Commercial Law
Final Exam
Course Introduction
Commercial Law explores the legal principles governing business and commercial transactions. This course covers key topics such as the formation and enforcement of contracts, sale of goods, agency, negotiable instruments, secured transactions, and legal aspects of different business structures. Students will examine statutory provisions, relevant case law, and judicial interpretations that shape the field of commercial law, gaining a practical understanding of rights, obligations, and remedies available to businesses and individuals engaged in commerce. The course is designed to provide a foundation for careers in business, law, and related professions, emphasizing problem-solving skills and ethical considerations in commercial dealings.
Recommended Textbook
Andersons Business Law and the Legal Environment 22nd Edition by David P. Twomey
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Chapter 1: The Nature and Sources of Law
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Q1) The private life of a nonpublic citizen is subject to public scrutiny.
A)True
B)False
Answer: False
Q2) Courts can create law.
A)True
B)False
Answer: True
Q3) The law works to cause our society to operate in an inefficient manner.
A)True
B)False
Answer: False
Q4) Several layers of law are enacted at different levels of government to provide the framework for business and personal rights and duties.At the base of this framework of laws is constitutional law.
A)True
B)False
Answer: True
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Page 3
Chapter 2: The Court System and Dispute Resolution
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Sample Questions
Q1) Voir dire examination is used in connection with:
A) determining whether the pleadings are valid.
B) jury selection.
C) deciding whether to appeal a trial court decision.
D) none of the above.
Answer: B
Q2) A probate court is an example of a general trial court.
A)True
B)False
Answer: False
Q3) The answer to the complaint is filed by the:
A) defendant.
B) prosecutor .
C) plaintiff.
D) judge.
Answer: A
Q4) A mediator has the power to actually make a decision in a dispute.
A)True
B)False
Answer: False
Page 4
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Chapter 3: Business Ethics, Social Forces, and the Law
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Sample Questions
Q1) Individual intentions,as expressed in contracts and wills,will not be given effect in the United States unless expressly authorized by law.
A)True
B)False
Answer: False
Q2) John Harrington operates a business that almost always hires skilled workers who are college graduates;currently,however,his business does have a part-time opening for an unskilled worker.Harrington is considering hiring an uneducated welfare recipient instead of a student from the local university.Apply the "Guidelines for Analyzing a Contemplated Action" to this problem.
Answer: From the decision-maker's point of view,there is greater risk in hiring an uneducated welfare recipient instead of a college student.If an uneducated welfare recipient is hired,there may be disruption in the workplace resulting from skilled,educated employees working with an unfamiliar type of co-worker.The value of hiring an uneducated welfare recipient is twofold: First,there may be a greater likelihood of assisting someone with a family (i.e. ,more individuals would benefit);and,second,the firm would further the current governmental and societal initiative to move individuals from "Welfare to Work."
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Chapter 4: The Constitution As the Foundation of the Legal Environment
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Q1) A law to declare war:
A) can be enacted by both state and federal governments.
B) can be enacted only by the national government.
C) can be enacted only by state governments.
Ddd)is prohibited by the U.S.Constitution.
Q2) The due process clause:
A) allows the U.S.government to take private property without due process.
B) allows a state to take private property without due process.
C) provides a guarantee of protection against loss of rights or property without the chance to be heard.
D) does not apply to state governments.
Q3) The Bill of Rights provides protection for corporations.
A)True
B)False
Q4) Pursuant to the commerce clause,the United States Supreme Court has the power "to regulate commerce with foreign nations,and among the several states,and with the Indian tribes."
A)True
B)False
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Chapter 5: Government Regulation of Competition and Prices
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Q1) In large cities talent agencies typically charge clients no more than a 10% commission.Tina's Talent,Amy's Actors & Models and the Barton Agency are the only three talent agents in a small city.Due to the limited amount of work available for actors and models in their city,the three talent agents have gotten together and agreed to never charge a commission below 15%.Discuss if this is acceptable under the Sherman Act.
Q2) A person who is harmed by a conspiracy that violates the Sherman Antitrust Act may sue the wrongdoers for four times the actual damages.
A)True
B)False
Q3) Unfair competition is controlled by:
A) statutes.
B) administrative agencies.
C) administrative regulations.
D) all of the above.
Q4) The Federal Trade Commission administers the law prohibiting unfair methods of competition.
A)True
B)False
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Chapter 6: Administrative Agencies
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Q1) Which of the following is true about judicial review of agency action?
A) Judges tend to substitute their own judgment for that of the agency.
B) Courts will reverse agency decisions merely because the court would have made a different decision based on the same facts.
C) Courts will reverse a decision if they disagree with the legal interpretation.
D) All of the above
Q2) Regulations properly adopted by agencies are important,but they do not have the full force of law as do statutes.
A)True
B)False
Q3) Before an appeal can be taken to a court concerning a determination of an agency,all administrative remedies must be exhausted.
A)True
B)False
Q4) The modern administrative agency typically possesses legislative,executive,and judicial powers.
A)True
B)False
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Chapter 7: The Legal Environment of International Trade
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Q1) A direct sale by an American firm to a customer abroad,with terms of payment commonly based on an irrevocable letter of credit,is an import sale.
A)True
B)False
Q2) United States antitrust laws can protect United States exports.
A)True
B)False
Q3) Under which of the following doctrines is it held that a foreign sovereign cannot be sued unless it engages in illegal commercial conduct?
A) act-of-state
B) sovereign compliance
C) Timberlane
D) sovereign immunity
Q4) The Export-Import Bank (EX-IM Bank)is an international agency.
A)True
B)False
Q5) The use of import quotas represents the most common form of tariff barrier.
A)True
B)False
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Chapter 8: Crimes
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Sample Questions
Q1) Conspiracy means ____ committing a criminal act.
A) thinking about
B) an agreement aimed at C) thinking with others about
D) all of the above
Q2) Corporate Integrity Agreements are the equivalent of putting a corporation on probation.
A)True
B)False
Q3) Bribery is defined as:
A) giving money,property,or any benefit to a person to influence that person's judgment.
B) using one's position as a public official to make an illegal demand.
C) using one's position as a nonpublic official to make an illegal demand.
D) exerting improper political influence.
Q4) A computer crime generally can only be committed by a person having some knowledge of the operation of a computer.
A)True
B)False
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Chapter 9: Torts
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Sample Questions
Q1) What type of damages is recoverable when the defendant's tortious conduct is accompanied by fraud,malice,or willful or wanton conduct?
A) compensatory
B) consequential
C) nominal
D) punitive
Q2) What form of tort liability was developed to provide guaranteed protection for those who are injured by conduct the law deems both serious and inexcusable?
A) strict liability
B) negligence
C) both a.and b.
D) neither a.nor b.
Q3) The tort of invasion of privacy includes:
A) intrusion into private affairs.
B) public disclosure of private facts.
C) misappropriation of another's name.
D) all of the above.
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11
Chapter 10: Intellectual Property Rights
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Sample Questions
Q1) It is important to protect trade dress against adoption by a competitor because such adoption can:
A) deceive purchasers into believing they have obtained a comparable product.
B) dilute the originator's resource investment in its product appearance.
C) usurp the business goodwill of the developer of the trade dress.
D) all of the above.
Q2) Herman Corporation is engaged in preparing a marketing campaign consisting of electronic and print images.Drawings and photographs for the campaign are coming from a variety of sources,including popular magazines,international newspapers,and web sources.The marketing vice president asserts that the company may use the images under the fair use doctrine.What factors should be considered in the application of the fair use doctrine?
Q3) Although processes and machines are eligible for patent protection,manufactures and compositions of matter are not.
A)True
B)False
Q4) Protection for trade dress is available under the Lanham Act.
A)True
B)False
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Chapter 11: Cyberlaw
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Q1) Appropriation involves taking an image,likeness,or name for purposes of commercial advantage.
A)True
B)False
Q2) Employers have access and control rights to their employees' e-mail.
A)True
B)False
Q3) When employers allow employees to reimburse the employer for private use of text services,employer monitoring and disclosure of those texts is:
A) always legal.
B) only legal if the employee gives his or her consent.
C) only legal for texts that are sent and received during work hours.
D) a violation of the law.
Q4) The tort of invasion of privacy has some application to cyberspace communication.
A)True
B)False
Q5) The distinction between offer and acceptance is no longer relevant in cyberlaw. A)True
B)False
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Chapter 12: Nature and Classes of Contracts: Contracting on
the Internet
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Sample Questions
Q1) An implied contract is shown by: A) a writing.
B) the acts and conduct of the parties.
C) statements made in open court.
D) an exchange of oral promises.
Q2) A bilateral contract is essentially an exchange of promises.
A)True
B)False
Q3) Louise owned a house next to Robert's house.Robert made a contract with Midcity Painters to paint his house.The painters arrived to paint Robert's house,but mistakenly painted Louise's house.She saw the painters at work and made no comment.Later,Midcity Painters sent Louise a bill for painting her house.She claimed that she was not liable because she had not made any contract with them.Is this a valid defense?
Q4) The effect of an implied contract is not the same as the effect of an express contract.
A)True B)False
14
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Chapter 13: Formation of Contracts: Offer and Acceptance
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Q1) In an auction __________,the auctioneer takes bids as agent for the seller with the understanding that no contract is formed until the seller accepts the transaction.
A) without reserve
B) with reserve
C) without preserve
D) with preserve
Q2) When an offer has been accepted:
A) a subsequent revocation of the offer may serve to nullify the resulting contract.
B) a contract is formed,assuming that all of the other elements of a contract are present.
C) either party may withdraw from the resulting contract without consent.
D) the acceptance is executory.
Q3) To make an offer,the offeror must appear to intend to create a binding obligation. A)True B)False
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15
Chapter 14: Capacity and Genuine Assent
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Q1) Generally,when a person of legal age makes a contract with a minor,the contract is voidable by either party.
A)True
B)False
Q2) A minor cannot avoid a contract that has been:
A) ratified.
B) signed.
C) processed.
D) disallowed by the court.
Q3) In order for fraud liability to arise,the listener must actually rely on the false statement of fact.
A)True
B)False
Q4) A minor cannot avoid a contract to purchase a car if the:
A) car has been destroyed.
B) car has been damaged.
C) car is used for non-commercial purposes.
D) minor is able to return the car but does not do so.
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Page 16
Chapter 15: Consideration
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Sample Questions
Q1) For a bilateral contract to be enforceable there must be:
A) mutuality of obligation.
B) an illusory promise.
C) forbearance.
D) adequacy of consideration.
Q2) Gerwin's daughter Mary was seeking a position as an associate attorney with Baker,Charles & Dixon,a large metropolitan law firm.The firm,after several meetings with Mary over a two-month period,made Mary an offer of employment on January 15.Mary accepted the offer that day and immediately left for Cape Cod to celebrate without telling Gerwin or anyone else about her new job.
On January 17,two days after Mary had accepted the offer,Gerwin sent Baker,Charles & Dixon a letter in which she offered to give Baker all of her legal business (approximately $40,000 per year)if the law firm would hire Mary.The law firm accepted.
After Gerwin learned that Mary already had been hired by Baker,Charles & Dixon,Gerwin refused to transfer her business to the law firm.The law firm has brought suit against Gerwin on the grounds that a valid contract exists between them.How will the case be decided?
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Page 17
Chapter 16: Legality and Public Policy
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Sample Questions
Q1) Public policy:
A) can be precisely defined
B) is frequently used by the courts as a reason to invalidate contracts
C) is protections from that which violates any established interest of society
D) all of the above
Q2) In the case of an illegal contract,both parties usually are prohibited from seeking relief in the courts:
A) if the illegal contract has not been performed.
B) if the contract has been partially performed.
C) if the contract has been fully performed.
D) all of the above.
Q3) Dealing honestly,reasonably,and in good faith:
A) is implied in every contract for services.
B) is implied in every contract for the sale of goods.
C) is an expressed obligation in every contract.
D) both a and b
Q4) An agreement that calls for the commission of a civil wrong is illegal and void.
A)True
B)False
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Chapter 17: Writing, Electronic Forms, and Interpretation of Contracts
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Q1) A writing that satisfies the requirement of a writing under the statute of frauds could be evidenced by:
A) a note.
B) a memorandum.
C) a contract.
D) all of the above.
Q2) If a contract is unclear,it will be interpreted against the party who drafted it.
A)True
B)False
Q3) When persons enter into an agreement,it is presumed that they intent the agreement to have some effect.
A)True
B)False
Q4) The parol evidence rule does not apply to changes made after the signing of the contract.
A)True
B)False
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Chapter 18: Third Persons and Contracts
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Q1) If there is a time limitation or any other restriction in a contract,a third-party beneficiary:
A) may ignore it.
B) may void it.
C) is bound thereby.
D) must consent to be bound thereby before it is effective.
Q2) The right to performance under a contract can be assigned:
A) if the burden of performance is not materially increased.
B) if the contract requires the performance of personal services.
C) if the contract provides for the extension of credit.
D) all of the above.
Q3) When a buyer assigns the right to goods under a contract,the buyer's liability to make payment to the seller is:
A) transferred to the third party.
B) terminated.
C) still in effect.
D) shared equally with the third party.
Q4) Persons who are not a party to a contract can never sue on the contract.
A)True B)False
20
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Chapter 19: Discharge of Contracts
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Q1) The parties may agree that the adequacy of performance under a contract is to be determined by a third party.
A)True
B)False
Q2) There is no exact standard or test by which to determine whether contractual performance is substantial.
A)True
B)False
Q3) The time for performance is typically essential in a contract for the sale of perishable property.
A)True
B)False
Q4) In a mutual rescission,both parties,acting in good faith,renew their commitment to perform all obligations set forth in their original agreement.
A)True
B)False
Q5) Payment by check is a conditional payment.
A)True B)False
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Chapter 20: Breach of Contract and Remedies
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Q1) Consequential damages may be recovered if:
A) the damages were not a foreseeable consequence of the breach.
B) the damages reasonably flow from the breach as a result of the injured party's particular circumstances.
C) the breach did not cause the damages.
D) the loss exceeds $500.
Q2) Consequential damages are those that necessarily flow from the breach. A)True
B)False
Q3) Gregory,a comedy writer,entered into a contract with Wessel,a comedian.The contract provided that Gregory would provide Wessel with a 15-minute monologue for his upcoming appearance on Comedy Hour and that Wessel would pay Gregory $250.All performers on Comedy Hour make $500 per appearance.As Gregory knows,the last time Wessel appeared on Comedy Hour he was asked to make special guest appearances at three local comedy clubs using the same monologue.He earned a total of $750 for the three performances.Shortly before Wessel was scheduled to appear on Comedy Hour,Gregory informed him that he was unable to provide the monologue.As a result,Wessel was forced to cancel his appearance.Wessel sued Gregory for breach of contract and requested damages of $1,250.What will result?
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Page 22
Chapter 21: Personal Property and Bailments
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Q1) In order for a bailment to be valid,the bailor must be the owner of the subject property.
A)True
B)False
Q2) The legal relation that arises when one person delivers possession of personal property to another under an express or implied agreement to return the property at a later date is called a:
A) tenancy agreement.
B) bailment.
C) rental agreement.
D) trust arrangement.
Q3) In common usage today,there is no distinction between real and personal property.
A)True
B)False
Q4) In states that follow the community property tradition,property acquired after the marriage belongs solely to the party who acquired it.
A)True
B)False
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Page 23
Chapter 22: Legal Aspects of Supply Chain Management
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Q1) The relationship of guest and hotelkeeper ends when the guest:
A) pays his or her bill.
B) advises the hotelkeeper of his or her departure .
C) leaves or ceases to be a transient.
D) has stayed for 30 days and becomes a boarder.
Q2) A public warehouser has a specific lien against the goods stored for reasonable costs incurred from the storage.
A)True
B)False
Q3) A hotelkeeper's lien on the baggage of a guest is terminated when:
A) the guest checks out of the hotel.
B) the guest pays the hotel bill in full.
C) the hotelkeeper posts a notice to limit liability.
D) all of the above.
Q4) The rights of a transferee of a negotiable bill of lading are defeated if the goods have been stopped in transit.
A)True
B)False
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Chapter 23: Nature and Form of Sales
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Q1) An agreement to modify a contract for the sale of goods:
A) is only binding if supported by consideration. B) has to be voluntary in order to be enforceable. C) is only binding if the original contract is invalid.
D) all of the above.
Q2) To satisfy the statute of frauds,the writing must be signed and must include the price of the goods.
A)True
B)False
Q3) Consumer protection statutes may require a writing that is more detailed than the writing required by the statute of frauds provision of the Uniform Commercial Code.
A)True
B)False
Q4) The UCC permits a court to refuse to enforce a sales contract that it finds to be unconscionable.
A)True
B)False
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Page 25
Chapter 24: Title and Risk of Loss
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Q1) __________ reserve auctions are those in which the goods must be sold regardless of whether the auctioneer is satisfied with the levels of the bids.
A) With
B) Without
C) Unqualified
D) Unrestricted
Q2) Most courts hold that when a customer takes an item from the shelf in a self-service store,there is:
A) no sale.
B) a sale.
C) a contract to sell.
D) a conditional sale.
Q3) If a buyer purchases goods on approval,the buyer's creditors cannot reach such goods until there is an approval.
A)True
B)False
Q4) Future goods can be identified before they are manufactured.
A)True
B)False
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Chapter 25: Product Liability: Warranties and Torts
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Q1) The warranty of merchantability guarantees that the:
A) party in question is a merchant.
B) product is fit for the ordinary purposes for which it is sold.
C) product will remain fit for its normal use for the applicable statute of limitations period.
D) product can be resold by the buyer if the buyer does not want to keep it.
Q2) An examination of goods excludes any implied warranty with respect to a defect that:
A) is apparent after a reasonable examination is made.
B) will not be apparent without chemical analysis.
C) will not be apparent until the goods are processed or used in manufacturing.
D) is unknown to all parties and is not detectable by reasonable examination.
Q3) No law requires a seller to make an express warranty.
A)True
B)False
Q4) In most instances,the mere fact that a sale was made gives rise to a(n):
A) express warranty.
B) limited warranty.
C) implied warranty.
D) full warranty.
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Chapter 26: Obligations and Performance
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Q1) When a party refuses to perform a contract at the time of performance,a repudiation has occurred.
A)True
B)False
Q2) The UCC does not specify the form that the assurance of performance is to take.
A)True
B)False
Q3) The obligations of the parties to a sales contract include:
A) the seller's duty to deliver the goods to the buyer's place of business.
B) the buyer's duty to always accept the goods.
C) the seller's duty to arrange for appropriate transport.
D) the buyer's duty to pay for the goods.
Q4) Upon a seller's tender of nonconforming goods and the buyer's rejection of them,the transaction has ended.
A)True B)False
Q5) A buyer has a right to insist that all the goods be delivered at one time.
A)True
B)False
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Chapter 27: Remedies for Breach of Sales Contracts
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Q1) Under the CISG,a buyer may reject goods
A) consistent with the right of rejection set forth in the UCC.
B) if the goods are nonconforming to the contract in any way.
C) only if the tender is a fundamental breach of the contract.
D) only if the tender is illegal in subject matter and/or purpose.
Q2) If a seller elects to resell the goods remaining in the seller's possession after the buyer breaks the contract,the seller:
A) must always give notice of the sale to the original buyer.
B) is never required to give notice of the sale to the original buyer.
C) is required to follow strict standards in the resale of the goods.
D) is not required to give notice of the sale to the original buyer when the goods are perishable.
Q3) When a sales contract is broken by the buyer,the seller has only the remedies of lien and resale available.
A)True
B)False
Q4) Consumer protection law prohibits the waiver of defenses in consumer contracts.
A)True
B)False
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Chapter 28: Kinds of Instruments, parties, and Negotiability
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Q1) An instrument is order paper if:
A) it is payable to bearer or the order of bearer.
B) it is payable to cash.
C) the last or only indorsement is a blank indorsement.
D) none of the above.
Q2) Instruments are always negotiable.
A)True
B)False
Q3) Antedating an instrument affects an instrument's negotiability.
A)True
B)False
Q4) Negotiation of commercial paper results in lesser rights to transferees than those rights afforded assignees of contracts under contract law.
A)True
B)False
Q5) The maker is the person who writes out and creates a promissory note.
A)True
B)False
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Chapter 29: Transfers of Negotiable Instruments and
Warranties of Parties
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Q1) A transferor may be able to set aside a negotiation obtained by fraud or duress unless:
A) a minor is involved.
B) the negotiation was part of an illegal transaction.
C) the negotiation was beyond the powers of the corporation.
D) the instrument has been acquired in the meantime by a holder in due course who did not know of the misconduct.
Q2) When parties intend to negotiate an order instrument but the holder fails to indorse it:
A) there is no negotiation.
B) the transfer has the effect of a contract assignment .
C) the transferee has the right to require the transferor's indorsement if consideration was given.
D) all of the above.
Q3) An instrument may be transferred by negotiation or by assignment.
A)True
B)False
Q4) Order paper is negotiated by the indorsement of the holder and delivery.
A)True
B)False
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Chapter 30: Liability of the Parties Under Negotiable Instruments
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Q1) A holder through a holder in due course is subject to limited defenses.
A)True
B)False
Q2) Which of the following will not be considered value in connection with determining holder in due course status?
A) performing the act for which the instrument was given
B) promising to perform an existing legal obligation
C) receiving the instrument as security for a loan
D) taking the instrument in payment of a debt
Q3) Manuel sued Patricia on a promissory note.Patricia admitted signing the note,but raised the defense that Manuel was not a holder in due course.Can Manuel recover without proving that he is a holder in due course?
Q4) Under the "close-connection" doctrine,a holder has taken so many instruments from its transferor or is so closely connected with the transferor that any knowledge the transferor has is deemed transferred to the holder,preventing holder in due course status.
A)True
B)False
Page 32
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Chapter 31: Checks and Funds Transfers
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Q1) A written stop payment order is effective for one year.
A)True
B)False
Q2) Which of the following statements describes a check?
A) The drawer is always a bank.
B) The maker is always a bank.
C) A check is generally payable on demand.
D) A check is a particular kind of note.
Q3) A written stop payment order or confirmation is effective for:
A) fourteen (14)days.
B) thirty (30)days.
C) six (6)months.
D) one (1)year.
Q4) A debit transaction occurs when a person making a payment requests such payment be made to the beneficiary's bank.
A)True
B)False
Q5) A notice of dishonor may be oral,written or electronic.
A)True
B)False
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Chapter 32: Nature of the Debtor-Creditor Relationship
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Q1) An agreement under which one party agrees to pay drafts drawn by a creditor is called a:
A) contract of surety.
B) guaranty contract.
C) letter of credit.
D) debtor's agreement.
Q2) When a suretyship or guaranty contract is entered into after and separate from the original transaction,there must be new consideration for the promise of the guarantor.
A)True
B)False
Q3) The use of letters of credit arose in international trade.
A)True
B)False
Q4) Contribution is the right of a co-obligator to demand that other obligator(s)pay their fair share of the debt.
A)True
B)False
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34
Chapter 33: Consumer Protection
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Q1) What is not a correct statement concerning the Fair Debt Collection Practices Act?
A) It prohibits improper practices in the collection of consumer debts.
B) It applies to original creditors who are collecting from original debtors.
C) The validity of the debt is not a defense.
D) Violators are liable to debtors for damages.
Q2) Individuals can seek criminal and civil penalties against those who violate consumer protection statutes.
A)True
B)False
Q3) Peter applied for a loan at three banks.Peter's application was denied at the first two banks but finally was approved by the third institution.Peter believes that the first two banks denied his application because of his minority status.No explanation ever was provided by the banks denying Peter's request for funds.After obtaining the loan,Peter soon found himself unable to make the prescribed payments.Peter went into default,causing the bank to turn his case over to a collection agency.The collection agency called him "night and day" and were very abusive in their collection practices.Peter became quite distraught and unable to function at his job.As a result,Peter was soon fired.Peter asks for your advice regarding his legal rights.What is your response?
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Chapter 34: Secured Transactions in Personal Property
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Q1) For a security interest to attach,the creditor must file a financing statement.
A)True
B)False
Q2) Generally,a secured creditor who has repossessed collateral may retain the collateral and cancel the debt.
A)True
B)False
Q3) A buyer who buys goods from a debtor in the ordinary course of business is subject to a creditor's security interest but only if the interest was perfected and the buyer had notice of it.
A)True
B)False
Q4) Under Revised UCC Article 9,a debtor may authorize a financing statement by acquiring the collateral that is subject to the security agreement.
A)True
B)False
Q5) Under Revised UCC Article 9,a financing statement must be signed by the debtor.
A)True
B)False
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Chapter 35: Bankruptcy
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Q1) A payment by a debtor in the ordinary course of business,such as the payment of a utility bill,will not be set aside by the bankruptcy trustee.
A)True
B)False
Q2) Under the 2005 reforms:
A) it is easier for creditors to show they did not receive a voidable preference.
B) nonconsumer debt payments of less than $7,500 are not subject to the voidable preference standards .
C) both a.and b.
D) none of the above.
Q3) If there are twelve (12)or more creditors,at least __________ of those creditors whose unsecured and undisputed claims total __________ or more must sign the involuntary petition.
A) one (1);$14,425
B) three (3);$14,425
C) one (1);$15,575
D) three (3);$15,575
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Chapter 36: Insurance
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Q1) To collect on property insurance,an insurable interest in the property must exist at the time that the loss is suffered.
A)True
B)False
Q2) What type of insurance is written for a specified number of years and terminates at the end of that period?
A) term insurance
B) whole life insurance
C) endowment insurance
D) universal insurance
Q3) Generally,the terms broker and agent are synonymous because both work directly for the insurer.
A)True
B)False
Q4) When a provision of an endorsement conflicts with a provision of a policy,the endorsement controls.
A)True
B)False
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Chapter 37: Agency
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Q1) A third person who deals with a person claiming to be an agent:
A) can rely on the statements made by the agent regarding the extent of the authority. B) cannot ignore any knowledge regarding a limitation of the agent's authority.
C) is not required to take notice of any acts clearly adverse to the interest of the principal.
D) all of the above.
Q2) The burden of proving the existence of an agency relationship rests on the person who seeks to benefit by such proof.
A)True
B)False
Q3) Initially,ratification is a question of:
A) intention.
B) consideration.
C) form.
D) implication.
Q4) A written authorization of agency is called a power of attorney.
A)True
B)False
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Chapter 38: Third Persons in Agency
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Q1) Tom Creighton hired Destroy,Inc. ,a demolition company,to level an old building on a busy downtown lot.Destroy,Inc.was given full rein to decide on the amount of explosives needed and the placement of the charges.Security for the site on the day of the explosion was contracted out to a private security firm.When the appointed day arrived,the building was brought down.However,the building fell in a slightly different direction than that anticipated by Destroy,Inc.Numerous pieces of adjoining property,both real and personal,were severely damaged.Creighton claims that the use of an independent contractor such as Destroy,Inc.has insulated him from liability.How do you respond to Creighton's claim?
Q2) If a contract is ambiguous regarding whether the agent has signed in a representative or an individual capacity:
A) there is a presumption that the agent signed in a representative capacity.
B) there is a presumption that the agent signed in an individual capacity.
C) the agent and the principal will both be liable on the contract.
D) parol evidence is admissible to establish the character in which the agent was acting.
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Chapter 39: Regulation of Employment
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Q1) An employment contract of indefinite duration is:
A) terminable at will by the employer.
B) terminable at will by the employee.
C) both a.and b.
D) invalid.
Q2) Deductions from wages for cash or merchandise shortages are legal even if they reduce an employee's wages below the minimum wage.
A)True
B)False
Q3) Sarbanes-Oxley (SOX)allows whistleblowers who are retaliated against an immediate lawsuit in federal district court.
A)True
B)False
Q4) An employment contract always will state a time or duration for the contract's applicability.
A)True
B)False
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Chapter 40: Equal Employment Opportunity Law
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Q1) The Equal Pay Act:
A) does not allow variances in wages pursuant to a seniority system.
B) generally requires that members of both sexes be paid equally for equal work.
C) prohibits all variations in wage rates paid to men and women.
D) all of the above.
Q2) It is not unlawful for an employer to hire employees on the basis of religion,sex,or national origin in those instances where religion,sex,or national origin is a bona fide occupational qualification (BFOQ)reasonably necessary to the normal operation of a particular enterprise.
A)True B)False
Q3) Generally,the EEOC attempts to remedy an unlawful practice through conciliation. A)True B)False
Q4) Employment testing and educational requirements must be "job-related";that is,employers must prove that employment testing and educational requirements bear a relationship to job performance.
A)True B)False
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Chapter 41: Types of Business Organizations
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Q1) Franchisors may be found liable for the wrongful conduct of their franchisees on an apparent authority theory when the conduct of the franchisor creates an appearance of authority.
A)True
B)False
Q2) A limited liability company is treated like a partnership under federal tax law and has the limited liability feature of corporations.
A)True
B)False
Q3) Business corporations exist to make a profit.
A)True
B)False
Q4) A sole proprietor is subject to unlimited personal liability for the debts of the business.
A)True B)False
Q5) Franchise disclosures are not required under federal law.
A)True
B)False
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Chapter 42: Partnerships
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Q1) Each partner is an agent of the partnership.
A)True
B)False
Q2) When a partnership is dissolved by a partner's bankruptcy,notice:
A) is not required.
B) must be given to the other partners only.
C) must be given to third persons only.
D) must be given to both other partners and third persons.
Q3) In determining the rights of partner Dewey in the firm of Dewey,Cheatham and Howe,the most important reference point is:
A) the Uniform Partnership Act.
B) the partnership agreement.
C) the sworn testimony of Cheatham and Howe.
D) the customs and traditions of similar partnerships.
Q4) Persons who are not partners under appropriate circumstances may be held liable to third persons as though they were partners.
A)True
B)False
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Chapter 43: LPs, LLCs, and LLPs
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Q1) The partners who manage the limited partnership and are personally liable for the firm debts are __________ partners.
A) general
B) active
C) licensed
D) unreserved
Q2) Limited liability companies may be formed without filing formal articles of organization with the secretary of state.
A)True
B)False
Q3) It is possible for a limited partner to be subject to the debts of the firm if the limited partner participates in the control of the business.
A)True
B)False
Q4) If a limited partnership certificate is never filed,all partners are treated as limited partners.
A)True
B)False
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Page 45
Chapter 44: Corporate Formation
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Q1) Where a corporation is properly formed,it is called a corporation:
A) di giorno.
B) de facto.
C) de jure.
D) by estoppel.
Q2) Bylaws are typically adopted by the managers of a corporation.
A)True
B)False
Q3) A public corporation is:
A) also know as a public utility.
B) organized for charitable and benevolent purposes or for purposes of finance,industry,and commerce.
C) established for governmental purposes and for the administration of public affairs.
D) all of the above.
Q4) A corporation is an artificial person that is created by governmental action. A)True
B)False
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Chapter 45: Shareholder Rights in Corporations
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Q1) Shares of stock that have been issued to stockholders in a corporation are said to be outstanding.
A)True
B)False
Q2) The two most common instruments used to provide the capital structure of a corporation are stocks and bonds.
A)True
B)False
Q3) Delivering stock to a creditor as security for a debt owed by the shareholder:
A) transfers ownership rights.
B) gives rise to a perfected security interest.
C) makes the creditor a perfected party after filing.
D) makes the debtor a perfected party after filing.
Q4) Corporate securities evidenced by a certificate are negotiable.
A)True B)False
Q5) An interest in a corporation is based on the ownership of one or more shares of stock of the corporation.
A)True
B)False
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Chapter 46: Securities Regulation
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Q1) The Securities Exchange Act of 1934 is concerned with the secondary distribution of securities in the national securities markets and in the over-the-counter markets.
A)True
B)False
Q2) Taylor,a securities lawyer for a major Wall Street law firm,worked on numerous successful takeover bids of companies listed on the New York Stock Exchange.Prior to the public announcement of the takeover bids,Taylor provided information to Rogers (his stockbroker)and to Price (his mistress)about certain planned takeover bids on which he had provided legal services.Rogers,who was aware of the relationship between Taylor and Price,made purchases of the target companies on Rogers' and Price's behalf,netting them more than a million dollars in profits each.The SEC brings an action against Taylor,Rogers,and Price under Rule 10b-5 and the Insider Trading Sanctions Act of 1984.Taylor defends that he is an outsider not subject to the 1984 law and Rule 10b-5,and that he received no personal benefit.Rogers and Price defend that they were merely acting on stock market tips received from a person who did not personally benefit from the disclosure.Decide.
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Page 48
Chapter 47: Accountants Liability and Malpractice
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Q1) An accountant may be liable for damages if the accountant fails to inform a client of the tax consequences associated with selling a business.
A)True
B)False
Q2) To ensure that audit partners do not become entrenched,Sarbanes-Oxley requires audit firms to change audit partners at least once every __________ years.
A) three (3)
B) five (5)
C) seven (7)
D) ten (10)
Q3) The contact rule applies in which of the following states?
A) Alabama
B) Indiana
C) New York
D) All of the above
Q4) Malpractice is both a form of negligence and a tort.
A)True
B)False
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Chapter 48: Management of Corporations
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Q1) The powers of the officers of a corporation are controlled by the laws of agency.
A)True
B)False
Q2) Ordinarily,the management of a corporation is not liable to third persons if the managerial policies cause loss to such third persons.
A)True
B)False
Q3) A president of a corporation does not have the authority to:
A) make a long-term employment contract.
B) mortgage a corporate property.
C) release a claim of the corporation.
D) perform any of the above acts.
Q4) The president of a business corporation does not have implied authority to execute commercial paper in the name of the corporation.
A)True
B)False
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Chapter 49: Real Property
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Q1) Technically,land is considered as extending downward to the earth's center and upward indefinitely.
A)True
B)False
Q2) Licensees are on the premises with the permission of the landowner.
A)True
B)False
Q3) A guarantee that the grantor owns the estate conveyed is called a covenant:
A) of right to convey.
B) against encumbrances.
C) of quiet enjoyment.
D) of seisin.
Q4) Personal property that is attached to the earth or placed in a building in such a way or under such circumstances that it is deemed part of the real property is called a(n):
A) asset.
B) estate.
C) easement.
D) fixture.
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Chapter 50: Environmental Law and Land Use Controls
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Q1) A method for determining total emissions in one area is referred to as the emissions offset concept.
A)True
B)False
Q2) Under the Clean Water Act,the EPA has developed effluent guidelines,which are ranges for discharges organized according to industrial groups and for specific plants in each of these groups.
A)True
B)False
Q3) A nonconforming use:
A) that is discontinued for a period of less than thirty (30)days may be resumed.
B) has a right to continue for only five (5)years.
C) has a constitutionally-protected right to continue.
D) that continues for more than one (1)year cannot be lost by abandonment.
Q4) The fact that harm occurred is sufficient to establish a nuisance.
A)True
B)False
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Chapter 51: Leases
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Q1) When a tenant remains in possession after the termination of the lease without permission of the landlord,the landlord may treat the tenant as either a trespasser or a tenant.Until the landlord elects to do one or the other,a tenancy __________ exists.
A) at sufferance
B) at will
C) for years
D) from year to year
Q2) The relationship of landlord and tenant is always created by an express contract.
A)True
B)False
Q3) If the tenant uses the property for any purpose other than the one specified in the lease,the landlord has the option to declare the lease terminated.
A)True
B)False
Q4) Making improvements is a duty that falls on the tenant. A)True
B)False
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Chapter 52: Decedents Estates and Trusts
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Q1) An individual who desires to make provisions that will be effective only on his or her death is said to have:
A) probationary intent.
B) a prejudicial interest.
C) testamentary intent.
D) attestation intent.
Q2) The relatives of an individual who dies without a valid will may acquire title to the decedent's property through:
A) intestate succession.
B) the right of replevin.
C) testate succession.
D) the right of acquisition.
Q3) Every trust must have a beneficiary.
A)True
B)False
Q4) Testamentary intent makes the provisions of the testator effective and binding during the testator's life.
A)True
B)False
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