Entrepreneurship and Law Practice Exam
Course Introduction
Entrepreneurship and Law explores the critical intersection between innovative business ventures and the legal frameworks that govern them. The course covers essential legal principles affecting startups and entrepreneurs, including intellectual property, business formation, funding and financing, contracts, liability, employment law, and regulatory compliance. Through case studies and practical scenarios, students gain insights into identifying and mitigating legal risks, structuring businesses for growth, and leveraging the law to support entrepreneurial success. The course equips aspiring entrepreneurs with the foundational legal knowledge required to navigate the complexities of launching and sustaining a business in today's dynamic environment.
Recommended Textbook Business Law and the Legal Environment 7th Edition by Jeffrey F. Beatty
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44 Chapters
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Page 2
Chapter 1: Introduction to Law
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Q1) In 1992,the North Carolina Supreme Court ruled in a case entitled Goodman v.Wenco Foods,Inc.,that when a substance in food causes injury to a consumer of the food,it is not a bar to recovery against the seller that the substance was natural to the food.If,in a 2008 case involving a consumer's injury caused by a fish bone in a bowl of fish chowder,the court followed the decision in Goodman v.Wenco Foods,Inc.,the court's action in the second case is an example of A)stare decisis.
B)statutory law.
C)public law.
D)criminal law.
Answer: A
Q2) If the President vetoes a bill,it can still become law if both the House and the Senate approve it with a 51% majority.
A)True
B)False
Answer: False
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3
Chapter 2: Business Ethics and Corporate Social Responsibility
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Q1) Research indicates that consumers are willing to pay more for a product that they believe to be ethically produced.
A)True
B)False
Answer: True
Q2) Oxtron,Inc.is considering establishing a program that actively encourages ethical behavior.What reasons would support Oxtron's adoption of an ethics program?
Answer: The following reasons support an ethics program: (1)society as a whole benefits from ethical behavior; (2)people feel better when they behave ethically; (3)unethical behavior can be very costly;and (4)ethical behavior is more likely to pay off with a better reputation,more creative and cooperative employees,and higher returns than companies that engage in wrong-doing.
Q3) When evaluating the right decision,deontological ethics bases its value on the A)results of doing something.
B)happiness derived in doing something.
C)reason for doing something.
D)rules of why something is done.
Answer: C
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Chapter 3: International Law
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Q1) Shari'a is another name for ______ law.
A)Islamic
B)civil
C)common
D)Jewish
Answer: A
Q2) Sovereign immunity holds that the courts of one nation lack the jurisdiction to hear suits against foreign governments unless the foreign nation has waived immunity,has violated international law,or?
A)has engaged in a bilateral treaty.
B)has been granted "most favored nation" status.
C)is engaging in commercial activity.
D)has agreed to arbitration.
Answer: C
Q3) The European Union is one of the world's most powerful regional associations with 42 member nations as of 2014.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Common Law, Statutory Law, and Administrative Law
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Q1) The majority of work done by legislative bodies is performed in committees.
A)True
B)False
Q2) Public hearings are required in formal administrative agency rulemaking.
A)True
B)False
Q3) The U.S.Supreme Court was asked to decide whether same-sex sexual harassment is a violation of Title VII of the Civil Rights Act.This law forbids discrimination in employment on the basis of sex.In interpreting statutes,the court may use all of the following EXCEPT
A)the plain meaning rule.
B)legislative history.
C)public policy.
D)enabling legislation.
Q4) Because of the concept of stare decisis,the U.S.Supreme Court,in interpreting a statute in 2009,must interpret certain statutory language in the same way as the U.S.Supreme Court interpreted the same statutory language in 1971.
A)True
B)False
Page 6
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Chapter 5: Constitutional Law
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Q1) A form of due process that holds that certain rights are so fundamental that the government may not eliminate them is referred to as
A)procedural due process.
B)judicial restraint.
C)substantive due process.
D)eminent domain.
Q2) Obscene speech is protected by the First Amendment.
A)True
B)False
Q3) Misleading commercial speech may be outlawed altogether without violating the Constitution.
A)True
B)False
Q4) Discuss the Miller test to determine if a creative work is obscene.
Q5) The "takings clause" prevents the government from taking private property for any reason.
A)True
B)False
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Chapter 6: Dispute Resolution
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Q1) Emails and their attachments are not subject to pretrial discovery.
A)True
B)False
Q2) Denzil was one of 50,000 people defrauded of $40 in an advertising scam.His best course of action to recover his money is to
A)mediate the claim with the advertiser.
B)bring an individual lawsuit against the advertiser in a state appellate court.
C)bring an individual lawsuit in a U.S. District Court.
D)become part of a class action lawsuit, which might include plaintiffs who are unaware of the lawsuit or are even unaware they were harmed.
Q3) The primary trial court in the federal system is the
A)United States district court.
B)United States Supreme Court
C)United States appellate courts.
D)various appeals courts.
Q4) A summons is a paper ordering a defendant to appear in court at a certain time.
A)True
B)False
Q5) Briefly describe the process of jury selection.
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Chapter 7: Crime
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Q1) When a judge orders a criminal defendant to reimburse the victim,it is called
A)reimbursement.
B)restitution.
C)restraint.
D)retribution.
Q2) Internet auctions are the number one source of consumer complaints about online fraud.
A)True
B)False
Q3) A crime is a violation of statutory law.
A)True
B)False
Q4) Which of the following makes it illegal for U.S.companies and citizens to bribe foreign officials to influence a governmental decision?
A)OSHA
B)RICO
C)CFAA
D)FCPA
Q5) Explain the difference between civil law and criminal law.
Q6) Compare and contrast money laundering and embezzlement.Give an example of each.
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Chapter 8: Intentional Torts and Business Torts
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Q1) An intentional tort involves conduct in which
A)the defendant intended to harm the plaintiff.
B)the defendant intended a certain physical act which ends up injuring someone. C)injuries are caused to someone because of the defendant's neglect or oversight.
D)there is resulting punishment, including prison, for the defendant.
Q2) The Supreme Court has held that in awarding punitive damages,a court must consider three "guideposts." Which of the following is NOT one of these guideposts?
A)the reprehensibility of the defendant's conduct
B)whether or not compensatory damages will also be awarded
C)the ratio between the harm suffered and the award
D)the difference between the punitive award and any civil penalties used in similar cases
Q3) On its website,Otrex,Inc.claimed that its pain reliever was more effective than Nelton,a competing pain reliever.Discuss the elements that Nelton must prove to win a case against Otrex under the Lanham Act.
Q4) Discuss the four elements that must be proven in order to win a defamation case.
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Page 10
Chapter 9: Negligence, Strict Liability, and Product Liability
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Q1) Most states recognize some form of comparative negligence.
A)True
B)False
Q2) While hunting,Roger enters Adele's property without permission and is injured by falling into a ditch that was obscured by the underbrush.Under the common law,Adele is liable for Roger's injuries.
A)True
B)False
Q3) List and discuss the elements necessary to establish negligence.
Q4) The test of "foreseeability" is generally used to determine the existence of which element of a negligence case?
A)Duty of due care
B)Breach
C)Factual cause
D)negligence per se
Q5) Res ipsa loquitur shifts the burden of proof from the plaintiff to the defendant.
A)True
B)False
Q6) Discuss the concepts of contributory negligence and comparative negligence.
Page 11
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Chapter 10: Cyberlaw and Privacy
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Q1) The Children's Online Privacy Protection Act
A)deals only with the collection of data that will be disclosed to children.
B)restricts the use of social media sites by children.
C)regulates the activities of Internet operators with regard to collecting information from children.
D)is enforced by the EEOC.
Q2) When you surf the Internet,tracking tools collect information about you,often without your knowledge.
A)True
B)False
Q3) Section 5 of the FTC Act requires all websites to have a privacy policy.
A)True
B)False
Q4) What provisions is commercial email subjected to under the CAN-SPAM Act?
Q5) Unsolicited commercial e-mail (UCE)or unsolicited bulk e-mail (UBE)messages
A)are commonly known as "cookies."
B)constitute about 90 percent of all e-mail.
C)are estimated to be fraudulent either in content or packaging in approximately one-fourth of all cases.
D)although annoying, do lower the cost of connecting to the Internet.
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Chapter 11: Introduction to Contracts
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Q1) Jennifer has offered to sell her laptop computer for $750 to Jack.She tells Jack that the computer is only six months old but,in fact,it is three years old,and Jennifer wants to unload the lemon.Jack agrees to buy the computer based on Jennifer's representations.This contract is
A)a void agreement because of the fraud involved.
B)a voidable contract, one that Jack can void.
C)a voidable contract, because it is unilateral.
D)a void contract because of the UCC.
Q2) In a unilateral contract,one party makes a promise that the other party can accept only by actually doing something.
A)True
B)False
Q3) Larry goes to his barber who has cut his hair for the past several years.The barber proceeds to cut his hair as they talk about the most recent snow storm to hit the area.This is an example of a
A)unilateral, implied contract.
B)bilateral, implied contract.
C)unilateral, express contract.
D)bilateral, express contract.
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Page 13
Chapter 12: Agreement
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Questions
Q1) Bob signed an agreement with Joe under which Bob agreed to purchase all the hay that Joe grew during the coming growing season.This contract will be
A)unenforceable due to its vagueness.
B)unenforceable due to the difficulty of devising an appropriate remedy for a breach.
C)enforceable as long as both parties act in good faith and Bob doesn't suddenly demand more hay than what was reasonably estimated.
D)unenforceable unless state real estate law makes an exception.
Q2) Jaime offered to buy Kevin's bike.Jamie is the A)offeree.
B)offeror.
C)mortgagor.
D)trustee.
Q3) Candy,Inc.signed an agreement with Sweet Plantation.Under the contract,Candy,Inc.agreed to purchase all the sugar cane Sweet Plantation grew during the coming season for $0.16 per pound.This contract will be unenforceable due to its vagueness.
A)True
B)False
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Page 14
Chapter 13: Consideration
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Q1) The UCC requires consideration for agreements modifying contracts for the sale of goods.
A)True
B)False
Q2) Marco agrees to sell Clowns R Us some balloons.The contract states that Clowns may buy as many balloons as it wishes.This agreement is
A)a requirements contract.
B)an output contract.
C)an illusory contract.
D)an enforceable contract.
Q3) Courts distinguish between mere gifts between parties and legally binding commitments by the element of consideration.
A)True
B)False
Q4) What phrase explains how a requirements contract can be valid?
A)"will buy 100 percent of output"
B)"willing to accept the entire quantity"
C)"no consideration needed"
D)"in good faith"
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Chapter 14: Legality
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Q1) Barbara,a skilled welder,was hired at Mainco Enterprises for a welding position.She was asked to sign a noncompete clause limiting future employment if she left Mainco.A court would be very likely to enforce the noncompete clause unless the time or geographic restriction is unreasonable.
A)True
B)False
Q2) According to section 2-302 of the UCC,if a court finds as a matter of law that a clause of a contract was unconscionable at the time the contract was made,the court must refuse to enforce the contract.
A)True
B)False
Q3) When Randy,an electrician,accepted a job with Buren Construction,Randy signed the following agreement,"Upon termination of my employment with Buren Construction,I agree never to work for another employer as an electrician." If Randy resigns from Buren Construction,this agreement would be upheld under the theory of freedom of contract.
A)True
B)False
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Page 16
Chapter 15: Capacity and Consent
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Q1) Fraudulent,but not innocent,misrepresentation permits the injured party to rescind a contract.
A)True
B)False
Q2) Pamela is planning to sell her home decorating store to her daughter.Pamela has
A)a greater duty to reveal problems in the business because her daughter assumes she will be honest.
B)no duty to disclose hidden defects in the business.
C)a lesser duty to reveal problems in the business because she has a relationship of trust with the buyer.
D)a duty to report only any latent defects she knows about that her daughter should not be expected to discover herself.
Q3) As it applies to minors,which of the following is LEAST likely to be regarded as a necessary?
A)Rent
B)Food
C)Medical expenses
D)Educational expenses
Q4) Discuss the meaning of "material fact" in fraud situations.
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Chapter 16: Written Contracts
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Q1) Patrick owned an acre of land which was being divided into building lots.Nancy was interested in purchasing the corner lot.In a signed writing,Patrick stated "I will sell Nancy Grimes a lot on Route 70 for $5,500 cash,payable on April 30,2012." This writing is sufficient under the statute of frauds to make the contract enforceable.
A)True
B)False
Q2) The Uniform Electronic Transmission Act (UETA)
A)declares that a contract or signature may not be denied enforceability just because it is in electronic form.
B)declares that E-signatures are invalid.
C)creates a safe cyberspace environment in which business communications cannot be intercepted or fraudulently altered.
D)has only been adopted in a handful of states.
Q3) E-signatures are valid in all 50 states.
A)True
B)False
Q4) Explain the reason behind having a statute of frauds and give arguments for and against having such a statute.
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Page 18
Chapter 17: Third Parties
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Q1) If Valley Bridge contracts with Rainbow Painters to paint a bridge and the contract requires that only Sherwin Williams paint be used,then Sherwin Williams,as third party beneficiary will be able to enforce the contract against either Valley Bridge or Rainbow Painters.
A)True
B)False
Q2) Regarding beneficiaries,if the promisee is making a gift,the third party is called a _______ beneficiary.
A)donee
B)creditor
C)intentional
D)obligor
Q3) A party may make either an assignment or a delegation,but cannot make both an assignment and a delegation simultaneously.
A)True
B)False
Q4) Briefly discuss the enforceability of contracts by third parties.
Q5) Discuss the potential liability differences between a delegation and a novation.
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Chapter 18: Performance, Breach and Discharge
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Q1) Which of the following statements is accurate concerning express conditions?
A)A court will enforce any express conditions intended by the parties.
B)A court may refuse to enforce an express condition intended by the parties if the court determines it is unfair and harmful to the general public.
C)A court requires strict performance if a clause of the contract expressly demands it.
D)A court applies an objective standard whenever ruling on a personal satisfaction contract.
Q2) A court may,at times,discharge a party who has not performed.
A)True
B)False
Q3) The distinction between a condition precedent and a condition subsequent
A)is important because it determines whether the burden of proof is beyond a reasonable doubt or preponderance of the evidence.
B)seldom arises in insurance cases.
C)determines who has the burden of proof.
D)is important because it determines whether the condition must be express or whether it can be implied.
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Chapter 19: Remedies
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Q1) Tess,a tenant,moves from her apartment in breach of the lease agreement.The landlord,Lenny,may not attempt to rent the apartment until the date of the lease expiration,and so has no recourse to minimize damages.
A)True
B)False
Q2) Abigail signed a contract to purchase a new car from Wolf's Auto Sales Company.The seller breached its agreement by not delivering the car.Abigail went to another car dealer and purchased the same model of car at the same price.Although she had experienced a legal injury,Abigail has no actual financial or other damages as a result of the breach.If Abigail sues and wins,what type of damages will she be awarded?
Q3) 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?
Q4) Most courts hold that a seller of goods is NOT entitled to consequential damages.
A)True
B)False
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Page 21
Chapter 20: Practical Contracts
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Q1) In a contract modification,the phrase "charged with such amendment" refers to
A)the party who suggested the change.
B)the party who will benefit from the change.
C)the party who will be adversely affected by the change.
D)the party who did NOT suggest the change.
Q2) 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.
Q3) Ambiguities in contracts are always interpreted in favor of the side that wrote the contract,since they are the ones who know what the provision is supposed to mean.
A)True
B)False
Q4) The legal term for a promise in a contract is "provision."
A)True
B)False
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Chapter 21: Introduction to Sales
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Q1) Under the UCC,a modification to a contract for the sale of goods needs no consideration to be binding.
A)True
B)False
Q2) To simplify,clarify,and modernize the law governing commercial transactions,the UCC permits the use of "open terms" in sales contracts.In the use of "open terms," which of the following is TRUE?
A)The court will use market value and other comparable sales to determine what a reasonable price would have been at the time of delivery if the parties have not settled the price in the contract.
B)If time of payment is not mentioned in the contract, payment within a commercially reasonable time is presumed.
C)If the contract permits the buyer or seller to determine the price during contract performance, the UCC requires the party to do so in good faith.
D)All of the above are true.
Q3) The UCC imposes a duty of good faith in the performance of all contracts.
A)True
B)False
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23
Chapter 22: Ownership, Risk and Warranties
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Q1) A gun manufacturer in Helena,Montana agrees to sell guns and ammunition to the ATF in Washington,D.C.The terms of the contract specify that the goods are to be shipped "FOB,Chicago." When does the buyer acquire title and risk of loss?
A)When the goods reach Chicago.
B)When the goods are delivered to the carrier in Montana.
C)When the goods are tendered in Washington D.C. by the carrier.
D)When the goods reach Washington D.C.
Q2) The buyer of a product is located in Des Moines,Iowa and the seller is located in Sacramento,California.The contract specifies F.O.B.Des Moines.What type of contract is this?
A)A destination contract
B)A mixed contract
C)A shipment contract
D)A carrier contract
Q3) If a seller includes an express warranty in the written sales contract,any disclaimer is invalid.
A)True
B)False
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Chapter 23: Performance and Remedies
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Q1) Assume that Sherrie's Cherries contracts with Dessert World to sell and ship 600 pounds of cherries in three equal installments of 200 pounds each.If the first installment arrives with 5 pounds of spoilage,then Dessert World may
A)reject the installment shipment because of the perfect tender rule.
B)not reject the installment if those in the food industry expect a small percentage of spoilage with fresh fruits or vegetables.
C)reject the entire contract.
D)declare a breach and "cover."
Q2) 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
Q3) Identify the possible remedies for a seller when the buyer breaches a contract.
Q4) If a seller cures within a reasonable amount of time,the contract
A)has been performed.
B)is breached.
C)is void.
D)is voidable.
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Chapter 24: Secured Transactions
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Q1) There is no way to attach a security interest in electronic chattel paper.
A)True
B)False
Q2) If repossessed collateral is sold or otherwise disposed of by the creditor,then the time,place,manner,and method of disposal must be
A)commercially reasonable.
B)scheduled with the debtor so that the debtor is able to attend.
C)court ordered.
D)perfected.
Q3) Explain the difference between attachment and perfection.
Q4) Pharm-Ace holds a patent on a drug.Pharm-Ace used the patent (evidenced by the patent certificate)to secure a $1 million loan from First Bank.The patent is chattel paper.
A)True
B)False
Q5) A PMSI in consumer goods perfects automatically,without filing.
A)True
B)False
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26
Chapter 25: Creating a Negotiable Instrument
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Q1) Valley National Bank issued a note promising to repay an investor on October 1,2011,three years from the date of issue,plus interest.The note
A)is a certificate of deposit, and it will pay a lower rate of interest than a regular savings account at Valley.
B)is a certificate of deposit, and it will pay a higher rate of interest than a regular savings account at Valley.
C)is a certificate of deposit, and whether the bank pays a higher or lower rate of interest than it pays on its regular savings accounts depends upon particular bank policy. D)constitutes a trade acceptance.
Q2) Laurel Speckle received a check from State University.She indorsed the check as follows: "For Deposit only,/s/ Laurel Speckle." Laurel's indorsement is a(n)
A)blank indorsement.
B)special indorsement.
C)restrictive indorsement.
D)improper indorsement.
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Chapter 26: Liability for Negotiable Instruments
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Q1) Suppose that Emmett impersonates a famous clown.He goes into an advertising agency and convinces the manager to issue a check to him in the name of the famous clown,purportedly as part of a fund-raising campaign for a nursing home for old retired clowns.If Emmett negotiates the check to a check-cashing store by forging the name of the famous clown,then the ad agency will be able to argue that the bank must reimburse the account because the bank paid a check on a forged signature.
A)True
B)False
Q2) Which rule states that if someone issues an instrument to a person who does not exist,then any indorsement in thename of the payee is valid as long as the person who pays the instrument doesnot know of the fraud?
A)The Imposter Rule
B)The Indorsement Rule
C)The Conversion Rule
D)The Fictitious Payee Rule
Q3) A drawee has primarily liability on a draft.
A)True
B)False
Q4) List the warranties a transferor of a negotiable instrument makes.
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Chapter 27: Accountants' Liability
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Q1) Fast Auditors prepared audited financial statements for Mega Company's registration statement in compliance with the 1933 Securities Act.John bought stock in Mega Company.It was discovered that the financial statements prepared for the registration statement contained some important omissions.John sued Fast Auditors to recover his investment when Mega Company turned out to be a bad investment.What must John prove to recover from Fast Auditors?
Q2) The IRS files criminal charges against Rich for evasion of federal taxes.Rich's accountant,Sonya,is summoned to appear in court to testify against Rich.The state where the incident occurred recognizes an accountant-client privilege.Does Sonya have to testify in federal court against her client?
A)Yes.
B)Yes, but only if she is granted immunity by her state.
C)No, the federal court must recognize her state's accountant-client privilege.
D)No, the federal accountant-client privilege will protect her from testifying.
Q3) Who owns and controls an accountant's working papers?
A)The client, in practice
B)The IRS
C)The accountant, in theory and practice
D)The client, in theory
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Page 29
Chapter 28: Agency Law
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Q1) Grant is a delivery person for Watkins Furniture.One day,after delivering a chair to Nadine's house,he stopped at a fast food restaurant to get a sandwich at the drive-through window.As he was leaving the parking lot,he accidentally hit the rear of Blanche's car.Discuss the possible liability of Watkins for Grant's accident.Would there be any difference in the potential liability of Watkins if Grant had the accident after driving 30 miles away to visit a friend?
Q2) Generally,either party to an agency relationship has the power to terminate it at any time.
A)True
B)False
Q3) An agency relationship can be created
A)by the conduct of the parties.
B)only by the meeting of all the standards of contract law.
C)only by a written agreement.
D)only if the agent is paid.
Q4) As a general rule,an agent is liable on contracts entered into on behalf of a fully disclosed principal.
A)True
B)False
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Chapter 29: Employment and Labor Law
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Q1) Sit-down strikes,in which members stop working but remain at their job posts,physically blocking replacement workers from taking their places are legal.
A)True
B)False
Q2) What is wrongful dischargeand under what circumstances? does the law prohibit the discharge of a worker?
Q3) Zoe,who works as a retail clerk,wishes to talk with her co-workers about organizing a union.Her employer forbids her from talking with other workers about union activity in the presence of customers and threatens to fire her if she joins the union.Does the employer have a legal right to make this threat to Zoe?
A)Yes, the employer may prohibit its employees from discussions about union organizing.
B)Yes, but only if expressly authorized by state law.
C)No, an employee has the right of free speech at anytime.
D)No. An employee may limit the time and place of conversation, but may not threaten to fire the employee.
Q4) Discuss the requirements of the Family and Medical Leave Act.
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Chapter 30: Employment Discrimination
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Q1) Under the Equal Pay Act of 1963 an employee may not be paid at a lesser rate than employees of the opposite sex for tasks requiring equal skill,effort,and responsibility under similar working conditions.
A)True
B)False
Q2) Mark was refused employment at a Christian bookstore because he was not a "born-again Christian." If Mark brings a Title VII action against the bookstore,the bookstore's best defense would be
A)it did not discriminate against a protected category.
B)Title VII doesn't apply to private businesses.
C)being a "born-again Christian" is a bona fide occupational qualification.
D)it could not reasonably accommodate Mark.
Q3) 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?
Q4) Retaliation means that an employer has done something that would deter a reasonable worker from complaining about discrimination.
A)True
B)False
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Chapter 31: Starting a Business: LLCs and Other Options
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Q1) The advantage to an S corporation is
A)its offering of multiple classes of stock.
B)its treatment of shareholders for income taxation purposes.
C)its ability to attract an unlimited number of shareholders.
D)its ability to have partnerships and corporations invest as shareholders.
Q2) Alan,a dentist,and his wife Martha,an attorney,can protect their personal assets with limited liability from their business dealings by creating and operating a professional corporation together.
A)True
B)False
Q3) Corporations have perpetual existence.
A)True
B)False
Q4) Which of the following would NOTbe personally liable for the debts of the business?
A)a sole proprietor
B)a partner in a general partnership
C)an S corp shareholder
D)a partner in a joint venture
Q5) Briefly discuss the the major restrictions placed on an "S" corporation.
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Chapter 32: Partnerships
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Q1) Sandy,Ramon,and Bonnie were partners.Sandy dissociated from the partnership.Bonnie and Ramon decided to continue the business.When Sandy dissociated,there was a $50,000 debt owed to Great State Bank.Which statement is correct?
A)Sandy remains liable on the $50,000 debt owed to Great State Bank.
B)Only Ramon and Bonnie are liable for the $50,000 debt owed to Great State Bank.
C)The debt is extinguished as a result of the dissociation.
D)Whether Sandy remains liable depends on whether she filed a statement of dissociation.
Q2) Gary and Herman are partners in a lawn mower repair business in Ohio.While Gary is on vacation,visiting his sister in Georgia,his sister's neighbor has trouble with her mower and Gary fixes it for her.She insists on paying him.Gary
A)may keep the payment since he did the work while he was on vacation.
B)must turn the money over to the partnership because he earned it doing the kind of work that the partnership does.
C)may not accept the money because it would create a conflict of interest.
D)may not accept the money because it would mean he was taking a business opportunity away from the partnership.
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Chapter 33: Life and Death of a Corporation
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Q1) Mike is planning on incorporating his business in the state of Delaware.Which of the following regarding the name of Mike's business is TRUE?
A)He will be able to use the words "Association" or "Institute" in his company name.
B)He will not be able to use abbreviations (such as Inc. or Corp.) in his company name.
C)His company name will not have to include one of the following words: Corporation, Incorporated, Company or Limited.
D)His company name can be the same as another corporation that already exists in Delaware.
Q2) Isabel,Wesley,Gina,and Lucas worked together intensively to form and become the only shareholders of a corporation that is environmentally conscious.Is there anything they can do to avoid having shares of stock in their company sold to someone who does not share their vision for the environment?
Q3) Identify four circumstances that might persuade a court to pierce the corporate veil.
Q4) What are some of the advantages for a business to incorporate in Delaware?
Q5) Discuss how a corporation is terminated.
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Chapter 34: Management Duties
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Q1) Directors have the authority to manage the corporate business.
A)True
B)False
Q2) List and discuss the three ways to acquire control of a corporation.
Q3) A manager who first offers an opportunity to disinterested directors or shareholders who turn it down has the right to take advantage of the opportunity herself.
A)True
B)False
Q4) Discuss the purposes of the "business judgment rule."
Q5) The Anderson v.Bellinocase held that
A)the defendant did not act in good faith and violated the corporate opportunity doctrine.
B)the business judgment rule protected the plaintiff's decision to award the Keno contract to an outside firm.
C)the plaintiff was not able to show that the defendant violated the corporate opportunity doctrine.
D)the defendant's action was not a conflict of interest and was made in good faith.
Q6) What is the definition of the business judgment rule?
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Chapter 35: Shareholder Rights
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Q1) A "fundamental change" in a corporation would be illustrated by
A)E-prise, Inc.merging with Vitta Corporation.
B)E-prise electing new members to the board.
C)Vitta Corporation adding a new product to its product line.
D)Vitta Corporation setting the date for its annual meeting.
Q2) Overall,directors get paid very little for the amount of work they perform.
A)True B)False
Q3) In a derivative lawsuit,the named plaintiff
A)is the corporation on whose behalf the lawsuit is filed.
B)is the particular class of shareholders primarily injured by the wrong.
C)consists of all the corporation's shareholders.
D)is the board of directors for the corporation.
Q4) Under both state and federal law,a shareholder can generally revoke a proxy at any time.
A)True B)False
Q5) List and describe the various rules that apply to fundamental corporate changes requiring shareholder approval.?
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Chapter 36: Bankruptcy
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Q1) 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?
Q2) A Chapter 7 debtor's agreement to pay a creditor on a debt after receiving a discharge in bankruptcy is called a A)voidable preference.
B)reaffirmation.
C)fresh start.
D)redemption.
Q3) An official acknowledgement that a debtor is under the jurisdiction of the bankruptcy court is called
A)a voluntary petition.
B)an involuntary petition.
C)an automatic stay.
D)an order for relief.
Q4) Bankruptcy is regulated by federal law.
A)True
B)False
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Chapter 37: Securities Regulation
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Q1) Under JOBS,privately held companies can sell up to $1 million in securities in any 12-month period if they sell the securities through an approved intermediary.
A)True
B)False
Q2) Typically,exemptions under the 1933 Act are based on either the type of security or the type of transaction.
A)True B)False
Q3) The 1933 Act prohibits fraud only in transactions involving registered securities.
A)True
B)False
Q4) If a registration statement contains a material misstatement or omission
A)the company is liable and has no defense.
B)anyone other than the company who signed the statement is liable and has no defense.
C)all experts are liable and have no defense.
D)the company is liable unless it can show due diligence.
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) Reciprocal dealing is a type of vertical cooperative strategy.
A)True
B)False
Q2) Exclusive dealing contracts,if they have an anticompetitive effect,are illegal under the
A)Sherman Act only.
B)Clayton Act only,
C)Sherman Act and Clayton Act.
D)Sherman Act, Clayton Act, and Robinson-Patman Act.
Q3) The Clayton Act prohibits anti-competitive mergers.
A)True
B)False
Q4) The chain of Mega Hardware stores agreed with Lock Tight Manufacturing not to carry any brand of locks and door handles other than those manufactured by Lock Tight.Mighty Lock threatened to sue for antitrust violations.On what basis and under what statute(s)would Mighty Lock sue?
Q5) The Sherman Act was designed to prevent extreme concentrations of economic power.
A)True
B)False
40
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Chapter 39: Consumer Protection
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Q1) The Federal Trade Commission Act considers the terms "deceptive" and "unfair" to be synonymous when determining what practices should be prohibited.
A)True
B)False
Q2) Richard received his credit card bill and noticed an error.He wrote to the company the next week,pointing out the error in his bill.Under the law,what is the credit card's obligation once it receives Richard's letter?
Q3) Brett applies for a $60,000 loan to purchase a tractor for his farm business.This loan is subject to TILA disclosure requirements.
A)True
B)False
Q4) Sandy noticed an unauthorized electronic funds withdrawal on her bank statement.In order for her to not be liable for the withdrawal,she must notify her bank within _______ of the date of the bank statement.
A)10 days
B)30 days
C)60 days
D)90 days
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Chapter 40: Environmental Law
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Q1) Armand Industries is producing a foul-smelling odor as a by-product of its factory's operations.However,the emission is not harmful to the health of those exposed to it.Armand would be subject to a primary national ambient air quality standard established by the EPA.
A)True
B)False
Q2) An Environmental Impact Statement must be prepared for every major federal action that significantly affects the quality of the environment.
A)True
B)False
Q3) Discuss the major provisions of the Clean Air Act.
Q4) A person who violates the Clean Water Act can face possible imprisonment in addition to other penalties.
A)True
B)False
Q5) Local regulation is more effective than state or federal regulation in controlling air pollution.
A)True
B)False
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Chapter 41: Intellectual Property
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Q1) Of the following,which is an advantage of trademark registration?
A)Potential damages are lower.
B)After five years the mark becomes almost impossible to challenge.
C)It allows the trademark owner to use the TM symbol to put others on notice of the protection.
D)It can't be used as an Internet domain name.
Q2) Bisha created a new recipe for a sandwich spread and applied for a patent to protect her trade secret.She is likely to receive this patent.
A)True
B)False
Q3) There are five categories of distinctive marks.Which is NOT one of them?
A)fanciful marks
B)arbitrary marks
C)generic marks
D)marks with secondary meaning
Q4) A copyright is valid for 28 years after it is obtained and can be renewed for another 28 years.
A)True
B)False
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Chapter 42: Real Property and Landlord Tenant
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Q1) The landlord's duty to provide quiet enjoyment of the premises and the landlord's duty to deliver and maintain the premises in a habitable condition are one and the same.
A)True
B)False
Q2) Juan has the right to walk (or drive)across his neighbor's property to reach the highway.Juan's right is referred to an easement appurtenant which allows use of the land.
A)True
B)False
Q3) Lauren and Hayden own residential houses side by side.Between the houses is one driveway that provides mutual access to both back yards.Lauren actually owns the property where the driveway sits.However,Hayden has the right to use the driveway to access his back yard.What type of easement does this situation describe,an easement appurtenant or an easement in gross? What are the differences between the two types of easements?
Q4) Landlord-tenant relationships are governed by a mixture of property law,contract law,and negligence law.
A)True
B)False
Page 44
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Chapter 43: Personal Property and Bailment
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Q1) Jimmy stole Dave's motorcycle and completely revamped the engine and changed the body.These accessions were very expensive,but Jimmy was completely satisfied with the results,intending to sell the motorcycle for a huge profit.If the motorcycle is recovered from Jimmy,Dave must pay Jimmy for the improvements.
A)True
B)False
Q2) Jerry enters a restaurant and hangs his coat in an unattended cloakroom near the entrance of the restaurant.Even though no employee of the restaurant is present,the provision of the cloakroom makes Jerry think it will be safe.In this situation,the restaurant is the bailor of Jerry's coat.
A)True
B)False
Q3) Which of the following is/are generally subject to a standard of strict liability for bailed goods?
A)contract carriers and common carriers
B)common carriers and innkeepers
C)common carriers
D)contract carriers
Q4) Distinguish between a contract and a gift.Give an example of each.
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Chapter 44: Planning for the Future: Estates and Insurance
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Q1) Joel is displeased with his son's lifestyle choices and,instead of dividing his estate,Joel wants to leave all of his property to his daughter,Marie,when he dies.Joel may
A)not leave everything to his daughter and nothing to his son.If Joel tries to do this, his son can take a forced share of his father's estate.
B)disinherit his son, but he must indicate in the will his reason for doing so.
C)disinherit his son for any reason as long as Joel indicates in the will that the son was omitted on purpose.
D)disinherit his son only if Joel leaves the son a nominal amount, such as $1.
Q2) Which of the following is NOTrequired to create a valid trust?
A)Legal age and sound mind of the grantor
B)Witnesses
C)A beneficiary(ies)
D)Property transferred to the trust
Q3) Parents may not disinherit their minor children without good reason.
A)True
B)False
Q4) Identify four ways a trust can be terminated.
Q5) Discuss the differences between a will and a trust.
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