Commercial Law
Test Bank
Course Introduction
Commercial Law is a foundational course that examines the legal principles and frameworks governing business and commercial transactions. The course covers key topics such as the formation and enforcement of contracts, sale of goods, agency relationships, negotiable instruments, and secured transactions. Students will explore the rights and obligations of parties involved in commercial activities, understand the regulation of commercial entities, and gain insight into dispute resolution mechanisms within a business context. Through case studies and real-world examples, the course prepares students to navigate the legal challenges commonly encountered in the commercial world.
Recommended Textbook
Andersons Business Law and the Legal Environment Comprehensive 23rd Edition by Twomey
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51 Chapters
2716 Verified Questions
2716 Flashcards
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Page 2
Chapter 1: The Nature and Sources of Law
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60 Verified Questions
60 Flashcards
Source URL: https://quizplus.com/quiz/21143
Sample Questions
Q1) Civil laws define wrongs against society.
A)True
B)False
Answer: False
Q2) The right to privacy means that individuals
A) cannot gossip about each other
B) cannot be lawfully searched.
C) can yell "Fire" in a crowded theater.
D) are protected against intrusions by others.
Answer: D
Q3) Procedural law creates legal rights and duties.
A)True
B)False
Answer: True
Q4) Criminal laws:
A) define wrongs against society.
B) define the rights of one person against another.
C) carry damage remedies against the wronged individual.
D) are punished by individuals who have been wronged.
Answer: A
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Chapter 2: The Court System and Dispute Resolution
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57 Verified Questions
57 Flashcards
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Sample Questions
Q1) A judge rules on the admissibility of evidence presented in the trial.
A)True
B)False
Answer: True
Q2) When testifying at trial, the witness for the plaintiff will undergo _______ by the plaintiff's attorney, and a(n) _______ by defense counsel.
A) a background check, cross-examination
B) direct examination, recross-examination
C) redirect examination, cross-examination
D) direct examination, cross-examination
Answer: D
Q3) In mediation, the mediator acts as a(n):
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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52 Verified Questions
52 Flashcards
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Sample Questions
Q1) Ethical violations can cause lasting detriment to a company's ability to do business through impacts on the company's reputation.
A)True
B)False
Answer: True
Q2) Voluntary improvements in value choices and business ethics are:
A) less effective than those brought about by government regulation.
B) less costly and intrusive than those brought about by government regulation.
C) virtually nonexistent in corporate America.
D) more common in third-world countries than in the United States.
Answer: B
Q3) An ethical duty of confidentiality could be breached in any of the following situations except:
A) information obtained through research of the employer is disclosed.
B) customer lists or leads are disclosed to a competitor.
C) proprietary information or technology of a business is disclosed.
D) when a confidential informant tells government officials of illegal company activity.
Answer: D
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5
Chapter 4: The Constitution As the Foundation of the Legal Environment
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60 Verified Questions
60 Flashcards
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Sample Questions
Q1) Administrative agencies are, in effect, a fourth branch of the government.
A)True
B)False
Q2) When the federal government deregulates an industry, the states automatically have the power to regulate the same industry.
A)True
B)False
Q3) Which of the following is not characteristic of the "living" Constitution?
A) strong government
B) strong President
C) administrative agencies
D) states' powers equal to federal powers
Q4) The Constitution prohibits the government from treating different people differently. A)True
B)False
Q5) California passed a law prohibiting any transporting of nuclear waste in the state unless the company doing so is a resident or is owned by residents of California. What constitutional issues does this law raise?
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Chapter 5: Government Regulation of Competition and Prices
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48 Verified Questions
48 Flashcards
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Sample Questions
Q1) Market power under the Sherman Act is defined by both geographic and product markets.
A)True
B)False
Q2) Nobel economist Milton Friedman believes that government regulation of business interferes with the free enterprise system.
A)True
B)False
Q3) The Robinson-Patman Act guarantees a seller the right to refuse to deal with anyone for any reason or purpose.
A)True
B)False
Q4) A person who is harmed by a conspiracy that violates the Sherman Antitrust Act may sue the wrongdoers for treble damages, which is four times the actual damages.
A)True
B)False
Q5) Criminal penalties are possible under the Sherman Act.
A)True
B)False
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Chapter 6: Administrative Agencies
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58 Verified Questions
58 Flashcards
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Sample Questions
Q1) To satisfy the requirements of due process, an agency handling a complaint must generally _______, although there is no right to _________.
A) give specific recommendations to the director of the agency, cross-examine witnesses.
B) give notice and hold a hearing, remain silent.
C) give notice and hold a hearing, trial by jury before an agency.
D) give sufficient notice only, remain silent.
Q2) In an administrative hearing, an administrative law judge hears the complaint and has the authority to swear witnesses, take testimony, make evidentiary rulings, and make a decision to recommend to the administrative agency heads for action.
A)True
B)False
Q3) Meetings are to be open to the public under:
A) the Administrative Protection Act.
B) the Sunshine Act.
C) the Freedom of Information Act.
D) the Administrative Procedure Act.
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Chapter 7: Crimes
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60 Flashcards
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Sample Questions
Q1) Criminal penalties for corporations are based on a percentage of sales.
A)True
B)False
Q2) Forgery includes signing another person's name to a check with the intent to defraud.
A)True
B)False
Q3) Generally, misdemeanors are more serious than felonies.
A)True
B)False
Q4) Embezzlement involves fraud.
A)True
B)False
Q5) 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?
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Page 9
Chapter 8: Torts
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Sample Questions
Q1) Professionals have a duty to perform their functions at the same level as would a reasonable person.
A)True
B)False
Q2) Bruce opens a used car lot but has difficulty competing with Humdinger Motors, a much larger used car lot down the street. In his newspaper ad, Bruce includes the false statement, "Humdinger sells cars with defective titles." Humdinger experiences an immediate decrease in sales. Bruce has most likely committed the tort of:
A) Malice
B) Contract interference
C) Disparagement
D) Defamation
Q3) Negligence is imposed because the activity involved is so dangerous that there must be full accountability, even if the activity is necessary and cannot be prohibited
A)True
B)False
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Chapter 9: Intellectual Property Rights and the Internet
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53 Verified Questions
53 Flashcards
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Sample Questions
Q1) Three types of patents available under U.S. law are:
A) utility, product, design.
B) design, packaging, invention.
C) design, plant, utility.
D) utility, regulatory, common law.
Q2) To be patentable, an invention must be new and not obvious to a person of ordinary knowledge and skill in the art or technology to which the invention is related.
A)True
B)False
Q3) An owner of a copyright may license some of his or her rights to another in exchange for royalty payments.
A)True
B)False
Q4) Protection for trade dress is available under the Lanham Act.
A)True
B)False
Q5) A copyright prevents the copying of an idea.
A)True
B)False
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Chapter 10: The Legal Environment of International Trade
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Sample Questions
Q1) The use of agency arrangements allows a U.S. firm to avoid taxation on sales made in its agent's country.
A)True
B)False
Q2) The World Trade Organization (WTO) provides a Dispute Settlement Body (DSB) to enable member countries to resolve trade disputes rather than engage in unilateral trade sanctions or a trade war.
A)True
B)False
Q3) The "Turtle Law" prohibits the importation of shrimp from countries that allow the harvesting of shrimp that could adversely affect endangered sea turtles.
A)True
B)False
Q4) The jurisdictional rule of reason addresses the problems that arise when a foreign country has a significant interest in regulating conduct taking place within the United States.
A)True
B)False
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Page 12
Chapter 11: Nature and Classes of Contracts: Contracting
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53 Verified Questions
53 Flashcards
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Sample Questions
Q1) An executory contract is:
A) void if neither party has performed.
B) One that has been completely performed.
C) entered into but not fully performed.
D) always unilateral in nature.
Q2) A contract requires:
A) an offer.
B) an acceptance.
C) both an offer and an acceptance.
D) an agreement manifested by the written or spoken words of the parties.
Q3) In some cases, third persons, such as third party beneficiaries or assignees, have rights on a contract.
A)True
B)False
Q4) The plaintiff in a quasi-contractual action can recover:
A) lost profits.
B) damages for mental distress.
C) the reasonable value of the benefit conferred upon the defendant.
D) for all the damages sustained.
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Chapter 12: Formation of Contracts: Offer and Acceptance
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Sample Questions
Q1) To make an offer, the offeror must appear to intend to create a binding obligation. A)True
B)False
Q2) The first statement made by one of two persons can be anyone of the following except:
A) acceptance.
B) preliminary discussion.
C) invitation to negotiate.
D) a survey.
Q3) A requirements contract is too vague to be a legally-enforceable agreement.
A)True
B)False
Q4) If either the offeror or offeree dies or becomes mentally incompetent before the offer is accepted, the offer is automatically terminated.
A)True B)False
Q5) Advertisements that call for an act may be deemed to be a unilateral contract. A)True B)False
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Chapter 13: Capacity and Genuine Assent
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44 Verified Questions
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Sample Questions
Q1) The obligation of a cosigner is discharged by:
A) the minority status of one of the parties.
B) the majority status of one of the parties.
C) the court's declaration of the contract's provision of necessaries.
D) the payment of the debt.
Q2) A finding of undue influence would most likely not occur in a contract between:
A) parent and child.
B) attorney and client.
C) neighbor and neighbor.
D) guardian and ward.
Q3) Roberta, an educated person, purchased real estate from Maurice. Roberta did not read entirely the contract that she signed. As a result, she did not notice the provision in the contract about the interest imposed on the unpaid portion of the purchase price. She refused to pay the interest specified in the contract. Maurice sued her. Could he recover?
Q4) A person who has drunk too much alcohol at a party and signs a contract may be able to rescind that contract.
A)True
B)False
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Page 15
Chapter 14: Consideration
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49 Flashcards
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Sample Questions
Q1) Gerwin's daughter Mary was seeking a position as an associate attorney with Baker, Charles & Dixon, a large metropolitan law firm. The firm, after several meetings with Mary over a two-month period, made Mary an offer of employment on January 15. Mary accepted the offer that day and immediately left for Cape Cod to celebrate without telling Gerwin or anyone else about her new job.?On January 17, two days after Mary had accepted the offer, Gerwin sent Baker, Charles & Dixon a letter in which she offered to give Baker all of her legal business (approximately $40,000 per year) if the law firm would hire Mary. The law firm accepted.?After Gerwin learned that Mary already had been hired by Baker, Charles & Dixon, Gerwin refused to transfer her business to the law firm. The law firm has brought suit against Gerwin on the grounds that a valid contract exists between them. How will the case be decided?
Q2) An agreement to pay reasonable additional compensation to a contractor for the performance of a pre-existing contract when the contractor faces extraordinary circumstances caused by unforeseen difficulties is called a:
A) good-faith adjustment.
B) bribe.
C) compensatory allowance.
D) relief payment.
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Page 16
Chapter 15: Legality and Public Policy
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Sample Questions
Q1) An unlicensed doctor can sue a patient for the doctor's fee if the patient in fact recovered because of the doctor's care.
A)True
B)False
Q2) Sam Wilson often goes to the horse races, participates in his state's lottery, and invests heavily in the stock of major U.S. companies. At work, Wilson is approached by his coworkers and asked to participate in a football pool. "It's totally based upon skill," his friends claim. In addition, Wilson's philanthropic club is holding a raffle in which an individual could win a new car. Are these activities gambling and therefore illegal activities?
Q3) When a nationally-known neurosurgeon in Chicago, Illinois sells her practice, the contract may specify that the seller will not practice within a 100-mile radius of Chicago for one year.
A)True
B)False
Q4) Agreements that are contrary to public policy are binding but voidable.
A)True
B)False
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Page 17
Chapter 16: Writing, Electronic Forms, and Interpretation of Contracts
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60 Verified Questions
60 Flashcards
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Sample Questions
Q1) The statute of frauds applies to:
A) the lease of an apartment on a month-to-month basis.
B) the cancellation of a written agreement for the sale and purchase of land.
C) an employment agreement.
D) the sale of goods priced at less than $500.
Q2) The parol evidence rule is based on the theory that any oral agreement was abandoned when the contact was written.
A)True
B)False
Q3) A promise to pay an attorney a fee owed by a third person can be enforced without a writing.
A)True
B)False
Q4) An oral contract to sell a house is binding if:
A) the agreement is witnessed by a member of the clergy.
B) there is a tape recording of the agreement.
C) the buyer paid the price and received the deed of conveyance.
D) the seller is a merchant.
18
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Chapter 17: Third Persons and Contracts
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50 Verified Questions
50 Flashcards
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Sample Questions
Q1) A professor owned a home next door to a very dilapidated, neglected home. John Cataldo purchased the home next door and made a contract with Wizard Home Improvements for a complete renovation of the property. The professor was delighted because the improvement of the Cataldo home was upgrading the neighborhood and raising the value of the professor's home.?After making the last required payment on the contract, John Cataldo became seriously ill and ultimately was taken to a nursing home for care.?When Wizard learned of Cataldo's illness and confinement, Wizard ceased work on the Cataldo home. Because the outside renovation work had not been completed, the premises began to return to its former rundown condition. The professor ultimately sued Wizard as a third-party beneficiary of the contract between Cataldo and Wizard. What is the probable outcome of the lawsuit?
Q2) A life insurance contract is a third-party:
A) beneficiary contract.
B) assignment contract.
C) payment contract.
D) performance contract.
Q3) An assignment is a transfer of duties, and a delegation is a transfer of rights.
A)True
B)False
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Page 19
Chapter 18: Discharge of Contracts
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Sample Questions
Q1) A contract may be discharge in all of the following scenarios except:
A) death or disability
B) destruction of subject matter
C) commercial impracticability
D) weather conditions
Q2) 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.
Q3) When performance is impeded due to the occurrence of an event whose nonoccurrence was a basic assumption of the contract, the contract may be discharged on the grounds of:
A) commercial impracticability.
B) commercial impossibility.
C) economic frustration.
D) economic stability.
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Chapter 19: Breach of Contract and Remedies
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58 Verified Questions
58 Flashcards
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Sample Questions
Q1) Which is not a correct statement concerning rescission of a contract?
A) The breach must be material.
B) The injured party who rescinds may recover money paid under the contract.
C) The contract remains in effect after the rescission.
D) Rescission is the undoing of the contract.
Q2) Between experienced businesspersons, exculpatory clauses are generally:
A) voidable.
B) void.
C) valid.
D) unenforceable.
Q3) When the contract requires that both parties submit disputes to arbitration, this is an example of a limitation-of-remedies clause.
A)True
B)False
Q4) Contract provisions that limit the remedies of the parties are generally unenforceable.
A)True
B)False
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Chapter 20: Personal Property and Bailments
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Sample Questions
Q1) At common law, a tenancy by entirety is created when property is transferred to both husband and wife.
A)True
B)False
Q2) In certain cases, real property can constitute a bailment.
A)True
B)False
Q3) In states that follow the community property tradition, property acquired after the marriage belongs solely to the party who acquired it.
A)True
B)False
Q4) To establish a gift, the party claiming to be the donee must prove:
A) delivery only.
B) intent only.
C) intent and a promise to deliver.
D) intent and delivery.
Q5) Proper delivery of a car would be satisfied with the delivery of a key.
A)True
B)False
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Chapter 21: Legal Aspects of Supply Chain Management
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Sample Questions
Q1) Bob Brown entered the Hotel Lux to attend a conference being held within the hotel. Sam Smith arrived to attend the same conference, registered at the front desk, and obtained a room. Sally Jones also intended to participate in the conference and was in essence living at the hotel at the time. What relationship exists between the hotel and each of these individuals? What can be said of the hotel's obligations to each individual under these circumstances?
Q2) What is not included in a common carrier's lien on goods that it transports?
A) consequential damages
B) demurrage
C) costs of preserving the goods
D) costs of a sale to enforce the lien
Q3) The rights and duties of warehousers are regulated by the UCC.
A)True
B)False
Q4) Bills of lading for intrastate shipments are governed by the UCC, while those for interstate shipments are regulated by the Federal Bills of Lading Act.
A)True
B)False
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Page 23
Chapter 22: Nature and Form of Sales
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Sample Questions
Q1) Goods physically existing and owned by a seller at the time of a transaction are called existing goods.
A)True
B)False
Q2) With regard to transactions between merchants, failure to repudiate a confirming letter within ten (10) days after receipt binds the non-signing merchant, just as if he had signed the letter or a contract.
A)True
B)False
Q3) A gift is a free transfer of the title to property.
A)True
B)False
Q4) The parol evidence rule does not apply to the sale of goods.
A)True
B)False
Q5) To satisfy the statute of frauds, the writing must be signed and must include the price of the goods.
A)True
B)False
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Chapter 23: Title and Risk of Loss
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Sample 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) Title to goods can be transferred without the actual delivery of the goods involved.
A)True
B)False
Q3) Anderson Clock Company is in the business of selling and repairing clocks. Jay purchased a grandfather clock from them. Laurie had left the clock at Anderson's for a cleaning and calibration. When Laurie found out the clock had been sold, she contacted Jay and demanded he return it. Must Jay comply with Laurie's demand? What other options does she have?
Q4) If a buyer purchases goods on approval, the buyer's creditors cannot reach such goods until there is an approval.
A)True
B)False
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25
Chapter 24: Product Liability: Warranties and Torts
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Sample Questions
Q1) The sale of food or drink at a restaurant carries all of the following implied warranties except:
A) the food or drink will be of average quality.
B) the food or drink will be fit for human consumption.
C) the food or drink will contain no foreign substances such as a nail or screw.
D) the food or drink will meet the customer's expectations.
Q2) An implied warranty arises automatically from the fact a sale has been made. A)True B)False
Q3) The statement "This chainsaw is the best one on the market" will most likely create an express warranty.
A)True
B)False
Q4) An express warranty is a statement of fact about the product that becomes part of the basis of the bargain. A)True B)False
Q5) The theories of product liability are mutually exclusive. A)True B)False
26
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Chapter 25: Obligations and Performance
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Sample Questions
Q1) The obligations of the parties to a sales contract include:
A) the seller's duty to deliver the goods to the buyer's place of business.
B) the buyer's duty to always accept the goods.
C) the seller's duty to arrange for appropriate transport.
D) the buyer's duty to pay for the goods.
Q2) The person on whom a demand for assurance is made, must reply in writing for the assurance to be deemed "adequate."
A)True
B)False
Q3) In January, a buyer and a seller agreed on the sale of 10,000 pounds of tomatoes to be delivered on July 1. The contract stated that the seller would set the price on June 15 and that the buyer would pay the price on delivery. On June 15, the market price of tomatoes was approximately 75 cents per pound. The seller set the price at $1.50 per pound and the buyer demanded that the price be lowered. When the parties could not agree, a lawsuit developed. The key issue was whether the seller had the right to set the $1.50 price. Decide.
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Page 27
Chapter 26: Remedies for Breach of Sales Contracts
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Sample Questions
Q1) Under both the CISG and the UCC, a buyer may reject goods only if the tender of the goods is a fundamental breach of the contract.
A)True
B)False
Q2) A defrauded buyer may avoid the contract and recover damages.
A)True
B)False
Q3) A buyer who cancels a sales contract because the seller fails to deliver the goods is entitled to recover as much of the purchase price as had been paid.
A)True
B)False
Q4) When a sales contract is broken by the buyer, the seller has only the remedies of lien and resale available.
A)True
B)False
Q5) Consumer protection law prohibits the waiver of defenses in consumer contracts.
A)True
B)False
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Page 28
Chapter 27: Kinds of Negotiable Instruments and Negotiability
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Sample Questions
Q1) The payee has no rights in an instrument until the drawer or the maker has delivered it to the payee.
A)True
B)False
Q2) In a negotiable instrument, the promise or order to pay must be unconditional.
A)True
B)False
Q3) The bank is the drawee on a check and has no liability until it has accepted the instrument.
A)True
B)False
Q4) Commercial paper are transferable, written, signed promises to pay a specified sum of money.
A)True B)False
Q5) If an instrument is nonnegotiable, the rights of the parties are governed by the general principles of contract law.
A)True B)False
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Chapter 28: Transfers of Negotiable Instruments and
Warranties of Parties
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Sample Questions
Q1) A qualified indorsement is given by using the phrase __________.
A) "as is"
B) "without recourse"
C) "with all faults"
D) "buyer beware"
Q2) When the negotiable instrument is negotiated by delivery without indorsement, the warranty liability of the transferor runs only to the immediate transferee.
A)True
B)False
Q3) A special indorsement consists of the signature of the indorser and words identifying the indorsee.
A)True
B)False
Q4) A restrictive indorsement specifies the purpose of the indorsement or the use to be made of the paper.
A)True
B)False
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Chapter 29: Liability of the Parties Under Negotiable Instruments
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Sample Questions
Q1) Economic duress, in the form of a reluctance to enter into a financially demanding instrument, is a universal defense.
A)True
B)False
Q2) For a change to constitute an alteration, the person making the change must be a party to the instrument.
A)True
B)False
Q3) When the primary party refuses to pay an instrument according to its terms, said party is required to give:
A) notice of nonpayment.
B) notice of dishonor.
C) notice of denial.
D) secondary party notice.
Q4) A contract signed by a minor raises a universal defense against any kind of holder.
A)True
B)False
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Chapter 30: Checks and Funds Transfers
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Q1) A consumer who notifies the issuer of an EFT card within two (2) days after learning of a loss or theft of the card can be held to a maximum liability of $500 for unauthorized use of the card; failure to notify within this time will increase the consumer's liability for losses to a maximum of $5,000.
A)True
B)False
Q2) When a bank certifies a check, the amount involved in the certification will be debited in the depositor's account until payment of the certified check.
A)True
B)False
Q3) A tender occurs when the holder of a check or other consumer transaction authorization demands payment.
A)True
B)False
Q4) Which of the following statements describes a check?
A) The drawer is always a bank.
B) The maker is always a bank.
C) A check is generally payable on demand.
D) A check is a particular kind of note.
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Chapter 31: Nature of the Debtor Creditor Relationship
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Q1) A letter of credit cannot extend for a period of more than five (5) years.
A)True
B)False
Q2) The issuer of a letter of credit can revoke or modify the letter at any time without the consent of the beneficiary, even if that right is not expressly reserved in the letter.
A)True
B)False
Q3) If a debtor is about to leave the state, the surety may call on the creditor to take action against the debtor.
A)True
B)False
Q4) An agreement or provision in an agreement that one party shall not be held liable for loss is:
A) contribution.
B) exoneration.
C) indemnity.
D) subrogation.
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33
Chapter 32: Consumer Protection
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Q1) It is lawful to refuse to extend credit to a consumer based on the consumer's:
A) race.
B) marital status.
C) credit history.
D) age.
Q2) Who may bring an action for relief under consumer protection legislation?
A) the Federal Trade Commission
B) a state attorney general
C) the consumer
D) all of these
Q3) Despite consumer protection legislation, for most consumers pursing their rights in court is not cost beneficial.
A)True
B)False
Q4) Consumer protection even protects a consumer from the consumer's own negligence.
A)True
B)False
Q5) The Fair Credit Reporting Act applies only to consumer credit.
A)True
B)False
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Chapter 33: Secured Transactions in Personal Property
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Q1) Whatever is received upon the sale, exchange, collection or other disposition of collateral is known as: ______.
A) goods.
B) paper.
C) proceeds.
D) security interest.
Q2) An after-acquired property clause in a consumer security agreement means that a creditor has a lien in the shifting stock of goods of the debtor.
A)True
B)False
Q3) 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
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Chapter 34: Bankruptcy
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Q1) Creditors who hold security for payment, such as a lien or a mortgage on the debtor's property, are less affected by the debtor's bankruptcy.
A)True
B)False
Q2) If the debtor is generally not paying debts as they become due, the debtor may be subject to an involuntary bankruptcy petition.
A)True
B)False
Q3) The status of a trustee in a bankruptcy proceeding is best described as the: A) prosecutor of the debtor.
B) successor to the debtor.
C) defender of the debtor.
D) protector of the debtor.
Q4) The filing of a voluntary, but not an involuntary, petition operates as an automatic stay.
A)True
B)False
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Chapter 35: Insurance
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Q1) The insured must comply with a number of time limitations in making a claim.
A)True
B)False
Q2) The person to whom an insurance promise is made is called: ______.
A) the insured.
B) the insurer.
C) the broker.
D) the agent.
Q3) To collect on property insurance, an insurable interest in the property must exist at the time that the loss is suffered.
A)True
B)False
Q4) All fires that cause damage are classified as hostile fires.
A)True
B)False
Q5) If an insurer denies liability for a loss, the insured has the burden of proving that there was a loss that came within the coverage of the policy.
A)True
B)False
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Chapter 36: Agency
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Q1) Ann was seriously ill and feared that she might lapse into a coma or somehow become unable to speak or act for herself in her medical emergency. She is aware that agents ordinarily lose their authority to act for principals who become mentally disabled. She nevertheless desires to have her husband Alberto make medical decisions and speak on her behalf. She is particularly concerned about existing on life support in a persistent and incurable vegetative state. Is there any action that she might take to enable Alberto to act for her?
Q2) When an unauthorized act is ratified, the effect is the same as though the act had been originally authorized.
A)True
B)False
Q3) The term apparent authority is used when there is: ______.
A) no interaction between the principal and third persons. B) actual authority.
C) only the appearance of authority and that appearance of authority was created by the principal.
D) only the appearance of authority and that appearance of authority was created by the agent.
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Chapter 37: Third Persons in Agency
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Q1) In which of the following scenarios is the agent exposed to the greatest risk of liability?
A) disclosed principal and authorized contract
B) undisclosed principal and authorized contract
C) partially disclosed principal and authorized contract
D) authorized receipt of money from third person remitted to disclosed principal
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) A principal is not bound by statements made by an agent during the transaction of business that is within the scope of the agent's authority.
A)True
B)False
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Page 39
Chapter 38: Regulation of Employment
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Q1) Collective bargaining contracts govern the rights of employers and employees only in public sectors of employment.
A)True
B)False
Q2) In a collective bargaining contract, the parties are generally not free to make an employment contract on any terms that they wish.
A)True
B)False
Q3) The Social Security Act established the federal Supplemental Security Income (SSI) program to aid all of the following persons except: ______.
A) The aged
B) The blind
C) The disabled
D) The infirm.
Q4) An employee differs from an agent, who can make contracts with third persons on behalf of a principal.
A)True
B)False
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Page 40
Chapter 39: Equal Employment Opportunity Law
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Q1) Title VII and the ADA protects U.S. citizens against discrimination in foreign countries:
A) as long as there is no "undue hardship" on the foreign employer.
B) if they are employed by American-owned companies.
C) if they are employed by foreign-owned companies.
D) regardless of what nation controls the company.
Q2) In a hostile work environment case, the plaintiff must prove severe and pervasive conduct on the supervisor's part to meet the plaintiff's burden of proof.
A)True
B)False
Q3) Unless justified by business necessity, physical standards such as height requirements that tend to exclude people of certain national origins violate Title VII.
A)True
B)False
Q4) Generally, the EEOC attempts to remedy an unlawful practice through mandatory arbitration.
A)True
B)False
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Chapter 40: Types of Business Organizations
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Q1) A business that complies with FTC franchise requirements meets all of the following criteria except: ______.
A) the franchisor must promise to provide a trademark or other commercial symbol.
B) the franchisor must promise to exercise significant control or provide significant assistance in the operation of the business; any current and past litigation against the franchisor.
C) the franchise must require a minimum payment of at least $540 during the first six months of operations.
D) the franchise must require a minimum payment of at least $5,400 during the first six months of operations.
Q2) Corporations are subject to a form of double taxation. A)True
B)False
Q3) A franchisor is the person to whom the franchise is granted. A)True
B)False
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Chapter 41: Partnerships
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Q1) Under the UPA, and absent an agreement, a tenancy in partnership possesses all the following characteristics, except:______.
A) each partner has an equal right to use firm property for partnership purposes in the absence of a contrary agreement.
B) each partner possesses no divisible interest in any specific item of partnership property that can be voluntarily sold, assigned, or mortgaged by a partner.
C) each creditor of a partner cannot proceed against any specific items of partnership property.
D) the partnership must file necessary documentation with the state where it does business.
Q2) Persons who are not partners under appropriate circumstances may be held liable to third persons under the doctrine of partnership by estoppel.
A)True B)False
Q3) The sharing of gross returns shows no significant evidence of a partnership.
A)True
B)False
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Chapter 42: LPs, LLCs, and LLPs
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Q1) Under the RULPA, a limited partner probably will not lose his limited liability in any of the following circumstances unless: ______.
A) the limited partner becomes a contractor for, or an agent or employee of, the limited partnership or of a general partner.
B) the limited partner consults with and advises a general partner regarding the partnership business.
C) the limited partner votes on partnership matters, such as dissolving and winding up the limited partnership or removing a general partner.
D) the partners fail to file a limited partnership certificate.
Q2) If an owner discloses he is an agent of an LLC, he will not be personally liable for the debts and obligations of the entity.
A)True
B)False
Q3) In a limited partnership, limited partners are not responsible for the debts of the firm if they engage in management activities.
A)True
B)False
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44
Chapter 43: Corporate Formation
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Q1) A corporation is a legal person created by governmental action.
A)True
B)False
Q2) In a merger situation, what is the right of a dissenting shareholder?
A) to block the merger until satisfied regarding its terms.
B) to have their shares appraised and purchased by the corporation.
C) to enforce a consolidation instead of a merger.
D) dissenting shareholders have no rights with respect to a merger.
Q3) Because ______ corporations have a more restricted range of powers than business corporations, actions not authorized by their corporate charters are more likely to be found ______.
A) nonprofit, ultra vires.
B) subchapter S, illegal.
C) a benefit, ultra vires
D) professional, illegal.
Q4) A corporation may be judicially dissolved when its management is deadlocked and the deadlock cannot be broken by the shareholders.
A)True
B)False
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Chapter 44: Shareholder Rights in Corporations
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Q1) As an owner of the corporation, a shareholder always has the right to inspect the books of the corporation for any purpose, regardless of whether the inspection is related to the shareholder's interest as a shareholder.
A)True
B)False
Q2) Shareholders exercise direct control over their corporation.
A)True
B)False
Q3) Statutes authorizing the formation of professional corporations usually require that share ownership be limited to: ________.
A) residents of the same state
B) attorneys with malpractice insurance
C) duly licensed professionals
D) professionals without a malpractice history
Q4) The two most common instruments used to provide the capital structure of a corporation are stocks and bonds.
A)True
B)False
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Chapter 45: Securities Regulation
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Q1) The fraud-on-the-market theory creates a presumption of securities fraud based on plaintiff's reliance on defendant's misrepresentations which affected the market price of the company's shares.
A)True
B)False
Q2) An unlawful sale under the Insider Trading Sanctions Act of 1984 can result in a civil penalty of up to how many times the profit gained or loss avoided?
A) two (2)
B) three (3)
C) four (4)
D) five (5)
Q3) Any shareholder owning more than five (5) percent of any class of the corporation's equity securities is statutorily defined as an insider and must file with the SEC a disclosure statement regarding such ownership and all related transactions.
A)True
B)False
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Chapter 46: Accountants Liability and Malpractice
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Q1) For accountants, fraudulent malpractice always involves upgrading the financial condition of the firm.
A)True
B)False
Q2) The contact rule does not require that the accountant to actually meet or communicate with the third party to establish a relationship equivalent to privity.
A)True
B)False
Q3) A disclaimer based on lack of knowledge protects an accountant from malpractice liability.
A)True
B)False
Q4) Courts generally impose liability on the accountant when a total stranger gets possession of the accountant's work and then sustains a loss because of a false statement in the work.
A)True
B)False
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Chapter 47: Management of Corporations
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Q1) The Dodd-Frank Act requires greater accountability by the board of directors to the shareholders, including all of the following except:
A) executive pay.
B) pay for performance.
C) claw-back provisions.
D) enhanced ethical training.
Q2) Under the Dodd-Frank Act's "say-on-pay" rule, public company shareholders have the right to a nonbinding vote to approve or disapprove executive compensation.
A)True
B)False
Q3) A corporation itself may be convicted of a criminal offense if its agent committed the offense acting within the scope of the agent's authority.
A)True
B)False
Q4) The duties of officers of a corporation are generally set forth in the articles of incorporation.
A)True
B)False
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Chapter 48: Real Property
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Q1) Which is not a correct statement about deeds?
A) The grantor must sign the deed.
B) A deed must be recorded to effectively pass title.
C) The fact that a deed is recorded provides notice to the world about who holds title.
D) A deed must be delivered to be effective.
Q2) If the parties involved agree that personal property will be considered a fixture, it will be deemed to be a fixture without the application of legal tests.
A)True
B)False
Q3) The right to cut firewood from another's property would constitute a profit. A)True
B)False
Q4) An easement by implication arises when one conveys a portion the land that has been used as a dominant estate in relation to the part retained.
A)True
B)False
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Chapter 49: Environmental Law and Land Use Controls
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Q1) When the use of land is in conflict with a zoning ordinance at the time the ordinance goes into effect, such use is described as a(n) __________.
A) restrictive covenant.
B) variance.
C) nonconforming use
D) private nuisance
Q2) An example of a nuisance could be smoke from a chemical plant that damages the paint on neighboring houses.
A)True
B)False
Q3) When the desired use of land is in harmony with the general nature of surrounding areas, a zoning variance is usually granted.
A)True
B)False
Q4) The Clean Air Agency was authorized by Congress to establish national air quality standards and see that the states developed plans for the implementation of those standards.
A)True
B)False
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Chapter 50: Leases
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Q1) If a tenant remains in possession after the termination of the lease without permission of the landlord, the landlord may treat the tenant as either a trespasser or a tenant. Until the landlord elects to do one or the other, a tenancy __________ exists.
A) at sufferance
B) at will
C) for years
D) from year to year
Q2) The covenant of quiet enjoyment imposes liability on the landlord for the unlawful acts of third persons.
A)True
B)False
Q3) Except in the case of a tenancy at will, a lease is generally not terminated by the death, insanity, or bankruptcy of either party
A)True
B)False
Q4) In a lease agreement, the lessor is the landlord, and the lessee is the tenant.
A)True
B)False
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Page 52
Chapter 51: Decedents Estates and Trusts
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Q1) State intestacy statutes commonly provide for distribution in the following order:
A) spouse, parents, lineals, collateral heirs.
B) spouse, lineals, collateral heirs, parents.,
C) spouse, lineals, parents, collateral heirs..
D) spouse, lineals, collateral heirs, parents.
Q2) Margo had only one son, and her husband had predeceased her. The son was reckless and extravagant, but Margo loved him dearly. She left all her property to a trustee in trust for her son and provided that the trust was a spendthrift trust. Margo further provided that the income from the trust was to be paid to her son quarterly until he reached the age of 30 at which time the full trust corpus was to be paid over to him. After Margo's death and before the son had reached the age of 30, the son signed a contract that purported to transfer the entire trust corpus to a finance company. The son was paid for this. The son had also run up many unpaid bills on which he was sued and judgments entered against him. The finance company and the other judgment creditors are seeking to compel the trustee to turn over the trust corpus to them. Decide.
Q3) When a decedent dies without a valid will he is said to have died testate.
A)True
B)False
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Page 53