Commercial Law
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Course Introduction
Commercial Law explores the legal principles and regulations that govern business and commercial transactions. The course covers key topics such as the formation and enforcement of contracts, the sale of goods, agency, negotiable instruments, secured transactions, and the legal structures of business organizations. Students will gain an understanding of both domestic and international commercial law, learning how legal frameworks facilitate commercial activity and how to resolve disputes that may arise in business contexts. Through case studies and practical examples, the course aims to equip students with the knowledge to navigate legal challenges in the business world.
Recommended Textbook
Business Law Text and Exercises 7th Edition by Roger
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Page 2
LeRoy Miller
Chapter 1: Introduction to the Law and Our Legal System
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Q1) A court may depart from a precedent if the precedent is no longer valid.
A)True
B)False
Answer: True
Q2) The National Conference of Commissioners on Uniform State Laws was formed because
A)conflicting state statutes frequently made trade and commerce between states very difficult.
B)the Eleventh Amendment of the U.S.Constitution required it.
C)Congress wanted to create a uniform set of laws for interstate commerce.
D)President Grover Cleveland ordered it.
Answer: A
Q3) Stare decisis is a doctrine obligating judges to follow the precedents established within their jurisdictions.
A)True
B)False
Answer: True
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Chapter 2: Ethics in Business
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Sample Questions
Q1) It is illegal for a company with a product that is outlawed in one country to look elsewhere for a market.
A)True
B)False
Answer: False
Q2) Some companies set up confidential systems for employees to "raise red flags" about suspected unethical practices.
A)True
B)False
Answer: True
Q3) Cost-benefit analysis is part of
A)duty-based ethics.
B)Kantian ethics.
C)rights-based ethics.
D)utilitarian ethics.
Answer: D
Q4) Effective corporate ethical policies must be integrated throughout the firm.
A)True
B)False
Answer: True
Page 4
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Chapter 3: The Courts and Alternative Dispute Resolution
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Q1) Arbitration is always legally binding.
A)True
B)False
Answer: False
Q2) On a motion for judgment on the pleadings,a court may consider evidence outside the pleadings.
A)True
B)False
Answer: False
Q3) Emil wants to initiate a suit against Fast Credit Company by filing a com?plaint.The complaint should include
A)an explanation of the proof to be offered at trial.
B)a motion for judgment on the pleadings.
C)a writ of certiorari.
D)a statement of the grounds for the court to exercise jurisdiction.
Answer: D
Q4) An appellant is the party who appeals to an appellate court.
A)True
B)False
Answer: True
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Chapter 4: Constitutional Law
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Sample Questions
Q1) Under the Constitution,the judicial branch interprets the laws.
A)True
B)False
Q2) The First Amendment requires a complete separation of church and state.
A)True
B)False
Q3) The commerce clause of the U.S.Constitution is found in
A)Article I,Section 8.
B)Article I,Section 2.
C)Article VIII,Section 1.
D)Article II,Section 8.
Q4) Congress may tax some states while exempting others.
A)True
B)False
Q5) Marie claims that a Nebraska state statute infringes on her "procedural due process" rights.This claim focuses on A)procedures used in making decisions to take life,liberty,or property.
B)the content of the statute.
C)the similarity of the treatment of similarly situated individuals.
D)the steps to be taken to protect Marie's privacy.
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Chapter 5: Torts and Cyber Torts
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Q1) Ralph,a van driver for Speedy Delivery Company,causes a multi-vehicle accident on a city street.Ralph and Speedy are liable to
A)all those who were injured.
B)only those who were uninsured.
C)only those whose injuries could have been reasonably foreseen.
D)only those whose vehicles were closest to Ralph's van.
Q2) Defense of others is a defense to an allegation of battery,but not assault.
A)True
B)False
Q3) Some risks are obvious but,with respect to the duty of care required to establish negligence,a warning is always necessary.
A)True
B)False
Q4) A tort is the only type of wrong that exists in the law.
A)True
B)False
Q5) If no harm results from an allegedly negligent act,there is no liability.
A)True
B)False
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Chapter 6: Intellectual Property and Internet Law
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Q1) Patent infringement is a tort.
A)True
B)False
Q2) Downloading software or music into a computer's random access memory without authorization is copyright infringement.
A)True
B)False
Q3) Pricing information cannot be a trade secret.
A)True
B)False
Q4) College Copy Shop (CCS) compiles,copies,and sells reading materials to students on the instructions of their professors,who indicate which parts of which publications should be included.These include texts published by Deep Topics,Inc.CCS does not obtain the permission of Deep Topics,or any of the other original publishers of the copied materials,and does not pay royalties on the sales of the compilations.Deep Topics and others file a suit against CCS,alleging infringement of the plaintiffs' intellectual property rights.Which type of intellectual property is involved in this situation? What is CCS's likely defense? How is a court most likely to rule? Explain.
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Chapter 7: Criminal Law and Cyber Crime
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Q1) Via the Internet,Rocky sabotages the computer system of Quik Chik'n Company,a food manufacturer,with the purpose of altering the levels of ingredients of the company's products so that consumers of the food become ill.Rocky is
A)a cyberterrorist.
B)a network employee.
C)an entrapper.
D)a prosecutor.
Q2) Smitty,driving while intoxicated,causes a car accident that results in the death of Tiffany.Smitty is arrested and charged with a felony.A felony is a crime punishable by death or imprisonment for A)any period of time.
B)more than one year.
C)more than six months.
D)more than ten days.
Q3) In some states,misdemeanors are punishable by imprisonment for up to 10 years.
A)True
B)False
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Chapter 8: Introduction to Contracts
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Sample Questions
Q1) Which of the following is NOT a true contract?
A)An express contract
B)An implied contract
C)A quasi contract
D)An informal contract
Q2) A check,like other negotiable instruments,is a formal contract.
A)True
B)False
Q3) GR8 Marketing Company and Brainfreeze Tunes,Inc.,sign a document that states GR8 agrees to create a marketing campaign for Brainfreeze,which agrees to pay GR8 for the service.GR8 and Brainfreeze have
A)an executed contract.
B)an express contract.
C)an implied contract.
D)a quasi contract.
Q4) A contract is an agreement that can be enforced in court.
A)True
B)False
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Chapter 9: Offer and Acceptance
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Q1) Jon says to Kristy,"I would like to sell you my sports memorabilia collec?tion." This is not an offer because it
A)does not describe the subject matter sufficiently.
B)does not include a price term.
C)only expresses an opinion.
D)only invites Kristy to negotiate.
Q2) Elin decides to try to sell her collection of celebrity memorabilia in an auction "with reserve." If Elin changes her mind,she can withdraw her collection
A)only before the auctioneer announces that the items are sold.
B)only before the auctioneer delivers the items to the buyers.
C)under no circumstances.
D)within thirty days after the auction.
Q3) Shelby offers to make digital copies of Relay Company's business conference videotapes,CDs,DVDs,and other media for $500.Under the mailbox rule,Relay's acceptance by e-mail will be considered effective when A)received.
B)sent.
C)followed up by a confirmation letter sent by regular mail.
D)composed on a Relay computer.
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Page 11
Chapter 10: Consideration
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Q1) Jack buys Jill's house for $1.00.If the contract is later disputed in court,the court is likely to declare Jack's consideration
A)unconscionable.
B)legally sufficient.
C)adequate.
D)a forbearance.
Q2) A covenant not to sue does not always bar further recovery.
A)True
B)False
Q3) Refer to Fact Pattern 10-4.In Carmen's suit against Dex to recover her repair and medical expenses,Carmen will most likely recover
A)half the amount to pay the costs over what Dex already paid Carmen.
B)nothing.
C)the estimated amount to pay those costs and any other liability.
D)the exact amount to pay those costs and no more.
Q4) In contract law,"consideration" refers to the time that a party takes to evaluate a deal.
A)True
B)False
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Chapter 11: Capacity
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Sample Questions
Q1) Disaffirmance is the legal avoidance,or setting aside,of a contractual obligation.
A)True
B)False
Q2) Fay is mentally incompetent but has not been so adjudged by a court.Any contract Fay enters into is
A)voidable if Fay has a lucid interval at the time of contracting.
B)voidable if Fay lacks the capacity to comprehend the consequences.
C)voidable if the other party does not realize that Fay is incompetent.
D)unavoidable.
Q3) Jody,a minor,is living at home with her parents,but signs a lease with Idyll Grove
Apartments,a land?lord,to rent an apartment.Jody can
A)disaffirm the lease because her parents can be held liable for it.
B)disaffirm the lease without liability.
C)not disaffirm the lease because an apartment is a "necessary."
D)not disaffirm the lease because she intended to live on her own.
Q4) In general,minors are NOT personally liable for their torts.
A)True
B)False
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Page 13
Chapter 12: The Legality of Agreements
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Sample Questions
Q1) U-Can-Own-It Corporation sells appliances to less educated consumers,including Vi,on installment plans.U-Can-Own-It files a suit against Vi when she stops making payments.Vi claims that the deal is unconscionable.The court will most likely consider
A)the geographic area of the relevant market.
B)the parties' relative bargaining power.
C)the quality of related products in the general market.
D)the relation of this deal to those of other customers.
Q2) Statutes often prescribe the terms of contracts.
A)True
B)False
Q3) William obtains a loan from a bank at 4.5% interest.The state where he obtains the loan has a usury statute that limits interest rates to a 3.5% maximum.William's contract with the bank is
A)enforceable only if William does not attempt to disaffirm it.
B)enforceable only if the bank does not attempt to disaffirm it.
C)enforceable only if both William and the bank knew of the statute when the contract was signed.
D)not enforceable.
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Chapter 13: Mistakes and Other Contract Defects
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Q1) Shelby wants to sell his Bobcat Skidsteer for $21,000.He emails Dave and offers to sell Dave the Bobcat.Due to a typo,Shelby tells Dave that he wants $20,100 for the Bobcat.Dave accepts the offer and pays Shelby $20,100.Shelby is
A)not bound by the contract due to a unilateral mistake.
B)not bound by the contract due to a bilateral mistake.
C)not bound by the contract due to a mistake of value.
D)bound by the contract.
Q2) Katie and Linda enter into a contract for Katie to buy Linda's house in which there are several terms that are subject to more than one reasonable interpretation.If Katie and Linda attach materially different meanings to a term
A)only Katie will be able to void the contract.
B)only Linda will be able to void the contract.
C)neither Katie nor Linda will be able to void the contract.
D)either Katie or Linda will be able to void the contract.
Q3) Words or terms in contracts that are subject to more than one reasonable interpretation can lead to bilateral mistakes.
A)True
B)False
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15
Chapter 14: Written Contracts
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Sample Questions
Q1) An integrated contract is a contract with more than one subject or part.
A)True
B)False
Q2) Ted and Svetlana orally agree to several different oral contracts.The Statute of Frauds will bar enforcement of an oral contract for
A)a deal that will be performed within a year.
B)a primary obligation.
C)a sale of goods for $100.
D)a sale of land.
Q3) Martha buys a candy bar for $5 and signs a contract for delivery of fresh flowers to her mother's nursing home every week for the rest of her mother's life.She then enters into a contract to assume George's debt to FastCars Dealership.Martha receives no personal benefit from assuming George's debt.The Statute of Frauds covers A)the candy bar purchase only.
B)the candy bar purchase and the contract for the flower delivery only.
C)the contract to assume George's debt only.
D)the contract to assume George's debt and the contract for the flower delivery only.
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Page 16
Chapter 15: Third Party Rights
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Sample Questions
Q1) An incidental beneficiary can sue directly to enforce a promisor's promise.
A)True
B)False
Q2) Ron makes a contract with Stu that indirectly benefits Tim,although nei?ther Ron nor Stu intended that result.Tim is
A)a delegatee.
B)an assignee.
C)an incidental beneficiary.
D)an intended beneficiary.
Q3) A right can be assigned even if the assignment will significantly alter the risks or duties of the obligor.
A)True
B)False
Q4) Refer to Fact Pattern 15-1.Delta will realize a profit from the sale of prod?ucts to Four-Square to remodel Carol's store.Delta is
A)a delegatee.
B)an assignee.
C)an incidental beneficiary.
D)an intended beneficiary.
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Chapter 16: Contract Discharge and Remedies
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Q1) Dobry Die & Mold,Inc.,enters into a contract with Chet's Refitting Service to fix Dobry's precisely engineered molding equipment.If Chet's delays the repair for five days,knowing that Dobry will lose a certain percentage of profit for the delay,Dobry might be awarded consequential damages to
A)establish,as a matter of principle,that Chet's acted wrongfully.
B)provide Dobry with funds for a foreseeable loss beyond the contract.
C)provide Dobry with funds for its loss of the bargain.
D)punish Chet's and set an example to deter others from similar acts.
Q2) Quasi contracts allow the courts to act as if a contract exists when there is no contract.
A)True
B)False
Q3) Hybrid Corporation enters into a contract with Insure Service,Inc.(ISI),to obtain health insurance for Hybrid employees.If ISI breaches the contract and Hybrid is awarded compensatory damages,the purpose would be to A)establish,as a matter of principle,that ISI acted wrongfully.
B)provide Hybrid with funds for a foreseeable loss beyond the contract.
C)provide Hybrid with funds for its loss of the bargain.
D)punish ISI and set an example to deter others from similar acts.
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Page 18
Chapter 17: E-Contracts
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Q1) Bret enters into a contract with Collegiate University over the Internet to take an online course titled "Internet Law." This is an e-contract because
A)the contract was entered into in e-commerce.
B)the contract was formed between a student and a university.
C)the contract will be performed online.
D)the subject matter of the contract is "Internet Law."
Q2) The UETA does not require that an agreement to conduct a transaction electroni?cally be made electronically.
A)True
B)False
Q3) National Shipping Corporation and Office Software Company (OSC) make a deal for OSCs products,communicating entirely online.Under the UETA,an electronic record is considered sent
A)only at a midway point between the sender and recipient.
B)only on coming into the recipient's control.
C)only on leaving the sender's control.
D)when it leaves the sender's control or comes into the recipient's control.
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Chapter 18: Introduction to Sales and Lease Contracts
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Q1) Clean Machines Company makes washing machines.Over the phone,Clean offers to sell Dealers Appliance Outlet one hundred model EZ2000 washers at a price of $150 per unit.Clean says that it will keep the offer open for ninety days.Dealers responds that within two or three weeks it will decide whether to accept.One week later,Clean faxes,and Dealer receives,notice that the offer is withdrawn.Dealer immediately phones Clean to accept the $150-per-unit offer.When Clean refuses to deliver at that price,Dealer files a suit.Clean asserts,first,that there is no contract and,second,that if there is a contract,it is unenforceable.Discuss Clean's assertions.
Q2) Tune Products,Inc.,offers to sell to Unlimited Sales Company one hundred MP3 players at $50 a piece,subject to certain specific delivery dates.Unlimited replies with a signed purchase order that reads,"Accept your of?fer for 100 I-appliances at $50 each. Must be delivered to our ware?house." Tune does not respond or deliver the goods.Unlimited files a suit for breach of contract,to which Tune answers that there is no contract because Unlimited's purchase order contained additional terms and is not signed by Tune.Can Unlimited recover? Explain.
Q3) A lease is NOT exempted from coverage under the UCC.
A)True
B)False
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Chapter 19: Title and Risk of Loss
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Q1) "Unless otherwise explicitly agreed," title passes to the buyer at the time at which the seller orally agrees to deliver the goods.
A)True
B)False
Q2) Sweets Store buys chocolate from Tasty Candies,Inc.The parties agree that the chocolate will be shipped "F.O.B.Sweets" via United Railroad Corporation.The chocolate is lost in transit.The loss is suffered by
A)Sweets and Tasty,but not United.
B)Sweets only.
C)Sweets,Tasty,and United.
D)Tasty only.
Q3) Megan,an agent for a department store,orders one hundred dresses from Sal's Clothing Shop for the Spring Blossom Sale.There is no specific agreement in the sale contract indicating when title will pass to the department store.The title will pass to the department store when
A)Megan signs the contract.
B)Megan and the Sal's Clothing Shop agent sign the contract.
C)Sal's Clothing Shop physically delivers the dresses to the department store.
D)Megan pays Sal's Clothing Shop for the dresses.
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Page 21
Chapter 20: Performance and Breach
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Q1) Clear Day Company,which is based in Delaware,agrees to sell fifty windows,currently stored in Florida,to Far Vu,Inc.,which is based in Hawaii.Absent an agreement to the contrary,the place of deliv?ery is in
A)California.
B)Delaware.
C)Florida.
D)Hawaii.
Q2) There are no circumstances under which a contract can be tendered by multiple deliveries of goods.
A)True
B)False
Q3) Mineral Resource Company contracts to provide several manufacturers with tin.When a cartel of tin-producing countries suddenly embargoes future shipments of tin to Mineral Resource so that it cannot fulfill its contracts,the distributor
A)can substitute some other material for the tin.
B)is excused from the performance of its contracts.
C)is liable for breach of contract.
D)must still supply the tin needs of its customers.
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Chapter 21: Warranties and Product Liability
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Q1) Sigrud buys spiked mountain-climbing shoes from Rockridge Gear store. The spikes come out of the shoes when Sigrud is on the side of a mountain,caus?ing her to be injured in a fall.Rockridge breached
A)an express warranty.
B)an implied warranty of fitness for a particular purpose.
C)an implied warranty of merchantability.
D)a warranty of title.
Q2) Cutter Company makes and sells table saws,which are designed to be safe if used properly.Erin buys a Cutter saw and lends it to her neighbor Frank.To reach a toolbox on a high shelf in his garage,Frank props the saw at an angle against a cabinet and climbs onto the saw.Frank loses his footing,slips off the saw,falls on the blade,and is injured.He files a product liability suit against Cutter,on the ground of negligence.On what basis could the maker prevail?
Q3) The course of performance is the practice or method of dealing so regularly observed as to justify an expectation that it will be observed in a particular transaction.
A)True
B)False
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Page 23
Chapter 22: Consumer Protection
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Q1) Obvious exaggerations in advertising are prohibited by federal statutes.
A)True
B)False
Q2) Mouth-Waterin' Treats Company wants to sell its candy in a normal-sized package la?beled "Gigantic Size." NuFabrics,Inc.,wants to advertise its sweaters as hav?ing "That Wool Feel," but does not want to specify on labels that the sweat?ers are 100 percent polyester.Can these firms market their products as they would like? If not,why not?
Q3) "Regulation Z" is a generic term for any consumer protection law.
A)True
B)False
Q4) Drugs must be shown to be effective before they can be marketed.
A)True
B)False
Q5) Steel Tool Company makes and sells tools.One of the tools is believed to be haz?ardous.Steel may be required to A)export the tool and sell it only abroad.
B)increase the price to cover the cost of any injuries or damage.
C)reduce the price to indicate the hazard to consumers.
D)remove the tool from the market.
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Chapter 23: The Essentials of Negotiability
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Q1) On the back of a check payable to Nero,he writes "Pay to Odell,without recourse" and signs it.This
A)does not effect the check's negotiability or any party's liability.
B)relieves Nero of liability on the check.
C)relieves Odell of liability on the check.
D)renders the check nonnegotiable.
Q2) With an interest-bearing instrument,it is necessary to know the exact interval during which the interest will accrue.
A)True
B)False
Q3) Once a negotiable instrument is issued,it can be transferred by assignment.
A)True
B)False
Q4) On the back of an envelope,Phoebe writes,"I promise to pay Quint or bearer $600 on de?mand.[Signed] Phoebe." What type of instrument is this? Is it nego?tiable? If not,why not?
Q5) To be negotiable,an instrument must be payable in a certain amount.
A)True
B)False
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Chapter 24: Transferability and Liability
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Q1) Stature Loan Company has notice that a promissory note is overdue if the note is a demand instrument and Stature takes it
A)an unreasonable time after its due date.
B)before its due date.
C)on its due date.
D)without noticing its due date.
Q2) A fictitious payee is a payee on a negotiable instrument whom the maker or drawer does not intend to have an interest in the instrument.
A)True
B)False
Q3) Jill,in good faith and for value,gets from Kiley a negotiable bearer in?stru?ment.Jill does not know that Kiley stole the instrument.Jill is
A)an HDC.
B)not an HDC,because Kiley did not acquire the instrument for value.
C)not an HDC,because Kiley did not acquire the instrument in good faith.
D)not an HDC,because the instrument is a bearer instrument.
Q4) A maker is primarily liable on an instrument.
A)True
B)False
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Chapter 25: Checks and Banking in the Digital Age
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Q1) Elton presents an uncertified check for payment more than six months after its date.The check was drawn by Dakota on her account in First Community Bank.The usual banking practice in such a case is to A)cash the check.
B)consult the customer.
C)refuse to cash the check.
D)ask the payee what he or she would prefer.
Q2) The rights and duties of a bank and its customer are contractual.
A)True
B)False
Q3) A bank has no right to charge a customer's account for the amount of a stale check. A)True
B)False
Q4) A customer must examine a bank statement and report any discovered forged signa?ture to recover from the bank for the forgery.
A)True
B)False
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Chapter 26: Agency
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Q1) Will is an agent for MaryElise.MaryElise gives Will clear instructions to only enter into contracts on Mondays,Wednesdays or Fridays.Will enters into a contract on MaryElise's behalf on a Tuesday.Will has breached
A)the duty of performance.
B)the duty of loyalty.
C)no duty.
D)the duty of obedience.
Q2) An agency relationship must be based on some affirmative indication that the agent agrees to act for principal and the principal agrees to have the agent so act.
A)True
B)False
Q3) Lenore is the sole proprietor of Mall Kiosks.With respect to contracting for her own business interests,Lenore is
A)an agent and has the authority.
B)an agent but does not have the authority.
C)not an agent and does not have the authority.
D)not an agent but does have the authority.
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Chapter 27: Employment and Immigration Law
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Q1) A promise that an employer makes in an employee handbook to employees regarding discharge policy will NOT be considered part of an implied contract.
A)True
B)False
Q2) Under federal law,both employers and employees contribute to help pay for the employees' loss of income on retirement.
A)True B)False
Q3) An employer may avoid laws regulating monitoring activities by telling employees that they are subject to monitoring.
A)True
B)False
Q4) Hu,Ivan,and Juana apply to work for King Meatpacking Company.These individuals' identities and eligibility to work must be verified by A)the employer.
B)the individuals.
C)the individuals' countries of origin.
D)the U.S.Citizenship and Immigration Services.
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Chapter 28: Discrimination and Labor Law
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Q1) An em?ployer who hires and fires workers ac?cording to a fair seniority sys?tem may have a good defense to an employment discrimination suit.
A)True
B)False
Q2) Title VII covers employees' online activities.
A)True
B)False
Q3) A good business reason for a practice that has a discriminatory effect may permit an employer to avoid liability for discrimination.
A)True
B)False
Q4) Machine Corporation requires its employees to have a high school diploma,claiming a definite connection between a high school edu?ca?tion and job performance.In a suit against Machine Corporation under Title VII,this requirement is shown to have a discriminatory effect.The employer has
A)no defense.
B)a bona fide occupational qualification defense.
C)a business necessity defense.
D)a seniority systems defense.
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Chapter 29: Sole Proprietorships,partnerships, Limited
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Q1) A limited liability company shares the tax advantages of a partnership.
A)True
B)False
Q2) One of the disadvantages of a sole proprietorship is that the owner is liable for all the actions of the business.
A)True
B)False
Q3) Will and Jay want to form a general partnership.To form a legal partnership,their agreement need NOT include
A)a sharing of profits and losses.
B)a joint ownership of the business.
C)an equal right to management in the business.
D)the initials LLC in the name of the business.
Q4) Federal law dictates the requirements for the formation of a limited liability company.
A)True
B)False
Q5) A partnership may be sued.
A)True
B)False
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Chapter 30: Formation and Termination of a Corporation
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Q1) DVD Rental Corporation would like to change its corporate status to that of an S corporation to avoid in?come taxes at the corporate level.To qualify,DVD Rental Corporation must
A)be located in the United States.
B)have more than one hundred shareholders.
C)be a non-profit corporation.
D)have more than one class of stock.
Q2) Wiley incorporates his business as Wiley Wire Corporation in Texas.He and his group of shareholders intend to make a profit from their sales of fencing wire.Wiley Wire Corporation is
A)a nonprofit corporation.
B)not a corporation.
C)an alien corporation.
D)a private corporation.
Q3) Smalltown,Alabama is incorporated by the government.Smalltown is
A)a foreign corporation.
B)a public corporation.
C)a private corporation.
D)an alien corporation.
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Page 32
Chapter 31: Management and Ownership of a Corporation
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Q1) A director does not need to disclose any conflict of interest before voting on a proposal.
A)True
B)False
Q2) A corporation's officers and other executive employees are hired by corporate shareholders.
A)True
B)False
Q3) The board of directors of Integral Components Corporation consists of Frida,Gayla,and Hart.A quorum is the minimum number of these directors
A)who must be at odds in a dispute to call for its resolution.
B)who must be present to validly transact business.
C)that the shareholders may remove from office at any one time.
D)whose positions must be vacant to warrant an election.
Q4) Corporate directors and officers are insurers of business success. A)True B)False
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Chapter 32: Secured Transactions
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Q1) On default,unless the security agreement states otherwise,the secured party has the right to take possession of the collateral.
A)True
B)False
Q2) Middling Credit Corporation asks Little Supply Company to agree to a security agreement that provides for coverage of the proceeds from the sale of after-acquired prop?erty.This is
A)a first-in-time rule.
B)a floating lien.
C)a funds guaranty.
D)in violation of secured transactions law.
Q3) The price that a secured party obtains on a sale of collateral is all that the creditor can recover on the debt.
A)True
B)False
Q4) A floating lien cannot apply to the proceeds of the sale of after-acquired property.
A)True
B)False
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Page 34
Chapter 33: Creditors Rights and Remedies
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Q1) Before the guarantor of a debt can be required to answer for the debt of a debtor,the debtor must have defaulted on the underlying obligation.
A)True
B)False
Q2) Michael performs a contract with Jill to fix the brakes on her car.Jill leaves her car with Michael,but then she refuses to pay Michael after he completes the work.Michael tells Jill that he will not return her car until she pays.Michael's lien on Jill's car will end A)in 30 days.
B)in 60 days.
C)when Michael voluntarily surrenders possession of the car. D)when Jill obtains a court order requiring Michael to return the car.
Q3) An employer can refuse to turn over a debtor's wages.
A)True B)False
Q4) An employee cannot be discharged due to a garnishment order.
A)True
B)False
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Chapter 34: Bankruptcy
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Q1) A Chapter 11 reorganization plan must provide for payment of tax claims over a five-year period.
A)True
B)False
Q2) Kofi files a petition for bankruptcy.Kofi must include with the petition
A)a plan to turn over his future income to the trustee.
B)a certificate proving attendance at a credit-counseling briefing.
C)a provision of adequate means for the petition's execution. d a statement of preference for one creditor over another.
Q3) Lulu joins with other creditors to force Mikhail,a debtor,into bankruptcy.One of the goals of bankruptcy law with respect to creditors is to
A)ensure that creditors will continue to lend to insolvent debtors.
B)protect creditor assets from diminution in value.
C)provide equitable treatment in the competition for debtor assets.
D)make all debtor property available for creditor claims.
Q4) Before filing for bankruptcy,a consumer-debtor must receive credit counseling.
A)True
B)False
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Page 36
Chapter 35: Insurance
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Q1) An insurance policy that provides for the replacement of a portion of the insured's monthly income from employment in the event that illness or injury causes a short or long-term disability is
A)life insurance.
B)health insurance.
C)disability insurance.
D)credit insurance.
Q2) Patty,who is divorced,owns a house.She has no reasonable expectation of benefit from the life of Quinn,her ex-spouse,but she applies for insur?ance on his life anyway.She also obtains a fire insurance policy on the house,which she later sells.Five years later,Quinn dies and the house is destroyed in a fire.Can Patty obtain payment on either the death of Quinn or the loss of the house? Explain.
Q3) The person who receives the proceeds under an insurance policy is called a beneficiary.
A)True
B)False
Q4) An insurance agent ordinarily works for the insurance company.
A)True
B)False
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Chapter 36: Morgages and Foreclosures
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Q1) Loan flipping
A)may result in prepayment penalties for the borrower.
B)is always a good idea for a homeowner.
C)rarely benefits the lender.
D)usually benefits both the borrower and the lender.
Q2) An escrow account is a borrower's bank account.
A)True B)False
Q3) Alan applies for a mortgage loan at Class Act Bank.Class Act Bank does not fully disclose all terms of the loan to Alan.This is A)commercial lending.
B)false lending.
C)predatory lending.
D)an acceptable way of doing business.
Q4) The average prime offer rate is the rate offered to the best-qualified borrowers. A)True B)False
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Chapter 37: Personal Property and Bailments
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Q1) Adding value to a piece of personal property by labor or materials is accession.
A)True
B)False
Q2) During a storm on Blue Lake,a boat sinks,but its owner Cappy survives.Cappy plans to return to the site of wreck to salvage its equipment and his possessions,but he delays.Meanwhile,Dick,an amateur diver,discovers the wreck and strips it clean of useful items.Cappy learns of the recovery and files a suit against Dick,claiming that the items are his.Dick responds that the sunken boat was abandoned and therefore he has good title to everything to which he took possession.What is the court likely to rule,and why?
Q3) A bailee must exercise reasonable care in preserving the bailed property.
A)True
B)False
Q4) Emily checks her luggage at Flyaway Airlines's ticket counter before boarding her flight to Houston.Subject to a bailment is
A)Emily.
B)Emily's luggage.
C)Emily's ticketed seat on the flight.
D)none of the choices.
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Page 39
Chapter 38: Real Property
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Q1) John owns an orchard behind Kay's house and property.The only access to the orchard is Kay's driveway,which John uses to get to his land.Does John have an ownership interest in this use of Kay's driveway? If so,what is it?
Q2) A conveyance creating a fee simple defeasible transfers all ownership rights in the property.
A)True
B)False
Q3) Fee simple ownership rights can be limited by zoning,noise and environmental laws.
A)True
B)False
Q4) For a party to take by adverse possession,the party's possession must not be hostile to the true owner's rights.
A)True
B)False
Q5) The government cannot take private property for public use.
A)True
B)False
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Chapter 39: Landlord and Tenant
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Q1) Sid rents an apartment from Town Properties,Inc.The lease,which ends on May 31,does not include an option for re?newal,and Sid and Town do not discuss whether Sid can stay on at the end of the term.On June 1,Sid has
A)an implied option to renew the term.
B)a right to remain contingent on notice from Town.
C)a right to remain subject to notice to Town.
D)no right to remain.
Q2) Paul wants to lease a condo for two years from Cool Condos Company.In most states the lease agreement
A)must be in writing.
B)can be oral or written.
C)must be oral.
D)must be signed by a judge.
Q3) Bill leases an apartment from Cathy.Two months later,Bill moves out,and arranges with Dian to move in and pay the rent to Cathy for the rest of the term.This is
A)an assignment.
B)an eviction.
C)a tenancy at sufferance.
D)a sublease.
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Page 41
Chapter 40: Wills and Trusts
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Q1) Jackie's will states,"I leave my red sports car to Angela." This is
A)a specific legacy.
B)a devise.
C)an execution.
D)a general legacy.
Q2) A trustee is a person for whose benefit a trust is held.
A)True
B)False
Q3) A will can be partially revoked.
A)True
B)False
Q4) A testator is a personal representative named in a will.
A)True
B)False
Q5) Kendall executes a separate written instrument to amend her prior will.This separate document is
A)a bequest.
B)a codicil.
C)a devise.
D)a holographic will.
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Chapter 41: Administrative Law
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Q1) The judicial branch exercises control over administrative agencies through its review of agency actions.
A)True
B)False
Q2) Congress leaves it to the Environmental Protection Agency to regulate the highly technical areas of air and water pollution.This is
A)the constitutional principle of checks and balances.
B)a delegation of tasks.
C)arbitrary and capricious.
D)a conflict with state administrative agencies,which take precedence.
Q3) Independent regulatory agencies are outside the federal executive departments.
A)True
B)False
Q4) The Merit Systems Protection Board issues a rule.Like other adminis?tra?tive agencies' rules,this rule is as
A)binding as a law passed by Congress.
B)persuasive as an expert's opinion.
C)suggestive as a newspaper's editorial.
D)unenforceable as a salesperson's puffery.
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Chapter 42: Antitrust Law
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Q1) A market division by class of customer between rival firms viola?tes antitrust law.
A)True
B)False
Q2) Spa Selectiva Company makes and sells beauty salon supplies.By selling its product at prices substantially below the normal cost of production,Spa Selectiva hopes to drive its competitors from the market.This is
A)market power.
B)predatory pricing.
C)price discrimination.
D)price-fixing.
Q3) Rally Speedboat Corporation refuses to sell its products to Super Weekends,Inc.,a recreational water products dealership.This is
A)an exclusive-dealing contract.
B)a horizontal market division.
C)attempted monopolization.
D)a unilateral refusal to deal.
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Chapter 43: International Law
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Q1) Two Japanese firms-Mikato,Ltd.,and Shuzushi,Ltd.-enter into a joint venture in an attempt to in?crease their market share of the U.S.auto market.If the joint venture is not a per se violation of U.S.antitrust laws,a U.S.court could ex?ercise jurisdiction over the firms
A)if the joint venture has a substantial effect on U.S.commerce.
B)if the joint venture has any effect on U.S.commerce.
C)if the joint venture was entered into in the United States.
D)under no circumstances.
Q2) The U.S.corporation Burger Heaven makes a deal with an Icelandic firm that allows the Icelandic firm to use Burger Heaven's trade name in Iceland in return for a fee.This is A)a franchise.
B)piracy.
C)a joint venture.
D)direct exporting.
Q3) A tariff is always a flat rate per unit.
A)True
B)False
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