Commercial Law Practice Exam
Course Introduction
Commercial Law is a foundational course that explores the legal principles governing business and commercial transactions. The course examines key areas such as the formation and enforcement of contracts, the sale of goods, agency relationships, negotiable instruments, secured transactions, and aspects of insolvency law. Students will gain an understanding of the legal environment in which businesses operate, including regulatory frameworks and dispute resolution mechanisms. Real-world cases and scenarios are used to illustrate how legal concepts are applied in commercial contexts, equipping students with practical skills for navigating business law challenges.
Recommended Textbook Business Law Principles for Todays Commercial Environment 4th Edition by David P. Twomey
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Chapter 1: The Nature and Sources of Law
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Sample Questions
Q1) Law may be classified in terms of principles of law and principles of equity.
A)True
B)False
Answer: True
Q2) ______ is a body of law that provides justice when the law does not offer an adequate remedy.
A)Ethics
B)Regulations
C)Equity
D)None of the above.
Answer: C
Q3) Our rights flow from:
A)the Constitution.
B)federal statutes.
C)city ordinances.
D)all of the above.
Answer: D
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Page 3
Chapter 2: The Court System and Dispute Resolution
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Sample Questions
Q1) The _____ rule(s)on the admissibility of evidence.
A)Judge
B)Jury
C)Attorneys
D)court clerk
Answer: A
Q2) Which of the following is an example of limited or special jurisdiction court?
A)Probate court
B)Juvenile court
C)Domestic Relations court
D)All of the above.
Answer: D
Q3) In mediation,the mediator acts as a:
A)judge.
B)attorney.
C)messenger.
D)expert witness.
Answer: C
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Chapter 3: Business Ethics, social Forces, and the Law
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Sample Questions
Q1) Moral standards based on positive law may allow businesses to conduct themselves unfairly so long as their actions are not illegal.
A)True
B)False
Answer: True
Q2) Companies with 100 years of consistent dividends:
A)use positive laws as a guide for ethical decisions.
B)have a goal of profitability no matter what the cost.
C)have a strong commitment to values.
D)all of the above.
Answer: C
Q3) Moral relativists believe that ethical decisions will differ based on circumstances.
A)True
B)False
Answer: True
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Chapter 4: The Constitution As the Foundation of the Legal Environment
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Q1) 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
Q2) The equal protection clause:
A)requires all persons to be treated equally even if reasonable grounds for different classifications exist.
B)allows laws that discriminate on the basis of moral standards.
C)requires that a statute be sustained unless it is clearly arbitrary or capricious.
D)allows laws that discriminate on the basis of cultural patterns.
Q3) Because the power to regulate interstate commerce has been interpreted broadly,Congress has great power to adopt regulatory laws affecting the economy. A)True
B)False
Q4) Ex post facto laws can be adopted by either states or the national government. A)True
B)False
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Chapter 5: Government Regulation of Competition and Prices
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Q1) The Federal Trade Commission administers the law prohibiting unfair methods of competition.
A)True
B)False
Q2) Vertical mergers:
A)occur between firms that have a competitor relationship.
B)occur between firms that have buyer and seller relationships.
C)are not covered by the Clayton Act.
D)are always protected by the federal government.
Q3) Under the Clayton Act,when large-scale enterprises plan to merge,they must in advance:
A)notify the New York Stock Exchange.
B)notify the President of the United States.
C)complete the necessary financing arrangements.
D)notify the Antitrust Division of the Department of Justice.
Q4) When large-size enterprises plan to merge,they must give written notice to the Interstate Commerce Commission.
A)True
B)False
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Chapter 6: Administrative Agencies
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Sample Questions
Q1) A significant difference between an administrative agency hearing and a court hearing is that:
A)a binding decision can only be made by an agency.
B)there is no right of trial by jury before an agency.
C)a court hearing allows no public intervention.
D)a court can enforce its decision.
Q2) An administrative agency has the power to investigate,to require persons to appear as witnesses,to require witnesses to produce relevant papers and records,and to bring proceedings against those who violate the law.
A)True
B)False
Q3) An administrative agency is a governmental body charged with administering and implementing legislation.
A)True
B)False
Q4) The Administrative Procedure Act is a federal law that establishes the operating rules for administrative agencies.
A)True
B)False
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Chapter 7: The Legal Environment of International Trade
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Sample Questions
Q1) Which of the following is NOT a nontariff barrier?
A)government subsidies
B)import quotas
C)complex custom procedures
D)an import or export duty or tax placed on goods as they move in or out of a country
Q2) Blocking laws prohibit the disclosure,copying,inspection,or removal of documents located in the enacting country in compliance with orders from foreign authorities.
A)True
B)False
Q3) Under the act-of-state doctrine,the courts of one country will not sit in judgment of the acts of the government of another country conducted within its own territory.
A)True
B)False
Q4) A societé anonyme is the European counterpart of a U.S.corporation.
A)True
B)False
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Page 9
Chapter 8: Crimes
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Sample Questions
Q1) Knowingly making false statements in a loan application to a federally insured bank:
A)is a form of embezzlement
B)is a federal crime.
C)is a crime in the state the bank operates in.
D)all of the above.
Q2) Sally operates a large manufacturing firm near a federal land preserve known for its waterfowl and fauna.The federal government has just filed suit against Sally and her corporation,charging them with criminal violations of various environmental protection statutes.What rights do Sally and her corporation have that are guaranteed under the United States Constitution?
Q3) Some types of instruments of crime are automatically forfeited.
A)True
B)False
Q4) Forgery includes signing another person's name to a check with the intent to defraud.
A)True
B)False
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Chapter 9: Torts
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Sample Questions
Q1) For tort liability to be imposed,the perpetrator of the tort must have acted with the intent to do wrong.
A)True
B)False
Q2) Slander of title and trade libel are collectively known as product __________.
A)Divestiture
B)Disparagement
C)Dilution
D)Diversion
Q3) Torts arise from a violation of a ____ duty.
A)public
B)private
C)contractual
D)criminal
Q4) Strict liability is one type of tort.
A)True
B)False
Q5) Truth is not a defense to defamation.
A)True
B)False
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Chapter 10: Intellectual Property Rights
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Sample Questions
Q1) Under the United States Supreme Court's "doctrine of equivalents," infringers may not avoid liability for patent infringement by substituting insubstantial differences for some of the elements of the patented product or process.
A)True
B)False
Q2) When secret information is shared or communicated for a special purpose and the person receiving the information knows it is not to be made known,it loses the protection it had while secret.
A)True
B)False
Q3) Which of the following is not the exclusive right of the holder of a copyright?
A)To prepare works that are derived from the original work.
B)To obtain a court order enjoining use of the original work by another.
C)To distribute copies of recordings of the original work.
D)To display or perform the original work in public.
Q4) In limited circumstances customer lists are protected under trade secret laws.
A)True
B)False
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Chapter 11: Cyberlaw
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Sample Questions
Q1) The distinction between offer and acceptance is no longer relevant in cyberlaw.
A)True
B)False
Q2) Misrepresentation and fraud on the Internet raises a variety of new legal issues.
A)True
B)False
Q3) Sales tax on Internet sales:
A)is never collected.
B)is always collected.
C)is collected if the seller has a physical presence in the state of sale.
D)follow the same rules for sales tax collected in brick and mortar stores.
Q4) Bon,located in Florida,desires to enter into a contract with Jon,a resident of Maine.Neither wishes to meet face-to-face,as both are busy with a variety of business interests.Instead,they wish to form a contract over the Internet.Would a contract formed over the Internet be valid?
Q5) Legal issues in cyberspace include appropriation and competition issues.
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) A contract can only involve two parties.
A)True
B)False
Q2) When purchasing from a website,the website terms generally become the contract of the parties and are legally enforceable.
A)True
B)False
Q3) With regard to a unilateral contract,the offeree does not accept the offer by express agreement,but rather by performance.
A)True
B)False
Q4) A person who makes a promise is the promisor,while a person to whom the promise is made is the promisee.
A)True
B)False
Q5) The principle behind the quasi contract is to prevent unjust enrichment. A)True
B)False
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Chapter 13: Formation of Contracts: Offer and Acceptance
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Q1) An offer is terminated upon rejection by the offeree unless:
A)the period of time for which the offeror agreed to keep the offer open has not yet expired.
B)the offeror renews the offer.
C)the offeree revokes the rejection.
D)the offeree makes a counteroffer.
Q2) An offer that is indefinite may be clarified by reference to another writing through:
A)incorporation.
B)reference.
C)annotation.
D)indexing.
Q3) A(n)__________ contract is a contract to buy all requirements of the buyer from the seller.
A)output
B)essentials
C)necessaries
D)requirements
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Chapter 14: Capacity and Genuine Assent
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Sample Questions
Q1) A party who speaks with a reckless disregard for the truth not knowing of the falsity of his or her words cannot be liable for fraud.
A)True
B)False
Q2) John,a 17-year-old,purchased a ping-pong table and four new ping-pong paddles.A week after he turned 18,John tried to return the ping-pong paddles.He told the seller that he had decided to keep the table.Can John avoid the contract in this way?
Q3) When necessary medical care is provided to a minor,a parent is liable at common law for the medical expenses provided the minor child.
A)True
B)False
Q4) Contractual capacity can exist even though a party does not understand every provision of the contract.
A)True
B)False
Q5) A contract obtained by physical duress is void.
A)True
B)False
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Chapter 15: Consideration
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Sample Questions
Q1) When there is no consideration for a promise,the agreement is:
A)a quasi contract.
B)equitable.
C)not binding.
D)unethical.
Q2) Courts will consider the adequacy of the consideration when:
A)one party clearly has the better of the deal.
B)one party has more business experience than the other.
C)one party claims to have been defrauded.
D)one party shows a much lower price nationally-advertised on television.
Q3) A cancellation provision:
A)makes a promise illusory.
B)gives a person a free way out.
C)is limited to the terms set forth by the provision.
D)none of the above.
Q4) Consideration is not required in:
A)contracts for the sale of goods.
B)employment contracts.
C)agreements to modify employment contracts.
D)agreements to modify contracts for the sale of goods.
Page 17
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Chapter 16: Legality and Public Policy
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Sample Questions
Q1) An agreement not to compete is enforceable:
A)in the sale of a business.
B)between competitors.
C)in contracts for the sale of goods.
D)in contracts for the sale of securities.
Q2) Agreements not to compete are always void.
A)True
B)False
Q3) Fees charged by a lender for the reasonable expense of making a loan,such as the cost of appraising property,are treated as interest for purposes of the usury law.
A)True
B)False
Q4) When an agreement is illegal,parties are usually not entitled to help from the courts. A)True
B)False
Q5) Substantive unconscionability has to do with matters of freedom of assent. A)True B)False
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Chapter 17: Writing, electronic Forms, and Interpretation of Contracts
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Sample Questions
Q1) A note or memorandum does not have to contain all the essential terms of the contract to be valid.
A)True
B)False
Q2) An insurance company cannot refuse to pay the fire loss of the buyer of a house on the grounds that the sales contract for the house was not binding because it was not properly signed.
A)True
B)False
Q3) Parol evidence may be admissible to:
A)contradict a complete written contract.
B)prove the modification or termination of a contract.
C)replace the statute of frauds.
D)create a contract.
Q4) The parol evidence rule generally precludes testimony that would contradict a complete written contract.
A)True
B)False
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Chapter 18: Third Persons and Contracts
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Sample Questions
Q1) A third-party beneficiary contract may be amended:
A)with the consent of the beneficiary.
B)by operation of law.
C)if the contract allows modifications without the beneficiary's consent.
D)all of the above.
Q2) An obligor may delegate his or her duties to perform under a contract when the:
A)performance of the duty is standardized and nonpersonal.
B)obligor is unable to perform his or her duties.
C)contract is silent as to the right of assignment.
D)obligor is an expert in his or her specialized duties under the contract.
Q3) An incidental beneficiary is the same thing as a third-party beneficiary.
A)True
B)False
Q4) 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.
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Chapter 19: Discharge of Contracts
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Q1) A __________ is a condition that must occur before a party to a contract has an obligation to perform under a contract.
A)condition precedent
B)condition subsequent
C)concurrent condition
D)none of the above
Q2) For the parties to enter into an accord and satisfaction that discharges the original obligation,there must be a bona fide dispute.
A)True
B)False
Q3) A condition subsequent can alter but not terminate a contract.
A)True
B)False
Q4) In which case will performance on the exact date specified in the contract most likely be deemed essential?
A)a sale of goods that fluctuate rapidly in value.
B)a sale of goods that remain stable in value.
C)a sale of real estate.
D)a sale of goods where no harm results from a delay in performance.
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Chapter 20: Breach of Contract and Remedies
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Q1) When an anticipatory repudiation of a contract occurs,the aggrieved person's option(s)include:
A)doing nothing and waiting for performance per the contract.
B)immediately declaring a breach of contract.
C)considering the contract cancelled.
D)all of the above.
Q2) Consequential damages may not be recovered,even if they were within the contemplation of the parties at the time of contracting.
A)True
B)False
Q3) In some cases the court may require specific performance when there is a breach of contract.
A)True
B)False
Q4) If there is a breach of contract,the law requires that the other party terminate the contract and bring a lawsuit.
A)True
B)False
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Chapter 21: Personal Property and Bailments
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Sample Questions
Q1) Bailments may be:
A)created orally or through a writing.
B)created for either real or personal property.
C)created for nonpossessory personal property.
D)made only after delivery to the bailor is accomplished.
Q2) After fully complying with the procedures of the Uniform Gifts to Minors Act,a donor is entitled to take back the donated property at any time before the minor donee reaches the age of 18.
A)True
B)False
Q3) A tenancy in common is a form of ownership by two or more persons.
A)True
B)False
Q4) Unclaimed property is often transferred to the government under the concept of escheat.
A)True
B)False
Q5) Most courts consider an engagement ring to be a conditional gift.
A)True
B)False
23
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Chapter 22: Legal Aspects of Supply Chain Management
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Q1) The rights of a holder of a duly negotiated warehouse receipt are extinguished by the warehouser's surrender of goods to the depositor.
A)True
B)False
Q2) The legal definition of a guest of a hotel requires that the person:
A)live at least five miles from the hotel.
B)is a guest of a registered occupant of the hotel.
C)is a transient.
D)stay at the hotel for at least 24 hours.
Q3) A negotiable warehouse receipt states that the goods received will be delivered to the bearer or to the order of any named person.
A)True
B)False
Q4) A purchaser of a nonnegotiable warehouse receipt:
A)receives no implied warranties.
B)may acquire rights superior to those of the transferor.
C)acquires only the title and the rights the transferor had authority to transfer.
D)may be considered to have the rights of a holder in due course.
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Page 24
Chapter 23: Nature and Form of Sales
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Q1) When a term of an acceptance conflicts with a term of an offer but it is clear that the parties intended to be bound by a contract,the UCC still recognizes the formation of a contract,and the conflicting terms cancel each other and are ignored.
A)True
B)False
Q2) Which of the following is not a sale of goods?
A)a bailment
B)an option to purchase
C)a gift
D)all of the above
Q3) The provisions of Article 6 concerning bulk transfers are designed to protect creditors.
A)True
B)False
Q4) 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
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25
Chapter 24: Title and Risk of Loss
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Questions
Q1) When particular goods have been selected by either the buyer or the seller,or both,as being the goods called for by the sales contract,the goods are said to be
A)identified.
B)actualized.
C)realized.
D)materialized.
Q2) __________ 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
Q3) "Without reserve" auctions give the auctioneer the right to withdraw the goods from the sale process if the bids are not high enough.
A)True
B)False
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Chapter 25: Product Liability: Warranties and Torts
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Q1) Arthur was looking for a Father's Day gift for his dad,Tony.Tony was a cigar smoker but Arthur was a nonsmoker.Arthur went to a cigar store and was looking around when the proprietor suggested Arthur try a new imported cigar.The proprietor touted this new cigar as "just like the great Cuban cigars." Arthur was reluctant but did light one of the cigars,which had a pleasant aromatic smell and took about five to six minutes to be consumed.On this basis,Arthur bought a box of the cigars and presented them to his father as a gift.When the father smoked one of the cigars,it gave off an acrid smell and was completely consumed in less than two minutes.When Arthur saw this,he was very upset and asked his father to try another.The same situation was repeated with the acrid odor and the cigar burning down very quickly like a cigarette. After Arthur tried unsuccessfully to return the cigars for a refund,Arthur filed a small claims court action against the store.The case was based on the failure of the purchased cigars to conform to the sample,breach of the implied warranty of merchantability,and the misleading statement "just like the Cuban cigars." Discuss the probable outcome of the case.
Q2) The theories of product liability are mutually exclusive.
A)True
B)False
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Chapter 26: Obligations and Performance
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Q1) When a buyer demonstrates in some way that the goods conform to the contract,the buyer has made a(n):
A)acceptance of the goods.
B)assignment of the goods.
C)substitution of the goods.
D)avoidance of the contract.
Q2) A seller's duty to deliver goods requires the seller to transport the goods to the place designated by the buyer.
A)True
B)False
Q3) Unless otherwise agreed,the proper place for the delivery of goods is:
A)the buyer's place of business.
B)the seller's home.
C)a delivery service selected by the seller.
D)the seller's place of business.
Q4) The seller's right to cure a defective tender means that the seller will be given a second chance to make a proper tender of conforming goods.
A)True
B)False
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Chapter 27: Remedies for Breach of Sales Contracts
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Q1) A defrauded buyer may avoid the contract and recover damages.
A)True
B)False
Q2) When a seller breaches a contract for the sale of goods to a buyer,the buyer is entitled to specific performance of the contract if the:
A)goods are unique.
B)market cost of the goods has increased.
C)goods can be purchased in any major city in the country.
D)buyer's customers will be disappointed if the buyer does not obtain the goods.
Q3) Proof of substantial impairment of the value of a contract to the buyer is required to justify revocation of acceptance.
A)True
B)False
Q4) Some courts allow sellers to recover the profits they would have made if the buyer had completed the transaction.
A)True
B)False
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Chapter 28: Kinds of Instruments, parties, and Negotiability
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Q1) Negotiation of commercial paper results in lesser rights to transferees than those rights afforded assignees of contracts under contract law.
A)True
B)False
Q2) Instruments are always negotiable.
A)True
B)False
Q3) Which of the following terms would make an instrument nonnegotiable?
A)It is dependent upon an event.
B)It is undated.
C)It is payable in foreign money.
D)It gives the holder the right to receive interest.
Q4) A drawee on a draft has no responsibility under the draft until it has accepted that instrument.
A)True B)False
Q5) If an order or promise is not for money,the instrument is not negotiable.
A)True
B)False
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Chapter 29: Transfers of Negotiable Instruments and
Warranties of Parties
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Q1) An indorsement "Pay to Donald Hames,Cathy Dukes" is not a valid indorsement because it does not contain the words "order" or "bearer."
A)True
B)False
Q2) A qualified indorsement qualifies the effect of a blank or special indorsement by disclaiming certain liabilities of the indorser to a maker or drawee.
A)True
B)False
Q3) If a lost negotiable instrument is in bearer form at the time of the loss,the finder is entitled to enforce payment.
A)True
B)False
Q4) If an instrument is drawn in favor of an officer of a named corporation,the instrument is payable to the corporation,the officer,or any successor to such officer.
A)True
B)False
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Chapter 30: Liability of the Parties Under Negotiable Instruments
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Q1) Universal defenses work against:
A)holders.
B)a holder through a holder in due course.
C)a holder in due course.
D)all of the above.
Q2) Generally defenses that could be raised in a breach of contact claim cannot be raised against a holder in due course.
A)True
B)False
Q3) 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
Q4) Economic duress,in the form of a reluctance to enter into a financially demanding instrument,is a universal defense.
A)True
B)False
32
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Chapter 31: Checks and Funds Transfers
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Q1) A forged endorsement must be reported within one year of the time that the bank statement is received.
A)True
B)False
Q2) 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.
Q3) A check is drawn on the assumption that the bank has sufficient funds in the drawer's account for payment.
A)True
B)False
Q4) To be effective,checks must be executed on forms that are printed expressly for that purpose and issued by a bank or other financial institution.
A)True
B)False
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Chapter 32: Nature of the Debtor-Creditor Relationship
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Q1) If there are two or more sureties and one pays more than its proportionate share of the debt,such surety has the right against the co-sureties known as:
A)indemnity.
B)exoneration.
C)subrogation.
D)contribution.
Q2) Sureties have no rights to protect them from loss,to obtain their discharge because of the conduct of others that would be harmful to them,or to recover money that they were required to pay because of the debtor's breach.
A)True
B)False
Q3) Bailment given as security for the payment of a debt is a(n):
A)pledge
B)contribution
C)guaranty
D)indemnity
Q4) Standby letters of credit are used only in international trade situations.
A)True
B)False
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Chapter 33: Consumer Protection
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Q1) Consumer protection laws,which commonly regulate the form of consumer contracts,provide that back-page disclaimers are void if the front page of a contract does not call attention to the presence of the terms on the back page.
A)True
B)False
Q2) The Fair Credit Reporting Act applies only to consumer credit.
A)True
B)False
Q3) The category of protected consumers for many statutes has been expanded to include partnerships,corporations and government entities.
A)True
B)False
Q4) Automobile lemon laws protect only persons buying automobiles for personal,family,or household use.
A)True B)False
Q5) A consumer may waive all defenses otherwise provided for by law. A)True B)False
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Chapter 34: Secured Transactions in Personal Property
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Q1) A(n)__________ statement is a document,which may be requested by a paid-up debtor,stating that a security interest is no longer claimed under the specified financing statement.
A)execution
B)discharge
C)termination
D)hold harmless
Q2) A security agreement need not describe the collateral involved.
A)True
B)False
Q3) Under Revised UCC Article 9,a financing statement must be signed by the debtor. A)True
B)False
Q4) Creditors receive an automatic 30-day temporary perfection in negotiable instruments taken as collateral.
A)True
B)False
Q5) A debtor must have rights in the collateral for a security interest to attach. A)True
B)False
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Chapter 35: Bankruptcy
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Q1) All debts are discharged in bankruptcy,whether disclosed by the debtor or not.
A)True
B)False
Q2) The filing of an involuntary bankruptcy case petition results in an order of relief.
A)True
B)False
Q3) A transfer of property by the debtor to a creditor may be set aside as a __________ transfer and the property recovered by the debtor's trustee in bankruptcy if (1)the transfer was made to pay a debt incurred at some earlier time; (2)the transfer was made when the debtor was insolvent and within ninety (90)days before the filing of the bankruptcy ; and (3)the transfer resulted in the creditor receiving more than the creditor would have received in a liquidation of the debtor's estate.
A)predetermined
B)preternatural
C)preordained
D)preferential
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Chapter 36: Insurance
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Q1) Any false statement in an application binds the insured.
A)True
B)False
Q2) If a man names his wife as beneficiary of his life insurance and the two are thereafter divorced,the insurance policy:
A)is canceled automatically.
B)is not affected.
C)is divided into two policies on the life of each for one-half the amount of the original policy.
D)becomes the property of the former wife.
Q3) A person who would suffer a direct pecuniary loss if a particular piece of property were destroyed has a(n):
A)contractual risk.
B)hazard.
C)underwriting.
D)insurable interest.
Q4) The insured must comply with a number of time limitations in making a claim.
A)True
B)False
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Chapter 37: Agency
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Q1) A durable power of attorney may be terminated by:
A)revocation by a competent principal.
B)the death of the principal.
C)revocation by a competent principal or by the death of the principal.
D)none of the above,since a "durable" power of attorney is designed by law to be irrevocable under all circumstances.
Q2) Which of the following is true?
A)An agent has the power to contract on behalf of a principal.
B)An employee generally does not have the power to contract on behalf of the employer.
C)An independent contractor controls the work he or she performs.
D)All of the above are true.
Q3) 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.
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Chapter 38: Third Persons in Agency
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Q1) The fact that a tort or crime is committed by an employee imposes vicarious liability on an employer.
A)True
B)False
Q2) Pamela was the agent in charge of distribution and collections for the Coble Dairy Products Cooperative.Thrower operated a grocery store and purchased dairy products from Coble.Pamela made false invoice sheets,showing delivery to Thrower of greater quantities than Thrower actually had ordered or received.Pamela collected from Thrower on the basis of these increased amounts,and then kept for herself the difference between the increased amounts and the amounts that should have been charged.When Thrower learned of this,he sued Coble for the excess payments he had made.Coble denied that Pamela was its agent in making excess collections.Will Thrower win?
Q3) If an agent commits a crime,the agent's liability will depend on the agency relationship.
A)True
B)False
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Chapter 39: Regulation of Employment
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Q1) Unemployment compensation benefits probably will be denied:
A)when an employee's theft of property results in termination.
B)to full-time students.
C)when an employee quits a job without cause.
D)all of the above.
Q2) Workers' compensation statutes provide the exclusive remedy for employees who are covered by such statutes and who suffer job-related injuries.
A)True
B)False
Q3) Workers' compensation statutes do not typically provide for:
A)immediate medical benefits.
B)prompt periodic wage replacement.
C)a death benefit.
D)punitive damages.
Q4) "Permissive" subjects of bargaining include seniority provisions,promotions,layoff and recall provisions,no-strike no-lockout clauses,and grievance procedures.
A)True
B)False
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Chapter 40: Equal Employment Opportunity Law
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Q1) The two principal legal theories under which a plaintiff may prove a case of unlawful employment discrimination are disparate treatment and disparate impact.
A)True
B)False
Q2) Which of the following scenarios would not qualify as a bona fide occupational qualification exception to Title VII?
A)a religious school hiring only members of that religion to teach religion
B)a women's store that sells wedding gowns hiring only women to measure and fit customers
C)an airline hiring only female flight attendants
D)all of the above scenarios would qualify as a bona fide occupational qualification exception to Title VII.
Q3) To be lawful,affirmative action must be time-limited . A)True
B)False
Q4) According to the EEOC,claims for retaliation may only be filed under Title VII. A)True
B)False
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Chapter 41: Types of Business Organizations
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Q1) In a corporation,a large number of investors may pool their assets to finance a large business enterprise.
A)True
B)False
Q2) An arrangement in which the owner of a trademark licenses others,under specified conditions or limitations,to use the trademark in purveying goods or services is a(n):
A)corporation.
B)limited partnership.
C)unincorporated association.
D)none of the above.
Q3) A sole proprietorship is taxed:
A)only on a personal.
B)only on the corporate level.
C)on a personal and a corporate level.
D)none of the above.
Q4) Unincorporated associations are generally formed to further a common purpose.
A)True
B)False
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Chapter 42: Partnerships
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Q1) A majority action of partners is not binding if it contravenes the partnership agreement.
A)True
B)False
Q2) 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.
Q3) A partner has the authority to do those acts that are customary for a member of a partnership conducting the particular business of that partnership.
A)True
B)False
Q4) A combination of two or more persons for a common nonprofit purpose is commonly an unincorporated association.
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) You are asked to provide two friends who are in business together with advice regarding what they need to do to legally in order to form a limited liability company.Although your friends like the general notion of limited liability in the operation of their business,they are totally unfamiliar with the legal processes for forming a LLC,so you need to provide them with the basic requirements for LLC creation.What specific advice would you give them?
Q3) A limited liability company may hold property in its own name. A)True
B)False
Q4) All owners of a limited liability company are known as officers.
A)True
B)False
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Chapter 44: Corporate Formation
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Q1) A quasi-public corporation is one that is organized for charitable or benevolent purposes.
A)True
B)False
Q2) 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.
Q3) A successor enterprise is not subject to the contract obligations of the former business if:
A)one corporation is absorbed by another through merger.
B)a corporation merely purchases the assets of another business.
C)two or more corporations consolidate.
D)none of the above.
Q4) A corporation may properly exist without a name.
A)True
B)False
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Chapter 45: Shareholder Rights in Corporations
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Q1) When the corporation has the right to sue its directors,officers,or third persons for damages caused by them to the corporation or for breach of contract,one (1)or more shareholders may bring such action if the corporation refuses to do so.This is known as a __________ action.
A)primary
B)derivative
C)deferential
D)preemptive
Q2) Dividends are payable in:
A)money.
B)products manufactured by the corporation.
C)shares of other corporations held by the corporation.
D)all of the above.
Q3) An interest in a corporation is based on the ownership of one or more shares of stock of the corporation.
A)True
B)False
Q4) A shareholder can give a proxy to vote shares only to another shareholder.
A)True
B)False
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Chapter 46: Securities Regulation
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Q1) Under the Litigation Reform Act of 1995,issuers of forward-looking statements that were not knowingly false when made have a safe harbor from related lawsuits if appropriate cautionary language was included.
A)True
B)False
Q2) Under the 1990 Remedies Act,the SEC may start administrative proceedings against any person or entity,whether regulated by the SEC or not.
A)True
B)False
Q3) The Securities Act of 1933 deals with the original distribution of securities by the issuing corporations.
A)True
B)False
Q4) An individual who receives information from an insider or temporary insider is called a:
A)tippee.
B)tipper.
C)de facto insider.
D)virtual insider.
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Chapter 47: Accountants Liability and Malpractice
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Q1) Which of the following statements is true?
A) Auditors are always eligible for whistleblower awards.
B) Auditors are only eligible for whistleblower awards if they report information to the board of directors and the board fails to take action.
C) Auditors are only eligible for whistleblower awards if they report conduct by a company that is intended to inhibit an SEC investigation.
D) Auditors are never eligible for whistleblower awards.
Q2) In some states an exculpatory clause protects the accountant from a malpractice suit brought by a third party but now from a suit brought by a client.
A)True
B)False
Q3) In contrast to contributory negligence principles,comparative negligence principles are never applied to malpractice situations.
A)True
B)False
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Chapter 48: Management of Corporations
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Q1) Corporations may ________ officers,directors,employees,and agents when they act in good faith,in a manner not opposed to corporate interests and with no reason to believe their conduct was unlawful.
A)ratify
B)breach
C)indemnify
D)authorize
Q2) The means by which stockholders may seek to protect themselves against corporate actions to which they object include all of the following except:
A)voting in new directors.
B)bringing legal action.
C)voiding the charter.
D)calling a special stockholders' meeting.
Q3) All states stipulate that there shall be no fewer than three directors for each corporation.
A)True
B)False
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Chapter 49: Real Property
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Q1) Real property includes land and all rights in land.
A)True
B)False
Q2) Tucker and Hankey were adjoining property owners.Tucker claimed that the fence separating their properties was not located properly and that it should be moved back onto Hankey's land.Hankey claimed that he owned the strip between the fence and the alleged boundary line by adverse possession.He proved that for forty (40)years there had been on the strip in question a barn with a cement floor,which had been built by the person from whom he purchased his land,and that he had been told by the former owner that the fence was the boundary line.The fence consisted of five-foot-high barbed wire set in cement.Did Hankey own the strip by adverse possession?
Q3) Recording statutes provide that a person purchasing land from the last holder of record will take title free of any unrecorded claim to the land of which the purchaser does not have notice or knowledge.
A)True
B)False
Q4) A deed,like a contract,must be supported by consideration to be effective.
A)True
B)False
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Chapter 50: Environmental Law and Land Use Controls
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Q1) Which of the following statements is correct concerning restrictive covenants?
A)Restrictive covenants that have not been enforced or observed are nevertheless valid and enforceable.
B)Restrictive covenants take precedence over conflicting statutes.
C)Restrictive covenants generally impose some limitations on the landowner's use of the property.
D)If any uncertainty exists in the interpretation of a restrictive covenant,the covenant will be interpreted liberally in favor of the limited use of the land.
Q2) Conduct that unreasonably interferes with the enjoyment of land is a nuisance.
A)True
B)False
Q3) A zoning restriction:
A)constitutes an eminent domain "taking."
B)always entitles the landowner to compensation.
C)never lowers the value of the land it concerns.
D)may prevent the landowner from use of the land.
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) A tenancy for years terminates at the expiration of the specified term,regardless of whether one party gives the other any notice of termination.
A)True
B)False
Q2) A landlord is most likely liable to a tenant who is injured by:
A)a defective condition of the leased premises that is under the control of the tenant.
B)an obvious condition of the leased premises known to the tenant at the time the lease was made.
C)an unforeseeable criminal act of a third person.
D)the criminal act of a third person,when such conduct was reasonably foreseeable.
Q3) A lease provision requiring a tenant to obey regulations that may be subsequently adopted by the landlord is void because it is unconscionable.
A)True
B)False
Q4) Renewal provisions in a lease are strictly construed against the tenant.
A)True
B)False
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Chapter 52: Decedents Estates and Trusts
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Q1) Unless statutory requirements are met,a will is invalid and the testator:
A)is considered to have died testate.
B)is considered to have died intestate.
C)is subject to federal law.
D)has provided guidelines of distribution.
Q2) A trustee can delegate the performance of personal duties.
A)True
B)False
Q3) A trust may be terminated:
A)by its own terms.
B)by merger of all interests in the same person.
C)via revocation by the settlor if allowed by the terms of the trust.
D)all of the above.
Q4) Every trust must have a beneficiary.
A)True
B)False
Q5) Generally,the right to make a will is limited to persons 18 or older.
A)True
B)False
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