Commercial Transactions
Exam Solutions
Course Introduction
This course provides a comprehensive examination of the legal principles and practices governing commercial transactions. It covers the formation, performance, and enforcement of contracts in the sale of goods, negotiable instruments, secured transactions, and payment systems. Students will explore the Uniform Commercial Code (UCC) and relevant case law to understand risk allocation, rights, and obligations of parties involved in business deals. Emphasis is placed on real-world applications, problem-solving, and the critical analysis of issues such as warranties, remedies, and the role of commercial credit in modern commerce.
Recommended Textbook
Business Law Text and Exercises 8th Edition by Roger LeRoy Miller
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3023 Verified Questions
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Chapter 1: Introduction to the Law and Our Legal System
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Sample Questions
Q1) Kevin is a judge hearing the case of Local Dispatch Co.v.National Transport Corp.Applying the relevant rule of law to the facts of the case requires Kevin to find previously decided cases that,in relation to the case under consideration,are
A) as different as possible.
B) as similar as possible.
C) at odds.
D) exactly identical.
Answer: B
Q2) Criminal law focuses on duties that exist between persons.
A)True
B)False
Answer: False
Q3) Law consists of enforceable rules governing relationships among individuals and between individuals and their society.
A)True
B)False
Answer: True
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Chapter 2: Ethics in Business
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Sample Questions
Q1) Dyan,the owner of Expert Restoration Services,Inc.,adheres to the "principle of rights" theory.Under this theory,a key factor in determining whether a business decision is ethical is how that decision
A) compares to religious principles.
B) affects the rights of others.
C) causes consequences that would follow if everyone in society acted the same way.
D) supports the right to make a profit.
Answer: B
Q2) An ethics program can clarify what a company considers to be unacceptable conduct.
A)True
B)False
Answer: True
Q3) Business ethics looks at the decisions that businesses make or have to make and whether those decisions are right or wrong.
A)True
B)False
Answer: True
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4
Chapter 3: The Courts and Alternative Dispute Resolution
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Sample Questions
Q1) Mountain States Trucking wants to initiate a suit against Open Pit Mining Corporation by filing a complaint.The complaint should include a statement alleging the facts establishing
A) an explanation to refute any defense Open Pit might assert.
B) a motion for summary judgment.
C) a motion to dismiss.
D) Mountain's basis for relief.
Answer: D
Q2) Service Employees International Union and Timberline Products,Inc.,have their dispute resolved in arbitration.The arbitrator arbitrates issues that the parties did not agree to submit to arbitration.This is a ground for a court to
A) none of the choices.
B) review the merits of the dispute.
C) review the sufficiency of the evidence.
D) set aside the award.
Answer: D
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5
Chapter 4: Constitutional Law
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Sample Questions
Q1) A law that prohibits or inhibits only some persons from exercising a fundamental right will be subject to "strict scrutiny" by the courts under the equal protection clause.
A)True
B)False
Q2) The Constitution sets forth specific powers that can be exercised by the national government and provides that the national government has the implied power to undertake actions necessary to carry its expressly designated powers.All other powers are expressly reserved to
A) none of the choices.
B) the states.
C) the national government.
D) the people.
Q3) The commerce clause's express grant of exclusive authority to regulate commerce that substantially affects trade and commerce among states is referred to as the
A) dormant aspect.
B) regulatory aspect.
C) substantive aspect.
D) exclusive aspect.
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6
Chapter 5: Tort Law
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Sample Questions
Q1) Diego is arrested for a theft committed by someone who stole his identity.A court orders his release,but due to a police error in Diego's paperwork,he is held in jail for a month.The police are most likely liable for
A) abuse of process.
B) false imprisonment.
C) malicious prosecution.
D) none of the choices.
Q2) Very few states limit the amount of damages that can be awarded in tort cases.
A)True
B)False
Q3) Ichiro is injured in a two-car accident and sues Heather,the driver of the other vehicle,alleging negligence.Heather claims that Ichiro was driving more carelessly than she was.Comparative negligence may reduce Ichiro's recovery
A) even if Ichiro was only slightly at fault.
B) only if Ichiro and Heather were equally at fault.
C) only if Ichiro was less at fault than Heather.
D) only if Ichiro was more at fault than Heather.
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Page 7
Chapter 6: Intellectual Property
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Sample Questions
Q1) With a few exceptions,almost anything is patentable.
A)True
B)False
Q2) Gas Up,Inc.,designs,makes,and sells a fuel injection system that copies Hybrid Corporation's design without Hybrid's permission.This is most likely
A) copyright infringement.
B) patent infringement.
C) trademark infringement.
D) a theft of trade secrets.
Q3) The Anti-Counterfeiting Trade Agreement applies to counterfeit physical goods and pirated,copyrighted works being distributed via the Internet.
A)True
B)False
Q4) The first person to invent a product obtains the patent rights rather than the first person to file an application for a patent.
A)True
B)False
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Chapter 7: Internet Law, social Media, and Privacy
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Sample Questions
Q1) Federal law permits the intentional accessing of stored electronic communication even if the accessing is unauthorized.
A)True
B)False
Q2) A licensor might grant a license allowing a trademark to be used as part of a domain name.
A)True
B)False
Q3) No federal court has held that digitally sampling a copyrighted sound recording of any length constitutes copyright infringement.
A)True
B)False
Q4) Federal law prevents a provider of communication services-such as a cell phone company-from divulging private communications to certain entities and individuals.
A)True B)False
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Chapter 8: Criminal Law and Cyber Crime
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Sample Questions
Q1) Felonies are punishable by imprisonment for more than a year or death.
A)True
B)False
Q2) Mariah takes off her ring and places it on her desk while she works.Without her knowledge or consent,her coworker Nita picks up the ring,puts it on,and walks away.Nita has likely committed
A) burglary.
B) forgery.
C) larceny.
D) no crime.
Q3) Individuals who are arrested must be informed of certain constitutional rights.
A)True
B)False
Q4) Laird is an employee of Motor Parts,an auto parts store.On the orders of his employer,he switches trademarks on parts that come into the store to be sold to consumers.This is most likely
A) forgery.
B) larceny.
C) robbery.
D) obtaining goods by false pretenses.
Page 10
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Chapter 9: Introduction to Contracts
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Sample Questions
Q1) An offeree is a person who makes an offer.
A)True
B)False
Q2) A quasi contract is a fictional contract.
A)True
B)False
Q3) If a contractual promise is not fulfilled,the person who made it may be required to perform the promised act.
A)True
B)False
Q4) Vita asks Walter,a cobbler and shoe salesperson,to repair a pair of work boots.There is no discussion of a price,and Vita and Walter do not sign any documents.After the repair,Walter hands Vita a bill.With respect to Vita's obligation to pay the bill,this is
A) an express contract.
B) an implied contract.
C) a quasi contract.
D) no contract.
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Chapter 10: Offer and Acceptance
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Sample Questions
Q1) An agreement is evidenced by one event: an offer.
A)True
B)False
Q2) The mailbox rule applies to communication by phone and fax as well as the mail.
A)True
B)False
Q3) Interstate Coffee Brokers,Inc.(ICBI),offers to sell Java Roasters,Inc.,fifty bags of coffee beans.Java rejects the offer.The offer is
A) terminated.
B) valid for a reasonable time to give Java a "second chance."
C) valid for the period of time prescribed by a state statute.
D) valid until ICBI revokes the offer.
Q4) Signe offers to sell Thomas her textbook but conditions the sale on Thomas accepting the offer by March 1.Signe may revoke the offer
A) before Thomas accepts the offer.
B) before March 1, whether or not Thomas has accepted the offer.
C) only after Thomas accepts the offer.
D) only after March 1.
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Page 12
Chapter 11: Consideration
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Sample Questions
Q1) Julia and Mary have a contract that is still executory.They mutually agree to rescind their contract and at the same time make a new contract.If the new contract is contested in court and the court finds that there was a preexisting duty under the original contract,then the new contract
A) will not be enforceable.
B) will still be enforceable.
C) will not require consideration from either side.
D) will be legally sufficient.
Q2) Claudia pledges to donate $10,000 to Disaster Relief & Recovery Inc.(DR&R).On the basis of the pledge,DR&R orders additional supplies.If Claudia does not fulfill the pledge,a court may enforce it
A) under the preexisting duty rule.
B) on the basis of unforeseen difficulties.
C) as an illusory promise.
D) under the doctrine of promissory estoppel.
Q3) An illusory promise is a promise that is enforceable without consideration.
A)True
B)False
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Chapter 12: Capacity
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Sample Questions
Q1) Food is a "necessary."
A)True
B)False
Q2) For a minor to disaffirm a contract,he or she must present the contract to a court.
A)True
B)False
Q3) Morgan,a minor,signs a contract to buy a Call4U phone and a monthly calling plan from Sterling,an independent sales representative.Morgan can avoid the contract.Sterling
A) can also avoid the contract.
B) cannot avoid the contract.
C) can avoid as much of the contract as Morgan elects to avoid.
D) must obtain Morgan's consent to avoid the contract
Q4) Becca is a minor.As a minor,Becca
A) is not usually legally bound by a contract.
B) has the right to avoid liability under a valid contract.
C) has the capacity to enter into a valid contract.
D) all of the choices.
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Page 14
Chapter 13: The Legality of Agreements
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Sample Questions
Q1) Allen and Beth decide to wager,in violation of a state statute,on the out-come of a baseball game.They each deposit money with Cory,who agrees to pay the winner of the bet.Before the game begins,Beth tells Cory that she has changed her mind about the bet.Beth can recover
A) the amount of her bet and the amount of Adam's bet.
B) the amount of her bet minus Cory's expenses.
C) the amount of her bet only.
D) nothing.
Q2) Which of the following is NOT likely to be required to obtain a professional license?
A) A certain education and a passing score on a state-administered exam
B) Good moral character
C) A fee
D) An ongoing business
Q3) If an illegal contract has been executed,either party can recover damages.
A)True
B)False
Q4) In general,an illegal contract is void.
A)True
B)False
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Chapter 14: Voluntary Consent
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Sample Questions
Q1) Words or terms in contracts that are subject to more than one reasonable interpretation can lead to bilateral mistakes.
A)True
B)False
Q2) Reformation occurs when a court alters the terms of a contract to reflect the true intent of the parties.
A)True
B)False
Q3) Voluntary consent may be lacking because of misrepresentation but not because of a mistake.
A)True
B)False
Q4) When both parties to a contract are mistaken about the same material fact,the contract cannot be rescinded.
A)True
B)False
Q5) Misrepresentation of a material fact is an element of fraud.
A)True
B)False
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Chapter 15: Written Contracts
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Sample Questions
Q1) Abner tells a representative of Brass & Woodwind Musical Instruments,Inc.,that he will pay for Claudia's trumpet if she does not.Abner does not secure any personal benefit for this promise.Abner's oral promise is enforceable as a contract by
A) Brass & Woodwind Musical Instruments, Inc.
B) Claudia.
C) Abner.
D) none of the choices.
Q2) Dick's Burgers n' Shakes enters into an oral contract with Restaurant Equipment Warehouse (REW)for REW's sale to Dick's of a single-spindle milkshake mixer for $300.Assuming the terms can be proved,the contract is enforceable by
A) the seller or the buyer.
B) the manufacturer of the mixer.
C) any third party with an interest in the deal, such as one of Dick's customers.
D) none of the choices.
Q3) A prenuptial agreement must be in writing to be enforceable.
A)True
B)False
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Page 17
Chapter 16: Third Party Rights
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Sample Questions
Q1) Opportunity Market Company (OMC)and Pierce enter into a contract for Pierce to cut and trim the landscaping around OMC's building before a meeting of the company's sales staff.When Pierce's schedule conflicts,he asks Rachel to do the cutting and trimming.This transfer of duties is
A) a delegation.
B) an assignment.
C) a third party beneficiary contract.
D) prohibited.
Q2) Mai is a third party beneficiary under a contract between Novia and Otis.Novia and Otis can modify or rescind their contract without Mai's consent
A) at any time.
B) at no time.
C) after Mai's rights have vested.
D) before Mai's rights have vested.
Q3) Giving notice is legally necessary to establish the validity of an assignment.
A)True
B)False
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18
Chapter 17: Contract Discharge and Remedies
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Sample Questions
Q1) After a contract is made,a supervening event may make performance impossible and discharge the contract.
A)True
B)False
Q2) Hybrid Corporation enters into a contract with Insure Service,Inc.(ISI),to obtain health insurance for Hybrid employees.If ISI breaches the contract and Hybrid is awarded compensatory damages,the purpose would be to
A) establish, as a matter of principle, that ISI acted wrongfully.
B) provide Hybrid with funds for a foreseeable loss beyond the contract.
C) provide Hybrid with funds for its loss of the bargain.
D) punish ISI and set an example to deter others from similar acts.
Q3) Carol enters into a contract to hire Joanne to paint a portrait of Carol's favorite cat.Joanne agrees to do the portrait to Carol's satisfaction for $100.When Joanne finishes the portrait,Carol announces that she is not satisfied with the portrait because it does not look like her cat.Carol
A) must accept the portrait and pay Joanne $100.
B) must accept the portrait and pay Joanne $50.
C) must accept the portrait and pay Joanne $25.
D) does not have to accept the portrait or pay Joanne any money.
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Page 19
Chapter 18: Introduction to Sales and Lease Contracts
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Sample Questions
Q1) County Dentists Clinic offers to buy from Dental & Medical Supplies Company a certain quantity of floss and other items for a certain price.Dental & Medical can accept the offer by
A) a material alteration of the terms within a reasonable time.
B) a promise to ship or a prompt shipment of the goods.
C) a prompt shipment of the goods only.
D) a shipment of nonconforming goods with a notice of accommodation.
Q2) Katlyn pays Mobile Edge Electronics $500 for a tablet.Under the UCC,this is
A) a gift.
B) a lease.
C) a sale.
D) a non-taxable transaction.
Q3) Under the UCC,an oral contract for a sale of goods is enforceable once payment has been made and accepted.
A)True
B)False
Q4) A lessor is a party who transfers the right to the possession and use of goods under a lease.
A)True
B)False
Page 20
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Chapter 19: Title and Risk of Loss
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Sample Questions
Q1) Identification,risk of loss,and insurable interest are all concepts that are involved in determining the rights and liabilities of parties to a contract.
A)True
B)False
Q2) When a merchant keeps the goods for the buyer to pick up,the risk of loss passes when the buyer actually takes possession of the goods.
A)True
B)False
Q3) In the following situations,two parties claim the same goods.Who is most likely to prevail in each circumstance? Explain.(a)Olan steals Phil's television set and sells it to Quincy,an innocent purchaser,for value.Phil learns Quincy has the set and demands its return.(b)Riley takes his television set for repair to Slick,a merchant who sells new and used television sets.By accident,one of Slick's employees sells the set to Tuna,an innocent purchaser-customer,who takes possession.Riley wants his set back from Tuna.
Q4) Under the UCC,the risk of loss is necessarily determined by title.
A)True
B)False
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21
Chapter 20: Performance and Breach
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Sample Questions
Q1) Refer to Fact Pattern 20-1.Flat Bread's refusal is
A) a justified response based on Flat Bread's relation to the contract.
B) an assignment of Daily Bread's rights under the contract.
C) a reasonable suspension of performance under the contract.
D) a repudiation of the contract.
Q2) If a buyer wrongfully refuses to accept goods,the seller can bring an action to recover the damages sustained.
A)True
B)False
Q3) Screen Perfect,Inc.,and TV Stores enter into a contract for a sale of high-definition television sets.Screen Perfect ships goods that do not exactly conform to the contract in some details.TV Stores
A) cannot reject the entire shipment.
B) can reject the entire shipment.
C) must accept the entire shipment.
D) must reject the entire shipment.
Q4) A shipment contract requires a seller to ship goods by a carrier.
A)True
B)False
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Chapter 21: Warranties and Product Liability
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Q1) Chord Guitars Inc.sells guitars and other stringed instruments to consumers.A Chord salesperson says to a potential customer,"This Chord is the best guitar you'll find anywhere,even online." This statement is
A) an implied warranty of fitness for a particular purpose.
B) an implied warranty of merchantability.
C) an express warranty.
D) puffery.
Q2) Watercourse Pipe Company includes in its contracts a provision that reads,in large red letters,"There are no warranties that extend beyond the description on the face hereof." This disclaimer negates
A) the implied warranty of fitness for a particular purpose.
B) the implied warranty of merchantability.
C) the implied warranty of title.
D) none of the choices.
Q3) To specifically disclaim an implied warrant of fitness for a particular purpose,a seller or lessor must mention the word fitness.
A)True
B)False
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Chapter 22: Consumer Protection
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Sample Questions
Q1) Mouth-Waterin' Treats Company wants to sell its candy in a normal-sized package labeled "Gigantic Size." NuFabrics,Inc.,wants to advertise its sweaters as having "That Wool Feel," but does not want to specify on labels that the sweaters are 100 percent polyester.Can these firms market their products as they would like? If not,why not?
Q2) Federal laws often provide more sweeping and significant protections for the consumer than state laws.
A)True
B)False
Q3) Hearth & Home Furniture store advertises bedroom suites at a "Special Low Price of $599." When Ilene tries to buy one of the suites,Jill,the salesperson,tells her that they are all sold and no more are obtainable.Jill adds that Hearth & Home has other bedroom suites available for as low as $2,599.This is
A) a cease-and-desist order.
B) bait-and-switch advertising.
C) counteradvertising.
D) puffery.
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Page 24
Chapter 23: The Essentials of Negotiability
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Q1) An instrument payable "with interest" must specify a particular rate to be negotiable.
A)True
B)False
Q2) Refer to Fact Pattern 23-2.On this instrument,LNG is
A) the banker.
B) the drawer.
C) the maker.
D) the trader.
Q3) Negotiating order instruments requires either delivery or indorsement but not both.
A)True
B)False
Q4) Ron signs an instrument using an "R" with a circle around it.With this mark for a signature,the instrument is
A) negotiable.
B) nonnegotiable, because an initial does not state the signer's name.
C) nonnegotiable, because an initial is not a signature.
D) nonnegotiable, because a simple initial implies a lack of binding intent.
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Chapter 24: Transferability and Liability
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Q1) Dishonor occurs if payment of an instrument is refused within the prescribed time.
A)True
B)False
Q2) A maker is primarily liable on an instrument.
A)True
B)False
Q3) An instrument is not defective simply because it is overdue.
A)True
B)False
Q4) An ordinary holder can recover nothing on an instrument that has been materially altered.
A)True
B)False
Q5) Failure to present an instrument on time is not improper presentment.
A)True
B)False
Q6) The good faith requirement applies to both the holder and the transferor.
A)True
B)False
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Chapter 25: Checks and Banking in the Digital Age
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Q1) Commercial banking practices consider a check that has been outstanding for three months to be a stale check.
A)True
B)False
Q2) Financial institutions that exchange digital images of checks must also send the original paper checks.
A)True
B)False
Q3) A substitute check is a paper reproduction of the front and back of an original check that contains all the same information required on checks for automated processing.
A)True
B)False
Q4) On Friday morning,Geoff deposits into his account at Heartland Bank a $500 check from Imelda,who also has an account at Heartland.On that same day,this check is considered
A) cashiered.
B) certified.
C) paid.
D) provisionally credited.
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Chapter 26: Agency
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Q1) For an agent's implied authority to be effective,a principal must confirm it in writing.
A)True
B)False
Q2) Spicy Wonder Hot Dog Vendors,Inc.,grants its agent Teona an exclusive territory in which to sell Spicy Wonder Hot Dog products.Spicy Wonder Hot Dog cannot compete with Teona in that territory under the principal's duty of
A) compensation.
B) compensation
C) indemnification.
D) reimbursement.
Q3) Emery is a corporate officer of Frakking Mining Corporation.Emery serves in a representative capacity for Frakking's owners.With respect to binding Frakking Mining to contracts,Emery is
A) an agent and has the authority.
B) an employee and does not have the authority.
C) an independent contractor and does not have the authority.
D) not an agent, an employee, or an independent contractor but does have the authority.
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28
Chapter 27: Employment, immigration, and Labor Law
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Q1) Employers are permitted to hire replacement workers to substitute for striking workers.
A)True
B)False
Q2) Digital Enterprises,Inc.,a data analysis firm,wants to hire Ernesto,a noncitizen.A work visa is most likely to be set aside for a noncitizen if
A) the noncitizen is of "ethnic similarity to the employer's workforce."
B) there is a shortage of qualified U.S. workers capable of doing the work.
C) bringing the worker into this country will adversely affect the labor force.
D) the noncitizen is a "person with an extraordinary work ethic."
Q3) The Family and Medical Leave Act requires employers to provide eligible employees with family or medical leave for any of the following reasons except
A) to care for a newly adopted child.
B) to care for a newly placed foster child.
C) to go on an extended family vacation.
D) if the employee is unable to perform the essential functions of his or her job due to a serious health condition.
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Chapter 28: Employment Discrimination
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Q1) Employees who leave their jobs voluntarily may still claim under Title VII that they were "constructively discharged" by their employer.
A)True
B)False
Q2) Once a plaintiff succeeds in proving discrimination,the burden shifts to the employer to justify the discriminatory practice.
A)True
B)False
Q3) Benny files a suit in a federal district court against the state of California,alleging employment discrimination under the Age Discrimination in Employment Act.The state asks the court to dismiss the suit.The court is most likely to rule that
A) the state is immune from the suit.
B) the suit can proceed.
C) Benny is immune from any defense the state might offer.
D) the court is immune from the request.
Q4) Title VII of the Civil Rights Act prohibits only intentional discrimination.
A)True
B)False
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Chapter 29: Sole Proprietorships, partnerships, and Limited Liability Companies
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Q1) Rosalee is a partner in Silver Dragon,a partnership consisting of the owners of a Chinese and American restaurant.Silver Dragon incurs debt for new dining tables and chairs.Rosalee is
A) not liable for the debt.
B) only liable for the debt up to the amount of her capital contribution.
C) personally liable only to the extent the other partners do not pay.
D) personally liable to the full extent of the debt.
Q2) A limited liability partnership must be formed in compliance with state law. A)True
B)False
Q3) Owen plans to open Owen's Pets Store,a pet sales and pet supplies outlet,and to hire Quimby and Ruth.Owen will invest only his own money.He does not expect to make any profit for at least two years and to make almost no profit for the first three years,but he hopes to expand eventually.Which form of business organization would be most appropriate? What are the chief characteristics,advantages,and disadvantages of this form of business organization? If Owen wants to obtain additional capital to expand the business,but does not want to lose control of the firm,what is his best option?
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Chapter 30: Formation and Termination of a Corporation
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Q1) Appraisal rights extend to mergers,consolidations,share exchanges,and sales of substantially all of the corporate assets.
A)True
B)False
Q2) The purpose of a corporation may be specified in its articles of incorporation.
A)True
B)False
Q3) Firms are obligated to return a principal amount per share to each holder of common stock.
A)True
B)False
Q4) Selecting the state in which to incorporate is an important step in the incorporation procedure.
A)True
B)False
Q5) Stocks represent the borrowing of funds by firms.
A)True
B)False
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Chapter 31: Management and Ownership of a Corporation
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Q1) Mickey is a director of Fine Art Dealers,Inc.Mickey is trained in art valuation.Fine Art Dealers makes several purchases in which it pays too much money for artwork.Mickey approves all the transactions without reading the details.Mickey is most likely
A) liable for violation of the business judgment rule.
B) liable for breach of duty of loyalty.
C) liable for breach of the duty of care.
D) not liable for breach of the duty of care.
Q2) Bea is a shareholder of Candy Confections Corporation.The right to inspect corporate books and records is
A) held by Bea, without restrictions.
B) held by Bea only if she is a director.
C) held by Bea, with some restrictions.
D) not held by Bea.
Q3) A majority shareholder does not owe a fiduciary duty to minority shareholders under any circumstances.
A)True
B)False
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Page 33
Chapter 32: Secured Transactions
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Q1) A secured party is any creditor who has a security interest in a debtor's collateral.
A)True
B)False
Q2) The payment of Olinda's debt to Pari is guaranteed by Olinda's personal property.Pari is most likely to perfect her interest by
A) insuring Olinda's property for the full amount of its value.
B) calculating the precise amount of Olinda's debt.
C) correcting grammatical errors in the parties' written agreement.
D) filing a financing statement with the appropriate authority.
Q3) To create an enforceable security interest,the secured party must give value.
A)True
B)False
Q4) To create an enforceable security interest,the secured party must give something of value to a debtor's other creditors.
A)True
B)False
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Chapter 33: Creditors Rights and Remedies
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Q1) Lenders Loan Company and Mortgage Service Corporation-Nadya's creditors-contract with Nadya for the discharge of her liquidated debts on payment of a lesser sum.This is
A) a composition agreement.
B) a subrogation.
C) a suretyship agreement.
D) in violation of most states' laws.
Q2) In some states,a judgment creditor must obtain a separate order of garnishment to cover each of the debtor's pay periods.
A)True
B)False
Q3) An employer can refuse to turn over a debtor's wages.
A)True
B)False
Q4) Consumer Credit,Inc.(CCI),lends $1,000 to Joe.Kay acts as Joe's surety.If Kay pays the loan,she gets
A) any right that CCI had against Joe, but not a right to be repaid by Joe.
B) a right to be repaid by Joe, but not any right that CCI had against Joe.
C) any right that CCI had against Joe and a right to be repaid by Joe.
D) none of the choices.
Page 35
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Chapter 34: Bankruptcy
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Q1) Roland files forChapter 7 bankruptcy.After all his assets have been sold and the proceeds distributed among his creditors,Roland's remaining debts
A) are discharged.
B) paid by the court.
C) must be paid by Roland.
D) are put on hold until Roland has sufficient means to pay them.
Q2) Donna goes through an involuntary bankruptcy proceeding.An involuntary bankruptcy occurs when
A) a debtor files forms designated for the purpose in a bankruptcy court.
B) a debtor is unable to pay his or her debts as they come due.
C) a debtor's creditors force the debtor into bankruptcy proceedings.
D) a debtor's debts exceed the fair market value of his or her assets.
Q3) The basic duty of a trustee is to collect the debtor's property and reduce it to money for distribution.
A)True
B)False
Q4) Before filing for bankruptcy,a consumer-debtor must receive credit counseling.
A)True
B)False
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Chapter 35: Insurance
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Q1) Frank applies to GuardDog Insurance Company for homeowners' insurance.The company issues a policy,but later discovers that Frank's application includes several misstatements.Most likely,these misstatements can
A) affect the coverage under the policy but cannot void the policy.
B) bind Frank but cannot affect the coverage.
C) not bind Frank or affect the policy.
D) void the policy.
Q2) Businesses typically protect their financial interests by obtaining insurance.
A)True
B)False
Q3) Rafe obtains a fire insurance policy on his vacation cabin near Smoky Mountain from Torchlight Insurance Company.The cabin is lost in a fire,but the parties dispute the amount of Torchlight's liability under an ambiguous clause in the policy.A court would most likely
A) interpret the clause against Rafe.
B) interpret the clause against Torchlight.
C) rewrite the clause and apply it as rewritten.
D) strike the clause from the policy.
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Chapter 36: Personal Property and Bailments
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Q1) Intangible personal property represents a set of rights and interests but has no real physical existence.
A)True
B)False
Q2) Nero and Omar agree to buy natural gas to sell to Power Fuel Refinery and to share storage costs until Power Fuel can take delivery.The gas is commingled so that Nero's cannot be distinguished from Omar's.This is
A) accession.
B) confusion.
C) conversion.
D) a bailment.
Q3) Marcy goes hunting out of season and shoots an endangered species of deer in a national park.Marcy's acquisition of the deer is
A) by production.
B) illegal.
C) by confusion.
D) by possession.
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Chapter 37: Real Property
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Q1) Huong owns a farm in Iowa,with a farmhouse,barn,and other structures permanently attached.Huong grows corn on the property.Land includes
A) the corn, the soil, and the structures.
B) the corn and the soil only.
C) the soil only.
D) the structures and the soil only.
Q2) Wilson has an easement that allows him to drive across Dave's land to get to Wilson's house.Janet has a license to fish in Dave's lake whenever she wants.A nonpossessory interest in Dave's property is held by
A) Wilson only.
B) Wilson and Janet.
C) Janet only.
D) none of the choices.
Q3) Jaime conveys his historic mansion to Main Street Historical Society in fee simple defeasible.In the mansion,Jaime now has
A) a partial ownership interest.
B) an easement.
C) no interest.
D) a profit.
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Page 39
Chapter 38: Landlord and Tenant Law
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Q1) Usually,a lease terminates when its terms ends.
A)True
B)False
Q2) A&B Storage,Inc.,signs a six-month lease to occupy a warehouse.This is
A) a periodic tenancy.
B) a tenancy at sufferance.
C) a tenancy at will.
D) a fixed-term tenancy.
Q3) Grey rents an apartment to Hugh,who retains possession of the apartment after the lease expires without making any payments of rent.This is
A) a periodic tenancy.
B) a tenancy at sufferance.
C) a tenancy at will.
D) a fixed-term tenancy.
Q4) Usually a landlord must comply with state statutes that delineate specific standards for the maintenance of buildings.
A)True
B)False
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Chapter 39: Wills and Trusts
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Q1) Aron owns a certificate of deposit with Beth,his sister,and an apartment building with Carl,his brother,in both cases as a joint tenant.Aron,a partner with Debra in Aron & Debra Accountants,obtains a life insurance policy with Debra as the designated beneficiary.Aron writes a will that gives particular items of personal property,as well as specific amounts of cash,to his children and his friends.The will leaves the residue of the estate to Eve,Aaron's favorite cousin.Carl dies.Aron,on his deathbed,makes a gift to the United Way.Will the certificate of deposit,the apartment building,the proceeds from the life insurance policy,and the gift to the United Way become part of Aron's estate and be distributed under the will? If not,how will these items be distributed and to whom?
Q2) Paxton makes a gift of real estate in his will to Orinda.This gift is
A) a bequest.
B) a devise.
C) a legacy.
D) a residuary.
Q3) In his will,Bryson makes a gift of $12,000 to Curtis.This is
A) a general bequest.
B) a general devise.
C) a specific bequest.
D) a specific devise.
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Page 41
Chapter 40: Administrative Law
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Q1) The House of Representatives alone can create a new federal administrative agency.
A)True
B)False
Q2) The president can appoint and remove officers from executive agencies.
A)True
B)False
Q3) A court will not review an administrative agency's decision until the party seeking review first exhausts all administrative remedies.
A)True
B)False
Q4) Enabling legislation creates administrative agencies.
A)True
B)False
Q5) The Food and Drug Administration (FDA)is an executive agency.As an executive agency,the FDA
A) is subject to the authority of state legislatures.
B) is subject to the authority of the Attorney General
C) is subject to the authority of the president.
D) is not subject to any higher authority.
Page 42
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Chapter 41: Antitrust Law
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Q1) A group boycott that is intended to eliminate competition is legal.
A)True
B)False
Q2) City Manufacturing Corporation conditions shipments of its products to Exurb Stores,Inc.,on Exurb's agreement not to buy products from Fresh Works Company,City's competitor.This is
A) an exclusive-dealing contract.
B) a tying arrangement.
C) price discrimination.
D) a unilateral refusal to deal.
Q3) Labor unions can organize and bargain without violating antitrust law.
A)True
B)False
Q4) Resale price maintenance agreements are subject to analysis under the rule of reason.
A)True
B)False
Q5) Under what circumstances would Quality Market,a small store in Rustic,an isolated town,be considered a monopoly? If Quality Market is a monopoly,is it in violation of antitrust law?
43
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Chapter 42: International Law
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Q1) In direct exporting,a U.S.company signs a sales contract with a foreign purchaser that provides for the conditions of shipment and payment of goods.
A)True
B)False
Q2) Call Center Corporation,a U.S.firm,owns property in India.The government of India seizes the property for a proper public purpose and pays Call Center just compensation.This is
A) confiscation.
B) defalcation.
C) dumping.
D) expropriation.
Q3) Some countries provide insurance for their citizens' investments abroad.
A)True B)False
Q4) Quotas are limits on the amounts of goods that can be exported.
A)True
B)False
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