Business Law
Study Guide Questions
Course Introduction
Business Law introduces students to the fundamental principles and concepts governing the legal environment of business. The course covers key topics such as contract law, tort law, agency, partnership, corporation, property law, and the regulatory context impacting business operations. Students will examine how legal issues influence management decision-making, navigate real-world cases, and explore the ethical and legal responsibilities of businesses. Throughout the course, emphasis is placed on developing practical knowledge to identify and address legal risks in various business scenarios.
Recommended Textbook
Business Law Today Standard Text and Summarized Cases 10th Edition by Roger LeRoy Miller
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Page 2
Chapter 1: The Legal Environment
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Sample Questions
Q1) In Benny v. City Car Dealership, a state supreme court held that a minor could cancel a contract for the sale of a car. Now a trial court in the same state is deciding Daphne v. Even Steven Auto Deals, Inc.,, a case with similar facts. Under the doctrine of stare decisis, the trial court is likely to
A) allow the minor to cancel the contract.
B) disregard the Benny case.
C) order the minor to cancel the contract.
D) require the minor to fulfill the contract.
Answer: A
Q2) Statutes are laws enacted by Congress and the state legislatures and comprise one of the sources of American law.
A)True
B)False
Answer: True
Q3) Criminal law focuses on duties that exist between persons.
A)True
B)False
Answer: False
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Chapter 2: Constitutional Law
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Sample Questions
Q1) Martin, a U.S. citizen, feels that a recently enacted federal law is unfair. He assembles a group of friends and they write a petition to the government. Martin and friends then stand quietly in front of the White House with signs declaring their belief that the law is unfair. Under the First Amendment, Martin has a right to
A) petition the government, but not to assemble a group peaceably.
B) assemble peaceably, but not to petition the government.
C) both petition the government and assemble peaceably.
D) neither petition the government nor assemble peaceably.
Answer: C
Q2) Orin claims that a Pennsylvania state statute infringes on his "substantive due process" rights. This claim focuses on
A) procedures used to make decisions to take life, liberty, or property.
B) the content of the statute.
C) the similarity of the treatment of similarly situated individuals.
D) the steps to be taken to protect Orin's privacy.
Answer: B
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Chapter 3: Courts and Alternative Dispute Resolution
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Sample Questions
Q1) Jack and Jill, citizens of Vermont, are involved in a case related to the adoption of their child. The Vermont state courts
A) have concurrent jurisdiction with federal courts over this case.
B) have original jurisdiction over this case.
C) have exclusive jurisdiction over this case.
D) do not have jurisdiction for over case.
Answer: C
Q2) Carol files a suit against Andy in a state trial court and loses. Carol
A) cannot take her case any higher in the court system.
B) can insist that the United States Supreme Court hear her case.
C) can plead her case before an appellate court.
D) can plead her case before a small claims court.
Answer: C
Q3) Federal courts are superior to state courts.
A)True
B)False
Answer: False
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Chapter 4: Torts and Cyber Torts
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Sample Questions
Q1) Manuel is walking past Thomas's house when he hears a smoke alarm going off. He also hears a child calling for help and sees smoke coming from a window. Manuel rushes into Thomas's house, finds the child and brings it outside. If Thomas sues Manuel for trespass to land, Manuel's defense will probably be
A) assisting someone in danger.
B) consent.
C) self-defense.
D) the reasonable person defense.
Q2) False imprisonment occurs when a person restrains another intentionally and without justification.
A)True
B)False
Q3) After two years of research and the investment of considerable funds, Coast-to-Coast Company (CC) develops a new product that it hopes will produce substantial profits. CC learns that a competitor, National Sales, Inc., has made and begun to sell a nearly identical product. CC learns from a reliable source that National paid a CC employee to obtain the plans for CC's product while it was in development. What legal recourse does CC have against National?
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Chapter 5: Intellectual Property and Internet Law
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Q1) Wendy works as a weather announcer for a TV station under the character name Weather Wendy. Wendy can register her name as a
A) a certification mark.
B) a collective mark.
C) a service mark.
D) a trade name.
Q2) The 1995 Federal Trademark Dilution Act allowed trademark owners to bring suit in federal court for trademark dilution.
A)True
B)False
Q3) James buys a copy of the book Downpour. Later, after reading the book, James sells it to his sister. Under the first sale doctrine, James's sale of the book is A) legal.
B) legal only if the copyright has expired.
C) legal only if he sells it for less than he paid for it.
D) illegal.
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Page 7
Chapter 6: Criminal Law and Cyber Crime
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Q1) Embezzlement can be committed only by physically taking property from the possession of another.
A)True
B)False
Q2) Crimes occurring in a business context are popularly referred to as white-collar crime.
A)True
B)False
Q3) Someone suffering from a mental illness may be incapable of the state of mind to commit a crime.
A)True
B)False
Q4) All persons who are arrested have the constitutional right to remain silent.
A)True
B)False
Q5) Corporations, like persons, can be liable for crimes.
A)True
B)False
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Chapter 7: Ethics and Business Decision Making
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Q1) Bilt-Well Construction Corporation makes a side payment to a government official in Nigeria to obtain a contract. In the United States, this is
A) illegal and unethical.
B) illegal but not unethical.
C) unethical but not illegal.
D) legal and ethical.
Q2) Housemate, Inc., makes and sells a variety of household products. With a fair amount of certainty, Housemate's decision makers can predict whether a given business action would be legal in A) all situations.
B) many situations.
C) no situations.
D) practically no situations.
Q3) Setting realistic workplace goals can increase the probability that employees will act unethically.
A)True
B)False
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Chapter 8: International Law in a Global Economy
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Q1) WiFi Corporation, a U.S. firm, signs a contract with Bueno Computadores, Ltd., an Argentinean firm, for a shipment and payment for WiFi's goods. This is
A) a distribution agreement.
B) a joint venture.
C) direct exporting.
D) licensing.
Q2) The simplest way for a U.S. firm to do business in a foreign market is to export its products directly to that market.
A)True
B)False
Q3) The United States taxes each barrel of imported oil at a flat rate. This is A) an antidumping duty.
B) a dumping duty.
C) a quota.
D) a tariff.
Q4) The Foreign Sovereign Immunities Act spells out what a "foreign state" includes.
A)True
B)False
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Chapter 9: Nature and Classification
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Q1) Avatar, Inc., and Bling Corporation sign a contract in which Avatar agrees to deliver t-shirts emblazoned with video game characters in exchange for Bling's promise to pay. Avatar delivers. The contract is
A) voidable.
B) executed.
C) executive.
D) executory.
Q2) The person who makes a promise is the promisee.
A)True
B)False
Q3) Jonathon promises to pay child support and alimony to his ex-wife every month after their divorce. Jonathon has
A) only a moral obligation to do keep his promise.
B) only a legal obligation to keep his promise.
C) both a legal and a moral obligation to keep his promise.
D) no obligation to keep his promise.
Q4) If a voidable contract is avoided, the parties to it are released from it.
A)True
B)False
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Chapter 9: Offer and Acceptance
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Sample Questions
Q1) The agreement resulting from a buyer clicking on a box containing the words "I agree" is known as a click-on agreement.
A)True
B)False
Q2) In most states, revocation becomes effective on receipt.
A)True
B)False
Q3) Under the UETA, a contract is unenforceable if it is solely in electronic form.
A)True
B)False
Q4) An offer made in obvious anger is still an effective offer.
A)True
B)False
Q5) Revocation is effective on dispatch.
A)True
B)False
Q6) A forum-selection clause indicates the forum, or location, for the delivery of goods purchased online.
A)True
B)False
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Chapter 11: Consideration, Capacity, and Legality
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Q1) All states require that members of certain professions to have licenses.
A)True
B)False
Q2) Past consideration can be legally sufficient consideration.
A)True
B)False
Q3) In general, courts consider the fairness of a contract when deciding if the contract is binding.
A)True
B)False
Q4) Colleen is intoxicated, but still mentally capable of understanding the consequences of her actions when she signs a contract to sell the rights to her latest phone app design to Addie. The contract is
A) enforceable only if Colleen does not attempt to disaffirm it.
B) enforceable even if Colleen attempts to disaffirm it.
C) unenforceable if Addie attempts to disaffirm it.
D) enforceable only if Addie does not attempt to disaffirm it.
Q5) Adequacy of consideration refers to how much consideration is given.
A)True
B)False
Page 13
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Chapter 12: Defenses to Contract Enforceability
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Sample Questions
Q1) Ted and Svetlana orally agree to several different oral contracts. The Statute of Frauds will bar enforcement of an oral contract for
A) a deal that will be performed within a year.
B) a primary obligation.
C) a sale of goods for $100.
D) a sale of land.
Q2) Kathleen sells Richard a racehorse for $1,000. Both Kathleen and Richard think that the horse is too slow to win any races. Richard then enters the horse in a race, and it wins easily. He enters it in more races, and the horse soon wins more than $1 million. Kathleen tries to rescind the contract to sell the horse, claiming that it was worth more than $1,000. A court will
A) cancel the contract due to Kathleen's failure to know the horse's value.
B) cancel the contract due to Richard's failure to know the horse's price.
C) cancel the contract due to the difference between the contract price and the horse's true value.
D) enforce the contract.
Q3) A unilateral mistake is a mistake made by both parties to a contract.
A)True
B)False
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Page 14
Chapter 13: Third Party Rights and Discharge
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Q1) Dylan enters into a contract to manage the operations of Cash's accounting office for one year, renewable for subsequent one-year terms. If this contract is discharged like most contracts, it will be
A) breached.
B) rescinded.
C) altered.
D) performed.
Q2) In most contracts, promises of performance are expressly qualified. A)True
B)False
Q3) Ruth contracts to provide Stan with fifty hours of telepathic personal coaching. The state legislature subsequently passes a law making telepathic personal coaching illegal. This law will
A) discharge the contract.
B) fulfill the contract.
C) not affect the contract.
D) require immediate performance of the contract.
Q4) There are no exceptions to the rule that any duty can be delegated. A)True B)False
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Chapter 14: Breach and Remedies
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Sample Questions
Q1) A remedy is the relief provided to an innocent contracting party when the other party breaches the contract.
A)True
B)False
Q2) A contract can include a provision stating that no damages can be recovered for certain types of breaches.
A)True
B)False
Q3) Refined Commodities, Inc., agrees to deliver ten tons of sheet metal to Select Builders Corporation. The agreement states that delivery is to be within "3" days, although the parties intend "30" days. Refined cannot convince Select to amend the contract. Refined should seek
A) damages.
B) reformation.
C) rescission.
D) specific performance.
Q4) A liquidated damages provision is the same as a penalty provision.
A)True B)False
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Chapter 15: The Formation of Sales and Lease Contracts
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Sample Questions
Q1) Bill orders 1,000 nails from Super Hardware, Inc. Super Hardware keeps its nails in packages of 100,000. Bill and the agent for Super Hardware both sign the contract for the sale of the nails on Monday. The agent separates 1,000 nails on Wednesday. The agent delivers the nails to Bill on Thursday morning, and Bill pays for the nails on Friday. Identification of the nails took place on
A) Monday.
B) Wednesday.
C) Thursday.
D) Friday.
Q2) Sweets Store buys chocolate from Tasty Candies, Inc. The parties agree that the chocolate will be shipped "F.O.B. Sweets" via United Railroad Corporation. The chocolate is lost in transit. The loss is suffered by
A) Sweets and Tasty, but not United.
B) Sweets only.
C) Sweets, Tasty, and United.
D) Tasty only.
Q3) All oral contracts are enforceable under the UCC.
A)True
B)False
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Page 17
Chapter 16: Performance and Breach of Sales Lease Contracts
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Sample Questions
Q1) Levi's Toy Store orders one hundred board games from Big Board Games Warehouse. When the games are delivered, they are all missing pieces. Levi's Toy Store rejects the shipment. Big Board Games wants to cure. Big Board Games must
A) promptly notify Levi's Toy Store of the intent to cure.
B) pay Levi's Toy store a cure fee.
C) send a truck to pick up the nonconforming goods before the end of the business day.
D) create a new contract with Levi's Toy Store.
Q2) On a lessee's insolvency, the lessor can stop delivery of the goods. A)True
B)False
Q3) Business Rental Corporation (BRC) and Cartage Trucking Company enter into a contract for a lease of ten hydraulic lifts. Under the perfect tender rule, BRC must ship or tender goods to the lessee that
A) approximately conform to all of the details of the contract.
B) entirely conform to the contract except in one or two details.
C) exactly conform to the contract in every detail.
D) substantially conform to the contract in most details.
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Page 18
Chapter 17: Warranties and Product Liability
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Q1) Fancy's Feedlot orders one hundred sacks of cattle feed from Bovine Feeders, Inc. Each bag has the words "Twenty percent protein" printed on the front. This is
A) an express warranty.
B) an implied warranty.
C) a warranty of title.
D) puffery.
Q2) Trucks & Trailers, Inc. (T&T), and United Delivery Service enter into a contract for a lease of trucks. T&T is a merchant who deals in goods of the kind leased. Under the UCC, an implied warranty of merchantability arises
A) automatically in lease contracts.
B) only if the lessee asks for it.
C) only if the lessor does not expressly disclaim it.
D) only in conjunction with sales contracts, not lease contracts.
Q3) A seller does not have to use words such as "warrant" to make an express warranty.
A)True
B)False
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19
Chapter 18: Negotiable Instruments: Transferability Liability
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Q1) A promise to give value in the future is sufficient to confer the rights of an HDC on one in possession of a negotiable instrument.
A)True
B)False
Q2) Entrepreneur Auto Rentals owes Sole Saver Auto Dealership $2,000. Entrepreneur executes a note to Sole Saver as security for the debt. This security
A) does not constitute sufficient consideration for HDC status.
B) does not satisfy the value requirement for HDC status.
C) satisfies the consideration requirement for HDC status.
D) satisfies the value requirement for HDC status.
Q3) Efron transfers an instrument to First Citizens Bank. This is not a negotiation unless A) the parties bargained over the amount paid for the instrument.
B) the transfer is an assignment.
C) the instrument is a negotiable instrument.
D) the transfer includes rights under a contract.
Q4) An instrument "payable to bearer" is negotiated by delivery.
A)True
B)False
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Page 20
Chapter 19: Checks and Banking in the Digital Age
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Q1) If a customer does not have sufficient funds to pay a check available in his or her checking account and the bank dishonors the check, the bank is liable to the customer.
A)True
B)False
Q2) Dru signs a check "pay to the order of Eppie" drawn on Dru's account in Bayside Bank. Greta forges Eppie's indorsement. Bayside pays the check. Most likely
A) Dru will be liable for the amount.
B) Eppie will have to pay Dru for the amount.
C) Bayside will have to recredit Dru's account.
D) the Federal Reserve will reimburse all parties for their costs.
Q3) Jackie inserts a debit card issued by her bank into a machine and keys in her personal identification number. She is then able to withdraw $500 in cash. Jackie is using A) an automated teller machine.
B) a point-of-sale system.
C) a direct deposit system.
D) an Internet payment system.
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21
Chapter 20: Secured Transactions
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Q1) Fiona borrows $1,000 from Garden State Bank, using her motorcycle as collateral. To perfect its security interest, the bank must file its financing statement with A) the secretary of state.
B) the county clerk.
C) the city treasurer.
D) the ward alderman.
Q2) The payment of Jose's debt to Klint is guaranteed by Jose's personal property. The process by which Klint can protect himself against the claims of third parties to this property is
A) attachment.
B) default.
C) perfection.
D) termination.
Q3) The "first-in-time" rule means that an unperfected security interest takes priority over a perfected security interest.
A)True
B)False
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22
Chapter 21: Creditors Rights and Bankruptcy
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Q1) A guarantor is secondarily liable on an obligation.
A)True
B)False
Q2) One goal of bankruptcy law is to protect a debtor.
A)True
B)False
Q3) A husband and wife may file a joint petition for bankruptcy.
A)True
B)False
Q4) Wilson wants to file an ordinary, or straight, bankruptcy. Wilson should file using
A) Chapter 7.
B) Chapter 11.
C) Chapter 13.
D) his state's bankruptcy code.
Q5) A discharge will be denied to a debtor who received a discharge within eight years of filing the current petition.
A)True
B)False
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Chapter 22: Mortgages Foreclosures After the Recession
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Q1) Hubert borrows $100,000 from Integrity Mortgage Mart to buy a home. Soon after obtaining the mortgage, Integrity convinces Hubert to refinance. This is
A) a short sale.
B) a subprime mortgage.
C) loan flipping.
D) steering and targeting.
Q2) A mortgage must be in writing to comply with the Statute of Frauds.
A)True
B)False
Q3) Gena borrows $350,000 from Fish Island Bank to buy a home, which secures the mortgage. In the seventh year of the loan, Gena stops making payments. After the bank repossesses the property but before it is sold, Gena may buy it by paying
A) an amount that equals the potential proceeds from the property's sale.
B) an amount that exceeds the potential proceeds from the property's sale.
C) the amount of the missed payments, but not more.
D) the full amount of the debt, plus any interest and costs.
Q4) A borrower has a right to rescind a mortgage within three business days.
A)True
B)False
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Chapter 23: Agency Relationships in Business
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Q1) Based on Nan's conduct, Odel reasonably believes that Poppy has the authority to act on Nan's behalf even though Poppy does not have the actual authority to do so. In this circumstance, Poppy has
A) apparent authority.
B) express authority.
C) implied authority.
D) no authority.
Q2) Remedies of the agent for breach of duty by the principal arise out of contract and tort law.
A)True
B)False
Q3) In a principal-agent relationship, the parties agree that the principal will act on behalf and instead of the agent in negotiating and transacting business with third persons.
A)True
B)False
Q4) A principal owes an agent a duty of compensation.
A)True
B)False
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Chapter 24: Employment, Immigration, and Labor Law
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Q1) Clerical Workers Union represents the employees of Miracle Medical Research Company. The management of the firm refuses to bargain with the union over the hiring of unnecessary workers. This violates
A) federal labor law.
B) state right-to-work laws.
C) federal employment discrimination law.
D) no federal or state law.
Q2) If an employee dies in a work-related incident, the employer must notify OSHA within eight hours.
A)True
B)False
Q3) Whistleblower statutes protect employees from retaliatory discharge.
A)True
B)False
Q4) Unfair labor practices are defined by the Norris-LaGuardia Act. A)True
B)False
Q5) Employees are entitled to overtime pay only at their employer's discretion. A)True
B)False
26
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Chapter 25: Employment Discrimination and Diversity
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Questions
Q1) Silky Coordinates, a women's clothing store, employs female attendants to assist customers in the dressing rooms. Radley, a forty-one-year-old male, applies for an attendant's job, but is not hired. In Radley's suit against Silky for employment discrimination under Title VII, the store has
A) no defense.
B) a bona fide occupational qualification defense.
C) a business necessity defense.
D) a seniority systems defense.
Q2) Constructive discharge is a theory that plaintiffs can use to establish any type of discrimination claims under the Civil Rights Act of 1964.
A)True
B)False
Q3) Employers can consider mitigating measures or medications when determining if an individual has a disability that fits the definition in the Americans with Disabilities Act of 1990.
A)True B)False
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Chapter 26: Sole Proprietorships and Private Franchises
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Q1) Echo enters into an agreement with Deep Pan Pies, Inc., to operate a franchise in Centre City. Later, Deep grants franchises to others within the city. Echo files a suit to close them. If the court rules in Echo's favor it will most likely be on the ground that A) Deep violated the antitrust laws.
B) Deep violated the implied covenant of good faith and fair dealing.
C) Echo paid a franchise fee.
D) Echo was the first Deep franchisee in Centre City.
Q2) Kelly, the owner of Llama Farms, a sole proprietorship, wants to obtain additional business capital but to maintain control. This can best be accomplished by A) borrowing funds.
B) bringing in partners.
C) issuing stock.
D) selling the business.
Q3) Most franchise agreements provide that notice of termination of a franchise is not necessary.
A)True
B)False
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Chapter 27: All Forms of Partnership
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Q1) Jack and Kyra are partners in Law Firm, LLP, a limited liability partnership. Jack supervises Kyra, who negligently fails to appear in court on behalf of Milo, a client. Liability to Milo rests with
A) Jack and Kyra.
B) Jack only.
C) Kyra only.
D) neither Jack nor Kyra.
Q2) Partnership profits must be shared in the same proportion as the partners' investment of capital in the firm.
A)True
B)False
Q3) Will and Jay form Northwest Air Express, a general partnership. The essential elements of this partnership do not include
A) a sharing of profits and losses.
B) a joint ownership of the business.
C) an equal right to management in the business.
D) goodwill.
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Chapter 28: Limited Liability Companies Special Business
Forms
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Q1) Neverend Music Company and Monotonous Metronome Corporation form a joint stock company. A joint stock company can be formed for, at the most,
A) an implied duration of not more than six months.
B) a perpetual existence.
C) a single activity or transaction.
D) a stated duration of not more than one year.
Q2) A syndicate may exist in the form of a partnership but not a corporation.
A)True
B)False
Q3) Farm2Fork, LLC, is a limited liability company. Rather than distribute its profits to its members, Energy wants to reinvest the profits in its business. For this reason, Energy may prefer to be taxed as A) a corporation.
B) a partnership.
C) a sole proprietorship.
D) a business trust.
Q4) A limited liability company can be taxed as a corporation.
A)True
B)False
30
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Chapter 29: Corporate Formation, Merger, and Termination
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Q1) Eagle Financial Corporation merges with First Bank Corporation, with Eagle Financial absorbing First Bank. After the merger
A) a different, new corporation is the surviving corporation.
B) Eagle Financial and First Bank are both surviving corporations.
C) Eagle Financial is the surviving corporation.
D) First Bank is the surviving corporation.
Q2) The purpose of a corporation may be specified in its articles of incorporation. A)True B)False
Q3) A sale of all of a corporation's assets requires the approval of its shareholders. A)True B)False
Q4) Raven is a shareholder of Quantum Mechanix Corporation. Raven could normally exercise appraisal rights if Quantum participated in A) a consolidation.
B) a dissolution.
C) a liquidation.
D) a winding up.
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Chapter 30: Management and Ownership of a Corporation
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Q1) Frawsty Corporation distributes beverages in the greater Northwest. Frawsty's board of directors can delegate some of its functions to
A) Frawsty's incorporators.
B) Frawsty's officers.
C) Frawsty's shareholders.
D) no one.
Q2) Lexy and Mort act as the incorporators for NuGame Corporation. After the first board of directors is chosen, subsequent directors are elected by a vote of NuGame's A) board of directors.
B) employees.
C) officers.
D) shareholders.
Q3) Hiring corporate officers and determining their compensation are decisions that would be made by a corporation's board of directors.
A)True
B)False
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Chapter 31: Investor Protection, Insider Trading, Corp Gov
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Q1) Securities of nonprofit, educational, and charitable organizations are not exempt from the registration requirement of the 1933 Securities Act.
A)True
B)False
Q2) "Blue sky laws" regulate securities data stored in cloud computing servers.
A)True
B)False
Q3) To raise capital to form Plasticity Corporation with Quinn, Rona sells bonds and stock in other companies, and plans to register an initial public offering under the Securities Act of 1933. SEC Rule l0b-5 covers
A) most forms of securities.
B) only bonds.
C) only securities registered under the Securities Act of 1933. D) only stock.
Q4) "Forward-looking" financial forecasts are prohibited under SEC Rule 10b-5. A)True
B)False
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Page 33
Chapter 32: Promoting Competition
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Q1) Fresh Vegetables, Inc., a wholesaler, refuses to sell its produce to Good Mart Stores, Inc., a retailer. This is
A) "an unfair or deceptive act or practice."
B) a per se violation.
C) not a violation.
D) subject to analysis under the rule of reason.
Q2) The possession of monopoly power alone does not constitute the offense of monopolization.
A)True
B)False
Q3) Master Manufacturing Corporation has exclusive control over the market for its product. Under the Sherman Act, this is
A) a per se violation.
B) a violation if it acquired this power through "business acumen."
C) a violation if it acquired this power through "anticompetitive means."
D) not a violation.
Q4) No person may be a director for two competing corporations at the same time.
A)True
B)False
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Chapter 33: Consumer and Environmental Law
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Q1) Merchants must ship orders within the time promised in their ads.
A)True
B)False
Q2) A credit-cardholder is liable for all unauthorized charges made before the creditor is notified that the card has been lost.
A)True
B)False
Q3) Bright Brew Coffee, Inc., processes and sells a variety of coffee products. Bright Brew's product packages must include
A) the identity of the company owner.
B) the net quantity of the contents.
C) the restaurants and stores in which the product is sold.
D) the type of consumer most likely interested in the product.
Q4) The Environmental Protection Agency periodically updates the air pollution standards.
A)True
B)False
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Chapter 34: Liability of Accountants Other Professionals
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Q1) Ezra, an accountant, intentionally misstates a material fact to mislead Fruit Packing Industries, Inc., a client. Fruit Packing justifiably relies on the misstatement to its detriment. Ezra is most likely liable for A) actual fraud.
B) constructive fraud.
C) destructive fraud.
D) virtual fraud.
Q2) Lars accuses Moe, an attorney, of committing malpractice. Malpractice is A) a breach of ethics.
B) a defalcation.
C) a mistake in judgment.
D) professional negligence.
Q3) Yves is an accountant charged with negligence by Zesty Soup Company, a client. Yves may successfully defend against the claim if he can show that A) scienter was lacking.
B) he complied with all International Financial Reporting Standards.
C) the negligence was not the proximate cause of the client's losses.
D) the negligence was only contributory.
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36
Chapter 35: Personal Property and Bailments
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Q1) One cannot acquire ownership by possession by "capturing" a wild animal.
A)True
B)False
Q2) Lauren owns a 1967 Ford Mustang, which Mike customizes and details to Lauren's specifications. The car earns several awards at regional vehicle customizing competition shows. The result of Mike's efforts is
A) accession.
B) acquisition.
C) conversion.
D) resolution.
Q3) Emily checks her luggage at Flyaway Airlines's ticket counter before boarding her flight to Houston, Texas. Subject to a bailment is
A) Emily.
B) Emily's luggage.
C) Emily's ticketed seat on the flight.
D) none of the choices.
Q4) A joint tenant's sale of his or her interest terminates the joint tenancy.
A)True
B)False
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Chapter 36: Real Property and Landlord-Tenant Law
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Q1) LaDonna signs a one-year lease with Mae to occupy an apartment in Ames, Iowa, near the University of Iowa. LaDonna needs the apartment only for two semesters and may have to sublet it for the rest of the term. LaDonna's tenancy is
A) a periodic tenancy.
B) a tenancy at will.
C) a tenancy at sufferance.
D) a fixed-term tenancy.
Q2) Region Construction Company has a right to drive its trucks across Staple Business, Inc.'s property, which is adjacent to Region's office. This right is
A) a leasehold estate.
B) a license.
C) an easement.
D) a profit.
Q3) Even after a tenant sublets leased premises, the tenant may be obligated to pay rent.
A)True
B)False
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Chapter 37: Insurance, Wills, and Trusts
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Q1) An executor is a personal representative appointed by a court for a decedent who dies without a will.
A)True
B)False
Q2) A person can insure anything in which he or she has an insurable interest.
A)True
B)False
Q3) Patty, who is divorced, owns a house. She has no reasonable expectation of benefit from the life of Quinn, her ex-spouse, but she applies for insurance on his life anyway. She also obtains a fire insurance policy on the house, which she later sells. Five years later, Quinn dies and the house is destroyed in a fire. Can Patty obtain payment on either the death of Quinn or the loss of the house? Explain.
Q4) Because insurance law follows contract law, bad faith tort actions against insurers are not allowed.
A)True
B)False
Q5) An insurer has a duty to avoid the payment of claims.
A)True
B)False
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