Corporate Law
Exam Answer Key
Course Introduction
Corporate Law provides an in-depth examination of the legal framework governing corporations, focusing on the formation, management, and dissolution of corporate entities. The course explores key principles such as corporate personality, limited liability, directors' duties, shareholder rights, and corporate governance. Students will analyze statutory provisions, case law, and regulatory policies that shape corporate activity, while also considering the ethical and social responsibilities of corporations. Through real-world case studies and problem-solving exercises, the course equips students with a comprehensive understanding of the laws and regulations impacting businesses in a corporate context.
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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Sample Questions
Q1) Several layers of law are enacted at different levels of government to provide the framework for business and personal rights and duties. At the base of this framework of laws is constitutional law.
A)True
B)False
Answer: True
Q2) Interpretations of aspects of the right to privacy are often found in:
A)statutes.
B)customs.
C)societal guidelines.
D)none of the above.
Answer: A
Q3) The group of time-honored rules that courts have used to solve similar problems for decades is called stare decisis.
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) A motion for a directed verdict is appropriate:
A)immediately after the pleadings are filed.
B)immediately after discovery is concluded.
C)immediately after the presentation of all evidence at trial.
D)on appeal.
Answer: C
Q2) In mediation,the mediator acts as a:
A)judge.
B)attorney.
C)messenger.
D)expert witness.
Answer: C
Q3) A "rent-a-judge" serves as a referee.
A)True
B)False
Answer: True
Q4) All courts have original jurisdiction.
A)True
B)False
Answer: False
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Chapter 3: Business Ethics, social Forces, and the Law
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Sample Questions
Q1) The theory of justice is based on the concept that if there were no laws or rules reasonable people would develop fair rules and standards.
A)True
B)False
Answer: True
Q2) Rights theory:
A)is also known an entitlement theory.
B)states that everyone has a set of rights.
C)believes that it is the government's responsibility to protect our rights.
D)all of the above.
Answer: D
Q3) Despite the importance of ethical behavior for business success,few Fortune 500 companies have codes of ethics to resolve ethical dilemmas.
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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Sample Questions
Q1) Pursuant to the commerce clause,the United States Supreme Court has the power "to regulate commerce with foreign nations,and among the several states,and with the Indian tribes."
A)True
B)False
Q2) The greatest change to the Constitution has been made by the United States Supreme Court through interpretation.
A)True
B)False
Q3) The power to tax income:
A)is possessed only by the federal government.
B)is possessed only by state governments.
C)may be exercised concurrently by both state and federal governments.
D)is controlled exactly like the power to wage war.
Q4) 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
Page 6
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Chapter 5: Government Regulation of Competition and Prices
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Sample Questions
Q1) Price discrimination is not permitted even when it can be justified on the basis of a difference in grade,quality,or quantity.
A)True
B)False
Q2) The United States Supreme Court generally has held that vertical merger agreements should not automatically be condemned as an unlawful restraint of interstate commerce merely because they create the potential to monopolize it.
A)True
B)False
Q3) Criminal penalties are possible under the Sherman Act.
A)True
B)False
Q4) The Sherman Act focuses on:
A)unfair methods of competition.
B)combinations or contracts in restraint of trade.
C)permitted price discriminations.
D)intrastate commerce.
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Chapter 6: Administrative Agencies
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Sample Questions
Q1) Modern administrators cannot make laws,but they can argue persuasively before Congress for the passage of needed legislation.
A)True
B)False
Q2) Arthur sustained an injury to his back.Arthur claimed the injury was suffered at work and filed a claim for workers' compensation benefits.The employer opposed this claim,saying the injury,if real,was the result of a congenital condition.In accordance with the statute,a hearing was held before the Workers' Compensation Board,which ruled against Arthur.Arthur became disgusted with the hearing officer and the proceedings because Arthur felt that the hearing officer did not like him.Arthur has consulted an attorney seeking to sue for workers' compensation benefits.An appeal is available within the agency,but Arthur wants to go directly to court because he feels that the agency appeal would be useless.Discuss the merits of this strategy.
Q3) Administrative agencies may make the rules,police the community to see the rules are obeyed,and sit in judgment to determine violations of their rules.
A)True
B)False
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Page 8
Chapter 7: The Legal Environment of International Trade
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Sample Questions
Q1) The Securities and Exchange Commission (SEC)is not limited to litigation when a securities law enforcement investigation runs into secrecy or blocking laws.
A)True
B)False
Q2) The United Nations Conference on Trade and Development (UNCTAD):
A)represents the interests of less developed countries.
B)arbitrates trade disputes between countries.
C)furnishes letters of credit to expedite trade.
D)all of the above.
Q3) Legal restrictions of U.S.firms doing business abroad in regard to payments made to foreign officials for obtaining business are set forth in the:
A)International Corruption Prohibition Act.
B)Global Anti-bribery Control Act.
C)Foreign Corrupt Practices Act.
D)International Graft Prohibition Act.
Q4) Law is the result of the desire of the lawmaker to achieve certain goals.
A)True
B)False
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Chapter 8: Crimes
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Sample Questions
Q1) Corporations are entitled to Fifth Amendment protection.
A)True
B)False
Q2) The issuing or delivery of a forged instrument to another person constitutes the crime of counterfeiting a forged instrument.
A)True
B)False
Q3) Sarbanes-Oxley (SOX):
A)created a new form of mail and wire fraud.
B)requires corporate officers to certify their financial statements.
C)provides for both fines and jail time for corporate fraud
D)all of the above.
Q4) The Fourth Amendment warrant requirement does not apply to businesses.
A)True
B)False
Q5) A person may be held criminally liable for acts committed by another.
A)True
B)False
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Chapter 9: Torts
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Sample Questions
Q1) "Tort" comes from the Latin term "tortus," which means "crooked,dubious,or twisted."
A)True
B)False
Q2) The tort of false imprisonment requires the detention of a person without his or her consent.
A)True
B)False
Q3) Philip Laws leased an apartment from Candice Sutton.Laws had notified Sutton on more than one occasion that the wooden steps to his apartment were decaying and in need of repair.Laws claimed that he had to leave the outside light on to avoid portions of the steps that no longer would bear his weight when he came in at night.Sutton promised to repair the steps while Laws was away on a business trip.Accordingly,Laws did not leave lights on during his absence.When he returned three nights later,Laws was injured when one of the steps broke under his weight as he was entering his apartment.Laws sued Sutton.Sutton replied that she should not bear liability for Laws' injury because Laws knew of the condition of the steps and had not taken the customary precaution of lighting the area.Based on what you have learned in this chapter,decide the case.
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Chapter 10: Intellectual Property Rights
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Sample Questions
Q1) It is important to protect trade dress against adoption by a competitor because such adoption can:
A)deceive purchasers into believing they have obtained a comparable product.
B)dilute the originator's resource investment in its product appearance.
C)usurp the business goodwill of the developer of the trade dress.
D)all of the above.
Q2) Owners of mask works are entitled to the exclusive right to reproduce and distribute their products under U.S.law for a period of:
A)10 years.
B)20 years.
C)28 years.
D)the life of the creator plus 70 years.
Q3) Under the Berne Convention Implementation Act of 1988,it is no longer mandatory that works published after March 1,1989 contain a notice of copyright.
A)True
B)False
Q4) In limited circumstances customer lists are protected under trade secret laws.
A)True
B)False
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Chapter 11: Cyberlaw
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Sample Questions
Q1) The Internet Tax Freedom Act (ITFA)prohibits companies from charging sales tax on Internet transactions.
A)True
B)False
Q2) Employee e-mail is:
A)spontaneous.
B)candid.
C)discoverable.
D)all of the above.
Q3) Sales tax on Internet sales:
A)is never collected.
B)is always collected.
C)is collected if the seller has a physical presence in the state of sale.
D)follow the same rules for sales tax collected in brick and mortar stores.
Q4) Appropriation involves taking an image,likeness,or name for purposes of commercial advantage.
A)True
B)False
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Page 13
Chapter 12: Nature and Classes of Contracts: Contracting on
the Internet
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Sample Questions
Q1) An agreement that contemplates the performance of an act prohibited by law is usually void.
A)True
B)False
Q2) Louise owned a house next to Robert's house.Robert made a contract with Midcity Painters to paint his house.The painters arrived to paint Robert's house,but mistakenly painted Louise's house.She saw the painters at work and made no comment.Later,Midcity Painters sent Louise a bill for painting her house.She claimed that she was not liable because she had not made any contract with them.Is this a valid defense?
Q3) An express contract is one in which the agreement is shown by the acts and conduct of the parties.
A)True
B)False
Q4) Negotiable instruments are examples of formal contracts.
A)True
B)False
Q5) A quasi contract may arise in a situation in which no contract exists.
A)True
B)False
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Chapter 13: Formation of Contracts: Offer and Acceptance
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Q1) If the offeree purports to accept an offer but in so doing makes any change to the terms of the offer,such action is a counteroffer that rejects the original offer.
A)True
B)False
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) An otherwise vague contract may be clarified by references in the contract to other documents or agreements.
A)True
B)False
Q4) At an auction sale,each bid is:
A)a counteroffer to the auctioneer's offer of the merchandise.
B)an acceptance of the auctioneer's offer.
C)an invitation to negotiate.
D)an offer.
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Chapter 14: Capacity and Genuine Assent
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Sample Questions
Q1) A contract based on a mutual mistake in judgment is:
A)voidable by the adversely affected party.
B)not voidable by the adversely affected party.
C)void ab initio.
D)none of the above.
Q2) A contract obtained by physical duress is void.
A)True
B)False
Q3) A factual incapacity may exist when,because of a mental condition caused by medication,drugs,alcohol,illness,or age,a person does not understand that a contract is being made or understand its general nature.
A)True
B)False
Q4) A party who speaks with a reckless disregard for the truth not knowing of the falsity of his or her words cannot be liable for fraud.
A)True
B)False
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Chapter 15: Consideration
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Sample Questions
Q1) 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.
Q2) 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
Q3) Damages recoverable in a case of promissory estoppel are determined by the profits that the promisee expected.
A)True
B)False
Q4) One promise may serve as consideration for many return promises. A)True
B)False
Q5) Consideration always must be an act or the promise to perform an act.
A)True
B)False
17
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Chapter 16: Legality and Public Policy
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Sample Questions
Q1) A provision in a contract that gives what the court believes is too much of an advantage over a buyer may be held void as unconscionable.
A)True
B)False
Q2) Legislation commonly requires that an installment-sale contract specify the cash price,down payment,finance charges,and insurance costs.
A)True
B)False
Q3) An agreement to restrain trade may be void on the grounds that it is:
A)fraudulent.
B)contrary to public policy.
C)illegal lobbying.
D)unfair to merchants.
Q4) 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
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Chapter 17: Writing, electronic Forms, and Interpretation of Contracts
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Sample Questions
Q1) The parol evidence rule does not apply to changes made after the signing of the contract.
A)True
B)False
Q2) When a contract falls within the statute of frauds,the signatures of both parties must be shown to the court.
A)True
B)False
Q3) Because many oral contracts are legally enforceable,it is a good business practice in the preliminary stages of discussions to stipulate that no binding agreement is intended to be formed until a written contract is prepared and signed by the parties.
A)True
B)False
Q4) An oral agreement to supply a line of credit for two (2)years cannot be enforced because of the statute of frauds.
A)True
B)False
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Chapter 18: Third Persons and Contracts
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Sample Questions
Q1) Unless language or circumstances indicate the contrary, a general assignment is:
A)a transfer of property only.
B)both a transfer of rights and a delegation of duties.
C)a delegation of duties only.
D)a transfer of rights only.
Q2) 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
Q3) The making of an assignment relieves the assignor of any and all obligations existing under the original contract.
A)True B)False
Q4) Persons who are not a party to a contract can never sue on the contract. A)True
B)False
Q5) An assignment is a transfer of rights,and a delegation is a transfer of duties.
A)True
B)False
Page 20
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Chapter 19: Discharge of Contracts
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Q1) All courts hold that when an agreement requires satisfaction of the other party regarding the acceptance of an act,a reasonable person standard is used.
A)True
B)False
Q2) In which case will performance on the exact date specified in the contract most likely be deemed essential?
A)a sale of goods that fluctuate rapidly in value.
B)a sale of goods that remain stable in value.
C)a sale of real estate.
D)a sale of goods where no harm results from a delay in performance.
Q3) The parties may agree that the adequacy of performance under a contract is to be determined by a third party.
A)True
B)False
Q4) For the parties to enter into an accord and satisfaction that discharges the original obligation,there must be a bona fide dispute.
A)True
B)False
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21
Chapter 20: Breach of Contract and Remedies
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Sample Questions
Q1) In some cases the court may require specific performance when there is a breach of contract.
A)True B)False
Q2) When the contract requires that both parties submit disputes to arbitration,this is an example of a limitation-of-remedies clause.
A)True B)False
Q3) Between experienced businesspersons,exculpatory clauses are generally: A)voidable. B)void.
C)valid.
D)unenforceable.
Q4) When the plaintiff seeks the remedy of specific performance,the plaintiff wants the other party to carry out the terms of the contract and not pay damages. A)True B)False
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22
Chapter 21: Personal Property and Bailments
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Sample Questions
Q1) __________ property means land and things embedded in the land.
A)Real
B)Personal
C)Intangible
D)Tangible
Q2) A bailee's interest in the bailed property can be characterized as:
A)ownership.
B)a fractional proprietary interest.
C)possession.
D)constructive ownership.
Q3) The legal concept of property includes rights in the property.
A)True
B)False
Q4) The legal relation that arises when one person delivers possession of personal property to another under an express or implied agreement to return the property at a later date is called a:
A)tenancy agreement.
B)bailment.
C)rental agreement.
D)trust arrangement.
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Chapter 22: Legal Aspects of Supply Chain Management
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Q1) A transferor makes certain implied warranties to the transferee when a bill of lading is transferred.These warranties are:
A)that the bill of lading is genuine.
B)that the transfer is rightful.
C)that the transferor has no knowledge of any defects.
D)all of the above.
Q2) 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
Q3) A contract carrier holds itself out as willing to furnish transportation for compensation without discrimination to all members of the public who apply.
A)True
B)False
Q4) A negotiable warehouse receipt states that the goods received will be delivered to the bearer or to the order of any named person.
A)True
B)False
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24
Chapter 23: Nature and Form of Sales
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Q1) A sales contract must be evidenced by a writing if the sales price of goods is equal to or more than:
A)$100.
B)$1,000.
C)$500.
D)$5,000.
Q2) Which of the following is not a sale of goods?
A)a bailment
B)an option to purchase
C)a gift
D)all of the above
Q3) A contract of indefinite duration may be terminated by notice from either party to the other party.
A)True
B)False
Q4) Defenses raised in a suit based on a sales contract differ greatly from defenses used in regard to any other type of contract.
A)True
B)False
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Chapter 24: Title and Risk of Loss
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Q1) 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?
Q2) "Without reserve" auctions give the auctioneer the right to withdraw the goods from the sale process if the bids are not high enough.
A)True
B)False
Q3) __________reserve auctions are those that give the auctioneer the right to withdraw the goods from the sale process if the bids are not high enough.
A)Qualified
B)Restricted
C)With
D)Without
Q4) A buyer with a voidable title cannot pass on valid title to a subsequent good faith purchaser.
A)True
B)False
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Chapter 25: Product Liability: Warranties and Torts
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Q1) It is necessary to the creation of an express warranty that the seller use formal words such as "warrant" or "guarantee."
A)True
B)False
Q2) The right to sue for damages sustained from a defective product is reserved exclusively to the buyer of such goods.
A)True
B)False
Q3) The requirement of privity of contract to allow recovery in a sales contract has been widely rejected.
A)True
B)False
Q4) Ordinarily,a seller's opinion about the good(s)cannot be treated as a warranty. A)True
B)False
Q5) 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) When a contract to sell identified goods does not specify a place of delivery,but both parties know that the goods are in a place other than the seller's place of business,that other place is the place of delivery.
A)True
B)False
Q2) A buyer always has a right to examine the goods to determine if,in fact,the goods conform to the contract.
A)True
B)False
Q3) Upon a seller's tender of nonconforming goods and the buyer's rejection of them,the transaction has ended.
A)True
B)False
Q4) Once goods have been accepted:
A)the buyer may never revoke that acceptance.
B)the buyer may only revoke acceptance if the defect was known at the time of the original acceptance.
C)the buyer may revoke acceptance without cause or reason.
D)none of the above.
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Chapter 27: Remedies for Breach of Sales Contracts
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Q1) A buyer returning to the seller a raincoat that shrank in the rain is revoking acceptance.
A)True
B)False
Q2) Under UCC Article 2,specific performance is a remedy available only to buyers in those circumstances in which the goods are specially manufactured,unique,or rare.
A)True B)False
Q3) In the absence of a liquidated damages clause and in the absence of proof of greater damages,the seller's damages are computed as
A)25% of the purchase price or $500,whichever is less.
B)25% of the purchase price or $500,whichever is greater.
C)20% of the purchase price or $500,whichever is greater.
D)20% of the purchase price or $500,whichever is less.
Q4) An action for breach of warranty generally must be brought within three (3)years of the breach.
A)True B)False
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Chapter 28: Kinds of Instruments, parties, and Negotiability
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Q1) The person to whom the order in a draft is addressed is known as the:
A)payee.
B)drawee.
C)drawer.
D)maker.
Q2) 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
Q3) The signature on an instrument must appear at the lower right-hand corner of the face of the instrument.
A)True
B)False
Q4) The signature requirement,as an element of negotiability,can be met by:
A)the use of initials.
B)a mark.
C)a trade name.
D)all of the above.
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Chapter 29: Transfers of Negotiable Instruments and
Warranties of Parties
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Q1) An instrument that originally was bearer paper always remains bearer paper.
A)True
B)False
Q2) An unqualified indorser who receives consideration for the indorsement impliedly warrants that:
A)the warrantor is a person entitled to enforce the instrument.
B)all signatures on the instrument are authentic and authorized.
C)the instrument has not been altered.
D)all of the above.
Q3) 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.
Q4) Bearer paper may only be negotiated by the actual transfer of possession of the instrument.
A)True
B)False
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Chapter 30: Liability of the Parties Under Negotiable Instruments
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Q1) An altered instrument can be enforced according to its original terms.
A)True
B)False
Q2) Presentment occurs when the primary party refuses to pay an instrument according to its terms.
A)True
B)False
Q3) A holder is a party in possession of an instrument that "runs" to him. An instrument runs to a party if it is:
A)payable to his or her order.
B)bearer paper.
C)indorsed to him or her.
D)all of the above.
Q4) 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
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Chapter 31: Checks and Funds Transfers
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Q1) 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.
Q2) A check is drawn on the assumption that the bank has sufficient funds in the drawer's account for payment.
A)True
B)False
Q3) A check is a particular kind of draft.
A)True
B)False
Q4) When a drawee bank pays on a check that lacks an essential endorsement:
A)the drawer is liable.
B)the payee is liable.
C)the drawee bank is liable.
D)no one is liable.
Q5) A written stop payment order is effective for one year.
A)True
B)False
33
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Chapter 32: Nature of the Debtor-Creditor Relationship
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Q1) 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
Q2) The creditor first must proceed against the debtor before suing the surety.
A)True
B)False
Q3) 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.
Q4) A third party arrangement occurs when a corporate officer agrees to be personally liable for a corporate note.
A)True
B)False
Q5) A letter of credit must be in writing and signed by the issuer.
A)True
B)False
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Chapter 33: Consumer Protection
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Q1) A sale of goods or services for $25 or more made to a buyer at home may be set aside without cause within five (5)business days.
A)True
B)False
Q2) A consumer may waive all defenses otherwise provided for by law.
A)True
B)False
Q3) An auto dealer who does not actually know of a roll-back can use lack of knowledge as a defense against odometer fraud,regardless of the condition of the car.
A)True
B)False
Q4) Consumer protection statutes are identical in all fifty states and the District of Columbia.
A)True
B)False
Q5) Automobile lemon laws protect only persons buying automobiles for personal,family,or household use.
A)True
B)False
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Chapter 34: Secured Transactions in Personal Property
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Q1) An interest in personal property or fixtures that secures payment or performance of an obligation is called a:
A)guaranty holding.
B)security interest.
C)guaranty interest.
D)good-faith guaranty.
Q2) A security interest needs to be perfected,whether or not there are competing claims for the collateral.
A)True
B)False
Q3) Creditors cannot legally request collateral on a previously unsecured loan.
A)True
B)False
Q4) When a security interest in property is inferior to other interests and claims to the property,it is said to be perfected.
A)True
B)False
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36
Chapter 35: Bankruptcy
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Q1) If the debtor is generally not paying debts as they become due,the debtor may be subject to an involuntary bankruptcy petition.
A)True
B)False
Q2) A discharge releases the debtor from the unpaid balance of most debts including taxes and tax penalties.
A)True B)False
Q3) Nonprofit corporations are exempt from involuntary bankruptcy proceedings.
A)True
B)False
Q4) If there are twelve (12)or more creditors,at least __________ of those creditors whose unsecured and undisputed claims total __________ or more must sign the involuntary petition.
A)one (1); $14,425
B)three (3); $14,425
C)one (1); $15,575
D)three (3); $15,575
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Chapter 36: Insurance
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Q1) For the purposes of Personal Auto Policy (PAP)coverage,an insured person "uses" an automobile by unloading groceries from the car while it is parked in the garage.
A)True
B)False
Q2) The fact that a partnership is terminated after a life insurance policy is obtained by one partner on another invalidates the policy.
A)True
B)False
Q3) An insured person is generally allowed,by policy provision or statute,a grace period of what length of time in which to make the payment of a premium due on a life insurance policy?
A)14 to 15 days
B)30 to 31 days
C)60 to 61 days
D)90 days
Q4) The insured must comply with a number of time limitations in making a claim. A)True
B)False
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Chapter 37: Agency
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Q1) The employer of an independent contractor does not have control over the performance of the work by the independent contractor.
A)True
B)False
Q2) If the principal revokes the agency:
A)the agent's authority to act for the principal is terminated immediately.
B)the right of the agent to bind the principal to third persons generally ends immediately upon the termination of the agent's authority.
C)the termination is not effective until notice is given to third parties.
D)all of the above.
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) A principal is liable for crimes of an agent:
A)if committed at the principal's direction.
B)if the agent is an employee and sells liquor to a minor without permission.
C)if the agent in the course of employment violates environmental protection laws.
D)all of the above.
Q2) Parol evidence is allowed to show whether an agent has signed in a representative or an individual capacity.
A)True
B)False
Q3) A third person dealing with the agent of a disclosed principal ordinarily intends to make a contract with the principal,not the agent.
A)True
B)False
Q4) The employer of a salesperson:
A)is only bound by a contract if the employee is acting as a soliciting agent.
B)is not bound by a contract if the employee is acting as a contracting agent.
C)is not bound by a contract until the contract is accepted.
D)is always bound by contracts made by all employee salespersons.
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Chapter 39: Regulation of Employment
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Q1) The rights of an employee to be compensated are governed primarily by the same principles that apply to the compensation of a(n):
A)partner.
B)stockholder.
C)agent.
D)independent contractor.
Q2) The rights of an employee with respect to compensation are governed in general by the same principles that apply to the compensation of an agent.
A)True
B)False
Q3) An employer has a "shop right" to use an invention of an employee without payment to the employee if the invention was made during working hours with the employer's material and equipment.
A)True
B)False
Q4) An employment contract always will state a time or duration for the contract's applicability.
A)True
B)False
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Chapter 40: Equal Employment Opportunity Law
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Q1) Criteria used to make employment decisions that have a disparate impact on women,such as height requirements,must be job-related.
A)True
B)False
Q2) Testing of prospective employees:
A)cannot have been developed by one employer and applied by another.
B)can be adjusted to favor members of a particular race.
C)must bear a relationship to job performance.
D)all of the above.
Q3) The Equal Pay Act prohibits variation in wage rates paid to men and women based solely on gender.
A)True
B)False
Q4) An employer cannot be held liable for the sexual harassment of an employee by a supervisor.
A)True
B)False
Q5) Pay raises based on seniority generally are considered lawful.
A)True
B)False
42
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Chapter 41: Types of Business Organizations
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Q1) A partnership is not dissolved by the death of a partner.
A)True
B)False
Q2) An unincorporated association:
A)cannot sue in its own name.
B)cannot be sued in its own name.
C)does not have any legal existence apart from the members who compose it.
D)all of the above.
Q3) 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
Q4) Government grants create:
A)sole proprietorships.
B)corporations.
C)partnerships.
D)unincorporated associations.
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Chapter 42: Partnerships
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Q1) Sharing of gross returns,as compared to the sharing of profits,is strong evidence of a partnership.
A)True
B)False
Q2) Partners hold title to firm property by:
A)tenancy in partnership.
B)tenancy in common.
C)joint tenancy.
D)none of the above.
Q3) A majority action of partners is not binding if it contravenes the partnership agreement.
A)True
B)False
Q4) In determining the rights of partner Dewey in the firm of Dewey,Cheatham and Howe,the most important reference point is:
A)the Uniform Partnership Act.
B)the partnership agreement.
C)the sworn testimony of Cheatham and Howe.
D)the customs and traditions of similar partnerships.
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Chapter 43: LPs, LLCs, and LLPs
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Q1) The partners who manage the limited partnership and are personally liable for the firm debts are __________ partners.
A)general
B)active
C)licensed
D)unreserved
Q2) A limited liability company pays federal income tax.
A)True
B)False
Q3) A limited liability company may hold property in its own name.
A)True
B)False
Q4) Limited liability companies may be formed without filing formal articles of organization with the secretary of state.
A)True
B)False
Q5) A limited liability company may be managed directly by the owners.
A)True
B)False
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Chapter 44: Corporate Formation
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Q1) Because nonprofit corporations have a more restricted range of powers than business corporations,actions not authorized by the charters of nonprofit corporations are more likely to be found ultra vires.
A)True
B)False
Q2) If there is a consolidation of corporations A,B,and C:
A)corporations B and C are absorbed into corporation A,and corporation A continues to exist.
B)all of the corporations continue to exist.
C)all corporations continue to exist,but corporation A owns all of the stock of corporations B and C.
D)corporations A,B,and C cease to exist,and a new corporation with the property and assets of the old corporations comes into being.
Q3) A successor enterprise is not subject to the contract obligations of the former business if:
A)one corporation is absorbed by another through merger.
B)a corporation merely purchases the assets of another business.
C)two or more corporations consolidate.
D)none of the above.
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Chapter 45: Shareholder Rights in Corporations
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Q1) A provision giving a corporation the right to purchase a shareholder's shares on the death of the shareholder is invalid.
A)True
B)False
Q2) Each shareholder owns a proportionate share of the property of the corporation.
A)True
B)False
Q3) Shareholders exercise direct control over their corporation.
A)True
B)False
Q4) Voting trusts are usually illegal.
A)True
B)False
Q5) Dividends are payable in:
A)money.
B)products manufactured by the corporation.
C)shares of other corporations held by the corporation.
D)all of the above.
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Chapter 46: Securities Regulation
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Q1) Under SEC Rule 504 of Regulation D,an issuer can offer and sell up to $2 million in securities within a 12 month period without registration and without most of the restrictions contained in Rules 505 and 506.
A)True
B)False
Q2) Companies whose securities are listed on a national securities exchange and unlisted companies with assets in excess of $10 million and 500 or more shareholders are exempt from the reporting requirements of the Securities Exchange Act of 1934.
A)True
B)False
Q3) Provision for exemption from the registration requirements of the Securities Act of 1933 is made for offerings made solely to accredited investors by SEC Regulation: A)A.
B)B.
C)C.
D)D.
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Chapter 47: Accountants Liability and Malpractice
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Q1) Any disclaimer by an accountant that excludes liability for malpractice based on negligence is void.
A)True
B)False
Q2) Misrepresentation:
A)is the same as fraud.
B)is a false statement of fact made with the intent to deceive.
C)is a false statement of fact made without any intent to deceive.
D)can be used as a limitation to excuse an accountant from liability.
Q3) In contrast to contributory negligence principles,comparative negligence principles are never applied to malpractice situations.
A)True
B)False
Q4) Professionals who fail to exercise normal care and skill in the performance of a contract for their services may be sued for a special type of breach described as:
A)sub par performance.
B)illegal practice.
C)malpractice.
D)competence reservation.
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Chapter 48: Management of Corporations
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Q1) A corporation is liable to a third person for the act of its agent:
A)to the same extent as a natural person would be liable.
B)only if the agent was expressly authorized to perform the act.
C)only if the agent's act was a crime.
D)only if the agent's act was based on an intent to benefit the corporation.
Q2) A stockholder-approved amendment to the certificate of incorporation may indemnify directors who:
A)acted in bad faith.
B)acted negligently.
C)breached their duty of loyalty.
D)gained an improper personal benefit.
Q3) The sale of corporate assets outside the regular course of a corporation's business is an example of an extraordinary matter.
A)True
B)False
Q4) The authority of corporate employees and other officers is generally limited to the duties of their offices.
A)True
B)False
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Chapter 49: Real Property
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Q1) Liens on land may be created voluntarily by the owner of land or involuntarily against the wishes of the owner.
A)True
B)False
Q2) A __________ is a combination of co-ownership and individual ownership.
A)cooperative
B)residential lease
C)commercial lease
D)condominium
Q3) A deed is not effective to pass title unless it is properly recorded.
A)True
B)False
Q4) Licensees are on the premises with the permission of the landowner.
A)True
B)False
Q5) A condominium is a combination of co-ownership and individual ownership.
A)True
B)False
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Chapter 50: Environmental Law and Land Use Controls
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Q1) The first federal legislation that dealt with air pollution was the Air Pollution Control Act of 1955,which was simply a statutory recognition of a concern about air quality.
A)True
B)False
Q2) __________ of the federal environmental laws carry criminal penalties for violations.
A)All
B)Most
C)Very few
D)None
Q3) The fact that harm occurred is sufficient to establish a nuisance.
A)True
B)False
Q4) A nonconforming use:
A)that is discontinued for a period of less than thirty (30)days may be resumed.
B)has a right to continue for only five (5)years.
C)has a constitutionally-protected right to continue.
D)that continues for more than one (1)year cannot be lost by abandonment.
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Chapter 51: Leases
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Q1) The relationship of landlord and tenant is always created by an express contract.
A)True
B)False
Q2) Igor immigrated to the United States and sought to rent an apartment.He answered an advertisement in a newspaper and signed a lease for an apartment without ever seeing the apartment.Igor found the premises filled with an abundance of debris,rats and insects.Also,the plumbing in the apartment was inoperable.These conditions:
A)do not affect the lease unless the landlord affirmatively warranted the condition of the premises.
B)are the responsibility of the tenant to repair.
C)most likely constitute a breach of the implied warranty of habitability.
D)do not entitle Igor to vacate the premises.
Q3) Many states provide that a lease for a term exceeding __________ must be in writing.
A)three (3)months
B)six (6)months
C)one (1)year
D)three (3)years
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Chapter 52: Decedents Estates and Trusts
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Q1) A trust is invalid if a beneficiary lacks capacity.
A)True
B)False
Q2) Under the Uniform Simultaneous Death Act,if survivorship cannot be established,the property of each person is disposed of as though each had survived the other.
A)True
B)False
Q3) Where a testatrix executes a will and later has a child:
A)the child is prohibited by law from receiving anything from the estate.
B)many states hold that the will of the testatrix is partially revoked by operation of law to provide a share to the after-born child.
C)a new will must be executed because the birth voids the original will.
D)the after-born child takes a share by escheat.
Q4) Probate is the act by which:
A)the court declares an instrument is a valid will.
B)a qualified person may contest the will.
C)the witnesses sign an attestation clause.
D)publication of the will takes place.
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Page 54