Commercial Law
Review Questions
Course Introduction
Commercial Law explores the legal principles and frameworks that govern business and commercial transactions. This course examines topics such as contracts, agency, sale of goods, secured transactions, negotiable instruments, and the regulation of business organizations. Students will develop an understanding of the rights and obligations of parties engaged in commerce, legal remedies available in case of disputes, and the impact of legislation on business activities. Real-world case studies and practical scenarios are used to highlight the application of commercial law in various business contexts, preparing students to navigate legal challenges in commercial environments.
Recommended Textbook Business Law 7th Edition by Henry R. Cheeseman
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54 Chapters
4195 Verified Questions
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Page 2
Chapter 1: Legal Heritage and the Information Age
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Sample Questions
Q1) Which doctrine was overturned in the case of Brown v.Board of Education?
A) the legality of poll taxes
B) the permissibility of separate but equal facilities
C) allowing only white males to vote
D) the acceptability of paying women less than men for comparable work
E) different working hours for male and female factory workers
Answer: B
Q2) Proponents of the Critical Legal Studies School of jurisprudence argue for great subjectivity in decisions made by judges.
A)True
B)False
Answer: True
Q3) The English Chancery Courts were under the authority of the Lord Chancellor.
A)True
B)False
Answer: True
Q4) Shaping moral standards is not a function of the law.
A)True
B)False
Answer: False
Page 3
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Chapter 2: Court Systems and Jurisdiction
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Q1) Which of the following is correct with regard to the Court of Appeals for the Federal District?
A) It hears appeals of all federal district court cases.
B) It hears its cases in New York City.
C) It includes three Supreme Court justices on its panel of judges.
D) It hears appeals only from within the District of Columbia.
E) It reviews decisions of the Patent and Trademark Office.
Answer: E
Q2) Small claims courts are considered courts of record.
A)True
B)False
Answer: False
Q3) The United States District Court is the general jurisdiction trial court in the federal system.
A)True
B)False Answer: True
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Chapter 3: Judicial, Alternative, and Online Dispute Resolution
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Q1) In a cross-complaint,the defendant sues the plaintiff.
A)True
B)False Answer: True
Q2) In general,a party must wait until the trial to find out the facts of the other party's case.
A)True
B)False Answer: False
Q3) A defendant who fails to answer the complaint will have a default judgment entered against him or her.
A)True
B)False Answer: True
Q4) If a plaintiff is injured in an auto accident and is seeking damages for physical injury,a court can order that party to submit to a physical examination to determine the extent of his or her injuries.
A)True
B)False Answer: True
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Chapter 4: Constitutional Law for Business and
E-Commerce
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Q1) The Federal Communications Commission (FCC)can regulate the use of offensive language on television even though the First Amendment applies to such speech.
A)True
B)False
Q2) The reason the Articles of Confederation were weak was because:
A) it gave limited power to the federal government
B) it did not provide Congress with the power to levy and collect taxes
C) it did not provide Congress with the power to regulate interstate commerce among the states
D) All of these are correct.
Q3) If the federal government preempts states from regulating in an area,the states may not continue to pass legislation that conflicts with federal statutes.
A)True
B)False
Q4) Since their creation,the protections in the Bill of Rights have generally been applicable to state and local governments as well as the federal government.
A)True
B)False
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Chapter 5: Intentional Torts and Negligence
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Sample Questions
Q1) Which of the following is true?
A) Slander and libel are two kinds of defamation.
B) Defamation and slander are two kinds of libel.
C) Defamation and libel are two kinds of slander.
D) Slander and libel are two terms for the same tort,and defamation is a different tort altogether.
E) Slander,libel,and defamation are three terms with the same meaning.
Q2) A reporter appears on television and reports that a collegiate athlete is currently using steroids.The reporter has a sincere belief that the information is true.Subsequently,it is determined that the information is false and inaccurate.If the athlete files a lawsuit,most courts would find which of the following?
A) The reporter is not liable for the statements because of the sincerely held belief on behalf of the reporter.
B) The reporter is not liable because the athlete is considered a public figure.
C) The reporter is liable for a claim of slander.
D) The reporter is liable for a claim of libel.
Q3) Strict liability is liability without fault.
A)True
B)False
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Page 7
Chapter 6: Strict Liability and Product Liability
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Sample Questions
Q1) In considering whether a product contains a defective design,the courts will consider the following except:
A) the degree of danger posed by the design
B) the profitability of the product
C) the likelihood of injury
D) the social utility of the product
E) the cost of producing a safer design
Q2) A wholesale distributor who is named in a product liability suit based on strict liability could avoid liability if:
A) the plaintiff had not purchased the product causing the injury
B) the distributor exercised reasonable care in all ways with respect to the product causing the injury
C) this product had been used for many years by other users without injury
D) this defect which caused the injury occurred after the product left the distributor
E) the product has been redesigned to eliminate the problem which caused the injury in this case
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8
Chapter 7: Intellectual Property and Cyber Piracy
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Sample Questions
Q1) Wildboards Company introduces a product called a "Rollerboard" for which it is granted a registered trademark.The Rollerboard is a snowboard with a removable row of wheels along the center of the underside.With the wheels attached,the user can attain extremely high speed in hard-packed snow conditions.In addition,many users have found that they can use their snowboards on streets with the wheels attached.This new use of snowboards becomes very popular and many competing snowboard makers introduce similar products.The sport becomes known generally as rollerboarding and most people refer to all such wheeled snowboards as rollerboards.The consequence of this is that:
A) Wildboards cannot stop competitors from using the term "rollerboard" for their products.
B) Competitors must pay royalties to Wildboards for using the term "rollerboard."
C) Wildboards can no longer use the name Rollerboard on its boards.
D) Competitors must put a disclaimer on their boards that they are not the original Rollerboard.
Q2) The granting of a patent terminates the ability to challenge its validity.
A)True
B)False
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Page 9
Chapter 8: Criminal Law and Cyber Crimes
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Sample Questions
Q1) What is a "penal code?"
A) the classification of a particular crime
B) a series of statutes that define precisely the conduct that is considered criminal
C) the list of sentences for particular crimes
D) the unwritten code of conduct among prison personnel
E) another term used to describe a crime's degree,such as first degree or second degree
Q2) An arrest warrant based on probable cause must first be obtained before a police officer can arrest an individual for the commission of a crime.
A)True
B)False
Q3) Persons convicted of money laundering can be fined up to $500,000 or twice the value of the property involved in the crime.
A)True
B)False
Q4) After a criminal trial,only the defendant has the right to appeal the verdict.
A)True
B)False
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Chapter 9: Nature of Traditional and E-Contracts
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Sample Questions
Q1) Which of the following is true in a unilateral contract?
A) The offeror requests an act as acceptance of his offer.
B) The offeror cannot revoke the offer once the offeree has begun performance or has substantially completed performance.
C) The offeror will treat either a promise to perform or the actual performance of the act as acceptance of his offer.
D) A and B only are true.
E) B and C only are true.
Q2) Which of the following is NOT needed in order to have a valid contract?
A) contractual capacity
B) an agreement
C) a signed written document
D) consideration
E) a legal object
Q3) Offers for both bilateral and unilateral contracts involve a promise by the offeror.
A)True
B)False
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Chapter 10: Agreement
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Sample Questions
Q1) John offered to sell Jane his 1959 Thunderbird automobile.Before Jane could accept the offer,lightning struck the car,and it was totally destroyed.Which of the following is true?
A) Jane can still accept the offer and John must find a 1959 Thunderbird to sell.
B) The offer is terminated by operation of law.
C) John can still revoke his offer,if he does so before Jane accepts.
D) Jane can still accept the offer; she will be entitled to the insurance proceeds.
Q2) Anita offered to sell her condo to Bill.Before Bill could accept,one of the parties was killed in a car accident.The remaining party wishes to go through with the contract.Which of the following best describes this situation?
A) The death of either party terminated the offer.
B) If Anita died,Bill can still accept the offer; Anita's estate will be liable for the contract.
C) If Bill died,Bill's heirs can still accept the offer.
D) If Anita died,the offer is terminated; if Bill died,Bill's heirs can still accept the offer.
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Chapter 11: Consideration and Promissory Estoppel
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Sample Questions
Q1) The requirement that consideration be bargained-for means that:
A) the consideration in a contract must be exchanged simultaneously
B) the values of the consideration cannot be greatly different between parties
C) the inducement for each party to give consideration was the consideration of the other party
D) one party determines the consideration to be given by each party
Q2) Most airline frequent flyer programs contain clauses allowing the airlines to change award levels (e.g.,requiring more miles to get a free ticket)or to even cancel the program and all earned benefits without any compensation to the passenger.Is there any problem with consideration here?
Q3) Requirements contracts are not valid contracts as they are illusory.
A)True
B)False
Q4) An agreement to settle an earlier contract that was in dispute is:
A) an illusory promise
B) a putout contract
C) a novation
D) the exercise of an option to cancel
E) an accord and satisfaction
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Chapter 12: Capacity and Legality
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Sample Questions
Q1) Under common law,the parties to an illegal contract were considered to be:
A) in pari delicto
B) victims of the more powerful party
C) in an adhesion contract
D) in an unconscionable contract
Q2) Lisa has been a dentist in Elmville for several years.She is now ready to retire and she sells her practice to Angie.As part of the sales agreement,Lisa agrees not to practice dentistry within 20 miles of Elmville for a period of three years.After 2 years,Lisa is bored,so she opens up a dental practice in her home.This practice is very small and Lisa wants to keep it that way.Angie sues on the noncompete agreement.What is the most likely result?
A) This agreement is fully enforceable.
B) This agreement is not enforceable because agreements in restraint of trade are never enforceable.
C) This agreement is not enforceable because it is not ancillary to an employment agreement.
D) This agreement is not enforceable because it is unreasonable as to area.
E) This agreement is not enforceable because it is unreasonable as to time.
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Page 14
Chapter 13: Genuineness of Assent and Undue Influence
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Sample Questions
Q1) Sally is thinking about buying Linda's car.Linda knows that there is a leak in the brake line,and that after driving the car for a few minutes,the brake fluid will leak out and the car will have no brakes.Sally does not ask about it and Linda does not tell her.Sally buys the car,and while driving home,the brakes fail.Sally has an accident and the car is destroyed.Sally sues Linda for fraud to get her money back.Which is true?
A) This is not fraud,since there was no misrepresentation.
B) This is not fraud,since there was no reliance.
C) This is not fraud,since there was no scienter.
D) Silence in this situation is a misrepresentation.
E) Silence is never a misrepresentation.
Q2) What is the effect of one party being mistaken about the subject matter of a contract?
A) The mistaken party can rescind the contract.
B) Either party can rescind the contract.
C) Either party can rescind the contract,and the mistaken party can recover damages.
D) There is no effect.
E) Neither party can rescind the contract or recover damages.
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Chapter 14: Statute of Frauds and Equitable Exceptions
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Sample Questions
Q1) Which of the following contracts is required to be in writing under the Statute of Frauds?
A) A contract for the sale of one piece of business equipment costing $700.
B) A contract for the sale of two pieces of business equipment costing $300 each.
C) A contract for the purchase of a secondhand piece of home furniture from a consumer by a consumer in the amount of $600.
D) A and B only are required.
E) A,B,and C are required.
Q2) What is the purpose of the parol evidence rule? Would it be better to simply allow all parol evidence in as evidence and leave it up to the jury how much weight to give to the evidence? Would this be better than not allowing the jury to see the evidence at all? What advantages and disadvantages would there be to eliminating the parol evidence rule?
Q3) For Statute of Frauds purposes,an "interest in land" includes only the land itself and any fixtures attached to the land.
A)True
B)False
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Chapter 15: Third-Party Rights and Discharge
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Sample Questions
Q1) Is the doctrine of commercial impracticability a good doctrine? Or,should the parties to a contract spell out in advance the exact circumstances when performance is excused? Isn't everyone who enters into a contract taking certain chances?
Q2) Third parties never acquire rights under other people's contracts.
A)True
B)False
Q3) A condition concurrent is one that requires the occurrence of an event before a party is obligated to perform a duty under the contract.
A)True
B)False
Q4) Amy agrees to build a barn for Sally.The contract provides that Sally must be "personally satisfied with the barn." If the barn is completed in a workmanlike manner,which of the following tests would be used to test Sally's satisfaction?
A) The personal satisfaction test.
B) The reasonable person test.
C) The workmanlike construction test.
D) The third-party satisfaction test.
E) Either test A or B would produce the same results.
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Page 17
Chapter 16: Remedies for Breach of Traditional and E-Contracts
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Sample Questions
Q1) When a court rewrites a contract to express the parties' true intentions,what remedy has it used?
A) reformation
B) restitution
C) specific performance
D) substituted contract
E) quasi-contract
Q2) "Benefit of the bargain" is descriptive of which type of damages?
A) compensatory damages
B) punitive damages
C) reliance damages
D) liquidated damages
E) injunction damages
Q3) Liquidated damages will be invalidated if they are unreasonably large or small.
A)True
B)False
Q4) The general standard to obtain an injunction is that the party seeking the injunction would suffer irreparable injury without the injunction.
A)True
B)False
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Chapter 17: Internet Law and E-Commerce
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Q1) In a licensing agreement,the licensor is the owner of intellectual property or informational rights who transfers rights in the property or information to the licensee.
A)True
B)False
Q2) The Anticybersquatting Consumer Protection Act protects any individual's name from being registered by another person.
A)True
B)False
Q3) The Electronic Communications Privacy Act protects electronic communications while they are in transit as well as when they are stored.
A)True
B)False
Q4) The government can get access to an individual's stored e-mail pursuant to a legitimate criminal investigation without a search warrant.
A)True
B)False
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Page 19
Chapter 18: Formation of Sales and Lease Contracts
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Sample Questions
Q1) A seller and a buyer orally agree to the following two transactions: The buyer wants to purchase 500 plain white tablecloths at $10 each.In addition,the buyer wants to purchase 500 tablecloths with it's very distinctive logo imprinted on them at $20 each.The seller delivers 250 of the plain white tablecloths,which the buyer accepts.Later,according to the contract,the seller attempts to deliver all the rest of the tablecloths; but the buyer refuses to accept or pay for any of them,claiming that the Statute of Frauds prohibits the enforcing of these contracts.Discuss in detail whether these contracts are enforceable and how much,if any,the seller can collect.
Q2) A "firm offer" can be held open as long as 3 months.
A)True
B)False
Q3) The lessee is the party who holds himself or herself out as having knowledge or skill peculiar to the goods involved in the transaction.
A)True
B)False
Q4) Which terms will be implied in a contract under the UCC if they are omitted in the express contract? Why does the UCC so freely imply these omitted terms? What are the risks of such a liberal policy of implying omitted terms?
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Page 20
Chapter 19: Title to Goods and Risk of Loss
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Sample Questions
Q1) The function of a letter of credit is to substitute the credit of a recognized international bank for that of the buyer.
A)True
B)False
Q2) In a contract for the sale of unborn cattle or livestock,at what point are the goods identified?
A) when the cattle or livestock are conceived
B) when the cattle or livestock are born
C) when the cattle or livestock are selected for delivery
D) when the cattle or livestock are delivered
Q3) In which of the following,does the buyer usually try out the goods for the buyer's own use?
A) sale on approval
B) sale or return
C) consignment and sale or return
D) consignment,sale or return,and sale on approval
E) sale or return and sale on approval
Q4) Under the UCC,the risk of loss depends on who had title to the goods.
A)True
B)False
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Chapter 20: Remedies for Breach of Sales and Lease Contracts
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Sample Questions
Q1) If goods are already in transit when a buyer breaches,the seller may stop their delivery.
A)True
B)False
Q2) If a merchant buyer rejects goods,and the seller does not have an agent or place of business at the market where the goods were rejected,the buyer must:
A) follow any reasonable instructions from the seller
B) if no instructions come from the seller,sell the goods
C) if the goods are not perishable,sell the goods
D) A and B only
E) A and C only
Q3) If a seller has delivered nonconforming goods that have been rejected by the buyer,the seller has a right to cure:
A) only if the time for performance has not yet expired
B) under some circumstances,even if the original time for performance has passed
C) only if the contract specifically allows for cure
D) only if the buyer agrees
E) only if the seller can do so within 10 days
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Chapter 21: Sales and Lease Warranties
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Q1) It is not necessary to use formal words such as "warrant" or "guarantee" in order to create an express warranty.
A)True
B)False
Q2) Steve was eating a chicken salad sandwich at a restaurant and began choking on a chicken bone.Which of the following is correct?
A) Steve would not be able to recover under either the Foreign Substance Test or the Consumer Expectation Test.
B) Steve would be able to recover under the Foreign Substance Test,but not the Consumer Expectation Test.
C) Steve would not be able to recover under the Foreign Substance Test,but would be able to recover under the Consumer Expectation Test.
D) Steve could recover under both the Foreign Substance Test and the Consumer Expectation Test.
Q3) Sellers of goods warrant that the goods they sell are delivered free from any third-party security interests.
A)True B)False
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Chapter 22: Creation of Negotiable Instruments
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Q1) Which of the following will result in an instrument being nonnegotiable?
A) It contains a variable interest rate such that the amount of interest that will be due cannot be determined at the time the note is created.
B) It states that the payment of funds will come from the proceeds of a specific contract.
C) It states that the entire balance will become immediately due in the event of a default by the maker.
D) It states that the rights of the payee to receive payment are subject to the terms of a separate agreement.
Q2) Which of the following is not a requirement of negotiability?
A) The instrument must be in writing.
B) The instrument must be signed by the maker or drawer.
C) The instrument must state a fixed amount of money.
D) The instrument must contain an indorsement.
Q3) An instrument that is payable "to the order of bearer" is:
A) order paper
B) bearer paper
C) nonnegotiable because of ambiguity
D) nonnegotiable because of a condition
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24
Chapter 23: Transferability and Holder In Due Course
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Q1) Which of the following is true about the assignment and the negotiation of a negotiable instrument?
A) An assignment does not require a signature whereas a negotiation does.
B) A negotiation results in a transfer of rights,but an assignment does not.
C) An assignment applies to bearer paper,and a negotiation applies to order paper.
D) An assignment can transfer no greater rights than those held by the transferor,whereas the transferee in a negotiation can receive greater rights than those held by the transferor.
Q2) If Stanley Starre receives a check payable to "Stanley Starr," how can he endorse the check?
A) He can indorse the check using "Stanley Starr."
B) He can indorse the check using "Stanley Starre."
C) He can indorse the check as both "Stanley Starre" and "Stanley Starr."
D) A,B,and C are correct.
Q3) Negotiation of which type(s)of instrument requires indorsement?
A) bearer instruments only
B) order instruments only
C) both bearer and order instruments
D) neither bearer nor order instruments
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Page 25
Chapter 24: Liability,Defenses and Discharge
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Q1) Transferors cannot be held liable for breaching implied warranties when negotiating instruments.
A)True
B)False
Q2) Signature liability on a negotiable instrument is also known as:
A) contract liability
B) agent liability
C) warranty liability
D) secondary liability
E) shelter liability
Q3) What is needed for a party to be considered secondarily liable on an instrument?
A) The instrument must be properly presented for payment.
B) The instrument is dishonored.
C) The notice of dishonor must be timely.
D) The notice of dishonor must be given to the person to be held secondarily liable.
E) All of these are correct.
Q4) A principal will be held liable for ratifying an agent's unauthorized signature.
A)True
B)False
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Chapter 25: Checks, the Banking System, and E-Money
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Q1) A principal-agent relationship is created between a customer and a bank:
A) only if the customer deposits a check that the bank must collect for the customer
B) any time the customer deposits an amount into the customer's checking account
C) only when the customer writes a check against her account
D) if the customer deposits a check that the bank must collect for the customer or if the customer writes a check against her account
Q2) Paula writes out a check for $30 when she has only $15 in her account.What can her bank do?
A) It can refuse to pay the check.
B) It can pay the check even if it results in an overdraft.
C) It can pay the check and then bill Paula $15 for the overdraft plus a $25 overdraft fee and interest on everything until it is all paid.
D) The bank can do any of the above.
Q3) When a bank wrongfully dishonors a check,both the drawer and the payee can recover reasonable damages from the bank.
A)True
B)False
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Chapter 26: Creditor's and Debtor's Rights
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Q1) What is a mortgage?
A) a loan to purchase a house or other real property
B) a contract to purchase a house or other real property
C) any loan associated with real property
D) a security agreement in which real property is pledged as collateral for the related debt
Q2) What does a right of redemption allow in connection with a mortgage or deed of trust?
A) It allows the granting of a second mortgage on the same property that is already secured.
B) It allows the lender to use the property to satisfy the debt if it goes into default.
C) It allows the use of a deed of trust arrangement in place of a conventional mortgage.
D) It allows the ability to foreclose on the property without court action.
E) It allows the borrower to recover foreclosed property by paying off the related debt.
Q3) Are the various requirements for filing mortgages and other security interests too burdensome on creditors? Do they work too much to the benefit of debtors?
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Chapter 27: Secured Transactions and Electronic Filing
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Q1) Which of the following is not personal property?
A) motor vehicles
B) jewelry
C) stock certificates
D) condominiums
E) copyrights
Q2) If one party's security interest attached in March,but has not been perfected,and another creditor's security interest attached and perfected in April,which of the following is true as of the following December?
A) The security interests have equal priority.
B) The security interest that attached in March has priority.
C) The security interest that attached in March has priority,but only if it became perfected prior to the other creditor bringing an action on the collateral.
D) The security interest that was perfected in April has priority.
Q3) The debtor in a secured transaction is in most cases the owner of the collateral.
A)True
B)False
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Chapter 28: Bankruptcy and Reorganization
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Sample Questions
Q1) If a debtor is an individual who wants to keep most of his property,has a steady income,and believes he can pay off most of his debts,the best bankruptcy plan for him would probably be:
A) straight bankruptcy
B) a reorganization
C) a consumer debt adjustment
D) a reaffirmation plan
E) a Chapter 12 plan
Q2) What is the purpose of allowing lawyers and accountants to have first claim on the assets of a bankruptcy estate? What are the risks and abuses that this rule could lead to?
Q3) Sole proprietorships may file for Chapter 13 bankruptcy.
A)True B)False
Q4) A liquidation bankruptcy is also known as straight bankruptcy. A)True B)False
Q5) A party can be petitioned into bankruptcy against that party's will. A)True
B)False
30
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Chapter 29: Agency Formation and Termination
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Sample Questions
Q1) An express agency arrangement can be formed with which types of agreements?
A) written only
B) oral only
C) oral or written
D) An agreement is not necessary to form an express agency.
Q2) The principal hires an agent to manage his restaurant.As a result,the agent hires two people to serve as waitstaff.The hiring of the waitstaff is an example of what type of authority?
A) implied
B) express
C) apparent
D) ratified
E) no authority
Q3) Which of the following is true?
A) All employees are agents,and no independent contractors are agents.
B) All employees are agents,and some independent contractors are agents.
C) Some employees are agents,and some independent contractors are agents.
D) Some employees are agents,and no independent contractors are agents.
E) No employees are agents,and no independent contractors are agents.
Q4) Why is capacity required for the principal,but not for the agent?
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Chapter 30: Liability of Principals, Agents, and Independent Contractors
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Sample Questions
Q1) An agent can usurp an opportunity available to the principal.
A)True
B)False
Q2) When is an agent liable for a tort committed by the principal?
A) when the agency is undisclosed
B) when the tort was committed with the scope of the agency
C) when the agent ratifies the action
D) when the agent has aided or abetted the principal's tortious conduct
E) both A and D
Q3) The significance of a "frolic and detour" is which of the following?
A) The employee can be liable to an employer if the frolic and detour is not authorized.
B) It determines if an employee can be liable on a contract made on the employer's behalf.
C) It can determine if someone working for a business is an employee or independent contractor.
D) It can determine if an employer is liable for the negligence tort of an employee.
E) It can determine if an employee is liable for torts he commits on the job.
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Page 32
Chapter 31: Employment,Worker Protection,and Immigration Laws
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Sample Questions
Q1) Which of the following is true about unemployment benefits?
A) Because they are set at the federal level,unemployment benefits are the same in every state.
B) Employees are eligible to receive benefits regardless of the reason that employment ends.
C) The taxes to support the unemployment benefits program are paid by the employer.
D) Once awarded,a recipient of unemployment benefits will be entitled to collect the award even if the employee finds other work.
Q2) Workers may not sue their employer to recover damages for employment-related injuries if the employer does not carry workers' compensation insurance.
A)True B)False
Q3) The Employee Retirement Income Security Act requires pension plans to be in writing.
A)True
B)False
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33
Chapter 32: Labor Law and Collective Bargaining
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Sample Questions
Q1) What is a lockout in connection with labor law?
A) an action by workers to prevent management from entering the company's premises
B) an action by workers to prevent customers from entering the company's premises
C) an action by workers to prevent suppliers from entering the company's premises
D) an action by management to prevent union organizers from entering the company's premises
E) an action by management to prevent workers from entering the company's premises
Q2) Section 8(a)of the National Labor Relations Act prevents employers from interfering with employee's rights to form a union.
A)True
B)False
Q3) A wildcat strike refers to a strike in which individual union members go on strike without proper authorization from the union.
A)True
B)False
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Chapter 33: Equal Opportunity in Employment
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Sample Questions
Q1) If a party has presented a complaint to the Equal Employment Opportunity Commission about alleged discrimination in violation of the Civil Rights Act of 1964,and the EEOC decides not to bring a suit on behalf of the employee,the EEOC will issue a(n):
A) order of dismissal of the complaint
B) notice of the complainant's right to appeal to the appropriate court of appeals
C) judgment in the employer's favor
D) injunction to prevent the illegal behavior in the future
E) right to sue letter
Q2) Which of the following is true about sexual harassment in the workplace?
A) If a supervisor approaches someone and asks that person out for a social date,and if the supervisor acts in socially customary manner,it will not be sexual harassment.
B) The standards for a hostile work environment are extremely vague and depend on all the facts and circumstances.
C) Sexual harassment claims require that persons of both sexes be involved.
D) Sexual harassment is covered under OSHA as part of workplace safety.
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Chapter 34: Small Businesses, Entrepreneurs, and General Partnerships
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Sample Questions
Q1) Which of the following businesses can be operated as a sole proprietorship?
A) any business,so long as there are no employees other than the proprietor
B) any service-type business
C) any business,so long as revenues are not excessively large
D) any business,so long as the number of employees is not excessively large
E) any business
Q2) State approval is needed in order to form a sole proprietorship.
A)True
B)False
Q3) Jack is the sole proprietor of Jack's Appliances.He gives out a 5-year warranty on all appliances that he sells.Sara buys a stove from him.A year later,Jack dies and the business is sold to Ken.Sara can now enforce the warranty against Ken.
A)True
B)False
Q4) Partners are allowed to bring an action for an accounting against other partners.
A)True
B)False
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Chapter 35: Limited Partnerships and Limited Liability
Limited Partnerships
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Sample Questions
Q1) What must be done by a limited partnership that is properly registered in one state in order to conduct business in another state?
A) Nothing,because the home state registration is good in all states.
B) It must obtain a certificate of limited partnership just as it had in the first state.
C) It must clearly indicate that it is formed in a different state to all parties with whom it does business.
D) It must obtain a registered agent in the new state.
E) It must obtain a certificate of registration in the new state.
Q2) A limited partnership is required to have at least:
A) two limited partners
B) one general partner and two limited partners
C) one general partner and one limited partner
D) two general partners
E) two partners who can be any mix of limited and general partners
Q3) A corporation may be a limited partner in a limited partnership.
A)True
B)False
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Page 37
Chapter 36: Corporate Formation and Financing
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Sample Questions
Q1) The bylaws of a corporation:
A) take precedence over the articles of incorporation
B) must be filed in the appropriate state office
C) are not binding on the officers and directors of the corporation
D) govern the internal management of the corporation and typically would include the time and place of the annual shareholders' meeting
Q2) Corporations' express powers come from both federal and state statutes,among other sources.
A)True
B)False
Q3) A professional corporation is one that:
A) is formed with the assistance of a lawyer
B) has been in existence long enough to reasonably assure that it will be profitable in the near future
C) is typically used as a form of doing business by doctors and lawyers
D) does not have shareholders
Q4) A debenture is a long-term secured debt instrument.
A)True
B)False
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Chapter 37: Corporate Governance and the Sarbanes
Oxley Act
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Sample Questions
Q1) Dividends may be paid in the form of:
A) cash only
B) cash or property only
C) cash,property,or additional stock
D) cash,property,debt,or additional stock
Q2) Regular,as well as special,meetings are provided for in the corporate bylaws.
A)True
B)False
Q3) Bob formed Bob's Brake Repair,Inc.in 1995.Bob has been the only shareholder since the corporation was formed.Bob has never worried about the corporate formalities since,as the only shareholder,he didn't worry about suing himself.He kept a single bank account and didn't always use the word "incorporated" on his signs and work orders.Recently,the brakes failed on a customer's car shortly after one of Bob's employees had repaired them.Can the person injured by the brake failure recover from Bob's personal assets?
Q4) Absent an agreement to the contrary,a corporate officer can be removed by the board of directors anytime the removal is deemed to be in the corporation's best interest.
A)True
B)False
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Chapter 38: Corporate Acquisitions and Multinational Corporations
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Sample Questions
Q1) If a group desires to solicit proxies to oppose a management action,management has the choice of mailing the proxy materials for the dissenting group or providing the dissenting group with a list of shareholders.
A)True
B)False
Q2) Which of the following best describes a share exchange?
A) Two corporations jointly purchase a third corporation and operate it as a joint venture.
B) Two corporations are combined to form a new third corporation,and the original two corporations cease to exist.
C) Two corporations are combined,with one of the original corporations surviving and the other ceasing to exist.
D) One corporation acquires all of the shares of a second corporation,with both corporations retaining their separate legal existence,the second a subsidiary of the first.
E) One corporation sells substantially all of its assets to a second corporation,with both corporations retaining their separate legal existence.
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Chapter 39: Limited Liability Companies and Limited
Liability Partnerships
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Sample Questions
Q1) Norm,Cliff and Sam form a limited liability company.Norm contributes $20,000,Cliff $30,000 and Sam $50,000.The operating agreement does not state how profits and losses are to be apportioned.The company makes a $60,000 profit during the year.Under the ULLCA,how will profits be divided?
A) Norm will receive $12,000,Cliff $18,000,and Sam $30,000.
B) Norm will receive $20,000,Cliff $20,000,and Sam $20,000.
C) Norm will receive $18,000,Cliff $12,000,and Sam $30,000.
D) Norm will receive $15,000,Cliff $15,000,and Sam $30,000.
Q2) Of the following,who owes a fiduciary duty of loyalty to an LLC?
A) all members of all LLCs
B) members of member-managed LLCs and managers of manager-managed LLCs
C) managers of manager-managed LLCs,but no other members of any LLCs
D) all members of manager-managed LLCs,but no one in member-managed LLCs
Q3) Based on management method,LLCs can be classified as either:
A) member-managed or manager managed
B) member-managed or professionally managed
C) generally managed or micromanaged
D) manager-managed or at-will-managed
E) member-managed or term-managed
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Chapter 40: Franchises and Special Forms of Business
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Sample Questions
Q1) Richard Manufacturing Co.manufactures a product and licenses retail dealers to sell that product to the public.Richard does not sell to the public.This type of franchise is called a(n):
A) distributorship franchise
B) processing plant franchise
C) chain-style franchise
D) area franchise
E) agency franchise
Q2) Which of the following is not part of the FTC franchise rule?
A) Franchisors must make certain additional disclosures if sales projections are included in materials.
B) The Uniform Franchise Offering Circular meets the requirements of the FTC franchise rule.
C) The rule contains certain minimum disclosures that must be made to prospective franchisees.
D) The disclosure materials must be filed with the FTC.
E) Franchisors in violation are subject to civil fines of up to $10,000 per violation.
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42
Chapter 41: Investor Protection and Online Securities Transactions
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Sample Questions
Q1) Rule 10b-5 of the Securities Exchange Act of 1934 applies to:
A) issuances of securities if they are covered by a registration statement
B) trading of securities if the trading is done on a national exchange
C) only transactions connected with a merger of consolidation
D) any transfer of securities
E) only transfers made in violation of a transfer restriction
Q2) An insider may be a representative hired by a company on a temporary and nonemployee-type status.
A)True
B)False
Q3) The Securities Act of 1933 primarily regulates the issuance of securities. A)True
B)False
Q4) A prospectus is used as a selling tool by the issuer. A)True
B)False
Q5) An issuer can qualify for an intrastate offerings exemption in only one state.
A)True
B)False
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Chapter 42: Ethics and Social Responsibility of Business
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Sample Questions
Q1) A business that is concerned solely with the financial implications of alternate courses of action is applying which theory of the social responsibility of business?
A) moral minimum
B) maximizing profits
C) stakeholder interest
D) corporate citizenship
Q2) Those who abide by Kantian ethics behave by doing unto others as they would have done unto themselves.
A)True
B)False
Q3) The golden rule,"Do unto others as you would have them do unto you," is most directly reflected in which moral theory?
A) ethical relativism
B) utilitarianism
C) ethical fundamentalism
D) Kantian ethics
E) Rawls's distributive justice theory
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Page 44
Chapter 43: Administrative Law and Regulatory Agencies
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Sample Questions
Q1) Administrative agencies may grant licenses.
A)True
B)False
Q2) An administrative law judge's decision is issued in the form of a judgment once the jury returns a verdict.
A)True
B)False
Q3) The Government in the Sunshine Act opens most federal administrative agency meetings to the public.
A)True
B)False
Q4) Which of the following is correct regarding administrative law judges?
A) They are employed by the administrative agency for which they hear cases.
B) They decide questions of both law and fact.
C) They must state reasons for their decisions.
D) all of the above
E) B and C only
Q5) Industry is one area that is not subject to administrative regulation.
A)True
B)False
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Chapter 44: Consumer Protection and Product Safety
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Sample Questions
Q1) Cosmetics unlike drugs do not require warnings as to carcinogens.
A)True
B)False
Q2) The FDA has the power to obtain search warrants,conduct inspections,and obtain orders for seizure of products.
A)True
B)False
Q3) Which of the following statements would not be deceptive under Section 5 of the Federal Trade Commission Act?
A) "This toothpaste cleans 50 percent better than others," but this claim cannot be proven.
B) "This car is a great car," but it is not a great car.
C) "This car is a 2002 PT Cruiser" when it really is a 2001 model.
D) "This deodorant keeps you drier than any other brand," but there is no evidence of this.
Q4) Should the Federal Trade Commission take a hands-off approach to regulating deceptive advertising? Should consumers be responsible for verifying the claims in advertisements? Why or why not? In what circumstances might regulation be most appropriate?
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Chapter 45: Environmental Protection and Global Warming
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Sample Questions
Q1) A permit is required to dump wastes into the ocean.
A)True
B)False
Q2) Under the Resource Conservation and Recovery Act,hazardous wastes are tracked from the time that they are generated until their ultimate disposal.
A)True
B)False
Q3) The National Forest Service has proposed granting permission to a ski area to expand and cut ski trails and construct lifts on some national forest service land.Which of the following items is not required to be included in the related environmental impact statement?
A) a description of the affected environment
B) the impact of the proposal on the environment
C) identification and discussions of alternatives to the action
D) identification of the parties who support the action
E) a cost-benefit analysis of the proposed action and the alternatives
Q4) Do the wealthier nations of the world have an obligation to assist the less wealthy nations in the development and implementation of programs and technology to reduce pollution?
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Chapter 46: Antitrust Law and Unfair Trade Practices
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Sample Questions
Q1) A corporation may be fined up to $100 million per violation of the Sherman Act.
A)True
B)False
Q2) The Hart-Scott-Rodino Antitrust Improvement Act led to rules requiring:
A) that certain activities are classified as per se violations
B) that failing companies be rescued through mergers whenever possible
C) that violators of antitrust laws be liable for treble damages
D) that mergers be allowed if United States competitiveness in world markets is improved
E) that the Federal Trade Commission and the Justice Department be notified in advance of any merger involving certain firms
Q3) In many antitrust cases the definition of the relevant market is the most important issue.The determination of the relevant market often determines the outcome of the entire case,yet there is much subjectivity in the determination of the relevant market.Should there be more rigid guidelines for relevant market determination? Why or why not?
Q4) Only a seller may be held liable under the price discrimination laws.
A)True
B)False
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Chapter 47: Personal Property and Bailment
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Sample Questions
Q1) Jackie is trying on clothes in the dressing room of Highspot Department Store.Jackie goes home,but leaves her purse in the dressing room.A Highspot employee,Maxine,finds the purse in the dressing room and gives it to the storeowner.Assuming Jackie never returns to claim the purse,who gets possession of the purse and its contents,assuming the purse is (a)lost,(b)mislaid,or (c)abandoned?
Q2) One way to acquire property is by production.
A)True
B)False
Q3) A bailment at will can be terminated at any time by only the bailor.
A)True
B)False
Q4) In order to be legally effective to transfer title,a gift must meet all of the following requirements except:
A) present intent by the donor to make the gift
B) consideration on the part of the donee
C) delivery of the subject matter to the donee
D) acceptance of the gift by the donee
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Chapter 48: Real Property
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Sample Questions
Q1) One of the requirements to acquire property by adverse possession is to occupy the property without the express or implied permission of the owner.
A)True
B)False
Q2) Gloria owns a piece of real property.She sells one-half of this property to Sam,but reserves the rights to cross over Sam's land to get to her remaining one-half.Gloria has created a(n):
A) easement in gross
B) easement appurtenant
C) easement a pendre
D) license
E) profit
Q3) In a condominium development,the common areas are owned:
A) by the unit owners as joint tenants
B) by a corporation
C) by the homeowners association
D) by the unit owners as tenants in common
E) in fee simple defeasible by the unit owners
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Chapter 49: Landlord Tenant Law and Land Use Regulation
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Sample Questions
Q1) Under which of the following transfers by a tenant of the tenant's rights in a lease is the tenant obligated to make rent payments to the original landlord?
A) assignment
B) sublease
C) both A and B
D) neither A nor B
Q2) Samuel leases an apartment from Bright Ways Apartments,signing a 2-year lease.After one year,Samuel is transferred to a new city,so he must give up his apartment.Samuel transfers his entire interest in this lease to Lisa.Lisa fails to make the rent payments as required,so Bright Ways sues both Samuel and Lisa.In this situation:
A) Because Samuel was transferred,the lease terminated as to him and only Lisa is liable.
B) Because this is an assignment,Samuel's interest is terminated and only Lisa is liable.
C) Because this is a sublease,Samuel's interest is terminated and only Lisa is liable.
D) Both Samuel and Lisa are liable for the rent.
E) Only Samuel is liable for the rent.
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Chapter 50: Insurance
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Sample Questions
Q1) The primary coverage of renters insurance is for the possessions of the insured.
A)True
B)False
Q2) Incontestability clauses are invalid as they are not fair to insurers.
A)True
B)False
Q3) Most insurance companies allow valuable items to be covered under an insured's homeowners policy thereby eliminating the need for any additional insurance.
A)True
B)False
Q4) An insurance broker typically works for a single insurance company.
A)True
B)False
Q5) With disability insurance,the payments are generally made to the insured even though the insured does not document actual expenses.
A)True
B)False
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Page 52
Chapter 51: Accountants' Liability
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Sample Questions
Q1) Elizabeth is an accountant in a small town in a rural western state.Elizabeth has performed an audit for a large agricultural cooperative in her town.The accountant who previously performed the audit died in the past year,and her working papers could not be found,so Elizabeth had a difficult time with the audit.There were some problems with the audit and the financial statements such that the local bank is not willing to renew the cooperative's line of credit.If the cooperative sues Elizabeth,what is most likely true about the duty of care imposed on Elizabeth?
A) Elizabeth will be held to a duty of care based on an accountant practicing in a small rural town.
B) Elizabeth will be held to a lower standard of care because of the lack of access to the prior year's work papers.
C) Elizabeth will be held to the same general standard of care as accountants anywhere in the nation.
D) Elizabeth committed constructive fraud by proceeding with the audit without having the working papers from the prior year.
Q2) Why is third party liability such an issue for accountants but not for most other professionals?
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Page 53
Chapter 52: Wills, Trusts, and Elder Law
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Sample Questions
Q1) A constructive trust can be implied to prevent fraud or unjust enrichment.
A)True
B)False
Q2) A general gift is one that is a specifically identified piece of property.
A)True
B)False
Q3) In general,a will must be in writing to be effective.
A)True
B)False
Q4) A gift of real property made in a will is known as a:
A) devise
B) legacy
C) corpus
D) bequest
E) Both A and D
Q5) A trust created by the terms of a will is a:
A) testamentary trust
B) inter vivos trust
C) probate trust
D) constructive trust
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Chapter 53: Family Law
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Sample Questions
Q1) Which of the following are grounds for an annulment?
A) The marriage was never consummated.
B) A party was intoxicated at the time of the marriage.
C) One of the parties was a minor and did not have parental consent for the marriage.
D) One of the parties was mentally incapacitated at the time of the marriage.
E) All of these are correct.
Q2) What percentage of divorce cases are settled between the parties prior to trial?
A) 10 percent
B) 35 percent
C) 90 percent
D) 100 percent
Q3) An independent adoption usually utilizes an agency to make the adoption official.
A)True
B)False
Q4) The court must approve an agency adoption,but need not approve an independent adoption before the adoption becomes legal.
A)True
B)False
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Page 55
Chapter 54: International and World Trade Law
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Sample Questions
Q1) The Statute of the International Court of Justice identifies the four sources of international law that courts are required to turn to in resolving international law disputes.
A)True
B)False
Q2) Negotiators from which nations signed the North American Free Trade Agreement in 1992?
A) the United States and Canada
B) the United States and Mexico
C) the United States,Canada,and Mexico
D) the United States,Mexico,and Panama
E) the United States,Canada,Mexico,Guatemala,and Panama
Q3) Most international law disputes are heard by national courts of individual nations.
A)True
B)False
Q4) One criticism of the World Trade Organization is that it does not have an appellate process for its decisions.
A)True
B)False
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