Business Organizations Law Practice Questions
Course Introduction
Business Organizations Law explores the legal principles governing the formation, operation, and dissolution of various business entities, including sole proprietorships, partnerships, limited liability companies (LLCs), and corporations. The course examines the rights and responsibilities of owners, directors, officers, and shareholders, as well as fiduciary duties, governance structures, and compliance obligations. It also addresses topics such as agency relationships, mergers and acquisitions, securities regulation, and the legal implications of business financing. By analyzing statutory law, case law, and real-world scenarios, students gain a comprehensive understanding of the legal framework essential for effective business decision-making and management.
Recommended Textbook
Business Law Principles for Todays Commercial Environment 5th Edition by Twomey
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51 Chapters
2716 Verified Questions
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Page 2
Chapter 1: The Nature and Sources of Law
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Sample Questions
Q1) Statutes which are drafted from Uniform State Laws are often used to regulate:
A) business.
B) foreign countries.
C) criminal behavior.
D) personal family matters.
Answer: A
Q2) Jacob just won the state lottery.Discuss his right to privacy.
Answer: Within the context of the Fourth Amendment,Jacob continues to be protected to the same extent he was prior to winning.Regarding his right to be protected from intrusions by others,however,he most likely will have to give up some privacy rights because of his good fortune; that is,although he remains a private citizen,he will not have quite the same degree of privacy protection in this arena as he had before winning the lottery.
Q3) A party may ask for legal,but not equitable,remedies in a single court.
A)True
B)False
Answer: False
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3
Chapter 2: The Court System and Dispute Resolution
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Q1) Generally,the prevailing party in a lawsuit is awarded the costs of the action,including witness fees and jury fees.
A)True
B)False
Answer: True
Q2) Arbitration procedures occur in a court of law.
A)True
B)False
Answer: False
Q3) The _____ rule(s)on the admissibility of evidence.
A) Judge
B) Jury
C) Attorneys
D) court clerk
Answer: A
Q4) An appellate court determines whether there has been reversible error.
A)True
B)False
Answer: True
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Chapter 3: Business Ethics, Social Forces and the Law
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Sample Questions
Q1) Moral standards based on positive law may allow businesses to conduct themselves unfairly so long as their actions are not illegal.
A)True
B)False
Answer: True
Q2) There is often a conflict between the goal of making money for shareholders and the goal of solving social problems through business.
A)True
B)False
Answer: True
Q3) The field of business ethics recognizes that social values typically must yield to the profitability motive.
A)True
B)False
Answer: False
Q4) Moral relativists solve ethical dilemmas according to time and place.
A)True
B)False
Answer: True
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Chapter 4: The Constitution as the Foundation of the Legal Environment
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Q1) The privileges and immunities clause means that if a business owner moves from California to Texas,she can engage in the same business.
A)True
B)False
Q2) The Due Process clause has extended the due process clause to protect the record or standing of a student.
A)True
B)False
Q3) When there is a direct conflict between a federal and a state law,federal law prevails under the supremacy clause.
A)True
B)False
Q4) California passed a law prohibiting any transporting of nuclear waste in the state unless the company doing so is a resident or is owned by residents of California.What constitutional issues does this law raise?
Q5) The Bill of Rights provides protection for corporations.
A)True
B)False
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Chapter 5: Government Regulation of Competition and Prices
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Sample Questions
Q1) The Sherman Act does not prohibit:
A) a company from engaging in purposeful conduct to exclude competitors.
B) a seller from dominating a market because of superior product or business.
C) competitors from agreeing not to deal with certain buyers.
D) contracts to fix prices.
Q2) Requiring buyers to purchase one product in order to get another is acceptable practice and not a violation of the Sherman Act.
A)True
B)False
Q3) Having a large percentage of the market is not necessarily a monopoly.
A)True
B)False
Q4) Freezo Refrigerators are sold by various retailers.Most of the same retailers also sell Icy Refrigerators.The Freezo brand outsells Icy in some stores,but not in others.Freezo has decided to offer secret bonuses and discounts to retailers where the sale of Freezo Refrigerators lags behind the sale of Icy Refrigerators.Freezo sees this action as an advertising ploy to increase market share.Retail stores where Freezo is number one are not eligible for any of these bonuses and discounts.Discuss the implications of Freezo's advertising plan.
Page 7
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Chapter 6: Administrative Agencies
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Sample Questions
Q1) Within the area in which the administrative agency is authorized to make decisions,the agency can be regarded as a specialized court or court of limited jurisdiction.
A)True
B)False
Q2) Wilma was an employee of the Electric Storage Battery Company.She was fired.She claimed that she was fired because she was a member of a labor union.The employer asserted that she was fired because she was a poor worker.Wilma filed an unfair labor practice complaint with the National Labor Relations Board.Its examiner held a hearing at which evidence was presented showing that Wilma was a poor worker.Other evidence presented showed that the employer was opposed to labor unions.The Board decided to believe Wilma's witnesses and concluded that she had been fired because she belonged to the union.Can the employer appeal this decision?
Q3) As Courts now tend to accept an agency's reasonable interpretation of a statute involving a technical matter,even though it was not the only interpretation that could have been made.
A)True
B)False
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Chapter 7: Crimes
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Q1) Because a corporation is not a human being,it cannot be convicted of a crime.
A)True
B)False
Q2) The Economic-Espionage Act (EEA):
A) makes it a crime to use a fraudulently obtained device to obtain money through an electronic fund transfer system.
B) makes it a crime to send unsolicited bulk emails.
C) makes it a crime to transfer proprietary files, documents and information from a computer to an unauthorized person.
D) all of these.
Q3) Counterfeiting is:
A) a federal crime only.
B) a state crime only.
C) both a federal and state crime.
D) determined by the individual.
Q4) Due process rights apply to:
A) individuals only.
B) corporations only.
C) both individuals and corporations.
D) individuals, but only in their official capacity within a business.
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Chapter 8: Torts
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Sample Questions
Q1) People generally have a duty to act as a reasonably prudent person would in similar circumstances.
A)True
B)False
Q2) Libel is the printed equivalent of the spoken form of defamation known as slander.
A)True
B)False
Q3) The shopkeeper's privilege gives store managers the absolute right to detain anyone they believe has shoplifted.
A)True
B)False
Q4) A trespass to personal property is any unpermitted entry below,on,across,or above the land of another.
A)True
B)False
Q5) The same action can have both civil and criminal liability.
A)True
B)False
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Chapter 9: Intellectual Property Rights and the Internet
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Sample Questions
Q1) A copyright bestows upon the creator of an artistic or literary work a federal statutory right to exclusively:
A) use the work.
B) reproduce the work.
C) display the work.
D) All of these
Q2) Trade dress refers to the packaging look and overall image of a product.
A)True
B)False
Q3) The Sony Bono Copyright Extension Act of 1998 extended copyright protection to the life of the author plus 50 years.
A)True
B)False
Q4) Three types of patents available under U.S.law are:
A) utility, product, design.
B) design, packaging, invention.
C) design, plant, utility.
D) utility, regulatory, common law.
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Chapter 10: The Legal Environmental of International Trade
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Sample Questions
Q1) Which of the following allows a domestic firm to maintain the greatest control over its foreign operations?
A) wholly-owned subsidiaries
B) licensing
C) foreign distributorships
D) agency arrangements
Q2) The goal of the North American Free Trade Agreement (NAFTA)is to eliminate all tariffs between the United States and Europe.
A)True
B)False
Q3) Under the act-of-state doctrine,the courts of one country will not sit in judgment of the acts of the government of another country conducted within its own territory.
A)True
B)False
Q4) The Securities and Exchange Commission (SEC)is not limited to litigation when a securities law enforcement investigation runs into secrecy or blocking laws.
A)True
B)False
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Chapter 11: Nature and Classes of Contracts: Contracting
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Sample Questions
Q1) The plaintiff in a quasi-contractual action can recover:
A) lost profits.
B) damages for mental distress.
C) the reasonable value of the benefit conferred upon the defendant.
D) for all the damages sustained.
Q2) A contract is a(n)________ agreement for which the _______.:
A) promissory, parties make mutual promises.
B) multi-party, law gives a remedy.
C) obligation, obligor promises to pay the obligee.
D) legally binding, law gives a remedy.
Q3) A bilateral contract consists of a:
A) promise for an act.
B) promise for refraining from acting.
C) promise for a promise.
D) promise to contract.
Q4) A contract never can be both executory and unilateral.
A)True
B)False
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Chapter 12: Formation of Contracts: Offer and Acceptance
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Sample Questions
Q1) Frank is drunk and while laughing hysterically says to Hal "I'll sell you my truck for a buck".Frank has made a valid offer.
A)True
B)False
Q2) When it is claimed that a contract is too indefinite to be enforced,a court will do its best to find the intent of the parties and thereby reach the conclusion that the contract is not too indefinite.
A)True
B)False
Q3) An option contract is a binding promise to keep an offer open for a stated period of time or until a specified date.
A)True
B)False
Q4) The first statement made by one of two persons can be anyone of the following except:
A) acceptance.
B) preliminary discussion.
C) invitation to negotiate.
D) a survey.
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Chapter 13: Capacity and Genuine Assent
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Sample Questions
Q1) An incompetent person may ordinarily avoid a contract in the same manner as a minor.
A)True
B)False
Q2) Certain persons cannot make contracts that will bind them.
A)True
B)False
Q3) Factual incapacity is imposed because of the class or group to which a person belongs.
A)True
B)False
Q4) Generally,when a person of legal age makes a contract with a minor,the contract is voidable by either party.
A)True
B)False
Q5) In which of the following cases is a contract between A and B binding?
A) A makes a mistake of material fact, and the mistake is unknown by B.
B) A and B make the same mistake of material fact.
C) A recklessly but honestly misrepresents a material fact.
D) A innocently misrepresents a material fact.
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Chapter 14: Consideration
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Sample Questions
Q1) Which of the following is not consideration for a present promise?
A) a good faith adjustment
B) compromise and release of claims
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 is the bargained-for exchange between the parties to a contract.
A)True
B)False
Q3) True consideration occurs only when the value of one promise is equal to the value of the promise given by the other party.
A)True
B)False
Q4) With regard to an unliquidated debt,payment by the debtor of less than the amount claimed by the creditor is consideration for the latter's agreement to release or settle the claim.
A)True
B)False
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Page 16
Chapter 15: Legality and Public Policy
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Sample Questions
Q1) In the absence of a valid restrictive covenant,the seller of a business may compete with an ex-employee and solicit customers of the former employer.
A)True
B)False
Q2) An unlicensed doctor can sue a patient for the doctor's fee if the patient in fact recovered because of the doctor's care.
A)True
B)False
Q3) A standard arbitration clause can be substantively unconscionable if the fees and costs are so excessive as to deny the innocent party the ability to resolve his claim.
A)True
B)False
Q4) In an employment contract,agreements not to compete are:
A) illegal
B) uniformly held to be in the public interest and therefore legal
C) valid only if the restriction protects the employee
D) valid, if the restriction is reasonable and necessary for the protection of the former employer
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17
Chapter 16: Writing, Electronic Forms, and Interpretation of Contracts
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Sample Questions
Q1) Through incorporation by deference,a contract can consist of both the original document and the detailed statement that is incorporated in it.
A)True
B)False
Q2) 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
Q3) The defense of noncompliance may not be raised by:
A) the parties to the oral contract.
B) third parties such as an insurance company or the IRS.
C) a promisor on the original contract.
D) a promisee on the original contract.
Q4) The parol evidence rule may not apply if:
A) the contract is materially incomplete.
B) the parties disagree on the meaning of the contract.
C) there is no ambiguity regarding the terms of the contract.
D) one party is unable to perform the contractual obligations.
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Chapter 17: Third Persons and Contracts
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Sample Questions
Q1) The rights of a third-party beneficiary always cannot be destroyed without that beneficiary's consent.
A)True
B)False
Q2) When duties under a contract are delegated,the party making the delegation remains responsible for the performance of the contract just as though no delegation had been made.
A)True
B)False
Q3) When a lease is assigned,the assignee becomes the sole obligor for rent payments,and the original lessee is discharged from the lease.
A)True
B)False
Q4) When work is guaranteed by one who repairs a building,the owner,on selling the building,may assign the guarantee to the buyer.
A)True
B)False
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19
Chapter 18: Discharge of Contracts
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Sample Questions
Q1) In most bilateral contracts,the performances of the parties are __________.
A) conditions precedent
B) conditions subsequent
C) recurrent conditions
D) concurrent conditions
Q2) The phrase "time is of the essence" means that:
A) the court is in a hurry to dispose of the case.
B) performance under the contract at the times specified in the contract is vital or essential.
C) the contract expressly states that time is of the essence.
D) the price stated in the contract is subject to change without notice.
Q3) Impossibility of performance applies when the debtor does not have sufficient funds to pay a debt.
A)True
B)False
Q4) Bankruptcy results in a discharge of contractual obligations by __________.
A) default
B) equity
C) operation of law
D) oath or affirmation
Page 20
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Chapter 19: Breach of Contract and Remedies
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Q1) An innocent party to an anticipatory repudiation of a contract has the right to treat the repudiation as a present,material breach and may file suit.
A)True
B)False
Q2) If an exculpatory clause limits liability for damages caused by negligent conduct,the tortfeasor's liability is:
A) contributorily negligent.
B) not limited if the conduct is willful.
C) limited unless the plaintiff signed a release.
D) limited if the conduct is grossly negligent.
Q3) A contractual provision which states that a waiver of rights will not constitute a modification to the contract is:
A) not enforceable as being in bad faith.
B) not enforceable as a violation of law.
C) enforceable by one party only.
D) enforceable.
Q4) Punitive damages are generally recoverable in contract actions.
A)True
B)False
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Chapter 20: Personal Property and Bailments
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Sample Questions
Q1) Sylvia and Morris were married and owned their home as tenants by the entirety.When Morris died,his will said that he left his half of his home to his brother Tim.Who owns the home at Morris's death?
A) The home is now owned solely by Sylvia.
B) The home is now owned by a joint tenancy between Sylvia and Tim.
C) The home is now owned by a tenancy in common between Sylvia and Tim.
D) The home is now owned by Sylvia and the state, in equal and divisible shares.
Q2) In states that follow the community property tradition,property acquired after the marriage belongs solely to the party who acquired it.
A)True
B)False
Q3) Joe rents a unit at the local Stor-More storage complex and places a lock on the unit's door.Joe has created a bailment with Stor-More.
A)True
B)False
Q4) In certain cases,real property can constitute a bailment.
A)True
B)False
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Page 22
Chapter 21: Legal Aspects of Supply Chain Management
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Sample Questions
Q1) A warehouse receipt may be either negotiable or nonnegotiable.
A)True
B)False
Q2) A public warehouser is statutorily required to insure all the goods.
A)True
B)False
Q3) Field warehousing is the storage of farm crops in the field where they have been grown.
A)True
B)False
Q4) The rights of a transferee of a negotiable bill of lading are defeated if the goods have been stopped in transit.
A)True
B)False
Q5) The rights and duties of a warehouse are for the most part the same as those of a(n):
A) bailee under a bailment for the sole benefit of the bailee.
B) bailee under an ordinary mutual-benefit bailment.
C) bailor under a bailment for the sole benefit of the bailor.
D) bailee under a bailment for the sole benefit of the bailor.
Page 23
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Chapter 22: Nature and Form of Sales
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Q1) If a contract for the sale of goods omits the price to be paid,the: ______.
A) contract is void because it is too indefinite to be enforced.
B) buyer is required to pay a reasonable price for the goods.
C) buyer can pay whatever price the buyer in good faith believes is a proper price.
D) seller can rightfully charge whatever price the seller in good faith believes is a proper price.
Q2) As a general rule,courts will __________ in recovering money or property transferred under an illegal agreement.
A) assist a commercial buyer
B) assist a non-commercial buyer
C) assist an institutional buyer
D) not aid either party
Q3) A sales agreement that does not satisfy the statute of frauds is:
A) a quasi contract.
B) criminal.
C) unenforceable.
D) unlawful.
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Chapter 23: Title and Risk of Loss
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Q1) In a non-shipment contract involving a merchant-seller,risk of loss passes to the buyer when he actually receives the goods from the merchant.
A)True
B)False
Q2) A consignment sale is treated as a sale or return under UCC Article 2.
A)True
B)False
Q3) In a sale or return transaction,until the actual return of the goods is made,title and risk of loss remain with the buyer.
A)True
B)False
Q4) A sale or return is a completed sale with an option for the buyer to return the goods. A)True B)False
Q5) Under a CF contract,the cost of shipment is included in the contract price. A)True
B)False
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25
Chapter 24: Product Liability: Warranties and Torts
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Sample Questions
Q1) Which of the following implied warranties is created when the buyer relies on the seller to pick out the goods that the buyer requires to meet a stated need?
A) conformity to description
B) Merchantability
C) fitness for a particular purpose
D) conformity to a sample or model
Q2) An implied warranty arises automatically from the fact a sale has been made.
A)True
B)False
Q3) An express warranty can be disclaimed,even if it was a critical part of the bargain to the buyer.
A)True
B)False
Q4) Any warranty that does not provide the complete protection of a full warranty is called a warranty in breach.
A)True
B)False
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26
Chapter 25: Obligations and Performance
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Q1) Jared agrees to purchase twelve computers from Zack Enterprises,Inc.for sale in Jared's department store.Twelve boxes from Zack Enterprises have just arrived at the department store.What are Jared's rights and responsibilities?
Q2) Good faith essentially means that neither party can do anything to impair the other party's expectation of performance.
A)True
B)False
Q3) Which method of payment gives the buyer credit by postponing the time for payment?
A) a promissory note
B) a check
C) a draft
D) a certified check
Q4) When a method of transportation called for by a contract becomes unavailable for any reason,the contract is automatically voided.
A)True
B)False
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Chapter 26: Remedies for Breach of Sales Contracts
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Q1) A buyer may revoke acceptance because of a seller's failure to complete promised repairs.
A)True
B)False
Q2) Fran had a very rare,and therefore expensive,automobile that she wished to sell.Fran worried that if the first attempt at selling the auto failed,the value of the auto might come into question.To prevent any potential loss of profit if the auto needed to be resold,Fran created a sales contract that provided for an estimation of damages should the contract later be breached by the potential buyer.A potential buyer was found,and the contract was signed.Later,because of a lack of sufficient financing,the buyer breached the sales contract.Fran requested the estimated damages provided for in the contract.The buyer refused,calling the clause unconscionable and excessive.Can Fran recover?
Q3) A buyer who cancels a sales contract because the seller fails to deliver the goods is entitled to recover as much of the purchase price as had been paid.
A)True
B)False
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Chapter 27: Kinds of Negotiable Instruments and Negotiability
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Q1) A negotiable instrument may be partly printed and partly typewritten.
A)True
B)False
Q2) An unconditional written promise made by one person to another,signed by the maker,that promises to pay on demand a specific sum of money to the bearer is a:
A) nonnegotiable draft.
B) bill of exchange.
C) promissory note.
D) certificate of deposit.
Q3) A certificate of deposit is a written promise made and signed by the maker to pay a sum certain in money to the holder of the instrument.
A)True
B)False
Q4) An action taken by a person on behalf of another is called: A) agency.
B) negotiability.
C) representative capacity.
D) identification of principal.
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Chapter 28: Transfers of Negotiable Instruments and
Warranties of Parties
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Sample Questions
Q1) If an instrument is payable to bearer,it can be negotiated by transfer of possession alone.
A)True
B)False
Q2) An ordinary holder of an instrument has immunity from certain defenses that might have been asserted against the transferor.
A)True
B)False
Q3) When a negotiable instrument is transferred by negotiation,the transferee becomes a holder in due course.
A)True
B)False
Q4) An instrument can be delivered by constructive delivery,in which the transferee has exclusive access to the instrument.
A)True
B)False
Q5) Order paper is negotiated by the indorsement of the holder only.
A)True
B)False
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Chapter 29: Liability of the Parties Under Negotiable Instruments
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Q1) Isidro issued a negotiable promissory note to his attorney in return for the attorney's promise to perform legal services.The attorney never rendered the legal services but quickly negotiated the note to Anna,a holder in due course.Anna and Mark were involved in business negotiations and Anna offered to purchase a car from Mark.She offered as part payment for the car the note issued by Isidro.By coincidence,Mark knew both Isidro and the attorney and the facts concerning the note and the unperformed legal services.Despite this,Mark accepted a negotiation of the note from Anna.Isidro refused to pay the note and Mark eventually sued Isidro to collect.What is the probable outcome?
Q2) A negotiable promissory note was issued by Gold.It was properly issued in all ways.Nevertheless,the payee managed to alter the note and raise the amount from $500 to $5,000.A holder in due course presented the note for payment to Gold who discovered the alteration.In this case:
A) Gold is liable for $500 only.
B) Gold is liable for the full $5,000.
C) Gold has no liability on the altered note.
D) Gold is liable for $2,500.
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Chapter 30: Checks and Funds Transfers
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Q1) A written stop payment order or confirmation is effective for:
A) fourteen (14)days.
B) thirty (30)days.
C) six (6)months.
D) one (1)year.
Q2) In theory,a valid check can be written on a cocktail napkin.
A)True B)False
Q3) A consumer who notifies the issuer of an EFT card within two (2)days after learning of a loss or theft of the card is limited to a maximum liability of:
A) $500.
B) $50.
C) There is no liability limitation in this situation.
D) There is no liability in this situation.
Q4) Postdating a check changes the check from a demand draft to a time draft. A)True B)False
Q5) The drawer of a check is always a bank. A)True B)False
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Chapter 31: Nature of the Debtor Creditor Relationship
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Q1) A letter of credit must be in writing and signed by the issuer.
A)True
B)False
Q2) A letter of credit: ______.
A) is an advance arrangement for financing.
B) is used only in domestic sales.
C) involves only two parties.
D) is used only in international sales.
Q3) Letters of credit are a two-party agreement used for financing.
A)True
B)False
Q4) Which of the following is not a suretyship defense?
A) statute of limitations
B) performance of the obligation by the principal debtor
C) creditor substitution of the original debtor with a new one
D) insolvency of bankruptcy of the principal debtor
Q5) An issuer in a letter of credit transaction has an obligation to assure that the goods sold by the seller in fact conform to the contract.
A)True
B)False
33
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Chapter 32: Consumer Protection
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Q1) An unsolicited distribution of credit cards to persons who have not applied for them is:
A) always allowed.
B) voidable.
C) illegal.
D) only allowed if the recipient is at least 21 years old.
Q2) A finance company may not reject an loan applicant on any of the grounds listed below,except:
A) the applicant is married.
B) the applicant is sixty-five or older.
C) the applicant is divorced.
D) the applicant is on a fixed income.
Q3) A consumer claiming that there has been a violation of a consumer protection statute has the burden of proving that the statutory definition of "consumer" has been satisfied.
A)True B)False
Q4) Consumer protection even protects a consumer from the consumer's own negligence.
A)True
B)False
Chapter 33: Secured Transactions in Personal Property
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Q1) Claim in a changing or shifting stock of the buyer's goods is known as after-acquired goods.
A)True
B)False
Q2) A security interest is like a lien on personal property that allows the creditor to take possession of the property if the debtor defaults.
A)True
B)False
Q3) Suppose Harvey is a secured creditor and Joe is the debtor.If Harvey sells the collateral because Joe defaulted,Joe is not liable for any deficiency.
A)True
B)False
Q4) A security agreement must be backed by a written record even if the creditor has possession of the collateral.
A)True
B)False
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Page 35
Chapter 34: Bankruptcy
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Q1) If there are twelve (12)or more creditors,at least __________ of those creditors whose unsecured and undisputed claims total __________ or more must sign the involuntary petition.
A) one (1); $14,425
B) three (3); $15,325
C) one (1); $15,575
D) three (3); $15,575
Q2) By operation of law,the trustee automatically becomes the owner of all of the debtor's property in excess of the property to which the debtor is entitled under exemption laws.
A)True
B)False
Q3) A debtor is presumed to be insolvent on and during what number of days immediately preceding the date of the filing of a bankruptcy petition?
A) 30
B) 60
C) 90
D) 120
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Chapter 35: Insurance
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Q1) An incontestability clause gives insurance companies a statutory period of time to pay the claims suffered by the insured.
A)True
B)False
Q2) An application for insurance: ______.
A) may be oral.
B) generally is attached to the policy and becomes a part of the insurance contract.
C) must be prepared by an attorney.
D) has no binding effect on the applicant.
Q3) An insurer who wrongfully refuses to defend the insured is liable for: ______.
A) breach of contract.
B) insurance fraud.
C) the tort of wrongful interference with contractual relations.
D) the tort of malicious prosecution.
Q4) To collect on property insurance,an insurable interest in the property must exist at the time that the loss is suffered.
A)True
B)False
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Chapter 36: Agency
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Q1) The scope of an agent's authority is always known by the third party.
A)True
B)False
Q2) When a principal dies,the agency is not terminated until the agent is notified of the principal's death.
A)True
B)False
Q3) A special agent is authorized by the principal to transact all affairs in connection with a particular type of business or trade or to transact all business at a certain place.
A)True
B)False
Q4) Ann was seriously ill and feared that she might lapse into a coma or somehow become unable to speak or act for herself in her medical emergency.She is aware that agents ordinarily lose their authority to act for principals who become mentally disabled.She nevertheless desires to have her husband Alberto make medical decisions and speak on her behalf.She is particularly concerned about existing on life support in a persistent and incurable vegetative state.Is there any action that she might take to enable Alberto to act for her?
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Chapter 37: Third Persons in Agency
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Q1) An owner ordinarily is not liable for harm caused a third person by the negligence of an employee of an independent contractor.
A)True
B)False
Q2) The fact that a tort or crime is committed by an employee imposes vicarious liability on an employer.
A)True
B)False
Q3) When a disclosed principal authorizes an agent's transaction with a third person,the principal and the third person may each sue the other in the event of a breach of the contract.
A)True
B)False
Q4) If an agent is sued for breach of implied warranty of authority by a third party,none of the following are defenses except: ______.
A) the agent acted in good faith.
B) the agent misunderstood the scope of authority.
C) the third party knew the agent was acting beyond her authority.
D) the agent had written authorization.
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Chapter 38: Regulation of Employment
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Q1) An employer is prohibited from requiring any documentation to determine a potential employee's work eligibility other than a driver's license and a social security card.
A)True
B)False
Q2) Any adversely affected person may challenge the validity of an OSHA in a U.S.Court of Appeals.
A)True
B)False
Q3) Which of the following categories of individuals are exempt from the minimum wage provisions of Fair Labor Standards Act (FLSA)?
A) executives
B) factory workers
C) full-time babysitters
D) housekeepers
Q4) An employee differs from an agent,who can make contracts with third persons on behalf of a principal.
A)True
B)False
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Chapter 39: Equal Employment Opportunity Law
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Q1) Religious societies may not grant hiring preferences to members of their religion.
A)True
B)False
Q2) Title VII permits the EEOC to sue employers directly when it has reasonable cause to believe that intentional discrimination was the defendant employer's "standard operating procedure."
A)True
B)False
Q3) A plaintiff in a Title VII lawsuit must belong to a protected class.
A)True
B)False
Q4) Under the ______ theory,it is not a defense for an employer to demonstrate that it did not intend to discriminate.
A) Title VII
B) disparate treatment.
C) vicarious liability
D) disparate impact
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Chapter 40: Types of Business Organizations
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Q1) Who serve as agents of the corporation and run the "day-to-day" operations of the business?
A) officers
B) directors
C) shareholders
D) employees
Q2) Normally in a franchise operation: ______.
A) both the franchiser and the franchisee will be liable to third persons for contracts that are breached by the franchisee.
B) only the franchisor will be liable to third persons for contracts that are breached by the franchisee.
C) only the franchisee will be liable to third persons for contracts that are breached by the franchisee.
D) neither the franchisor nor the franchisee will be liable to third persons for contracts that are breached by the franchisee.
Q3) The death of a majority shareholder terminates a corporate enterprise.
A)True
B)False
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42
Chapter 41: Partnerships
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Q1) Under the UPA,partners hold title to firm property by tenancy in partnership.
A)True B)False
Q2) All states except New York have adopted either the UPA or the RUPA.
The Uniform Partnership Act,a codification of partnership law,has been adopted by 49 states.
A)True B)False
Q3) Each partner has to a right to do all of the following without a partnership vote except: ______.
A) take an equal part in transacting the business of the firm.
B) receive compensation for any work done for the partnership.
C) sell the firm's goods in the regular course of business.
D) borrow money for firm purposes.
Q4) Partnership property may consist of:
A) real property only.
B) personal property only.
C) any and all property acquired by the partnership.
D) all property contributed by the partners or acquired for the firm or with its funds.
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Chapter 42: LPs, LLCs, and LLPs
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Q1) In a limited partnership,limited partners are not responsible for the debts of the firm if they engage in management activities.
A)True
B)False
Q2) LLC promoters can 'shake hands' and form an LLC.
A)True
B)False
Q3) An LLC may be formed without filing formal articles of organization with the secretary of state.
A)True
B)False
Q4) Limited partners may contribute only cash as their capital contributions.
A)True
B)False
Q5) When no LP certificate is filed,what is the result?
A) Only limited partners are fully liable.
B) Only general partners are fully liable.
C) Limited partners retain their limited liability.
D) Both general and limited partners are fully liable.
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Chapter 43: Corporate Formation
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Q1) Corporations come into existence as the result of the activities of one or more persons known as promoters.
A)True
B)False
Q2) For the purpose of suing a corporation in federal court,the corporation is a citizen in the state where it has its principal place of business.
A)True
B)False
Q3) In a merger situation,what is the right of a dissenting shareholder?
A) to block the merger until satisfied regarding its terms.
B) to have their shares appraised and purchased by the corporation.
C) to enforce a consolidation instead of a merger.
D) dissenting shareholders have no rights with respect to a merger.
Q4) B-Corporations are for-profit corporations that create public benefits while providing economic returns to their investors.
A)True B)False
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Chapter 44: Shareholder Rights in Corporations
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Q1) Manis owns 100 shares of stock of the Linquist Corporation.She sells her stock to Sosnik and delivers to him: (1)her stock certificate for 100 shares and (2)a written,signed assignment of the 100 shares to Sosnik.The assignment form printed on the back of the share certificate is left blank and is not signed.Sosnik refuses to take the certificate and the assignment on the ground that Manis must fill in and sign the assignment form on the stock certificate to make the transfer of stock effective.Is he correct?
Q2) To correctly transfer shares of stock,a physical delivery from the owner of the shares directly to the transferee is required.
A)True
B)False
Q3) Another term for par value is book value.
A)True
B)False
Q4) If a share certificate is lost,destroyed,or stolen,the ownership of the shareholder is destroyed.
A)True
B)False
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Chapter 45: Securities Regulation
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Q1) Rule 10b-5 only applies to registered securities not sold in interstate commerce.
A)True
B)False
Q2) The Sarbanes-Oxley Act of 2002 contains a "clawback provision" which requires the CEO and CFO to reimburse the issuer for any bonus or incentive-based compensation received during the 12-month period following the issuance of the restated financial statements.
A)True
B)False
Q3) Which of the following acts was passed to ensure that public shareholders faced with a cash tender offer would not be required to respond without sufficient information?
A) the Mann Act
B) the Robinson-Patman Act
C) the Williams Act
D) the SEC Act
Q4) The Securities Act of 1933 prohibits "bad investment" offerings to the public.
A)True
B)False
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Chapter 46: Accountants' Liability and Malpractice
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Q1) Horseco,a new business,purchased ten thoroughbred horses for racing and breeding purposes.It hired John,an accountant,to prepare financial projections of anticipated future earnings for the first five (5)years of the new business.The information provided to John as the basis for the projections included assumptions made by Horseco about anticipated earnings from racing and breeding.The assumptions were based on Horseco's experience and were not based on objective standards that could be examined by John.John included with the projections a disclaimer that stated that the income projections were based on assumptions provided by Horseco and that John assumed no personal responsibility for the accuracy of those projections.Subsequently,the Larson Company purchased a fifty (50)percent interest in Horseco,and when Horseco's income did not match the projections,Larson sued John for accounting malpractice.How will the court decide?
Q2) Breach of contract remedies are available to third parties against accountants because they are ordinarily considered third-party beneficiaries of contracts with accountants.
A)True
B)False
Q3) Disclaimers are not enforceable unless they are clear and unambiguous.
A)True
B)False
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Chapter 47: Management of Corporations
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Q1) Under the responsible corporate officer doctrine officers and directors are not personally responsible for crimes they have committed when it can be demonstrated that in carrying out such crimes,they acted on behalf of the corporation.
A)True
B)False
Q2) Shareholders indirectly determine the management policies of the business.
A)True
B)False
Q3) Directors are usually allowed to vote by proxy.
A)True
B)False
Q4) Extraordinary matters requiring shareholder votes include all of the following except: ______.
A) sale of corporate assets outside the regular course of business.
B) amendment of bylaws.
C) corporate mergers.
D) corporate dissolution.
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Page 49
Chapter 48: Real Property
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Q1) A personal,revocable privilege to perform an act or series of acts upon the land of another is called a(n): ______.
A) easement.
B) tenement.
C) license.
D) lien.
Q2) A deed is not necessary to transfer title to land when the land is a gift.
A)True
B)False
Q3) Tucker and Hankey were adjoining property owners.Tucker claimed that the fence separating their properties was not located properly and that it should be moved back onto Hankey's land.Hankey claimed that he owned the strip between the fence and the alleged boundary line by adverse possession.He proved that for forty (40)years there had been on the strip in question a barn with a cement floor,which had been built by the person from whom he purchased his land,and that he had been told by the former owner that the fence was the boundary line.The fence consisted of five-foot-high barbed wire set in cement.Did Hankey own the strip by adverse possession?
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Page 50
Chapter 49: Environmental Law and Land Use Controls
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Q1) It is probable that a zoning variance would be granted:
A) even though many of the neighboring property owners object.
B) on the grounds of hardship, regardless of who created the hardship.
C) to an outside advertiser to build a billboard.
D) when the desired use of the land is in harmony with the general nature of the surrounding areas.
Q2) Those affected by a nuisance are entitled to damages for the loss of the use of the land or for harm that is caused by the nuisance.
A)True
B)False
Q3) Under the Clean Water Act,the EPA has developed effluent guidelines,which are ranges for discharges organized according to industrial groups and for specific plants in each of these groups.
A)True
B)False
Q4) When the desired use of land is in harmony with the general nature of surrounding areas,a zoning variance is usually granted.
A)True
B)False
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Chapter 50: Leases
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Q1) A landlord is not liable to the tenant for crimes committed on the premises by third persons,unless they are reasonably foreseeable.
A)True
B)False
Q2) An express promise by a landlord to not disturb the tenant's possession of the land is known as the covenant of: __________.
A) domesticity.
B) tranquil possession.
C) quiet enjoyment.
D) unfettered use.
Q3) The covenant of quiet enjoyment imposes liability on the landlord for the unlawful acts of third persons.
A)True
B)False
Q4) The lessor has the right to the exclusive possession of the premises during the term of the lease.
A)True
B)False
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Chapter 51: Decedents' Estates and Trusts
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Q1) A will may be contested on any of the following grounds except: __________.
A) lack of mental capacity of the testator.
B) undue influence, duress, or mistake.
C) forgery.
D) appointment of a personal representative.
Q2) A written will must be signed by the testator at the bottom or end of the will.
A)True
B)False
Q3) The beneficiaries of a decedent are paid prior to debts.
A)True
B)False
Q4) Eccentric behavior means that the testator cannot have testamentary capacity.
A)True
B)False
Q5) Which of the following is an incorrect statement concerning trusts?
A) The trustee has legal title to the corpus.
B) The beneficiary has equitable title to or beneficial interest in the corpus.
C) Generally, a beneficiary may not transfer his or her interest in the trust.
D) A trustee cannot delegate the performance of personal duties.
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