Commercial Law
Practice Exam
Course Introduction
Commercial Law introduces students to the legal principles governing 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 an overview of relevant legislation. Students will explore the rights, obligations, and liabilities of parties engaged in commercial activities, and analyze how laws facilitate fair and efficient commerce. Through case studies and legal analysis, the course aims to equip students with a fundamental understanding of how commercial law operates within both domestic and international business environments.
Recommended Textbook Business Law and the Legal Environment Standard Edition 6th Edition by
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Page 2
Jeffrey F. Beatty
Chapter 1: Introduction To Law
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Sample Questions
Q1) Henry David Thoreau felt that war was unjust and therefore refused to pay his taxes when the United States declared war on Mexico.Thoreau felt that there was a higher law than the law of the land.Which theory of jurisprudence was he applying?
A) Legal Positivism.
B) Natural Law.
C) Legal Realism.
D) Common Law.
Answer: B
Q2) Wilfred was driving too fast for the icy road conditions and hit Sally's car.Sally can sue Wilfred in criminal court.
A)True
B)False
Answer: False
Q3) Congress can create a statute on any topic at all.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Business Ethics And Social Responsibility
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Q1) Kent needed to reduce his workforce by five people.Before notifying them,he thought about how he would feel if he were the one receiving the news and he tried to find ways to help the employees in their transition.Kent was exercising the value of:
A) courage.
B) compassion.
C) fairness.
D) responsibility.
Answer: B
Q2) Wever,Inc.is considering relocating a facility to Mexico.The interests of the various stakeholders affected by this decision may conflict.
A)True
B)False
Answer: True
Q3) Which of the following is NOT a stakeholder?
A) a business competitor.
B) shareholders.
C) employees.
D) the environment.
Answer: A
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Page 4
Chapter 3: Dispute Resolution
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Q1) Primary methods of alternative dispute resolution include litigation and mediation.
A)True
B)False
Answer: False
Q2) The United States has taken a position that legal issues are best resolved by lawsuits involving parties with conflicting interests presenting their strongest possible case to a neutral factfinder.Because of this,the legal system in the United States is considered:
A) an adversary system.
B) a conflict system.
C) an alternative dispute resolution system.
D) a mediation system.
Answer: A
Q3) The biggest change in litigation in the last decade is:
A) an explosive rise of electronic discovery.
B) a decrease in the use of discovery.
C) the replacement of interrogatories with depositions.
D) the use of juries in appellate courts.
Answer: A
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Chapter 4: Common Law,Statutory Law,And Administrative Law
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Q1) The Environmental Protection Agency was investigating whether Exgrow,Inc.violated the Clean Air Act.Exgrow refused to give the EPA its computerized reports concerning pollution.To get the reports,EPA should use:
A) a stare decisis.
B) a de novo.
C) an excaliber.
D) a subpoena duces tecum.
Q2) The Administrative Procedure Act:
A) applies to all federal agencies.
B) applies to executive branch agencies but not to independent agencies.
C) applies to independent agencies but not to executive branch agencies.
D) does not apply to federal agencies.
Q3) If the President vetoes a bill and if both the House and Senate repass the bill by a two-thirds margin,the bill becomes law.
A)True
B)False
Q4) The largest source of new law is court decisions.
A)True
B)False
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Chapter 5: Constitutional Law
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Q1) Congress passed the federal OSHA establishing job safety standards.Illinois passed its own statute,which had slightly more lenient standards.Illinois workers are only held to the state standards unless they are involved in interstate commerce.
A)True
B)False
Q2) Assume that the state of Ohio passed a hazardous waste statute,seeking to protect the general public and workers.The state statute did not violate the Commerce Clause because it imposed no restriction on interstate commerce.Both the state statute and the federal Occupational Safety and Health Act established job safety standards and specified worker training and employer licensing,but the requirements differed.Discuss which statute(s)Ohio corporations had to obey,and identify the source of the answer.
Q3) The primary source of federal power to regulate business is the:
A) Supremacy Clause.
B) Commerce Clause.
C) Contract Clause.
D) Privilege and Immunities Clause.
Q4) Discuss the Miller test to determine if a creative work is obscene.
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Chapter 6: Intentional Torts And Business Torts
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Q1) A salesclerk at Sparkle Jewelry Store observed a customer remove a ring from a display case and put it in his pocket.In most states,Sparkle:
A) can reasonably detain the customer for suspicion of shoplifting.
B) cannot detain the customer but can alert the police.
C) cannot detain the customer but once the customer leaves the store, the salesclerk can make a citizen's arrest.
D) cannot detain the customer but can sue for conversion.
Q2) Rodney was employed by Deluxe Discount Store.Rodney's manager directed him to check the prices of dog food at Huge Savings Store.The manager of Huge Savings Store saw Rodney writing down prices and asked him to leave.Rodney,fearful that he would be fired by Deluxe,refused to leave.Rodney committed the tort of:
A) larceny.
B) trespass.
C) misrepresentation.
D) conversion.
Q3) On its Web site,Otrex,Inc.claimed that its pain reliever was more effective than Nelton,a competing pain reliever.Discuss the elements that Nelton must prove to win a case under Section 43(a)of the Lanham Act.
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Chapter 7: Negligence And Strict Liability
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Q1) List and discuss the elements necessary to establish negligence.
Q2) Courts have ruled that negligently retaining a violent employee is a tort.
A)True
B)False
Q3) Which of the following acts resulting in injury would be negligence per se?
A) Janet driving 40 mph over the posted speed limit.
B) Ted keeping explosives in his private, locked garage without complying with state law regulating the storage of such materials.
C) A retailer selling glue containing benzene to a 14-year-old boy in violation of state law.
D) All the above acts are negligence per se.
Q4) In a comparative negligence state,if the plaintiff in a negligence lawsuit is found to be 30 percent negligent,the plaintiff would recover:
A) 70 percent of the damages.
B) all of the damages.
C) none of the damages.
D) 30 percent of the damages.
Q5) In negligence cases the courts often refer to the term "reasonable person." What is meant by this term?
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Chapter 8: Crime
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Q1) The intent required to commit a burglary would be:
A) general intent.
B) reckless conduct.
C) strict liability.
D) specific intent.
Q2) The burden of proof required in a criminal case is:
A) clear and convincing.
B) a preponderance.
C) beyond a reasonable doubt.
D) highest degree of honesty.
Q3) The primary purpose of RICO was:
A) to be a tool against organized crime.
B) to raise revenue.
C) to prosecute non-citizens.
D) to prosecute those engaged in tax fraud.
Q4) The parties to a criminal trial are the government and the defendant.
A)True
B)False
Q5) Compare and contrast money laundering and embezzlement.Give an example of each.
Page 10
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Chapter 9: International Law
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Q1) The European Union is one of the world's most powerful regional associations with 42 member nations as of 2011.
A)True
B)False
Q2) Explain the origin and purpose of the World Trade Organization.
Q3) MagNet is a U.S.company based in Utah.It is negotiating to sell $4 million worth of computer goods to a French company,L'la.L'la is insisting that the contract be governed by the CISG.What are some of the primary differences between the UCC and the CISG?
Q4) Zebra Toy Company invests a large sum of money in retail stores located in a foreign country.Zebra intends to bring its foreign earnings back home to the United States.This practice is known as:
A) repatriation of profits.
B) inflow profit streaming.
C) expropriation.
D) comity.
Q5) Explain what the General Agreement on Tariffs and Trade (GATT)is and give pro and con arguments concerning this agreement.
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Page 11
Chapter 10: Introduction To Contracts
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Q1) One of the factors leading courts away from a laissez-faire approach to contract law was:
A) the movement away from requiring a writing and a seal on contracts.
B) a change in relative bargaining power between parties to contracts.
C) the assumption that promises are not legally significant.
D) the assumption that parties had freedom to contract and would have to live with the consequences.
Q2) Paid surrogacy contracts are viewed by the legislative majority in all states as immoral and illegal.
A)True
B)False
Q3) Mary goes into Honest Harry's Electronics and purchases a TV.Mary agrees to pay for the TV in 30 days on the store's "30 days same as cash" plan.This is an executory contract.
A)True
B)False
Q4) A valid contract can legally be voided by either party.
A)True
B)False
Q5) Discuss the requirements of promissory estoppel.
Page 12
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Chapter 11: Agreement
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Q1) Which of the following are generally considered to be legal offers?
A) Placing an item up for auction.
B) Catalog advertisements.
C) Price lists.
D) A note scribbled on a restaurant napkin that includes the details of the offer.
Q2) If an offer specifies no time limit in which to accept:
A) the offeree has 30 days to respond.
B) the offeree has 10 days to respond.
C) the offer is not valid and therefore it does not matter when the offeree responds.
D) the offeree has a reasonable period during which to accept.
Q3) If both parties believe they have a binding contract,this belief any later questions about the validity and enforceability of the agreement.
A)True
B)False
Q4) Discuss the effect of the Uniform Commercial Code on the law of sales contracts in the area of open terms.
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Chapter 12: Consideration
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Q1) Billy owes a liquidated debt of $3000 to Rayna,his personal weight trainer.Billy sends Rayna a check for $300 on which he has marked,"Payment in Full." If Rayna cashes the check she will not be able to successfully sue Billy for the remainder of the debt.
A)True
B)False
Q2) Section 2-306 of the UCC expressly disallows output contracts in the sale of goods.
A)True B)False
Q3) Walter worked nights as a clerk in a fast-food store.On his last work shift,Walter's boss told him,"I'm really grateful for the year that you have worked here.I am going to give you a bonus of $1,000 in your last paycheck." When Walter got his last paycheck,there was no bonus.If Walter sues,the likely result will be:
A) Walter will win, as the promise is enforceable.
B) Walter will lose, as he gave no consideration.
C) Walter will lose unless the promise was in writing.
D) Walter will win, as no consideration is required to modify an employment contract.
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Page 14
Chapter 13: Legality
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Q1) Judith is a CPA with an excellent reputation and client base.She sells her tax preparation business to Shawn,and the sales contract includes a noncompete clause restricting Judith from opening a similar business for two years within a 10-mile radius of her former office.If she opens a tax preparation office five miles away after one year,a court would probably:
A) grant an injunction barring her from operating the new office.
B) order confiscation of all of her new client files and turn them over to Shawn.
C) refuse to become involved, as the noncompete clause was illegal.
D) refuse to enforce the noncompete clause, as it is unreasonable regarding time and geographic area.
Q2) When Mohammed was hired by Pomico,Inc.,he signed the following agreement,"Upon termination of my employment with Pomico,I agree not to work for a competing company within 30 miles of Pomico's headquarters for one year." This agreement,important to protecting secret information developed in the employer's business,is:
A) an unenforceable exculpatory agreement.
B) an unenforceable usurious agreement.
C) an enforceable bailment agreement.
D) an enforceable agreement not to compete.
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Page 15
Chapter 14: Capacity And Consent
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Q1) Larson put his home on the market for sale.His good friend Bill came to look at the home for possible purchase or rental.Bill noticed a crack in the ceiling and inquired about it to Larson.Larson said that there had been a water leakage problem in the area but it had been fixed two years ago and had not leaked since.Bill made a written offer on the house which was accepted in writing by Larson the next day.On the day prior to closing,Bill went to make a final inspection.Bill observed water leaking through another crack in a ceiling of the house and in the garage.The next day,Bill informed the real estate agent that he was rescinding the contract because of the leaks.Larson subsequently rented the property to another party.A couple of months later,Larson filed a suit seeking a court order to make Bill purchase the house or in the alternative for money damages.Bill defended by claiming that Larson either defrauded him or there was a mutual mistake and asked for the return of his earnest money and/or damages for fraud.The trial court found there was no evidence to find fraud on the part of Larson because the roof had been previously fixed and the two parties had been good friends.What is the appropriate remedy when a court concludes that there has been a mutual mistake of material fact?
Q2) The age of majority to contract in all states is 21. A)True B)False
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Page 16
Chapter 15: Written Contracts
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Q1) Under a contract for the sale of land,the statute of frauds:
A) does not apply if the purchase price for the land is less than $500.
B) requires that the entire agreement be in one single document.
C) requires the defendant to sign the agreement.
D) does not apply if the total price of the land is to be paid in less than one year..
Q2) The Uniform Electronic Transmission Act (UETA):
A) declares that a contract or signature may not be denied enforceability just because it is in electronic form.
B) was passed by Congress in 2002.
C) creates a safe cyberspace environment in which business communications cannot be intercepted or fraudulently altered.
D) All of the above.
Q3) Hannah orally agrees to sell her house to Brett for $175,000.If she delivers the deed to Brett with the expectation of payment in two weeks and he fails to pay,most courts will not enforce the contract since it was not in writing.
A)True
B)False
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Page 17
Chapter 16: Third Parties
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Q1) Andrew Durham was injured in a job-related accident that resulted in a workers' compensation settlement agreement with the employer's insurance carrier,Traveler's Indemnity Company.The settlement agreement required Traveler's to pay Durham $2500 per month for the rest of his life.To finance its obligation,Traveler's purchased an annuity in its name.The settlement agreement required Traveler's approval or consent prior to an assignment of the annuity payments.Durham later decided to open a business and went to a credit union for a $214,000 loan.The credit union loaned the money,taking a security interest in Durham's monthly annuity payments.Traveler's consent was never secured.Was this a valid assignment?
Q2) 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
Q3) An assignment is effective from the moment it is made,regardless of whether the assignor notifies the obligor.
A)True
B)False
Q4) Discuss the potential liability differences between a delegation and a novation.
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Chapter 17: Performance And Discharge
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Q1) A court may,at times,discharge a party who has not performed.
A)True
B)False
Q2) Assume that Jessie and Lester have formed a contract whereby Jessie agrees to deliver 10,000 dozen "Grade A Large Eggs" to be shipped in recycled paper cartons.A shortage of paper makes paper cartons much more expensive,so Jessie uses styrofoam cartons and ships the eggs.Lester is entitled to cancel the contract based on this deviation of terms in the contract.
A)True
B)False
Q3) A contract between a company in the U.S.and one in China,contained a clause that stated: "If an event happens which is extraordinary and out of the control of the parties such as a strike,act of God,fire,accident,or transportation difficulties,then the affected party shall be relieved of its obligations under the contract." This type of clause is:
A) an objective impossibility clause.
B) a force majeure clause.
C) a concurrent condition clause.
D) a condition precedent clause.
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Chapter 18: Remedies
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Q1) All Seasons,Inc.ordered $5,000 worth of Christmas decorations from Santa,Inc.The shipment of decorations was to arrive no later than October 1,but did not arrive until December 1.All Seasons was able to purchase some of the unfulfilled order through other suppliers,but had to pay 15% more than the price under contract with Santa,Inc.As a result of the delay,All Seasons' sales were down 25%.All Seasons can recover:
A) punitive damages.
B) nominal damages.
C) compensatory damages and consequential damages.
D) compensatory damages, consequential damages, and punitive damages.
Q2) In a construction contract,there is a $1000 per day estimate of damages for each day that the contract runs over the completion date.The contractor is 30 days late when the job is completed,resulting in a prospective damage award of $30,000.What is this type of clause,and when will it be enforced?
Q3) Expectation interest can best be described as money spent in reliance upon the agreement.
A)True
B)False
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Page 20
Chapter 19: Practical Contracts
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Q1) Contracts must begin with the word,"whereas" in order to be legal.
A)True
B)False
Q2) A letter of intent is not likely to be enforceable unless:
A) there is a clearly stated start date for the contract.
B) both parties agree on compensation.
C) it is clear that both parties intended to be bound by the letter.
D) conditions in the letter are met.
Q3) The title of a contract should be:
A) general, like "Memorandum of Agreement.".
B) written like a sentence, with only the first letter capitalized.
C) short -- no more than five words.
D) descriptive of the agreement, and typed in all capital letters.
Q4) One reason you may not need a written contract is:
A) you are dealing with a party you do not know well, so you need to remain flexible.
B) you are buying land from a member of your family.
C) the terms of the agreement are simple and the value of the transaction is small.
D) you have negotiated enough that you both know what the other person intends.
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Page 21
Chapter 20: Introduction To Sales
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Q1) The stated purpose(s)of Article 2 of the UCC is/are:
A) to simplify the law governing sales.
B) to permit the continued development of business practices through custom and usage.
C) to make the laws governing sales uniform among the various states.
D) All of the above are correct.
Q2) If Edmund and Kaylin have a writing mistakenly showing a sale and purchase of goods for $10,000 when the price should have been $1,000,a court will most likely:
A) enforce the agreement, relying on oral testimony to determine the correct price.
B) only enforce the agreement as written.
C) not hear the case unless both parties are merchants.
D) not enforce the agreement since the writing did not reflect a meeting of the minds of the parties.
Q3) Leasing goods is an insignificant part of business,and it is governed by extensions of the UCC Article related to sales rather than having a separate article of the Code to cover leases.
A)True
B)False
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Chapter 21: Ownership And Risk
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Q1) Graham,an adult,purchases a car from a minor,and subsequently sells it to Harlow,another adult.Harlow paid full value for the car and had no reason to know that Graham had purchased the car from a minor.Which of the following best describes this situation?
A) Graham had good title and Harlow gets good title.
B) Graham had good title and Harlow gets a voidable title.
C) Graham had voidable title and Harlow gets good title.
D) Graham had void title and Harlow gets void title.
Q2) In which case does the buyer receive no title to the goods he purchases?
A) Owner has good title. Max steals the goods and sells them to buyer.
B) Owner has good title. Max purchases the goods using deception. He then sells them to buyer who gives value and acts in good faith.
C) Owner has good title. Max purchases the goods using fraud. He then sells them to buyer who is not a BFP.
D) All of the above.
E) Both a and c.
Q3) Crops are considered identified when they are planted.
A)True
B)False
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Page 23
Chapter 22: Warranties And Product Liability
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Q1) In a tort case,the statute of limitations runs from the time the defect was discovered.
A)True
B)False
Q2) Tu-thumbs buys a used paint sprayer from the local paint store.The sprayer had a large sign on it which said "AS IS." The dealer made no promises or statements concerning the performance of the paint sprayer.When Tu-thumbs attempts to spray paint his house,the trigger on the sprayer sticks in the "on" position and before Tu-thumbs can pull the electrical cord to cut the power,paint is sprayed all over his prize Borzoi dog that is scheduled to be shown in a dog show the next day.Tu-thumbs sues the dealership.Who wins?
A) Dealer wins; there were no express warranties and all implied warranties have been successfully disclaimed.
B) Tu-thumbs wins; he can recover on the basis of express warranties.
C) Tu-thumbs wins; he can recover on the basis of the implied warranty of merchantability because the word "merchantability" was not used in the disclaimer.
D) Dealer wins; even though there were implied warranties, the damage to the dog could not have been foreseen.
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Page 24
Chapter 23: Performance And Remedies
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Q1) Wimble ordered 1,000 pro-quality luminescent orange tennis balls from Sports Unlimited at a cost of $800.On June 1,Sports Unlimited shipped standard white tennis balls,but Wimble rejected them.Wimble bought the same number of pro-quality luminescent orange balls from another supplier the same day for $650.In a suit against Sports Unlimited,Wimble may recover $800.
A)True
B)False
Q2) A buyer has an absolute right to reject goods as long as the rejection is timely. A)True
B)False
Q3) Precision had a contract to supply Higgins,Co.with 500 medical instruments for delivery in three months.Several weeks later Higgins reads in the Wall Street Journal that Precision has been sued for selling defective instruments.Higgins could:
A) require written assurances from Precision.
B) sue Precision for damages immediately.
C) "cover."
D) declare the contract is breached.
Q4) Identify six possible remedies for a seller when the buyer breaches a contract.
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Page 25
Chapter 24: Secured Transactions
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Q1) Wedney,Inc.has a purchase money security interest in one of Yoro Chicken's meat processing machines.Wedney filed a financing statement on the day the machine was delivered,perfecting its interest.Great State Bank already had a security interest in the machine.Which party has superior priority rights in the meat processing machine?
A) Wedney. A PMSI in collateral other than inventory takes priority over a conflicting security interest if the PMSI is perfected at the time the debtor receives the collateral or within 20 days after he receives it.
B) Great State Bank, since it had an earlier security interest.
C) The party who is first to repossess the collateral.
D) The creditors have equal priority.
Q2) All but which of the following may be used as collateral in a secured transaction under UCC Revised Article 9?
A) Bank deposit accounts.
B) Personal injury tort claims of individuals.
C) Tort claims of a corporation.
D) A computer program if, by purchasing a computer, the buyer of the computer acquires the right to use that embedded program.
E) Both b and c.
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Page 26
Chapter 25: Creating A Negotiable Instrument
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Q1) An instrument is negotiable if it satisfies six standards.Which of the following is a standard of negotiability?
A) The instrument can be oral provided there is proof beyond a reasonable doubt.
B) The instrument must be payable on demand.
C) The instrument must be conditional.
D) The instrument must state a definite sum of money.
Q2) Trisha loaned Brian $600 evidenced by a promissory note.When Brian paid off the loan,he did not ask Trisha for the note.She sold it to Carin,a holder in due course.Brian does not have to pay Carin since he already paid Trisha the full $600.
A)True
B)False
Q3) Margo is in possession of a check issued to her by Felix.The check states,"Pay to the order of Margo." If Margo wishes to transfer the check to Pete to pay a debt she owes him,all she needs to do is strike out her name on the front of the check,write in Felix's name and give it to him.
A)True
B)False
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Page 27
Chapter 26: Liability For Negotiable Instruments
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Q1) Which of the following will discharge an instrument?
A) A payor tenders payment in full.
B) The parties agree to a discharge.
C) The terms of the instrument are intentionally changed.
D) All of the above.
Q2) A check was indorsed as follows:
Jessica Hall
without recourse
Paul Samuels
Collection guaranteed
Melissa Liston
Which of the following will discharge all of the indorsers?
A) Notice of dishonor.
B) The without recourse indorsement within the chain.
C) Insolvency of drawer.
D) Certification of the check.
Q3) A drawee has primarily liability on a draft.
A)True
B)False
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Chapter 27: Accountants' Liability
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Q1) Halbeck,LLC was negligent in its audit of E-treme,Inc.Unbeknownst to Halbeck,E-treme used the financial statements to secure a loan from Great State Bank.Under the Ultramares doctrine,Halbeck will be liable to Great State Bank for its losses on the loan.
A)True
B)False
Q2) Clint is auditing MegaCorp.In reviewing the sales ledger,Clint saw that MegaCorp had sold 3,000 disk drives to CompSales,Inc.Clint reviewed the original invoice of this sale to ensure that the date,price,quantity,and customer's name all match.He then verified each step along the paper trail until the disk drives left the warehouse.This illustrates: A) tracing.
B) vouching.
C) following.
D) monitoring.
Q3) Manuel,in conducting an audit,must rely most heavily on rules found in generally accepted accounting principles (GAAP).
A)True
B)False
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Chapter 28: Agency Law
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Q1) Factors influencing whether a servant is acting within the scope of employment include all but which of the following?
A) The act is similar to the one the principal authorized.
B) The act is not seriously criminal.
C) The act took place during hours that the servant is generally employed.
D) All of the answer choices are factors in determining if an act is "within the scope of employment."
Q2) Alex worked for years for MegaCorp.During his employment with MegaCorp,he learned a great deal of confidential information and knew that if this information got into the hands of competitors or the general public,MegaCorp could suffer great business losses.Alex claims that he was wrongfully fired by MegaCorp and accordingly he believes he has no obligation to MegaCorp to keep any information he acquired with them as confidential.MegaCorp claims that Alex is under a continuing duty to keep confidential information secret,even though he is no longer with the company.Who is right? Why?
Q3) Rob agrees to act as an agent for Diane in selling her car.Diane has a duty of loyalty to Rob.
A)True
B)False
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Chapter 29: Employment Law
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Q1) Under the Equal Pay Act of 1963 an employee may not be paid at a lesser rate than employees of the opposite sex for tasks requiring equal skill,effort,and responsibility under similar working conditions.
A)True
B)False
Q2) It is legal for a private employer to use lie detector tests as part of its usual hiring process.
A)True
B)False
Q3) The prohibition against wrongful discharge prohibits an employer from firing a worker for a bad reason.
A)True
B)False
Q4) Discuss the requirements of the Family and Medical Leave Act.
Q5) Whistleblowers are employees who disclose illegal behavior on the part of their employers.
A)True
B)False
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Chapter 30: Labor Law
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Q1) Rick and Allan want to start a union in the small factory where they work.Outline the basic procedures they will need to follow to get a union recognized as the exclusive bargaining unit for the company employees.
Q2) A company's collective bargaining agreement has expired and negotiations are underway for a new one.After one exhausting session,union leaders have decided management will not bargain in good faith.The union declares it will be going out on strike the following midnight if an agreement is not reached.The union:
A) is allowed to go out on strike the following midnight.
B) must give the employer at least seven days' notice before going out on strike.
C) must give the employer at least 30 days' notice before going out on strike.
D) must give the employer at least 60 days' notice before going out on strike.
Q3) Joan was unhappy with her union's decision not to file a grievance about one of her complaints.Consequently,she publicly criticized the union officials.Since Joan went public with her criticism,the union can discipline her.
A)True
B)False
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Chapter 31: Starting A Business
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Q1) The importance of a Subchapter S corporation is:
A) its organizational structure.
B) its treatment of shareholders for income taxation purposes.
C) its requirement of restrictive transfer rights of the shares.
D) its small cost of formation.
Q2) Compare and contrast the following forms of business organization: sole proprietorship,general partnership,limited partnership,limited liability company,and corporation as to ease of formation,liability of owners,management,and tax implications.
Q3) Trudy wishes to buy a national franchise.What information is the seller legally required to provide before she buys the franchise?
Q4) A partnership is a taxable entity,separate from the partners.
A)True B)False
Q5) Briefly discuss the limitations on a corporation electing Subchapter "S" status.
Q6) What is a limited liability company? Explain the advantages and disadvantages of this type of business ownership?
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Chapter 32: Partnerships
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Q1) Which of the following is a rightful dissociation?
A) A partner in a partnership at will serves notice that he intends to withdraw.
B) A partner in a term partnership withdraws before the end of the term.
C) A partner in a term partnership becomes bankrupt.
D) A partner violates the partnership agreement.
Q2) Sandy,Ramon,and Bonnie were partners.Sandy dissociated from the partnership.Bonnie and Ramon decided to continue the business.When Sandy dissociated,there was a $50,000 debt owed to Great State Bank.Which statement is correct?
A) Sandy remains liable on the $50,000 debt owed to Great State Bank.
B) Only Ramon and Bonnie are liable for the $50,000 debt owed to Great State Bank.
C) The debt is extinguished as a result of the dissociation.
D) Whether Sandy remains liable depends on whether she filed a statement of dissociation.
Q3) Ending a partnership involves which of the following three steps?
A) Dissolution, winding up, and termination.
B) Dissociation, winding down, and consummation.
C) Failure, dividing up, and paying off.
D) Dissociation, agreement, and dissolution.
Q4) 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) Incorporation protects:
A) shareholders against personal liability for the debts of the company.
B) anyone involved in management of the business against personal liability for wrongdoing.
C) the public from wrongdoing by either the shareholders or the management of the corporation.
D) All the above are correct.
Q2) Discuss how a corporation is terminated.
Q3) Owners of preferred stock typically have a preference in liquidation.
A)True
B)False
Q4) A business corporation can be incorporated under either state law or federal law.
A)True
B)False
Q5) Preemptive rights are:
A) not legal in the majority of states.
B) designed to prevent dilution of a shareholder's ownership in the company.
C) required to be offered to shareholders by the Model Act.
D) designed to indemnify managers who act in good faith.
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Chapter 34: Corporate Management
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Q1) A finding by a court that a manager's decision had a rational business purpose does not necessarily protect the manager from a finding that he breached a duty of care.
A)True
B)False
Q2) Tender offers are regulated on the federal level by the National Labor Relations Act.
A)True
B)False
Q3) In the Unocal Corp.v.Mesa Petroleum Co.case,the court said the board of directors could act with the primary goal of keeping themselves in office.
A)True
B)False
Q4) A manager used her position in the company to develop a new business the company might have pursued.This is a breach of the:
A) duty of care.
B) duty of non-competition.
C) duty of loyalty.
D) duty of recognition.
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Chapter 35: Shareholders
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Q1) In reality,the officers of the large corporations have a great deal of influence on who will be nominated and elected as directors.
A)True
B)False
Q2) 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.
Q3) A majority of shareholders of FamLi Co.wish to expel Glenn,a minority shareholder.In most states,the company cannot expel Glenn unless:
A) it pays a fair price for Glenn's stock.
B) there is a legitimate business purpose for expelling him.
C) Both of the above.
D) Neither a nor b
Q4) A shareholder proxy is generally revocable at any time.
A)True
B)False
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Chapter 36: Securities Regulation
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Q1) The guiding principal of federal securities law is:
A) to keep investors from making bad investments.
B) to insure investors have full and accurate information.
C) to avoid another stock market crash.
D) to promote the issuance of securities.
Q2) The Foreign Corrupt Practices Act:
A) applies only to corporations registered under the federal Securities Exchange Act.
B) makes it illegal to bribe U.S. and foreign officials.
C) applies to any U.S. corporations.
D) applies only to foreign corporations.
Q3) The Foreign Corrupt Practices Act makes it a crime:
A) for U.S. companies to sell unregistered stock in other countries.
B) for non U.S. companies to sell unregistered securities in the U.S.
C) to "bribe" foreign governments or officials.
D) to conspire to defraud stock purchasers in other countries.
Q4) After the SEC completes its review of a preliminary registration statement,it sends the issuer a comment letter setting forth changes that must be made.
A)True
B)False
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Chapter 37: Bankruptcy
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Q1) What are the three main purposes of the federal Bankruptcy Code? How are these purposes supported and fostered in the Code?
Q2) 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
Q3) Link negligently ran his car into John,causing $50,000 in injuries.Link was intoxicated at the time of the accident.Can Link discharge this debt in bankruptcy?
A) Yes, claims based on negligence are dischargeable.
B) Yes, as long as he didn't intend to hit John's car.
C) No, such claims are not dischargeable in bankruptcy.
D) No, because Link breached a fiduciary duty.
Q4) In Chapter 11 only the debtor may propose plans of reorganization.
A)True
B)False
Q5) Karen has filed for bankruptcy.Who has the authority to confirm or reject a plan of payment,and what factors will be considered when deciding whether to approve a repayment plan under Chapter 13?
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Chapter 38: Antitrust
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Q1) John D.Rockefeller's oil business was the main reason which legislation was enacted?
A) Sherman Act.
B) Robinson-Patman Act.
C) Clayton Act.
D) NLRA.
Q2) The chain of Mega Hardware stores agreed with Lock Tight Manufacturing not to carry any brand of locks and door handles other than those manufactured by Lock Tight.Mighty Lock threatened to sue for antitrust violations.On what basis and under what statute(s)would Mighty Lock sue? What factors would a court consider in deciding the case?
Q3) Horizontal cooperative strategies would include all EXCEPT:
A) market division.
B) price fixing.
C) reciprocal dealing.
D) bid-rigging.
Q4) The Clayton Act prohibits anti-competitive mergers.
A)True
B)False
Q5) Discuss when monopoly power is not a violation of Section 2 of the Sherman Act.
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Chapter 39: Consumer Law
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Q1) The FTC may consider an act unfair if it simply violates public policy.
A)True
B)False
Q2) Marla applies for and receives a three-year loan through Sharkey Lenders for $5,000 at 27% APR.If the loan agreement violates the applicable usury statute,Marla may be able to keep:
A) the interest that exceeds the usury limit.
B) all of the interest on the loan.
C) the interest and the $5,000.
D) Any of the answer choices are possible, depending on where the loan was made.
Q3) Prime Products,Inc.was going to be able to ship the comforter Margaret ordered within three weeks instead of the seven days it had originally promised.Prime must cancel Margaret's order and notify her that it can deliver within three weeks if she wants to reorder.
A)True
B)False
Q4) Commonground Collections has been hired to collect past-due medical bills for Lakeview Physicians.List some activities that Commonground may not do pursuant to the FDCPA.
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Chapter 40: Environmental Law
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Q1) The United States has ____ percent of the world's population and consumes about ____ percent of the world's energy.
A) 20; 65
B) 25; 10
C) 10; 50
D) 5; 25
Q2) The Toxic Substances Control Act regulates:
A) chemicals other than pesticides, foods, drugs, and cosmetics.
B) insecticides.
C) natural gas.
D) pesticides.
Q3) A person who violates the Clean Water Act can face possible imprisonment in addition to other penalties.
A)True
B)False
Q4) The Environmental Protection Agency (EPA)was created by Congress to:
A) consolidate environmental regulations under one agency.
B) protect corporate investors.
C) prevent conflicts between the Departments of Commerce and Interior.
D) eliminate discrimination.
Page 42
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Chapter 41: Cyberlaw
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Q1) The United States of America v.Angevine case held that the professor had no reasonable expectation of privacy in his office computer.
A)True
B)False
Q2) Jorgeson Co.,on its website,promised the company would not give PII to third parties without the customer's consent,but then gave out such information.This practice violates Section 5 of the FTC Act.
A)True
B)False
Q3) Lois receives an e-mail asking her to update her personal information on a website that is an illegal imitation of a legitimate site.This practice:
A) is a crime called phishing.
B) is a tort called information theft.
C) is a breach of contract action known as shilling.
D) may be prosecuted under the GLB Privacy Act.
Q4) Explain the difference between an ISP and a Web host,and discuss whether they are treated alike under the Communications Decency Act (CDA).
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Chapter 42: Intellectual Property
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Q1) If Cub Cadet wins a trademark infringement suit by proving the defendant's trademark,Kub Kadet,is likely to deceive customers about who made the goods,Cub Cadet is entitled to:
A) up to three times actual damages.
B) an injunction to prevent further infringement.
C) any profits Kub Kadet made on its infringing product.
D) All of the above.
Q2) Intellectual property:
A) producers are likely to be adequately paid in the free market.
B) production is not subsidized by the government.
C) typically is expensive to produce but cheap to reproduce and transmit.
D) typically is expensive to produce, copy, and transmit.
Q3) A color cannot be trademarked since it cannot be kept from use by other businesses.
A)True
B)False
Q4) Briefly discuss a patent,copyright,and trademark.
Q5) Explain what a domain name is.Discuss if and how a domain name can be registered as a trademark or if a trademark can be registered as a domain name.
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Chapter 43: Real Property And Tenant-landlord Law
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Q1) Discuss the tenant's and the landlord's basic duties under a landlord-tenant relationship.
Q2) A tenancy with no fixed duration is a:
A) tenancy from month to month.
B) tenancy at will.
C) periodic tenancy.
D) tenancy for years.
Q3) Angelina owned a lot near a lake.Although she never had permission from the owner of the adjoining land,each weekend when she camped on her lot she crossed his land to take her boat to the boat ramp at the lake.If Angelina continued this use of her neighbor's land for the number of years required by local statute,she would have:
A) created a "profit."
B) an easement by prescription.
C) a grant easement.
D) a license to use her neighbor's land.
Q4) Owners in a joint tenancy with the right of survivorship cannot transfer their interest during their lifetime.
A)True
B)False
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Chapter 44: Personal Property And Bailment
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Q1) Discuss a bailor's liability for defects in the bailed property.
Q2) After a meeting with his advisor to register for a class at State University,Ron forgot his calculator in the dean's outer office.Theresa,another student,found the calculator.The calculator is treasure trove and Theresa may keep it.
A)True
B)False
Q3) The difference between an inter vivos gift and a gift causa mortis is that the inter vivos gift is made during the donor's lifetime and a gift causa mortis is a gift is made after the donor's lifetime by the donor's estate.
A)True
B)False
Q4) An estray statute:
A) governs the ownership of livestock that have strayed from the rest of the herd.
B) is a federal statute that governs the rights of ownership of found property.
C) is both of the above.
D) is neither of the above.
Q5) Distinguish between a contract and a gift.Give an example of each.
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Chapter 45: Planning For The Future: Wills,Trusts,And
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Q1) Joel is displeased with his son's lifestyle choices and,instead of dividing his estate,Joel wants to leave all of his property to his daughter,Marie,when he dies.Joel:
A) may not leave everything to his daughter and nothing to his son. If Joel tries to do this, his son can take a forced share of his father's estate.
B) may disinherit his son, but he must indicate in the will his reason for doing so.
C) may disinherit his son for any reason as long as Joel indicates in the will that the son was omitted on purpose.
D) may disinherit his son only if Joel leaves the son a nominal amount, such as $1.
Q2) A later will revokes a prior will only if that revocation is clearly stated.
A)True
B)False
Q3) Parents may not disinherit their minor children without good reason.
A)True
B)False
Q4) Discuss the differences between a will and a trust.
Q5) Identify four ways a trust can be terminated.
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