received.John Adams." Is the note a negotiable instrument?
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Chapter 39: Negotiation and Holder in Due Course
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Q1) A holder in due course takes the instrument free of the all personal and real defences.
A)True
B)False
Q2) To negotiate an instrument:
A)it must not be transferred involuntarily.
B)it must be transferred voluntarily.
C)it must be transferred by a person other than the issuer.
D)it must be transferred by the issuer.
Q3) How does one become a "holder in due course"?
Q4) Under the Revised Article 3,a check deposited in a depositary bank without indorsement:
A)makes the bank a holder of an item delivered to it only if the customer indorses it.
B)makes the bank a holder of an item delivered to it for collection whether or not the customer indorses it.
C)makes the customer the holder only if the bank indorses it at the time of delivery.
D)makes the customer the holder only if the bank at the time of delivery qualified as a holder.
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Chapter 40: Liability of Parties
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Q1) Which of the following is true of the obligations of an acceptor?
A)If the certification or acceptance does not state an amount then the acceptor is free of all obligations.
B)If the certification of a check or other acceptance of a draft states the amount accepted,the obligation of the acceptor is the amount of the instrument at the time a holder in due course takes it.
C)If the certification of a check or other acceptance of a draft states the amount certified or accepted,the obligation of the acceptor is that amount.
D)If the certification or acceptance does not state an amount,or if the amount of the instrument is subsequently raised,then the obligation of the acceptor is the raised amount.
Q2) Ted stole Ron's checkbook and wrote a check for $100,forging Ron's signature.Under these circumstances:
A)Ted but not Ron is liable on the check.
B)Ron but not Ted is liable on the check.
C)both Ted and Ron are liable on the check.
D)the bank will be liable on the check.
Q3) Who is entitled to enforce an instrument?
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Chapter 41: Checks and Electronic Fund Transfers
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Q1) Bob purchased a new washing machine from a local department store.He paid for the washing machine by check.Two days later,Bob discovered that the washing machine did not work.Bob telephoned the bank and issued an oral stop-payment order on the check.Which of the following will be true for an oral stop-payment order?
A)An oral stop-payment is not valid for more than 24 hours.
B)An oral stop-payment is valid for only 14 days unless Bob confirms it in writing during that time.
C)An oral stop-payment is not valid for more than 48 hours.
D)An oral stop-payment order is valid for 6 months and can be extended for another 6 months by giving the bank instructions to continue.
Q2) A bank may pay a postdated check unless it has received notice from the customer not to pay until the instrument's date.
A)True B)False
Q3) Describe the provisions of the Electronic Funds Transfer Act.
Q4) A drawee bank is obligated to certify a check.
A)True B)False
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Page 43
Chapter 42: Introduction to Security
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Q1) If the creditor allows the principal an extension of time to perform the contract,compensated sureties are relieved of liability unless they consent to the extension of time.
A)True
B)False
Q2) Define strict foreclosure.
Q3) Accommodation sureties:
A)are people paid for serving as a surety.
B)are protected by the courts at a higher level than other types of sureties.
C)have no protection from the court.
D)are professional companies which take payment for acting as a surety.
Q4) A guarantor is a person who:
A)joins with the person who is primarily liable in promising to make the payment or to perform the duty.
B)does not join in making a promise,but makes a separate promise and agrees to be liable on the happening of a certain event.
C)is held for higher liability than a surety.
D)has personal defenses if the principal refuses to pay.
Q5) What is a possessory lien? Give an example.
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Chapter 43: Security Interests in Personal Property
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Q1) A financing statement is valid for a period of:
A)five years from the date of filing.
B)one year from the date of filing.
C)two months from the date of filing.
D)five months from the date of filing.
Q2) If state law requires a certificate of title for motor vehicles,then a creditor who takes a security interest in a vehicle can rely on attachment of its security interest in the car to perfect it.
A)True
B)False
Q3) A creditor can perfect a security interest by filing a public notice it.
A)True
B)False
Q4) The most common way of perfecting a security interest is by:
A)automatic perfection.
B)filing a financing statement in the appropriate public office.
C)posting private notice of the interest.
D)mere attachment of the security interest.
Q5) Define future advances and explain how covering future advances in the security agreement benefits the creditor.
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Chapter 44: Bankruptcy
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Q1) Both secured and unsecured creditors are required to file proofs of claims.
A)True
B)False
Q2) Preferential liens are treated in a manner similar to preferential payments.
A)True
B)False
Q3) A reorganization plan is essentially:
A)a supervised attempt by the state to solve a debtor's financial problems.
B)a contract between a debtor and its creditors.
C)a contract filed voluntarily by the creditors.
D)a contract between a debtor,its creditors and trustees.
Q4) If a debtor has more than a dozen creditors,an involuntary petition to declare bankruptcy must be signed by at least three.
A)True
B)False
Q5) A bankrupt person's estate is administered by ___.
A)the creditors
B)the creditors' committee
C)the trustee
D)the bankruptcy judge
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Chapter 45: The Antitrust Laws
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Q1) The two components to a relevant market determination to decide if a firm has monopoly power are the geographic market and the product market.
A)True
B)False
Q2) Describe the Hart-Scott-Rodino Antitrust Improvements Act.
Q3) When a manufacturer states a "suggested retail price" for their products,this violates Section 1 of the Sherman Act.
A)True
B)False
Q4) ________ provides that the Sherman Act shall not apply to nonimport trade unless the conduct has a direct,substantial,and reasonably foreseeable effect on trade or commerce within the U.S,on the U.S.import trade,or on the activities of U.S.exporters.
A)The Robinson-Patman Act
B)The Clayton Act
C)The Noerr Doctrine
D)The Foreign Trade Antitrust Improvement Act
Q5) Describe the type of behavior Section 3 of the Clayton Act is designed to attack.
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Chapter 46: Consumer Protection Laws
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Q1) The Holder in Due Course rule creates a warranty claim or defense where the product is sold "as is."
A)True B)False
Q2) One of the purposes of the TILA is to enable the consumer to understand all the charges made in connection with credit.
A)True B)False
Q3) A debtor may rescind a contract under the Truth in Lending Act:
A)only if the debtor's home is used as collateral.
B)only in the instance of a first mortgage on his home.
C)by way of oral notification to the creditor.
D)within 30 days after the purchase on credit.
Q4) Discuss the product safety standards issued by the Consumer Product Safety Act (CPSA).Also,list at least three products which,although consumer goods,do not come under the authority of CPSA.
Q5) The TILA fixes interest rates.
A)True B)False
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Chapter 47: Environmental Regulation
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Q1) Under the RCRA,most of the wastes defined as hazardous are subject to:
A)a "cradle to the grave" tracking system.
B)pretreatment standards,in the case of industrial discharge permits.
C)proper disposal by treatment at the point the waste enters the water distribution system.
D)on-site treatment before it enters the sewer system.
Q2) Dischargers in violation of the Clean Water Act can face up to two years in prison and a fine of $50,000 per day of violation.
A)True
B)False
Q3) The Clean Water Act prohibits any dredging or filling activity undertaken without a permit in a wetland that is:
A)located in the United States,irregardless of navigability.
B)part of the navigable waters of the United States.
C)under federal protection.
D)habituated by marine life.
Q4) Describe Superfund's "Community Right to Know" requirement.
Q5) What are the major requirements a person who generates,treats,stores,or transports significant quantities of hazardous waste must meet?
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