Commercial Law
Exam Materials
Course Introduction
Commercial Law is a comprehensive study of the legal principles governing business and commercial transactions. The course covers key topics such as contract law, agency, sale of goods, negotiable instruments, and the legal frameworks regulating different types of commercial organizations. Students will gain insight into the rights and obligations of parties involved in commerce, explore solutions to common legal disputes in business, and examine the impact of national and international legislation on commercial activities. Emphasis is placed on real-world case studies and the practical application of legal concepts to everyday business scenarios.
Recommended Textbook Essentials of Business Law and the Legal Environment 11th Edition by Richard A. Mann
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50 Chapters
4286 Verified Questions
4286 Flashcards
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Page 2
Chapter 1: Introduction to Law
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Sample Questions
Q1) The burden of proof in a criminal case is preponderance of the evidence.
A)True
B)False
Answer: False
Q2) The common law system is used in:
A)Australia.
B)Latin America.
C)England.
D)(a) and (c) above.
Answer: D
Q3) The three distinct and independent branches of the United States government are:
A)the executive branch, the House of Representatives, and the U.S. Senate.
B)the federal judiciary, the House of Representatives, and the U.S. Senate.
C)the federal judiciary, the Congress, and the executive branch.
D)the state government, the federal government, and local government.
Answer: C
Q4) The common law system is used in most of Europe,Scotland,and Latin America.
A)True
B)False
Answer: False
Page 3
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Chapter 2: Business Ethics
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Sample Questions
Q1) To a libertarian,it is unjust for a society to take wealth earned by one citizen and to distribute it to others who did not earn it.
A)True
B)False
Answer: True
Q2) To a __________ ,whether telling a lie in a given instance would produce greater pleasure than telling the truth is less important than deciding if a general practice of lying would maximize society's pleasure.
A)deontologist
B)rule utilitarian
C)ethical fundamentalist
D)ethical relativist
Answer: B
Q3) Utilitarian notions underlie cost-benefit analysis.
A)True
B)False
Answer: True
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Chapter 3: Civil Dispute Resolution
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Sample Questions
Q1) The definition of a default judgment is:
A)a legal pleading that contains denials, admissions, affirmative defenses, and counterclaims.
B)a pleading that is a statement of the initial claim against the defendant.
C)an assertion that even if the plaintiff's allegations are true, the plaintiff would not be entitled to a remedy.
D)a judgment against a defendant who fails to respond to a complaint.
Answer: D
Q2) Explain how state courts are affected by federal court decisions under the doctrine of stare decisis.
Answer: A United States Supreme Court decision on a federal question is binding on all state courts.A decision of a federal court other than the Supreme Court on a federal question may be persuasive,but it is not binding.
Q3) A court needs to have both subject matter jurisdiction and jurisdiction over the parties involved before it can hear a particular case.
A)True
B)False
Answer: True
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Chapter 4: Constitutional Law
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Sample Questions
Q1) In a sex discrimination case under the Equal Protection Clause,the courts apply the strict scrutiny standard of review.
A)True
B)False
Q2) The Bill of Rights was approved by the first Congress to guarantee that the federal government would not abuse its powers.
A)True
B)False
Q3) The U.S.Constitution provides that Congress has the power to regulate commerce with other nations and among the states.The Commerce Clause has what effect(s)?
A)It provides a broad source of power for the federal government to regulate the economy.
B)It restricts state regulations that obstruct or unduly burden interstate commerce.
C)Both (a) and (b).
D)Neither (a) nor (b).
Q4) What rights are protected by the First Amendment? What sorts of speech are constitutionally protected?
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6
Chapter 5: Administrative Law
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Sample Questions
Q1) Parties seeking to challenge agency action by way of judicial review must have standing and must have exhausted their administrative remedies.
A)True
B)False
Q2) Congress has enacted disclosure statutes to enhance public and political oversight of agency activities.These statutes include:
A)Freedom of Information Act.
B)Government in the Sunshine Act.
C)Both (a) and (b) are correct.
D)Neither (a) nor (b).
Q3) The Sunshine Act allows for closed meetings if they concern agency participation in pending or anticipated litigation.
A)True
B)False
Q4) In 1990,Congress enacted the Administrative Dispute Resolution Act to require agencies to use alternative dispute resolution.
A)True
B)False
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Page 7
Chapter 6: Criminal Law
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Sample Questions
Q1) Losses due to computer crimes are estimated to be:
A)in the millions of dollars.
B)in the tens of billions of dollars.
C)in the trillions of dollars.
D)decreasing because of stricter security measures now in place.
Q2) Which one of the following is NOT true of a criminal suit?
A)A criminal suit is brought by the government, not by an individual.
B)In a criminal suit, guilt is never presumed.
C)A purpose of a criminal suit is repayment to the victim.
D)A criminal suit requires a higher burden of proof than a civil suit.
Q3) Civil law is a part of public law,whereas criminal law is a part of private law.
A)True
B)False
Q4) White-collar crime is defined as a nonviolent crime usually involving deceit,corruption,or breach of trust.
A)True
B)False
Q5) The defendant must testify in a criminal proceeding.
A)True
B)False
Page 8
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Chapter 7: Intentional Torts
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Sample Questions
Q1) The tort of public disclosure of private facts requires:
A)publication.
B)private information about either an individual or a corporation.
C)a false statement.
D)that the matter made public would be offensive and objectionable to a reasonable person.
Q2) The same act can be both a tort and a crime.
A)True
B)False
Q3) Andrew noticed Michael and his pregnant wife Georgette walking down the street and drove his car within inches of Michael,as a joke.Michael wasn't injured,but his wife suffered severe mental distress and needed to be hospitalized in order to save the pregnancy.Andrew has:
A)no liability to Georgette, because he has not committed a tort against her.
B)committed the tort of battery against Georgette.
C)committed the tort of battery against Michael but has committed no tort against Georgette.
D)committed the tort of intentional infliction of emotional distress against Georgette.
Q4) Identify the elements of a tort and the objectives of tort law.
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Chapter 8: Negligence and Strict Liability
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Sample Questions
Q1) Sarina goes to Marlin's Department Store to look for clothes.The store happens to be in the process of remodeling,and there is a lot of clutter in the aisle.Sarina trips over the clutter and is injured.Under the Second Restatement,Sarina's status with regard to the store is that of:
A)licensee.
B)business visitor.
C)public invitee.
D)trespasser.
Q2) A form of strict liability applies to all except which of the following situations?
A)A lawnmower sold in a defective condition that injures its owner.
B)A fireworks factory that blows up and injures townspeople and their property.
C)Abnormally risky medical procedures.
D)A herd of goats that walk onto a neighbor's property and trample and eat the neighbor's roses.
Q3) A "reasonable person standard" does not apply to children since they do not have the judgment,intelligence,knowledge,or experience of adults.
A)True
B)False
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Chapter 9: Introduction to Contracts
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Sample Questions
Q1) Quasi contracts are used to provide a remedy when the parties enter into a(n):
A)void contract.
B)implied in fact contract.
C)situation in which promissory estoppel applies.
D)All of the above.
Q2) Charles says to Wes,"If you will mow my lawn,I will give you $15." Wes says nothing,but he mows the lawn.No contract exists under this fact situation,because Wes did not accept Charles's offer.
A)True
B)False
Q3) Caroline signs a contract to work as a sales rep for Incellmed Corporation for a period of two years.This contract is governed by:
A)Article 2 of the UCC.
B)state common law.
C)federal statute.
D)the law of quasi contract.
Q4) A quasi contract is another name for an oral contract.
A)True
B)False
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Chapter 10: Mutual Assent
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Sample Questions
Q1) Death or insanity of either the offeror or the offeree ordinarily terminates the offer.
A)True
B)False
Q2) Dakota's question to Austin,"Will you buy my computer for $800?" is an offer to Austin.
A)True
B)False
Q3) Maylin's offer stated that Camille's acceptance should be by regular mail,to be received no later than June 30.Camille didn't decide to accept until June 29 and was afraid regular mail would take too long.Camille faxed an acceptance on June 29.Since Camille used an unauthorized means of acceptance:
A)the purported acceptance is ineffective.
B)under the traditional rule, the acceptance is effective if Maylin receives it on June 29 or June 30.
C)under the Restatement rule, Camille's acceptance would be effective.
D)Both (b) and (c).
Q4) Discuss how parties show mutual assent and what standard is used to determine agreement.
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Chapter 11: Conduct Invalidating Assent
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Sample Questions
Q1) The law requires that to form a valid contract the agreement must be voluntary and knowing.
A)True
B)False
Q2) Ralph sold a motel to Steve by stating that he had paid $250,000 for it and that his net average annual profit from the business has been $40,000.In reality he paid $100,000 for the motel and has earned a net average annual profit of only $30,000.Steve made no attempt to verify the statements until after the transaction was completed.In this case:
A)Ralph has committed fraudulent misrepresentation.
B)Steve is bound by the contract, because he failed to verify the statements which were made to him.
C)the contract is voidable at Steve's option.
D)Two of the above, (a) and (c).
Q3) There are two distinct types of fraud.
A)True
B)False
Q4) Fraud in the inducement will render an agreement void.
A)True
B)False
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Chapter 12: Consideration
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Sample Questions
Q1) Jason's mother would like him to go to college,so in June he enrolls at the local university.He also quits his job and tells his mother his plans to take classes.His mother says,"I'm so happy that you are going to college that I want to pay for your books." Jason then sends her a bill for $485.Jason's mother's promise is:
A)enforceable, because Jason returned to college.
B)enforceable, because Jason is giving up the right to do something else.
C)unenforceable, because it is a unilateral contract.
D)unenforceable, because Jason had already enrolled in school when she made the statement that she wanted to pay for his books, and there is no consideration.
Q2) Past actions unbargained for by the parties in an agreement can become valid consideration for a contract.
A)True
B)False
Q3) Obligations contingent upon a stated event are known as conditional promises. A)True
B)False
Q4) Define legal detriment.
Q5) Define a substituted contract and explain how it affects an agreement.
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Chapter 13: Illegal Bargains
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Sample Questions
Q1) Maximum rates of interest that are permitted under usury statutes are uniform from state to state.
A)True
B)False
Q2) The usual means of enforcing an agreement prohibiting an employee from competing in a described territory for a stated period of time is by injunction.
A)True
B)False
Q3) An agreement in connection with the sale of a business that prohibits the seller from engaging in the same or similar business for a period of twenty-five years would be unreasonable and unenforceable.
A)True
B)False
Q4) Under which of the following circumstances would a court be unlikely to enforce the illegal contract?
A)Where the aggrieved party was unaware of the illegality.
B)Where a party withdraws from an illegal agreement prior to performance.
C)Where the agreement is with an unlicensed attorney.
D)Where one of the parties is less at fault than the other.
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Chapter 14: Contractual Capacity
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Sample Questions
Q1) Joe is mentally impaired from the effects of a prescribed medication.If he makes a contract while under this impairment,the contract would be voidable if he cannot comprehend the subject of the contract,its nature,and its probable consequences,even if the other party does not know or have reason to know of his mental condition.
A)True
B)False
Q2) An automobile will never be considered be a necessary item for a minor.
A)True
B)False
Q3) Joanne,a minor,sold her laptop computer to Bruce,an adult.Bruce then sold the laptop to Anna,also an adult,who had no knowledge of the fact that the original owner was a minor.Under the Uniform Commercial Code,Joanne may:
A)avoid her contract with Bruce and recover her laptop.
B)not avoid her contract with Bruce and may not recover her laptop.
C)register with the UCC filing department and require that if Anna sells the laptop she must give Joanne the rights of first refusal.
D)None of the above.
Q4) What are the two tests for mental competency?
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Page 16
Chapter 15: Contracts in Writing
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Sample Questions
Q1) The parol evidence rule applies to partially written agreements.
A)True
B)False
Q2) Under the UCC,__________ refers to the manner and extent to which the respective parties to a contract have accepted successive tenders of performance by the other party without objection.
A)course of dealing
B)usage of trade
C)course of performance
D)integrated document
Q3) E-Sign was enacted by Congress in 2000 and makes electronic records and signatures valid and enforceable across the United States for many types of transactions in or affecting interstate or foreign commerce.
A)True
B)False
Q4) Identify at least six situations in which the parol evidence rule does not apply.
Q5) Most types of contracts are valid without being written.
A)True
B)False
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Chapter 16: Third Parties to Contracts
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Sample Questions
Q1) Barbara owes Arthur $2,000.On July 1,Arthur assigns the right to the $2,000 to Caleb.Thereafter,on July 15,Arthur assigns the same right to David,who in good faith gives value for it and knows nothing about the first assignee.In this case:
A)Caleb has the right to the payment of $2,000.
B)David has the right to the $2,000.
C)neither Caleb nor David can claim the $2,000.
D)The rule differs by state.
Q2) To protect the obligor or the public interest,some contract rights are not assignable.
A)True
B)False
Q3) A transfer to a third party of a contractual obligation is known as a(n):
A)assignment of rights.
B)delegation of duties.
C)revocability of assignment.
D)partial assignment.
Q4) When the rights under a contract are highly personal,they are not assignable.
A)True
B)False
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Page 18
Chapter 17: Performance, Breach, and Discharge
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Sample Questions
Q1) The "perfect tender rule" provides that only substantial deviations from the promised performance in a sales contract under the Code constitute a material breach and discharge the aggrieved party from the duty of performance.
A)True
B)False
Q2) Discharge by performance is the most frequent method of discharging a contractual duty.
A)True
B)False
Q3) Marie owes Nathan $900 and the parties agree that Marie will paint Nathan's house in satisfaction of the debt.The debt is not discharged until Marie performs the substituted agreement by painting Nathan's house.
A)True
B)False
Q4) A novation is an agreement between two parties to have one substitute for the other in a contract.
A)True
B)False
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Chapter 18: Contract Remedies
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Sample Questions
Q1) The remedy for misrepresentation is specific performance of the contract.
A)True
B)False
Q2) Harry said to Marge,"I have a ring once owned by Marilyn Monroe.Would you like to buy it for $500?" Marge pays for the ring,but the next day a friend tells her that Harry had recently purchased the ring at a local store.Marge enjoys wearing the ring and wears it constantly for twelve months.Finally,she goes to Harry and says,"Here is the ring you lied about.Give me my $500." Most likely Marge will:
A)get her money back since Harry's statement was fraudulent.
B)not get her money back since she should have investigated the facts about the ring more carefully.
C)not get her money back since she is a good faith purchaser of merchandise.
D)not get her money back since she has affirmed the contract by taking an unduly long time to disaffirm.
Q3) What interests of injured parties are protected by remedies for a breach of contract?
Q4) Incidental damages are those that arise directly out of the breach.
A)True
B)False
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Page 20
Chapter 19: Introduction to Sales and Leases
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Sample Questions
Q1) Under the CISG,which of the following would not always be considered a material alteration to an offer?
A)A change in payment.
B)A change in time of delivery.
C)A change in color of goods ordered.
D)The addition of an arbitration clause for settlement of disputes.
Q2) Which of the following is not true about a consumer lease under UCC Article 2A?
A)The lessor must be regularly engaged in the business of leasing or selling goods.
B)The lessee cannot be an organization.
C)There is no dollar limit on the amount of a consumer lease under Article 2A.
D)Consumer protection provisions are contained in Article 2A, and these may not be varied by the parties' agreement.
Q3) What does Article 2 say with regard to the following?
a.Good faith.
b.Unconscionability.
c.Expansion of commercial practices.
Q4) Discuss the similarities or possible differences between the parol evidence rule under the common law of contracts and the parol evidence rule found in Article 2.
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Page 21
Chapter 20: Performance
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Sample Questions
Q1) Sam agrees to sell Bill one 18-cubic-foot,yellow refrigerator for $700.It is to be delivered to Bill's home on July 7.Under the perfect tender rule,which one of the following cases would permit Bill to rightfully reject the goods?
A)Sam delivered an 18-cubic-foot, silver refrigerator on July 7, and Bill calls Sam to complain.
B)Sam sent an 18-cubic-foot, yellow refrigerator with a small dent in it on July 7. Bill refuses delivery but never bothers to call Sam.
C)Sam sent his truck to Bill's home with the 18-cubic-foot, yellow refrigerator on July 7, but Bill was not home.
D)Sam sent 18-cubic-foot, yellow refrigerator without ice cube trays on July 5 and notifies Bill of the defect.
Q2) Where goods are in the possession of a bailee and are to be delivered without being moved,in most instances the seller may either tender to the buyer a document of title or obtain an acknowledgment by the bailee of the buyer's right to possess the goods.
A)True
B)False
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Chapter 21: Transfer of Title and Risk of Loss
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Q1) If goods are sold and delivered to buyer with an option to return them,the risk is on the buyer until they are returned.
A)True
B)False
Q2) Identification may be made by either the seller or the buyer.
A)True
B)False
Q3) In a contract where the buyer is to pick up the goods at the seller's place of business and the seller is a merchant,the risk of loss passes to the buyer when the goods are tendered to the buyer.
A)True
B)False
Q4) Security interests,defined by the Code as interests in personal property or fixtures that ensure payment or performance of obligations,are governed by Article 6 of the UCC. A)True
B)False
Q5) How has the Code affected the rights of good faith purchasers with respect to minors?
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Chapter 22: Product Liability: Warranties and Strict Liability
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Sample Questions
Q1) Identify at least four means states have used to limit the punitive damages a plaintiff can collect in a product liability lawsuit.
Q2) An implied warranty exists by operation of law.
A)True
B)False
Q3) Which of the following is not an express warranty?
A)Restating facts or market figures about a product.
B)The opinion of an expert in a certain field regarding a product in that field.
C)A statement of the product specifications.
D)The seller's opinion of the value of goods.
Q4) Ed buys a car from a friend "as is." The friend tells him,"In my opinion,this car is in excellent mechanical condition." The friend has made an express warranty.
A)True
B)False
Q5) Define and discuss horizontal and vertical privity.Explain the effect of the Code and the courts on the concept of privity of contract.
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Page 24
Chapter 23: Sales Remedies
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Q1) Landview Appliances sells a stove to Evan for his home.The contract of sale excludes liability for consequential damages.When Evan turns on the stove,it catches fire,burning Evan severely.Evan cannot recover for his injuries because of the exclusion of damages clause.
A)True
B)False
Q2) Under the CISG,avoidance of a contract cancels any provision for settlement of disputes.
A)True
B)False
Q3) Demrow Co.,which contracted to buy 400 fishing poles from Royal Industries,anticipatorily breached the contract.Royal may proceed to identify to the contract conforming goods in its possession so that it can exercise the remedy of resale of the goods.
A)True
B)False
Q4) Breach of one installment of an installment contract never gives rise to breach under the whole contract.
A)True
B)False
Page 25
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Chapter 24: Form and Content
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Sample Questions
Q1) The vital importance of negotiable instruments and electronic transfers as methods of payment cannot be overstated.
A)True
B)False
Q2) Distinguish between a note and a certificate of deposit.How are they alike? How are they different? Explain your answer.
Q3) Which of the following has been held to destroy the negotiability of an instrument and to render its transfer a contractual assignment?
A)"I wish you would pay."
B)"Pay to the order of John Jones."
C)"Pay bearer."
D)None of the above.
Q4) A __________ is a specialized form of promise to pay money given by a maker in which the bank is the maker.
A)note
B)certificate of deposit
C)trade acceptance
D)cashier's check
Q5) Who are the parties to checks and notes?
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Chapter 25: Transfer and Holder in Due Course
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Sample Questions
Q1) Any transfer for value of an instrument is a negotiation.
A)True
B)False
Q2) If a person paying an instrument subject to the impostor rule fails to exercise ordinary care,the issuer may recover from the payor to the extent the payor's negligence contributed to the loss.
A)True
B)False
Q3) If the issuer and the person paying an instrument subject to the impostor rule are both negligent,comparative negligence would apply.
A)True
B)False
Q4) Maxine indorsed her paycheck by signing her name on the back,but she lost it on the way to the bank.The check is now comparable to cash because it is a bearer instrument.
A)True
B)False
Q5) Identify the defenses that can be used against a holder in due course and those defenses that cannot be used against a holder in due course.
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Chapter 26: Liability of Parties
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Sample Questions
Q1) Misty wrote a check to Acme for $220.She is discharged from liability on the check if Acme does not present the check for payment within 30 days after the date the check was signed.
A)True
B)False
Q2) Presentment is a demand made by or on behalf of a person entitled to enforce the instrument for:
A)payment by the drawee or other party obligated to pay the instrument.
B)acceptance by the drawee of a draft.
C)Both (a) and (b) are correct.
D)None of the above.
Q3) An unauthorized signature cannot be ratified by the person whose name appears on the instrument.
A)True
B)False
Q4) Warranties on presentment are the same regardless of who is the payor or acceptor.
A)True
B)False
Q5) Discuss the effect of an unauthorized signature on an instrument.
Page 28
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Chapter 27: Bank Deposits, Collections, and Funds Transfers
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Sample Questions
Q1) Banks like electronic funds transfers because they eliminate the float time that a drawer enjoys on a checking account and the paperwork involved in processing checks.
A)True
B)False
Q2) Mary receives her monthly bank statement on December 30th.She looks at it quickly,then sets it aside.Three days later,she examines it again and discovers a forged check.What must she do to avoid responsibility for the check?
Q3) Which of the following is NOT a duty of a collecting bank in the collection process?
A)Duty of care.
B)Duty to act in a timely manner.
C)Duty to honor a valid stop payment order.
D)Duty to honor a restrictive endorsement.
Q4) If a bank pays on a check even though it has a "stop payment order," the bank is liable to the customer only if the customer can prove a loss because of the payment.
A)True
B)False
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Chapter 28: Relationship of Principal and Agent
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Q1) Victor negligently led Gus to believe that Brenda had the authority to act on Victor's behalf.If Brenda had no authority but Gus reasonably and in good faith relied on Brenda's apparent authority:
A)Victor can be liable to Gus for Gus's loss suffered because of his reliance.
B)Victor cannot be held liable to Gus because Brenda had no actual authority.
C)only Brenda can be held liable for any loss Gus suffered because of his reliance.
D)Gus must bear any loss because he did not determine the extent or existence of Brenda'a authority.
Q2) A principal may generally revoke the authority of an agent at any time.
A)True
B)False
Q3) Jones,an agent of Rossi,is authorized to sell Rossi's ownership of wheat on the commodities market on Monday.On Monday,however,the market opens with the lowest prices for wheat in two decades.Jones must go ahead and sell Rossi's wheat on Monday. A)True
B)False
Q4) What is an independent contractor? Can an independent contractor also be an agent?
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Page 30
Chapter 29: Relationship With Third Parties
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Q1) Which of the following is correct with regard to a contract entered into with a third person by an agent of an undisclosed principal?
A)The agent has no liability to the third person if the agent has acted within the scope of her authority.
B)The agent is personally liable upon the contract.
C)The undisclosed principal has no liability on the contract, even if her existence and identity are discovered by the third person.
D)If the third party obtains a judgment against the principal and the judgment is satisfied, the agent may still have liability to that third party.
Q2) Edward is hired to manage Fred's business.Which of the following is untrue regarding Edward's authority?
A)Edward has authority to sell a used cash register when he buys a new computerized checkout system for the store.
B)Edward has authority to send bills to customers and to accept payments on behalf of Fred.
C)Edward can hire employees, but he cannot fire them without Fred's consent.
D)Edward can enter into contract with wholesalers for merchandise in the store.
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Page 31
Chapter 30: Formation and Internal Relations of General Partnerships
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Q1) Under the RUPA,a partner violates the duty of loyalty if the conduct furthers the partner's own interest.
A)True
B)False
Q2) Miller and Baker formed a partnership and purchased a cycle shop.The name of the new business cannot be "Miller Cycle Shop" because the name of the partnership must include the names of both partners if it includes the name of one partner.
A)True
B)False
Q3) To be partnership property,title to real estate bought with partnership assets and used by the partnership may be put in the name of:
A)any partner in that individual's name.
B)the partnership only.
C)the partnership in its name, or one or more partners in their capacity as partners in the partnership if the name of the partnership is indicated in the instrument transferring title.
D)None of the above.
Q4) What are the ways the RUPA recognizes a partnership as an entity?
Page 32
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Chapter 31: Operation and Dissolution of General Partnerships
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Q1) The UPA provides that partners are __________ liable on all debts and contract obligations of the partnership.
A)jointly
B)strictly
C)jointly and severally
D)partially
Q2) Austin withdraws from a partnership and the remaining three partners decide to continue in business.Discuss the effect of the withdrawal on the partnership and on creditors rights under the UPA.
Q3) Randy,Mona,and Richard are partners.Under the UPA,a creditor of their partnership must name all three partners as defendants in a suit on a contract obligation of the partnership.
A)True
B)False
Q4) The RUPA requires a central filing of a statement of partnership authority specifying the names of partners authorized to execute instruments transferring real property held in the name of the partnership.
A)True
B)False
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Chapter 32: Limited Partnerships and Limited Liability Companies
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Q1) The causes of dissolution and the priorities in the distribution of assets for a limited partnership are the same as those of a general partnership.
A)True
B)False
Q2) A general partner may also be a limited partner and thereby also share in profits and distributions as a limited partner.
A)True
B)False
Q3) The court in Wyler v.Feuer stated that:
A)the general partner owes the limited partners a duty of reasonable care in the management of the business.
B)the general partner may be held liable to the limited partner for any mistakes made or losses incurred in management of the business.
C)a limited partner has a limited right to manage and control the partnership business.
D)Two of the above, both (a) and (b).
Q4) Discuss the duties of general partners to limited partners.
Q5) What are the liabilities of a limited partner in a limited partnership?
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Chapter 33: Nature and Formation of Corporations
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Q1) A corporation formed in substantial compliance with the incorporation statute and the required organizational procedures is a:
A)de facto corporation.
B)de jure corporation.
C)corporation by estoppel.
D)private corporation.
Q2) The RMBCA has been adopted,in whole or in part,by most states.
A)True
B)False
Q3) Which of the following is the basic governing document of a corporation?
A)A subscription.
B)A charter, after filing.
C)The set of bylaws.
D)A certificate of authority.
Q4) "Piercing the corporate veil" will result in personal liability of shareholders.
A)True
B)False
Q5) What are the consequences of a defective incorporation?
Q6) What are the principal attributes of a corporation?
Q7) Name the classifications of corporations.
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Chapter 34: Financial Structure of Corporations
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Q1) Treasury shares are shares that have been authorized but have not yet been issued.
A)True
B)False
Q2) The most customary type of dividend is a:
A)stock dividend.
B)cash dividend.
C)property dividend.
D)liquidating dividend.
Q3) The difference between common and preferred stock is that the latter is a debt instrument,whereas the former represents an equity interest in the company.
A)True
B)False
Q4) The board of directors may issue bonds without the authorization or consent of the shareholders.
A)True B)False
Q5) What are the two major issues regarding payment for shares?
Q6) Discuss the use of and types of stock options.
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Chapter 35: Management Structure of Corporations
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Q1) One of the fiduciary duties of directors is the duty not to compete with the corporation.They may pursue their own business interest,but they may not:
A)use corporate resources do do so.
B)hire away personnel for their own business.
C)use corporate facilities to do so.
D)All of the answer choices are correct.
Q2) A director may make business decisions in reliance on information provided to him without incurring liability for negligence as long as he:
A)notifies the preparer of the information.
B)reasonably believes that the information is reliable.
C)conducts his own independent investigation.
D)is given a sworn affidavit by the preparer.
Q3) To protect a shareholder's interest in the corporation,the law provides shareholders with certain enforcement rights.
A)True
B)False
Q4) Discuss whether officers and directors may entrust important work to others and their potential liability if they do.
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Chapter 36: Fundamental Changes of Corporations
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Q1) A purchaser of all the assets normally does not assume the liabilities of that company.
A)True
B)False
Q2) The statutory provisions governing dissolution and liquidation usually prescribe procedures to safeguard the interests of the corporation's creditors.These procedures include:
A)the required mailing of notice to known creditors.
B)a general publication of notice.
C)the preservation of claims against the corporation.
D)All of the above.
Q3) If Barker Co.buys 51% of the shares of Carter Co.:
A)Carter Co.'s board would have to approve the sale.
B)Barker Co.'s board would have to approve the sale.
C)both boards would have to approve the sale.
D)both sets of shareholders would have to approve the sale.
Q4) Shareholders do not have vested property rights resulting from provisions in the articles of incorporation.
A)True
B)False
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Chapter 37: Secured Transactions and Suretyship
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Q1) A bond,which guarantees the performance of the terms of a contract,is a(n):
A)judicial bond.
B)official bond.
C)performance bond.
D)fidelity bond.
Q2) "Value" under Article 9 of the UCC is defined as including:
A)consideration under contract law.
B)a binding commitment to extend credit.
C)antecedent debt.
D)All of the above.
Q3) If the debtor is in default and the secured party wants to repossess the collateral in order to sell it,he must get a court order to do so.
A)True
B)False
Q4) Article 9 of the UCC applies to a security interest without consent that arises by operation of law,such as a mechanic's lien.
A)True
B)False
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Chapter 38: Bankruptcy
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Q1) An automatic stay would not prevent a creditor from creating a lien against the debtor's property.
A)True B)False
Q2) If the debtor contests the involuntary petition for bankruptcy,the court must enter an order for relief against the debtor.
A)True
B)False
Q3) Non-bankruptcy compromises to give debtors relief while protecting the rights of creditors include:
A)compositions.
B)non-statutory assignments for the benefit of creditors.
C)receiverships under the direction of a court with equity powers.
D)All of the above.
Q4) A debtor who files for bankruptcy can keep up to $1,450 in jewelry and all social security,veteran's and disability benefits under the exemptions found in the Bankruptcy Code.
A)True B)False
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Chapter 39: Securities Regulation
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Q1) Effective in 2010,the SEC adopted new requirements to improve the disclosure shareholders of public companies receive regarding compensation and corporate governance.These new rules require disclosure of any directorships held by each nominee at any time during the past seven years at any public company.
A)True
B)False
Q2) Insiders would violate the short-swing profits rule (16b)of the 1934 Act by buying stock on January 1 and selling on May 1.
A)True
B)False
Q3) In 2006,the SEC abolished the requirement that a registration statement disclose compensation paid to senior executives and directors.
A)True
B)False
Q4) As amended in 2008,SEC rules define a small business issuer as a noninvestment company with less than $10 million in public float.
A)True
B)False
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Chapter 40: Intellectual Property
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Questions
Q1) Jonah,a businessman,has no connection with Harvard University,but he has a new line of computer software that he would like to market to university students and faculty under the name of "Harvard Software." In this case:
A)Jonah may in all likelihood register the name "Harvard Software" under the Lanham Act.
B)Jonah may in all likelihood be able to copyright the name "Harvard Software" under the Copyright Act.
C)it is unlikely that Jonah will be able to register the name "Harvard Software," because it falsely suggests a connection to an institution.
D)it is unlikely that Jonah will be able to register the name "Harvard Software," because it has no secondary meaning.
Q2) Discuss the concept of fair use in relation to copyright law.
Q3) Federal trademark protection:
A)lasts for ten years after registration.
B)can be renewed an unlimited number of times.
C)can be abandoned by non-use.
D)All of the above.
Q4) Identify the three types of patents,their requirements,and duration.
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Page 42
Chapter 41: Employment Law
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Sample Questions
Q1) Title VII of the Civil Rights Act of 1964 prohibits employment discrimination on the basis of race,color,gender,religion,or national origin in any employment-related process.
A)True
B)False
Q2) The __________ is responsible for enforcing federal anti-discrimination laws.
A)OSHA
B)Social Security Administration
C)EEOC
D)NLRB
Q3) Workers' compensation acts have been adopted by all states in an effort to provide speedier and more certain relief to injured workers than was available through litigation.
A)True
B)False
Q4) The Social Security system has five major benefit programs,one of which is Medicare.
A)True
B)False
Q5) What are the remedies available for violations of the Civil Rights Act of 1964?
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Chapter 42: Antitrust
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Sample Questions
Q1) In enacting Section 2 of the Clayton Act,Congress was concerned with sellers who sought to harm or eliminate their competitors through:
A)mergers.
B)price discrimination.
C)tying arrangements.
D)None of the above.
Q2) An agreement between a manufacturer and a wholesaler is horizontal.
A)True
B)False
Q3) What are the major functions of the Federal Trade Commission (FTC)and what power does the FTC have?
Q4) Which of the following is true in relation to market share and monopoly power?
A)A market share greater than 50% generally indicates monopoly power.
B)A market share between 50 and 75% is, in itself, inconclusive in determining monopoly power.
C)Market share is rarely used as a test of monopoly power because it is difficult to determine.
D)Market share is a common test for monopoly power because it is an easy, objective measurement for courts to determine.
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Chapter 43: Accountants Legal Liability
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Q1) Which of the following is correct with regard to an accountant's contractual liability?
A)An accountant is bound to perform all the duties she explicitly agrees to perform.
B)An accountant implicitly agrees to perform a contract in a competent and professional manner.
C)An accountant who breaches his contract with a client may also be liable to a third party intended beneficiary.
D)All of the above are correct.
Q2) What is the basis of an accountant's potential criminal liability in rendering professional services?
Q3) What sort of liability does an accountant have under the Securities Exchange Act of 1934?
A)Civil liability where there is scienter.
B)Criminal liability where there is a willful violation.
C)Both (a) and (b) are correct.
D)Neither (a) nor (b) is correct.
Q4) List the services that the Sarbanes-Oxley Act prohibits accounting firms from performing for audit clients.
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Chapter 44: Consumer Protection
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Q1) Lemon laws are generally understood to be laws that:
A)apply to the safety of food additives for fruits and vegetables.
B)are federal legislation designed specifically to protect state consumers from fraudulent car manufacturers.
C)are state laws that attempt to provide new car purchasers with rights that are similar to full warranties under the Magnuson-Moss Act.
D)are Interstate Compacts to uniformly deal with lemon cars.
Q2) In order for a full warranty to be given for a consumer product,the manufacturer must provide that:
A)the product will be repaired for free.
B)the warranty lasts for at least 10 days.
C)the consumer can opt for replacement if the product is unsatisfactory.
D)consequential damage cannot be excluded.
Q3) A warranty creates a duty on the seller's part that the goods and services she sells will conform to certain qualities,characteristics,or conditions.
A)True
B)False
Q4) Discuss the role of the state attorneys general in consumer protection.
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Page 46
Chapter 45: Environmental Law
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Q1) NEPA requires that the EIS contain:
A)an analysis of the relationship between local short-term uses of the environment and the maintenance and enhancement of long-term productivity.
B)reversible and retrievable commitments of resources involved.
C)only a brief outline of the adverse environmental effects of a proposed action.
D)All of the above.
Q2) TSCA includes provisions that:
A)regulate the manufacture of new chemicals.
B)allow for the registration of pesticides.
C)require that exports be labeled "not registered for use in the United States of America."
D)All of the above.
Q3) What are the two major issues that the NEPA (National Environmental Policy Act)addresses?
Q4) Private tort actions have been quite successful in controlling environmental damage.
A)True
B)False
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Chapter 46: International Business Law
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Q1) The act-of-state doctrine provides that to maintain international relations and trade,a host country must refrain from imposing its laws on a foreign sovereign nation present within its borders.
A)True
B)False
Q2) Governments can use nontariff barriers to give local industries a competitive advantage.
A)True
B)False
Q3) The European Community was formed through a merger between the Common Market,the European Coal and Steel Community,and the European Atomic Energy Community.
A)True
B)False
Q4) The WTO administers trade agreements but does not get involved with dispute resolution.
A)True
B)False
Q5) Discuss how an owner of intellectual property protects those rights in other countries.
Page 48
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Chapter 47: Introduction to Property, property Insurance,
Bailments, and Documents of Title
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Q1) If Jim,Ken,and Lee each deposit 10,000 bushels of wheat in a grain elevator,they would own one-third of the mixture by:
A)accession.
B)adverse possession.
C)prescription.
D)confusion.
Q2) Carol took her earrings off at Marcia's beauty shop and put them on the counter.She left the shop without remembering the earrings.Betty finds them and wants to keep them.Can she?
A)Yes, since she is a finder.
B)Yes, she now is the true owner.
C)No, since the earrings were personal property.
D)No, Marcia would have the right to keep them as against anyone but Carol.
Q3) A furnace would often be classified as a "fixture."
A)True
B)False
Q4) How does the liability of a common carrier differ from that of an ordinary bailee with regard to property that is lost or damaged while in possession of the carrier?
Q5) Why are delivery and acceptance both necessary to have a valid gift?
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Chapter 48: Interests in Real Property
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Q1) Jack,a landlord,sells his apartment house to Bob,who knows that each of the four apartments is rented.May Bob tell the tenants to vacate and install his own tenants?
A)Yes, since he is now the owner.
B)Yes, the leases terminate when Jack's ownership ends.
C)No, he must wait until their leases expire.
D)No, they may stay as long as they wish.
Q2) The characteristics of a qualified or base fee estate include(s)that:
A)it is possible to convey or will property to a person to enjoy absolutely, subject to its being taken away at a later date should a certain event occur.
B)a holder of a qualified fee interest may transfer the property by deed, subject to the initial condition.
C)a qualified fee interest may pass by intestate succession.
D)All of the above.
Q3) A leasehold is like a bailment in that it permits the tenant to have a possessory but not an ownership interest in the landlord's estate.
A)True
B)False
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Page 50
Chapter 49: Transfer and Control of Real Property
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Q1) Jan owns lots in the Cruz neighborhood,where she was planning to build an 8-story apartment complex.Cruz has adopted a single-family dwelling ordinance that encompasses Jan's lots.Jan goes to the library and finds she can attempt to get judicial review of ordinances based on the following:
A)the zoning ordinance is invalid.
B)the ordinance has been applied unreasonably.
C)the ordinance amounts to confiscation of property.
D)All of the above.
Q2) The seller's warranty that he has marketable title to the land would be breached if the buyer discovers:
A)a lien on the land.
B)a defect in the chain of title.
C)a lease of the premises.
D)All of the above.
E)Both (a) and (b) above are correct.
Q3) Which of the following is NOT essential to a valid deed?
A)Grantor.
B)Grantee.
C)Delivery.
D)Recording.
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Chapter 50: Trusts and Wills
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Q1) A trustee has a duty to make proper allocation of benefits and burdens between income beneficiaries and remaindermen.Which of the following statements is true concerning this allocation?
A)Current expenses are chargeable to the remaindermen.
B)Extraordinary expenses are chargeable to the remaindermen.
C)Money paid for the use of trust property is chargeable to the remaindermen.
D)Any profit from the use of trust property is allocated to the remaindermen.
Q2) The owner of legal title to the property in a trust is the:
A)grantor.
B)settlor.
C)beneficiary.
D)trustee.
Q3) Which of the following statements about wills is correct?
A)A will must be written on one piece of paper.
B)Another writing may be incorporated by reference into a will.
C)The testator must sign his or her full name.
D)The testator cannot have any "help" in signing a will.
Q4) A trust may serve any purpose that is not against the law or public policy.
A)True
B)False
Page 52
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