Contracts and Sales Law Exam Review
Course Introduction
Contracts and Sales Law introduces students to the fundamental principles governing legally enforceable agreements and the sale of goods. The course covers contract formation, enforceability, performance, breach, and remedies, with a particular emphasis on common law doctrines and the Uniform Commercial Code (UCC) as it pertains to the sale of goods. Students will explore key concepts such as offer, acceptance, consideration, capacity, and legality, and analyze real-world cases to understand how courts interpret and enforce contractual obligations. The course also examines issues unique to sales contracts, including warranties, risk of loss, and remedies for nonperformance, preparing students for further study or practice in commercial and consumer law.
Recommended Textbook
Andersons Business Law and the Legal Environment 22nd Edition by David P. Twomey
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2754 Verified Questions
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Chapter 1: The Nature and Sources of Law
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Sample Questions
Q1) Individual rights guaranteed in the United States Constitution:
A) have no accompanying duties.
B) apply only to a small number of individuals.
C) are subject to state legislative laws.
D) generally have accompanying duties.
Answer: D
Q2) Legal principles expressed for the first time in court decisions are called:
A) statutory law.
B) stare decisis.
C) common law.
D) precedents.
Answer: D
Q3) In addition to state legislatures and the United States Congress,all cities,counties,and other governmental subdivisions have some power to adopt ordinances within their sphere of operation.
A)True
B)False
Answer: True
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Chapter 2: The Court System and Dispute Resolution
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Sample Questions
Q1) The federal court system consists of ____ level(s)of courts.
A) one
B) two
C) three
D) four
Answer: C
Q2) Reversible errors are commonly made by supreme courts.
A)True
B)False
Answer: False
Q3) Garnishment is a procedure accomplished only by attorneys.
A)True
B)False Answer: False
Q4) The _____ rule(s)on the admissibility of evidence.
A) Judge
B) Jury
C) Attorneys
D) court clerk
Answer: A
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Chapter 3: Business Ethics, Social Forces, and the Law
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Sample Questions
Q1) An ethical duty of confidentiality could be breached where:
A) information obtained through research of the employer is disclosed.
B) customer lists or leads are disclosed to a competitor.
C) proprietary information or technology of a business is disclosed.
D) all of the above.
Answer: D
Q2) Ethical egoism believes that feeling guilty about poor ethical decisions will lead to better future decisions.
A)True
B)False
Answer: False
Q3) Individual intentions,as expressed in contracts and wills,will not be given effect in the United States unless expressly authorized by law.
A)True
B)False
Answer: False
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Page 5
Chapter 4: The Constitution As the Foundation of the Legal Environment
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Q1) Because the power to regulate interstate commerce has been interpreted broadly,Congress has great power to adopt regulatory laws affecting the economy.
A)True
B)False
Q2) When the president negotiates a treaty with a foreign country and submits it to the Senate for approval,the president's action is:
A) an express Constitutional amendment.
B) an amendment by judicial interpretation.
C) an amendment by practice.
D) the power of manifest destiny.
Q3) The equal protection clause:
A) requires all persons to be treated equally even if reasonable grounds for different classifications exist.
B) allows laws that discriminate on the basis of moral standards.
C) requires that a statute be sustained unless it is clearly arbitrary or capricious.
D) allows laws that discriminate on the basis of cultural patterns.
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Chapter 5: Government Regulation of Competition and Prices
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Q1) The Sherman Act applies only to buying and selling activities,not manufacturing and production activities.
A)True
B)False
Q2) Each of the states and the federal government have statutes and regulations that prohibit unfair methods of competition.
A)True
B)False
Q3) __________ power relates to a firm's ability to control price and exclude competitors.
A) Market
B) Competitive
C) Product
D) Production
Q4) Under the Sherman Act competitors are permitted to agree not to deal with certain buyers.
A)True
B)False
Page 7
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Chapter 6: Administrative Agencies
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Q1) An administrative agency is a governmental body charged with administering and implementing legislation.
A)True
B)False
Q2) An agency hearing is generally not subject to the rules of evidence.
A)True
B)False
Q3) A court will not reverse an agency's decision merely because the court would have made a different decision based on the same facts.
A)True
B)False
Q4) Proposed administrative regulations must be:
A) printed in the Federal Register.
B) published in the trade journals of those trades that will be affected by the proposed rules.
C) both a.and b.
D) none of the above.
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Chapter 7: The Legal Environment of International Trade
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Q1) Blocking laws prohibit the disclosure,copying,inspection,or removal of documents located in the enacting country in compliance with orders from foreign authorities.
A)True
B)False
Q2) The interests of the less-developed nations of the world are represented by the United Nations Conference on Trade and Development (UNCTAD).
A)True
B)False
Q3) Under the General Agreement on Tariffs and Trade (GATT),the principle of trade without discrimination is embodied in the most favored nation clause.
A)True
B)False
Q4) The Foreign Corrupt Practices Act prohibits improper payments to influence foreign officials.
A)True B)False
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Chapter 8: Crimes
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Q1) The Sarbanes-Oxley Act (SOX)made minor adjustments to penalties and prison sentences for executives of companies.
A)True
B)False
Q2) The Economic-Espionage Act (EEA):
A) makes it a crime to use a fraudulently obtained device to obtain money through a electronic fund transfer system.
B) makes it a crime to send unsolicited bulk emails.
C) makes it a crime to transfer proprietary files,documents and information from a computer to an unauthorized person.
D) all of the above.
Q3) A crime generally consists of:
A) an act or omission.
B) a mental state.
C) a mental state and an act or omission.
D) a mental state,an act or omission,and harm.
Q4) Generally,misdemeanors are more serious than felonies.
A)True
B)False
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Chapter 9: Torts
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Sample Questions
Q1) A shopkeeper may lose the shopkeeper's privilege if:
A) the customer is kept an unreasonable amount of time.
B) the shopkeeper acted with reasonable suspicion.
C) the shopkeeper acted with necessary force.
D) all of the above.
Q2) To determine whether the defendant is liable for negligence,a reasonable person standard is employed.
A)True
B)False
Q3) Plaintiffs are typically awarded punitive damages in negligence cases.
A)True
B)False
Q4) Truth is not a defense to defamation.
A)True
B)False
Q5) The tort of false imprisonment requires the detention of a person without his or her consent.
A)True
B)False
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Chapter 10: Intellectual Property Rights
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Q1) Once a mark is registered in accordance with federal law,the holder of the mark has the exclusive right to use the mark in perpetuity.
A)True
B)False
Q2) An owner of a copyright may license some of his or her rights to another in exchange for royalty payments.
A)True
B)False
Q3) Under the Semiconductor Chip Protection Act reverse engineering exemption,competitors may study mask works but may not use the results of that study to design their own semiconductor chip.
A)True
B)False
Q4) Written computer programs are not given the same protection as other copyrighted material.
A)True
B)False
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Page 12
Chapter 11: Cyberlaw
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Sample Questions
Q1) The Federal Trade Commission (FTC)has begun to take positions on Internet issues that are:
A) tailored to Cyberspace.
B) specific to the type of website that has the issue.
C) identical to its stances of other types of commerce issues.
D) none of the above.
Q2) Potential employers are free to do pre-hiring monitoring of applicants without their knowledge.
A)True
B)False
Q3) The key to being able to have Internet Service Providers (ISPs)release identities of those who post statements on the Internet is whether the posters were engaged in illegal or harmful activities.
A)True
B)False
Q4) Legal issues in cyberspace include appropriation and competition issues.
A)True
B)False
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Chapter 12: Nature and Classes of Contracts: Contracting on the
Internet
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Sample Questions
Q1) Quasi contracts are contracts.
A)True
B)False
Q2) In a bilateral contract,each party will be a promisor and,therefore,each party will:
A) be an obligor.
B) be able to avoid the contract.
C) not be in privity of contract.
D) be an agent for the other side.
Q3) An executory contract is an agreement by which something remains to be done by one or both parties.
A)True
B)False
Q4) A contract is essentially an agreement that creates an obligation.
A)True
B)False
Q5) With regard to a unilateral contract,the offeree does not accept the offer by express agreement,but rather by performance.
A)True
B)False
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Chapter 13: Formation of Contracts: Offer and Acceptance
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Sample Questions
Q1) Contractual intention is determined by objective standards.
A)True
B)False
Q2) When an offer has been accepted:
A) a subsequent revocation of the offer may serve to nullify the resulting contract.
B) a contract is formed,assuming that all of the other elements of a contract are present.
C) either party may withdraw from the resulting contract without consent.
D) the acceptance is executory.
Q3) An output contract is too vague to be a legally-enforceable agreement.
A)True
B)False
Q4) A(n)__________ contract is a contract to buy all requirements of the buyer from the seller.
A) output
B) essentials
C) necessaries
D) requirements
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15
Chapter 14: Capacity and Genuine Assent
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Q1) When necessary medical care is provided to a minor,a parent is liable at common law for the medical expenses provided the minor child.
A)True
B)False
Q2) An incompetent person may ordinarily avoid a contract in the same manner as a minor.
A)True
B)False
Q3) The maximum amount of time that a minor has to disaffirm a contract is:
A) one year from the date of the agreement.
B) 30 days from learning of his or her right to disaffirm.
C) the age of majority.
D) a reasonable period of time after reaching the age of majority.
Q4) A person lacks contractual capacity if:
A) the person is a chronic alcoholic.
B) the person is a drug addict.
C) because of mental impairment,the person does not comprehend that a contract is being made or understand its consequences.
D) all of the above.
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Chapter 15: Consideration
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Sample Questions
Q1) A promise that in fact does not impose any obligation on the promisor is known as an elusive promise.
A)True
B)False
Q2) A cancellation provision:
A) makes a promise illusory.
B) gives a person a free way out.
C) is limited to the terms set forth by the provision.
D) none of the above.
Q3) Which of the following can be consideration for a promise?
A) Refraining from beating one's spouse.
B) Promising to refrain from beating one's spouse.
C) Refraining from smoking cigarettes.
D) Refraining from using cocaine.
Q4) When a debtor tender a check stating "paid in full" and the creditor cashes the check,the debt:
A) is always discharged.
B) may be discharged if it is a liquidated debt.
C) may be discharged if it is a unliquidated debt.
D) is never discharged.
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Chapter 16: Legality and Public Policy
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Q1) An agreement not to compete is enforceable:
A) in the sale of a business.
B) between competitors.
C) in contracts for the sale of goods.
D) in contracts for the sale of securities.
Q2) If a contract appears to be legal on its face,it will be enforceable even if it was entered into for an illegal purpose.
A)True
B)False
Q3) Which of the following agreements represent(s)an unreasonable restraint of trade?
A) a combination to create a monopoly
B) an agreement to obtain a "corner" on a market
C) an association of merchants to increase prices
D) all of the above
Q4) Private lotteries,which generally are held to be illegal,involve three elements:
A) prize,chance,and consideration.
B) return,skill,and wager.
C) prize,skill,and consideration.
D) attractive return,minimal involvement,and skill.
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Chapter 17: Writing, Electronic Forms, and Interpretation of Contracts
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Sample Questions
Q1) The standard statute of frauds:
A) requires full disclosure in the case of consumer sales on credit.
B) requires a seller of real estate to obtain a broker's license.
C) specifies the punishment of perjury.
D) requires that a contract for the sale of land be evidenced by a writing.
Q2) When a contract proves to be a bad bargain:
A) the injured party is never bound by the terms of the contract.
B) courts will always imply terms that are necessary to avoid hardship.
C) parties are generally still bound by the terms of the contract.
D) the contract must be rewritten.
Q3) Parol evidence is not admissible to show fraud,duress or mistake.
A)True
B)False
Q4) A person who is prevented from enforcing a contract because of the statute of frauds also is prevented from recovering the value of services,property,or money furnished the other party to the oral contract.
A)True
B)False
Page 19
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Chapter 18: Third Persons and Contracts
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Q1) An assignee's rights are the same as those that had been possessed by the assignor.
A)True
B)False
Q2) If there is a time limitation or any other restriction in a contract,a third-party beneficiary:
A) may ignore it.
B) may void it.
C) is bound thereby.
D) must consent to be bound thereby before it is effective.
Q3) A person who has a right to buy on credit can transfer that right to a close relative.
A)True
B)False
Q4) An assignment is valid only if:
A) it is in a particular form.
B) it is written.
C) there is a manifestation of the intent to assign.
D) the assignment is paid for by the assignee.
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Page 20
Chapter 19: Discharge of Contracts
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Sample Questions
Q1) A contract to build a house is deemed performed when:
A) there has been substantial performance of the contract.
B) the house is approved by the city housing inspectors.
C) the house is approved by the owner's architect.
D) the house is approved by the owner.
Q2) If the parties to a contract agree to undo the agreement and return any consideration involved,the contract is discharged by:
A) mutual cancellation
B) mutual rescission.
C) novation
D) accord and satisfaction
Q3) The time for performance is typically essential in a contract for the sale of perishable property.
A)True
B)False
Q4) An offer to perform is known as a(n)__________.
A) rendering
B) offering
C) tinder
D) tender
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Chapter 20: Breach of Contract and Remedies
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Q1) Whether there has been a waiver is a question of fact.
A)True
B)False
Q2) If a plaintiff's loss involves damaged property,it is described as liquidated damages.
A)True
B)False
Q3) If one party to a contract breaks the contract,the other party generally is under a duty to stop any further performance to avoid sustaining greater damages.
A)True
B)False
Q4) If there is a breach of contract,the law requires that the other party terminate the contract and bring a lawsuit.
A)True
B)False
Q5) In some cases the court may require specific performance when there is a breach of contract.
A)True
B)False
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Chapter 21: Personal Property and Bailments
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Q1) In order for delivery to occur,a gift must actually be handed over to the recipient.
A)True
B)False
Q2) Most courts consider an engagement ring to be a conditional gift.
A)True
B)False
Q3) When a bailor sues the bailee for damages to the bailed property,who has the burden of proving fault and that such fault was the proximate cause of the bailor's loss?
A) the person in possession of the property
B) the bailor
C) the bailee
D) the jury
Q4) The person who turns over the possession of bailed property is the bailor,and the person who accepts possession is the bailee.
A)True
B)False
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Chapter 22: Legal Aspects of Supply Chain Management
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Q1) Bills of lading for intrastate shipments are governed by the UCC,while those for interstate shipments are regulated by the Federal Bills of Lading Act.
A)True
B)False
Q2) A common carrier transporting goods under a COD shipment may:
A) make delivery without first obtaining payment.
B) not make delivery without first receiving payment.
C) accept a check as payment and have no liability.
D) not avoid liability without a signed release.
Q3) A common carrier of goods has the right to:
A) make reasonable and necessary rules for the conduct of its business.
B) charge a rate that enables a fair return.
C) charge demurrage.
D) all of the above.
Q4) If a warehouse receipt provides for the delivery of the goods "to the bearer," the receipt may be negotiated by transfer of the document.
A)True
B)False
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24
Chapter 23: Nature and Form of Sales
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Q1) A writing that is offered to satisfy the statute of frauds must have been written for that purpose.
A)True
B)False
Q2) Which of the following can satisfy the statute of frauds writing requirement?
A) bills of sale
B) Letters
C) Telegrams
D) all of the above
Q3) If a contract for the sale of goods does not state the price to be paid,the:
A) contract is void because it is too indefinite to be enforced.
B) buyer is required to pay a reasonable price for the goods.
C) buyer can pay whatever price the buyer in good faith believes is a proper price.
D) seller can rightfully charge whatever price the seller in good faith believes is a proper price.
Q4) The CISG governs all contracts between parties in the countries that have ratified it.
A)True
B)False
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Chapter 24: Title and Risk of Loss
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Q1) Title to goods can be transferred without the actual delivery of the goods involved.
A)True
B)False
Q2) Under a CF contract,the seller must get the goods to a carrier and buy an insurance policy in the buyer's name to cover the goods while in transit.
A)True
B)False
Q3) Bob Corporation entered into a contract to sell parts to Zeck.The contract provided that the goods would be shipped "FOB Bob's warehouse." Bob shipped parts to Zeck that were stolen from the carrier.When Zeck checked the invoice,Zeck discovered that Bob had sent Model #20B instead of Model #20A,which the contract required.Whose loss? Why?
Q4) __________ reserve auctions are those in which the goods must be sold regardless of whether the auctioneer is satisfied with the levels of the bids.
A) With
B) Without
C) Unqualified
D) Unrestricted
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Page 26
Chapter 25: Product Liability: Warranties and Torts
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Q1) The right to sue for damages sustained from a defective product is reserved exclusively to the buyer of such goods.
A)True
B)False
Q2) With used or secondhand goods,what is fit for normal use will be:
A) a higher standard than with new goods.
B) a lower standard than with new goods.
C) the same standard as with new goods.
D) not applicable since the goods are not new.
Q3) Manufacturers who prepare goods to the buyer's specifications are under exceptionally stringent warranty obligations for fitness for a particular use.
A)True
B)False
Q4) If a merchant sells a lawn mower that will not cut any type of grass,there is a breach of the warranty of merchantability.
A)True
B)False
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Chapter 26: Obligations and Performance
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Q1) A buyer has a right to insist that all the goods be delivered at one time.
A)True
B)False
Q2) The obligations of the parties to a sales contract include:
A) the seller's duty to deliver the goods to the buyer's place of business.
B) the buyer's duty to always accept the goods.
C) the seller's duty to arrange for appropriate transport.
D) the buyer's duty to pay for the goods.
Q3) If adequate assurance of performance is not given within five (5)business days from the time of the demand for assurance,the demanding party may treat the contract as repudiated.
A)True
B)False
Q4) When a party refuses to perform a contract when the time for performance arises,an anticipatory repudiation has occurred.
A)True
B)False
Q5) The UCC does not specify the form that the assurance of performance is to take.
A)True
B)False
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Chapter 27: Remedies for Breach of Sales Contracts
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Q1) A buyer who breaches a contract after making a down payment generally will be subject to the rule that the seller may retain the full down payment as damages.
A)True
B)False
Q2) In an action by a third party against the buyer that is based on the seller's breach of warranty,the buyer must give notice of the action to the seller.
A)True
B)False
Q3) If a buyer chooses to cover the substituted goods purchased must be substantially identical to the contract goods.
A)True
B)False
Q4) The right of a buyer to cancel or rescind a sales contract is never impacted by a delay in exercising that right.
A)True B)False
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Chapter 28: Kinds of Instruments, parties, and Negotiability
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Q1) A negotiable instrument may be partly printed and partly typewritten.
A)True
B)False
Q2) Negotiation of commercial paper results in lesser rights to transferees than those rights afforded assignees of contracts under contract law.
A)True
B)False
Q3) When a drawee has signified in writing on a draft the willingness to make a specified payment,the drawee is called the acceptor.
A)True
B)False
Q4) Revised UCC Article 3 refers to drawers,indorsers,and accommodation parties as "secondary obligors."
A)True
B)False
Q5) The drawee on a check is a bank.
A)True
B)False
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Chapter 29: Transfers of Negotiable Instruments and
Warranties of Parties
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Q1) The warranties made by an unqualified indorser guarantee that payment of the instrument will be made.
A)True
B)False
Q2) The warranty liability of a qualified indorser is the same as that of an unqualified indorser.
A)True
B)False
Q3) It is worse for the holder to lose order paper than to lose bearer paper.
A)True
B)False
Q4) An indorsement "Pay to Donald Hames,Cathy Dukes" is not a valid indorsement because it does not contain the words "order" or "bearer."
A)True
B)False
Q5) A person who acquires the instrument on which the last indorsement is blank becomes the holder.
A)True
B)False
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Chapter 30: Liability of the Parties Under Negotiable Instruments
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Q1) Bad faith sometimes exists just because a transferee takes an instrument under odd circumstances.
A)True
B)False
Q2) Mabel issues a negotiable promissory note to the order of Rachel.Rachel endorses the note to Batton,who takes it as a holder in due course.Batton gives the note to his brother,Albert,as a gift.In this situation:
A) Albert will acquire Batton's rights.
B) Albert is a holder through a holder in due course.
C) both a.and b.
D) none of the above.
Q3) Under the __________doctrine,the holder has taken so many instruments from its transferor or is so closely connected with the transferor that any knowledge the transferor has is deemed transferred to the holder,preventing holder in due course status.
A) constructive partnership
B) close-connection
C) symbiotic relationship
D) collaborative relationship
Page 32
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Chapter 31: Checks and Funds Transfers
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Q1) To be effective,checks must be executed on forms that are printed expressly for that purpose and issued by a bank or other financial institution.
A)True
B)False
Q2) A bank must be given a reasonable amount of time to put a stop payment order into effect.
A)True
B)False
Q3) A consumer who notifies the issuer of an EFT card within two (2)days after learning of a loss or theft of the card can be held to a maximum liability of $500 for unauthorized use of the card;failure to notify within this time will increase the consumer's liability for losses to a maximum of $5,000.
A)True
B)False
Q4) Which of the following statements describes a check?
A) The drawer is always a bank.
B) The maker is always a bank.
C) A check is generally payable on demand.
D) A check is a particular kind of note.
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Chapter 32: Nature of the Debtor-Creditor Relationship
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Q1) The bank that tells the beneficiary that a letter of credit has been issued is known as the correspondent bank.
A)True
B)False
Q2) Which of the following is correct concerning suretyship and guaranty?
A) A surety is always liable from the moment the principal is in default.
B) A guarantor is always liable from the moment the principal is in default
C) Both a.and b.
D) None of the above.
Q3) A letter of credit usually sets a:
A) minimum money amount.
B) maximum money amount.
C) both of the above.
D) none of the above.
Q4) A surety is liable from the moment of default whereas a guarantor is ordinarily only liable if the creditor cannot collect from the principal debtor.
A)True
B)False
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34
Chapter 33: Consumer Protection
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Q1) Pursuant to the Credit Repair Organization Act of 1996,credit repair organizations must be "non-profit."
A)True
B)False
Q2) The types of provisions that make contracts unconscionable include clauses that award excessive damages or the application of credit payments across purchases over time so that the consumer is never able to pay off any goods.
A)True
B)False
Q3) Anyone promoting the sale of a real estate development that is divided into fifty (50)or more parcels of less than five (5)acres each must file a development statement with the secretary of Housing and Urban Development.
A)True
B)False
Q4) Consumer protection law often requires those dealing with consumers to make certain mandated disclosures.
A)True
B)False
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Chapter 34: Secured Transactions in Personal Property
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Q1) A security interest that is effective against third persons as well as against the buyer is called a:
A) universal security interest.
B) prohibitive security interest.
C) perfected security interest.
D) protective security interest.
Q2) When a consumer gives a creditor a security interest in forthcoming health insurance proceeds,the creditor must file a statement with the insurance company in order to have a perfected security interest.
A)True
B)False
Q3) An after-acquired property clause in a consumer security agreement can cover only goods acquired by the debtor within thirty (30)days after the creditor gave value to the debtor.
A)True
B)False
Q4) For a security interest to attach,the creditor must file a financing statement.
A)True
B)False
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Chapter 35: Bankruptcy
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Q1) Debtor's exemptions are provided under federal law and thus are the same in each state.
A)True
B)False
Q2) The debtor will be denied a discharge if:
A) the debtor had been extravagant.
B) the debtor incurred debts because of negligence.
C) the debtor received a discharge ten (10)years previously.
D) the debtor refused to obey a lawful order of the court.
Q3) Nonprofit corporations are exempt from involuntary bankruptcy proceedings.
A)True
B)False
Q4) If an involuntary bankruptcy petition is dismissed other than by consent of all petitioning creditors and the debtor,the court may award which of the following to the debtor?
A) Costs
B) Reasonable attorney fees
C) Damages
D) All of the above
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Chapter 36: Insurance
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Q1) What type of insurance is written for a specified number of years and terminates at the end of that period?
A) term insurance
B) whole life insurance
C) endowment insurance
D) universal insurance
Q2) An insurer's bad faith refusal to pay a claim generally is considered to be any frivolous or unfounded refusal to comply with the demand of a policyholder to pay according to the policy.
A)True
B)False
Q3) A contract of insurance is to be interpreted as it would be understood by a person with technical knowledge of the law or of insurance.
A)True
B)False
Q4) Exceptions to coverage are generally strictly interpreted against the insurer.
A)True
B)False
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Chapter 37: Agency
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Q1) Which of the following is not a condition necessary for ratification?
A) The agent must have purported to act on behalf of or as an agent for the identified principal.
B) The third party benefiting from the ratification must give consideration for the ratification.
C) The principal must have been capable of authorizing the act both at the time of the act and at the time it was ratified.
D) The principal must have full knowledge of all material facts.
Q2) An agent's duties must be expressly stated in the agency agreement and may not be implied from the principal's words or conduct.
A)True
B)False
Q3) For ratification to occur,the agent must have purported to act on behalf of,or as agent for,the identified principal.
A)True
B)False
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Chapter 38: Third Persons in Agency
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Q1) Different rules of law govern the vicarious liability of principals and employers.
A)True
B)False
Q2) Subject to certain limitations,a third person,on learning of the existence of an undisclosed principal,may sue the principal.
A)True
B)False
Q3) An owner ordinarily is not liable for harm caused a third person by the negligence of an employee of an independent contractor.
A)True
B)False
Q4) If the principal is not disclosed,the agent is necessarily the other contracting party and is bound by the contract.
A)True
B)False
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Chapter 39: Regulation of Employment
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Q1) "Permissive" subjects of bargaining include seniority provisions,promotions,layoff and recall provisions,no-strike no-lockout clauses,and grievance procedures.
A)True
B)False
Q2) The Immigration and Naturalization Act (INA)sets forth criminal and civil penalties against employers who knowingly hire illegal aliens.
A)True
B)False
Q3) ERISA establishes an insurance plan to protect employees when the employer goes out of business.To provide this protection,the statute created a:
A) pension surety system.
B) Pension Benefit Guaranty Corporation.
C) Pension Accrual Compensation System.
D) bond system of payment.
Q4) In older cases,the employer-employee relationship was referred to as the master-servant relationship.
A)True
B)False
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Chapter 40: Equal Employment Opportunity Law
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Q1) If a state or local Equal Employment Opportunity agency (EEO)exists,a party charging discrimination must first file a complaint with that agency before filing a charge with the EEOC.
A)True
B)False
Q2) Employers may avoid liability for "hostile work environment" sexual harassment by following a program that includes expressing strong disapproval of such conduct,advising employees how to inform the employer of complaints,and disciplining wrongdoers.
A)True
B)False
Q3) Unless justified by business necessity,physical standards such as height requirements that tend to exclude people of certain national origins violate Title VII. A)True
B)False
Q4) According to the EEOC,claims for retaliation may only be filed under Title VII. A)True
B)False
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Page 42
Chapter 41: Types of Business Organizations
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Q1) Who serve as agents of the corporation and run the "day-to-day" operations of the business?
A) officers
B) directors
C) shareholders
D) employees
Q2) A major disadvantage of the sole proprietorship is:
A) no organizational fees.
B) the sole proprietor obtains all of the profits.
C) the sole proprietor is personally liable for the debts of the sole proprietorship.
D) the sole proprietor is free to make all business decisions concerning operation of the sole proprietorship.
Q3) Arnold was the sole shareholder,president,and chief executive officer of Algernon Enterprises,Inc.Acting on behalf of Algernon,Arnold negotiated the credit purchase of inventory from Amax.The contract was signed in the name of Algernon Enterprises.Algernon never paid the sums due on the contract,and Arnold and the corporation were sued.Is Arnold personally liable to Amax?
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Chapter 42: Partnerships
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Q1) A partner has the authority to do those acts that are customary for a member of a partnership conducting the particular business of that partnership.
A)True
B)False
Q2) The Uniform Partnership Act,a codification of partnership law,has been adopted by 49 states.
A)True
B)False
Q3) A partnership may occur even though the parties did not label their relationship a partnership.
A)True
B)False
Q4) Which of the following does not result in dissolution of the partnership by operation of law?
A) The expulsion of a partner.
B) Bankruptcy of the partnership or of one of the partners.
C) The death of a partner.
D) All of these will result in dissolution of the partnership by operation of law.
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Chapter 43: LPs, LLCs, and LLPs
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Q1) A limited liability company pays federal income tax.
A)True
B)False
Q2) All owners of a limited liability company are known as officers.
A)True
B)False
Q3) Under the Revised Uniform Limited Partnership Act,a limited partner probably will not lose the protection of limited liability when the limited partner:
A) becomes a contractor for,or an agent or employee of,the limited partnership or of a general partner.
B) consults with and advises a general partner regarding the partnership business.
C) votes on partnership matters,such as dissolving and winding up the limited partnership or removing a general partner.
D) all of the above.
Q4) A limited liability company is identical to a Subchapter S corporation.
A)True
B)False
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Chapter 44: Corporate Formation
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Q1) Stock that is reacquired by the corporation that issued it is commonly called "boomerang" stock.
A)True
B)False
Q2) Bylaws are typically adopted by the managers of a corporation.
A)True
B)False
Q3) A public corporation is:
A) also know as a public utility.
B) organized for charitable and benevolent purposes or for purposes of finance,industry,and commerce.
C) established for governmental purposes and for the administration of public affairs.
D) all of the above.
Q4) A quasi-public corporation is one that is organized for charitable or benevolent purposes.
A)True
B)False
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Chapter 45: Shareholder Rights in Corporations
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Q1) As an owner of the corporation,a shareholder always has the right to inspect the books of the corporation for any purpose,regardless of whether the inspection is related to the shareholder's interest as a shareholder.
A)True
B)False
Q2) Corporate securities evidenced by a certificate are negotiable.
A)True
B)False
Q3) All shares must have a par value of at least one dollar per share.
A)True
B)False
Q4) A shareholder has:
A) an absolute right to dividends.
B) a right to dividends when declared.
C) a right to insist that dividends be declared.
D) to share equally all dividends with fellow shareholders.
Q5) A shareholder can give a proxy to vote shares only to another shareholder. A)True B)False
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Chapter 46: Securities Regulation
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Q1) A corporation may sue a director owning more than ten (10)percent of any class of corporate stock who makes a profit by selling any such stock:
A) if the sale is made more than six (6)months after the original purchase of the stock by the director.
B) only if the stock was originally acquired with fraudulent intent.
C) only if the stock was sold with fraudulent intent.
D) if the sale was made less than six (6)months after the original purchase of the stock by the director.
Q2) The Securities Exchange Act of 1934 is concerned with the secondary distribution of securities in the national securities markets and in the over-the-counter markets.
A)True
B)False
Q3) Under the Litigation Reform Act of 1995,issuers of forward-looking statements that were not knowingly false when made have a safe harbor from related lawsuits if appropriate cautionary language was included.
A)True
B)False
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Chapter 47: Accountants Liability and Malpractice
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Q1) When an accountant makes a contract to perform services,there is a duty to exercise the skill and care that are common for the accounting profession.
A)True
B)False
Q2) Which of the following statements is true?
A) Auditors are always eligible for whistleblower awards.
B) Auditors are only eligible for whistleblower awards if they report information to the board of directors and the board fails to take action.
C) Auditors are only eligible for whistleblower awards if they report conduct by a company that is intended to inhibit an SEC investigation.
D) Auditors are never eligible for whistleblower awards.
Q3) An entity not in privity with an accountant is prohibited from recovering against the accountant for malpractice when the accountant had no knowledge of any use that could affect the party.
A)True
B)False
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Chapter 48: Management of Corporations
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Q1) All of the directors of the XYZ Corporation were present at a meeting called on a Monday evening at 9 p.m.Meetings normally were held on Friday evenings at 6 p.m.At the Monday meeting,a report was made indicating that an agent of the corporation was having difficulties formalizing a contract in a foreign country.The report indicated that if funds were made available to a local political figure,the contract the company desired would be obtained.The directors unanimously voted to forward the necessary funds for this operation to the agent.An action was later commenced against the directors,alleging illegal activities.In response,the directors argue that: (1)no illegal activity had occurred;(2)if an illegal activity did occur,it was not at a valid meeting of the corporation and was therefore not an official action of the board;and (3)if they had to legally defend themselves,they would seek reimbursement from the corporation.Discuss the directors' contentions.
Q2) The officers of a corporation are liable for errors of judgment that cause a loss to the stockholders.
A)True
B)False
Q3) In dealing with the corporation,directors act in a fiduciary capacity.
A)True
B)False
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Chapter 49: Real Property
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Q1) An easement may be created only by deed.
A)True
B)False
Q2) An estate in fee simple grants ownership in property for a specific period of time.
A)True
B)False
Q3) Equipment attached to a rented building by a tenant and used in business is:
A) called a trade fixture.
B) called a business fixture.
C) called a commercial fixture.
D) not a fixture.
Q4) Recording statutes provide that a person purchasing land from the last holder of record will take title free of any unrecorded claim to the land of which the purchaser does not have notice or knowledge.
A)True
B)False
Q5) Licensees are on the premises with the permission of the landowner.
A)True
B)False
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Chapter 50: Environmental Law and Land Use Controls
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Q1) Only government agencies can sue for violations of an environmental protection control.
A)True
B)False
Q2) Which federal agency is most often authorized to adopt standards and regulations to carry out the provisions of environmental statutes?
A) FTC
B) ICC
C) EPA
D) SEC
Q3) When a zoning ordinance is adopted,any existing property used for a purpose that does not conform to the zoning ordinance:
A) must be demolished.
B) must no longer be used for a nonconforming use or purpose.
C) may be used for any use that does not conform to the zoning regulation.
D) may continue to be used for the same nonconforming use.
Q4) Solid waste disposal regulations today deal almost entirely with recycling.
A)True
B)False
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Chapter 51: Leases
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Q1) Generally,the tenant has the right to the exclusive possession of the premises during the term of the lease.
A)True
B)False
Q2) Arnold Properties,Inc.entered into a lease agreement with Janet for a residential house.Janet made four (4)subsequent monthly payments.At the end of the four (4)months,Janet learned that she was to be transferred to a new job in another state.Janet approached her landlord and explained her situation.The landlord was unsympathetic and refused to release Janet from her rent.The landlord insisted on enforcement of rental payment for the duration of the lease,which was for one (1)year.Janet had not provided for a release in her lease to cover the possibility of a job transfer.Must Janet pay for the remaining eight (8)months of rent even if she is not in physical possession of the property?
Q3) If a tenant fails to pay rent on time the landlord:
A) has an automatic lien on the tenant's personal property for the money due.
B) has the right to lock the tenant out of the property.
C) may take legal steps to evict the tenant.
D) all of the above.
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53
Chapter 52: Decedents Estates and Trusts
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Q1) Which of the following is generally not required for the testator to have testamentary capacity?
A) The testator knows the exact value of his or her estate.
B) The testator understands the writing to be a will.
C) The testator has a reasonable appreciation of the identity of relatives and friends.
D) The testator has a reasonable appreciation of the extent of the property that may exist at death.
Q2) An individual who desires to make provisions that will be effective only on his or her death is said to have:
A) probationary intent.
B) a prejudicial interest.
C) testamentary intent.
D) attestation intent.
Q3) A will cannot be modified by merely crossing out a clause and writing in something new.
A)True
B)False
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