Commercial Law
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Course Introduction
Commercial Law provides an in-depth examination of the legal principles and frameworks governing business and commercial transactions. The course covers key topics such as the formation and enforcement of contracts, the sale of goods, agency relationships, negotiable instruments, and secured transactions. Students will explore the rights and obligations of parties involved in commerce, addressing both domestic and international contexts, and analyzing relevant statutes and case law. Emphasis is placed on practical problem-solving skills, critical thinking, and the application of legal concepts to real-world business scenarios.
Recommended Textbook Business Law and the Legal Environment Standard Edition 8th Edition by Jeffrey
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Page 2
F. Beatty
Chapter 1: Introduction to Law
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Q1) Which of the following played a role in the creation of the U.S.government by solving the problem of federalism?
A)The Visigoths
B)The Iroquois Native Americans
C)Confucius
D)Alexis de Tocqueville
Answer: B
Q2) Congress can create a statute on any topic at all.
A)True
B)False
Answer: False
Q3) If the title of an appellate court case appears as Jones v.Smith,
A)then it is correct to say that Jones is the plaintiff and Smith is the defendant.
B)it means that Smith won the trial court decision.
C)you cannot determine which party is the plaintiff,because when a defendant loses a trial and files an appeal,some courts (but not all)reverse the names of the parties.
D)the trial judge was Jones and the appellate judge is Smith.
Answer: C
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3
Chapter 2: Ethics and Corporate Social Responsibility
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Q1) John Johnson is a customer of company ABC.As such,John is a(n)
A)shareholder.
B)customer and stakeholder.
C)customer only.
D)stakeholder only.
Answer: B
Q2) A company that engages in unethical behavior may suffer severe consequences.
A)True
B)False
Answer: True
Q3) Why do many major corporations actively encourage ethical behavior?
A)Unethical behavior always reduces profits.
B)Unethical behavior can quickly destroy a business.
C)Unethical acts are always illegal.
D)Unethical behavior always leads to a reduction in profits.
Answer: B
Q4) Unethical behavior is a bar to financial success.
A)True
B)False
Answer: False
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Chapter 3: International Law
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Q1) The International Chamber of Commerce (ICC)is the world's largest global business organization.
A)True
B)False
Answer: True
Q2) Extraterritoriality can be defined as
A)the power of one nation to create trade restrictions that involve other countries.
B)the power to regulate tariffs in foreign nations as provided for by GATT.
C)the power of one nation to impose its laws in other countries.
D)the power of a company to extend its subsidiaries overseas without abiding by trade laws.
Answer: C
Q3) Explain the origin and purpose of the World Trade Organization.
Answer: The WTO was established by GATT.It has the authority to resolve trade disputes between signatory countries.The WTO addresses primarily tariff violations or nontariff barriers.This international "court" may order compliance from any nation violating GATT and may penalize countries by imposing trade sanctions.
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Chapter 4:
Common Law, Statutory Law, and Administrative Law
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Q1) Which law imposes controls on federal agencies by requiring basic fairness in areas not regulated by enabling legislation?
A)The 1964 Civil Rights Act.
B)The Clean Agency Act.
C)The Administrative Procedure Act.
D)The Freedom of Information Act.
Q2) Define the common law.Discuss its conflicting goals and the doctrine created to serve one of these goals.
Q3) Discuss the four most important limitations on the power of federal administrative agencies.
Q4) The U.S.Supreme Court was asked to decide whether same-sex sexual harassment is a violation of Title VII of the Civil Rights Act.This law forbids discrimination in employment on the basis of sex.In interpreting statutes,the court may use all of the following EXCEPT
A)the plain meaning rule.
B)legislative history.
C)public policy.
D)enabling legislation.
6
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Chapter 5: Constitutional Law
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Q1) A government action interfering with a fundamental right will be judged using A)strict scrutiny.
B)intermediate scrutiny.
C)minimal scrutiny.
D)legitimate scrutiny.
Q2) By creating three independent and equal branches of the federal government,the U.S.Constitution prevented the federal government's power from being concentrated in one person.
A)True
B)False
Q3) The Framers of our Constitution,a true cross section of the population at the time,created the Constitution by amending the Articles of Confederation,which had been the governing document of the colonists.
A)True
B)False
Q4) Discuss the Miller test to determine if a creative work is obscene.
Q5) The "takings clause" prevents the government from taking private property for any reason.
A)True
B)False
Page 7
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Chapter 6: Dispute Resolution
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Q1) Generally,mandatory arbitration provisions in a contract are valid.
A)True
B)False
Q2) The Supreme Court will not grant a writ of certiorari unless
A)the case began in a federal court.
B)two or more U.S.courts of appeals have decided the legal issue differently.
C)four of the nine justices vote in favor of hearing the case.
D)it finds that it has diversity jurisdiction over the case.
Q3) In reaching its verdicts,appellate courts conduct trials and rehear all evidence.
A)True
B)False
Q4) In order for a federal court to have jurisdiction,there must be a federal question involved and at least $75,000 in dispute.
A)True
B)False
Q5) A summons is a paper ordering a defendant to appear in court at a certain time.
A)True
B)False
Q6) Briefly describe the process of jury selection.
Page 8
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Chapter 7: Crime
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Q1) Which of the following is NOT a component of money laundering?
A)taking the proceeds from a criminal act
B)attempting to conceal the source of the money
C)using the money to commit crimes
D)investing profits back into the company
Q2) The police arrived at Otis's apartment one evening and demanded to look around "just to make sure nothing was happening." They had no warrant and had received no complaints about him.Which statement best describes this situation?
A)The police probably should not have bothered Otis,but they really did nothing wrong.
B)The police violated Otis's Fourth Amendment rights.
C)The police were in the right;they must have suspected Otis had committed a crime.
D)The police violated Otis's Sixth Amendment rights.
Q3) The Federal Sentencing Guidelines are just guidelines.Judges do not have to follow them.
A)True
B)False
Q4) Explain the difference between civil law and criminal law.
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Chapter 8: Intentional Torts and Business Torts
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Q1) Wilma's arm is broken when Paula knocks her down during an argument.If Wilma sues Paula for battery,what damages is Wilma likely to receive?
Q2) The First Amendment guarantee of freedom of speech is an absolute right.
A)True
B)False
Q3) Which of the following is the general goal of compensatory damages?
A)to find a way to help the defendant avoid jail time for his or her crime
B)to restore the plaintiff to the position he or she was in before the injury
C)to punish the defendant for extreme and outrageous conduct
D)to make the defendant suffer as much as the plaintiff suffered
Q4) Which of the following statements is correct regarding the differences between contract,tort,and criminal law?
A)Tort and criminal law both impose a punishment for the defendant including prison and/or a fine.
B)Criminal law imposes duties of conduct on all persons.
C)Contract law awards money damages for the plaintiff;tort and criminal law do not.
D)Criminal law is prosecuted by the government.
Q5) Discuss the four elements that must be proven in order to win a defamation case.
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Chapter 9: Negligence, Strict Liability, and Product Liability
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Q1) Kelley went ice skating on a neighbor's pond,but she fell through a thin area into icy waters.Kelley did not have permission to be on the property,and the neighbor did not even know that she was there.Is the neighbor liable for Kelley's injuries?
A)Yes.The neighbor should have posted "thin ice" notices.
B)No.Kelley was a trespasser,and the neighbor can only be held liable for intentionally injuring her or for gross misconduct.
C)It may depend on Kelley's age.
D)Yes,the neighbor is strictly liable.
Q2) Kenneth was exposed to radiation on his job in an environmental cleanup.In a lawsuit against his employer,the court must decide the full extent of both present and future damages rather than allowing Kenneth to return to court years later if medical problems develop at that time.
A)True
B)False
Q3) The duty of care that each of us must follow is to behave as a reasonable person.
A)True
B)False
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Chapter 10: Privacy and Internet Law
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Q1) Which of the following is NOT true under the Electronic Communications Privacy Act?
A)An intended recipient of an email has the right to disclose it to third persons.
B)ISPs are prohibited from disclosing the content of electronic messages to anyone other than the addressee,even if the disclosure is necessary for the performance of the ISP's service.
C)An employer has the right to monitor workers' email if the monitoring occurs in the ordinary course of business.
D)An employer has the right to monitor workers' email if the employer provides the computer system.
Q2) After Jan's boyfriend broke up with her,she posted sexually explicit pictures of him on her Facebook page and wrote about how he was a terrible boyfriend.Jan's actions are protected by the First Amendment to the Constitution.
A)True
B)False
Q3) Discuss the liability of internet service providers (ISPs)under the Communications Decency Act of 1996 (CDA).
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Page 12
Chapter 11: Introduction to Contracts
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Q1) Which of the following represents a unilateral offer?
A)"I will pay you $50 if you mow my lawn."
B)"I will pay you $50 if you promise to trim that tree."
C)"I will pay you $50 for your CD player."
D)"I will pay you $50 for your backpack."
Q2) An express contract
A)must be in writing.
B)may be inferred by the conduct of the parties involved.
C)has both parties setting forth their intentions.
D)is not valid in many states.
Q3) Valerie promises Teresa that she will pay Teresa $75 if Teresa will clean Valerie's house by noon on Saturday.If Teresa cleans the house by noon on Saturday and Valerie pays the $75,then this is an implied,bilateral,executory contract.
A)True
B)False
Q4) When promissory estoppel is used by the courts,it is because there is NOT an enforceable contract present.
A)True
B)False
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Chapter 12: Agreement: Offers and Acceptances
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Q1) Software clickwrap and browsewrap agreements limiting the manufacturer's maximum responsibility to a refund of the purchase price even if the software destroys your hard drive have generally been found to be binding against consumers.
A)True
B)False
Q2) The intent of the offeror to extend an offer to the offeree is generally determined by reference to
A)the beliefs of the offeror.
B)the subjective intention of the offeror.
C)the assumptions of the offeror.
D)the words and conduct of the offeror.
Q3) Spangel Fashions sends out its spring and summer catalog to Cindy.Cindy falls in love with the cute dress featured on the front cover of the catalog.When Cindy calls to order the dress,she is informed that the company has sold out of the dress.Cindy is upset and claims that the store is in breach of contract.She argues that the catalog presented an offer,which she accepted when she called to order the dress.Is Cindy correct? Why/why not?
Q4) What elements are necessary for an offer to be valid? Give two examples of nonoffers.
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Chapter 13: Consideration
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Q1) As it pertains to consideration,which of the following constitutes value?
A)an illusory promise
B)a preexisting duty
C)a forbearance
D)All of these are correct.
Q2) Courts distinguish between mere gifts between parties and legally binding commitments by the element of consideration.
A)True
B)False
Q3) Denton agreed to build a cedar deck for the Thrashers for $7,000.After he began the work,the Thrashers asked him to add cedar flower boxes at one side.Denton replied he would,but it would cost an additional $600.The Thrashers would not be obligated to pay the additional sum because the original agreement already obligated Denton to complete the deck for $7,000.
A)True
B)False
Q4) An illusory promise is valid consideration.
A)True
B)False
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Chapter 14: Legality
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Q1) Which of the following can be characterized as an exculpatory clause?
A)Contractor is not liable for damage caused by its employees.
B)Buyer agrees to pay $5,000 for a used cell phone.
C)Creditor charges 45% interest on a loan.
D)All of these are correct.
Q2) L & M loaned Joan $400 so that she could buy her textbooks for the current semester.L & M's terms for repayment of the loan (including interest)are $200 in two months,$200 in four months,and another $100 at the end of the fifth month.The legal maximum rate of interest on this type of loan is 6 percent per annum.L & M's loan is usurious.
A)True
B)False
Q3) Discuss the pros and cons of gambling and state what the California Court of Appeals ruled regarding the treatment of gambling on credit.
Q4) What are the two most common settings for legitimate non-compete agreements?
A)real estate purchase and employment relationship
B)sale of a business and real estate purchase
C)real estate purchase and insurance purchase
D)sale of a business and employment relationship
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Chapter 15: Voidable Contracts: Capacity and Consent
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Q1) Adrianna wants to purchase a ten-acre tract of land.Under what circumstances would the seller be required to divulge information Adrianna does not possess?
Q2) If Jane persuades Linda to buy her horse by telling Linda that the horse runs "like the wind," then Jane's statement is A)fraud.
B)reckless misrepresentation.
C)a unilateral mistake.
D)puffery.
Q3) Marty,a 16-year-old,contracts with Cream-of-the-Crop Cycles to buy an $8,000 motorcycle.Marty agrees to make monthly payments until the purchase price plus interest is paid in full.Which of the following is correct?
A)The contract is voidable by Marty.
B)The contract is void as soon as it is made.
C)The contract is voidable by Cream-of-the-Crop Cycles.
D)The contract is voidable by either Marty or Cream-of-the-Crop Cycles.
Q4) Discuss the meaning of "material fact" in fraud situations.
Q5) Describe legal capacity and discuss how it applies to minors entering into and cancelling contracts.
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Chapter 16: Written Contracts
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Q1) Christine agrees to marry Barry after he tells her he will buy her a brand-new Rolls Royce within a year of their marriage.After they are wed,Barry refuses to give her the car.What will happen if Christine sues Barry?
A)She will win because of the "one-year rule."
B)She will lose because a promise made in consideration of marriage must be in writing.
C)She will win because a spouse is legally required to keep the promises made to his/her partner.
D)She will lose because Barry's promise of a car is a collateral promise,which must be in writing.
Q2) Parol evidence refers to anything (other than the written contract itself)that was said,done,or written before or as the parties signed the contract.
A)True
B)False
Q3) List the types of agreements that are within the Statute of Frauds and explain the consequences if the parties do not comply with the requirements of the Statute of Frauds.
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Chapter 17: Third Parties
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Q1) Johann,a well-known musician,agrees to give ten guitar lessons to Elton for $2,000.Nothing in the contract itself prohibits a delegation.If Johann delegates his obligation to Eugene,a second-year musical student and enthusiastic guitar player,then the delegation will probably be
A)permitted because contracts may be freely delegated.
B)permitted because the contract is just for music lessons.
C)prohibited because the contract is for service from a specific person.
D)prohibited by the UCC because this is a sale of services.
Q2) Which of the following duties can probably be delegated?
A)an agreement to perform an operation
B)a contract to paint a picture
C)an agreement by an attorney to draft a contract
D)an agreement to paint a house
Q3) Norm and Frank have a legal contract that is silent with regard to an assignment of the contract.In order for Norm to assign all or part of his rights under a contract,Frank must grant such permission to Norm.
A)True
B)False
Q4) Briefly discuss the enforceability of contracts by third parties.
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Chapter 18: Contract Termination
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Q1) Dana hires Paris to paint a portrait of her poodle,"Mack." The painting is to be done to Dana's personal satisfaction.Upon completion of the painting,which of the following will be true?
A)Dana may refuse to accept the painting if she really does not like it.
B)Dana may refuse to accept the painting only if a reasonable person would not like it.
C)Dana may refuse to accept the painting if she cannot afford to pay for it.
D)Dana may not refuse to accept the painting.
Q2) Which of the following statements is accurate concerning express conditions?
A)A court will enforce any express conditions intended by the parties.
B)A court may refuse to enforce an express condition intended by the parties if the court determines it is unfair and harmful to the general public.
C)A court requires strict performance if a clause of the contract expressly demands it.
D)A court applies an objective standard whenever ruling on a personal satisfaction contract.
Q3) Identify the factors courts consider in deciding the validity of commercial impracticability and frustration of purpose claims.
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Page 20
Chapter 19: Remedies
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Q1) Dr.Gonzalez ordered specialized surgical equipment from Physician's Supply Co. ,but the company informed Dr.Gonzalez that it would not be able to meet his order by the agreed date.Even if Dr.Gonzalez does nothing to secure equipment from another source,he will be able to recover damages since the contract was breached by Physician's Supply,not Gonzalez.
A)True
B)False
Q2) The concept that expectation interest is designed to put the injured party in the position he or she would have been in had both sides fully performed their obligations is found in
A)Bi-Economy Market,Inc.v.Harleysville Ins.Co.of New York.
B)Hadley v.Baxendale.
C)Hawkins v.McGee.
D)None of these are correct.
Q3) Abigail signed a contract to purchase a new car from Wolf's Auto Sales Company.The seller breached its agreement by not delivering the car.Abigail went to another car dealer and purchased the same model of car at the same price.Although she had experienced a legal injury,Abigail has no actual financial or other damages as a result of the breach.If Abigail sues and wins,what type of damages will she be awarded?
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Page 21
Chapter 20: Practical Contracts
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Q1) Some contracting parties are intentionally vague in contract terms.
A)True
B)False
Q2) A contract should have a descriptive title,which is generally in all capital letters,underlined and centered at the top of the page.
A)True
B)False
Q3) Which of the following guidelines applies to writing the title of a contract?
A)It should be written in general terms,like "Memorandum of Agreement."
B)It should be written like a sentence,with only the first letter capitalized.
C)It should be brief with no more than five words.
D)It should be descriptive of the agreement and typed in all capital letters.
Q4) The legal term for a promise in a contract is "provision."
A)True
B)False
Q5) Compare and contrast the perspectives of a lawyer and a business client when approaching the negotiation of a contract.
Q6) Outline the parts of a typical contract.
Q7) Define and compare the terms "vagueness" and "ambiguity."
Page 22
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Chapter 21: Introduction to Sales
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Q1) Oxtren,Inc.is a tools wholesaler.Oxtren sent M&E Tools a purchase order offering to buy 200 Model 308 milling and drilling machines with R-8 spindles.The purchase order stated the credit term to be 2% discount if payment was made in 10 days,with the full amount due in 30 days.M&E responded with an acceptance form accepting the offer.The acceptance form,however,stated that full payment was due on delivery and that disputes under the contract would be settled by arbitration. (A)
Do the parties have an agreement? (B) What is the payment term? (C) Is the arbitration clause part of the agreement?
Q2) Under the UCC,a modification to a contract for the sale of goods needs no consideration to be binding.
A)True
B)False
Q3) The UCC is federal legislation enacted by Congress.
A)True
B)False
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Page 23
Chapter 22: Ownership, Risk and Warranties
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Q1) A tag attached to a tree in a nursery identifying the tree as a Southern Magnolia creates an express warranty.
A)True
B)False
Q2) Crops are considered identified when they are planted.
A)True
B)False
Q3) Discuss the concept of insurable interest.Indicate the difference between a buyer's and a seller's insurable interest.
Q4) In a breach of warranty case,the buyer must
A)notify the seller of defects within a reasonable time.
B)bring any lawsuit no later than three years after the defect was discovered.
C)extend the statute of limitations in writing rather than orally if he chooses to allow a longer time for bringing suit.
D)notify the seller of defects within six months of his discovery or he cannot bring a lawsuit.
Q5) The UCC looks solely upon "title" to determine ownership in goods.
A)True
B)False
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Chapter 23: Performance and Remedies
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Q1) A homeowner has a contract with a firewood supplier to bring a stack of hardwood at the beginning of each month from October through March.If the supplier has brought a mixture of hard and soft woods for the first three deliveries and the homeowner accepted the deliveries,the homeowner cannot reject a delivery in January just because it includes some soft wood.
A)True
B)False
Q2) Leonna orders five table settings of china from Elite China.Each set includes a dinner plate,cup & saucer,bowl,and dessert plate.The china is sold only in sets.When the delivery arrives,Leonna discovers that Elite China sent the wrong pattern.Leonna immediately calls Elite China and is instructed to send the shipment back.While repacking the shipment,Leonna changes her mind and decides to keep the cups and saucers.She returns everything else.Can she do this?
Q3) Under the "perfect tender rule" the buyer may reject the goods if they fail in any respect to conform to the contract.
A)True
B)False
Q4) Identify the possible remedies for a buyer when the seller breaches a contract.
Q5) Identify the possible remedies for a seller when the buyer breaches a contract.
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Chapter 24: Secured Transactions
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Q1) In terms of collateral,which of the following would be categorized as "equipment"?
A)a mowing tractor used to mow personal property
B)crops produced by a farming operation
C)goods held by someone for sale or lease
D)a computer system used in a retail store
Q2) Explain the difference between attachment and perfection.
Q3) First Federal had a perfected security interest in Vicor's printing press.Second Credit had a security interest in the same press,but its interest was not perfected.First Federal takes priority over Second Credit.
A)True
B)False
Q4) Pharm-Ace holds a patent on a drug.Pharm-Ace used the patent (evidenced by the patent certificate)to secure a $1 million loan from First Bank.The patent is chattel paper.
A)True
B)False
Q5) A PMSI in consumer goods perfects automatically,without filing.
A)True
B)False
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Chapter 25: Creating a Negotiable Instrument
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Q1) There are three parties on a promissory note: the maker,the drawee,and the payee.
A)True
B)False
Q2) Charlene Brown has possession of a check made out to the order of Charlene Brown (herself)which she received in payment for writing a manuscript for her publisher.Charlene is a holder in due course and the publisher cannot claim any "real" defenses to payment.Charlene has an unconditional right to be paid for the check. A)True
B)False
Q3) A & D,Inc.wrote a negotiable note payable to Vicy,Inc.for the purchase of some satellite receivers.A & D left the amount of the note blank because it was uncertain as to amount of the applicable tax.Vicy completed the note for $3,000 more than A & D actually owed for the receivers it purchased.The note was negotiated to a holder in due course.A & D will not have to honor the note as this constituted fraud in the execution.
A)True
B)False
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Chapter 26: Liability for Negotiable Instruments
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Q1) Ivy wants to buy a necklace from Bethany for $500 and offers to write a check.To protect herself,Bethany insists that Ivy give her a certified check.If Ivy does this,who then becomes primarily liable?
A)Bethany
B)the bank
C)Ivy
D)both Ivy and the bank
Q2) Which of the following statements regarding instrument liability is TRUE?
A)The holder of an instrument must first ask for payment from those who are secondarily liable.
B)For any given instrument,only one person can be liable at a time.
C)A person with primary liability is unconditionally liable and must pay unless he or she has a valid defense.
D)A person with secondary liability has the same liability to the holder as a person with primary liability.
Q3) List the warranties a transferor of a negotiable instrument makes.
Q4) List and explain the five different ways to discharge an instrument according to Article 3 of the UCC.
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Chapter 27: Accountants Liability
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Q1) Fast Auditors prepared audited financial statements for Mega Company's registration statement in compliance with the 1933 Securities Act.John bought stock in Mega Company.It was discovered that the financial statements prepared for the registration statement contained some important omissions.John sued Fast Auditors to recover his investment when Mega Company turned out to be a bad investment.What must John prove to recover from Fast Auditors?
Q2) Under the amended Securities Exchange Act of 1934,accountants are liable jointly and severally whether or not they knew they were violating the law.
A)True
B)False
Q3) Larry is a certified public accountant in a firm that audits public companies.Larry is accused of unethical conduct.Is Larry required to abide by the ethical standards of the Public Company Accounting Oversight Board?
A)Yes.
B)He can be held liable only if he had actual knowledge of the particular guideline he is accused of violating.
C)No,the PCAOB establishes audit rules,not ethical guidelines.
D)No,the PCAOB has no authority over Larry.
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29
Chapter 28: Agency Law
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Q1) In its most basic terms,a fiduciary relationship is one of A)trust.
B)control.
C)competition.
D)disclosure.
Q2) Janelle has an art collection that she wants to sell.She calls Amber and tells her to sell the art collection for her at an upcoming auction.Amber agrees.This is an example of A)apparent authority.
B)respondeat superior.
C)intermediary agency.
D)express authority.
Q3) Which of the following persons is NOT an agent?
A)Diane,a shoe salesperson for a retail store.
B)Tim,a real estate broker for a large real estate company.
C)Craig,a telephone marketing employee.
D)Harold,a trustee to the beneficiaries of an estate.
Q4) A principal is bound by contracts that an agent enters into with authority.Discuss the various types of contractual authority an agent may have.
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Chapter 29: Employment and Labor Law
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Q1) The duty of fair representation created by the NLRA requires that
A)a union treat all members fairly,impartially,and in good faith.
B)a union must pursue any member's grievance against the employer.
C)an employer,in communications with employees during a union organizing effort,must fairly represent the effects it believes a union will have on the company.
D)the NLRB certify only proposed bargaining units that it thinks the union can properly represent.
Q2) In the absence of a specific law to the contrary,employers have the right to fire workers for off-duty conduct.
A)True
B)False
Q3) What is wrongful discharge and under what circumstances does the law prohibit the discharge of a worker?
Q4) Which is the best definition of "employment at will"?
A)In the absence of a specific legal exception,an employee can be fired for any reason.
B)Once hired,employees are free to choose whatever job they want to have.
C)An employee can leave a company at any time and for any reason.
D)Employees have a legal right to organize and join labor unions.
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Page 31
Chapter 30: Employment Discrimination
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Q1) Which of the following questions could an interviewer safely ask a candidate in a job interview?
A)Are you a United States citizen?
B)When did you graduate from college?
C)Could you carry a 100-pound weight,as required by this job?
D)Are you married?
Q2) As part of the hiring process,it is legal for employers to use any personal information potential employees post on social media.
A)True
B)False
Q3) Brian is a police officer.He just turned 54 years old and is worried that he will be forced to retire next year when he turns 55.The Age Discrimination in Employment Act will protect him if his employer tries to force him to retire early.
A)True
B)False
Q4) The EEOC is the federal agency responsible for enforcing Title VII. A)True
B)False
Q5) Discuss the two categories of sexual harassment.
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Chapter 31: Starting a Business: Llcs and Other Options
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Q1) Generally,a joint venture is a partnership created for one limited purpose.
A)True
B)False
Q2) When a partner leaves the partnership,whether it be voluntary or by expulsion,death or bankruptcy,it is called
A)dissociation.
B)termination.
C)detachment.
D)separation.
Q3) The Federal Trade Commission requires franchisors to
A)give prospective franchisees a franchise disclosure document at least 14 business days prior to the signing of a contract or payment of any money.
B)give prospective franchisees earnings information on the company.
C)disclose any litigation the company has ever been involved in.
D)let prospective franchisees know how many franchisees have gone out of business in the prior five years.
Q4) The most common form of business ownership is the corporation.
A)True
B)False
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Chapter 32: Partnerships
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Q1) A partnership can only be held liable for the partners' authorized acts.
A)True
B)False
Q2) Kyle,Pedro,and Madeline form a partnership.There is no agreement as to the duration of the partnership.The partnership is a partnership at will.
A)True
B)False
Q3) Which statement about the financial rights of partners is accurate?
A)All partnership property belongs to the individual partners.
B)Partners share profits equally unless they agree otherwise.
C)Partners share losses equally.
D)All of these are correct.
Q4) In which case did the plaintiff wish to be a partner so he could share in the profits of the enterprise?
A)Banker v.Estate of Banker
B)Moren v.Jax Restaurant
C)Herman v.Pickell & Kaleidoscope Books
D)Marsh v.Gentry
Q5) Identify and briefly discuss the management rights and duties of a partner.
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Chapter 33: Life and Death of a Corporation
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Q1) What is the first step that must be taken to terminate a corporation?
A)filing
B)vote
C)revocation
D)winding up
Q2) Wizardry Corporation's purpose clause in its charter states the following: "To operate a home-cleaning service business." After a few years of successful operation,Wizardry is offered the challenge of landscaping a neighboring business.If Wizardry accepts the offer,it would be violating its charter under
A)the de jure doctrine.
B)the de facto doctrine.
C)the ultra vires doctrine.
D)an estoppel theory.
Q3) A promoter is personally liable on any contract he or she signs before the corporation is formed.
A)True
B)False
Q4) Identify four circumstances that might persuade a court to pierce the corporate veil.
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Chapter 34: Management Duties
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Q1) Which of the following describes the duty of loyalty?
A)It requires managers to make decisions they reasonably believe to be in the best interest of the corporation.
B)It prohibits managers from making a decision that benefits them at the expense of the corporation.
C)It requires consideration of the interests of the surrounding community.
D)It requires using care that an ordinarily prudent person would take in a similar situation.
Q2) The Williams Act regulates the conduct of the target company in a takeover situation.
A)True
B)False
Q3) What is the definition of the business judgment rule?
Q4) Courts have long ruled that corporate directors and officers owe a fiduciary duty to
A)the corporation only.
B)the corporation and shareholders.
C)shareholders only.
D)society at large.
Q5) List and discuss the three ways to acquire control of a corporation.
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Chapter 35: Shareholder Rights
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Q1) The NYSE and NASDAQ both require that the members of the nominating committee be independent directors who are less likely to simply go along with whatever the CEO wants.
A)True
B)False
Q2) A proxy is a vote that is mailed in,like an absentee ballot.
A)True
B)False
Q3) Kian is the chief financial officer of Yonkka,Inc.He is also a member of Yonkka's board of directors.Kian is
A)an inside director.
B)an outside director.
C)holding an illegal position.
D)a public director.
Q4) Larry has owned $5,000 of stock in E-prise,Inc.for the past 18 months.Under SEC rules,Larry can require that one proposal be placed in the company's proxy statement to be voted on at the shareholder meeting.
A)True
B)False
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Chapter 36: Bankruptcy
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Q1) Generally,filing bankruptcy stops the collection activity of creditors.
A)True
B)False
Q2) In a voluntary petition,a claim of exemptions lists
A)the names and addresses of all creditors.
B)all assets that the debtor is entitled to keep.
C)the debtor's job,income,and expenses.
D)the debtor's assets and debts.
Q3) Alimony and child support obligations are considered priority claims.
A)True
B)False
Q4) When a debtor no longer has an obligation to pay a debt,that debt has been A)terminated.
B)revoked.
C)completed.
D)discharged.
Q5) In a Chapter 13 bankruptcy,creditors cannot force a debtor into bankruptcy;nor can they vote to confirm or reject a plan of reorganization.
A)True
B)False
38
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Chapter 37: Securities Regulation
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Q1) A control security is stock which gives the owner a controlling interest in the company.
A)True
B)False
Q2) The Fallwater Partnership wants to incorporate and is considering using a DPO.Explain what a DPO is and discuss the advantages and disadvantages of this course of action.
Q3) Felicity brought a lawsuit under Section 11 of the 1933 Act against Mojo Corp.What will Felicity have to prove in order to prevail?
A)only that she relied on the registration statement
B)that Mojo was negligent in preparing the registration statement
C)that there was a material misstatement or omission in the registration statement and she lost money
D)that Mojo intentionally tried to deceive investors
Q4) The "tipper" of inside information can be convicted of a crime,but the "tippee" cannot.
A)True
B)False
Q5) Discuss the process an issuer follows for either an IPO or a secondary offering.
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Chapter 38: Antitrust
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Q1) In vertical price-fixing,the manufacturer sets the
A)minimum prices that retailers may charge.
B)maximum prices that retailers may charge.
C)number of items a retailer may sell at a specific price.
D)date by which a retailer must sell products.
Q2) Explain horizontal price-fixing and vertical minimum and maximum price-fixing.Discuss their status under antitrust laws.
Q3) What is the Justice Department's current position relative to reciprocal dealing agreements?
A)The Justice Department actively enforces this illegal activity.
B)The Justice Department is only concerned about these agreements if a large,national company is involved.
C)The Justice Department only gets involved if such an agreement will foreclose a significant share of the market and if the participants agreed not to buy from other competitors.
D)The Justice Department only gets involved if such an agreement is "decidedly uneven," meaning that one company benefits significantly more than the other.
Q4) Discuss when monopoly power is not a violation of Section 2 of the Sherman Act.
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Page 40
Chapter 39: Consumer Protection
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Q1) Chase received a magazine in the mail that he did not order.He was surprised,but read and enjoyed the magazine.A month later,another copy arrived,along with a bill for $25 to cover the subscription.Which of the following applies to this situation?
A)Chase does not have to pay for the magazine,even if the company continues to send it to him.
B)Chase needs to return the two copies of the magazine he received to show that he is not interested.
C)Chase must notify the magazine whether or not he wants to continue receiving the magazine within 30 days.
D)Chase must pay the bill because the magazine company is entitled to be paid for sending out subscriptions.
Q2) Prime Products,Inc.found out that it was going to take 3 weeks to ship the comforter Margaret ordered instead of the 7 days it had originally promised her.Prime Products must cancel Margaret's order and notify her that it can deliver within 3 weeks if she wants to reorder.
A)True
B)False
Q3) What must a seller disclose under the Magnuson-Moss Warranty Act?
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Page 41
Chapter 40: Environmental Law
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Q1) The EPA will allow individual states' air pollution level to rise as long as it still meets the EPA's existing national standards.
A)True
B)False
Q2) The disposal of nonhazardous solid waste has generally been left to the states.
A)True
B)False
Q3) Foiler Manufacturing,a new corporation,estimates it may generate approximately 200 kilograms of hazardous waste each month.Discuss the EPA requirements it faces in relation to this waste.
Q4) In considering what is navigable waters,the Supreme Court ruled that
A)the definition of navigable water must include all ponds and lakes even if they are not connected to open bodies of water.
B)waterways confined to one state can be navigable water if pollutants can leak into drinking water.
C)the definition of navigable water excludes intermittent streams or wetlands.
D)all waterways including wetlands,intermittent streams,and ponds are all navigable waters.
Q5) Discuss the major provisions of the Clean Air Act.
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Chapter 41: Intellectual Property
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Q1) James and his band played a very familiar song.However,they made up different words for the song that were intended to be funny.James's version of the popular song with different words is known as a A)knock off.
B)parody.
C)mockarama.
D)link.
Q2) Explain what a trademark is,and list the four different types of "marks" that can be protected under trademark law.Explain how each mark is used.
Q3) Ernest invents a novel,useful,nonobvious product.He
A)must apply for a patent within one year of selling the product commercially.
B)is entitled to a patent over someone else who invents the same product if he is the first to invent it.
C)may receive patent protection for two years by filing a simpler,shorter,cheaper provisional patent application while he is working on his complex,regular patent application.
D)may sell his product for up to five years to see how well it sells before going through the complex process of filing a patent application with the PTO Office.
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Page 43
Chapter 42: Real Property and Landlord Tenant Law
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Q1) Darlene conveys her beachfront property to Dan as a life estate,and upon Dan's death,the property will revert to Darlene or her heirs.Darlene's future interest in the beachfront property is called a remainder.
A)True
B)False
Q2) Ollie leased a building in Old Town.Ollie installed a washer and dryer unit and a new furnace in the basement of the building with new duct work throughout the building.Upon expiration of the lease,Ollie intends to remove the washer and dryer,but not the furnace.The washer and dryer can easily be removed without harming anything.Removal of the furnace,however,will damage the building.Are the washer,dryer,and furnace fixtures?
A)The washer,dryer,and furnace are all fixtures.
B)The furnace is a fixture,but the washer and dryer are not.
C)The washer and dryer are fixtures,but the furnace is not.
D)The furnace and the washer are fixtures,but the dryer is not.
Q3) Landlords have the right,and may have a duty,to evict tenants who seriously disturb others.
A)True
B)False
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Chapter 43: Personal Property and Bailment
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Q1) Farmer Fred is leasing pasture land from Wealthy Warren.Farmer Fred is working the soil to turn the pasture land into land that will be able to grow crops.As Farmer Fred is preparing the field,he discovers a treasure chest full of gold and silver coins.The coins are all dated before 1810.A finder of treasure trove under common law,
A)is entitled to keep the treasure trove.
B)is required to turn the property over to the owner.Here,under common law,Farmer Fred is required to turn the treasure trove over to Wealthy Warren.
C)is required to turn the treasure trove over to the State.
D)is required to turn the treasure trove over to the federal government who will give the treasure trove to the closest Native American reservation.
Q2) Jody loaned her neighbor,Phil,her snow blower.Phil set it near his driveway and later accidentally ran over and destroyed it.In a suit to recover damages,Jody as plaintiff has the burden of proving that Phil was negligent and caused the destruction of her snow blower.
A)True
B)False
Q3) Distinguish between a contract and a gift.Give an example of each.
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Chapter 44: Planning for the Future: Wills, Trusts and Insurance
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Q1) Insurance policies often contain a covenant of good faith and fair dealing.Even if the clause is not in the policy,often courts will imply it.Explain the covenant of good faith and fair dealing and provide an example illustrating when an insurance company might breach this covenant.
Q2) Parents may not disinherit their minor children without good reason.
A)True
B)False
Q3) Experts estimate that more than _______ percent of the population will not be capable of making their own medical decisions at the end of their lives.
A)25
B)50
C)75
D)90
Q4) The Uniform Probate Code has been adopted in all states.
A)True
B)False
Q5) The only function of a will is to dispose of a person's property upon death.
A)True
B)False
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