Commercial Law
Test Preparation
Course Introduction
Commercial Law is a foundational course that explores the legal principles and frameworks governing business and commercial transactions. It covers topics such as contract formation and enforcement, the sale of goods, negotiable instruments, agency, partnership, and company law. Students will examine the legal rights and obligations of parties engaged in commerce, understand dispute resolution methods, and analyze case law to apply legal reasoning to real-world business problems. The course equips students with essential legal knowledge for navigating the commercial environment, ensuring compliance, and making informed business decisions.
Recommended Textbook
Business Law Text and Cases 14th Edition by
Kenneth W. Clarkson
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61 Chapters
3772 Verified Questions
3772 Flashcards
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Page 2
Chapter 1: Law and Legal Reasoning
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Sample Questions
Q1) There are no precedents on which the court deciding the case Standard Resource Co. v. Topline Inventory, Inc., can base its decision. The court can consider, among other things,
A) the opinions of the friends and relatives of the judge.
B) the results of a poll of those in the courtroom.
C) public policy or social values.
D) none of the choices.
Answer: C
Q2) The U.S. Constitution reserves to the federal government all powers not granted to the states.
A)True
B)False
Answer: False
Q3) A key to avoiding business disputes is to go ahead without thinking ahead.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Courts and Alternative Dispute Resolution
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Sample Questions
Q1) SPF Sunscreen Corporation and Taylor agree to resolve their dispute through arbitration. The arbitrator's decision is called
A) a conclusion of law.
B) a finding of fact.
C) an award.
D) a verdict.
Answer: C
Q2) To resolve a dispute in nonbinding arbitration, Alyson in Baltimore and Chuck in Denver utilize E-Resolve, an online dispute resolution (ODR) service. This limits these parties' recourse to the courts
A) not at all.
B) until the ODR service has issued a decision.
C) with respect to any dispute arising between them.
D) with respect to this dispute only.
Answer: A
Q3) The United States Supreme Court does not have original jurisdiction in any case.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Court Procedures
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Sample Questions
Q1) Isabel and Josh engage in a business transaction that leads to a dispute. Isabel initiates a lawsuit against Josh by filing a complaint. The sheriff serves Josh with a summons. If Josh chooses to ignore it,
A) Isabel must file an amended complaint.
B) Isabel will have a judgment entered in her favor.
C) Josh must be served with a second summons.
D) Josh will have a judgment entered in his favor.
Answer: B
Q2) Pietro files a suit against Qiana. If Qiana fails to respond,
A) Pietro will have a default judgment entered against him.
B) Qiana will be considered to be in denial.
C) the suit will be dismissed.
D) Qiana will have a default judgment entered against her.
Answer: D
Q3) Only a defendant may file a motion for summary judgment.
A)True
B)False
Answer: False
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5
Chapter 4: Business and the Constitution
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Sample Questions
Q1) A federal law prohibiting the use of a certain pesticide directly conflicts with a state law permitting that use. The state law will be rendered invalid due to
A) the supremacy clause.
B) the commerce clause.
C) the equal protection clause
D) the due process clause.
Q2) A law that has any impact on religion is unconstitutional.
A)True
B)False
Q3) The First Amendment protects commercial speech more extensively than noncommercial speech.
A)True
B)False
Q4) Under the supremacy clause, a valid federal statute or regulation will preempt a conflicting state or local law or regulation on the same general subject.
A)True
B)False
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Chapter 5: Business Ethics
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Sample Questions
Q1) Brewster, the chief executive officer of Cog & Gear Lubricants Corporation, wants to ensure that Cog & Gear's activities are legal and ethical. The best course for Brewster and Cog & Gear is to act
A) in good faith.
B) out of ignorance of the law.
C) with regard for the firm's shareholders only.
D) in their own self-interest.
Q2) Management's behavior sets the ethical tone of a firm.
A)True
B)False
Q3) Destiny and Eduardo, investors in Competitive Acquisitions Corporation, are dissatisfied with the profit-maximization theory of corporate objectives. These investors and others who look beyond profits and dividends may consider the triple bottom line, which does not include a corporation's
A) impact on people.
B) profits.
C) impact on the planet.
D) congressional lobbying activities.
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7
Chapter 6: Tort Law
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Sample Questions
Q1) Quint sells cars for Rough Ride Motors. To make a sale, he asserts that a certain model of a Swifty auto is the "best one ever made." This is
A) fraud even if the statement is the truth.
B) fraud if Quint believes that the statement is not true.
C) fraud if Quint is stating his opinion, not the facts.
D) not fraud.
Q2) Harm must be foreseeable to be considered the proximate cause of an injury in negligence.
A)True
B)False
Q3) The purpose of tort law is to provide remedies for the violation of various protected interests.
A)True
B)False
Q4) If no harm results from an allegedly negligent act, there is no liability.
A)True
B)False
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Chapter 7: Strict Liability and Product Liability
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Sample Questions
Q1) Assumption of risk is no defense to a product liability action.
A)True
B)False
Q2) Digg Deep Inc. makes and leases a backhoe to Estes. Due to a defect attributable to Digg Deep's negligence, Estes is injured in an accident in which his neighbor Fortis is also hurt. In a product liability suit based on negligence, Digg Deep may be liable to
A) Estes only.
B) no one.
C) Estes and Fortis.
D) Fortis only.
Q3) Some states limit the application of strict product liability to situations involving personal injuries.
A)True
B)False
Q4) When a user is injured as a result of a seller's misrepresentation, the basis of product liability may be the tort of fraud.
A)True
B)False
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9
Chapter 8: Intellectual Property Rights
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Sample Questions
Q1) A marketing technique can be a trade secret.
A)True
B)False
Q2) A personal name is not protected under trademark law if it acquires a secondary meaning.
A)True
B)False
Q3) Protection of trade secrets extends both to ideas and to their expression.
A)True
B)False
Q4) AllforOne Inc. develops a new phone that the company names "OneforAll." AllforOne can obtain trademark protection for A) the phone.
B) the "newness" of the device.
C) the name "OneforAll."
D) none of the choices.
Q5) A trademark must be registered to support a trademark infringement action. A)True
B)False
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Chapter 9: Internet Law, Social Media, and Privacy
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Sample Questions
Q1) BeFriends Corporation uses the trademark of Community Life Inc., a social media site, as a meta tag without Community Life's permission. This may be permissible
A) if the appropriating site has nothing to do with the meta tag.
B) if the two sites appear in the same search engine results.
C) if the use constitutes trademark infringement.
D) under no circumstances.
Q2) Cybersquatting occurs when key words are inserted into a Web site's keywords coding to tell Internet browsers specific information about a Web page.
A)True
B)False
Q3) Using another's trademark in a meta tag does not normally constitute trademark infringement, even if it is done without the owner's permission.
A)True
B)False
Q4) Social media posts are routinely included in discovery in litigation.
A)True
B)False
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Chapter 10: Criminal Law and Cyber Crime
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Sample Questions
Q1) Mae is granted immunity after she agrees to testify about a crime. Mae has an absolute privilege against self-incrimination and can
A) be prosecuted only for a crime about which she agreed to testify.
B) not be prosecuted for any crime.
C) not refuse to testify.
D) refuse to testify.
Q2) Constitutional safeguards to protect the rights of individuals apply in federal courts.
A)True
B)False
Q3) Cameron is an accountant in the accounting department of Data Analytics Company. Cameron's son's college tuition is due within a week, or he cannot continue taking classes. To meet the due date, Cameron transfers funds from Data Analytics to a fictitious bank account, planning to repay the firm within one month. The transfer is discovered before the firm is repaid, and Cameron is arrested. What crime, or crimes, if any, has Cameron committed?
Q4) Counterfeiting is robbery.
A)True
B)False
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Page 12
Chapter 11: Nature and Terminology
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Sample Questions
Q1) One of the requirements of a valid contract is an adequate price.
A)True
B)False
Q2) The element of intent is of prime importance in determining whether a contract has been formed.
A)True
B)False
Q3) When a contract's writing is not clear, a court will not consider evidence outside the contract to interpret its terms.
A)True
B)False
Q4) Lark promises to buy Mac's used textbook for $60. Lark is
A) an executor.
B) an offeree.
C) a promisee.
D) a promisor.
Q5) A bilateral contract comes into existence at the moment promises are exchanged. A)True
B)False
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Chapter 12: Agreement in Traditional and E-Contracts
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Sample Questions
Q1) Business Properties, Inc. (BPI), offers to sell a cold storage warehouse to Corporate Investments. Corporate says that it will pay BPI $100 to hold the offer open for three business days. This
A) creates an illegal contract by adding a clause to BPI's offer.
B) makes the offer irrevocable for three days if BPI accepts.
C) negates BPI's offer by changing the price term.
D) voids BPI's offer by extending the time term.
Q2) Lauren files a suit against Moving Service for breach of contract, based on what Lauren claims was Moving's offer. For a court to determine if a contract has been breached, under the common law, the offer must include terms that are A) exactly precise.
B) reasonably definite.
C) unequivocally approximate.
D) vague or uncertain.
Q3) A counteroffer is a rejection of the original offer and the simultaneous making of a new offer.
A)True
B)False
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Chapter 13: Consideration
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Sample Questions
Q1) Refer to Fact Pattern 13-5. In Carmen's suit against Brick to recover her repair and medical expenses, Carmen will most likely recover
A) half the amount to pay the costs over what Brick already paid Carmen.
B) nothing.
C) the estimated amount to pay those costs and any other liability.
D) the exact amount to pay those costs and no more.
Q2) Refer to Fact Pattern 13-2. If, as Boyd claims, the consideration in this problem is inadequate, it may indicate a lack of
A) accord in Boyd's satisfaction with the value of the deal.
B) voluntary consent.
C) flexibility on the part of College Credit to accommodate Boyd's needs.
D) "heft," "substance," or "weight" in the terms of the contract.
Q3) A transaction that lacks a bargained-for exchange lacks an element of consideration.
A)True
B)False
Q4) To be legally sufficient, consideration must be evidenced by something tangible.
A)True
B)False
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Chapter 14: Capacity and Legality
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Sample Questions
Q1) Holly, a real estate broker licensed only in Iowa, concludes a sale of farmland in Illinois. Holly can
A) collect the commission if it has not been paid.
B) keep the commission if it has already been paid.
C) foreclose on the property to obtain any unpaid amount.
D) none of the choices.
Q2) A covenant not to compete is enforceable only if it is necessary to restrain trade.
A)True
B)False
Q3) Countrywide Trucking Inc. contracts with Dewey to transport crated goods to a certain destination for $5,000. Countrywide delivers the crates, but Dewey does not pay. Countrywide learns that the crates contained stolen goods. Countrywide can recover from Dewey
A) none of the choices.
B) $5,000, but not the goods.
C) the goods but not $5,000.
D) the goods and $5,000.
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Page 16
Chapter 15: Mistakes, Fraud, and Voluntary Consent
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Sample Questions
Q1) Lee applies to Marketing Corporation for a position as a software engineer. Lee has no training in computers or programming and no background as an engineer. After Lee is hired, Marketing learns the truth. The employer can rescind the contract on the basis of A) none of the choices.
B) fraud.
C) mistake.
D) undue influence.
Q2) Refer to Fact Pattern 15-1. Data Storage's best defense against enforcement of the contract is that Enterprises knew
A) a bilateral mistake supports the cancellation of a contract.
B) a mistake of value supports the cancellation of a contract.
C) a unilateral mistake supports the cancellation of a contract.
D) the price was below the prices of comparable services.
Q3) A material fact is a fact that is important to the subject matter of a contract.
A)True
B)False
Q4) Courts may award punitive damages in fraud actions.
A)True
B)False
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Chapter 16: The Writing Requirement in Our Digital World
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Sample Questions
Q1) A contract in which a party assumes a primary obligation normally must be in writing to be enforceable.
A)True
B)False
Q2) Colin and Delta Water Company enter into an oral contract under which Delta agrees to provide Colin with lifetime employment. This contract may be enforceable by A) Colin only.
B) Delta only.
C) any interested third party, such as a Delta supplier.
D) either Colin or Delta.
Q3) Air Flo, Inc., and Banyan Grove Apartments enter into an oral contract in which Air Flo agrees to provide air-conditioning and heating maintenance for Banyan Grove's facilities for two years. This contract is enforceable by A) Air Flo.
B) Banyan Grove.
C) any third party, such as a HVAC supplies provider.
D) none of the choices.
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18
Chapter 17: Third Party Rights
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Sample Questions
Q1) The rights of a third party beneficiary under a contract do not vest if the third party materially changes his or her position in justifiable reliance on the promise.
A)True
B)False
Q2) D'Alemberte contracts with Elias to render personal nursing services for the benefit of Federica. This is
A) a delegation.
B) an assignment.
C) a third party beneficiary contract.
D) an alienation.
Q3) Retail Outlets, Inc., contracts with Smooth Paving Inc. to grade and pave a parking lot. Smooth assigns the contract to Tough Road Company, which has a poor record of completing projects. Retail could most successfully argue that the contract cannot be assigned because
A) Retail did not consent to the assignment.
B) Retail did not receive adequate consideration for the assignment.
C) the assignment will materially increase the risk of nonperformance.
D) Tough Road was not an original party to the deal.
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Chapter 18: Performance and Discharge
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Sample Questions
Q1) Inez hires Josh to paint her portrait to her satisfaction for $4,000. When Josh finishes the portrait, Inez announces that she is not satisfied with it. Inez
A) must pay Josh the contract price.
B) must pay Josh half of the contract price as a compromise.
C) must pay Josh only the cost of his materials.
D) does not have to pay Josh.
Q2) Contracts that are executory on both sides can be rescinded by agreement. A)True
B)False
Q3) A contract comes to an end when both parties fulfill their respective duties by performing the acts they have promised.
A)True
B)False
Q4) A contractual obligation may not be discharged through novation.
A)True
B)False
Q5) An express condition is often prefaced by the word if, provided, after, or when.
A)True
B)False
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Chapter 19: Breach of Contract and Remedies
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Sample Questions
Q1) Guido and Hal want to rescind their contract under which Guido sold Hal a mountain bike for $100. To rescind the contract
A) Guido must return the $100 and Hal must return the bike.
B) Guido must return the $100 only.
C) Hal must return the bike only.
D) the parties can keep the "benefits" of their bargain.
Q2) Ordinarily, the remedy for a seller's breach of a contract for a sale of real estate is specific performance.
A)True
B)False
Q3) Dino hires Eve to perform at Dino's Club, but Eve later breaches the agreement to accept a higher-paying job at Five Star Arena. Dino files a suit against Eve. The court will most likely
A) award damages to Dino.
B) cancel Dino and Eve's contract.
C) order Eve to perform the contract.
D) reform Dino and Eve's contract.
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Chapter 20: The Formation of Sales and Lease Contracts
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Sample Questions
Q1) If the parties to a contract for a sale of goods have not agreed on a price, a court will determine a reasonable price at the time for delivery.
A)True
B)False
Q2) The terms of a fully integrated contract can be contradicted by evidence of any prior agreements.
A)True
B)False
Q3) Under the UCC, parties to sales and lease contracts are free to establish whatever terms they wish.
A)True
B)False
Q4) Brad buys a bulldozer from Construction Equipment Corporation, which he leases to Deep Digg, Inc. In this situation, the lessee is
A) Brad.
B) Construction Equipment Corporation.
C) Deep Digg, Inc.
D) none of the choices.
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Chapter 21: Title, Risk, and Insurable Interest
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Sample Questions
Q1) In the following situations, two parties claim the same goods. Who is most likely to prevail in each circumstance? Explain.
(a) Czeslaw steals Denise's Ultra HD TV set and sells it to Ezra, an innocent purchaser, for value. Denise learns that Ezra has the set and demands its return.
(b) Gwendolyn takes her all-terrain vehicle (ATV) for repair to Hank's Sales & Repair, a merchant who fixes and sometimes sells used ATVs. By accident, one of Hank's employees sells Gwendolyn's ATV to John, an innocent purchaser-customer, who takes possession. Gwendolyn wants her ATV back from John.
Q2) Commercial Rents Corporation agrees to lease a pressure washer to Delivery Trucks, Inc., which agrees to pick it up at E Street Warehouse. Before Delivery Trucks retrieves the washer, it is stolen. The loss is suffered by
A) Commercial Rents.
B) Delivery Trucks.
C) E Street Warehouse.
D) the thief.
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23
Chapter 22: Performance and Breach of Sales and Lease Contracts
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Sample Questions
Q1) Erin contracts in writing to sell her Ford-brand pick-up truck to Garth for $10,500. Erin agrees to deliver the truck on Friday, and Garth promises to pay the $10,500 on the following Monday. On Thursday, Garth tells Erin that he changed his mind and will not buy the truck. Over the weekend, Garth changes his mind again and tenders $10,500 to Erin on Monday. Erin has not sold the truck to another party but refuses the tender and refuses to deliver. Garth claims that Erin has breached their contract. Erin contends that Garth's repudiation released her from her duty to perform under the contract. Who is correct, and why?
Q2) If, before the time for performance, a buyer communicates an intent not to perform, the seller can consider the buyer in breach and pursue a remedy.
A)True
B)False
Q3) Tender must occur at a reasonable hour and in a reasonable manner.
A)True
B)False
Q4) The doctrine of commercial impracticability only extends to problems that are unforeseen.
A)True
B)False
Page 24
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Chapter 23: Warranties
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Sample Questions
Q1) Implied warranties can arise from a "usage of trade."
A)True
B)False
Q2) Every sale or lease by a merchant who deals in goods of the kind sold or leased automatically gives rise to an implied warranty of merchantability.
A)True
B)False
Q3) Fred buys running shoes from Gear Store, telling the clerk that he wants the shoes to compete in High Pace Triathlon. The shoes break apart during the competition, causing Fred to fall and sustain an injury. The seller most likely breached
A) an express warranty.
B) an implied warranty of fitness for a particular purpose.
C) an implied warranty of merchantability.
D) none of the choices.
Q4) A full warranty requires free repair or replacement of any defective part.
A)True
B)False
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Chapter 24: International and Space Law
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Q1) In the global environment of business, the law of a particular nation, such as Germany, China, or the United States, is classified as
A) space law.
B) global law.
C) international law.
D) national law.
Q2) Bango! Business, Inc., a U.S. firm, may have committed, in Chile, acts that would constitute, in the United States, violations of U.S. antitrust laws. These laws apply A) extraterritorially.
B) only to signatories of the North American Free Trade Agreement.
C) only to members of the World Trade Organization.
D) only within U.S. borders.
Q3) Minerals Mining Company, a U.S. firm, owns property in Bolivia. The government of Bolivia seizes the property for an illegal purpose without paying just compensation. This is
A) confiscation.
B) defalcation.
C) dumping.
D) expropriation.
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Page 26
Chapter 25: Negotiable Instruments
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Q1) To be negotiable, an instrument must have portability.
A)True
B)False
Q2) Refer to Fact Pattern 25-3. The instrument that Bea signed is most likely
A) a certificate of deposit.
B) a draft.
C) an order to pay.
D) a promissory note.
Q3) Refer to Fact Pattern 25-2. On this instrument, LNG is
A) the drawee.
B) the drawer.
C) the maker.
D) the trader.
Q4) Only unconditional promises or orders can be negotiable.
A)True
B)False
Q5) On the back of an envelope, Phoebe writes, "I promise to pay Quint or bearer $600 on demand. [Signed] Phoebe." What type of instrument is this? Is it negotiable? If not, why not?
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Chapter 26: Transferability and Holder in Due Course
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Q1) Refer to Fact Pattern 26-1. When Patricia writes "Pay to Patricia" above Nina's signature, Nina's signature becomes
A) a blank indorsement.
B) a qualified indorsement.
C) a special indorsement.
D) a forgery.
Q2) Idina wants to buy a promissory note from Jo. The note is due on April 1. To become an HDC, Idina must buy the note a.m. on April 1
A) before midnight on April 1.
B) before noon on April 1.
C) before 8:00
D) within thirty days of April 1.
Q3) For a check, a "reasonable time" is ninety days after the date of the check.
A)True
B)False
Q4) A purchaser can become an HDC of an instrument even if it is so incomplete that an element of negotiability is lacking.
A)True
B)False
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Chapter 27: Liability, Defenses, and Discharge
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Q1) Warranty liability arises only from a transferor's signature.
A)True
B)False
Q2) A maker is primarily liable on an instrument.
A)True
B)False
Q3) A maker is secondarily liable on an instrument.
A)True
B)False
Q4) Jen is the maker of a note, on which Bart is secondarily liable. Credit Instruments Company (CIC) is the current holder of the note. Bart will be obligated to pay the note if
A) Jen defaults on the note.
B) CIC breaches a transfer warranty.
C) CIC negotiates the note to Delta Collection Agency, a third party.
D) CIC presents the note for payment.
Q5) A refusal to pay an instrument constitutes dishonor under any circumstances.
A)True
B)False
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Chapter 28: Banking in the Digital Age
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Q1) Faye forges Greta's signature on a check "payable to the order of Faye" drawn on Greta's account in Hearthside Bank. Most likely, if the bank pays the check
A) the bank will have to recredit Greta's account.
B) the loss will be apportioned among all of the bank's customers.
C) Greta will be liable for the amount.
D) the Federal Reserve will reimburse all parties for their costs.
Q2) Bea writes a check for $100 drawn on Savers Credit Union and presents it to Timpani Jewelers for payment. If the check is not backed by sufficient funds, Bea may be prosecuted for A) fraud.
B) negligence.
C) forgery.
D) none of the choices.
Q3) A bank is not obligated to pay an uncertified check presented less than six months from its date.
A)True
B)False
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Chapter 29: Creditors Rights and Remedies
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Q1) A surety is primarily liable for the debt of a principal.
A)True
B)False
Q2) In a few states, statutes allow the homestead exemption only if the judgment debtor has a family.
A)True
B)False
Q3) An employer can dismiss an employee because his or her wages are being garnished.
A)True
B)False
Q4) A lender does not have to strictly comply with the state statute governing foreclosure-substantial compliance is sufficient.
A)True
B)False
Q5) In a suretyship relationship, a third person's credit becomes the security for a debt.
A)True
B)False
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Chapter 30: Secured Transactions
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Q1) Whatever a secured party obtains on a sale of collateral is all that he or she can collect on the debt.
A)True
B)False
Q2) Fiona borrows $1,000 from Garden State Bank, using her recreational vehicle (RV), which she purchased at Hugo's RV Sales & Service, as collateral. To perfect its security interest, the bank must file its financing statement with
A) the secretary of state.
B) the county clerk.
C) the city treasurer.
D) Hugo's RV.
Q3) Most of the customers in any business are buyers in the ordinary course of business.
A)True B)False
Q4) A security interest is enforceable only if the debtor has title to the collateral. A)True
B)False
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Chapter 31: Bankruptcy Law
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Q1) Daniel is a trustee for a federal bankruptcy court. Daniel's duties include
A) collecting the debtor's available estate.
B) establishing priority for the payment of unsecured creditors.
C) operating a debtor's business to obtain maximum profit for creditors.
D) submitting to an examination under oath by the creditors.
Q2) To adjust debt and institute a repayment plan, Don, a family fisherman in the Gulf of Mexico, may file a petition in bankruptcy for relief under the Bankruptcy Code'sChapter A) 7.
B) 11.
C) 12.
D) 13.
Q3) Any "person"-defined as including corporations-may be a debtor in a liquidation proceeding.
A)True
B)False
Q4) A debtor must be insolvent to file for bankruptcy relief.
A)True
B)False
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Page 33
Chapter 32: Agency Formation and Duties
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Q1) John contracts with Kelly to buy a certain number of cattle for Kelly's Circle K ranch. John makes a deal with Lawson, the owner of a local herd, and makes a down payment. Kelly fails to pay the rest of the price. Lawson sues John for breach of contract. John's right to hold Kelly liable for any damages that he has to pay is the right of A) compensation.
B) cooperation.
C) indemnification.
D) reimbursement.
Q2) Largo is an agent for MaryElise. MaryElise gives Largo clear instructions to enter into contracts on her behalf only on Mondays, Wednesdays, or Fridays. Largo enters into a contract on her behalf on Tuesday. Largo has breached
A) the duty of performance.
B) the duty of loyalty.
C) no duty.
D) the duty of obedience.
Q3) The agent has the right to a safe working environment.
A)True
B)False
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Chapter 33: Agency Liability and Termination
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Q1) Bayou Development Corporation hires Coastal Brokerage Associates to sell the condominiums in a building at Bayou Development's resort. The agency will terminate
A) after the condos have been sold.
B) if the prices of the condos must be reduced to sell them.
C) once Bayou Development obtains insurance to cover the property.
D) when Bayou Development pays Coastal Brokerage its first commission.
Q2) Lena is a salesperson for Musical Instruments, Inc. She tells Nayda, a customer, that an instrument has a certain quality when, as Lena knows, it does not. In reliance, Nayda buys the instrument. Liable for this misrepresentation is
A) no one.
B) Lena.
C) Musical Instruments.
D) Nayda.
Q3) Implied authority is authority declared in clear, direct, definite terms.
A)True
B)False
Q4) An agency relationship terminates only when both parties consent to end it.
A)True
B)False
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Chapter 34: Employment, Immigration, and Labor Law
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Q1) An employee who discloses information relating to fraud perpetrated by his or her employer against the government is protected from retaliatory discharge under federal and state statutes.
A)True
B)False
Q2) Northwest Energy Company is subject to mandatory workers' compensation laws in the states in which it does business. Odele and Phelps work for Northwest Energy as part of a crew that travels to remote locations to repair broken pumps and other damaged equipment. At a distant site, Odele is injured in an accident that is entirely Phelps's fault. Odele files a claim for workers' compensation. Should the claim be granted? What would be Northwest Energy's best defense against it?
Q3) For a union election to be held, at least 30 percent of the workers to be represented must support a union or an election on unionization.
A)True
B)False
Q4) Employees can voluntarily pay overtime wages to otherwise ineligible employees.
A)True
B)False
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Page 36
Chapter 35: Employment Discrimination
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Q1) The right of employees to bring claims against their employer under Title VII of the Civil Rights Act as a group or class is unlimited.
A)True
B)False
Q2) Rachel, a fifty-five-year-old member of a racial minority with a disability, believes that she is a victim of employment discrimination. Potentially the most widespread form of discrimination is based on
A) age.
B) disability.
C) gender.
D) race.
Q3) Mena, a female, and Neil, a male, are employees of Operational Processes Corporation. Mena regularly e-mails sexually explicit images to Neal via Operational's network. Neil finds this offensive. This is
A) hostile-environment harassment.
B) not harassment or any form of discrimination.
C) quid pro quo harassment.
D) same-gender harassment.
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Chapter 36: Small Businesses and Franchises
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Q1) Savory Sandwiches LLC wants to present information in "disclosure documents" via the Internet to prospective franchisees. Among other legal requirements with which the franchisor must comply, prospective franchisees must
A) agree to settle any lawsuits that may arise over the documents.
B) be able to download or save all electronic documents.
C) provide e-mail addresses for Level Fencing to verify users' authenticity.
D) register with the Federal Trade Commission via Level Fencing's Web site.
Q2) Diane organized, and owns and operates, Reliable Roofing, a construction outfit, in the simplest form of business organization. This is
A) a limited partnership.
B) a limited liability company.
C) a corporation.
D) a sole proprietorship.
Q3) A franchisee ordinarily does not pay a fee for a franchise license (the privilege of being granted a franchise).
A)True
B)False
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Chapter 37: All Forms of Partnerships
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Q1) Rita and Salvatore do business as Tech Fixers, a partnership. In most states, for the purposes of collecting judgments and having accounting performed, this firm would be treated as
A) an aggregate of individuals.
B) a person.
C) an entity.
D) a non-entity.
Q2) Refer to Fact Pattern 37-1. Ann and Demi are
A) not partners, because Demi does not have an ownership interest or management rights in Bowls Bistro.
B) not partners, because the pay includes an hourly wage.
C) not partners, because the pay includes only 10 percent of the profits.
D) partners in a partnership.
Q3) Brad and Carol are partners in Doctors for Children, a medical clinic. Brad's dissociation from the firm results in
A) the automatic termination of the firm's legal existence.
B) the partnership's buyout of Brad's interest in the firm.
C) the immediate maturity of all partnership debts.
D) the temporary suspension of the partnership's business.
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Page 39
Chapter 38: Limited Liability Companies and Special Business Forms
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Q1) Unless otherwise agreed, joint venturers have an equal voice in controlling a venture-related project.
A)True
B)False
Q2) Oil Reserves, Inc., and Petro Corporation form a joint venture to design and test petroleum storage facilities and equipment. When a dispute arises, Oil Reserves files a suit against Petro. The court is most likely to apply the same principles to this joint venture as it applies to
A) sole proprietorships.
B) limited liability companies.
C) corporations.
D) partnerships.
Q3) Generally, if a member dissociates form a limited liability company (LLC), the other members cannot continue to carry on the LLC's business.
A)True
B)False
Q4) A cooperative cannot be incorporated.
A)True
B)False
40
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Chapter 39: Corporate Formation and Financing
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Q1) Express powers of a corporation can be found in state corporation statutes.
A)True
B)False
Q2) In certain instances of fraud, a court may "pierce the corporate veil" to hold the shareholders individually liable.
A)True
B)False
Q3) A foreign corporation normally does not need a certificate of authority to sell goods or services via the Internet.
A)True
B)False
Q4) A corporation whose shares are held by relatively few persons is a close corporation.
A)True
B)False
Q5) In corporate law, acts of a corporation that are beyond its express or implied powers are de facto acts.
A)True B)False
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Chapter 40: Corporate Directors, Officers, and Shareholders
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Q1) Since stock is intangible personal property, the ownership right to stock exists independently of a stock certificate.
A)True
B)False
Q2) Eve is a director of Fab Style Corporation. Without informing Fab, Eve goes into business with Gro Trend, Inc., in competition with Fab. Eve is most likely liable for breach of
A) none of the choices.
B) the business judgment rule.
C) the duty of care.
D) the duty of loyalty.
Q3) Neil, a majority shareholder of Oil Changes Inc., effectively excludes Polly, a minority shareholder, from the benefits of stock ownership in the firm. Polly can
A) assert the business judgment rule.
B) bring a suit for damages.
C) exercise de facto control.
D) force a cumulative vote.
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Chapter 41: Mergers and Takeovers
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Q1) Garden Supply Company and Home & Lawn Corporation plan to consolidate. Most likely, the articles of consolidation will be filed with
A) the county recording office.
B) the local retailers' association.
C) the state's secretary of state.
D) the U.S. Department of Commerce.
Q2) On dissolution, corporate assets are distributed to shareholders according to their stock rights and any remaining assets are used to pay creditors.
A)True
B)False
Q3) Generally, a corporation that is selling all of its assets must obtain the approval of the board of directors and the shareholders.
A)True
B)False
Q4) All forms of business organizations are treated as legal entities separate from their owners.
A)True
B)False
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Chapter 42: Investor Protection, Insider Trading, and Corporate Governance
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Q1) Ridley is an officer of Sun Watts, Inc. Ridley knows that a Sun Watts engineer recently developed a new, inexpensive method for collecting, storing, and converting solar power into fuel. Ridley takes advantage of this information to buy Sun Watts stock from Taylor and, after the discovery is announced, to sell the stock to Ulrich at a profit. Taylor claims that this is a violation of federal law. Is Taylor correct? If so, what federal law has Ridley violated, and what are its possible penalties?
Q2) Global Trade Corporation is a public company that is poised to issue securities that do not qualify for an exemption from registration. This means that Global Trade must A) file a registration statement with the SEC.
B) issue the securities through an online registration site.
C) refrain from issuing the securities to unregistered investors.
D) register the securities with a national stock exchange.
Q3) The Securities and Exchange Commission does not regulate the content of proxy statements.
A)True
B)False
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Page 44
Chapter 43: Administrative Agencies
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Q1) Rulemaking-the formulation of new administrative regulations-is a major function of administrative agencies.
A)True
B)False
Q2) The Federal Emergency Management Agency (FEMA) discovers that Goodnuff Trailers, Inc., is violating a FEMA regulation. If this situation is resolved like most such disputes, the outcome will be
A) a negotiated settlement.
B) a trial and a fine.
C) a trial and an appeal to a higher authority.
D) a trial and the dissolution of the business.
Q3) A failure of the Federal Bureau of Investigation to comply with a request under the Freedom of Information Act (FOIA) may be challenged in
A) a federal district court.
B) a hearing before the U.S. Freedom of Information Agency.
C) a meeting with Congress's FOIA subcommittee.
D) a special conference with the president of the United States.
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Chapter 44: Consumer Law
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Q1) In a transaction subject to the Truth-in-Lending Act, the terms of a credit instrument must be fully disclosed.
A)True
B)False
Q2) Teri borrows $10,000 from USA Bank to remodel a room in her home. This transaction is subject to
A) no federal law.
B) the Consumer Leasing Act.
C) the Consumer Product Safety Act.
D) the Truth-in-Lending Act.
Q3) Merchants must issue a refund within a specified period of time when a consumer cancels an order.
A)True
B)False
Q4) An information label must be attached to every new car to include the fuel economy estimate for the vehicle.
A)True
B)False
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Chapter 45: Environmental Protection
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Q1) Any oil facility that discharges oil into navigable waters or onto an adjoining shore may be liable for cleanup costs, as well as damages.
A)True
B)False
Q2) Wetlands may be filled or dredged without a permit from the U.S. Army Corps of Engineers.
A)True
B)False
Q3) Industrial Solvents, Inc., averages $15,000 profit per day before deciding to ignore air pollution standards, after which the average is $30,000. Industrial Solvents is subject to a fine of
A) $0.
B) $15,000 per day.
C) $30,000 per day.
D) $30,000 total.
Q4) National effluent (pollution) standards are set by each affected industry.
A)True
B)False
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Chapter 46: Antitrust Law
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Q1) Price discrimination occurs when a seller charges different prices to competing buyers for identical goods or services.
A)True
B)False
Q2) To prevent its competitors from obtaining sufficient supplies to make their products, Continental Steel, Inc., uses its market power to increase the prices of those supplies. This is
A) price discrimination.
B) business judgment.
C) predatory bidding.
D) predatory pricing.
Q3) A restraint of trade is an agreement between firms that has the effect of reducing anticompetitive business practices.
A)True
B)False
Q4) A trade association practice or agreement that restrains trade is analyzed under the rule of reason.
A)True
B)False
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Chapter 47: Professional Liability and Accountability
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Q1) A failure to follow generally accepted accounting principles and generally accepted auditing standards is proof of a lack of due diligence.
A)True
B)False
Q2) An accountant is required to discover every impropriety, defalcation, and fraud in a client's books.
A)True B)False
Q3) A professional can be liable for constructive fraud only if he or she acted with fraudulent intent.
A)True
B)False
Q4) Farley, an accountant, intentionally misstates a material fact to mislead Global Industries, Inc., a client. Global justifiably relies on the misstatement to its detriment. Farley is most likely liable for A) fraud.
B) malpractice.
C) negligence.
D) none of the choices.
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Chapter 48: Personal Property and Bailments
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Q1) Real property can be the subject of a bailment.
A)True
B)False
Q2) Gail, an inventor, has tools in her workshop. She has a patent on her most recent invention, a convection oven. She licenses the patent to Housewares, Inc. Her tangible personal property includes
A) the tools.
B) the license.
C) the patent.
D) all of the choices.
Q3) In a bailment of fungible goods, the bailee must return the identical goods given by the bailor.
A)True
B)False
Q4) Accession occurs when someone adds value to an item of personal property by the use of labor or materials.
A)True
B)False
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Chapter 49: Real Property and Landlord-Tenant Law
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Q1) The landlord is responsible for all damage to leased premises.
A)True
B)False
Q2) Investment Properties Inc. conveys an office building to Jim with a deed that makes the greatest number of warranties and provides the most extensive protection against defects of title. This deed is
A) a grant deed.
B) a quitclaim deed.
C) a special warranty deed.
D) a warranty deed.
Q3) Surface and subsurface rights cannot be separated.
A)True
B)False
Q4) Sol allows Tiffany to camp on his land for several days and take photos for an upcoming exhibit of landscape photography. Sol has given Tiffany
A) a fee simple absolute.
B) a license.
C) a profit.
D) an easement.
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Chapter 50: Insurance
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Q1) Cooks Delight LLC makes and sells kitchen appliances. To cover injuries to consumers if the appliances prove defective, Cooks should obtain
A) group insurance.
B) health insurance.
C) liability insurance.
D) life insurance.
Q2) A person who obtains insurance from an insurance company's agent is usually protected the moment the premium is paid.
A)True
B)False
Q3) Hernando obtains an insurance policy that protects him against some risks of loss to the contents of his residence. This is
A) homeowners' insurance.
B) term life insurance.
C) malpractice insurance.
D) liability insurance.
Q4) Property insurance cannot be canceled for nonpayment of premiums.
A)True
B)False
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Chapter 51: Wills and Trusts
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Q1) Before dying from injuries suffered in an accident, Lynda tells her cousin Marina that on her death, Natalia is to be given possession of Lynda's farm. In most states, this oral "will" would be
A) not permitted.
B) permitted but not probated.
C) valid only because its witness is not its beneficiary.
D) valid only because it does not involve a transfer of personal property.
Q2) Gunther dies intestate. The debts of the estate are paid by his
A) estate, after its assets are distributed.
B) estate, before its assets are distributed.
C) heirs, after the estate's assets are distributed.
D) heirs, before the estate's assets are distributed.
Q3) According to the terms of Donna's will, specific gifts are made, and taxes and other estate expenses and debts are paid. The assets of her estate that remain are A) the bequest.
B) the devise.
C) the legacy.
D) the residuary.
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Chapter 52: The Legal Environment of Business
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Q1) Salma wishes to file a suit in a Texas state court against Ubi. Texas allows for service of process via social media if Salma can authenticate Ubi's social media account. Allowing service of process only by means of social media raises a question whether that service comports with A) due process.
B) the Federal Rules of Civil Procedure.
C) the freedom to contract.
D) the rules of evidence.
Q2) Regional Sales Company expects its sales staff to constantly check their e-mail for work-related messages outside normal working hours. Employees' constant online connectivity with their work raises an issue about
A) the definition of work.
B) work-related stress.
C) the quality of workers' lives.
D) overburdened company servers.
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Chapter 53: Torts and Crimes
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Q1) Pay-to-Buy.com, Inc. obtains a patent on an online payment system. The patent is vaguely worded and overly broad. In evaluating the patent, a court is most likely to A) have difficulty, resulting in Pay-to-Buy being targeted by patent trolls.
B) apply the patent broadly.
C) issue a vaguely worded protection order.
D) hold that Pay-to-Buy's business practices are illegal.
Q2) Money2Play Corporation does not make or sell products or services but buys a patent and asserts it against New Functions, Inc., a start-up applications company, demanding licensing fees and threatening an infringement suit. Because of these threats, New Functions is most likely to
A) have difficulty in attracting investors.
B) target other firms with patent litigation to obtain investment capital.
C) cease and desist.
D) collect more capital to fund its operations than without the threats.
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Chapter 54: Contracts and E-Contracts
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Q1) Pals & Allies, Inc., sponsors QuikFlik, a social-networking, video-sharing site. Pals & Allies changes the terms of service on its site with thirty days' notice to its users. Rochelle and other users continue to use the site but nevertheless file a suit against its owner for breach of contract. If the court rules against the plaintiffs, it will most likely be because A) a change to terms of service is not a breach of contract.
B) the site belongs to Pals & Allies, not its users.
C) Pals & Allies set the original terms and can change them freely.
D) the plaintiffs continued to use the site after the thirty-day period.
Q2) Fantasy sports leagues are exempt from a federal statute that prohibits unlawful Internet gambling if the outcomes reflect the knowledge and skill of the participants and the performance of the athletes in real sporting events. Daily fantasy sports games may not meet this definition because the effect on the result of a participant's skill is decreased, and the effect of luck is increased, by A) the short duration of the fantasy games.
B) the amount of the payout in an individual game.
C) the number of participants in a given game.
D) the size of the entry fee to play a fantasy game.
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Chapter 55: Domestic and International Sales and Lease Contracts
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Q1) Web Resource Inc. and World Marketing Ltd., businesses located in different countries, agree to a contract. Like different individuals, Web Resource and World Marketing have different perceptions of what the agreement between them is and what it means to fulfill it. This is because
A) in every country arbitration is the preferred method of dispute resolution.
B) in every country it is acceptable to file an action in a court to resolve a dispute.
C) a business contract is only the expression of the framework of a deal.
D) Web Resource and World Marketing are influenced by different cultures.
Q2) The label on AmBeer Inc.'s beer reads, "U.S. quality" and, beneath that phrase in small print, "Made with Imported Hops." Bruce and other consumers file a class action against the brewer in California, which prohibits the use of an unqualified U.S.-origin claim. The plaintiffs' best ground for a possible recovery is most likely
A) misleading advertising.
B) unethical labeling practices.
C) inconsistent puffery.
D) inferior taste.
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Chapter 56: Negotiable Instruments
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Q1) Transactions in virtual currency do not require financial institutions, and can be conducted anonymously. With these features of virtual currency in mind, the most ethical action a user can take is to
A) protect himself or herself.
B) avoid the use of virtual currency entirely.
C) use virtual currency exclusively.
D) take advantage of those who are not aware of how virtual currency is used.
Q2) Virtual currency is stored in a digital wallet and identified by public keys. To access virtual currency requires corresponding sequences of private keys. Unlike real currency, virtual currency is
A) not issued or backed by any government or bank.
B) subject to special digital transaction fees.
C) risk-free.
D) required to be accepted in payment or exchange.
Q3) Businesses have been required to switch to digital invoices in
A) the European Union.
B) the United States.
C) countries that host the Association of Financial Professionals.
D) the home regions of cloud-based companies.
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Page 58
Chapter 57: Creditors Rights and Bankruptcy
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Q1) Robert borrows $15,000 from State College to help pay for his education. He signs a note payable to the school for the amount of the loan plus interest. Robert defaults, and the school transfers the note to a collection agency. This means that A) additional costs to collect payment can be added to the unpaid principal. B) additional requirements can be imposed on the borrower to graduate.
C) none of the choices.
D) Robert may have to accept a job offer from a select list of employers.
Q2) Olivia borrows $25,000 from the U.S. Department of Education to help pay for her education at Public University. She signs a note payable to DOE for the amount of the loan plus interest. The loan may be canceled if she is A) a teacher in a certain school or subject area.
B) a military serviceperson.
C) a medical technician.
D) any of the choices.
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Chapter 58: Agency and Employment
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12 Verified Questions
12 Flashcards
Source URL: https://quizplus.com/quiz/22620
Sample Questions
Q1) Rob, a taxi driver for Swift Cab Company, and other cabdrivers file a suit in a Texas state court against Uber, alleging unfair competition. If the result in this suit is like the result in similar suits, the court will most likely rule in favor of A) Rob.
B) Swift Cab.
C) the state of Texas.
D) Uber.
Q2) Employer responsibilities and benefits under the Patient Protection and Affordable Care Act are linked to the number of "full-time equivalent" employees. To avoid the requirements of the act, there is evidence that some employers
A) reduce the hours of their employees.
B) employ part-time workers instead of full-time employees.
C) are urging unemployed Americans to remain out of the work force.
D) all of the choices.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 59: Business Organizations
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Source URL: https://quizplus.com/quiz/22621
Sample Questions
Q1) Bill starts Castaway to market a new line of uniquely designed fishing gear. Delta Bank loans $50,000 to Bill for the project. The bank is most likely to recover the amount of the loan from Bill's personal assets
A) if Bill provides a complete, accurate record of business transactions.
B) if the loan is not subject to an agreement that imposes personal liability.
C) if Bill's business is a sole proprietorship.
D) under no circumstances.
Q2) Vera starts World Markets Inc. an online business to advertise and sell goods handcrafted in a variety of countries. The purpose of advertising law generally is to create marketplaces in which businesses can operate free of
A) deceptive and unfair practices.
B) international restrictions on speech.
C) the rules of private Web sites (such as Facebook).
D) competition.
Q3) Predictive analytics in the digital realm focuses on
A) predicting certain behavior based on certain data.
B) analyzing certain data to predict digital developments.
C) analyzing certain predictions to monitor certain results.
D) predicting certain digital data based on reasoned analysis.
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Chapter 60: Government Regulation
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12 Verified Questions
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Source URL: https://quizplus.com/quiz/22622
Sample Questions
Q1) Eve is an attorney. With respect to client information, under the American Bar Association's Model Rules of Professional Conduct, Eve, like other attorneys
A) is required to guarantee that a breach of confidentiality will never occur.
B) has an ethical duty to safeguard the information.
C) does not need to be concerned with keeping the information secure.
D) does not own the data.
Q2) To reduce the emission of greenhouse gases, power companies are required to save specified amounts of energy by A) all of the states.
B) less than half of the states.
C) more than half of the states.
D) none of the states.
Q3) The effects of climate change can be lessened by a reduction in greenhouse gases (GHGs). With this purpose in mind, GHG emission goals have been set by A) about half a dozen states.
B) about a dozen states.
C) about half of the states.
D) nearly all of the states.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 61: Property and Its Protection
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Source URL: https://quizplus.com/quiz/22623
Sample Questions
Q1) According to the United States Supreme Court,
A) Metro City can take a parking lot for a privately owned sports stadium.
B) all of the choices.
C) Laborville can condemn a vacant field for a private manufacturing plant.
D) Sleepyton can take residential property for a private corporate complex.
Q2) Kevin and Laura are married. Together, they buy a virtual asteroid near the virtual planet Magellan in the virtual NightSky universe. In the event of a divorce, to avoid property division issues with respect to the asteroid, this couple
A) can use a pre-nuptial agreement or an addenda to it.
B) cannot split their interests in the asteroid or any virtual property.
C) must surrender their rights in the asteroid to the creators of NightSky.
D) must abandon their rights in the asteroid to other virtual property owners in the NightSky universe.
To view all questions and flashcards with answers, click on the resource link above.