Business Organizations Law
Test Bank
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, and corporations. The course examines topics such as agency relationships, fiduciary duties of directors and officers, shareholder rights, financing, mergers and acquisitions, and regulatory compliance. Through the analysis of statutes, landmark cases, and real-world scenarios, students will gain a foundational understanding of how legal frameworks support business decision-making and address the rights and responsibilities of organizational participants.
Recommended Textbook
Andersons Business Law and the Legal Environment 22nd Edition by David P. Twomey
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2754 Verified Questions
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Page 2
Chapter 1: The Nature and Sources of Law
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Sample Questions
Q1) A constitution is a body of principles that establishes the structure of a government and the relationship of that government to the people who are governed.
A)True
B)False
Answer: True
Q2) Case law consists of the rules and regulations parties agree to as part of their contractual relationship.
A)True
B)False
Answer: False
Q3) The right of privacy does not apply to intrusions into our privacy by means of new technology.
A)True
B)False
Answer: False
Q4) Law is often defined as the body of principles that courts will enforce.
A)True
B)False
Answer: True
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Chapter 2: The Court System and Dispute Resolution
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Sample Questions
Q1) Original jurisdiction courts are generally ____________.
A) supreme courts
B) appellate courts
C) trial courts
D) limited courts
Answer: C
Q2) In a minitrial:
A) only three jurors are used.
B) the trial addresses only portions of the case or certain issues related to the case.
C) the decision is always fully binding on the parties.
D) none of the above.
Answer: B
Q3) If questions of fact are involved,the court will decide the case based on the pleadings alone.
A)True
B)False
Answer: False
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Chapter 3: Business Ethics, Social Forces, and the Law
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Sample Questions
Q1) Positive law:
A) is enacted by government authority.
B) ensures that businesses will follow a high level of ethical standards.
C) is also known as natural law.
D) all of the above.
Answer: A
Q2) Despite the importance of ethical behavior for business success,few Fortune 500 companies have codes of ethics to resolve ethical dilemmas.
A)True
B)False
Answer: False
Q3) "Primum non nocere" is Latin for:
A) Above all,do no harm.
B) Let the buyer beware.
C) Hear no evil,see no evil,and speak no evil.
D) No news is good news.
Answer: A
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Chapter 4: The Constitution As the Foundation of the Legal Environment
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Q1) Under the "bedrock view," the purpose of a constitution is to state certain fundamental principles for all time.
A)True
B)False
Q2) The powers given by the federal government to the states are described as delegated powers.
A)True
B)False
Q3) The U.S.Constitution is a document that:
A) is clear in allocating the rights and responsibilities of people and our government.
B) can be interpreted only according to the bedrock principles of 1776.
C) can be interpreted only in accordance with current values.
D) must be interpreted to accommodate both stability and flexibility.
Q4) Silence of Congress indicates that Congress is unwilling to make changes to an existing law.
A)True
B)False
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Chapter 5: Government Regulation of Competition and Prices
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Sample Questions
Q1) A violator of the Sherman Act may be subject to:
A) fine only.
B) imprisonment only.
C) both fine and imprisonment.
D) neither fine nor imprisonment.
Q2) The federal government may regulate any area of business to advance the nation's economic needs.
A)True
B)False
Q3) Unfair competition is controlled by:
A) statutes.
B) administrative agencies.
C) administrative regulations.
D) all of the above.
Q4) 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
Page 7
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Chapter 6: Administrative Agencies
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Sample Questions
Q1) An administrative agency is barred from examining the records of a business enterprise by the constitutional guarantee against unreasonable searches and seizures.
A)True
B)False
Q2) The modern administrative agency typically possesses legislative,executive,and judicial powers.
A)True
B)False
Q3) Members of administrative agencies are ordinarily
A) pre-selected.
B) elected.
C) assigned.
D) appointed.
Q4) If an agency causes a substantial loss to a business by enforcement of its laws,that business:
A) always can hold the agency liable for damages.
B) never can hold the agency liable for damages.
C) may seek damages if the agency acted in bad faith.
D) may seek damages if the agency complied with its own guidelines.
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Chapter 7: The Legal Environment of International Trade
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Q1) One reason the U.S.controls the export of goods and technology is:
A) for national security reason.
B) foreign policy.
C) short supply of domestic goods.
D) All of the above are reasons the U.S.controls the export of goods and techonolgy.
Q2) Blocking laws prohibit the disclosure,copying,inspection,or removal of documents located in the enacting country in compliance with orders from foreign authorities.
A)True
B)False
Q3) The U.S.dollar is considered the international currency.
A)True
B)False
Q4) The provisions of the United Nations Convention on Contracts for the International Sale of Goods (CISG)have been strongly influenced by:
A) the GATT's most-favored nation clause.
B) the European Economic Community's Treaty of Rome.
C) the Uniform Commercial Code.
D) the success of the Organization of Petroleum Exporting Companies.
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Page 9
Chapter 8: Crimes
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Sample Questions
Q1) Which of the following statements is true?
A) Felonies are punishable by a minimum of six months in prison.
B) Felonies involve white-collar crimes only.
C) Felonies are more serious than misdemeanors.
D) All of the above.
Q2) The criminal law of all states is the same because all states have adopted a uniform criminal code.
A)True
B)False
Q3) The Fifth Amendment to the United States Constitution's protection against self-incrimination applies to:
A) individuals only.
B) corporations only.
C) both individuals and corporations.
D) individuals,but only in their official capacity within a business.
Q4) Generally,misdemeanors are more serious than felonies.
A)True
B)False
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Page 10
Chapter 9: Torts
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Sample Questions
Q1) Oral or spoken defamation is:
A) slander.
B) libel.
C) privilege.
D) perjury.
Q2) When contributory negligence is proven,damages awarded as reduced based on the plaintiff's degree of fault.
A)True
B)False
Q3) A wrong that arises from a violation of a private duty is called a:
A) criminal action.
B) tort.
C) crime.
D) de mala.
Q4) A victim of a tort may sue and recover money damages.
A)True
B)False
Q5) The media enjoy a qualified privilege for stories that turn out to be false. A)True
B)False
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Chapter 10: Intellectual Property Rights
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Sample Questions
Q1) A trademark is any word,name,symbol,device,or combination of these used to identify a product.
A)True
B)False
Q2) To be patentable,an invention must be new and not obvious to a person of ordinary knowledge and skill in the art or technology to which the invention is related.
A)True
B)False
Q3) Protection for trade dress is available under the Lanham Act.
A)True
B)False
Q4) The Lanham Act grants protection for:
A) marks.
B) patents.
C) copyrights.
D) trade secrets.
Q5) Trademarks and service marks are recorded with the Register of Copyrights. A)True B)False
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Chapter 11: Cyberlaw
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Sample Questions
Q1) Employee e-mail is:
A) spontaneous.
B) candid.
C) discoverable.
D) all of the above.
Q2) __________ is a federal law that recognizes digital signatures as authentic for purposes of contract formation.
A) Cyber-sign
B) We-sign
C) Electra-sign
D) E-sign
Q3) Employees may waive their attorney-client privileges when using their work computers for communication.
A)True
B)False
Q4) Federal law now recognizes the validity of electronic signatures.
A)True
B)False
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Page 13
Chapter 12: Nature and Classes of Contracts: Contracting on
the Internet
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Sample Questions
Q1) With regard to a unilateral contract,the offeree does not accept the offer by express agreement,but rather by performance.
A)True
B)False
Q2) Only the parties who signed the original contract can have rights with respect to that contract.
A)True
B)False
Q3) An agreement that contemplates the performance of an act prohibited by law is usually void.
A)True
B)False
Q4) A contract under which one or both parties have not yet fully performed is termed a(n):
A) void agreement.
B) executory contract.
C) executive contract.
D) executed contract.
Page 14
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Chapter 13: Formation of Contracts: Offer and Acceptance
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Sample Questions
Q1) 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
Q2) If an offer requires that acceptance be communicated by a specific date and the acceptance is properly dispatched by the offeree on the final date,
A) no contract is formed,since the offeror will undoubtedly receive the dispatched acceptance after the deadline for acceptance.
B) a contract is formed,but the contract is voidable at the election of the offeror.
C) the acceptance is timely and a contract is formed,even though the offeror actually receives the acceptance well after the specified date has passed.
D) the acceptance is timely and a contract is formed,but only if the offeror actually receives the acceptance by the deadline specified for acceptance.
Q3) An acceptance must be absolute and unconditional.
A)True
B)False
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Chapter 14: Capacity and Genuine Assent
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Sample Questions
Q1) Ordinarily,every party to a contract is presumed to have contractual capacity until the contrary is shown.
A)True
B)False
Q2) A person who has drunk too much alcohol at a party and signs a contract may be able to rescind that contract.
A)True
B)False
Q3) As a general rule,the nondisclosure of information that is not asked for does not impose fraud liability or impair the validity of a contract.
A)True
B)False
Q4) Contractual capacity is the ability to:
A) read and write.
B) sign a written contract.
C) understand that a contract is being made and to understand its general nature.
D) understand the legal meaning of the contract being made.
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Chapter 15: Consideration
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Sample Questions
Q1) Courts will consider the adequacy of the consideration when:
A) one party clearly has the better of the deal.
B) one party has more business experience than the other.
C) one party claims to have been defrauded.
D) one party shows a much lower price nationally-advertised on television.
Q2) Ordinarily,a promise to perform an existing legal obligation is:
A) not consideration.
B) binding if the promisor promises to perform with extra care.
C) binding if the promisor promises to perform to suit the personal satisfaction of the promisee.
D) binding if the promisee would experience substantial loss due to breach of the promise.
Q3) 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
Q4) Consideration is the bargained-for exchange between the parties to a contract.
A)True
B)False
Page 17
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Chapter 16: Legality and Public Policy
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Sample Questions
Q1) Courts are quick to invalidate contracts on the ground that they are contrary to public policy because such contracts are so offensive to society.
A)True
B)False
Q2) Agreements that are illegal are:
A) enforceable if one party acted in good faith.
B) voidable by one of the parties.
C) void.
D) voidable by either party.
Q3) One element involved in the determination of unconscionability is:
A) the comparative bargaining power of the parties.
B) the opportunity to make a contract for better terms with someone else.
C) the course of the economy after the contract is made.
D) whether a loss will be sustained by performance of the contract.
Q4) Which of the following is not illegal?
A) an office football "pool" with a cash entry fee and cash prize
B) a raffle with an entry fee to win a car
C) a "giveaway" to every tenth person who buys meat at a butcher shop
D) a "giveaway" to every tenth person entering a department store
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Chapter 17: Writing, Electronic Forms, and Interpretation of Contracts
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Sample Questions
Q1) An oral contract containing a promise by an executor to pay estate debts from estate funds is:
A) binding.
B) voidable by the executor or administrator.
C) enforceable against the executor only if the executor signs written proof of the agreement.
D) enforceable against the other contracting party only if that party signs a written agreement.
Q2) A father's oral promise to his daughter and her fiancée made in consideration of their contemplated marriage is binding when made in the course of a serious discussion.
A)True
B)False
Q3) A person who is prevented from enforcing a contract because of the statute of frauds also is prevented from recovering the value of services,property,or money furnished the other party to the oral contract.
A)True B)False
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Chapter 18: Third Persons and Contracts
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Q1) Unless language or circumstances indicate the contrary,a general assignment is:
A) a transfer of property only.
B) both a transfer of rights and a delegation of duties.
C) a delegation of duties only.
D) a transfer of rights only.
Q2) An assignment is valid only if:
A) it is in a particular form.
B) it is written.
C) there is a manifestation of the intent to assign.
D) the assignment is paid for by the assignee.
Q3) Generally,an assignment may be in any form.
A)True
B)False
Q4) An assignment:
A) is a contract.
B) requires consideration.
C) is a transfer of rights.
D) is not enforceable.
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Chapter 19: Discharge of Contracts
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Q1) To avoid litigation over impossibility and impracticability issues,modern contracting parties often contract around the doctrine of impossibility,specifying the failures that will excuse performance in their contracts.The clauses in which they do this are called __________ clauses,and they are generally enforced by courts as written.
A) delta force
B) force majeure
C) magnum force
D) force corporeal
Q2) If the parties to a contract agree to undo the agreement and return any consideration involved,the contract is discharged by:
A) mutual cancellation
B) mutual rescission.
C) novation
D) accord and satisfaction
Q3) A contract to build a house is deemed performed when:
A) there has been substantial performance of the contract.
B) the house is approved by the city housing inspectors.
C) the house is approved by the owner's architect.
D) the house is approved by the owner.
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Chapter 20: Breach of Contract and Remedies
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Sample Questions
Q1) Between experienced businesspersons,exculpatory clauses are generally:
A) voidable.
B) void.
C) valid.
D) unenforceable.
Q2) An injured party that does not suffer an actual loss from the breach of a contract is entitled to nominal damages.
A)True
B)False
Q3) Consequential damages are those that necessarily flow from the breach.
A)True
B)False
Q4) If a plaintiff seeking damages in a breach of contract action receives $1 in damages,the damages would most likely be classified as:
A) punitive damages.
B) exemplary damages.
C) nominal damages.
D) compensatory damages.
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Page 22
Chapter 21: Personal Property and Bailments
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Q1) Humberto called his friend John and asked him to come over immediately because Humberto had suffered a stroke and might be dying.In their telephone conversation,Humberto advised John that he wanted to give John his gold watch.Immediately after their telephone conversation,Humberto wrote out a will that left his share in Blackacre to John.Blackacre was the marital home of Humberto and Connie,who owned the home as tenants by the entirety.Humberto died before John arrived at Blackacre.John claims the watch and a share in the home.Connie contests both matters.Decide.
Q2) The bailor must both inform the bailee of known defects and make a reasonable investigation to discover defects in a:
A)mutual benefit bailment.
B) Bailment for the sole benefit of the bailee.
C) both a.and b.
D) neither a.nor b.
Q3) At common law,a tenancy by entirety or a tenancy by the entireties is created when property is transferred to both husband and wife.
A)True
B)False
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Page 23
Chapter 22: Legal Aspects of Supply Chain Management
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Q1) In most states,statutes limit or provide a method of limiting the common law liability of a hotelkeeper.
A)True
B)False
Q2) The relationship of guest and hotelkeeper ends when the guest:
A) pays his or her bill.
B) advises the hotelkeeper of his or her departure .
C) leaves or ceases to be a transient.
D) has stayed for 30 days and becomes a boarder.
Q3) Jeff purchased in good faith a warehouse receipt for 1,000 pairs of running shoes without notice of any defense to it,for value,and in the regular course of his business.Unknown to Jeff,the goods had been stolen from Jane and delivered to the warehouse that issued the receipt purchased by Jeff.Which of the following statements is true?
A) Jeff holds a duly negotiated document of title and is not subject to Jane's title.
B) Jane is entitled to the goods and will prevail over Jeff.
C) Jeff is not a holder of a duly negotiated document.
D) Jane cannot recover the goods but can sue the warehouse for conversion.
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Chapter 23: Nature and Form of Sales
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Q1) To satisfy the statute of frauds,the writing must be signed and must include the price of the goods.
A)True
B)False
Q2) A writing that is offered to satisfy the statute of frauds must have been written for that purpose.
A)True
B)False
Q3) The parol evidence rule does not apply to the sale of goods.
A)True
B)False
Q4) When the price of the goods is $500 or more,a writing signed by the defendant is required in all cases.
A)True
B)False
Q5) Which of the following is not a sale of goods?
A) a bailment
B) an option to purchase
C) a gift
D) all of the above
25
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Chapter 24: Title and Risk of Loss
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Questions
Q1) When particular goods have been selected by either the buyer or the seller,or both,as being the goods called for by the sales contract,the goods are said to be
A) identified.
B) actualized.
C) realized.
D) materialized.
Q2) If shipped goods are damaged or destroyed after risk of loss passes: A) the contract is avoided
B) the seller has breached the contract
C) the buyer has the option to accept or not accept the goods
D) it is the buyer's loss
Q3) Once goods in a contract have been identified the buyer holds an insurable interest in them.
A)True
B)False
Q4) If a seller under a shipment contract sends nonconforming goods,the risk of loss in transit is on the buyer.
A)True
B)False
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Chapter 25: Product Liability: Warranties and Torts
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Q1) An auto manufacturer is excused from liability if it can be shown the defect was in a component part purchased from a manufacturer.
A)True
B)False
Q2) The requirement of privity of contract to allow recovery in a sales contract has been widely rejected.
A)True B)False
Q3) Whenever a sale of goods is made,certain warranties are implied unless they are expressly excluded.
A)True
B)False
Q4) A warranty is limited if:
A) only the original buyer is covered by the warranty.
B) the buyer must pay any cost for repair or replacement of a defective product.
C) it covers only part of the product purchased.
D) all of the above.
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Chapter 26: Obligations and Performance
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Q1) An acceptance of goods can be done either expressly or by implication.
A)True
B)False
Q2) If adequate assurance of performance is not given within five (5)business days from the time of the demand for assurance,the demanding party may treat the contract as repudiated.
A)True
B)False
Q3) In a cash sale not requiring the movement of goods,each party has the right to demand that the other perform at the same time.
A)True
B)False
Q4) The person on whom a demand for assurance is made must reply in writing for the assurance to be deemed "adequate."
A)True
B)False
Q5) The UCC does not specify the form that the assurance of performance is to take.
A)True
B)False
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Chapter 27: Remedies for Breach of Sales Contracts
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Q1) In the absence of an agreement for the extension of credit to the buyer for the purchase of goods,and until the buyer pays for the goods or performs whatever actions the contract requires,the seller has the right to retain possession of the goods.
A)True
B)False
Q2) A buyer may reject the goods or revoke the acceptance for any defects in the goods.
A)True
B)False
Q3) The tort statutes of limitations tend to be __________the UCC statute of limitations.
A) shorter than B) longer than C) equal to D) excluded by
Q4) Under both the CISG and the UCC,a buyer may reject goods only if the tender of the goods is a fundamental breach of the contract.
A)True
B)False
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Chapter 28: Kinds of Instruments, parties, and Negotiability
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Q1) George was the maker of a written promissory note that stated that $500 would be paid on the sale of George's automobile.George initialed the note instead of writing his full name.The promissory note stated that it would be payable six months from the date.The promissory note was not dated.You now have come into possession of this note.Is this note negotiable? Discuss the elements of negotiability and whether each one has been met.
Q2) A payee has no rights in an instrument until:
A) the drawer or the maker has delivered the instrument to the payee.
B) an acceptor has been established.
C) an accommodation party has signed the instrument.
D) a guarantor has signed the instrument.
Q3) A promissory note that is payable "on the date of my marriage" is nonnegotiable even if the maker of the note marries.
A)True
B)False
Q4) In a negotiable instrument,the promise or order to pay must be unconditional.
A)True
B)False
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Page 30
Chapter 29: Transfers of Negotiable Instruments and
Warranties of Parties
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Q1) The warranties made by an unqualified indorser guarantee that payment of the instrument will be made.
A)True
B)False
Q2) If an instrument bears a restrictive indorsement,any further transfer or negotiation is effectively barred.
A)True
B)False
Q3) Order paper is negotiated by the indorsement of the holder and delivery.
A)True
B)False
Q4) An indorsement "for deposit only" is:
A) restrictive.
B) qualified.
C) special.
D) blank.
Q5) The transfer and collection of negotiable instruments between banks requires specific indorsements.
A)True
B)False
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Chapter 30: Liability of the Parties Under Negotiable Instruments
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Q1) Which of the following is not a universal defense available against all holders?
A) fraud as to the nature or essential terms of the instrument
B) forgery or lack of authority
C) fraud in the inducement
D) duress depriving control
Q2) Value is similar to consideration..
A)True
B)False
Q3) A person cannot become a holder through a holder in due course unless that person satisfies the requirements for holder in due course status.
A)True
B)False
Q4) An altered instrument can be enforced according to its original terms.
A)True
B)False
Q5) For a change to constitute an alteration,the person making the change must be a party to the instrument.
A)True
B)False
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Chapter 31: Checks and Funds Transfers
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Q1) The liability for losses on counterfeit checks depends on:
A) whether or not the bank acted reasonably in its processing systems in clearing the checks.
B) whether or not the bank complied with time requirements for customers regarding the checks.
C) both a.and b.
D) none of the above.
Q2) A check is a particular kind of draft.
A)True
B)False
Q3) When a bank certifies a check,the amount involved in the certification will be retained in the depositor's account until payment of the certified check.
A)True
B)False
Q4) A forged endorsement must be reported within one year of the time that the bank statement is received.
A)True
B)False
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Chapter 32: Nature of the Debtor-Creditor Relationship
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Q1) The issuer of a letter of credit is in effect the obligor on a third-party beneficiary contract made for the benefit of the beneficiary of the letter.
A)True
B)False
Q2) Contribution is the right of a co-obligator to demand that other obligator(s)pay their fair share of the debt.
A)True
B)False
Q3) When a surety pays a debt that it is obligated to pay,it automatically acquires the claim and the rights of the creditor through:
A) assignment.
B) exoneration.
C) subrogation. D) default.
Q4) Howard bought goods from Williams.Howard sent Williams a draft covered by a letter of credit issued by First National Bank.Is the bank required to investigate to determine whether the goods sent by Williams conform to the contract?
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34
Chapter 33: Consumer Protection
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Q1) Consumer protection even protects a consumer from the consumer's own negligence.
A)True
B)False
Q2) Consumer protection laws,which commonly regulate the form of consumer contracts,provide that back-page disclaimers are void if the front page of a contract does not call attention to the presence of the terms on the back page.
A)True
B)False
Q3) It is lawful to refuse to extend credit to a consumer based on the consumer's:
A) race.
B) marital status.
C) credit history.
D) age.
Q4) Pursuant to the Credit Repair Organization Act of 1996,credit repair organizations must be "non-profit."
A)True
B)False
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Page 35
Chapter 34: Secured Transactions in Personal Property
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Q1) When there are two perfected secured creditors in the same collateral:
A) priority goes to the creditor who perfected first.
B) priority goes to the creditor who is owed the greatest amount of money.
C) each perfected secured creditor has a 50% interest in the collateral.
D) Both perfected secured creditors are treated like unsecured creditors in regards to the collateral.
Q2) An after-acquired property clause in a consumer security agreement can cover only goods acquired by the debtor within thirty (30)days after the creditor gave value to the debtor.
A)True
B)False
Q3) A security agreement must be backed by a written record even if the creditor has possession of the collateral.
A)True
B)False
Q4) A security interest gives a creditor the same protection than is afforded by a right to sue on the debt.
A)True B)False
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Chapter 35: Bankruptcy
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Q1) A court can dismiss an individual debtor's petition if the debtor does not satisfy the means test.
A)True B)False
Q2) A debtor may recover damages against any creditor who filed a bankruptcy petition in bad faith.
A)True B)False
Q3) An automatic stay:
A) arises only upon the filing of a voluntary petition.
B) prevents any further interest from accruing on a debtor's outstanding debts.
C) prevents creditors from taking action outside of the bankruptcy proceeding against a debtor.
D) ends if a debtor attempts to incur additional debt after a petition has been filed.
Q4) All debts are discharged in bankruptcy,whether disclosed by the debtor or not. A)True B)False
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Chapter 36: Insurance
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Q1) If a man names his wife as beneficiary of his life insurance and the two are thereafter divorced,the insurance policy:
A) is canceled automatically.
B) is not affected.
C) is divided into two policies on the life of each for one-half the amount of the original policy.
D) becomes the property of the former wife.
Q2) What is a correct statement concerning burden of proof?
A) The insured has the burden of proving that the loss was a covered loss.
B) The insurer has the burden of proving that the loss was not covered.
C) Exceptions to coverage are liberally interpreted in favor of the insurer.
D) Exceptions to coverage are disregarded in life insurance matters.
Q3) Subornation is the right of a party secondarily liable to stand in the place of the creditor after making payment to the creditor and to enforce the creditor's right against the party primarily liable in order to obtain indemnity from such primary party.
A)True
B)False
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Chapter 37: Agency
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Q1) An agent is distinguished from an ordinary employee in that employees are hired to represent the employer in dealings with third persons.
A)True
B)False
Q2) Which of the following is true?
A) An agent has the power to contract on behalf of a principal.
B) An employee generally does not have the power to contract on behalf of the employer.
C) An independent contractor controls the work he or she performs.
D) All of the above are true.
Q3) It is the duty of an agent to act with the care that:
A) the principal would exercise under the circumstances.
B) a reasonable principal would exercise under the circumstances.
C) a reasonable juror would exercise under the circumstances.
D) a reasonable person would exercise under the circumstances.
Q4) A principal may ratify an action taken by an agent that the principal would not have been capable of authorizing at the time that the action was taken.
A)True
B)False
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Chapter 38: Third Persons in Agency
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Q1) If an agent makes a properly authorized contract with a third person on behalf of a disclosed principal,the agent has no personal liability on the contract.
A)True
B)False
Q2) The employer of a salesperson:
A) is only bound by a contract if the employee is acting as a soliciting agent.
B) is not bound by a contract if the employee is acting as a contracting agent.
C) is not bound by a contract until the contract is accepted.
D) is always bound by contracts made by all employee salespersons.
Q3) In which of the following scenarios is the agent exposed to the greatest risk of liability?
A) disclosed principal and authorized contract
B) undisclosed principal and authorized contract
C) partially disclosed principal and authorized contract
D) authorized receipt of money from third person remitted to disclosed principal
Q4) Modern law holds that an employer is liable for an intentional tort committed by an employee for the purpose of furthering the employer's business.
A)True
B)False
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Chapter 39: Regulation of Employment
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Q1) The rights of an employee to be compensated are governed primarily by the same principles that apply to the compensation of a(n):
A) partner.
B) stockholder.
C) agent.
D) independent contractor.
Q2) "Permissive" subjects of bargaining include seniority provisions,promotions,layoff and recall provisions,no-strike no-lockout clauses,and grievance procedures.
A)True
B)False
Q3) The Federal __________ Act makes it unlawful to intercept oral and electronic communications and provides for __________ against the violator.
A) Wiretapping;civil damages
B) Wiretapping;criminal liability and civil damages
C) Homeland Security;civil damages
D) Homeland Security;criminal liability and civil damages
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Chapter 40: Equal Employment Opportunity Law
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Q1) Title VII of the Civil Rights Act of 1964 applies to:
A) the hiring process.
B) discipline.
C) discharge
D) all of the above.
Q2) A disparate impact exists when an employer's facially neutral employment practices have a significantly adverse impact on a protected group and the practice is not shown to be job-related and necessary.
A)True
B)False
Q3) Which of the following scenarios would not qualify as a bona fide occupational qualification exception to Title VII?
A) a religious school hiring only members of that religion to teach religion
B) a women's store that sells wedding gowns hiring only women to measure and fit customers
C) an airline hiring only female flight attendants
D) all of the above scenarios would qualify as a bona fide occupational qualification exception to Title VII.
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Chapter 41: Types of Business Organizations
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Q1) A corporation must have at least two shareholders.
A)True
B)False
Q2) A limited liability company is treated like a partnership under federal tax law and has the limited liability feature of corporations.
A)True
B)False
Q3) In a corporation,a large number of investors may pool their assets to finance a large business enterprise.
A)True
B)False
Q4) An arrangement in which the owner of a trademark licenses others,under specified conditions or limitations,to use the trademark in purveying goods or services is a(n):
A) corporation.
B) limited partnership.
C) unincorporated association.
D) none of the above.
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Chapter 42: Partnerships
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Q1) Robertson and Enrickson prepared an agreement to enter into a partnership.Both of the partners realized that outside capital was needed for the firm to begin operations;however,they also realized that their individual and combined credit ratings would not attract sufficient funds.In order to improve the new partnership's ability to attract investment capital,and with the approval of Enrickson,Robertson added his friend Thompson's name to the partnership agreement.Thompson,a well-known personality from a family of means,was not asked to be a partner and knew nothing of Robertson's and Enrickson's actions.Upon seeing Thompson's name on the partnership agreement,a local bank readily agreed to advance Robertson and Enrickson the total sum required to begin operations.The partnership has now failed,and the bank would like to hold Thompson,Robertson and Enrickson liable for the amount of the loan.Will the bank recover from Thompson,Robertson and Enrickson?
Q2) In order to satisfy the statute of frauds,all partnership agreements must be in writing.
A)True
B)False
Q3) Each partner is an agent of the partnership.
A)True
B)False
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Page 44
Chapter 43: LPs, LLCs, and LLPs
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Q1) A limited liability company is identical to a Subchapter S corporation.
A)True
B)False
Q2) Limited liability partnership statues are designed to permit the conversion of existing general partnerships into limited liability partnerships.
A)True
B)False
Q3) Both general partnerships and limited partnerships are created only through the process of executing a certificate.
A)True
B)False
Q4) A limited partner can never lose money.
A)True
B)False
Q5) All owners of a limited liability company are known as officers.
A)True
B)False
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Page 45
Chapter 44: Corporate Formation
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Questions
Q1) Osvaldo was attempting to promote a corporation to be named Xavier,Inc.In that capacity,Osvaldo signed a lease in the name of Xavier and ordered furniture in the company's name.The corporation was in fact formed and the board of directors,knowing of the actions of Osvaldo,moved into the space Osvaldo had leased.Upon delivery and inspection of the furniture Osvaldo ordered,numerous defects were discovered,and the furniture was accordingly rejected and returned to the seller.The corporation was not successful,and as a result,the rent was not paid.Osvaldo was sued for the unpaid rent and for breach of contract concerning the furniture.The corporation was sued on the same grounds.Decide the cases against Osvaldo and Xavier,Inc.
Q2) What is not a correct statement concerning promoters?
A) Promoters are generally active before the corporation is formed.
B) Two (2)or more promoters are required to form a corporation.
C) Promoters are fiduciaries with respect to the corporation and its shareholders.
D) Promoters are liable for any torts that they commit while promoting the corporation.
Q3) A corporation may exercise its power to borrow money by issuing bonds.
A)True
B)False
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Page 46
Chapter 45: Shareholder Rights in Corporations
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Q1) A shareholder does not:
A) qualify as a member of the corporation.
B) own any specific property of the corporation.
C) have a fractional interest in the total property of the corporation.
D) all of the above.
Q2) A provision giving a corporation the right to purchase a shareholder's shares on the death of the shareholder is invalid.
A)True
B)False
Q3) The two most common instruments used to provide the capital structure of a corporation are stocks and bonds.
A)True
B)False
Q4) To correctly transfer shares of stock,a delivery from the owner of the shares directly to the transferee is required.
A)True
B)False
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Chapter 46: Securities Regulation
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Q1) A prospectus sets forth the key information contained in the registration statement.
A)True
B)False
Q2) An investment contract exists if which of the following elements are present?
A) an investment of money
B) a common enterprise
C) an expectation of future profits
D) all of the above
Q3) Investors who lack inside information and have sold their stock during the relevant time period may recover damages from insiders who have made use of the undisclosed information.
A)True
B)False
Q4) Under Regulation D,Rule 506,sales may be made to:
A) an unlimited number of accredited investors
B) an unlimited number of unaccredited investors
C) no more than 500 accredited investors
D) no more than 35 unaccredited investors
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Chapter 47: Accountants Liability and Malpractice
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Q1) The privity rule:
A) allows for an accountant's client to recover from an accountant in a negligence malpractice suit.
B) allows for a third part to recover from an accountant in a negligence malpractice suit.
C) both a.and b.
D) neither a.nor b.
Q2) Which of the following statements is true?
A) Auditors are always eligible for whistleblower awards.
B) Auditors are only eligible for whistleblower awards if they report information to the board of directors and the board fails to take action.
C) Auditors are only eligible for whistleblower awards if they report conduct by a company that is intended to inhibit an SEC investigation.
D) Auditors are never eligible for whistleblower awards.
Q3) Any disclaimer by an accountant that excludes liability for malpractice based on negligence is void.
A)True
B)False
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Chapter 48: Management of Corporations
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Q1) Most states permit action to be taken by the board of directors without holding an actual meeting.
A)True
B)False
Q2) A board of directors may enter into any contract or transaction necessary to carry out the business for which the corporation was formed.
A)True
B)False
Q3) The relationship between a corporation and its agents is governed by the:
A) statute under which the corporation was formed.
B) corporate charter.
C) corporate bylaws.
D) same rules as are applicable when the principal is a natural person.
Q4) Eligibility for membership on a board of directors is determined by all of the following except:
A) statute.
B) certificates of filing.
C) articles of incorporation.
D) bylaws.
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Chapter 49: Real Property
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Q1) A condominium and a cooperative are essentially the same.
A)True
B)False
Q2) A trade fixture is a fixture that is traded in by the owner when purchasing new fixtures.
A)True
B)False
Q3) A guarantee that the grantor owns the estate conveyed is called a covenant:
A) of right to convey.
B) against encumbrances.
C) of quiet enjoyment.
D) of seisin.
Q4) What type of deed merely transfers whatever interest,if any,the grantor may have in the property,without specifying that interest in any way?
A) common law
B) statutory
C) quitclaim
D) warranty
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Chapter 50: Environmental Law and Land Use Controls
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Q1) The process by which the buyer conducts a thorough investigation of the property and its current and former uses to determine whether there are any problems with respect to environmental law or nuisance is called:
A) continuing the nuisance.
B) due diligence.
C) nuisance per se.
D) nuisance per fact.
Q2) Public zoning and restrictive covenants in deeds have a similar purpose,but each has a different source of authority.
A)True
B)False
Q3) Due diligence usually consists of searching public records and inspecting the land.
A)True
B)False
Q4) The EPA has the authority of have activities halted through the use of injunction. A)True
B)False
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Chapter 51: Leases
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Q1) A provision in a residential lease excusing a landlord from liability for damage caused by water,snow,or ice is __________.
A) enforceable
B) enforceable,but only in those areas of the United States that are unusually exposed to adverse weather conditions
C) void
D) voidable
Q2) If a tenant fails to pay rent on time the landlord:
A) has an automatic lien on the tenant's personal property for the money due.
B) has the right to lock the tenant out of the property.
C) may take legal steps to evict the tenant.
D) all of the above.
Q3) A lessor can always refuse to renew the lease of a tenant who reports the landlord to the fire department for violation of fire safety laws.
A)True
B)False
Q4) A sublease and an assignment of a lease accomplish the same results.
A)True
B)False
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Chapter 52: Decedents Estates and Trusts
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Q1) A trust is invalid if a beneficiary lacks capacity.
A)True
B)False
Q2) Unless statutory requirements are met,a will is invalid and the testator:
A) is considered to have died testate.
B) is considered to have died intestate.
C) is subject to federal law.
D) has provided guidelines of distribution.
Q3) A living will,now legal in most states,provides that if the testator becomes unable to express his or her wishes and is in an irreversible,incurable medical condition,he or she does not want life-sustaining medical treatments.
A)True
B)False
Q4) Generally,the right to make a will is limited to persons 18 or older.
A)True
B)False
Q5) A will cannot be modified by merely crossing out a clause and writing in something new.
A)True
B)False
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