Contracts and Sales Law
Pre-Test Questions
Course Introduction
Contracts and Sales Law explores the fundamental principles governing legally enforceable agreements and the sale of goods. The course covers contract formation, interpretation, performance, breach, and remedies, as well as the rights and obligations of parties under the Uniform Commercial Code (UCC) and relevant case law. Students analyze issues such as offer and acceptance, consideration, capacity, defenses to enforceability, and third-party rights, along with warranties, risk of loss, and remedies unique to sales transactions. Practical examples and case studies are used to develop skills in applying legal concepts to real-world commercial scenarios.
Recommended Textbook
Business Law Principles for Todays Commercial Environment 4th Edition by David P. Twomey
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52 Chapters
2754 Verified Questions
2754 Flashcards
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Chapter 1: The Nature and Sources of Law
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Q1) The law could best be described as:
A)only statutory in nature.
B)only the creation of our courts.
C)a collection of rights.
D)none of the above.
Answer: C
Q2) Rights always stand alone,without any duties.
A)True
B)False
Answer: False
Q3) Your private life is protected from intrusions by other people by:
A)the Fourth Amendment of the United States Constitution.
B)the Equal Protection Clause.
C)court decisions of the United States Supreme Court.
D)local ordinance.
Answer: C
Q4) Both Congress and state legislatures enact statutory law.
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) Billy has a dispute with Sleepdigit Bedspring Company over a number of beds Billy recently purchased from Sleepdigit for use in his hotel.Billy needs to decide whether to pursue litigation or employ an alternative means of dispute resolution.What advantages are most often associated with alternative dispute resolution? Which choice would be most appropriate in this case?
Answer: The most frequently cited advantages of alternative dispute resolution,compared to litigation,are a)cost savings and b)time savings.As far as a specific method of alternative dispute resolution,arbitration might be the best approach for Billy in his commercial dispute with Sleepdigit; in addition to the cost-saving and time-saving advantages of alternative dispute resolution,arbitration has a long history of success in the area of commercial contracts.
Q2) Who is entitled to file a motion to dismiss?
A)defendant only
B)plaintiff only
C)both plaintiff and defendant
D)none of the above
Answer: A
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Page 4
Chapter 3: Business Ethics, social Forces, and the Law
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Sample Questions
Q1) Under United States law,the legal owner (titleholder)of property is free to engage in any use of the property that he or she may desire.
A)True
B)False
Answer: False
Q2) Laws that prohibit mislabeling of food,speeding,and sale of alcohol to minors exist primarily:
A)for protection of the person.
B)for protection of public health,safety,and morals.
C)for protection of property.
D)for protection of the state.
Answer: B
Q3) Kant's theory understood that sometimes you have to use someone to achieve a one-sided benefit.
A)True
B)False
Answer: False
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Chapter 4: The Constitution As the Foundation of the Legal Environment
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Q1) When it comes to the constitution,stability is more important than flexibility.
A)True
B)False
Q2) All current rights against governmental intrusion are expressly stated in the Constitution.
A)True
B)False
Q3) The Constitution took certain powers away from the national government and gave them to the state governments.
A)True
B)False
Q4) The "living" Constitution has which of the following characteristics?
A)strong federal government
B)strong president
C)various administrative agencies with significant power
D)all of the above
Q5) The purpose of the first ten amendments to the Constitution was to enlarge the power of the federal government.
A)True
B)False
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Chapter 5: Government Regulation of Competition and Prices
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Sample
Questions
Q1) Each of the states and the federal government have statutes and regulations that prohibit unfair methods of competition.
A)True
B)False
Q2) The Robinson-Patman Act:
A)prohibits charging different prices to different buyers when the margin costs are the same.
B)allows sellers to offer incentives and bonuses to certain customers.
C)allows sellers to refuse to deal with anyone for any reason.
D)all of the above.
Q3) A manufacturer having a restriction on territories in the form of a sole outlet is a per se violation.
A)True
B)False
Q4) Under the Sherman Act competitors are permitted to agree not to deal with certain buyers.
A)True
B)False
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Chapter 6: Administrative Agencies
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Sample Questions
Q1) Which of the following is true about judicial review of agency action?
A)Judges tend to substitute their own judgment for that of the agency.
B)Courts will reverse agency decisions merely because the court would have made a different decision based on the same facts.
C)Courts will reverse a decision if they disagree with the legal interpretation.
D)All of the above
Q2) The Federal Register lists all administrative regulations,presidential proclamations,and executive orders on a semiannual basis.
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) Meetings are to be open to the public under:
A)the Administrative Protection Act.
B)the Sunshine Act.
C)the Freedom of Information Act.
D)none of the above.
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Chapter 7: The Legal Environment of International Trade
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Q1) In antidumping cases:
A)The International Trade Administration determines whether foreign goods are being sold in the United States at less than fair value (LTFV).
B)The International Trade Commission determines if there is an injury to a U.S.industry as a result of such sales.
C)Remedial action will be taken only if findings of both LTFV sales and injury are present.
D)All of the above
Q2) The transfer of technology rights in a product to allow another firm in a foreign country to produce a product in return for royalties or other specified payments is called:
A)exporting.
B)licensing.
C)agency representation.
D)subsidiary sales.
Q3) United States antitrust laws can protect United States exports.
A)True
B)False
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Chapter 8: Crimes
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Q1) The criminal law of all states is the same because all states have adopted a uniform criminal code.
A)True
B)False
Q2) The Racketeer Influenced and Corrupt Organizations (RICO)Act authorizes both criminal and civil actions.
A)True
B)False
Q3) Crimes and criminal punishment guidelines are specified in detailed criminal codes and statutes.
A)True
B)False
Q4) The unauthorized use of a computer belonging to someone else is:
A)a crime in all states.
B)a crime in some states.
C)not a crime in any state.
D)a crime under federal law only.
Q5) An act that is a felony in one state be a felony in all states.
A)True
B)False
10
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Chapter 9: Torts
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Sample Questions
Q1) Plaintiffs are typically awarded punitive damages in negligence cases.
A)True
B)False
Q2) Comparative negligence:
A)has been rejected by most of the states.
B)allows a comparison of negligence between plaintiff and defendant.
C)only applies when the plaintiff has signed a release.
D)is a bar to recovery under common law.
Q3) In order to establish the tort of false imprisonment,a person must show imprisonment for:
A)any amount of time.
B)at least one minute.
C)at least ten minutes
D)at least one hour.
Q4) Strict liability is one type of tort.
A)True
B)False
Q5) If a crime does not hurt an identifiable person,it is not a tort.
A)True
B)False
11
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Chapter 10: Intellectual Property Rights
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Sample Questions
Q1) A copyright bestows upon the creator of an artistic or literary work a federal statutory right to exclusively:
A)use the work.
B)reproduce the work.
C)display the work.
D)all of the above.
Q2) The type of patent that may be granted to developers of new and non-obvious ornamental features of manufactured articles is called a(n):
A)design patent.
B)functional or utility patent.
C)improvement patent.
D)plant patent.
Q3) To be patentable,an invention must be new and not obvious to a person of ordinary knowledge and skill in the art or technology to which the invention is related.
A)True
B)False
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Chapter 11: Cyberlaw
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Sample Questions
Q1) Statutory protections for privacy in cyberspace:
A)include state laws that are difficult to enforce against web sponsors with no presence in the state.
B)often address specific issues such as financial information rather than general protections .
C)may not protect an individual from federal agency "routine use".
D)all of the above.
Q2) The law of real property is included in those categories of legal issues covered by cyberlaw.
A)True
B)False
Q3) Bon,located in Florida,desires to enter into a contract with Jon,a resident of Maine.Neither wishes to meet face-to-face,as both are busy with a variety of business interests.Instead,they wish to form a contract over the Internet.Would a contract formed over the Internet be valid?
Q4) Federal law now recognizes the validity of electronic signatures.
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) Only the parties who signed the original contract can have rights with respect to that contract.
A)True
B)False
Q2) A contract is essentially an agreement that creates an obligation.
A)True
B)False
Q3) Negotiable instruments are:
A)formal contracts.
B)informal contracts.
C)option contracts.
D)first-refusal agreements.
Q4) A void contract is one that is otherwise valid but may be rejected or set aside by one of the parties.
A)True
B)False
Q5) An offeror makes an offer to an offeree.
A)True
B)False
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Chapter 13: Formation of Contracts: Offer and Acceptance
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Sample Questions
Q1) A counteroffer is a(n):
A)acceptance of the original offer.
B)rejection of the original offer.
C)acceptance of the original offer and an invitation to further negotiate.
D)a revocation of the original offer.
Q2) If not an offer,the first statement made by one of two persons is most properly termed a(n):
A)option.
B)acceptance.
C)invitation to negotiate.
D)contract.
Q3) If an offer is indefinite or vague,no contract arises from an attempt to accept it.
A)True
B)False
Q4) Acceptance of an offer to form a unilateral contract need not be communicated to the offeror to be effective.
A)True
B)False
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Chapter 14: Capacity and Genuine Assent
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Sample Questions
Q1) I believe that I own a very valuable vase.I tell you this information and state that I will sell it to you for $800.I sell the vase to you,and you later find out that the vase is worth only $200.Fraud:
A)has occurred.
B)has not occurred.
C)can always be based upon a statement of opinion or value.
D)none of the above.
Q2) In order for fraud liability to arise,the listener must actually rely on the false statement of fact.
A)True
B)False
Q3) Factual incapacity is imposed because of the class or group to which a person belongs.
A)True
B)False
Q4) Fraud requires a misstatement of either a fact or an opinion.
A)True
B)False
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Page 16
Chapter 15: Consideration
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Q1) Sara Student wished to pay off her $5,000 student loan.If she sends in a check for $3,000 and the creditor cashes the check,the debt will be fully satisfied provided the check is marked "paid in full."
A)True
B)False
Q2) Dave Tompkins was up late one night watching a television campaign for a charitable organization.The organization was seeking donations in order to construct a new building that would serve as the organization's headquarters.One of Tomkins' favorite performers appeared to promote the campaign,and this prompted Dave to telephone in a pledge.Tomkins pledged $10,000 to the charity and,feeling good about his action,finally went to sleep.The next morning,Tomkins regretted making the pledge because its enforcement would cause great personal financial hardship.Will the charity be able to legally enforce the pledge Tomkins made? If so,why might the charity choose not to enforce a lawful pledge?
Q3) If a merchant receives and cashes a check for partial payment of a debt and the check bears the notation that the amount is in full payment of a disputed sum,the total debt is released.
A)True
B)False
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Page 17
Chapter 16: Legality and Public Policy
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Sample Questions
Q1) In an employment contract,agreements not to compete are:
A)illegal
B)uniformly held to be in the public interest and therefore legal
C)valid only if the restriction protects the employee
D)valid,if the restriction is reasonable and necessary for the protection of the former employer
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) Agreements that are contrary to public policy are not binding.
A)True
B)False
Q4) If a contract can be interpreted in two ways,one legal and the other illegal,the court will assume that the legal meaning was intended unless the contrary is clearly indicated. A)True
B)False
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Chapter 17: Writing, electronic Forms, and Interpretation of Contracts
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Sample Questions
Q1) If words and numbers contradict each other in a contract,the rule of construction favors the words.
A)True
B)False
Q2) An oral contract to sell a house is binding if:
A)the agreement is witnessed by a member of the clergy.
B)there is a tape recording of the agreement.
C)the buyer paid the price and received the deed of conveyance.
D)the seller is a merchant.
Q3) The writing required by the statute of frauds in the case of a contract for the sale of land must:
A)be addressed to the other party to the contract.
B)be made with the intent to create a writing to satisfy the statute of frauds.
C)be signed at the end of the writing.
D)describe the land to be sold.
Q4) The parol evidence rule does not prohibit proof that:
A)the contract was thereafter modified.
B)conduct exists that violates the law.
C)the written contract is not a binding agreement.
D)all of the above.
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Chapter 18: Third Persons and Contracts
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Q1) Which of the following is not a third-partybeneficiary contract?
A)a contract in which A hires B to give A's niece piano lessons
B)a contract to repair sewers in front of Macy's Department Store
C)a life insurance contract with a named beneficiary
D)a contract between X and Y for Y to install a new door on Z's home
Q2) The rights of a third-party beneficiary always can be destroyed without that beneficiary's consent.
A)True
B)False
Q3) The making of an assignment __________ the assignor of any obligation of the contract.
A)relieves
B)conditionally relieves C)does not relieve D)discharges
Q4) A person entitled to receive money may generally assign that right to another person.
A)True B)False
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Chapter 19: Discharge of Contracts
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Q1) 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
Q2) When a building contractor has substantially performed a contract to construct a building,the contractor is entitled to recover the full contract price.
A)True
B)False
Q3) A party who in good faith has provided substandard performance of a contract may sue to recover the payment specified in the contract.
A)True
B)False
Q4) By operation of law,a party can be discharged in bankruptcy from debts.
A)True
B)False
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21
Chapter 20: Breach of Contract and Remedies
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Sample Questions
Q1) Punitive damages are generally recoverable in contract actions.
A)True
B)False
Q2) The rule of mitigation of damages requires that a party injured by a breach of contract must:
A)take any and all steps possible to reduce the damages that will be sustained because of the breach.
B)discharge the contract before filing suit for breach.
C)hire someone else to perform the contract.
D)take reasonable steps to reduce the damages that would otherwise be sustained because of the breach.
Q3) Which is NOT a correct statement concerning a liquidated damages clause?
A)If the clause is enforced,the injured party can collect no more than the amount specified.
B)If the clause is enforced,the injured party has a choice between compensatory damages or liquidated damages.
C)It must be possible to determine actual damages.
D)The amount of liquidated damages are established by the parties to the contract.
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Chapter 21: Personal Property and Bailments
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Q1) Joint tenancy and tenancy in common both feature the right of survivorship.
A)True
B)False
Q2) A bailee's lien gives the bailee the right to keep possession of the bailed property until reasonable charges for storage and/or repairs are paid.
A)True
B)False
Q3) In order for delivery to occur,a gift must actually be handed over to the recipient.
A)True
B)False
Q4) A bailee's interest in the bailed property can be characterized as:
A)ownership.
B)a fractional proprietary interest.
C)possession.
D)constructive ownership.
Q5) Most courts consider an engagement ring to be a conditional gift.
A)True
B)False
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Chapter 22: Legal Aspects of Supply Chain Management
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Q1) A factor is a consignee.
A)True
B)False
Q2) Contract clauses that limit a common carrier's liability are void as contrary to public policy.
A)True
B)False
Q3) A warehouser is an insurer of goods.
A)True
B)False
Q4) A warehouser that holds itself out to serve the public generally without discrimination is called a(n):
A)public warehouser.
B)general warehouser.
C)nondiscriminatory warehouser.
D)ordinary warehouser.
Q5) The rights of a transferee of a negotiable bill of lading are defeated if the goods have been stopped in transit.
A)True
B)False
24
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Chapter 23: Nature and Form of Sales
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Q1) Under Article 2 of the UCC,in a situation where it is clear that the parties intended a contract,but a term in the acceptance conflicts with a term in the offer:
A)there is no contract.
B)the acceptance is viewed entirely as a counteroffer.
C)there is a contract for the terms of the offer and acceptance that are consistent,but the conflicting terms cancel out.
D)there is a contract,and the conflicting term in the offer is part of the contract.
Q2) To satisfy the statute of frauds,the writing must be signed and must include the price of the goods.
A)True
B)False
Q3) Article 2 of the Uniform Commercial Code applies to the sale of:
A)corporate stocks.
B)U.S.Treasury bonds.
C)goods.
D)insurance policies.
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Chapter 24: Title and Risk of Loss
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Q1) If shipped goods are damaged or destroyed after risk of loss passes:
A)the contract is avoided
B)the seller has breached the contract
C)the buyer has the option to accept or not accept the goods
D)it is the buyer's loss
Q2) Someone who finds and resells stolen property passes on a good title to a good faith purchaser.
A)True
B)False
Q3) Goods that are not yet in existence or are not yet owned by the seller are__________ goods.
A)fungible
B)nonexistent
C)future
D)contingent
Q4) A consignment sale is treated as a sale or return under UCC Article 2.
A)True
B)False
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Chapter 25: Product Liability: Warranties and Torts
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Q1) An express warranty is basically any statement of fact or promise made about the goods that becomes part of the basis of the bargain.
A)True
B)False
Q2) The federal regulation of express warranties:
A)applies only to limited warranties.
B)applies to a seller who makes a written express warranty for a consumer product costing more than $10.
C)requires all express warranties to be full warranties.
D)requires an implied warranty to be designated as either full or limited.
Q3) A seller cannot be held liable for the breach of an express warranty if the seller honestly believed that the warranted statement was true.
A)True
B)False
Q4) The warranties of both merchantability and fitness for a particular purpose exist under the Convention on Contracts for the International Sale of Goods (CISG).
A)True
B)False
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Chapter 26: Obligations and Performance
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Q1) 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.
Q2) A buyer has a right to insist that all the goods be delivered at one time.
A)True
B)False
Q3) The UCC imposes a higher degree of good faith on a merchant seller or buyer of goods than on a nonmerchant seller or buyer of goods.
A)True
B)False
Q4) If a contractually-specified mode of transportation is not available,the:
A)contract is automatically voided.
B)seller must make delivery by a commercially-reasonable substitute.
C)buyer must arrange to pick up the goods.
D)seller must make personal delivery.
Q5) The standard for rejection requires that any defect in the good be material.
A)True
B)False
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Chapter 27: Remedies for Breach of Sales Contracts
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Q1) Under both the CISG and the UCC,a buyer may reject goods only if the tender of the goods is a fundamental breach of the contract.
A)True
B)False
Q2) A liquidated damages clause is a contractual provision stipulating the amount of damages to be paid in the event of default or breach of contract.
A)True
B)False
Q3) A buyer may revoke acceptance because of a seller's failure to complete promised repairs.
A)True
B)False
Q4) Which of the following is not an example of incidental damages recoverable by a seller?
A)expenses for the care of the goods after the buyer's breach
B)expenses for transportation of the goods after the buyer's breach
C)expenses for resale of the goods after the buyer's breach
D)expenses for the attorney's fees after the buyer's breach
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Chapter 28: Kinds of Instruments, parties, and Negotiability
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Q1) An instrument is order paper when by its terms it is payable to the order of any person described in it,or to a person or order.
A)True
B)False
Q2) Instruments are negotiable when they contain the terms required by contract law.
A)True
B)False
Q3) A(n)__________ instrument's terms are enforceable,but the instrument is treated simply as a contract governed by contract law.
A)nonnegotiable
B)negotiable
C)accommodation
D)secondary
Q4) When ambiguous language exists:
A)words control figures if a conflict exists.
B)handwriting supersedes typewritten words or terms.
C)typewritten terms supersede preprinted terms.
D)all of the above.
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Chapter 29: Transfers of Negotiable Instruments and
Warranties of Parties
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Q1) A transferor may be able to set aside a negotiation obtained by fraud or duress unless:
A)a minor is involved.
B)the negotiation was part of an illegal transaction.
C)the negotiation was beyond the powers of the corporation.
D)the instrument has been acquired in the meantime by a holder in due course who did not know of the misconduct.
Q2) Sue is an employee at an ABC store.One of Sue's duties is to prepare the bank deposit at the end of the business day.Sue had a very busy day and made a few mistakes.All of the checks,except two,were indorsed with the stamp "ABC,Inc." that ABC had provided.The bank received the deposit and noticed the lack of indorsement on the two checks.In addition,three of the checks that Sue was to include with the deposit were lost in the parking lot after closing.Phil found the checks and deposited them into his personal account.What is the effect of ABC's indorsement on the lost checks and the lack of indorsement on the two deposited checks?
Q3) Bearer paper may only be negotiated by the actual transfer of possession of the instrument.
A)True
B)False
Page 31
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Chapter 30: Liability of the Parties Under Negotiable Instruments
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Q1) Fraud in the inducement is a:
A)limited defense not available against a holder in due course.
B)universal defense available against all holders.
C)limited defense available against all holders.
D)universal defense not available against a holder in due course.
Q2) In general,transferees who are aware of facts that would make a reasonable person ask questions are deemed to know what they would have learned if they had asked questions.
A)True
B)False
Q3) Bad faith sometimes exists just because a transferee takes an instrument under odd circumstances.
A)True
B)False
Q4) A holder in due course must meet all of the following conditions except:
A)giving value for the instrument.
B)taking the instrument when it is overdue.
C)acting in good faith.
D)being ignorant of defenses and adverse claims.
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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) 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.
Q3) If oral,a stop payment order is binding on the bank for __________ days unless confirmed in writing within that time.
A)five (5)
B)seven (7)
C)fourteen (14)
D)thirty (30)
Q4) A tender occurs when the holder of a check or other consumer transaction authorization demands payment.
A)True
B)False
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Chapter 32: Nature of the Debtor-Creditor Relationship
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Q1) A letter of credit:
A)cannot last for more than five years.
B)may be in either oral or written form.
C)can only be issued by a bank.
D)must be in writing and signed by the issuer.
Q2) Contribution is the right of a co-obligator to demand that other obligator(s)pay their fair share of the debt.
A)True
B)False
Q3) Bailment given as security for the payment of a debt is a(n):
A)pledge
B)contribution
C)guaranty
D)indemnity
Q4) A guaranty of payment creates a(n):
A)contract of surety.
B)contract of credit.
C)letter of credit.
D)absolute guaranty.
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Chapter 33: Consumer Protection
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Q1) The Fair Credit Reporting Act applies only to consumer credit.
A)True
B)False
Q2) Samuel signed a contract to purchase furniture on credit.The contract clearly set forth in bold print all charges included in the cost of the credit,including the interest rate and annual percentage rate.The seller informed Samuel that the seller regularly sold these contracts to a finance company that paid it immediate cash and then collected from the debtors.The seller further advised that the finance company did not want "the headache" of determining the validity of consumer complaints and that therefore the contract provided that the consumer waived all defenses concerning the furniture against the finance company.The contract expressly provided that the seller would remain responsible for any non-conformities in the furniture or breaches of contract on its part.The furniture was defective,but the finance company is demanding that Samuel make the payments to it required by the contract and resolve its disputes with the seller of the furniture.Samuel consults you regarding his rights.What is your response?
Q3) A consumer may waive all defenses otherwise provided for by law.
A)True
B)False
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Chapter 34: Secured Transactions in Personal Property
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Q1) Collateral may change its form and character during the course of a security agreement.
A)True
B)False
Q2) Generally,a secured creditor who has repossessed collateral may retain the collateral and cancel the debt.
A)True
B)False
Q3) A(n)__________ statement is a document,which may be requested by a paid-up debtor,stating that a security interest is no longer claimed under the specified financing statement.
A)execution
B)discharge
C)termination
D)hold harmless
Q4) Consumer goods are classified into different categories based on the debtor's intended use,not the physical characteristics of the goods.
A)True
B)False
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Chapter 35: Bankruptcy
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Q1) A reorganization plan may,in certain instances,provide for the rejection of executory contracts or collective bargaining agreements.
A)True
B)False
Q2) Which of the following is a correct legal conclusion regarding reorganization bankruptcy?
A)Individuals,partnerships,and corporations in business may be reorganized.
B)A plan for reorganization may be filed only by a committee of creditors.
C)When a reorganization plan is confirmed by the court,the creditors can revert back to their original position if they are not satisfied with the plan.
D)Individuals within a particular class of creditors can be treated differently if they object to the reorganization plan.
Q3) Creditors who hold security for payment,such as a lien or a mortgage on the debtor's property,are less affected by the debtor's bankruptcy.
A)True
B)False
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Chapter 36: Insurance
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Q1) If a man names his wife as beneficiary of his life insurance and the two are thereafter divorced,the insurance policy:
A)is canceled automatically.
B)is not affected.
C)is divided into two policies on the life of each for one-half the amount of the original policy.
D)becomes the property of the former wife.
Q2) Exceptions to coverage are generally strictly interpreted against the insurer. A)True
B)False
Q3) When a provision of an endorsement conflicts with a provision of a policy,the endorsement controls.
A)True B)False
Q4) Sylvia Jurgen operates a florist shop.During a particularly busy day,she allowed one of her employees,Terry Lioni,to use her (Jurgen's)personal car to assist with deliveries.Lioni had just obtained his driver's license.Lioni was involved in an accident that was his fault.Would Jurgen's liability insurance pay in this situation?
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Chapter 37: Agency
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Q1) An agent has implied __________ authority to do any act that usually accompanies the transaction for which the agent is authorized to act.
A)express
B)apparent
C)customary
D)incidental
Q2) The burden of proving the existence of an agency relationship rests on the person who seeks to benefit by such proof.
A)True
B)False
Q3) The term apparent authority is used when there is:
A)no interaction between the principal and third persons.
B)actual authority.
C)only the appearance of authority and that appearance of authority was created by the principal.
D)only the appearance of authority and that appearance of authority was created by the agent.
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Chapter 38: Third Persons in Agency
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Q1) The liability of an agent to a third person depends on the existence of authority and the manner of executing the contract.
A)True
B)False
Q2) Payment to an authorized agent is:
A)payment to the principal only if the agent remits the payment.
B)payment to the principal if the third person informs the principal.
C)payment to the principal,provided the agent does not misappropriate the payment.
D)payment to the principal.
Q3) When a business owner uses an independent contractor to perform nonhazardous work,the owner ordinarily is:
A)not liable for harm to third persons or their property.
B)not bound to contracts made by the independent contractor.
C)not liable for the negligence of employees of the independent contractor.
D)all of the above.
Q4) A principal may be liable to a third person for an agent's unauthorized contracts.
A)True
B)False
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Chapter 39: Regulation of Employment
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Q1) Employers are required to maintain records of certain occupational illnesses and injuries by:
A)ECHO.
B)ESCHA.
C)OSHA.
D)ECOT.
Q2) In older cases,the employer-employee relationship was referred to as the master-servant relationship.
A)True
B)False
Q3) Workers' compensation statutes do not typically provide for:
A)immediate medical benefits.
B)prompt periodic wage replacement.
C)a death benefit.
D)punitive damages.
Q4) An employee is hired to work under the control of the employer and the employer-employee relationship requires the consent of both parties.
A)True
B)False
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Chapter 40: Equal Employment Opportunity Law
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Q1) The Americans With Disabilities Act prohibits employers from discriminating against disabled individuals,but does not require that any accommodations be made for such individuals.
A)True
B)False
Q2) 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
Q3) It is not unlawful for an employer to hire employees on the basis of religion,sex,or national origin in those instances where religion,sex,or national origin is a bona fide occupational qualification (BFOQ)reasonably necessary to the normal operation of a particular enterprise.
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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Chapter 41: Types of Business Organizations
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Q1) A franchise agreement in which the franchisor grants the franchisee authority to manufacture and sell products under the trademark(s)of the franchisor is known as a manufacturing or processing franchise.
A)True
B)False
Q2) The major advantage to investors in a corporation stems from the fact that their risk of loss is limited to the amount of their investment.
A)True
B)False
Q3) Sally Gomez is interested in starting a new business.Although Gomez has developed her business plan and is ready to implement her ideas,she lacks the necessary finances to begin her new business.Along with a lack of finances,Gomez worries about the potential liability involved with starting a new business.Gomez would hate to lose all that she has personally accumulated to date in the event of a successful lawsuit against her.She is considering a sole proprietorship,a partnership,or a corporation as the organizing structure of her new venture.Which type of business would best serve Gomez's needs at this given time?
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Chapter 42: Partnerships
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Q1) A combination of two or more persons for a common nonprofit purpose is commonly an unincorporated association.
A)True
B)False
Q2) All partners must contribute money to be treated as partners.
A)True
B)False
Q3) In determining whether a partnership exists,which of the following factors is not evidence of a partnership?
A)Shared profits and losses
B)Co-ownership of property
C)Equal control of the business
D)All of these are evidence of partnership.
Q4) Dissolution of a partnership:
A)always means that the business has ended.
B)increases the authority of the partners.
C)both a.and b.
D)neither a.nor b.
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Chapter 43: LPs, LLCs, and LLPs
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Q1) It is impossible to form a business in a manner that allows for single taxation and limited liability.
A)True
B)False
Q2) The owners of a limited liability company are known as: A)members.
B)partners.
C)contributors.
D)electors.
Q3) The dissolution and winding up of a limited partnership is governed by the same principles applicable to a __________.
A)"Subchapter S" corporation.
B)limited liability company.
C)general partnership.
D)none of the above.
Q4) Courts tend to resolve ambiguities in limited partnership agreements against the general partners.
A)True
B)False
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Chapter 44: Corporate Formation
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Q1) When two corporations merge:
A)their separate existences cease,and a new corporation is formed.
B)one of the corporations absorbs the other.
C)each corporation's stockholders keep their original shares of stock
D)a new charter is needed.
Q2) Shareholders ordinarily cannot be sued for corporate liabilities.
A)True
B)False
Q3) After a corporate charter has been forfeited,the owners and officers of the dissolved corporation are __________ shielded from personal liability by using the corporate name when making contracts.
A)still
B)conditionally
C)not
D)retroactively
Q4) Nonprofit corporations:
A)are also known as a eleemosynary corporations.
B)are organized for charitable or benevolent purposes.
C)include hospitals and universities.
D)all of the above.
Page 46
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Chapter 45: Shareholder Rights in Corporations
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Q1) A shareholder may make an absolute transfer of stock or may transfer it merely as collateral to secure the payment of a debt.
A)True
B)False
Q2) When the corporation has the right to sue its directors,officers,or third persons for damages caused by them to the corporation or for breach of contract,one (1)or more shareholders may bring such action if the corporation refuses to do so.This is known as a __________ action.
A)primary
B)derivative
C)deferential
D)preemptive
Q3) Restrictions on the transfer of stock are valid if they are not unreasonable. A)True
B)False
Q4) No writing is required for a contract by which a broker agrees with a customer to buy or sell securities for the customer.
A)True
B)False
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Chapter 46: Securities Regulation
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Q1) Any shareholder owning more than five (5)percent of any class of the corporation's equity securities is statutorily defined as an insider and must file with the SEC a disclosure statement regarding such ownership and all related transactions.
A)True
B)False
Q2) An investment contract exists if which of the following elements are present?
A)an investment of money
B)a common enterprise
C)an expectation of future profits
D)all of the above
Q3) Exchanges,brokers,and dealers who deal in the securities traded in interstate commerce or on any national security exchange must register with the SEC unless exempted by it.
A)True
B)False
Q4) All private or limited offerings of securities are exempt from the SEC registration requirements.
A)True
B)False
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Chapter 47: Accountants Liability and Malpractice
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Q1) What constitutes negligence is the same for an accountant who is a full-time employee as it is for an independent outside auditor.
A)True B)False
Q2) The contact rule does not require that the accountant meet or communicate with the third party to establish a relationship equivalent to privity.
A)True B)False
Q3) When the privity rule is applied,a bank lending money to the client of an accountant cannot sue the accountant for malpractice.
A)True B)False
Q4) The Public Company Oversight Board:
A) is a governmental body.
B) must have at least three board members that are CPAs. C) enforces rules to ensure audit quality and auditor independence. D) all of the above.
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Chapter 48: Management of Corporations
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Q1) A corporation generally may avoid a transaction because of a director's secret disqualification,such as a conflict of interest.
A)True
B)False
Q2) Officers and directors may be criminally liable for failure to prevent the commission of a crime if they are found to be the "responsible corporate officers."
A)True
B)False
Q3) A quorum is broken if shareholders leave and those remaining are not sufficient to constitute a quorum.
A)True
B)False
Q4) A board of directors may enter into any contract or transaction necessary to carry out the business for which the corporation was formed.
A)True
B)False
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Chapter 49: Real Property
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Q1) Property may be taken from its private owner and the title acquired by the taking government or public authority under the power of:
A)a restrictive covenant.
B)eminent domain.
C)an affirmative covenant.
D)restraint.
Q2) Small children are afforded additional protection against the trespass rule through the "attractive nuisance" doctrine.
A)True
B)False
Q3) The general view is that the owner of land owns the space above the land,subject to the rights of flying aircraft,even if the aircraft interferes with the use of the land and represent a danger to persons or property on the land.
A)True
B)False
Q4) An unrecorded mortgage is not valid and binding between the parties.
A)True
B)False
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Chapter 50: Environmental Law and Land Use Controls
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Q1) The zoning power permits any regulation that is conducive to advancing public health,welfare,and safety.
A)True
B)False
Q2) Which federal agency has primary responsibility for enforcing environmental laws?
A)the Environmental Protection Agency
B)the Council of Environmental Quality
C)the Superfund Panel
D)none of the above
Q3) If any uncertainty exists in the interpretation of a restrictive covenant,the covenant will be construed strictly in favor of the free use of the land.
A)True
B)False
Q4) Only government agencies can sue for violations of an environmental protection control.
A)True
B)False
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Chapter 51: Leases
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Q1) Making improvements is a duty that falls on the tenant.
A)True
B)False
Q2) In the absence of an agreement to the contrary,a tenant is not liable for increased taxes imposed on the rented property by a general tax increase.
A)True
B)False
Q3) If taxes or assessments on leased premises are increased because of improvements made by the tenant the:
A)landlord is only liable for such increases if the improvements stay with the property.
B)landlord is liable for such increases whether or not the improvements stay with the property.
C)landlord is liable for such increases only to the extent that the improvements actually increase the fair market value of the property.
D)tenant is always liable for such increases.
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Chapter 52: Decedents Estates and Trusts
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Q1) A holographic will is an unwitnessed will that is written by the testator entirely by hand.
A)True
B)False
Q2) A codicil:
A)must be executed with the same formalities as a will.
B)is treated the same as a will.
C)does not invalidate the entire will.
D)all of the above.
Q3) If a trust is created to take effect within the lifetime of the settlor,it is a testamentary trust.
A)True
B)False
Q4) To make a valid will,the testator must have testamentary capacity.
A)True
B)False
Q5) A written will must be signed by the testator at the bottom or end of the will.
A)True
B)False
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