Commercial Law
Study Guide Questions
Course Introduction
Commercial Law explores the legal framework governing business transactions and the commercial relationships between individuals and organizations. This course covers key topics such as contracts, sales of goods, agency, negotiable instruments, secured transactions, and commercial dispute resolution. Emphasis is placed on the application of legal principles to real-world business scenarios, helping students understand how laws foster fair and efficient commerce. Through case studies and legal analysis, students develop practical skills and a comprehensive understanding of the regulatory environment affecting commerce on both a national and international scale.
Recommended Textbook
Fundamentals of Business Law Today Summarized Cases 10th Edition by Roger LeRoy Miller
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Page 2
Chapter 1: The Legal and Constitutional Environment of Business
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Q1) Americans with a Better Cause (ABC),a nonprofit organization,files a suit against the U.S.Department of Justice (DOJ),claiming that a cer-tain federal statute the DOJ is empowered to enforce conflicts with the U.S.Constitution and with a state constitution.In each situation,which source of law has priority?
Answer: The U.S.Constitution is the supreme law of the land.A law in violation of the Constitution,no matter what its source,will be de-clared unconstitutional and will not be enforced.Thus,the federal statute does not have priority over the Constitution.The federal statute would have priority over the state constitution,however,because under the U.S.Constitution,when there is a conflict between a federal law and a state law,the state law is rendered invalid.
Q2) The Second Amendment to the U.S.Constitution reserves all powers not delegated to the national government to the states.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Courts and Alternative Dispute Resolution
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Q1) iTablets,Inc.,files a suit against Andromeda Pads Corporation.Suri is a witness for iTablets.Kevin is a witness for Andromeda.iTablets may direct interrogatories to A)Andromeda.
B)Suri.
C)Kevin.
D)the judge.
Answer: A
Q2) Drummond wants to make a federal case out of his dispute with Elena.Federal cases originate in
A)federal courts of appeals.
B)federal district courts.
C)state trial courts.
D)the United States Supreme Court.
Answer: B
Q3) Interrogatories are written questions for which written answers are prepared and signed under oath.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Ethics and Business Decision Making
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Q1) If the interests of different stakeholders conflict,it can be difficult to determine which group's interest should receive greater weight.
A)True
B)False
Answer: True
Q2) An ethical code of conduct typically outlines a company's policies.
A)True
B)False
Answer: True
Q3) Managers should apply the same ethical standards to themselves and to their employees.
A)True
B)False Answer: True
Q4) Compliance with the law does not necessarily fulfill all ethical obligations.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Tort Law
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Q1) Jane develops a new color of lipstick.To market her lipstick,Jane uses a computer design program to show a famous model using Jane's lipstick.Jane does not ask the model's permission.The model can sue Jane for A)battery.
B)fraudulent misredefamation.presentation.
C)defamation.
D)invasion of privacy.
Q2) Kelly is injured when she slips and falls on Layla's sidewalk.To determine whether Layla owed a duty of care to Kelly,Layla is subject to the standard of
A)a realistic person.
B)a reasonable person.
C)a recognizable person.
D)a reliable person.
Q3) Some risks are obvious but that does not necessarily excuse a business owner from the duty to protect customers from foreseeable harm.
A)True
B)False
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Chapter 5: Intellectual Property
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Q1) A fanciful use of ordinary words may be trademarked.
A)True
B)False
Q2) Sights Unseen,Inc.,(SUI) sells telescopes with distinctively designed lenses and mirrors.Later,without SUI's permission,Telescopes Etc.Corporation begins to sell scopes with identical structures of lenses and mirrors.This is most likely
A)copyright infringement.
B)patent infringement.
C)trademark infringement.
D)not infringement.
Q3) College Copy Shop (CCS) compiles,copies,and sells reading materials to students.The compilations are prepared on the instructions of professors,who indicate which parts of which publications should be included for their students.The copied materials include texts published by Deep Topics,Inc.CCS does not obtain the permission of Deep Topics,or any of the other original publishers of the copied materials,and does not pay royalties on the sales of the compilations.Deep Topics and others file a suit against CCS,alleging infringement of their intellectual property rights.Which type of intellectual property is involved in this situation? What is CCS's likely defense? How is a court most likely to rule? Explain.
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Page 7
Chapter 6: Internet Law,social Media,and Privacy
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Q1) Riley obtains permission from Saga Company to use the firm's game app on Riley's smartphone,tablet,and other mobile device.But Riley does not obtain ownership rights in the app.This is
A)a license.
B)a cookie.
C)cloud computing.
D)a violation of the law.
Q2) Federal law prevents a provider of communication services-such as a cell phone company-from divulging private communications to certain entities and individuals.
A)True
B)False
Q3) Interactive Entertainment Corporation markets its products online.Through the use of cookies,Interactive Entertainment and other online marketers can
A)track individuals' Web browsing activities.
B)gain access to competitors' servers.
C)"sweet talk" consumers into buying certain products.
D)attack competitors' Web sites.
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Chapter 7: Criminal Law and Cyber Crime
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Q1) Dirk,an employee of Ergonomic Elevators,Inc.,pays Ferbie,an employeeof Ergonomics' competitor G-Force Risers Company,for a secret G-Forcepricing schedule.This is
A)an effective marketing strategy.
B)commercial bribery.
C)creative legal bookkeeping.
D)money laundering.
Q2) The crime of theft requires the taking of property,without regard to whether the perpetrator knew it belonged to another.
A)True
B)False
Q3) Under the exclusionary rule,illegally obtained evidence may not be included in any criminal prosecution.
A)True
B)False
Q4) Picking pockets is larceny.
A)True
B)False
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Chapter 8: Nature and Classification
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Q1) Ellen offers to sell her math textbook to Julia for $50.Julia does not respond.Ellen and Julia do not have a contract because they lack the requirement of A)agreement.
B)capacity.
C)consideration.
D)legality.
Q2) InTown Delivery Service promises to deliver a certain couch to Kurt,who promises to pay for the service.If InTown does not perform,it may be required to A)do nothing.
B)make another promise.
C)pay monetary damages.
D)perform a different service.
Q3) A contract is valid only if both of the parties entering into it have the capacity to do so.
A)True
B)False
Q4) Some promises create moral,but not legal,obligations.
A)True
B)False
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Chapter 9: Agreement in Traditional and E-Contracts
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Q1) Lovett County Bank offers to lend money to Kino,the owner of Java Stop,at 15 percent interest.Before Kino accepts,a state statute is enacted prohibiting loans at rates greater than 12 percent.Kino and the bank have
A)have a contract for a loan at 15 percent interest.
B)have a contract for a loan at 12 percent interest.
C)have a contract for a loan at 0 percent interest.
D)no contract for a loan.
Q2) Laredo advertises a reward for the return of his lost dog.Mikayla,who does not know of the reward,finds and returns the dog.Mikayla cannot recover the re-ward,because she
A)did not confer a benefit on Laredo by returning the dog.
B)did not know of the reward when she found and returned the dog.
C)does not need the money.
D)returned the dog.
Q3) In most states,revocation becomes effective on receipt.
A)True
B)False
Q4) An offer that astatute makes illegal terminates only af-ter a rea-sonable time.
A)True
B)False
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Chapter 10: Consideration, capacity, and Legality
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Q1) Duffy and Elbert agree to hijack a truck carrying a load of pecans. If Duffy later refuses to go through with the crime,Elbert can
A)enforce the agreement.
B)obtain damages from Duffy in the amount of Duffy's probable share of the illegal profits.
C)recover in quasi contract for the loss of his share of the illegal profits.
D)do nothing.
Q2) A person who enters into a contract when he or she is intoxicated can void the contract if he or she did not comprehend the legal consequences.
A)True
B)False
Q3) An illusory promise is unenforceable.
A)True
B)False
Q4) Refer to Fact Pattern 10-1.Sally and Tasty
A)may rescind their entire contract.
B)may rescind their contract to the extent that it is executory.
C)must perform their entire contract.
D)must perform the part of their contract that is executory.
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Chapter 11: Defenses to Contract Enforceability
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Q1) An innocent party may neverrescind a fraudulent con-tract.
A)True
B)False
Q2) A unilateral mistake always gives the mistaken party a right to relief from the contract.
A)True
B)False
Q3) Mark fails to reveal a material fact in a business deal with Nancy.This constitutes fraud
A)if Mark is unaware of the fact and the failure.
B)if the amount of consideration received is grossly inadequate.
C)if the fact concerns a serious defect known to Mark and unlikely to be known by Nancy. D)under any circumstances.
Q4) A false statement by an expert to a naive buyer usually will entitle the buyer to rescind or reform a contract.
A)True
B)False
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Chapter 12: Third Party Rights and Discharge
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Q1) Refer to Fact Pattern 12-1.Delta will realize a profit from the sale of prod-ucts to Four-Square to remodel Carol's store.Delta is
A)a delegatee.
B)an assignee.
C)an incidental beneficiary.
D)an intended beneficiary.
Q2) There are no exceptions to the rule that any duty can be delegated.
A)True
B)False
Q3) If a contract does not require that performance be rendered directly to a third party,the third party is an intended beneficiary.
A)True
B)False
Q4) A delegator is a party who transfers his or her obligation under a contract to another party.
A)True
B)False
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Chapter 13: Breach and Remedies
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Q1) Rough & Ready Timber Company orally contracts with Shawn for the purchase of five acres of Shawn's timberland.Shawn makes the transfer but Rough & Ready does not pay the price.The lack of a written contract could bar enforcement of this deal.If so,Shawn could most likely recover on a theory of
A)reformation.
B)restitution.
C)liquidated damages.
D)quasi contract.
Q2) A contract between E-Debits,Inc.,and First Credit Corporation includes a provision excluding liability as a result of fraud.This provision is
A)enforceable because the parties are protected from liability.
B)enforceable because the parties consented to it.
C)enforceable if the parties have equal bargaining power.
D)not enforceable.
Q3) In a contract for a sale of goods,the usual measure of compensatory dam-ages is the difference between the contract price and the market price.
A)True
B)False
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Chapter 14: The Formation of Sales and Lease Contracts
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Q1) Thorpe buys an HD TV from Viewpoint Electronics store,which agrees to keep the TV for Thorpe until he picks it up.Before Thorpe gets the TV,a fire destroys the store and the set.The loss is suffered by
A)neither Thorpe nor Viewpoint
B)Thorpe and Viewpoint.
C)Thorpe only.
D)Viewpoint only.
Q2) In most situations involving sales,rights and liabilities are determined by who has the title to the goods.
A)True
B)False
Q3) Generally,acceptance of an offer to lease goods may be made in any reasonable manner and by any reasonable means.
A)True
B)False
Q4) A firm offer by a merchant may be oral.
A)True
B)False
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Chapter 15: Performance and Breach of Sales and Lease Contracts
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Q1) If a contract specifies a certain carrier,a substitution of a different carrier for any reason breaches the contract.
A)True
B)False
Q2) Leatherbound Stores,Inc.,rejects a shipment of goods that does not conform to its contract with Cowhide Corporation,but is unable to obtain instructions from the seller.Leatherbound may
A)resell or return the goods only.
B)resell or store the goods only.
C)return or store the goods only.
D)resell,return,or store the goods.
Q3) Text Publishers,Inc.,contracts for a sale of textbooks to University Bookstores,Inc.Viable Shipping Corporation,the carrier,transports the books to Warehouse Storage Company.Text's right to stop delivery is lost when University's rights to the goods are acknowledged by
A)the appropriate government agency.
B)the students who opt to buy the books.
C)University Bookstores.
D)Warehouse Storage.
Page 17
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Chapter 16: Warranties and Product Liability
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Q1) If a seller is an expert and gives an opinion as an expert,then he or she usually creates an express warranty.
A)True
B)False
Q2) Goldtone Corporation makes cell phones.Haji files a product liabil-ity suit against Goldtone,alleging a design defect.In deciding whether to hold Goldtone liable,the court may consider an alternative design's A)popularity among industrial designers.
B)attractiveness to consumers.
C)aesthetics.
D)effect on the product.
Q3) Ceramic Tile Company designs and makes floor tiles.In a product liability suit based on negligence,Ceramic could be liable for vio-lating its duty of care with respect to A)neither the design nor the making of the tiles.
B)the design and the making of the tiles.
C)the design of the tiles only.
D)the making of the tiles only.
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Chapter 17: Negotiability, transferability, and Liability
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Q1) Eppie gives a check to Fund Investments to buy 100 shares of stock in GR8 Tech Corporation for Eppie.The price of the shares is constantly fluctuating.Fund Investments asks Eppie to leave the amount of the check blank and allow it to fill in the price when making the purchase.Eppie agrees.Fund Investments buys the stock when the price is $4,000,but fills in the check for $5,000.The check is negotiated as payment for a $5,000 debt to Hasty Accounting Services,which takes the check in good faith and without no-tice of Fund Investments' act.Hasty later learns that Fund Investments was not author-ized to fill in the check for $1,000 over the price.Is Hasty an HDC? If so,for how much?
Q2) Stature Loan Company has notice that a promissory note is overdue if the note is a demand instrument and Stature takes it
A)an unreasonable time after its due date.
B)before its due date.
C)on its due date.
D)without noticing its due date.
Q3) A special indorsement names the indorsee.
A)True
B)False
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Chapter 18: Checks and Banking in the Digital Age
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Q1) A check is not a substitute for cash.
A)True
B)False
Q2) Jen signs a check "pay to the order of Key" drawn on Jen's account in Little Bank to buy Key's car.If there are insufficient funds in Jen's account to cover the amount of the check,but the bank pays it,this creates
A)a cashier's check.
B)an overdraft.
C)a stale check.
D)a stop-payment order.
Q3) Trudy forges Uma's signature on a check "payable to the order of Trudy" drawn on Uma's account in Verity Bank.Most likely,if the bank pays the check
A)the Federal Reserve will reimburse all parties for their costs.
B)he loss will be apportioned among all of Verity's customers.
C)Uma will be liable for the amount.
D)Verity will have to recredit Uma's account.
Q4) Today,most checks are processed manually.
A)True
B)False
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Chapter 19: Secured Transactions
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Q1) The payment of Frida's debt to Gianini is guaranteed by Frida's personal property.Gianini is
A)a debtor.
B)a secured party.
C)a secured transaction.
D)a security interest.
Q2) A security agreementmay provide for coverage of after-acquired property.
A)True
B)False
Q3) A financing statement must include a description of the collateral by type or item.
A)True
B)False
Q4) Everyday Loans,Inc.,issues a line of credit in Glade Electronics Corporation under a security agreement.Later,Glade buys new HD-TVs to add to its inventory.Everyday has a security interest in the new inventory
A)if the security agreement included an after-acquired property clause.
B)if Everyday has not yet filed a financing statement.
C)if Glade bought the inventory with Everyday funds.
D)under no circumstances.
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Chapter 20: Creditors Rights and Bankruptcy
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Q1) A mechanic's lien is possessory.
A)True
B)False
Q2) A surety can never assert fraud as a defense.
A)True
B)False
Q3) Before filing for bankruptcy,a consumer-debtor must receive credit counseling.
A)True
B)False
Q4) Bess wishes to appeal a decision from a federal bankruptcy court.Bess must appeal to
A)a county court.
B)a federal district court.
C)the U.S.Supreme Court.
D)a state court.
Q5) Wilson wants to file an ordinary,or straight,bankruptcy.Wilson should file using
A)Chapter 7.
B)Chapter 11.
C)Chapter 13.
D)his state's bankruptcy code.
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Chapter 21: Agency Relationships
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Q1) Real estate brokers are independent contractors.
A)True
B)False
Q2) An agency relationship created for an illegal purpose is enforceable.
A)True
B)False
Q3) Jim agrees to act on Kit's behalf,subject to Kit's control,and Kit trusts Jim to so act.This describes a relationship between
A)a business and its competitors.
B)a government and its governed
C)a parent and a child.
D)a principal and an agent.
Q4) In a principal-agent relationship,the parties agree that the principal will act on behalf and instead of the agent in negotiating and transacting business with third persons.
A)True
B)False
Q5) Giving an agent a power of attorney confers implied authority.
A)True
B)False
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Chapter 22: Employment Law
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Q1) Quinn is an employee of Regional Industries,Inc. Quinn is threatened with a discharge when he refuses a transfer to a Regional department in which several employees suffered serious injuries from exposure to hazardous chemicals.Quinn may be entitled to protection from discharge under A)no law.
B)the Family and Medical Leave Act.
C)the Occupational Safety and Health Act.
D)the state workers' compensation act.
Q2) Jason and Katrina work on the loading dock for Longhaul Transport Company.Jason has a disability.Katrina has seniority.Jason asks for a transfer,which would represent an accommodation for his disability.Longhaul gives the transfer to Katrina on the basis of her seniority.Jason files a suit against Longhaul for discrimination on the basis of his disability.The court is most likely to rule that
A)Katrina's seniority is a good defense.
B)Jason's disability is a sufficient basis for relief.
C)Longhaul's action was a business necessity.
D)Longhaul's action was a reasonable accommodation.
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Page 24
Chapter 23: Sole Proprietorships, partnerships, and Limited Liability Companies
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Q1) Cody is a partner in Delta Accounting Service.Cody can inspect
A)all of Delta's books and records.
B)Delta's books and records only as the firm's management permits.
C)Delta's books and records only for a reasonable purpose.
D)Delta's books and records relating to Cody's capital contribution only.
Q2) Kirby is a manager of Jumpstart Fitness LLC,a limited liability company.Jumpstart is formed in a state that imposes fiduciary duties on LLC managers.Kirby owes these duties to
A)Jumpstart's members.
B)Jumpstart's suppliers.
C)Jumpstart's customers.
D)none of the choices.
Q3) Will and Jay form Northwest Air Express,a general partnership.The essential elements of this partnership do not include
A)a sharing of profits and losses.
B)a joint ownership of the business.
C)an equal right to management in the business.
D)goodwill.
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Chapter 24: Corporate Formation, financing, and Termination
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Q1) Express powers of a corporation can be found in the articles of incorporation.
A)True
B)False
Q2) Eagle Financial Corporation merges with First Bank Corporation,with Eagle Financial absorbing First Bank.After the merger
A)a different,new corporation is the surviving corporation.
B)Eagle Financial and First Bank are both surviving corporations.
C)Eagle Financial is the surviving corporation.
D)First Bank is the surviving corporation.
Q3) In most cases,only a corporation's common stockholders need to approve a merger. A)True
B)False
Q4) A de jure corporation is one that is not properly formed. A)True B)False
Q5) A corporation whose shares are held by relatively few persons is a close corporation. A)True
B)False
26
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Chapter 25: Corporate Directors, officers, and Shareholders
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Q1) Niche Stores,Inc.,must hold a shareholders' meeti
A)once a month.
B)once a year.
C)once every two years.
D)only when it is called by the board of directors.
Q2) Denise,Ervin,and Flem occupy the positions of directors on the board of Gallery Corporation.As directors,they may not
A)authorize major corporate policy decisions.
B)decide to issue stock and bonds,and declare dividends.
C)select and remove corporate officers.
D)subordinate the corporation's welfare to their personal interests.
Q3) Dave is an officer for Sweet Somethings Candies,Inc.In 2012,chocolate hearts were very popular.Acting within his managerial authority and the powers of the corporation,Dave signs a contract for an increase in chocolate heart production for 2013.In 2013 chocolate hearts do not sell well and Sweet Somethings Candies loses money.Dave is most likely
A)liable for breach of duty of care.
B)liable for breach of duty of loyalty.
C)none of the choices.
D)liable for violation of the business judgment rule.
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Chapter 26: Investor Protection, insider Trading, and Corporate Governance
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Q1) Della,an officer for Energy Petrol Corporation (EPC),buys 100 shares of EPC stock.One week later,EPC announces that it will merge with a competitor,Fuel Oil Company,and the price of EPC stock increases.One month later,Della sells her shares for a profit.Under Section 16(b) of the Securities Exchange Act of 1934,Della would not be liable if,after buying the stock,she had waited
A)less than fourteen days to sell it.
B)more than six months to sell it.
C)ninety days to sell it.
D)two months to sell it.
Q2) A registration statement must state how a corporation plans to use the proceeds from the sale of the securities.
A)True
B)False
Q3) Corporations' chief executive officers are directly accountable for the accuracy of financial statements filed with the Securities and Exchange Commission.
A)True
B)False
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Chapter 27: Personal Property and Bailments
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Q1) Helen owns heavy construction equipment and the tools to service it,as well as office furniture,including computers.Ilya owns a number of pat-ents,trademarks that identify the products made under those patents,and stock in the company that sells those products.Personal property in-cludes the items owned by
A)Helen and Ilya.
B)Helen only.
C)Ilya only.
D)neither Helen nor Ilya
Q2) Emily checks her luggage at Flyaway Airlines's ticket counter before boarding her flight to Houston,Texas.Subject to a bailment is
A)Emily.
B)Emily's luggage.
C)Emily's ticketed seat on the flight
D)none of the choices.
Q3) A copyright is tangible personal property.
A)True
B)False
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Chapter 28: Real Property and Landlord-Tenant Law
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Sample Questions
Q1) Mix-It Concrete Company has the right to enter Nim's land and remove the rock from Nim's quarry.This is
A)a fee simple absolute.
B)a license.
C)an easement.
D)a profit.
Q2) Jai owns an orchard behind Key's house and property.The only access to the orchard is Key's driveway,which Jai uses to get to her orchard.Jai sells the orchard to Laurentz.Can Laurentz use the right-of-way across Key's property?
Q3) A profit is the right to make limited use of another person's real property without taking anything from the property.
A)True
B)False
Q4) Under the covenant of quiet enjoyment,a landlord promises that a ten-ant will not be disturbed in the possession of the premises.
A)True
B)False
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Chapter 29: Insurance, wills, and Trusts
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72 Verified Questions
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Source URL: https://quizplus.com/quiz/35675
Sample Questions
Q1) Grace applies for a homeowners' insurance policy on her house with Heroic Insurance Company through Ian,a broker.In this transaction,Ian is
A)an agent for both parties.
B)Grace's agent,and not Heroic's agent.
C)Heroic's agent,and not Grace's agent.
D)not an agent.
Q2) A nuncupative will is a will that is completely in the handwriting of the testator. A)True
B)False
Q3) A will is probated in part to establish its validity. A)True
B)False
Q4) Amelia executes a separate written instrument to amend her prior will.This separate document is
A)a codicil.
B)a holographic will.
C)a living will.
D)a nuncupative will.
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Chapter 30: Liability of Accountants and Other Professionals
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Sample Questions
Q1) An accountant is not liable for a misleading statement that affects the price of a security if the accountant acted in good faith.
A)True
B)False
Q2) Lucille,an accountant,is subject to the ac-counting conventions,rules,and procedures that constitute generally ac-cepted accounting principles (GAAP).GAAP are determined by
A)the International Accounting Standards Board.
B)the American Bar Association.
C)the American Institute of Certified Public Accountants.
D)the Financial Accounting Standards Board.
Q3) An accountant is required to discover every impropriety,defalcation,and fraud in a client's books.
A)True
B)False
Q4) Accountants and other professionals may not be held liable for negligence in the performance of their service.
A)True
B)False
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Chapter 31: International Law in a Global Economy
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Sample Questions
Q1) In some cases,foreign states are not immune from the jurisdiction of U.S.courts.These circumstances are governed by
A)theUniform Commercial Code.
B)theForeign Sovereign Immunities Act.
C)theEuropean Union.
D)theNorth American Free Trade Agreement.
Q2) Yokio,Ltd.,and Zeno,S.A.,transact an international sale of goods.At the request of these parties,a court in Portugal resolves a dispute between them.A U.S.court will most likely honor the judgment
A)if it is consistent with U.S.laws and public policy.
B)if it is consistent with Portuguese laws and public policy.
C)if it does not benefit the U.S.to deny it.
D)under no circumstances.
Q3) The basis for India to give effect to the laws and court decisions of the United States is primarily
A)courtesy and respect.
B)fear and intimidation.
C)admiration and envy.
D)payments of cash and exchanges of property.
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