Commercial Law
Test Preparation
Course Introduction
Commercial Law explores the legal principles and frameworks that govern business and commercial transactions. This course covers key topics such as contract law, the sale of goods, agency, negotiable instruments, and the regulation of businesses and partnerships. Students will analyze statutory provisions and case law to understand the rights and obligations of parties involved in commerce, and learn how commercial disputes are resolved. The course aims to equip students with the knowledge required to navigate legal issues in business environments, preparing them for careers in legal practice, corporate governance, and entrepreneurship.
Recommended Textbook Business Law and the Legal Environment Standard Edition 6th Edition by
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Page 2
Jeffrey F. Beatty
Chapter 1: Introduction To Law
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Q1) In 1992,the North Carolina Supreme Court ruled in a case entitled Goodman v.Wenco Foods,Inc.,that when a substance in food causes injury to a consumer of the food,it is not a bar to recovery against the seller that the substance was natural to the food.If,in a 2008 case involving a consumer's injury caused by a fish bone in a bowl of fish chowder,the court followed the decision in Goodman v.Wenco Foods,Inc.,the court's action in the second case is an example of:
A) stare decisis.
B) statutory law.
C) public law.
D) criminal law.
Answer: A
Q2) Henry David Thoreau felt that war was unjust and therefore refused to pay his taxes when the United States declared war on Mexico.Thoreau felt that there was a higher law than the law of the land.Which theory of jurisprudence was he applying?
A) Legal Positivism.
B) Natural Law.
C) Legal Realism.
D) Common Law.
Answer: B
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Page 3
Chapter 2: Business Ethics And Social Responsibility
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Sample Questions
Q1) Generally,ethical managers have happier,more satisfying lives.
A)True
B)False
Answer: True
Q2) Why should ethics be a concern to business?
A) Society as a whole benefits from ethical behavior.
B) People feel better when they behave ethically.
C) Unethical behavior can be very costly.
D) All of the above.
Answer: D
Q3) Kent needed to reduce his workforce by five people.Before notifying them,he thought about how he would feel if he were the one receiving the news and he tried to find ways to help the employees in their transition.Kent was exercising the value of:
A) courage.
B) compassion.
C) fairness.
D) responsibility.
Answer: B
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Chapter 3: Dispute Resolution
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Q1) An appeals court can rule that a trial court's ultimate ruling was correct even if the trial court made some minor errors during the trial.
A)True
B)False
Answer: True
Q2) Briefly describe the process of jury selection.
Answer: The process of jury selection is called voir dire.The court's goal is to select an impartial jury.Through a series of questions,attorneys for each side attempt to get the most favorable jury for their position.As potential jurors are questioned,either side may exclude a juror for cause (some reason to think the person may not be impartial)or via a limited number peremptory challenges,in which no reason must be stated for excluding a juror.
Q3) Jurisdiction is:
A) the study of law.
B) the authority of a court to decide a particular type of case.
C) a federal court concept.
D) applicable only to appeals courts.
Answer: B
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Chapter 4: Common Law,Statutory Law,And Administrative Law
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Q1) The majority of work done by legislative bodies is performed in committees.
A)True
B)False
Q2) Actual hearings are required in formal administrative agency rulemaking.
A)True
B)False
Q3) The Civil Rights Act of 1964,a federal statute,forbids discrimination on the basis of national origin in employment.The Equal Employment Opportunity Commission (EEOC)is the administrative agency that oversees the law.The EEOC issued Guidelines on Discrimination because of National Origin.According to one of the guidelines,the EEOC will presume a violation of the law if an employer sets a work requirement that employees must speak only English in the workplace.This is an interpretive rule because it interprets the Civil Rights Act.
A)True
B)False
Q4) Administrative agencies exist at the federal,state,and local levels.
A)True
B)False
Page 6
Q5) Discuss the four most important limitations on the power of federal administrative agencies.
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Chapter 5: Constitutional Law
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Q1) The First Amendment to the U.S.Constitution explicitly protects citizens from abridgment of the right of free speech by any level of government.
A)True
B)False
Q2) Identify the basic job of a President of the United States,the source of executive power,and three key powers associated with the position of President.
Q3) Smalltown,located in a border state,seemed to favor Caucasians over Latinos in their hiring practices.The courts will review the practice using:
A) minimal scrutiny.
B) intermediate scrutiny.
C) strict scrutiny.
D) Supremacy Clause scrutiny.
Q4) The doctrine of preemption is based on the Constitution's:
A) Commerce Clause.
B) Due Process Clause.
C) Equal Protection Clause.
D) Supremacy Clause.
Q5) Discuss the Miller test to determine if a creative work is obscene.
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Chapter 6: Intentional Torts And Business Torts
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Q1) In order for a plaintiff to win a case involving intentional infliction of emotional distress,she must prove the defendant acted in an extreme and outrageous manner.
A)True
B)False
Q2) On its Web site,Otrex,Inc.claimed that its pain reliever was more effective than Nelton,a competing pain reliever.Discuss the elements that Nelton must prove to win a case under Section 43(a)of the Lanham Act.
Q3) Under Section 230 of the Communications Decency Act,Internet service providers are held responsible for defamatory postings by their members or users.
A)True
B)False
Q4) Opinion is generally a valid defense in a defamation lawsuit because it is not meant to be a factual statement.
A)True
B)False
Q5) The First Amendment guarantee of freedom of speech is an absolute right.
A)True
B)False
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Chapter 7: Negligence And Strict Liability
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Q1) In Hernandez v.Arizona Board of Regents,the court held that individuals who:
A) intentionally provide alcohol to minors can be liable for negligence to injured third parties.
B) intentionally provide alcohol to minors cannot be held liable for negligence to injured third parties.
C) carelessly provide alcohol to minors can be held liable for damages for resulting injury to third parties.
D) none of the above.
Q2) A landowner's highest duty is owed to licensees.
A)True
B)False
Q3) Tort law is not concerned with how to respond to injury caused by criminals,as this would be addressed by criminal law.
A)True
B)False
Q4) Res ipsa loquitur shifts the burden of proof from the plaintiff to the defendant.
A)True
B)False
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Chapter 8: Crime
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Q1) There is only one valid reason to punish criminals -- deterrence.
A)True
B)False
Q2) The intent required to commit a burglary would be:
A) general intent.
B) reckless conduct.
C) strict liability.
D) specific intent.
Q3) Criminal defendants have the right to a lawyer at all the important stages of the criminal process.
A)True
B)False
Q4) The primary purpose of RICO was:
A) to be a tool against organized crime.
B) to raise revenue.
C) to prosecute non-citizens.
D) to prosecute those engaged in tax fraud.
Q5) Taking a service without paying for it is a common type of larceny.
A)True
B)False
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Chapter 9: International Law
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Sample Questions
Q1) In Marubeni America Corp.v.United States,the federal appellate court ruled that the Nissan Pathfinder was,for tariff classification purposes a motor vehicle for the transport of passengers.The classification of goods is significant because:
A) the tariffs will vary depending on the classification.
B) the fair value will vary depending on the classification.
C) the subsidy will vary depending on the classification.
D) the dumping duty will vary depending on the classification.
Q2) Although the United States government officially signed the GATT treaty,the United States Congress has refused to ratify the agreement.
A)True
B)False
Q3) Multinational enterprises are companies doing business in several countries simultaneously.
A)True
B)False
Q4) Yount,Inc.is interested in expanding its business to include exporting its products to several other countries.Discuss two federal statutes that should be considered before making the decision to export.
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11
Chapter 10: Introduction To Contracts
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Sample Questions
Q1) Robert,a minor,buys a stereo from Jane for $200.State law allows a minor to disaffirm contracts within a reasonable time after turning 18.Robert disaffirms the contract the day after turning 18 and returns the stereo.
A) This contract was a valid contract, Robert cannot disaffirm.
B) This contract was a voidable contract, Robert can disaffirm.
C) This contract was a void contract.
D) This contract was unenforceable because it needed to be in writing to be enforceable.
Q2) When promissory estoppel is used by the courts,it is because there is NOT an enforceable contract present.
A)True
B)False
Q3) Discuss the requirements of promissory estoppel.
Q4) Jerry offers to shovel the snow from Ben's driveway for $35.Ben replies "OK." This is an example of:
A) an implied, unilateral contract.
B) an express, unilateral contract.
C) an implied, bilateral contract.
D) an express, bilateral contract.
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Page 12
Chapter 11: Agreement
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Sample Questions
Q1) Briefly discuss how an offer can be accepted.Include offers for both bilateral and unilateral contracts.
Q2) On January 8,Quastrar,Inc.sent Hylavian Company a letter offering to sell $10,000 in restaurant supplies.On January 18,Hylavian mailed a letter to Quastrar accepting the offer.Quastrar received the acceptance letter on January 20.On January 17,Quastrar sent a letter revoking the offer.Hylavian received this letter on January 21.A contract between Quastrar and Hylavian:
A) was not formed because the revocation was effective before the acceptance was sent.
B) was not formed because the revocation was effective before the acceptance was received.
C) was formed on January 18.
D) was formed on January 20.
Q3) Software clickwrap and shrinkwrap agreements limiting the manufacturer's maximum responsibility to a refund of the purchase price even if the software destroys your hard drive have generally been found to be binding against consumers.
A)True
B)False
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Chapter 12: Consideration
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Q1) Under the Uniform Commercial Code,an agreement modifying a contract:
A) always requires consideration.
B) requires consideration only when the sale of goods is involved.
C) may not require consideration.
D) requires consideration only when one of the parties is incompetent.
Q2) In January,Alex promised to pay Y-K Inc.$5,000 if it would refrain from filing suit against him on a breach of contract action.Y-K agreed and accepted a $5,000 check from Alex.Which of the following statements is correct?
A) Y-K's promise to refrain from suing Alex was not supported by legal consideration.
B) Y-K's promise to refrain from suing Alex was supported by legal consideration and is enforceable.
C) This is an accord and satisfaction, and Y-K cannot sue.
D) The courts would apply promissory estoppel in this situation.
Q3) What two exceptions did the UCC create for accord and satisfaction check cases?
Q4) Courts enforce all promises in the interests of simple morality.
A)True
B)False
Q5) Discuss the concept of consideration.
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Chapter 13: Legality
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Q1) E-mation,Inc hires Marvin to steal trade secrets from one of its competitors for $10,000.Marvin demands half of the money up front.E-mation pays Marvin $5000 but Marvin decides not to pursue theft of the trade secrets.E-mation sues Marvin for the return of the $5000.What will the court do with this contract?
A) The court will order Marvin to return the $5000.
B) The court will order Marvin to return the $5000 with interest.
C) The court will order Marvin to obtain the trade secrets.
D) The court will not do anything to help E-mation get its money back.
Q2) To raise revenues,the City of St.Cloud required restaurants to purchase a special permit if they wanted to serve food in an open-air patio.(This is in addition to he sanitation inspection license.)While at Hola Taco,a restaurant in St.Cloud,a customer notices that Hola Taco's permit expired.This mean the customer is not legally required to pay for her food.
A)True
B)False
Q3) An agreement may violate public policy even if the agreement does not require a party to commit a crime,tort,or violate a statute.
A)True
B)False
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Page 15
Chapter 14: Capacity And Consent
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Q1) Discuss the concept of a "material fact" in fraud situations.
Q2) Adrianna wants to purchase a ten-acre tract of land.Under what circumstances would the seller be required to divulge information Adrianna does not possess?
Q3) Marty,a 16-year-old,contracts with Cream-of-the-Crop Cycles to buy an $8,000 motorcycle.Marty agrees to make monthly payments until the purchase price plus interest are paid in full.Which of the following is correct?
A) The contract is voidable by Marty.
B) The contract is void as soon as it is made.
C) The contract is voidable by Cream-of-the-Crop Cycles.
D) The contract is voidable by either Marty or Cream-of-the-Crop Cycles.
Q4) When a business is concerned about selling to minors because of their right to disaffirm contracts,the business might protect itself by:
A) getting the minor to sign an agreement not to disaffirm.
B) requiring an adult co-signer.
C) requiring a court-appointed guardian to be named.
D) using a layaway system until the minor turns 18.
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Page 16
Chapter 15: Written Contracts
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Questions
Q1) Willis and Leslie orally agree to the sale of a parcel of land for $50,000: one-half payable now as a down payment; one-half payable in 30 days at the time of closing when the title will be transferred.The buyer,Willis,is to have possession immediately.Willis pays Leslie $25,000,takes possession of the land,and starts building a house.At the time of closing,Willis has made a substantial beginning on the house.However,Leslie refuses to transfer the title,claiming the oral contract is not enforceable.This contract is:
A) enforceable, because the statute of frauds does not apply to this interest in land.
B) unenforceable, because there is no writing signed by Leslie.
C) enforceable, because Willis has partially performed the oral contract and made improvements on the land.
D) unenforceable, because the parol evidence rule applies.
Q2) Which of the following would suffice for a signature on a writing under the statute of frauds?
A) A stamped signature.
B) A handwritten signature.
C) A name keyed at the bottom of an e-mail.
D) Any of the above would suffice. Judges define "signature" very broadly.
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Chapter 16: Third Parties
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Q1) Brandon orally assigned his right to $100 from a lawn mowing contract to Will as a gift.This assignment is:
A) not valid because it was not in writing.
B) valid even though it was oral and there was no consideration from Will.
C) irrevocable once Brandon has told Will about the gift.
D) not valid because Will gave no consideration for the assignment.
Q2) A party may make either an assignment or a delegation,but cannot make both an assignment and a delegation simultaneously.
A)True
B)False
Q3) If Valley Bridge contracts with Rainbow Painters to paint a bridge and the contract requires that only Sherwin Williams paint be used,then Sherwin Williams,as third party beneficiary will be able to enforce the contract against either Valley Bridge or Rainbow Painters.
A)True
B)False
Q4) Discuss the potential liability differences between a delegation and a novation.
Q5) Briefly discuss the enforceability of contracts by third parties.
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Chapter 17: Performance And Discharge
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Q1) The statement,"You will have a job with Snelling & Snelling as long as you complete your degree in business administration this May" does not create a condition because it does not include the phrase "provided that."
A)True
B)False
Q2) Abdulla hired Granite Construction to build an addition onto his home.Granite Construction dug the foundation but then abandoned the project.Granite Construction is entitled to receive the full contract price minus the value of the defects.
A)True
B)False
Q3) Identify four factors courts consider in deciding the validity of commercial impracticability and frustration of purpose claims.
Q4) A court may,at times,discharge a party who has not performed.
A)True
B)False
Q5) Name and describe the types of conditions,explain how conditions are created,and discuss whether it is important to identify the type of condition in a contract.
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Page 19
Chapter 18: Remedies
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Q1) In a promissory estoppel case,a court will generally award:
A) only reliance damages.
B) specific performance.
C) both reliance and punitive damages.
D) only nominal damages.
Q2) Under the UCC,the buyer is entitled to consequential damages if the seller could have reasonably foreseen them.
A)True
B)False
Q3) Costs to store a vehicle for a short period of time after an auto dealer fails to complete the contract to purchase the vehicle would be:
A) compensatory damages.
B) incidental damages.
C) consequential damages.
D) punitive damages.
Q4) Damages must be estimated with reasonable certainty.
A)True
B)False
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Page 20
Chapter 19: Practical Contracts
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Q1) Ambiguities in contracts are always interpreted in favor of the side that wrote the contract,since they are the ones who know what the provision is supposed to mean.
A)True
B)False
Q2) The legal term for a promise in a contract is "provision."
A)True
B)False
Q3) Nate works as a carnival barker.His employment contract specifies that he can be fired if he "loses his voice." This is an example of:
A) vagueness.
B) extortion.
C) ambiguity.
D) duress.
Q4) Which of the following is generally NOT in the introductory paragraph of a contract?
A) The date of contracting.
B) The location of contracting.
C) The parties to the contract.
D) The nature of the contract.
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Chapter 20: Introduction To Sales
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Q1) Lian contracted for financial services from E-wise.This contract is governed by Article 2 of the UCC.
A)True
B)False
Q2) Long's Department Store contracted to buy 1,000 drop-waist velour dresses in heather gray from Durham.Subsequently,Durham called and asked to ship mink-colored dresses instead of heather gray.Long agreed,in writing,to the change.Which statement is correct?
A) The modification is not enforceable since there was no consideration for the change. B) The modification is not enforceable since the parties are merchants.
C) The modification is enforceable.
D) Whether the modification is enforceable depends on the gap-filler rule.
Q3) The UCC does not apply to a contract for the sale of goods if the value of the goods is less than $500.
A)True
B)False
Q4) Discuss the importance of the UCC to the law of sales.Include who created the UCC,how it becomes law,and the stated purposes of the statute.
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Page 22
Chapter 21: Ownership And Risk
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Q1) Crops are considered identified when they are planted.
A)True
B)False
Q2) A buyer has an insurable interest in goods when they are identified.
A)True
B)False
Q3) The UCC looks solely upon "title" to determine ownership in goods.
A)True
B)False
Q4) In a consignment contract,the consignee:
A) holds title.
B) takes the goods intending to resell them, and the goods are subject to the claims of the creditors of the consignee.
C) is the party who leaves goods with the consignor to be resold.
D) cannot transfer title since the consignor retains the title.
Q5) If Terrill steals a digital camera and sells it to Samuel,Samuel will get a valid title as long as he can prove he gave value for the camera and acted in good faith.
A)True
B)False
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Chapter 22: Warranties And Product Liability
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Q1) Which of the following statements could create an express warranty?
A) "This is the best car available in town."
B) "This motorcycle will double in value in the next ten years."
C) "These tires have 10,000 miles on them."
D) "This antique is quite a bargain."
Q2) An express warranty can be created by which of the following?
A) An affirmation of fact or promise.
B) A description.
C) A model.
D) All of the above.
Q3) The UCC requires sellers to give written warranties.
A)True
B)False
Q4) Even though a car has an obvious dent in the rear quarter panel,the salesperson tells a potential customer,"This car has never been in an accident." The salesperson's statement creates a valid express warranty.
A)True
B)False
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24
Chapter 23: Performance And Remedies
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Q1) Buyer Bob breaches his contract for the sale of goods with Seller Suzie.Suzie still has possession of the goods at the time of the breach.Suzie can refuse to deliver the goods and:
A) resell the goods and sue Bob for the total contract price.
B) either resell the goods or sue, but not both.
C) resell the goods and sue for any loss on the sale plus incidental damages less expenses saved.
D) resell the goods and sue only for incidental damages.
Q2) Family Time Restaurant has a contract with Prime Meats for Prime to deliver 100 pounds of ground sirloin twice a week for the next three months.If,on one delivery,Prime brings 95 pounds of ground chuck instead of 100 pounds of ground sirloin:
A) Family Time may unquestionably reject the non-conforming goods because they vary in both quantity and quality.
B) Family Time may reject the non-conforming installment only if it substantially impairs the value of that installment and cannot be cured.
C) Prime has no right to cure.
D) the perfect tender rule applies.
Q3) Identify six possible remedies for a seller when the buyer breaches a contract.
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25
Chapter 24: Secured Transactions
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Q1) Wedney,Inc.sold a meat processing machine to Yoro Chickens,taking a security interest in the machine.Yoro Chickens defaulted on the loan.Wedney repossessed the machine.Wedney would like to retain the machine to use as a model.Which of the following statements is correct?
A) Wedney must notify the debtor that it intends to retain the machine and give Yoro 20 days to object.
B) By taking possession, Wedney automatically foreclosed on the collateral. Wedney has valid title and need do nothing else.
C) Since the machine is equipment, Wedney cannot retain the machine. Wedney must dispose of the collateral in a commercially reasonable manner.
D) Wedney can retain the machine but must pay Yoro the surplus, the difference between the fair market value of the machine and the amount of the debt.
Q2) Article 9 applies to any transaction intended to create a security interest in real property.
A)True
B)False
Q3) Explain the difference between attachment and perfection.
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Chapter 25: Creating A Negotiable Instrument
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Q1) To be negotiable,a check must be in writing.Under the UCC,a check:
A) must be written on standard size paper of 6" ´ 2.5".
B) must be written on an official bank form.
C) need not be on any official form or even on paper.
D) Both a and b are requirements for a negotiable check.
Q2) On March 1 Donna wrote a check for $296 to Sun Services.When will the check be overdue? What is the effect of the check's being overdue? What is the effect if the check is stamped "Insufficient Funds" by Donna's bank?
Q3) Sophie issues a promissory note made "payable to the order of Molly." Molly indorses the note by signing her name and gives the note to Dana.Which of the following is correct?
A) Sophie issued a bearer instrument and Molly kept it in bearer form.
B) Sophie issued an order instrument, but Molly changed it to bearer form.
C) Sophie issued an order instrument and Molly kept it in order form.
D) Sophie issued a bearer instrument and Molly changed it to bearer form.
Q4) A draft is always a check,but a check is not always a draft.
A)True
B)False
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Chapter 26: Liability For Negotiable Instruments
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Q1) A check was indorsed as follows:
Jessica Hall
without recourse
Paul Samuels
Collection guaranteed
Melissa Liston
Which of the following will discharge all of the indorsers?
A) Notice of dishonor.
B) The without recourse indorsement within the chain.
C) Insolvency of drawer.
D) Certification of the check.
Q2) Explain when presentment warranties apply.Identify the presentment warranties on a check and a promissory note.
Q3) An accommodation party on a negotiable instrument:
A) must receive consideration.
B) is secondarily liable on the instrument.
C) is the same as a "guarantor" under the UCC.
D) has the same liability to a holder as the person for whom he signed.
Q4) List the warranties a transferor of a negotiable instrument makes.
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Chapter 27: Accountants' Liability
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Q1) An auditor who determines a company is materially misstating certain items on its financial statements should issue:
A) an unqualified opinion.
B) a qualified opinion.
C) an adverse opinion.
D) a disclaimer of opinion.
Q2) A study by the Government Accountability Office found:
A) substantial market power in the four largest accounting firms. The Big Four audit 97 percent of all public companies in the United States that have sales over $250 million.
B) evidence of collusion among the top accounting firms in the United States.
C) conclusive evidence that consolidation in the accounting industry led to an increase in audit fees and a decline in independence.
D) All of the above.
Q3) After completing an audit,the most unfavorable opinion an auditor can issue is a disclaimer of opinion.
A)True
B)False
Q4) Discuss the advantages and disadvantages of using IFRS.
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Chapter 28: Agency Law
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Q1) Barnett was orally hired by Paula to locate desirable real estate that she could use for rental property.She stated she wanted to find a four-plex that could be purchased for under $200,000 that could be rented for at least $1,000 per month per unit (which equates to $4,000 rental per month for the property).Barnett located a four-plex that could be purchased for $160,000 and was renting for $1,200 per unit.It was such a good deal that he purchased it for himself.About two months later he found a second property that was listed for $199,000 and rented for $1,000 per unit.Paula purchased the property.Afterwards,she learned that Barnett had bought the $160,000 four-plex for himself without telling her about it.Paula believes that Barnett has acted improperly.Barnett claims that he did what she asked -- he found a property for under $200,000 that rented for $1,000 per unit.He also claims that since their agreement was oral,he has a legal defense if she pursues the matter in court.Does Paula have any legal recourse against Barnett? Explain.
Q2) Kaiya is a sales representative of TriColor.Kaiya owes a fiduciary duty to TriColor. A)True B)False
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Chapter 29: Employment Law
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Q1) Which of the following may be a legitimate,nondiscriminatory criterion for selection of an employee?
A) Age.
B) Race.
C) Color.
D) Educational level.
Q2) Maude was denied employment with Trucks R Us as a warehouse worker because she didn't meet the weight requirement of 160 pounds.Trucks argued the weight requirement was reasonable because warehouse workers often have to lift things weighing up to 100 pounds.If she sues Trucks,she will probably:
A) lose, as the weight requirement seems like a reasonable occupational requirement.
B) lose, as the 160-pound requirement doesn't discriminate.
C) win, as the weight requirement is discriminatory and doesn't appear necessary for the requirement of lifting 100 pounds.
D) win, as the employer specifically cannot have a weight requirement.
Q3) Some courts have held that employee handbooks create binding contract terms.
A)True
B)False
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Chapter 30: Labor Law
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Q1) The NLRA requires the union and the employer to reach an agreement through good-faith collective bargaining.
A)True
B)False
Q2) Employees of Truan went on strike because Truan refused to bargain in good faith.After the strike,the striking workers are:
A) entitled to get their jobs back.
B) not entitled to get their jobs back.
C) entitled to get their jobs back but only as they become available.
D) fired.
Q3) The dock workers on Main Harbor were union members.They have been negotiating a contract with management,so far unsuccessfully.Discuss what tactics they might use in unison to gain a bargaining advantage,identify the statute that guarantees their rights,and discuss the possible response by management.
Q4) A fundamental aim of the National Labor Relations Act is the establishment of industrial peace and the preservation of the flow of commerce.
A)True
B)False
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32
Chapter 31: Starting A Business
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Q1) In order to obtain limited liability,Tom and Doris formed an LLC to operate their catering business.They sometimes deposited the proceeds from catering jobs into their personal checking accounts and if they needed to pay personal bills and were short of funds,they used the business account.If creditors of the business cannot get payment for their invoices,is there anything a court can do to help the creditors?
Q2) All the business forms listed below have limited liability except the:
A) limited liability company.
B) general partnership.
C) Subchapter "S" corporation.
D) corporation.
Q3) The Federal Trade Commission requires franchisors to:
A) give prospective franchisees an offering circular at least 14 business days prior to the signing of a contract or payment of any money.
B) disclose the exact amount of the initial investment required.
C) disclose any litigation the company has ever been involved in
D) disclose how many franchisees have gone out of business in the prior five years.
Q4) Briefly discuss the limitations on a corporation electing Subchapter "S" status.
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33
Chapter 32: Partnerships
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Q1) Sandy,Ramon,and Bonnie were partners.Sandy dissociated from the partnership.Bonnie and Ramon decided to continue the business.When Sandy dissociated,there was a $50,000 debt owed to Great State Bank.Which statement is correct?
A) Sandy remains liable on the $50,000 debt owed to Great State Bank.
B) Only Ramon and Bonnie are liable for the $50,000 debt owed to Great State Bank.
C) The debt is extinguished as a result of the dissociation.
D) Whether Sandy remains liable depends on whether she filed a statement of dissociation.
Q2) Ramiro is dissociated from the partnership he helped form ten years ago.If his partners want to continue the business,what must they do? Does it make any difference if the dissociation was wrongful?
Q3) The dissolution of a partnership means the same as its termination.
A)True
B)False
Q4) The rules set out in the UPA defining the liability of partners to outsiders can be modified by the partnership agreement.
A)True
B)False
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Chapter 33: Life And Death Of A Corporation
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Q1) The officers of a corporation are:
A) chosen by the board of directors.
B) appointed by the president of the company.
C) elected by shareholders.
D) appointed by the Secretary of State.
Q2) Laurie is incorporating her business.Laurie's home state is Wisconsin.Business will be conducted in California,Michigan,Pennsylvania,and Virginia.Laurie:
A) must incorporate the business in Wisconsin, the home state.
B) must incorporate the business in Wisconsin, California, Michigan, Pennsylvania and Virginia.
C) must incorporate in Delaware.
D) can incorporate the business in any state.
Q3) A corporation is not allowed to issue dividends to shareholders unless it is solvent. A)True
B)False
Q4) Identify four circumstances that might persuade a court to pierce the corporate veil.
Q5) Discuss how a corporation is terminated.
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35
Chapter 34: Corporate Management
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Q1) A board of directors is considering whether to invest a great deal of money into research and development.Such a decision could have a long-term beneficial effect for the company's future.As an alternative,the board could forego the expenditure into research and development and buy back its own shares in order to immediately increase the company's reserves.Which of the below groups would most likely favor the option to increase the company's reserves and not invest in more research and development?
A) Management.
B) Shareholders.
C) Stakeholders other than the shareholders.
D) Employees.
Q2) The Williams Act:
A) is designed to regulate the conduct of those attempting to take over a company. B) is designed to regulate the conduct of the target company subject to a takeover. C) prohibits corporate defensive tactics.
D) None of the above.
Q3) What is the definition of the business judgment rule?
Q4) List and discuss the three ways to acquire control of a corporation.
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Chapter 35: Shareholders
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Q1) Kalina is the CEO of Northfield Corporation.Who sets her compensation,and what types of compensation would she likely receive in addition to her salary? Can shareholders do anything to challenge her level of compensation if they think it is unfairly high in comparison to average employee compensation within the company?
Q2) Who has the right to manage the business of a corporation?
A) Shareholders.
B) Officers.
C) Bondholders.
D) The board of directors.
Q3) If a public company decides not to solicit proxies for a shareholder meeting,it need not give shareholders the information that would have been required in a proxy statement.
A)True
B)False
Q4) A derivative lawsuit is filed by the directors on behalf of the corporation against third parties who have committed wrongful acts and/or breaches of contract.
A)True
B)False
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Chapter 36: Securities Regulation
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Q1) The 1934 Act is primarily intended to:
A) maintain the integrity of the secondary market for securities.
B) make sure companies who wish to raise money by the sale of securities comply with disclosure requirements for the initial offering.
C) coordinate federal and state laws with a primary emphasis on allowing the individual states to maintain primary control over securities law.
D) All the above are correct.
Q2) The SEC creates law in all but which of the following ways?
A) Bringing cease and desist orders.
B) Issuing releases.
C) Promulgating rules.
D) Writing no-action letters.
Q3) The SEC has enforcement powers,including the power to issue cease and desist orders,to levy fines,and to confiscate profits from illegal transactions.
A)True
B)False
Q4) What are the three primary ways the SEC creates law?
Q5) What information must be contained in a registration statement?
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Chapter 37: Bankruptcy
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Q1) Which of the following is a primary goal of bankruptcy:
A) to preserve as much of the debtor's property as possible.
B) to divide the debtor's assets fairly between the debtor and the creditors.
C) to divide the debtor's assets fairly among the creditors.
D) All of the above.
Q2) Karen has filed for bankruptcy.Who has the authority to confirm or reject a plan of payment,and what factors will be considered when deciding whether to approve a repayment plan under Chapter 13?
Q3) Which of the following statements concerning a Chapter 11 reorganization plan is true?
A) A reorganization plan will be confirmed by the court only if a majority of each class of creditors votes in favor of the plan.
B) A reorganization plan can be confirmed by the court over objections of some creditors if the court determines that the plan is feasible and fair.
C) Only the bankruptcy court has the authority to confirm or reject the reorganization plan. Creditors do not have a right to vote on the plan.
D) A reorganization plan binds only the debtor and not the creditors.
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Page 39
Chapter 38: Antitrust
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Q1) Under modern antitrust law analysis,a company with a market share between 70 and 90 percent has a monopoly.
A)True
B)False
Q2) Reciprocal dealing is a type of vertical cooperative strategy.
A)True
B)False
Q3) The traditional formula for determining damages for a violation of the Robinson-Patman Act was to:
A) calculate the estimated amount of lost profits.
B) determine the difference between the two prices and multiply the difference by the number of units purchased.
C) allow a jury to determine the amount of punitive damages without using any particular formula.
D) All the above.
Q4) Companies with substantial assets must notify the FTC before consummating a merger.
A)True B)False
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Chapter 39: Consumer Law
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Q1) John loans George money and they sign a written agreement whereby George will repay John in monthly installments.Is this loan subject to the Truth-in-Lending Act?
A) Yes, if the loan is for more than $1,000.
B) Yes, if John and George live in different states.
C) No, if John is not in the business of offering credit.
D) No, if John and George are related.
Q2) Richard received his credit card bill and noticed an error.He wrote to the company the next week,pointing out the error in his bill.Under the law,what is the credit card's obligation once it receives Richard's letter?
Q3) In 30-year mortgages,the finance charge typically exceeds the amount of the principal.
A)True
B)False
Q4) The Magnuson-Moss Warranty Act covers all consumer products regardless of their cost.
A)True
B)False
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Chapter 40: Environmental Law
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Q1) Which of the following options are available to power plants for meeting emissions standards?
A) Installing scrubbers.
B) Switching to alternative fuels.
C) Trading emissions allowances.
D) All of the above are options that power plants can use in meeting emissions standards.
Q2) An Environmental Impact Statement must be prepared for every major federal action that significantly affects the quality of the environment.
A)True
B)False
Q3) The Toxic Substances Control Act regulates:
A) chemicals other than pesticides, foods, drugs, and cosmetics.
B) insecticides.
C) natural gas.
D) pesticides.
Q4) Discuss the purpose of and problems with the Kyoto Protocol from the perspective of the United States.
Q5) Discuss the four major provisions of the Clean Air Act.
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Chapter 41: Cyberlaw
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Q1) The United States of America v.Angevine case held that the professor had no reasonable expectation of privacy in his office computer.
A)True
B)False
Q2) Tom receives an e-mail from someone alleging to be a Nigerian government official who has stolen money from the government.He needs some place safe to keep the money for a short time.The official promises that,if Tom lets his bank account be used for this purpose,Tom will be allowed to keep a percentage of the stolen money.Tom gives in to the temptation and provides his account information.Instead of receiving money,Tom loses everything he had in the account to the scammer.In this situation:
A) prosecution can be under state law.
B) prosecution can be under the Computer Fraud and Abuse Act.
C) a civil action can be brought under Section 5 of the FTC Act.
D) All of the above.
Q3) Maria,who lives in the United States,gains unauthorized access to a bank's computer system and steals financial information about customers.Of what is Maria guilty,and under what statute(s)could she be prosecuted?
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Page 43
Chapter 42: Intellectual Property
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Q1) Ernest invents a novel,useful,nonobvious product.He:
A) must apply for a patent within one year of selling the product commercially.
B) is entitled to a patent over someone else who invents the same product if he is the first to file an application.
C) may receive patent protection for two years by filing a simpler, shorter, cheaper provisional patent application while he is working on his complex, regular patent application.
D) may sell his product for up to five years to see how well it sells before going through the complex process of filing a patent application with the PTO Office.
Q2) McDonald's famous golden arches and other marks used by the company illustrate a:
A) suggestive mark.
B) service mark.
C) certification mark.
D) collective mark.
Q3) A patent is available for an idea as well as a tangible application.
A)True
B)False
Q4) Briefly discuss a patent,copyright,and trademark.
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Chapter 43: Real Property And Tenant-landlord Law
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Q1) Liz and Jeff live in California,a state that recognizes community property.Jeff is a machinist who makes $30,000 a year.Liz is the owner of a franchise where her take-home profit is approximately $75,000 a year.Jeff and Liz purchased a house during their marriage wherein Liz paid three-fourths of the purchase price and Jeff paid one-fourth.Which of the following statements is correct with regard to Jeff and Liz?
A) Each owns one-half of the real property and other assets they acquire during the marriage.
B) The community property rules allow Jeff and Liz to maintain separate ownership of assets they each bring to the marriage or inherit.
C) Community property cannot be sold by Jeff or Liz without consent by the other.
D) All of the above are correct.
Q2) Which of the following is a possessory interest in land?
A) Fee simple absolute.
B) Easement.
C) Profit.
D) License.
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Chapter 44: Personal Property And Bailment
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Q1) Jimmy stole Dave's motorcycle and completely revamped the engine and changed the body.These accessions were very expensive,but Jimmy was completely satisfied with the results,intending to sell the motorcycle for a huge profit.If the motorcycle is recovered from Jimmy,Dave must pay Jimmy for the improvements.
A)True
B)False
Q2) Rhonda is a server in a restaurant.One day she finds a purse while clearing a table.The purse is most likely:
A) lost property.
B) mislaid property.
C) treasure trove.
D) abandoned property.
Q3) A bailment relationship can be created with respect to either real or personal property.
A)True
B)False
Q4) Discuss a bailor's liability for defects in the bailed property.
Q5) Distinguish between a contract and a gift.Give an example of each.
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Chapter 45: Planning For The Future: Wills,Trusts,And Insurance
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Q1) Estate planning has two primary goals: to ensure property is distributed as the owner desires and to minimize estate taxes.
A)True
B)False
Q2) Legal requirements for a will depend on state law,but generally include all but which of the following?
A) A writing.
B) Signatures of at least three witnesses.
C) The testator's signature.
D) Witnesses who will not inherit under the will.
Q3) Property of a person who dies without a will is distributed according to intestacy laws.
A)True
B)False
Q4) An insurance policy must meet which of the following?
A) State statutory requirements for tort law.
B) Federal statutory requirements for tort law.
C) Common law requirements for contracts.
D) Common law requirements for tort law.
Q5) Identify four ways a trust can be terminated.
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