Corporate Law
Midterm Exam
Course Introduction
Corporate Law explores the legal framework governing the formation, operation, and dissolution of corporations. This course covers topics such as corporate personality, shareholder rights, directors duties, corporate governance, mergers and acquisitions, and regulatory compliance. Students will examine key statutes, case law, and business practices that shape the modern corporate environment, gaining insight into legal risks and ethical considerations faced by corporations. The course equips students with an understanding of how corporate law influences strategic business decisions and the responsibilities of corporate actors within national and global contexts.
Recommended Textbook Business Law and the Legal Environment Standard Edition 8th Edition by
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Page 2
Jeffrey F. Beatty
Chapter 1: Introduction to Law
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Q1) In 1994,the Arizona Supreme Court decided the case of Hernandez v.Arizona Board of Regents and found a duty of care to avoid furnishing alcohol to underage consumers.If in 2008 a Flagstaff,Arizona,plaintiff brings a lawsuit against an Arizona university's fraternity for providing alcohol to members under the legal drinking age,the Hernandez v.Arizona Board of Regents case will serve as precedent.
A)True
B)False
Answer: True
Q2) Congress can create a statute on any topic at all.
A)True
B)False
Answer: False
Q3) The doctrine of stare decisis
A)makes the legal process more expensive.
B)is an equitable remedy.
C)makes the law more predictable.
D)is unimportant to the common law.
Answer: C
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3
Chapter 2: Ethics and Corporate Social Responsibility
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Q1) Generally speaking,managers feel better about themselves when they behave ethically.
A)True
B)False
Answer: True
Q2) Alanis tries to talk her supervisor out of a business decision she thinks is unethical.Which of the following best characterizes her reaction?
A)loyalty
B)capitulation
C)voice
D)exit
Answer: C
Q3) Your text outlines three practices to help one avoid ethical traps: slow down,remember your Life Principles,and
A)focus on the matter at hand.
B)do not trust your first instinct.
C)think about what society expects.
D)go with your gut reaction.
Answer: B
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Page 4
Chapter 3: International Law
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Q1) If a foreign government hires an American consulting firm to help the country's textile industry improve production operations,the contract is commercial,and if the foreign government refuses to pay,the consulting firm may sue the government in American courts.
A)True
B)False Answer: True
Q2) The Foreign Corrupt Practices Act prohibits bribery abroad.
A)True
B)False Answer: True
Q3) A contract involving the sale of goods from a Texas seller to a French wholesaler must always use the United Nations Convention on Contracts for the International Sale of Goods (CISG).
A)True
B)False Answer: False
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Chapter 4: Common Law, Statutory Law, and Administrative Law
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Q1) The U.S.Supreme Court's holding in Wards Cove Packing v.Atonio
A)differed from the holding in Griggs v.Duke Power Co. ,partly because the Court was more conservative at the time Wards Cove was decided.
B)upheld the ruling in Griggs v.Duke Power Co.
C)found that overt racial discrimination existed.
D)set forth a "business necessity" requirement for employment hiring practices.
Q2) Discuss the two federal statutes that give Americans the power to acquire or protect personal information.
Q3) Congresswoman Sloan introduced a bill in the House of Representatives.If the bill is approved by the House committee specializing in that subject,the bill will go to A)a Senate committee specializing in the subject matter of the proposed legislation. B)the full House.
C)a Conference Committee made up of representatives of both the House and Senate. D)the voters of her state for approval.
Q4) Discuss the four most important limitations on the power of federal administrative agencies.
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Page 6
Chapter 5: Constitutional Law
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Q1) Midori owned a home in Lexington,Kentucky.The city wanted her property to build a parking garage as part of a redevelopment.Even though Midori did not want to move,the city took her house (and provided her with compensation)through the power of A)due process.
B)eminent domain.
C)the incorporation doctrine.
D)the Supremacy Clause.
Q2) The Supreme Court's approach during the period from the 1950s through the 1970s in deciding cases on constitutional grounds is described as A)judicial restraint.
B)judicial activism.
C)judicial review.
D)the dormant aspect of its judicial power.
Q3) The amendments to the U.S.Constitution protect the people from the power of state and federal governments.
A)True
B)False
Q4) Discuss the Miller test to determine if a creative work is obscene.
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Chapter 6: Dispute Resolution
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Q1) After being served with a summons and a copy of the complaint,a defendant usually files a pleading known as an answer,briefly replying to each allegation in the complaint.
A)True
B)False
Q2) Pablo,a resident of New Mexico,while driving through Arizona was struck by a SUV driven by Dick,a resident of California.Dick was speeding when the accident happened and Pablo suffered severe injuries that ruined a potential acting career.Pablo's damages are estimated at $200,000.Discuss the court system(s)in which Pablo may bring a lawsuit.
Q3) After the plaintiff has presented her case,the defendant may be granted a A)directed verdict.
B)summary judgment.
C)judgment NOV
D)judgment on the pleadings.
Q4) Summary judgment is appropriate when there are no essential facts in dispute.
A)True
B)False
Q5) Define discovery,and identify and explain five of the most important forms of discovery.
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Chapter 7: Crime
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Q1) The police arrived at Otis's apartment one evening and demanded to look around "just to make sure nothing was happening." They had no warrant and had received no complaints about him.Which statement best describes this situation?
A)The police probably should not have bothered Otis,but they really did nothing wrong.
B)The police violated Otis's Fourth Amendment rights.
C)The police were in the right;they must have suspected Otis had committed a crime.
D)The police violated Otis's Sixth Amendment rights.
Q2) Although RICO was passed to prevent gangsters from taking money they earned illegally and investing it in legitimate businesses,it is now often used against businesspeople who break the law.
A)True
B)False
Q3) Criminal defendants have the right to a lawyer at all the important stages of the criminal process.
A)True
B)False
Q4) Explain the difference between civil law and criminal law.
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Chapter 8: Intentional Torts and Business Torts
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Q1) Tipton Company makes a deal with Patton Company to purchase 100 canvas tarps.Patton's competitor,QC Industries,tells Tipton Company executives that Patton's goods are shoddy and Tipton cancels the contract with Patton.What will likely occur?
A)Patton will sue Tipton for defamation.
B)QC Industries will sue Patton for intentional infliction of emotional distress.
C)Patton will sue QC Industries for tortious interference with a contract.
D)Tipton will sue Patton for tortious interference with a prospective advantage.
Q2) A salesclerk at Braybon's Department Store observed a customer remove a ring from a display case and put it in her purse.In most states,Braybon's will be able to detain the customer for suspicion of shoplifting.
A)True
B)False
Q3) If Gloria threw a rock that hit Merle,she is liable for an intentional tort of battery only if she intended to injure or harm Merle.
A)True
B)False
Q4) Discuss the four elements that must be proven in order to win a defamation case.
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Chapter 9: Negligence, Strict Liability, and Product Liability
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Q1) If the defendant successfully proves __________,no matter how slight the plaintiff's negligence,the plaintiff will be denied any recovery of damages.
A)contributory negligence
B)comparative negligence
C)res ipsa loquitur
D)negligence per se
Q2) Kyle was eating clam chowder soup in a restaurant when a very small piece of bone lodged in his throat.Fortunately,he was able to remove the bone with his fingers.However,he was upset by the incident and sued the restaurant for negligence.What is the most likely result in this case?
A)Kyle will not collect any damages since he did not sustain any damages.
B)Kyle will collect damages because the restaurant committed negligence per se.
C)Kyle will collect damages if he proves it was possible to prevent tiny fish bones from being present in clam chowder.
D)Kyle will collect damages,as res ipsa loquitur applies.
Q3) Tort issues are firmly ingrained in law and do not change.
A)True
B)False
Q4) List and discuss the elements necessary to establish negligence.
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Chapter 10: Privacy and Internet Law
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Q1) Social media postings,wikis,customer reviews,and blogs are all examples of user-generated content.
A)True
B)False
Q2) What are some ways we lose our privacy in the digital world?
A)through data breaches
B)through surveillance
C)via the internet of things
D)All of these are correct.
Q3) Which of the following statutes requires that commercial email not have deceptive headings and clearly indicate if the email is an advertisement?
A)ECPA
B)CDA of 1996
C)Section 5 the FTC Act
D)CAN-SPAM
Q4) What provisions are commercial email subjected to under the CAN-SPAM Act?
Q5) When you shop online,most retailers collect personal information about you.
A)True
B)False
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Chapter 11: Introduction to Contracts
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Q1) When Myrtle comes home from work one evening,she finds that her yard has been mowed and trimmed.Later,a man comes to collect for the yard work done.Myrtle refuses to pay for the work since she has never seen the man before and did not hire him to do her yard work.Which of the following answers is most accurate?
A)This is an implied,unilateral contract and she must pay the price requested by the man.
B)This is an express,voidable contract that either party may avoid.
C)The court would order Myrtle to pay the reasonable value of the yard work because of the benefit conferred on her.
D)Myrtle would not have to pay for the yard work.
Q2) Valerie promises Teresa that she will pay Teresa $75 if Teresa will clean Valerie's house by noon on Saturday.If Teresa cleans the house by noon on Saturday and Valerie pays the $75,then this is an implied,bilateral,executory contract.
A)True
B)False
Q3) A valid contract can legally be voided by either party.
A)True
B)False
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Chapter 12: Agreement: Offers and Acceptances
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Q1) A seller's form clearly states no warranty is included.The buyer's form states that the seller warrants the goods for one year.In this case
A)no contract can be created.
B)the warranty term is a "different term," and the majority of states hold that a contract can be formed but the contradictory terms cancel each other out.
C)the warranty term is an "additional term" that becomes part of the contract in most states.
D)the warranty term is a "different term," which in most states becomes part of the contract unless the seller promptly objects.
Q2) Noah tells Ivy he is willing to sell his comic book collection to her for $100.Ivy says no,she would rather save her money to buy a new cell phone.What just happened?
A)termination by expiration
B)termination by rejection
C)termination by revocation
D)termination by operation of law
Q3) Briefly discuss how an offer can be accepted.Include in your answer the application of the mirror image rule.
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Chapter 13: Consideration
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Q1) If Becky promises not to drink alcohol until she becomes a legal adult in exchange for Ben's promise of $1,000,the agreement is
A)enforceable because Becky is giving up the right to do something she would otherwise be entitled to do.
B)enforceable because the agreement accomplishes Ben's goal of keeping Becky from drinking.
C)not enforceable because Becky does not have a legal right to drink alcohol.
D)not enforceable because Becky is a minor and could disaffirm the contract.
Q2) Bernie owes an undisputed amount to Wilde's Heating & Air Conditioning.Which of the following is true?
A)If Wilde's agrees to accept less than the full amount as full payment,the agreement is not binding.
B)The undisputed amount is also known as an unliquidated amount.
C)If the parties agree to settle for less than the full amount,their agreement is governed by the ruling in Henches v.Taylor.
D)If Wilde's agrees to accept less than the full amount,the agreement is only binding if it is in writing and signed by Bernie.
Q3) What two exceptions did the UCC create for accord and satisfaction check cases?
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15
Chapter 14: Legality
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Q1) Usury laws are designed to protect consumers from
A)obtaining loans to gamble on credit.
B)taking insurance policies out on the life of another.
C)companies charging excess interest on loans.
D)professionals practicing a trade without a valid license.
Q2) A national bank based in New York issues credit cards to customers in all 50 states.What interest rate can the bank charge customers?
A)the interest rate of New York only
B)the interest rate of New York or that of the customer's state,whichever is higher
C)the interest rate of the customer's state only
D)the interest rate of New York or that of the customer's state,whichever is lower
Q3) Discuss exculpatory clauses,and designate when an exculpatory clause is unenforceable.
Q4) A gambling contract is illegal unless it is a type of wagering specifically authorized by state statute.
A)True
B)False
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Chapter 15: Voidable Contracts: Capacity and Consent
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Q1) A(n)_______ contract is illegal from the beginning and may not be enforced by either party;a(n)_______ contract is legal but permits one party to escape,if he or she so wishes.
A)disaffirmed;affirmed
B)void;voidable
C)affirmed;disaffirmed
D)voidable;void
Q2) If a minor can cancel a contract,it can be done at any time before the minor reaches the age of majority or within a reasonable time after reaching majority age.
A)True
B)False
Q3) Roger,a minor,buys a stereo from Tuneland,Inc.Roger uses the stereo for a few months,returns it to Tuneland,and demands his money back.Roger may rescind the contract,return the stereo and get his money back.
A)True
B)False
Q4) Describe legal capacity and discuss how it applies to minors entering into and cancelling contracts.
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17
Chapter 16: Written Contracts
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Q1) Which of the following is a "special circumstance" in which an oral contract may be enforceable under the UCC?
A)It is the first transaction between both parties who are not considered to be merchants.
B)The contract is for goods in an amount of $750.
C)The seller is specially manufacturing goods for the buyer and begins work on them before the buyer cancels the order.
D)There are no special circumstances to the UCC;it deems that all contracts must be in writing.
Q2) Tony signed a contract agreeing to purchase a used,high-powered boat for $10,000.Prior to signing the contract,the sales representative explained that the boat motor was guaranteed for six months for all labor and parts.The written contract contained nothing about the warranty;however,it did have an integration clause in it.Tony had problems with the boat motor,causing expensive repairs.Tony returned the boat to the sales representative for the repairs,only to learn the salesman denied knowing anything about a six-month warranty.If Tony sues,discuss the likely outcome.
Q3) Explain the reason behind having a Statute of Frauds and give arguments for and against having such a statute.
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Chapter 17: Third Parties
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Q1) Susan took out a life insurance policy on herself,paying all of the premium payments.She named her daughter,Jessica,as the beneficiary under the policy.Jessica has not given anything in consideration for the policy.Jessica is a(n)
A)donee beneficiary who has rights to enforce the policy once Susan dies.
B)creditor beneficiary who has rights to enforce the policy once Susan dies.
C)incidental beneficiary because Jessica did not give any consideration for the policy and therefore cannot enforce the policy even when Susan dies.
D)promisor in the contract with no enforcement rights.
Q2) An assignment for consideration is irrevocable.
A)True B)False
Q3) Assignment is prohibited when the obligor is agreeing to perform personal services. A)True B)False
Q4) Discuss the potential liability differences between a delegation and a novation.
Q5) Claims for personal injury are generally assignable.
A)True
B)False
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Chapter 18: Contract Termination
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Q1) The statement,"You will have a job with Snelling & Snelling as long as you complete your degree in business administration this May" does not create a condition because it does not include the phrase "provided that."
A)True
B)False
Q2) In negotiating the purchase of a vehicle,the sales representative told Karla,"I guarantee that you will be personally satisfied with this car." The guarantee was written on the contract when Karla purchased the car.If a controversy arises over Karla's satisfaction,the court will apply a subjective standard,which means Karla's judgment must be reasonable.
A)True
B)False
Q3) Monumental,Inc.contracts with Champion Builders to erect a three-story office building on a parcel of land it has purchased.Before construction begins,the local zoning board changes the zoning of the parcel and those adjoining it to residential use only.Monumental's contract with Champion is discharged.
A)True
B)False
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Chapter 19: Remedies
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Q1) Larry wanted to buy a 1957 Cadillac once owned by Reggie Jackson.Larry entered into a contract with the owner agreeing to pay $102,000.The owner subsequently changed his mind.If Larry sues,what remedies are potentially available?
Q2) Carswell,a contractor,enters into a contract with Helen,a homeowner,to remodel her bathroom.The contract provides a specific completion date.The contract provides that if Carswell does not have the job finished by the date,Helen may deduct $200 per day from the contract price until the job is finished.This is an example of liquidated damages.
A)True
B)False
Q3) Which of the following statements concerning liquidated damages is NOT TRUE?
A)A liquidated damages clause will be enforced,if,when the contract was made,it was difficult to estimate actual damages.
B)The amount of liquidated damages must be a reasonable estimation of the actual harm resulting from a breach.
C)Nominal damages are not the same thing as liquidated damages.
D)Liquidated damages are enforceable even if the amount is considered to be a penalty on the breaching party.
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Page 21
Chapter 20: Practical Contracts
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Q1) In which of the following situations is it likely that you may NOT need a written contract?
A)You are dealing with a party you do not know well,so you need to remain flexible.
B)You are buying land from a member of your family.
C)The terms of the agreement are simple and the value of the transaction is small.
D)You have negotiated with the other party enough that you both know what the other person intends.
Q2) Any ambiguity in a contract is interpreted against the party who drafted the contract.
A)True
B)False
Q3) Nate works as a sales representative.His employment contract specifies that he cannot work for a competitor for a period of two years from employment.This is an example of A)vagueness.
B)extortion.
C)ambiguity.
D)duress.
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22
Chapter 21: Introduction to Sales
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Q1) A requirements contract is a contract
A)in restraint of trade.
B)in which the seller provides all of the goods that the buyer needs.
C)in which the buyer purchases all of the goods that the seller produces.
D)in which a party must buy a product it does not want in order to be allowed to buy a product it requires.
Q2) Harriett raises and sells hippos.In order to keep her hippos happy and healthy,she feeds them Hippo Chow,which she buys from the local pet store.Under the UCC,Harriett is
A)a merchant of both hippos and Hippo Chow.
B)a merchant of hippos,but not of Hippo Chow.
C)a merchant of Hippo Chow,but not of hippos.
D)not a merchant of either hippos or Hippo Chow.
Q3) Which of the following contracts requires a writing under the UCC,Article 2?
A)Jeremy,a full-time student,sold his snow blower to a friend for $450.
B)Kayla,a full-time student,purchased a used computer from Office Plus for $300.
C)A toy manufacturer contracted to sell dolls valued at $10,000 to a department store.
D)Tobias Department Store contracted to sell Jenny a $400 doll.
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Page 23
Chapter 22: Ownership, Risk and Warranties
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Q1) In a shipment contract,the risk passes to the buyer when the goods are properly tendered at the destination point.
A)True
B)False
Q2) Imogene takes her diamond solitaire ring to Sparkle Jewelry Shop to have the prongs holding the diamond retipped and the ring cleaned.The clerk at Sparkle tells her she will have to leave the ring and that it should be ready in about a week.When Imogene returns in a week to get her ring,she finds out that the ring has been sold.Which of the following is true?
A)Sparkle Jewelry Shop had the power to transfer all of Imogene's rights in the ring to a good faith buyer in the ordinary course of business.
B)This situation was a theft of the ring by Sparkle,and Sparkle must retrieve the ring and return it to Imogene.
C)The buyer of the ring must return it to Imogene since the buyer did not fully investigate whether Sparkle had good title to the ring.
D)Imogene has lost title to her ring and has no recourse since she was responsible for investigating the merchant's integrity before leaving her property.
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Page 24
Chapter 23: Performance and Remedies
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Q1) In some industries it is a routine practice to draft contracts permitting imperfection in the seller's goods,thereby limiting the effect of the perfect tender rule by the parties' agreement.
A)True
B)False
Q2) Leonna orders five table settings of china from Elite China.Each set includes a dinner plate,cup & saucer,bowl,and dessert plate.The china is sold only in sets.When the delivery arrives,Leonna discovers that Elite China sent the wrong pattern.Leonna immediately calls Elite China and is instructed to send the shipment back.While repacking the shipment,Leonna changes her mind and decides to keep the cups and saucers.She returns everything else.Can she do this?
Q3) Under the "perfect tender rule" the buyer may reject the goods if they fail in any respect to conform to the contract.
A)True
B)False
Q4) Define these terms: usage of trade,course of dealing,and course of performance and identify how they are used according to the UCC.
Q5) Identify the possible remedies for a seller when the buyer breaches a contract.
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Chapter 24: Secured Transactions
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Q1) The initial term for which a financing statement will be effective is
A)one year.
B)five years.
C)ten years.
D)two years.
Q2) Spicy & Hot,Inc.is interested in expanding its Mexican food restaurant into a Mexican food catering business.Spicy & Hot,Inc.buys a new delivery van from Van World.Spicy & Hot,Inc.is a buyer in the ordinary course of business when purchasing the van.
A)True
B)False
Q3) Under Article 9 of the UCC,electronic chattel paper may be used as collateral in a secured transaction.
A)True
B)False
Q4) Fowler Bros.has applied to Gibralter Bank for a $50,000 loan for its business expansion.If Fowler Bros.plans to use its account at Gibralter Bank as collateral,discuss what the bank needs to do for a security interest to attach.
Q5) Explain the difference between attachment and perfection.
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Page 26
Chapter 25: Creating a Negotiable Instrument
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Q1) In June,The Seascape Gallery sells an oil painting to Collegiate Systems,Inc.Collegiate promises to pay for the painting in three months.The gallery prepares a draft ordering Collegiate Systems to pay $3,000 to First Bank on September 15.Collegiate Systems signs the draft.The draft is a
A)sight draft.
B)time draft.
C)trade draft.
D)future draft.
Q2) A "holder" of order paper can be described as A)the payee.
B)any person in possession of the instrument.
C)any person in possession of the instrument if it is payable to or indorsed to him.
D)the first party to come in contact with a negotiable instrument.
Q3) On March 1 Donna wrote a check for $296 to Sun Services.When will the check be overdue? What is the effect of the check's being overdue? What is the effect if the check is stamped "Insufficient Funds" by Donna's bank?
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Chapter 26: Liability for Negotiable Instruments
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Q1) An indorser who writes "without recourse" next to her signature on a negotiable instrument is not liable for payment.
A)True
B)False
Q2) Lance indorses a promissory note to Connie in exchange for consideration.Unknown to Lance,the note is not good because the maker's signature was forged.Connie later attempts to present the instrument for payment to the original alleged maker,Lilly,who is able to deny liability for payment due to the forged signature.Connie may later sue Lance for breach of a transfer warranty.
A)True
B)False
Q3) James Packard,a lawyer representing Robert Marino,received a check for $16,000 in settlement of Robert's case.Instead of turning over the money to Robert or putting it into a trust fund for him,James forged Robert's indorsement and deposited the money into his own account without notifying Robert.Discuss the claims the parties have.
Q4) List the warranties a transferor of a negotiable instrument makes.
Q5) Explain when presentment warranties apply.Identify the presentment warranties on a check and a promissory note.
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Page 28
Chapter 27: Accountants Liability
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Q1) GBH,an accounting firm,was hired to prepare financial statements for E-treme.GBH
A)cannot show the working papers to E-treme unless there is a valid court order.
B)cannot show the working papers to E-treme unless it obtains permission from the AICPA.
C)can show the working papers to anyone that asks,since the accountant owns them.
D)must allow E-treme access to the working papers.
Q2) One of the accountant's most important roles is to serve as an independent evaluator of the financial statements issued by management to investors and creditors.
A)True
B)False
Q3) In 2007,the Securities and Exchange Commission (SEC)began to allow foreign companies to use which of the following for its reporting standards?
A)SOX
B)GAAP
C)GAAS
D)IFRS
Q4) Under what circumstances are accountants liable to their clients for fraud?
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Chapter 28: Agency Law
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Q1) Which of the following is a duty of a principal to an agent?
A)duty of loyalty
B)duty to indemnify for reasonable expenses
C)duty to provide information
D)All of these are correct.
Q2) Jim agreed to show Donna's car to a potential buyer.Donna was not able to be home since she had to attend a meeting.After showing the car,Jim left the keys in it and the car was stolen.Which statement is correct?
A)Since Jim is a gratuitous agent,he will only be liable for the loss of the car if his conduct constitutes gross negligence.
B)Since Jim is a gratuitous agent,he will be liable for the loss of the car if his conduct constitutes ordinary negligence.
C)Since Jim is a gratuitous agent,he has no liability for the car.
D)Since Jim is a gratuitous agent,he is strictly liable for the loss of the car.
Q3) Generally,either party to an agency relationship has the power to terminate it at any time.
A)True
B)False
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Chapter 29: Employment and Labor Law
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Q1) In the absence of a specific law to the contrary,employers have the right to fire workers for off-duty conduct.
A)True
B)False
Q2) Connie and her fellow union employees went out on strike when the company refused to meet the union's demands for higher wages and better benefits.Shortly thereafter,the company began hiring permanent replacement workers.After a hard eight-month strike,the union and the company reached an agreement.When the strike was over,Connie was upset that she was not given her job back.The replacement worker that took over her job was retained.She believes she has a legal right to her job,especially since she was a faithful employee for over 20 years.Is Connie right? Explain.
Q3) The duty of fair representation created by the NLRA requires that
A)a union treat all members fairly,impartially,and in good faith.
B)a union must pursue any member's grievance against the employer.
C)an employer,in communications with employees during a union organizing effort,must fairly represent the effects it believes a union will have on the company.
D)the NLRB certify only proposed bargaining units that it thinks the union can properly represent.
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Chapter 30: Employment Discrimination
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Q1) Sullivan Consumer Products Co.asks its employees to apply four tests in determining whether their behavior violates Title VII with respect to sexual harassment.Which of the following is one of the four tests?
A)Would your friends be impressed with your behavior?
B)Do you think your behavior is humorous?
C)Would your behavior help you to get a promotion?
D)Would you like your behavior reported in your local newspaper?
Q2) Generally speaking,an employer does not have to give workers a day off on their religious Sabbath if doing so would cause an undue hardship for the employer.
A)True
B)False
Q3) In order to be considered sexual harassment,behavior must be so severe that it interferes with an employee's ability to work.
A)True
B)False
Q4) What accommodations might an employer be expected to make for a disabled employee? What standard is used to determine whether an employer would be expected to make these accommodations?
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Chapter 31: Starting a Business: Llcs and Other Options
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Q1) Jill owns a retail business by herself and was sued by a customer who fell in the store.The customer claimed the business was negligent in caring for its floors.Which statement best describes Jill's potential liability?
A)Jill has no potential liability to the customer.
B)Jill can be held personally liable to the customer since she is the owner.
C)Jill can only be liable up to the amount she initially invested in the business.
D)Jill cannot be held personally responsible;the woman's insurance must pay for the claim.
Q2) Debra wanted to form a partnership with Lawrence.He agreed and they became co-owners in an equal partnership.This year,after expenses,the partnership had a profit of $200,000.How will the taxation of this profit be handled?
A)Since the partnership was Debra's idea,she will pay income tax on the profit on her personal tax return.
B)The business will pay half of the tax liability,and Debra and Lawrence will pay the other half.
C)Debra and Lawrence must both pay tax on the business's profit.
D)The business itself will pay the taxes on the business's profit.
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Chapter 32: Partnerships
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Q1) Elion was a partner in a partnership.Elion's death would be considered a wrongful dissociation.
A)True
B)False
Q2) Randy,Joan,and Arnie are partners.Their agreement did not address dissociation nor how long the partnership would last.Randy decided to leave the partnership.What happens when Randy serves notice he intends to withdraw?
A)The partnership can either buy him out and continue in business or wind up the business and terminate the partnership.
B)The partnership automatically terminates.
C)The partnership winds down.
D)The partnership estoppes.
Q3) Jeremiah was a partner in a partnership,but he quit unexpectedly when he got his feelings hurt over an internal decision.Dissociation has occurred.
A)True
B)False
Q4) Identify and briefly discuss the management rights and duties of a partner.
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Chapter 33: Life and Death of a Corporation
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Q1) The person who creates a corporation is called the A)promoter.
B)partner.
C)agent.
D)incorporator.
Q2) When a corporation accepts legal responsibility for a contract,it is called novation.
A)True
B)False
Q3) The lawyer who forms the corporation cannot legally serve as its incorporator.
A)True
B)False
Q4) Which state does your textbook cite as being particularly attractive to companies looking to incorporate?
A)Ohio
B)Alaska
C)Utah
D)Delaware
Q5) Discuss how a corporation is terminated.
Q6) What are some of the advantages for a business to incorporate in Delaware?
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Chapter 34: Management Duties
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Q1) A director violates the corporate opportunity doctrine if he or she competes with the corporation,unless the disinterested directors approve of the director's actions.
A)True
B)False
Q2) Which of the following statements is correct with respect to state efforts to offer protection to companies targeted for hostile takeovers?
A)Courts offer the only legal protection to companies targeted for hostile takeovers.
B)Statutory law offers the only legal protection to companies.
C)Both statutory law and the state courts have provided some degree of protection for companies.
D)State courts and state statutes have offered no protection for companies targeted for hostile takeovers.
Q3) A speculator plans to acquire control of Kelp Corporation and then resell it at a profit.A speculator is sometimes known as a corporate raider.
A)True
B)False
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Chapter 35: Shareholder Rights
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Q1) The NYSE and NASDAQ both require that the members of the nominating committee be independent directors who are less likely to simply go along with whatever the CEO wants.
A)True
B)False
Q2) A corporation's obligation to voluntarily provide shareholders with financial information
A)depends on whether the company is publicly or privately held.
B)depends on the requirements of the Model Business Corporation Act.
C)is extensive and is carefully regulated by the SEC if the company is privately held. D)depends on the ruling of the board of directors.
Q3) If a public company decides not to solicit proxies for a shareholder meeting,it need not give shareholders the information that would have been required in a proxy statement.
A)True
B)False
Q4) Vernon and David are the controlling shareholders in E-treme,Inc.Discuss the obligations that Vernon and David owe to the minority shareholders.
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Chapter 36: Bankruptcy
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Q1) Chapters 11 and 13 are liquidation chapters.
A)True
B)False
Q2) Jun-seo owes $20,000 in unsecured claims to 15 different creditors,and he has generally not been paying debts that are due.Two of Jun-seo's creditors want to force him into bankruptcy by filing an involuntary petition;the other creditors do not agree.Which of the following statements is correct about this situation?
A)An involuntary petition cannot be filed because Jun-seo is not that deeply in debt.
B)An involuntary petition cannot be filed because not enough creditors want to force Jun-seo into bankruptcy.
C)An involuntary petition can be filed because Jun-seo is not making his payments in a timely way.
D)An involuntary petition can be filed because any one of Jun-seo's creditors can force him into bankruptcy.
Q3) Karen has filed for bankruptcy.Who has the authority to confirm or reject a plan of payment,and what factors will be considered when deciding whether to approve a repayment plan under Chapter 13?
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Page 38
Chapter 37: Securities Regulation
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Q1) Securities offered and sold entirely within one state by a corporation of that state are exempt from registration.
A)True
B)False
Q2) After the SEC completes its review of a preliminary registration statement,it sends the issuer a comment letter setting forth changes that must be made.
A)True
B)False
Q3) To recover for an alleged violation of SEC Rule 10b-5,a plaintiff is required to prove reliance on a misstatement or omission relative to the purchase of the security.
A)True
B)False
Q4) Section 16 of the 1934 Act addresses what type of insider trading?
A)classic insider trading
B)tipping
C)short-swing trading
D)takeovers
Q5) Discuss the process an issuer follows for either an IPO or a secondary offering.
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Chapter 38: Antitrust
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Q1) What type of collusion does the Supreme Court refer to as "the supreme evil of antitrust"?
A)price-fixing
B)reciprocal dealing
C)price discrimination
D)vertical mergers
Q2) Violations of antitrust law are either per se violations or rule of reason violations.What are the differences between these two types of violations? Give examples of each.
Q3) Two universities located within 30 miles of each other agree to allocate their customers so as to help them both.The two schools draw a line down a map,and each university agrees to accept students only on their side of the line.What type of horizontal cooperative strategy does this represent?
A)market division
B)refusal to deal
C)reciprocal dealing
D)joint venture
Q4) Explain horizontal price-fixing and vertical minimum and maximum price-fixing.Discuss their status under antitrust laws.
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Chapter 39: Consumer Protection
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Q1) Suppose Bill's credit card is stolen and he notifies his credit card company of this fact.Which of the following is true regarding the amount of unauthorized charges made before Bill notified his credit card company?
A)Bill is not responsible for any of the unauthorized charges.
B)Bill is responsible for the first $50 of unauthorized charges.
C)Bill is responsible for the first $100 of unauthorized charges.
D)Bill is responsible for half of the unauthorized charges.
Q2) Prime Products,Inc.found out that it was going to take 3 weeks to ship the comforter Margaret ordered instead of the 7 days it had originally promised her.Prime Products must cancel Margaret's order and notify her that it can deliver within 3 weeks if she wants to reorder.
A)True
B)False
Q3) In 30-year mortgages,the finance charge typically exceeds the amount of the principal.
A)True
B)False
Q4) What must a seller disclose under the Magnuson-Moss Warranty Act?
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Page 41
Chapter 40: Environmental Law
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Q1) Under the Clean Air Act
A)California was granted special permission to set stricter pollution standards than the federal standards.
B)all states must follow federal automobile emission standards.
C)the states must each set automobile emission standards,which must then be approved by the EPA.
D)states were given the option of following federal standards or adopting their own stricter standards.
Q2) Which program was designed as a method for limiting air pollutants in an economically efficient manner by allowing enterprises to sell its leftover emissions allowance to other companies or stockpile it for future use?
A)the Paris Accord
B)cap and trade
C)total maximum daily load (TMDL)
D)Resource Conservation and Recovery Act (RCRA)
Q3) Local regulation is more effective than state or federal regulation in controlling air pollution.
A)True
B)False
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Page 42
Chapter 41: Intellectual Property
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Q1) McDonald's famous golden arches and other marks used by the company illustrate a
A)suggestive mark.
B)service mark.
C)certification mark.
D)collective mark.
Q2) A company's trade secret lasts for
A)20 years after the application is filed.
B)70 years after the death of the creator.
C)10 years,but it can be renewed for an unlimited number of terms as long as it is used.
D)as long as it is kept confidential.
Q3) James and his band played a very familiar song.However,they made up different words for the song that were intended to be funny.James's version of the popular song with different words is known as a
A)knock off.
B)parody.
C)mockarama.
D)link.
Q4) Briefly define patent,copyright,and trademark,and explain how long they last.
Q5) Identify the main provisions of the Digital Millennium Copyright Act.
Page 43
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Chapter 42: Real Property and Landlord Tenant Law
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Q1) Tom rented an apartment from Margaret on a month-to-month basis,with rent due on the first of the month.This type of tenancy is known as a "tenancy at will."
A)True
B)False
Q2) In a condemnation,a court order specifies what compensation is just for the property owner and awards title to the government.
A)True
B)False
Q3) Patrick owns an office building and leases space on a year-to-year basis.Patrick maintains a reversionary interest on the property.
A)True
B)False
Q4) You go to a theater to see a play one Saturday evening.You have A)purchased an interest called a "profit."
B)an easement by reservation.
C)a license to enter the theater.
D)no property right in the theater just by purchasing the ticket for the play.
Q5) What is the doctrine of adverse possession? Briefly explain how it works.
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Chapter 43: Personal Property and Bailment
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Q1) Beth owned an original U.S.flag.She had previously loaned the flag to Ross,a lawyer,so that he could display the flag on the wall behind his office desk.One day while visiting Ross in his office and admiring the flag,Beth said to Ross,"You are so fond of that flag,I would like you to have it!" Ross responded with a gracious "thank you." In this situation
A)Beth has not made a valid,binding gift of the flag because gifts are never binding and can always be revoked by the donor.
B)Beth has not made a valid,binding gift of the flag because the donor must deliver the property to the donee,which was not done here.
C)Beth has made a valid,binding gift if Beth agreed to give the flag in exchange for Ross's legal services.
D)Beth has made a valid,binding gift because she intended to transfer present ownership to Ross and Ross accepted the flag.
Q2) All bailments have to be by agreement between the bailor and bailee.
A)True
B)False
Q3) Distinguish between a contract and a gift.Give an example of each.
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Chapter 44: Planning for the Future: Wills, Trusts and Insurance
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Q1) Which type of automobile insurance covers the cost of damage caused by fire,theft,or vandalism?
A)liability insurance
B)comprehensive insurance
C)collision insurance
D)uninsured motorist insurance
Q2) The major disadvantage of a trust is
A)expense.
B)lack of privacy.
C)an often lengthy probate process.
D)lack of control.
Q3) The Uniform Probate Code has been adopted in all states.
A)True
B)False
Q4) April purchased a life insurance policy on herself.On her death,the proceeds of the insurance were to be paid to her minor child,Ryan.Ryan is the beneficiary.
A)True
B)False
Q5) Identify four ways a trust can be terminated.
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