Contracts and Sales Law Exam Solutions
Course Introduction
Contracts and Sales Law explores the foundational principles, rules, and practices governing the formation, interpretation, and enforcement of contracts, as well as the specialized rules applicable to the sale of goods under the Uniform Commercial Code (UCC). Students will study topics such as offer and acceptance, consideration, breach of contract, remedies, defenses to enforcement, and third-party rights. The course also covers the key distinctions between common law contract rules and UCC provisions related to sales transactions. Through analysis of case law and real-world examples, students will develop the skills necessary to identify and resolve legal issues arising in contractual and commercial contexts.
Recommended Textbook
Business Law Today Comprehensive 9th Edition by Roger LeRoy Miller
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45 Chapters
3172 Verified Questions
3172 Flashcards
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Chapter 1: The Legal Environment
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Sample Questions
Q1) Sam is a judge hearing the case of Local Co.v.National Corp.Applying the relevant rule of law to the facts of the case requires Sam 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) A decision on a given issue by a court is not binding on an inferior court.
A)True
B)False
Answer: False
Q3) In Sales Distribution Corp.v.Consumer Products Co.,the court decides that a precedent is incorrect or inapplicable.The court
A)may rule contrary to the precedent.
B)must apply the precedent.
C)must ask a higher court to rule on the case.
D)must refuse to decide the case.
Answer: A
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Page 3
Chapter 2: Constitutional Law
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Sample Questions
Q1) Justice For All,a political organization,files a claim to challenge a Colorado statute that limits the liberty of all persons to broadcast "annoying" radio commercials.This claim is most likely based on the right to A)equal protection of the law.
B)privacy.
C)procedural due process.
D)substantive due process.
Answer: D
Q2) Oklahoma enacts a law requiring all businesses in the state to donate 10 percent of their profits to Protestant churches that provide certain services to persons whose income is below the poverty level.PriceLess Stores files a suit to block the law's enforcement.The court would likely hold that this law violates A)no clause in the U.S.Constitution.
B)the establishment clause.
C)the free exercise clause.
D)the supremacy clause.
Answer: C
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Chapter 3: Courts and Alternative Dispute Resolution
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Sample Questions
Q1) Carol files a suit against Downwind Boat Corporation.Downwind responds that it appears from the pleadings the parties do not dispute the facts and the only question is how the law applies to those facts.Downwind supports this response with witnesses' sworn statements.This is
A)a counterclaim.
B)a motion for judgment on the pleadings.
C)a motion for summary judgment.
D)a motion to dismiss.
Answer: C
Q2) Venue is the term for the subject matter of a case.
A)True
B)False
Answer: False
Q3) During the trial phase of Fuel Corporation's suit against Gas Stations,Inc.,their attorneys engage in voir dire.This is
A)the assessment of the arguments on the issues.
B)the determination of the issues to be argued.
C)the litigation of the issues and arguments.
D)the selection of jurors.
Answer: D
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Chapter 4: Torts and Cyber Torts
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Sample Questions
Q1) If an actor's conduct creates no risk,there is no negligence.
A)True
B)False
Q2) Clyde enters Desert Decathlon,an athletic competition in which Clyde has often competed.Regarding the risk of injury,Clyde assumes the risks
A)attributable to the Decathlon in any way.
B)different from the risks normally associated with the Decathlon.
C)greater than the risks normally associated with the Decathlon.
D)normally associated with the Decathlon.
Q3) Only a foreseeable intervening event can break the connection between a wrongful act and an injury to another.
A)True
B)False
Q4) Dru tells his Excel Company coworkers that Fiona,Excel's office manager,is stealing from their employer.The statement is defamatory only if A)a coworker believes it.
B)Fiona feels as if she were falsely imprisoned.
C)the statement is true.
D)the statement is false.
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Chapter 5: Intellectual Property and Internet Law
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Sample Questions
Q1) A collective mark distinguishes products that are likely to be of interest to collectors.
A)True
B)False
Q2) Mary Kate Corporation allows Ashley Company to use Mary Kate's trademark as part of Ashley's domain name.This is
A)a license.
B)a likelihood of consumer confusion.
C)cybersquatting.
D)trademark dilution.
Q3) Ellen publishes a book titled First Place,which includes a chapter from Frank's copyrighted book Great Racecar Drivers.Ellen's use of the chapter is actionable provided A)consumers are confused.
B)Ellen's use is intentional.
C)Ellen's use reproduces Frank's chapter exactly.
D)Ellen does not have Frank's permission.
Q4) A list of customers cannot be a trade secret.
A)True
B)False
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Chapter 6: Criminal Law
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Sample Questions
Q1) Ludwig receives from Milo a marimba stolen from Nadine.To be criminally liable,Ludwig must know
A)Milo.
B)Nadine.
C)that the marimba is stolen.
D)what a marimba is.
Q2) Roy owns Roy's Cafe.A fire destroys the cafe,and Roy is arrested on suspicion of setting it to collect the insurance.At the time of the arrest,Roy is not informed of his rights.Any statement Roy makes will be admissible
A)in all circumstances.
B)in some circumstances.
C)in no circumstances.
D)regardless of the circumstances.
Q3) A crime can be committed only against persons.
A)True
B)False
Q4) Only private attorneys prosecute criminal defendants.
A)True
B)False
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Chapter 7: Cyber Crime
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Sample Questions
Q1) A cyberterrorist might target a government agency,but not a business.
A)True
B)False
Q2) Posing as Sterling Bank,Roxanne e-mails Quentin,asking him to update his personal banking information by calling a certain phone number.He makes the call and supplies the data,which Roxanne promptly sells to Porcio.This is
A)cyber stalking.
B)employment fraud.
C)phishing.
D)vishing.
Q3) Federal agencies cannot share information with foreign agencies investigating spamming.
A)True
B)False
Q4) Most states regulate spam.
A)True
B)False
Q5) Computer fraud is a state,not a federal,crime.
A)True
B)False
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Chapter 8: Ethics and Business Decision Making
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Sample Questions
Q1) Corporate ethical policies must be clearly communicated to be effective.
A)True
B)False
Q2) Dion,an accountant for Entertainment Sports,Inc.,attempts to apply a duty-based approach to ethical reasoning in conflicts that occur on the job.This approach is based on the idea that a person must
A)achieve the greatest good for the most people.
B)avoid unethical behavior regardless of the consequences.
C)conform to society's ethical standards.
D)place his or her employer's interest first.
Q3) Ethics is concerned with the fairness or justness of an action.
A)True
B)False
Q4) Halley,a lawyer on the staff of International Group,applies the utilitarian theory of ethics in business contexts.Utilitarianism focuses on
A)moral values.
B)religious beliefs.
C)the consequences of an action.
D)the nature of an action.
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Chapter 9: Nature and Classification
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Q1) A void contract is enforceable if it is in writing.
A)True
B)False
Q2) Avatar,Inc.,and Bling Corporation sign a contract in which Avatar agrees to deliver t-shirts emblazoned with video game characters in exchange for Bling's promise to pay.Avatar delivers.The contract is
A)voidable.
B)executed.
C)executive.
D)executory.
Q3) Parties can form a contract without putting the terms in writing.
A)True
B)False
Q4) A contract cannot be void if its purpose is legal.
A)True
B)False
Q5) A voidable contract is a valid contract that can be avoided at the option of at least one of the parties to it.
A)True
B)False
11
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Chapter 10: Agreement in Traditional and E-Contracts
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Sample Questions
Q1) An offer must be communicated to the offeree to be effective.
A)True
B)False
Q2) An e-contract must meet the same basic requirements as a paper contract.
A)True
B)False
Q3) Craig decides to sell his Double-D Ranch in an auction "without reserve." If Craig changes his mind at the auction,he can withdraw his property
A)only before the auctioneer announces that the ranch is sold.
B)only before the auctioneer delivers the deed to the buyer.
C)under no circumstances.
D)within thirty days after the auction.
Q4) A "sale" of software generally involves a right to use the software and a passage of ownership rights in the software to the buyer.
A)True
B)False
Q5) An agreement is evidenced by a single event: an acceptance.
A)True
B)False
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Chapter 11: Consideration
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Sample Questions
Q1) To be legally sufficient,consideration must include something of economic value.
A)True
B)False
Q2) Jean promises to pay Khalil $500 because "he does not have as much money as other people." Jean's promise is
A)enforceable because society wants people to keep their promises.
B)enforceable because the redistribution of wealth is a valid social goal.
C)not enforceable because Jean could have given more.
D)not enforceable because Khalil has not given consideration in return.
Q3) Baked Stuff Company agrees to supply Comida Café with all the corn chips that it requires for a year.A sudden blight caused by an organism hitherto unknown in the United States results in a shortage of corn,and the price rises sharply.Baked Stuff asks Comida to pay a higher price for the chips.This request is
A)invalid as an attempt at extortion or the so-called holdup game.
B)invalid under the preexisting duty rule.
C)valid as a risk ordinarily assumed in business.
D)valid due to the unforeseen difficulty of the sudden price increase.
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Page 13
Chapter 12: Capacity and Legality
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Sample Questions
Q1) A party's lack of understanding of contract terms can deprive him or her of any meaningful choice.
A)True
B)False
Q2) Jolie signs a contract with Keaton,an unlicensed physician,to perform plastic surgery-a medical procedure.This contract is enforceable by A)Jolie.
B)Jolie's medical insurance company.
C)Keaton.
D)no one.
Q3) An innocent party who has fully performed an illegal contract may sometimes enforce it against a guilty party.
A)True B)False
Q4) An exculpatory clause in an employment contract is always enforceable. A)True B)False
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14
Chapter 13: Voluntary Consent
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Sample Questions
Q1) Refer to Fact Pattern 13-2.The parties' belief about the adjacency of the property is
A)a bilateral mistake.
B)a fraudulent misrepresentation.
C)a unilateral mistake.
D)unconscionable.
Q2) A unilateral mistake of fact will usually enable a party to a contract to avoid it.
A)True
B)False
Q3) Misrepresentation of a material fact cannot occur through conduct alone.
A)True
B)False
Q4) Even if an obvious,significant clerical error exists in a written contract,the contract is enforceable.
A)True
B)False
Q5) An innocent party can enforce a fraudulent contract.
A)True
B)False
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Chapter 14: The Statute of Fraudswriting Requirement
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Sample Questions
Q1) Theo and Uma orally agree on the sale of Theo's Fitness Center to Uma and note the terms on a sheet of the center's letterhead stationery,which only Theo signs.This agreement is most likely enforceable against
A)neither Theo nor Uma.
B)Theo and Uma.
C)Theo only.
D)Uma only.
Q2) Downspout Drainage Company hires Earl to design a Web page for Downspout for $400.Before the project is started,Downspout asks Earl to trouble-shoot Downspout's computer operating system software for an additional $400.Earl agrees.The entire contract is oral.Earl completes the work,but Downspout refuses to pay.Earl files a suit against Downspout,which raises the Statute of Frauds as a defense.Can Earl recover from Downspout If so,how much,and on what basis
Q3) To be enforceable,a writing evidencing an oral contract that would otherwise be unenforceable must include every term.
A)True
B)False
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Page 16
Chapter 15: Performance and Discharge
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Sample Questions
Q1) Refer to Fact Pattern 15-2.With respect to Mutual's duties,Neil's performance most likely
A)discharges Mutual from the contract.
B)has no effect on Mutual's performance.
C)increases Mutual's duties under the contract.
D)suspends Mutual's duty to perform.
Q2) Daphne agrees to buy Eduardo's Chef's Table restaurant on the condition that Financial Credit Company approves the financing.This approval is
A)a concurrent condition.
B)a condition precedent.
C)a condition subsequent.
D)a condition conjectural.
Q3) Performance that provides a party with most of the benefits of a contract,in spite of a deviation from the terms,is complete performance.
A)True
B)False
Q4) A promise to perform under a contract may be absolute.
A)True
B)False
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Chapter 16: Breach and Remedies
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Sample Questions
Q1) A remedy is the relief provided to an innocent contracting party when the other party breaches the contract.
A)True
B)False
Q2) Lou and Mira want to rescind their contract under which Lou sold an MP3 player to Mira for $50.To rescind the contract
A)Lou must return the $50 and Mira must return the player.
B)Lou must return the $50 only.
C)Mira must return the player only.
D)the parties can keep the "benefits" of their bargain.
Q3) The injury suffered by a nonbreaching party due to the breach of a contract may be remedied by payment of compensatory damages.
A)True
B)False
Q4) If a party breaches a contract,the other party can file a criminal complaint
A)True
B)False
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18
Chapter 17: Third Party Rights
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Sample Questions
Q1) Trudy and Uri enter into a contract for the sale of Trudy's house for which Uri agrees to pay her $250,000.Uri wants to transfer his right to the ownership of the house to Val,his niece.This transfer
A)is prohibited.
B)may be oral or written.
C)must be implied.
D)must be in writing.
Q2) The vesting of contractual rights in a third party will always prevent the original parties to the contract from modifying it.
A)True
B)False
Q3) An assignee can compel the obligor to perform.
A)True
B)False
Q4) A third party beneficiary contract is formed when a contract confers a benefit on any third party.
A)True
B)False
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Page 19
Chapter 18: The Formation of Sales and Lease Contracts
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Q1) Doctors Clinic orders 1,000 bandages from Emergency Supplies Company but fails to specify the sizes.The bandages are delivered in an assortment of sizes.Doctors Clinic may
A)accept the bandages "as is" only.
B)accept the bandages "as is" or reject the entire shipment only.
C)accept only the bandages that it wants and reject the rest.
D)reject the entire shipment only.
Q2) Quinn enters into a series of agreements with Reba involving a sale of a Suite Dreams Motel,including the land,building,furnishings,shares of stock in Suite Dreams Company,and a contract with Trudy to create an ad campaign.Reba suspects that Quinn may be misrepresenting the facts.The UCC Statute of Frauds governs
A)the sale of any of the property evidenced by a writing.
B)the entire deal,including the marketer's services.
C)the sale of the furnishings priced at $500 or more.
D)the sale of the land and the building.
Q3) Article 2 of the UCC governs contracts for sales of goods.
A)True
B)False
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20
Chapter 19: Title and Risk of Loss
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Q1) Regal Recreation Sales,Inc.,allows Sandy to take a Regal boat for a "test run." Sandy tries the boat for a few hours,returns,and buys it.This is
A)a bailment.
B)a consignment.
C)a sale on approval.
D)a sale or return.
Q2) Fits-Like-A-Glove Shoes,Inc.,and Retail Footwear Stores enter into a contract for a sale of shoes.The contract indicates that the price includes transportation costs to a specific destination by including the term
A)C.I.F.
B)delivery ex-ship.
C)F.A.S.
D)F.O.B.
Q3) Unless a contract provides otherwise,it is assumed to be a destination contract.
A)True
B)False
Q4) C.I.F.stands for "cost,insurance,freight."
A)True
B)False
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Chapter 20: Performance Breach of Sales Lease Contracts
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Q1) Tender must occur at a reasonable hour and in a reasonable manner.
A)True
B)False
Q2) On a lessee's insolvency,the lessor can stop delivery of the goods.
A)True
B)False
Q3) BBQ,Inc.,makes and sells grills to Grill Mart,a retailer,which sells one of the grills to Hope,a consumer.BBQ and Grill Mart include in their contracts a limitation on consequential damages for personal injuries arising from a breach of warranty.This is prima facie unconscionable with respect to
A)all of these parties.
B)BBQ and Grill Mart,but not Hope.
C)Hope only.
D)none of these parties.
Q4) If goods fail to conform to a contract in any way,the buyer or lessee must reject them.
A)True
B)False
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22
Chapter 21: Warranties and Product Liability
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Q1) A warranty against infringement is a promise by the seller that the product was constructed in a workmanlike manner.
A)True
B)False
Q2) Sari buys a new sport utility vehicle (SUV)from Terrific Cars & Trucks,Inc.The most important factor in determining whether an express warranty is created is whether
A)Sari expresses to Terrific what she wants warranted.
B)Sari's desire for the SUV becomes part of her motivation to deal.
C)Terrific expresses to Sari what it expects of its customers.
D)Terrific promise becomes part of the basis of the bargain.
Q3) Imported Carpets Store and Jill enter into a contract for a sale of an Oriental rug.Imported Carpets,a merchant who deals in goods of the kind sold,generally describes the goods,details technical specifications,and shows a sample.Under the UCC,if these are inconsistent
A)the general description displaces the sample.
B)the general description displaces the technical specifications.
C)the sample takes precedence over the general description.
D)the sample takes precedence over the technical specifications.
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Chapter 22: Negotiable Instruments: Transferability Liability
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Q1) An order stating "I wish you would pay" is sufficient to create a negotiable instrument.
A)True
B)False
Q2) A person whose name is forged on an instrument is liable to pay only a holder in due course the value of the forged instrument.
A)True
B)False
Q3) Petra signs a check payable to Quincy,who indorses the back,gives it to Regional Credit Union,and receives cash.The transfer of the check from Quincy to the credit union is
A)an assignment.
B)a negotiation.
C)a payment.
D)a sale.
Q4) A check "payable to the order of bearer" is neither an order instrument nor a bearer instrument.
A)True
B)False
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Chapter 23: Checks and Banking in the Digital Age
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Q1) Dru signs a check "pay to the order of Eppie" drawn on Dru's account in First Federal Bank.Greta forges Eppie's indorsement.First Federal pays the check.Most likely
A)Dru will be liable for the amount.
B)Eppie will have to pay Dru for the amount.
C)First Federal will have to recredit Dru's account.
D)the Federal Reserve will reimburse all parties for their costs.
Q2) On Monday,Eve deposits in her account at Fiscal Bank a local check for $500.After 5:00 p.m.on Friday,from these funds,Eve can withdraw no more than
A)$100.
B)$400.
C)$500.
D)$600.
Q3) Tiny authorizes United Bank to make transfers from his account to make payments on his debt to Vic's Auto Dealership,which sold Tiny the car that serves as collateral for the debt.After three payments,Vic's repossesses the car and refuses to return it.Tiny phones the bank to stop the payments and follows up with a confirming letter.The bank fails to stop the next two payments,and Vic's refuses to refund anything.Can Tiny get his money from the bank Explain.
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Chapter 24: Security Interests in Personal Property
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Q1) A security agreement must be filed in person to be valid and enforceable.
A)True
B)False
Q2) A pledge is a promise by a debtor to take reasonable care of the collateral.
A)True
B)False
Q3) When a secured debt is paid,the secured party must file a termination statement regardless of the goods' classification.
A)True
B)False
Q4) To be valid,a security agreement must contain a description of the collateral.
A)True
B)False
Q5) A security interest cannot be perfected without the filing of a financing statement.
A)True
B)False
Q6) An improper filing renders a secured party unperfected.
A)True
B)False
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Chapter 25: Other Creditors Remedies and Suretyship
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Q1) If a surety pays the debt owed to a creditor,then the surety acquires any rights that the creditor had against the debtor.
A)True B)False
Q2) An artisan's lien is effective only if a creditor possesses the property subject to the lien.
A)True B)False
Q3) A guaranty contract must be in writing to be enforceable.
A)True B)False
Q4) A surety is released from his or her obligation if a debtor cannot pay a debt. A)True B)False
Q5) Dolf borrows money from Elin.Dolf defaults.To use attachment as a remedy,Elin must first
A)file a suit against Dolf.
B)lose a suit against Dolf.
C)succeed in a suit against Dolf.
D)take possession of Dolf's property.
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Chapter 26: Bankruptcy
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Q1) To adjust debt and institute a repayment plan,Rolf,a family farmer,may file a petition in bankruptcy under the Bankruptcy Code's Chapter A)1.
B)3.
C)5.
D)12.
Q2) A petition for a discharge in bankruptcy under Chapter 7 may be filed by
A)Employees Credit Union,a corporation.
B)Federal Savings & Loan Association,a corporation.
C)Goodhands Insurance Company,a corporation.
D)Huey,an independent financial adviser.
Q3) Refer to Fact Pattern 26-2.Based on the size of the studio's estate in bankruptcy,each of Jazz's creditors will get only 10 percent of their claims.Regarding the payment to Music,Inc.,the trustee may
A)not recover it because Music's claim has priority.
B)not recover it unless Music is an in?sider.
C)recover it as a fraudulent transfer.
D)recover it as a voidable preference.
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Chapter 27: International Law in a Global Economy
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Q1) Sam,or any U.S.citizen,can bring a civil suit in a U.S.court against a foreign entity for A)a tort allegedly committed in the United States only.
B)a tort allegedly committed in the United States or overseas.
C)a tort allegedly committed overseas only.
D)no purpose.
Q2) WiFi Corporation,a U.S.firm,signs a contract with Bueno Computadores,Ltd.,an Argentinean firm,for a shipment and payment for WiFi's goods.This is A)a distribution agreement.
B)a joint venture.
C)direct exporting.
D)licensing.
Q3) Foreign exchange markets comprise a worldwide system for buying and selling currency.
A)True
B)False
Q4) Restrictions on exports may include tariffs.
A)True
B)False
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Chapter 28: Agency Relationships in Business
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Q1) A fiduciary relationship allows parties to avoid obligations without liability.
A)True
B)False
Q2) A power of attorney is a written document.
A)True
B)False
Q3) Iggy hires Joy to act as his agent to purchase Kup-a-Koffee Kompany.Iggy tells Joy to reveal only that she is buying the firm on behalf of a third party,without telling Kup-a-Koffee's seller who that third party is.Iggy is
A)a disclosed principal.
B)an implied principal.
C)an undisclosed principal.
D)a partially disclosed principal.
Q4) An independent contractor's physical conduct is controlled,or subject to control,by his or her employer.
A)True
B)False
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Chapter 29: Employment, immigration, and Labor Law
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Q1) General Packaging Corporation,a U.S.employer,may hire Hilo,a noncitizen,if Hilo is
A)a lawful permanent resident of the United States.
B)an unlawful but hopefully permanent resident in the United States.
C)an unlawful but only temporary resident in the United States.
D)any of the choices.
Q2) Staffing Solutions Corporation is subject to the Social Security Act,which
A)covers only employees who do not receive employer-paid pensions.
B)governs state unemployment compensation funds.
C)provides retirement,survivors,and disability insurance.
D)regulates disputes between unions and management.
Q3) Mineral Mining Corporation is a U.S.employer.Mineral,and other U.S.employers,must perform I-9 verifications for new hires who work under the employer's direct supervision
A)excluding contractors and day workers.
B)excluding contractors but including day workers.
C)excluding day workers but including contractors.
D)including contractors and day workers.
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Chapter 30: Employment Discrimination
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Q1) An employer must hire a disabled applicant even if he or she lacks necessary job qualifications.
A)True
B)False
Q2) The Americans with Disabilities Act of 1990 defines disabled persons as persons impaired mentally or physically "in any way."
A)True
B)False
Q3) Riki files an employment,gender-based discrimination suit against Superior Corporation under Title VII,on a disparate-impact theory.To succeed,Riki must show that Superior hires fewer women than the percentage of A)qualified women in the local labor market.
B)qualified women in the United States.
C)women in Superior's state.
D)women who apply to Imperial for work.
Q4) Under current law,an employer cannot adopt an affirmative action plan.
A)True
B)False
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Page 32
Chapter 31: Sole Proprietorships and Private Franchises
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Q1) In a chain-style business operation,a franchise operates under a franchisor's trade name.
A)True
B)False
Q2) Pricey Auto Corporation gives notice to Quint that Pricey is terminating their franchise arrangement.Winding up the business requires
A)a new franchise agreement.
B)nothing more than closing immediately.
C)Quint's death,disability,or insolvency.
D)returning Pricey's property.
Q3) Rita buys a Super Grill franchise.Super Grill requires that its franchisees buy its products for every phase of their operations.Because Rita wishes to buy less expensive products,she challenges the requirement.Her best argument is probably that the requirement violates
A)the commerce clause.
B)the Equal Protection Clause.
C)the federal antitrust laws.
D)the First Amendment.
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Chapter 32: All Forms of Partnerships
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Q1) On a partner's dissociation,his or her right to participate in the management and conduct of the business terminates.
A)True
B)False
Q2) For most purposes,the law recognizes a partnership as an aggregate of its members.
A)True
B)False
Q3) Denise and Elke do business as Final Curtain Decorators.In most states,for purposes of holding title to property,this partnership would be treated as A)an aggregate of the individual partners.
B)a natural person.
C)an entity.
D)a non-existent party.
Q4) The maximum amount of money at risk by a limited partner is the amount of his or her investment in the limited partnership. A)True
B)False
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Chapter 33: Limited Liability Companies Special Business
Forms
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Q1) Fay is a member of Garden Groves LLC.Like other members of limited liability companies,Fay's liability for Garden Groves's obligations resembles the liability of A)a member of a joint venture.
B)an owner of a sole proprietorship.
C)a partner of a partnership.
D)a shareholder of a corporation.
Q2) As the beneficiary of a business trust,Kevin's liability for trust debts and obligations is
A)limited to his capital investment in the trust.
B)limited to his personal assets.
C)nothing.
D)unlimited.
Q3) The owners of an unincorporated cooperative have joint liability for its obligations. A)True B)False
Q4) A limited liability company is operated in compliance with state law.
A)True B)False
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Chapter 34: Corporate Formation and Financing
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Q1) A corporation whose shares are held by relatively few persons is a partnership.
A)True
B)False
Q2) A corporation cannot be formed without a profit-making purpose.
A)True
B)False
Q3) Any person who buys common stock acquires voting rights in a corporation.
A)True
B)False
Q4) The abbreviation "P.A." in the name "Painless Dental,P.A." means that this organization is
A)a private association.
B)a professional association.
C)a public association.
D)a publicly administered corporation.
Q5) When the corporate privilege is abused for personal benefit,the courts will require the owners to assume personal liability.
A)True
B)False
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Chapter 35: Corporate Directors,officers, Shareholders
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Q1) Luke is a director of Motor Parts Corporation.Luke makes decisions with respect to Motor Parts in good faith,in what he believes is the firm's best interest,and without violating any duties owed to it.If,despite these circumstances,Luke exercises poor business judgment,under the business judgment rule Luke is
A)immune from liability.
B)liable only to the extent that he gains as a result.
C)liable only to the extent that Motor Parts suffers as a result.
D)wholly liable.
Q2) Natalie is a shareholder of Off-Road Vehicle Company.As a shareholder,Natalie does not have
A)a right to compensation.
B)dividend rights.
C)inspection rights.
D)preemptive rights.
Q3) Corporate shareholders are the ultimate authority in every corporation.
A)True
B)False
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Chapter 36: Corporate Acquisitions, takeovers, Termination
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Q1) The results of a consolidation are different from those of a merger-both companies remain.
A)True
B)False
Q2) Federal securities laws strictly control the terms,duration,and circumstances under which most tender offers are made.
A)True
B)False
Q3) Generally,a corporation that purchases the assets of another corporation is automatically responsible for the liabilities of the selling corporation.
A)True
B)False
Q4) A corporation can extend its operations through a consolidation. A)True
B)False
Q5) Shareholder appraisal rights do not usually extend to short-form mergers.
A)True B)False
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Chapter 37: Investor Protection,insider Trading, Corp Gov
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Q1) To raise capital to form Plasticity Corporation with Quinn,Rona sells bonds and stock in other companies,and plans to register an initial public offering under the Securities Act of 1933.SEC Rule l0b-5 covers
A)most forms of securities.
B)only bonds.
C)only securities registered under the Securities Act of 1933.
D)only stock.
Q2) Bild-It-Rite Corporation is a public company that is preparing to issue securities that do not qualify for an exemption from registration.This means that Bild-It-Rite 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) Private parties cannot sue violators of Section 10(b)and Rule 10b-5.
A)True
B)False
Q4) Generally,states have antifraud patterned after federal securities law.
A)True
B)False
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Chapter 38: Administrative Law
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Questions
Q1) Nursing Home Care Company is charged with violating a rule of the Social Security Administration.Most likely,Nursing Home Care will be required to appear at a hearing presided over by
A)a federal appellate court judge.
B)a federal district court judge.
C)an administrative law judge.
D)a U.S Marshal.
Q2) Under the exhaustion doctrine,a party must feel "exhausted" about an administrative action or regulation to challenge it in court.
A)True
B)False
Q3) In most instances,an agency is not required to obtain a search warrant before a physical search for evidence is conducted.
A)True
B)False
Q4) Every portion of every meeting of a federal administrative agency does not have to be open to public observation.
A)True
B)False
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Chapter 39: Promoting Competition
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Q1) Enterprising Business Corporation may be engaging in conduct that violates the Sherman Act.To bring an action against the firm under this statute requires that its conduct have a significant impact on
A)international commerce.
B)Internet commerce.
C)interstate commerce.
D)intrastate commerce.
Q2) Conditioning the sale of one product on the purchase of another is a tying arrangement.
A)True
B)False
Q3) A joint refusal to deal with a particular person or firm is always a violation of antitrust law.
A)True
B)False
Q4) Maximum resale price maintenance agreements are subject to analysis under the rule of reason.
A)True B)False
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Chapter 40: Consumer Law
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Q1) Special Roast Coffee,Inc.,processes and sells a variety of coffee products.Special Roast's product packages must include
A)the company owner's identity.
B)the contents' net quantity.
C)the restaurants and stores in which the product is sold.
D)the type of consumer most likely interested in the product.
Q2) Bodie's application to City Bank for a credit card is denied.Bodie can obtain information on her credit history in a credit agency's files under A)no federal law.
B)the Equal Credit Opportunity Act.
C)the Fair Credit Reporting Act.
D)the Fair Debt Collection Practices Act.
Q3) Labels must be accurate.
A)True
B)False
Q4) State laws often provide more sweeping and significant protections for the consumer than federal laws.
A)True
B)False
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Chapter 41: Environmental Law
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Q1) Ski Resorts,Inc.,wants to add a new run to its facility in a national park on federal land.For this action,an environmental impact statement is A)prohibited.
B)required.
C)unnecessary.
D)voluntary.
Q2) Truckers Storage Depot,a private company,wants to build a warehouse on private land.For this action,an environmental impact statement is A)prohibited.
B)required.
C)unnecessary.
D)voluntary.
Q3) River Valley Company operates a public water supply system.River Valley must send to every household that it supplies with water an annual statement describing A)River Valley's financial situation and facts that might affect it.
B)other businesses in which River Valley is involved.
C)parties who might be held liable if pollution problems arise.
D)the source of the water,and any contaminants and health concerns.
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Chapter 42: Liability of Accountants Other Professionals
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Q1) Longway Trucking,Inc.,files a suit against Midge,an accountant,under the antifraud provisions of the Securities Exchange Act of 1934 and Rule 10b-5 of the Securities and Exchange Commission.To succeed in recovering damages,Longway must show that Midge
A)acted with scienter.
B)bought or sold a security.
C)is incompetent.
D)knows nothing about securities.
Q2) Bertha is an accountant with Chocolate Shoppes Corporation.Doral buys Chocolate stock and loses money on the investment.To recover from Bertha under Section 10(b)of the Securities Exchange Act of 1934 and Rule 10b-5 of the Securities and Exchange Commission,Doral must prove
A)nothing.
B)scienter,fraud,and reliance only.
C)scienter,fraud,reliance,and materiality only.
D)scienter,fraud,reliance,materiality,and causation.
Q3) A qualified opinion must be specific and identify the reason for the qualification.
A)True
B)False
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Page 44
Chapter 43: Personal Property and Bailments
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Q1) GR8 Stores,Inc.,hires Haul-Way Company,a common carrier,to transport fifty large-screen HDTVs from San Diego to Phoenix.En route,a pothole causes the truck to crash,damaging the goods.Liability for the damage most likely rests with
A)GR8 Stores and Haul-Way.
B)GR8 Stores only.
C)Haul-Way only.
D)neither GR8 Stores nor Haul-Way.
Q2) Property voluntarily placed by its owner and inadvertently forgotten is mislaid property.
A)True
B)False
Q3) A finder acquires title to lost property good against the whole world,including the original owner.
A)True
B)False
Q4) A bailment must be in writing to be valid.
A)True
B)False
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Chapter 44: Real Property and Landlord-Tenant Law
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Q1) A fixed-term tenancy terminates at the end of the specified period without notice.
A)True
B)False
Q2) Mineral Products Corporation,which owns no land,has a right to mine the copper from Natural Resource Company's land.Mineral's right is
A)a leasehold estate.
B)a license.
C)an easement.
D)a profit.
Q3) Dora leases a house from Evan for a two-year term.To ensure the validity of their lease,it should include
A)a description of the premises.
B)a due date for the payment of the property taxes.
C)a requirement that Dora perform structural repairs to the house.
D)a requirement that Evan carry liability insurance.
Q4) A fixed-term tenancy is created when a lease does not specify its duration.
A)True
B)False
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Chapter 45: Insurance,wills,and Trusts
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Q1) Don executes a will leaving half of his farm to his spouse Elsie and the rest to his sons,Frank and Greg,in equal shares.The will disinherits a third son,Hal.Don and Elsie divorce,but Don dies before changing his will.Under the Uniform Probate Code
A)Elsie receives half of the farm,and Frank and Greg share the rest.
B)Elsie receives half of the farm,and Frank,Greg,and Hal share the rest.
C)Frank and Greg receive the entire estate in equal shares.
D)the state inherits the entire estate.
Q2) Under a coinsurance clause,a homeowner who insures a home for 80 percent of its value can recover only 80 percent of the cost for damage to it.
A)True
B)False
Q3) Mason creates a trust to prevent his son,Newt,the beneficiary,from assigning his rights to future payments of income from the trust.This is
A)a charitable trust.
B)a constructive trust.
C)a spendthrift trust.
D)an illegal trust.
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Page 47