Corporate Law
Mock Exam
Course Introduction
Corporate Law examines the legal framework governing the formation, operation, and regulation of corporations. This course covers key topics such as corporate governance, the rights and duties of directors and shareholders, mergers and acquisitions, fiduciary responsibilities, and compliance with securities regulations. Students will analyze landmark cases, statutory provisions, and contemporary issues affecting corporate entities. Emphasis is placed on understanding how legal principles shape business strategies and protect stakeholder interests in both domestic and international contexts.
Recommended Textbook Business Law and the Legal Environment 21st Edition by David P. Twomey
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52 Chapters
2751 Verified Questions
2751 Flashcards
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Chapter 1: The Nature and Sources of Law
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Sample Questions
Q1) Substantive law:
A) specifies the steps to follow to enforce legal rights.
B) concerns equitable relief only.
C) creates, defines, and regulates rights and duties.
D) draws solely on English legal principles.
Answer: C
Q2) Sheriff Jane desires to search your home. What law requires that the sheriff obtain a search warrant?
A) the Fourth Amendment of the United States Constitution
B) the Equal Protection Clause
C) state statute
D) local uniform police ordinances
Answer: A
Q3) Individual rights guaranteed in the United States Constitution:
A) have no accompanying duties.
B) apply only to a small number of individuals.
C) are subject to state legislative laws.
D) generally have accompanying duties.
Answer: D
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Page 3
Chapter 2: The Court System and Dispute Resolution
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57 Verified Questions
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Sample Questions
Q1) The answer to the complaint is filed by the:
A) defendant.
B) moving party.
C) plaintiff.
D) none of the above.
Answer: A
Q2) Depositions are usually taken in the courtroom.
A)True
B)False
Answer: False
Q3) A deposition:
A) is the testimony of a witness taken under oath.
B) is conducted outside of the courtroom.
C) can be used to impeach a witness.
D) all of the above.
Answer: D
Q4) The power of a court to decide certain types of cases is called jurisdiction.
A)True
B)False
Answer: True
Page 4
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Chapter 3: Business Ethics, Social Forces, and the Law
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52 Verified Questions
52 Flashcards
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Sample Questions
Q1) Laws such as those authorizing tax collection and draft registration exist primarily:
A) because they are morally justified.
B) to protect individual health and welfare.
C) to protect individual property rights.
D) to enable the government to continue to function.
Answer: D
Q2) In applying the "front-page-of-the-newspaper" test to a contemplated course of conduct one should ask:
A) Would I be found criminally liable if this winds up on the front page of the newspaper?
B) Would I be liable for monetary damages if this winds up on the front page of the newspaper?
C) Would I be willing to have my spouse, friends, and children read about this if it winds up on the front page of the newspaper?
D) Would I be able to explain this to the authorities if it winds up on the front page of the newspaper?
Answer: C
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Chapter 4: The Constitution As the Foundation of the Legal Environment
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Sample Questions
Q1) When there is a direct conflict between a federal and a state law, federal law prevails under the supremacy clause.
A)True
B)False
Q2) The states may coin money as long as it is backed by gold.
A)True
B)False
Q3) Which of the following is true about administrative agencies?
A) Administrative agencies exercise powers guaranteed to them in the U.S. Constitution.
B) Administrative agencies exercise powers allocated to them by the president.
C) Administrative agencies make decisions that are rarely reviewed by the courts.
D) Administrative agencies make decisions that are effectively reviewed by voters.
Q4) A constitution is the written document that establishes the structure of the government and its relationship to the people.
A)True
B)False
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Page 6
Chapter 5: Government Regulation of Competition and Prices
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Sample Questions
Q1) The Freezo Refrigeration Company entered into agreements with retail store owners. The agreements provided that the store owners would not sell Freezo's refrigerators below Freezo's suggested minimum retail price and that, in return, Freezo would not sell its refrigerators at retail in the store owners' respective territories. Are these agreements valid?
Q2) For violation of the Sherman Act, the maximum fine that may be imposed on a natural person is:
A) $1 million.
B) $350,000.
C) $0.
D) $1 billion.
Q3) The Sherman Act provides that every contract in restraint of trade is illegal.
A)True
B)False
Q4) Each of the states and the federal government have statutes and regulations that prohibit unfair methods of competition.
A)True
B)False
Page 7
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Chapter 6: Administrative Agencies
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58 Verified Questions
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Sample Questions
Q1) The public has access to the activity of administrative agencies in three ways: (1) open records, (2) open meetings, and (3) public announcement of agency guidelines.
A)True
B)False
Q2) Members of administrative agencies are ordinarily
A) pre-selected.
B) elected.
C) assigned.
D) appointed.
Q3) Under modern law, when the issue that an agency decides is a question of law based on a technical statute:
A) the court on appeal will reverse the agency's decision if the court disagrees with the decision.
B) the court will not accept the agency's decision unless the agency's interpretation is the only one that could have been made.
C) the court will tend to accept the agency's interpretation of the law as long as it is reasonable.
D) the court will not reverse the agency's decision.
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8
Chapter 7: The Legal Environment of International Trade
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Sample Questions
Q1) Franchising is a form of licensing that now is very common in international business.
A)True
B)False
Q2) Parties to international ventures often agree to arbitrate their disputes in neutral countries.
A)True
B)False
Q3) Which of the following allows a domestic firm to maintain the greatest control over its foreign operations?
A) wholly-owned subsidiaries
B) licensing
C) foreign distributorships
D) agency arrangements
Q4) A common barrier to the free movement of goods across borders is the tariff barrier.
A)True
B)False
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Chapter 8: Crimes
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Sample Questions
Q1) When a defendant is convicted of a crime, the court may also declare that the defendant's rights in any property used or gained from the crime be confiscated. This is known as __________.
A) forfeiture
B) reversion
C) subversion
D) divestiture
Q2) Crimes are generally defined and their punishments specified by:
A) trial court judges.
B) appellate judges.
C) codes and statutes.
D) the United States Constitution.
Q3) Racketeering is defined as:
A) using money to influence public officials.
B) using money to influence employees of competitors.
C) using money derived from illegal activities to invest in legitimate businesses.
D) using money to influence foreign officials.
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Chapter 9: Torts
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Sample Questions
Q1) Maria intentionally attempts to have Patty break a contract Patty has with Alfred. Maria will be liable under which theory of tort?
A) libel
B) product disparagement
C) contract interference
D) intentional infliction of emotional distress
Q2) Professionals have a duty to perform their functions at the same level as would a reasonable person.
A)True
B)False
Q3) Concerning torts and crimes, choose the correct statement:
A) Every tort is a crime.
B) Every crime is a tort.
C) No crime is a tort.
D) A crime may also be a tort.
Q4) Governments are generally immune from tort liability.
A)True
B)False
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Chapter 10: Intellectual Property Rights
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52 Verified Questions
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Sample Questions
Q1) Generic terms that refer to a type or class of goods are never subject to trademark protection.
A)True
B)False
Q2) In order to obtain a court order enjoining a competitor from using your trademark, it is necessary to show that:
A) you invested a certain level of resources to develop the mark.
B) the competitor is making unfair profits from use of the mark.
C) the competitor's use of the mark risks confusing the public.
D) all of the above.
Q3) A business formula, information compilation, or device that provides an advantage over competitors that do not have it is known as a:
A) competitive advantage.
B) strategic advantage.
C) trade secret.
D) restraint of trade.
Q4) Protection for trade dress is available under the Lanham Act.
A)True
B)False
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Chapter 11: Cyberlaw
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52 Verified Questions
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Sample Questions
Q1) Describe the rights of employers to monitor the e-mail of employees who are using their employers' email system.
A) Employers may monitor employees' e-mails, but only if the employees have consented.
B) Employers may monitor employees' e-mails, regardless of whether employees have consented.
C) Employers may monitor employees' e-mails, but only if notice is given.
D) Employers may not monitor employees' e-mails.
Q2) The law of real property is included in those categories of legal issues covered by cyberlaw.
A)True
B)False
Q3) "Pump and Dump" is a violation of:
A) contract law.
B) criminal law.
C) standard jurisdictional practice.
D) securities law.
Q4) The Internet has facilitated access to capital markets.
A)True
B)False
Page 13
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Chapter 12: Nature and Classes of Contracts: Contracting
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Sample Questions
Q1) An executed contract is an agreement that has been completely performed. A)True
B)False
Q2) The elements of a contract include all of the following except:
A) an agreement.
B) two or more competent parties.
C) consideration.
D) an illegal purpose.
Q3) The subject matter of a contract may relate to:
A) the performance of personal services.
B) the construction of a house.
C) the transfer of ownership of property.
D) all of the above.
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 customer requested a price from a carpenter on a teak cabinet to be built according to the buyer's specifications. Because teak wood is difficult to obtain, the customer agreed to pay the cost of the wood plus $175 and the carpenter agreed to build it. Which of the following is correct?
A) Although the price is somewhat unclear, the parties have entered into a contract.
B) This is an agreement to agree, and is not binding.
C) This agreement fails for indefiniteness.
D) The carpenter is bound by the agreement, but not the customer.
Q2) An option is itself a contract to refrain from revoking an offer.
A)True
B)False
Q3) In general, an acceptance occurs when:
A) a particular form of words is stated to the offeror.
B) a particular mode of expression is made to the offeror.
C) the offeree reserves the right to reject the offer.
D) a clear expression of the offeree's agreement to be bound by the terms of the offer occurs.
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Page 15
Chapter 14: Capacity and Genuine Assent
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44 Verified Questions
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Sample Questions
Q1) A unilateral mistake as to a fact does not affect the contract when the mistake is unknown to the other contracting party.
A)True
B)False
Q2) A person who has drunk too much alcohol at a party and signs a contract may be able to rescind that contract.
A)True
B)False
Q3) The obligation of a cosigner is discharged by:
A) the minority status of one of the parties.
B) the majority status of one of the parties.
C) the court's declaration of the contract's provision of necessaries.
D) the payment of the debt.
Q4) A minor cannot avoid a contract to purchase a car if the:
A) car has been destroyed.
B) car has been damaged.
C) car is used for non-commercial purposes.
D) minor is able to return the car but does not do so.
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Page 16
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) Forbearance to assert a claim is binding consideration:
A) only if the claim has legal merit.
B) regardless of whether the claim has merit, and regardless of whether the claim has been asserted in good faith.
C) only if the claim has legal merit and has been asserted in good faith.
D) when the claim, regardless of whether it has legal merit, has been asserted in good faith.
Q3) True consideration occurs only when the value of one promise is equal to the value of the promise given by the other party.
A)True
B)False
Q4) Forbearance may constitute consideration.
A)True
B)False
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Chapter 16: Legality and Public Policy
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Sample Questions
Q1) An agreement not to compete is enforceable:
A) in the sale of a business.
B) between competitors.
C) in contracts for the sale of goods.
D) in contracts for the sale of securities.
Q2) Even if part of a contract is illegal, the court may enforce a divisible, legal part of the contract.
A)True
B)False
Q3) Which of the following is not an example of a state penalty for violating usury law?
A) restricting the lender to the recovery of the loan but no interest whatsoever
B) allowing the lender to recover the loan principal and interest up to the maximum contract rate
C) restricting the lender to the recovery of the loan plus seventy-fifty percent (75%) of the interest
D) requiring the lender to pay, as a penalty, double the interest the borrower paid on a usurious loan
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18
Chapter 17: Writing, Electronic Forms, and Interpretation of Contracts
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Sample Questions
Q1) Franklin, a hobby-shop supplier, and Gordon, a hobby-shop owner, entered into a contract that provided that Franklin would sell Gordon fifty World War II battleship models at Franklin's cost of $2.95 each, plus a reasonable profit. Gordon brought suit to enforce the contract against Franklin, who refused to deliver the models. Franklin claimed that there was no contract because of indefiniteness. Is Franklin correct?
Q2) 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.
Q3) In interpreting an ambiguous contract, one part of the contract:
A) must be viewed in isolation.
B) must be viewed as a condition.
C) must be viewed in connection with the rest of the contract.
D) must be viewed as indicating joint and several liability.
Q4) In the absence of a statute requiring a writing, a contract may be oral or written.
A)True
B)False
Page 19
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Chapter 18: Third Persons and Contracts
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Sample Questions
Q1) Janet Jones sold the assets and liabilities of her coin-operated laundry to Kevin Katz for $10,000. The assets of the business included all of the washers and dryers. The liabilities included the amounts still owing on seven new dryers, which had been purchased recently from Dryer Company under an installment contract. Katz agreed to make the installment payments on the new dryers as they came due. After Katz failed to make an installment payment when it was due, Dryer Company sued Jones. Jones claimed she no longer was liable. How will the court decide?
Q2) Whenever a contract is intended to benefit a third person, this person is referred to as a delegator.
A)True
B)False
Q3) When duties under a contract are delegated, the party making the delegation remains responsible for the performance of the contract just as though no delegation had been made.
A)True
B)False
Q4) An employer can assign to another employer the right to have an employee work.
A)True
B)False
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Chapter 19: Discharge of Contracts
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Sample Questions
Q1) To establish impossibility a party must show (1) the unexpected occurrence of an intervening act; (2) that the risk of the unexpected occurrence was not allocated by agreement or custom; and (3) that the occurrence made performance impossible.
A)True
B)False
Q2) To avoid litigation over impossibility and impracticability issues, modern contracting parties often contract around the doctrine of impossibility, specifying the failures that will excuse performance in their contracts. The clauses in which they do this are called __________ clauses, and they are generally enforced by courts as written.
A) delta force
B) force majeure
C) magnum force
D) force corporeal
Q3) Impossibility of performance applies when the debtor does not have sufficient funds to pay a debt.
A)True
B)False
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Chapter 20: Breach of Contract and Remedies
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Sample Questions
Q1) One party to a contract permitting the other party to continue performance without objecting that the performance is unsatisfactory is an example of a(n):
A) waiver.
B) breach.
C) anticipatory repudiation.
D) forbearance.
Q2) When a party expressly declares before the time for performance arrives that the contract will not be performed, such a declaration is called an anticipatory repudiation.
A)True
B)False
Q3) If one party to a contract breaks the contract, the other party generally is under a duty to stop any further performance to avoid sustaining greater damages.
A)True
B)False
Q4) Punitive damages are generally recoverable in contract actions.
A)True
B)False
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22
Chapter 21: Personal Property and Bailments
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Sample Questions
Q1) 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
Q2) With regard to a bailment, a valid delivery and acceptance need not require that the bailee be aware that goods have been placed within the bailee's exclusive possession or control.
A)True
B)False
Q3) At common law, a tenancy by entirety or a tenancy by the entireties is created when property is transferred to both husband and wife.
A)True
B)False
Q4) Property held by a bailee may be used by the bailee without the permission of the bailor.
A)True
B)False
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Chapter 22: Legal Aspects of Supply Chain Management
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Sample Questions
Q1) The rights of a holder of a warehouse receipt depend on whether the receipt is: A) negotiable.
B) rescissory.
C) notarized as a document of title.
D) notarized as a bill of lading.
Q2) Bob Brown entered the Hotel Lux to attend a conference being held within the hotel. Sam Smith had arrived to attend the same conference, had registered at the front desk, and had obtained a room. Sally Jones also intended to participate in the conference and was in essence living at the hotel at the time. What relationship exists between the hotel and each of these individuals? What can be said of the hotel's obligations to each individual under these circumstances?
Q3) 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
Q4) The purchase of a warehouse receipt by due negotiation eliminates all prior claims. A)True
B)False
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Page 24
Chapter 23: Nature and Form of Sales
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Sample Questions
Q1) As a general rule, courts will __________ in recovering money or property transferred under an illegal agreement.
A) assist a commercial buyer
B) assist a non-commercial buyer
C) assist an institutional buyer
D) not aid either party
Q2) An offer to buy or sell goods may be accepted in any manner that is reasonable under the circumstances.
A)True
B)False
Q3) UCC Article 2 applies not only to contracts for the sale of familiar items of personal property, such as automobiles or chairs, but also to the transfer of commodities, such as oil, gasoline, milk, and grain.
A)True
B)False
Q4) Any modification of a sales contract must be supported by some form of consideration.
A)True
B)False
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Chapter 24: Title and Risk of Loss
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Sample Questions
Q1) "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
Q2) When goods are existing and identified to the contract and there is no document of title, the title to the goods passes to the buyer at the time of the transaction.
A)True
B)False
Q3) A consignment sale is treated as a(n) __________ under UCC Article 2, and the dealer-consignee has full authority to sell the goods for the consignor and can pass title to the goods.
A) ordinary sale
B) final sale
C) sale on approval
D) sale or return
Rrrr
Q4) Title and risk of loss always pass to the buyer at the same time.
A)True
B)False
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Chapter 25: Product Liability: Warranties and Torts
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Sample Questions
Q1) The warranty of merchantability guarantees that the:
A) party in question is a merchant.
B) product is fit for the ordinary purposes for which it is sold.
C) product will remain fit for its normal use for the applicable statute of limitations period.
D) product can be resold by the buyer if the buyer does not want to keep it.
Q2) The defendant in a defective product suit may be:
A) the seller.
B) the manufacturer.
C) the manufacturer of a component part.
D) all of the above.
Q3) In most instances, the mere fact that a sale was made gives rise to a(n):
A) express warranty.
B) limited warranty.
C) full warranty.
D) implied warranty.
Q4) 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
Page 27
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Chapter 26: Obligations and Performance
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Q1) When a party refuses to perform a contract at the time of performance, a repudiation has occurred.
A)True
B)False
Q2) 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
Q3) In a cash sale that does not require the physical moving of the goods, the:
A) parties are required to perform concurrently.
B) seller is required to tender the goods before the buyer must pay for them.
C) buyer must pay for the goods in advance.
D) buyer must actually receive the goods before he or she is required to pay for them.
Q4) 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
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Chapter 27: Remedies for Breach of Sales Contracts
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Sample Questions
Q1) Rejection of improper tender and revocation of acceptance are
A) synonymous.
B) distinguishable remedies.
C) common law remedies.
D) non-UCC remedies.
Q2) If goods are specially manufactured and the buyer refuses to take them, it is possible for the seller to recover as damages the full purchase price and keep the goods.
A)True
B)False
Q3) When goods are sold for consumer use and personal injuries are sustained, a total exclusion of liability in the sales contract is:
A) enforceable.
B) unenforceable.
C) unconscionable.
D) both b. and c.
Q4) A buyer may reject the goods or revoke the acceptance for any defects in the goods.
A)True B)False
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Chapter 28: Kinds of Instruments, Parties, and Negotiability
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Sample Questions
Q1) Negotiation of commercial paper results in lesser rights to transferees than those rights afforded assignees of contracts under contract law.
A)True
B)False
Q2) 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
Q3) The person on whom the order to pay a draft is made is called a drawer.
A)True
B)False
Q4) If an order or promise is not for money, the instrument is not negotiable.
A)True
B)False
Q5) If an instrument is negotiable, it is governed by Article 2 of the UCC.
A)True
B)False
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Chapter 29: Transfers of Negotiable Instruments and
Warranties of Parties
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Sample Questions
Q1) A person who acquires the instrument on which the last endorsement is blank becomes the holder.
A)True
B)False
Q2) If an instrument is payable to bearer, it may be negotiated by transfer of possession alone.
A)True
B)False
Q3) An instrument that originally was bearer paper always remains bearer paper.
A)True
B)False
Q4) A forged or unauthorized endorsement is by definition:
A) an endorsement of the person by whom it appears to have been made.
B) no endorsement of the person by whom it appears to have been made.
C) binding on the party who refuses to ratify the instrument.
D) incapable of being ratified.
Q5) A restrictive endorsement specifies the purpose of the endorsement or the use to be made of the paper.
A)True
B)False
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Chapter 30: Liability of the Parties Under Negotiable Instruments
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Q1) To have the status of a holder in due course, a person must first be a holder.
A)True
B)False
Q2) A holder through a holder in due course is subject to all defenses.
A)True
B)False
Q3) Jones issued a check to Smith in return for Smith's promise to do work. Smith never did the promised work, but offered to buy goods from Gomez by endorsing the check to Gomez. Gomez had had no prior dealings with Jones or Smith, but accepted the check in payment. Gomez:
A) cannot be a holder in due course.
B) is considered an assignee of Smith's rights.
C) is a holder through a holder in due course.
D) is a holder in due course.
Q4) A holder can recover from any of the parties who are liable on the instrument, regardless of the order of the signatures on the instrument.
A)True
B)False
Page 32
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Chapter 31: Checks and Funds Transfers
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Q1) 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)
Q2) The duties of a drawee bank include all of the following except to:
A) maintain security concerning information relating to the depositor-bank relationship.
B) pay on demand all checks to the extent of the bank's assets.
C) exercise reasonable care in the payment of checks.
D) generally refuse to pay any checks after the drawer has died.
Q3) The act of stopping payment on a check imposes no liability on the depositor.
A)True
B)False
Q4) A buyer may stop payment on a certified check issued to a seller if the goods are defective when received.
A)True
B)False
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33
Chapter 32: Nature of the Debtor-Creditor Relationship
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Q1) The creditor's failure to give the surety notice of default is not a defense.
A)True
B)False
Q2) An issuer has an obligation to honor drafts under a letter of credit if the conditions specified in the letter have been satisfied. This obligation includes the bank's obligation to assure that the goods sold by the seller in fact conform to the contract.
A)True
B)False
Q3) Suretyship is governed by the UCC.
A)True
B)False
Q4) A letter of credit cannot extend for a period of more than five (5) years.
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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Page 34
Chapter 33: Consumer Protection
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Q1) What is not a correct statement concerning consumer protection legislation?
A) It prohibits the consumer from suing in his or her own right and gives the right to sue solely to an agency or to the attorney general.
B) It recognizes that the theoretical right of the consumer to sue may be of little practical value.
C) It provides special remedies.
D) It provides certain agencies to police statutes passed to aid consumers.
Q2) Pursuant to the Credit Repair Organization Act of 1996, credit repair organizations must be "non-profit."
A)True
B)False
Q3) A consumer claiming that there has been a violation of a consumer protection statute has the burden of proving that the statutory definition of "consumer" has been satisfied.
A)True
B)False
Q4) Consumer protection even protects a consumer from the consumer's own negligence.
A)True
B)False
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Chapter 34: Secured Transactions in Personal Property
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Q1) King Electronics, a retailer of video equipment, sold two DVRs to Larson, a psychologist, for use in her professional practice, which was located in her home. The sale to Larson was made on credit. King retained a security interest in the DVRs sold but did not file a financing statement. Mills, another creditor of Larson, has asserted that his lien on the two DVRs is superior to King's security interest. Is he right? As you decide, remember to classify the DVRs as collateral in the hands of King and Larson.
Q2) A security agreement must:
A) identify the parties involved.
B) contain a reasonable description of the collateral.
C) demonstrate that the creditor intends to have a security interest.
D) all of the above.
Q3) The property that is subject to the security interest is called collateral.
A)True
B)False
Q4) In most cases, value, which allows attachment of a security interest, is any consideration that supports a simple contract.
A)True
B)False
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Page 36
Chapter 35: Bankruptcy
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Q1) An involuntary bankruptcy case is commenced by creditors filing a petition with a bankruptcy court.
A)True
B)False
Q2) A discharge releases a debtor from student loan obligations that first became due within two (2) years before bankruptcy.
A)True
B)False
Q3) The creditors of Sara Delano have petitioned for involuntary bankruptcy proceedings against her. Delano has been consistently late in paying her obligations for the past year. Two months before the petition was filed, a custodian was appointed to protect Delano's property. In her statement contesting the bankruptcy petition, Delano pointed out that she had dealt in good faith and could not be shown to be guilty of any act of misconduct. In addition, she cited her willingness to allow a custodian to be appointed as an indication of her intention to avoid bankruptcy and honor her obligations. Can she prevail?
Q4) To be set aside as a preference, a transfer must be fraudulent.
A)True
B)False
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Chapter 36: Insurance
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Q1) An insurable interest in property must exist at the time that the loss is suffered, while an insurable interest in life must exist at the time that the policy is issued.
A)True
B)False
Q2) An insurer may cancel any contract of insurance by the insurer's unilateral act as long as the insurer gives advance written notice.
A)True
B)False
Q3) An insurer who wrongfully refuses to defend the insured is liable for:
A) breach of contract.
B) insurance fraud.
C) the tort of wrongful interference with contractual relations.
D) the tort of malicious prosecution.
Q4) The person to whom an insurance promise is made is called:
A) the insured.
B) the insurer.
C) the policyholder.
D) both a. and c.
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Page 38
Chapter 37: Agency
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Q1) It is the duty of an agent to act with the care that:
A) the principal would exercise under the circumstances.
B) a reasonable principal would exercise under the circumstances.
C) a reasonable juror would exercise under the circumstances.
D) a reasonable person would exercise under the circumstances.
Q2) A principal may ratify an unauthorized contract of an agent.
A)True
B)False
Q3) When the principal's words or conduct leads a third person to reasonably believe that a party is authorized to act as his or her agent but this is not true, and the third person relies on that appearance, this creates a case of __________ authority.
A) express
B) apparent
C) customary
D) incidental
Q4) 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
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Chapter 38: Third Persons in Agency
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Q1) If an agent commits a crime, the agent's liability will depend on the agency relationship.
A)True
B)False
Q2) 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
Q3) The liability of a buyer for the purchase price of goods is terminated by the fact that the buyer gave the buyer's agent the purchase price to remit to the seller.
A)True
B)False
Q4) A principal is not bound by statements made by an agent during the transaction of business that is within the scope of the agent's authority.
A)True
B)False
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Chapter 39: Regulation of Employment
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Q1) "Permissive" subjects of bargaining include seniority provisions, promotions, layoff and recall provisions, no-strike no-lockout clauses, and grievance procedures.
A)True
B)False
Q2) The Federal __________ Act makes it unlawful to intercept oral and electronic communications and provides for __________ against the violator.
A) Wiretapping; civil damages
B) Wiretapping; criminal liability and civil damages
C) Homeland Security; civil damages
D) Homeland Security; criminal liability and civil damages
Q3) An employment contract of indefinite duration is:
A) terminable at will.
B) invalid.
C) automatically terminated after five years.
D) terminable only for good cause.
Q4) An agreement by an employee to refrain from disclosing trade secrets is binding.
A)True
B)False
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Chapter 40: Equal Employment Opportunity Law
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Q1) Title VII protects members of which racial grouping(s)?
A) black only
B) black, Native American, and Asian-Pacific
C) white only
D) all racial groupings
Q2) Which of the following scenarios would not qualify as a bona fide occupational qualification exception to Title VII?
A) a religious school hiring only members of that religion to teach religion
B) a women's store that sells wedding gowns hiring only women to measure and fit customers
C) an airline hiring only female flight attendants
D) all of the above scenarios would qualify as a bona fide occupational qualification exception to Title VII.
Q3) An employer can be held liable for the sexual harassment of an employee by a supervisor.
A)True
B)False
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Chapter 41: Types of Business Organizations
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Q1) A corporation must have at least two shareholders.
A)True
B)False
Q2) A major disadvantage of the sole proprietorship is:
A) no organizational fees.
B) the sole proprietor obtains all of the profits.
C) the sole proprietor is personally liable for the debts of the sole proprietorship.
D) the sole proprietor is free to make all business decisions concerning operation of the sole proprietorship.
Q3) A sole proprietorship is taxed:
A) on a personal and corporate level.
B) only on the corporate level.
C) only on the personal level.
D) none of the above.
Q4) Franchising is basically contractual in nature.
A)True
B)False
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Chapter 42: Partnerships
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Q1) The assignee of a partner's interest in the partnership becomes a partner only with the consent of the other partners.
A)True
B)False
Q2) Regarding distribution of assets upon winding up a partnership, what is paid first?
A) debts to outside creditors
B) return of capital
C) debts of partners who are creditors
D) profits
Q3) Creditors of a firm have first claim on the assets of the partnership.
A)True
B)False
Q4) The formal document that is prepared to evidence the contract of the parties creating their partnership may be called:
A) a partnership agreement.
B) articles of incorporation
C) articles of cooperation
D) all of the above.
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Page 44
Chapter 43: LPs, LLCs, and LLPs
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Q1) Every limited partnership must have at least one general partner.
A)True
B)False
Q2) A limited liability company is identical to a Subchapter S corporation.
A)True
B)False
Q3) In a limited partnership, general partners are not responsible for the debts of the firm.
A)True
B)False
Q4) A limited liability company pays federal income tax.
A)True
B)False
Q5) The dissolution of a limited partnership is governed by unique rules quite different from those applicable to the dissolution of a general partnership.
A)True
B)False
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Chapter 44: Corporate Formation
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Q1) A business corporation may legally merge with a charitable corporation.
A)True
B)False
Q2) Shareholders ordinarily cannot be sued for corporate liabilities.
A)True
B)False
Q3) The corporate form of business continues regardless of changes in stock ownership.
A)True
B)False
Q4) "Conglomerate" describes the relationship of equal companies engaged in similar fields of business activity.
A)True
B)False
Q5) A corporation may be judicially dissolved when its management is deadlocked and the deadlock cannot be broken by the shareholders.
A)True
B)False
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Page 46
Chapter 45: Shareholder Rights in Corporations
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Q1) All shares must have a par value of at least one dollar per share.
A)True
B)False
Q2) Restrictions on the transfer of stock are valid if they are not unreasonable.
A)True
B)False
Q3) Under the RMBCA, a preincorporation subscription agreement is irrevocable for six (6) months unless the subscription agreement provides a longer or shorter period, or all of the subscribers agree to revocation.
A)True
B)False
Q4) Preferred stock cannot have priority over common stock with respect to dividends. A)True
B)False
Q5) Until a transfer is recorded on its books, a corporation is entitled to treat the person whose name is on its books as the owner of its stock.
A)True B)False
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Chapter 46: Securities Regulation
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Q1) Which of the following acts was passed to ensure that public shareholders faced with a cash tender offer would not be required to respond without sufficient information?
A) the Mann Act
B) the Robinson-Patman Act
C) the Williams Act
D) the SEC Act
Q2) An unlawful sale under the Insider Trading Sanctions Act of 1984 can result in a civil penalty of up to how many times the profit gained or loss avoided?
A) two (2)
B) three (3)
C) four (4)
D) five (5)
Q3) Investors who lack inside information and have sold their stock during the relevant time period may recover damages from insiders who have made use of the undisclosed information.
A)True
B)False
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Chapter 47: Accountants Liability and Malpractice
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Q1) A disclaimer that protects an accountant from liability for inaccurate reporting of certain specified financial information will be held valid if the accountant had no means of examining the information.
A)True
B)False
Q2) Herman hires Juanita as his accountant. Juanita commits negligence in preparing financial statements for a business Herman owns. Several investors rely on the financial statements and purchase shares of stock in the business. In a state that has adopted the privity rule, what result?
Q3) To help eliminate conflicts of interest, Sarbanes-Oxley prohibits certain activities by audit firms for their audit clients, including:
A) the design and implementation of financial information systems.
B) actuarial services.
C) management functions and human resources.
D) all of the above.
Q4) A disclaimer based on lack of knowledge will always protect an accountant from liability.
A)True
B)False
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Chapter 48: Management of Corporations
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Q1) In addition to the corporation itself, which of the following parties are ordinarily responsible for corporate debts?
A) directors
B) officers
C) directors and officers
D) none of the above
Q2) Eligibility for membership on a board of directors is determined by all of the following except:
A) statute.
B) certificates of filing.
C) articles of incorporation.
D) bylaws.
Q3) The RMBCA provides that, absent a conflicting provision in the articles of incorporation, directors may be removed:
A) with or without cause by a majority vote of the shareholders.
B) with cause by a majority vote of the shareholders, and without cause by a unanimous vote.
C) with or without cause by a unanimous vote of the shareholders.
D) only with cause.
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Page 50
Chapter 49: Real Property
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Q1) A guarantee that the grantor owns the estate conveyed is called a covenant:
A) of right to convey.
B) against encumbrances.
C) of quiet enjoyment.
D) of seisin.
Q2) Recording statutes provide that a person purchasing land from the last holder of record will take title free of any unrecorded claim to the land of which the purchaser does not have notice or knowledge.
A)True
B)False
Q3) If the parties involved agree that personal property will be considered a fixture, it will be deemed to be a fixture without the application of legal tests.
A)True
B)False
Q4) For a deed to be effective, the grantee must clearly indicate, either expressly or by conduct, an intention to accept the deed.
A)True
B)False
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Chapter 50: Environmental Law and Land Use Controls
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Q1) A zoning restriction:
A) constitutes an eminent domain "taking."
B) entitles the landowner to compensation.
C) will not lower the value of the land it concerns.
D) can prevent the landowner from making the most profitable use of the land.
Q2) If a restrictive covenant is valid, it binds only the original grantee in the deed that created the covenant.
A)True
B)False
Q3) Conduct that unreasonably interferes with the enjoyment of land is a nuisance.
A)True
B)False
Q4) When a zoning ordinance is adopted, any property used for a purpose that does not conform to the zoning ordinance:
A) must be demolished.
B) must no longer be used for a nonconforming use or purpose.
C) may be used for any use that does not conform to the zoning regulation.
D) may continue to be used for the same nonconforming use.
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Page 52
Chapter 51: Leases
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Q1) Which of the following is an example of a legal restriction that may be imposed on a tenant's deposit?
A) a statutory limitation on the amount of the deposit
B) a requirement that the landlord hold the deposit in a trust fund
C) a requirement that the landlord pay interest for the period the deposit is held
D) all of the above
Q2) In a lease agreement, the person who owns the real property and permits the occupation of the premises is known as the __________, and the person who occupies the property is known as the __________.
A) lessor; lessee
B) lessee; lessor
C) grantor; grantee
D) grantee; grantor
Q3) If the tenant uses the property for any purpose other than the one specified in the lease, the landlord has the option to declare the lease terminated.
A)True
B)False
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Chapter 52: Decedents Estates and Trusts
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Q1) A will may only be revoked by operation of law; it may not be revoked by act of the testator.
A)True
B)False
Q2) The requirements to create a trust are uniform.
A)True
B)False
Q3) Which of the following is not a duty of a trustee?
A) to use reasonable skill
B) to defend the trust in court
C) to invest trust assets
D) to deliver possession of trust assets to the settlor for the trust period
Q4) A will, to be effective, always must be dated.
A)True
B)False
Q5) A trustee is not permitted to profit personally from the position of trustee, other than to receive the compensation allowed by contract or law.
A)True
B)False
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