Entrepreneurship and the Law
Final Test Solutions
Course Introduction
Entrepreneurship and the Law explores the critical intersection between innovative business ventures and legal frameworks. This course equips students with foundational knowledge of the legal issues affecting startups and small businesses, including entity formation, intellectual property rights, contract negotiation, financing, regulatory compliance, and employment law. Students will analyze real-world cases, learn to identify legal risks and opportunities, and gain practical tools for navigating the legal landscape of entrepreneurship. The course emphasizes proactive legal strategies to help entrepreneurs launch, grow, and protect their businesses while fostering ethical and sustainable practices.
Recommended Textbook
Business Law Principles for Todays Commercial Environment 4th Edition by David P. Twomey
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52 Chapters
2754 Verified Questions
2754 Flashcards
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Chapter 1: The Nature and Sources of Law
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Sample Questions
Q1) Courts can create law.
A)True
B)False Answer: True
Q2) Time honored rules of the community are called the common law.
A)True
B)False Answer: True
Q3) Substantive law creates rights and duties.
A)True
B)False Answer: True
Q4) ____ is a body of principles that establishes the structure of a government and the relationship of that government to the people.
A)A constitution
B)Statutory law
C)Stare decisis
D)The common law
Answer: A
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Chapter 2: The Court System and Dispute Resolution
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Sample Questions
Q1) Judicial Triage:
A)is a court management tool.
B)results in some cases being expedited.
C)results in some cases being postponed.
D)all of the above.
Answer: D
Q2) If questions of fact are involved,the court will decide the case based on the pleadings alone.
A)True
B)False
Answer: False
Q3) The United States Supreme Court can never function as a court of original jurisdiction.
A)True
B)False
Answer: False
Q4) Reversible errors are commonly made by supreme courts.
A)True
B)False
Answer: False
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Chapter 3: Business Ethics, social Forces, and the Law
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Sample Questions
Q1) The theory of justice is based on the concept that if there were no laws or rules reasonable people would develop fair rules and standards.
A)True
B)False
Answer: True
Q2) Companies with 100 years of consistent dividends:
A)use positive laws as a guide for ethical decisions.
B)have a goal of profitability no matter what the cost.
C)have a strong commitment to values.
D)all of the above.
Answer: C
Q3) An ethical duty of confidentiality could be breached where:
A)information obtained through research of the employer is disclosed.
B)customer lists or leads are disclosed to a competitor.
C)proprietary information or technology of a business is disclosed.
D)all of the above.
Answer: D
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Chapter 4: The Constitution As the Foundation of the Legal Environment
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Sample Questions
Q1) Ex post facto laws can be adopted by either states or the national government.
A)True
B)False
Q2) Within the past five years,the U.S Supreme Court has:
A)placed some limitations on the commerce clause.
B)increased Congressional authority for all activities that have economic impact.
C)given states the ability to override the federal government on interstate commerce issues.
D)all of the above
Q3) One of the characteristics of the "living" Constitution is limited government.
A)True
B)False
Q4) A system in which a central government is given power to administer to national concerns and individual states administer to local concerns is called:
A)bicameral.
B)constitutional.
C)federal.
D)tripartite.
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Chapter 5: Government Regulation of Competition and
Prices
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Sample Questions
Q1) In large cities talent agencies typically charge clients no more than a 10% commission. Tina's Talent,Amy's Actors & Models and the Barton Agency are the only three talent agents in a small city. Due to the limited amount of work available for actors and models in their city,the three talent agents have gotten together and agreed to never charge a commission below 15%. Discuss if this is acceptable under the Sherman Act.
Q2) Criminal penalties are possible under the Sherman Act.
A)True
B)False
Q3) __________ power relates to a firm's ability to control price and exclude competitors.
A)Market
B)Competitive
C)Product
D)Production
Q4) A "suggested retail price" is not a violation of the antitrust laws.
A)True
B)False
Page 7
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Chapter 6: Administrative Agencies
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Sample Questions
Q1) Which of the following is beyond the enforcement power of an agency?
A)requiring proof of compliance with agency regulations
B)issuing a cease-and-desist order
C)convicting of criminal violations
D)imposing civil penalties
Q2) Members of administrative agencies are ordinarily
A)pre-selected.
B)elected.
C)assigned.
D)appointed.
Q3) In an administrative hearing,an administrative law judge hears the complaint and has the authority to swear witnesses,take testimony,make evidentiary rulings,and make a decision to recommend to the administrative agency heads for action.
A)True
B)False
Q4) Because administrative agencies have broad powers,they are subject to strict procedural rules as well as disclosure requirements.
A)True
B)False
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Chapter 7: The Legal Environment of International Trade
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Sample Questions
Q1) Three defenses are commonly raised to the extraterritorial application of U.S.antitrust laws.They are:
A)act-of-state,sovereign compliance,and sovereign immunity doctrines.
B)jurisdictional rule of reason,effects doctrine,and comity.
C)foreign legislation,sovereign compliance,and comity.
D)foreign antitrust laws,sovereign immunity doctrine,and International Monetary Fund applications.
Q2) The U.S.dollar is considered the international currency.
A)True
B)False
Q3) The General Agreement on Tariffs and Trade (GATT):
A)is a multilateral treaty
B)is subscribed to by the United States
C)has as its goal the liberalization of world trade
D)all of the above
Q4) The goal of the North American Free Trade Agreement (NAFTA)is to eliminate all tariffs between the United States and Europe.
A)True
B)False
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Chapter 8: Crimes
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Sample Questions
Q1) The Fourth Amendment warrant requirement does not apply to businesses.
A)True
B)False
Q2) The Racketeer Influenced and Corrupt Organizations (RICO)Act is a product of:
A)Congress.
B)international trade agreements.
C)state law.
D)none of the above.
Q3) Which of the following statements is true?
A)Felonies are punishable by a minimum of six months in prison.
B)Felonies involve white-collar crimes only.
C)Felonies are more serious than misdemeanors.
D)All of the above.
Q4) The Racketeer Influenced and Corrupt Organizations (RICO)Act authorizes both criminal and civil actions.
A)True
B)False
Q5) A crime consists of three elements: the mental state,the intent,and the act.
A)True
B)False
10
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Chapter 9: Torts
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Sample Questions
Q1) Maria intentionally attempts to have Patty break a contract 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 jobs at the level of:
A)a reasonable person.
B)a reasonable professional in the same business.
C)an extraordinarily careful person.
D)none of the above.
Q3) Trespass applies to:
A)personal property only.
B)land only.
C)both personal property and land.
D)only government-owned property.
Q4) The assumption of risk defense has been abolished in several states.
A)True
B)False
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Chapter 10: Intellectual Property Rights
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Sample Questions
Q1) Trademarks may be used to protect the exclusive right to identify either products or services.
A)True
B)False
Q2) Design patents have a duration of ____ years.
A)10
B)14
C)17
D)20
Q3) Computer programs are subject to protection in the U.S.under:
A)copyright laws.
B)patent laws.
C)trade secret laws.
D)all of the above.
Q4) In order to protect themselves from disclosure of proprietary or confidential information,businesses may:
A)implement security measures to prevent access by outsiders.
B)enforce contractual nondisclosure agreements against departing employees.
C)limit disclosure of such information to those with a need to know.
D)all of the above.
Page 12
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Chapter 11: Cyberlaw
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Sample Questions
Q1) Federal law now recognizes the validity of electronic signatures.
A)True
B)False
Q2) __________ refers to laws and precedent applicable to Internet transactions and communications.
A)Cyberlaw
B)Cyborglaw
C)Silicalaw
D)Simlaw
Q3) __________ is a federal law that recognizes digital signatures as authentic for purposes of contract formation.
A)Cyber-sign
B)We-sign
C)Electra-sign
D)E-sign
Q4) The formation of contracts in cyberspace is governed today largely by:
A)international contract law principles.
B)traditional contract law principles.
C)federal contract law principles.
D)uniform state laws.
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Chapter 12: Nature and Classes of Contracts: Contracting
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Sample Questions
Q1) A contract never can be both executory and unilateral.
A)True
B)False
Q2) Negotiable instruments are examples of formal contracts.
A)True
B)False
Q3) 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
Q4) The principle behind the quasi contract is to prevent unjust enrichment.
A)True
B)False
Q5) A contract under which one or both parties have not yet fully performed is termed a(n):
A)void agreement.
B)executory contract.
C)executive contract.
D)executed contract.
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Chapter 13: Formation of Contracts: Offer and Acceptance
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Sample Questions
Q1) On April 15,Morgan sent a letter to Clark offering to sell her business to Clark for $200,000.The offer stated that it would expire on May 1.On April 30,Morgan sent another letter to Clark that stated that she was withdrawing the offer.Clark received that letter on May 1.Also on April 30,Clark sent a letter to Morgan accepting the offer.Morgan received that letter of acceptance on May 1.Morgan refused to sell the business to Clark,claiming that no contract had been formed.Clark brought suit to enforce the contract against Morgan.Based on what you have learned in this chapter,decide the probable outcome of the case.
Q2) When it is claimed that a contract is too indefinite to be enforced,a court will do its best to find the intent of the parties and thereby reach the conclusion that the contract is not too indefinite.
A)True
B)False
Q3) If an offer does not state how long it shall remain open,it remains open for ten days. A)True
B)False
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Page 15
Chapter 14: Capacity and Genuine Assent
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Sample Questions
Q1) Discriminatory and punitive incapacities have largely disappeared.
A)True
B)False
Q2) As a general rule,the nondisclosure of information that is not asked for does not impose fraud liability or impair the validity of a contract.
A)True
B)False
Q3) A factual incapacity may exist when,because of a mental condition caused by medication,drugs,alcohol,illness,or age,a person does not understand that a contract is being made or understand its general nature.
A)True
B)False
Q4) I believe that I own a very valuable vase.I tell you this information and state that I will sell it to you for $800.I sell the vase to you,and you later find out that the vase is worth only $200.Fraud:
A)has occurred.
B)has not occurred.
C)can always be based upon a statement of opinion or value.
D)none of the above.
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Chapter 15: Consideration
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Sample Questions
Q1) Past benefits already received by a promisor cannot be consideration for a later promise.
A)True
B)False
Q2) When there is no consideration for a promise,the agreement is:
A)a quasi contract.
B)equitable.
C)not binding.
D)unethical.
Q3) Which of the following is not consideration for a present promise?
A)a good faith adjustment
B)compromise and release of claims
C)the promise to pay one's child support obligation,consistent with a pre-existing court order.
D)the performance of a requested act
Q4) An illusory promise creates a bilateral contract.
A)True
B)False
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Chapter 16: Legality and Public Policy
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Sample Questions
Q1) Courts are quick to invalidate contracts on the ground that they are contrary to public policy because such contracts are so offensive to society.
A)True B)False
Q2) When parties are not equally guilty,the least guilty party is granted relief when it is in the public interest.
A)True B)False
Q3) Agreements that are contrary to public policy are not binding. A)True B)False
Q4) Substantive unconscionability has to do with matters of freedom of assent. A)True B)False
Q5) When a court finds a clause of a contract unconscionable at the time it was made,it may enforce the remainder of the contract. A)True B)False
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Chapter 17: Writing, electronic Forms, and Interpretation of Contracts
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Sample Questions
Q1) If a contract is unclear,it will be interpreted against the party who drafted it.
A)True
B)False
Q2) Under the majority view,a contract that does not satisfy the statute of frauds is not enforceable.
A)True
B)False
Q3) A promise to pay a debt must be in writing if:
A)the debt is for more than $500.
B)the debt is now due and payable.
C)the promise is to pay the debt of another.
D)the debt owed is the promisor's.
Q4) An oral contract to sell a house is binding if:
A)the agreement is witnessed by a member of the clergy.
B)there is a tape recording of the agreement.
C)the buyer paid the price and received the deed of conveyance.
D)the seller is a merchant.
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Chapter 18: Third Persons and Contracts
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Sample Questions
Q1) An assignee of a contract can bring suit on the contract only in the name of the assignor.
A)True B)False
Q2) A person entitled to receive money may generally assign that right to another person.
A)True B)False
Q3) A cause of action may not be assigned. A)True B)False
Q4) Persons who are not a party to a contract can never sue on the contract. A)True B)False
Q5) Generally,only the parties to a contract may sue on it. A)True B)False
Q6) An employer can assign to another employer the right to have an employee work. A)True B)False
Page 20
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Chapter 19: Discharge of Contracts
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Q1) Ordinarily,a temporary impossibility __________ the duty to perform.
A)suspends
B)excuses
C)discharges
D)none of the above
Q2) A homeowner who refinances her home mortgage may cancel the transaction:
A)if the terms of the contract were less favorable than anticipated.
B)within three business days.
C)only if she was the victim of fraud.
D)upon payment of a $1,000 penalty,as required by a Federal Trade Commission rule.
Q3) The phrase "time is of the essence" means that:
A)the court is in a hurry to dispose of the case.
B)performance under the contract at the times specified in the contract is vital or essential.
C)the contract expressly states that time is of the essence.
D)the price stated in the contract is subject to change without notice.
Q4) By operation of law,a party can be discharged in bankruptcy from debts.
A)True
B)False
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Chapter 20: Breach of Contract and Remedies
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Sample Questions
Q1) If a seller delivers defective goods,the buyer does not lose the right to object to the breach of contract if the buyer:
A)accepts the goods.
B)accepts the goods with a reservation of right.
C)agrees to a modification of the contract.
D)accepts the performance without protest.
Q2) When the contract requires that both parties submit disputes to arbitration,this is an example of a limitation-of-remedies clause.
A)True
B)False
Q3) If a plaintiff's loss involves damaged property,it is described as liquidated damages.
A)True
B)False
Q4) 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
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Chapter 21: Personal Property and Bailments
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Sample Questions
Q1) Barry and Eldridge owned Blueacre as tenants in common.Eldridge died.Blueacre is owned:
A)solely by Barry because of the survivorship feature.
B)jointly by Barry and the state because of escheat.
C)by Barry and Eldridge's heirs.
D)solely by Eldridge's heirs.
Q2) In common usage today,there is no distinction between real and personal property.
A)True
B)False
Q3) Joint tenancy and tenancy in common both feature the right of survivorship.
A)True
B)False
Q4) A person becomes a(n)__________ at the moment of taking possession of abandoned personal property.
A)Bailor
B)Bailee
C)constructive bailee
D)Owner
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Page 23
Chapter 22: Legal Aspects of Supply Chain Management
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Sample Questions
Q1) A warehouse receipt may be either negotiable or nonnegotiable.
A)True
B)False
Q2) Bills of lading for intrastate shipments are governed by the UCC,while those for interstate shipments are regulated by the Federal Bills of Lading Act.
A)True
B)False
Q3) A negotiable warehouse receipt that provides for delivery of the goods to the order of Jill Jones may be negotiated by delivery of the document to the purchaser.
A)True
B)False
Q4) A transferee of a nonnegotiable warehouse receipt acquires only the title and rights that the transferor had actual authority to transfer.
A)True
B)False
Q5) A common carrier is liable for all delays in the delivery of goods.
A)True
B)False
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Chapter 23: Nature and Form of Sales
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Sample Questions
Q1) Goods physically existing and owned by a seller at the time of a transaction are called existing goods.
A)True
B)False
Q2) Which term is not required in a writing in order to satisfy the statute of frauds?
A)language indicating that a sale or contract to sell has been made
B)the price of the goods
C)the quantity of goods involved in the transaction
D)the signature of the defendant
Q3) All goods other than those existing and owned by a seller at the time of a transaction are called:
A)existing goods.
B)tangible goods.
C)future goods.
D)intangible goods.
Q4) When the price of the goods is $500 or more,a writing signed by the defendant is required in all cases.
A)True
B)False
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Chapter 24: Title and Risk of Loss
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Q1) Goods are called identified goods when they have been selected as the goods called for by a sales contract.
A)True B)False
Q2) If a seller under a shipment contract sends nonconforming goods,the risk of loss in transit is on the buyer.
A)True B)False
Q3) In a self-service store a sale cannot occur until the goods are paid for.
A)True B)False
Q4) In a sale on approval,the buyer's approval must be demonstrated by express words. A)True B)False
Q5) A seller's insurable interest in goods always terminates with the passage of the title to the buyer.
A)True B)False
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Chapter 25: Product Liability: Warranties and Torts
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Q1) A disclaimer or exclusion of the warranty of merchantability will be invalid if:
A)the goods cost $500 or more.
B)the defects in the goods are obvious to all buyers.
C)it is made at the time of the sale.
D)it is not conspicuously set forth in a writing.
Q2) Plaintiffs suing for damages caused by a defective product are limited to taking action only against the manufacturer(s)of such goods.
A)True
B)False
Q3) An action for negligence rests upon common law tort principles. A)True
B)False
Q4) The federal regulation of express warranties:
A)applies only to limited warranties.
B)applies to a seller who makes a written express warranty for a consumer product costing more than $10.
C)requires all express warranties to be full warranties.
D)requires an implied warranty to be designated as either full or limited.
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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) 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
Q3) Jared agrees to purchase twelve computers from Zack Enterprises,Inc.for sale in Jared's department store.Twelve boxes from Zack Enterprises have just arrived at the department store.What are Jared's rights and responsibilities?
Q4) A party to a sales contract may demand at any time that the other party provide adequate assurance of performance.
A)True B)False
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Page 28
Chapter 27: Remedies for Breach of Sales Contracts
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Q1) On January 15,2012,Anders brought an action against Barnes for breach of a contract for the sale of electronic parts.The breach occurred on January 10,2008,and Anders discovered the breach on January 20,2008.The state statute of limitations for contract actions is five years.Barnes raised the UCC statute of limitations as a defense to the action.Is this defense valid?
Q2) A seller may cancel a sales contract if the buyer: A)wrongfully rejects the goods. B)repudiates the contract. C)fails to make a payment due on or before delivery. D)all of the above.
Q3) Under both the CISG and the UCC,a buyer may reject goods only if the tender of the goods is a fundamental breach of the contract.
A)True B)False
Q4) Consumer protection law prohibits the waiver of defenses in consumer contracts. A)True B)False
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Chapter 28: Kinds of Instruments, parties, and Negotiability
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Q1) The person to whom the order in a draft is addressed is known as the:
A)payee.
B)drawee.
C)drawer.
D)maker.
Q2) When the drawee of a draft has indicated by writing or record a willingness to pay the amount specified in the draft the drawee is called a(n):
A)acceptor.
B)accommodation party.
C)payee.
D)secondary obligator.
Q3) The payee has no rights in an instrument until the drawer or the maker has delivered it to the payee.
A)True
B)False
Q4) Article 3 of the UCC establishes a four year statute of limitations for most actions involving negotiable instruments.
A)True
B)False
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Chapter 29: Transfers of Negotiable Instruments and
Warranties of Parties
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Q1) When the name of the payee is spelled incorrectly,the payee:
A)must indorse the instrument with the incorrect spelling of the payee's name.
B)must indorse the instrument with the correct spelling of the payee's name .
C)may indorse the instrument with either the correct or incorrect spelling of the payee's name.
D)may not indorse the instrument.
Q2) When a special indorsement is made,the instrument continues to be order paper and may be negotiated only by an indorsement and delivery.
A)True
B)False
Q3) A qualified indorsement qualifies the effect of a blank or special indorsement by disclaiming certain liabilities of the indorser to a maker or drawee.
A)True
B)False
Q4) An instrument that originally was bearer paper always remains bearer paper.
A)True
B)False
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Chapter 30: Liability of the Parties Under Negotiable Instruments
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Q1) Generally defenses that could be raised in a breach of contact claim cannot be raised against a holder in due course.
A)True
B)False
Q2) Under the "close-connection" doctrine,a holder has taken so many instruments from its transferor or is so closely connected with the transferor that any knowledge the transferor has is deemed transferred to the holder,preventing holder in due course status.
A)True
B)False
Q3) Instruments may not be negotiated if they have been dishonored by non-acceptance.
A)True
B)False
Q4) Fraud in the inducement is a:
A)limited defense not available against a holder in due course.
B)universal defense available against all holders.
C)limited defense available against all holders.
D)universal defense not available against a holder in due course.
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Chapter 31: Checks and Funds Transfers
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Q1) Certification of a check at the request of a holder:
A)releases all prior secondary parties.
B)releases the drawer but not prior indorsers.
C)releases prior indorsers,but not the drawer.
D)does not release all prior secondary parties.
Q2) Ordinarily,the drawee bank is liable to the drawer when it pays a check on which the drawer's signature has been forged.
A)True
B)False
Q3) If a bank pays a check whose face has been altered to increase the amount above that which the drawer intended to pay,the bank:
A)is liable to the drawer for the amount of the increase.
B)is liable to the drawer for the full amount of the check.
C)incurs liability only if it failed to examine the check before payment.
D)incurs liability only if the drawer made the alteration.
Q4) A tender occurs when the holder of a check or other consumer transaction authorization demands payment.
A)True
B)False
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Chapter 32: Nature of the Debtor-Creditor Relationship
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Q1) 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
Q2) A surety that has made payment of a claim for which it was liable as a surety is entitled to which of the following from the principal?
A)Indemnity
B)Exoneration
C)Assignment
D)Subrogation
Q3) A(n)__________ is an undertaking by one person,for consideration,to pay another person a sum of money in the event of a specified loss.
A)absolute guaranty
B)indemnity contract
C)guaranty of payment
D)surertyship
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34
Chapter 33: Consumer Protection
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Q1) The Fair Credit Reporting Act applies to:
A)consumer credit.
B)commercial credit.
C)business credit.
D)all of the above.
Q2) It is lawful to refuse to extend credit to a consumer based on the consumer's:
A)race.
B)marital status.
C)credit history.
D)age.
Q3) The subterranean lending market makes loans to consumers who have bankruptcies,no credit history,low-to-moderate incomes,or a poor credit history.
A)True
B)False
Q4) The Telephone Consumer Protection Act prohibits:
A)automated marking calls without prior express consent.
B)calls to patients' room in hospitals.
C)calls after 9:00 PM.
D)all of the above.
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Chapter 34: Secured Transactions in Personal Property
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Q1) The perfection obtained by filing a financing statement lasts for __________.
A)five (5)years,and is renewable.
B)five (5)years,and is non-renewable.
C)ten (10)years,and is renewable.
D)ten (10)years,and is non-renewable.
Q2) Upon a default by a buyer,the secured seller may resell the collateral:
A)not less than three (3)months after the buyer's default.
B)not less than six (6)months after the buyer's default.
C)only at a public sale.
D)at either a public or a private sale.
Q3) A debtor must have rights in the collateral for a security interest to attach.
A)True
B)False
Q4) A security interest gives a creditor the same protection than is afforded by a right to sue on the debt.
A)True
B)False
Q5) Creditors cannot legally request collateral on a previously unsecured loan.
A)True
B)False
Page 36
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Chapter 35: Bankruptcy
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Q1) 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?
Q2) A debtor is presumed to be insolvent on and during what number of days immediately preceding the date of the filing of a bankruptcy petition?
A)30
B)60
C)90
D)120
Q3) If a trustee is not elected by creditors,an interim trustee will be appointed by the court.
A)True
B)False
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Chapter 36: Insurance
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Q1) For the purposes of fire insurance,all fires that cause damage are considered hostile fires.
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) Part of every whole life insurance premium covers the cost of insurance.The remainder of the premium is devoted to the investment component of the policy,which builds up over time to its:
A)reimbursement point.
B)cash surrender value.
C)culmination value.
D)return point.
Q4) Under no-fault insurance,an insurer is obligated to pay an injured person without regard to whose fault caused the harm.
A)True
B)False
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Chapter 37: Agency
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Q1) The employer of an independent contractor does not have control over the performance of the work by the independent contractor.
A)True
B)False
Q2) The term apparent authority is used when an appearance of authority has been created by a principal,but actual authority does not exist.
A)True
B)False
Q3) The intention to ratify an unauthorized act may be expressed by words or conduct.
A)True
B)False
Q4) An agent is under a duty to obey:
A)all instruction given by the third party.
B)all lawful instructions given by the principal.
C)all instructions given by the principal.
D)none of the above,since "obedience" is not an obligation of the agent.
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Chapter 38: Third Persons in Agency
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Q1) Sid worked as the agent of Rosemary.Rosemary was in the business of buying antique clocks and selling them to the public.She became so successful at this that people began to become reluctant to sell to her,feeling that if she was buying the clock,it probably could be sold for more.Rosemary instructed Sid to purchase several clocks but not to reveal that the purchases were being made on her behalf.Sid contracted to buy several clocks and gave his own check as down payment to keep Rosemary's identity concealed.Although Rosemary had authorized the contracts,she reneged on the contracts.Sid thereupon told the seller what had happened and stopped payment on the down payment check.The seller of the clocks sued Rosemary on the bounced check and for breach of contract.Sid was sued on the same causes of action.Decide all cases.
Q2) Modern decisions hold the principal liable for which actions of the agent?
A)Fraudulent acts
B)Misrepresentations
C)Both a.and b.
D)Neither a.nor b.
Q3) An owner ordinarily is not liable for harm caused a third person by the negligence of an employee of an independent contractor.
A)True
B)False
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Page 40
Chapter 39: Regulation of Employment
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Q1) Under the employment-at-will doctrine,the employer has historically been allowed to terminate the employment contract at any time for any reason or for no reason.
A)True
B)False
Q2) The federal-state system that provides unemployment compensation under the Social Security Act of 1935 does not cover which of the following categories of workers?
A)Agricultural employees
B)Domestic employees
C)State and local government employees
D)None of these categories of workers are covered by the federal-state system.
Q3) An employer may be justified in discharging an employee because of the employee's:
A)nonperformance of duties.
B)incompetency.
C)serious misconduct.
D)all of the above.
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Chapter 40: Equal Employment Opportunity Law
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Q1) What is the principal law regulating equal employment opportunity in the United States?
A)Title VII of the Civil Rights Act of 1964
B)The United States Constitution
C)The Fair Labor Standards Act
D)The Equal Pay Act
Q2) What is an employer defense to a disparate impact charge?
A)The employer did not intend to discriminate.
B)The employment practice is job-related and consistent with business practice.
C)The disparate impact was not the result of extreme recklessness or gross negligence on the part of the employer.
D)The practice is widespread and accepted in the industry.
Q3) Criteria used to make employment decisions that have a disparate impact on women,such as height requirements,must be job-related.
A)True
B)False
Q4) Generally,the EEOC attempts to remedy an unlawful practice through conciliation.
A)True
B)False
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Chapter 41: Types of Business Organizations
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Q1) Business corporations exist to make a profit.
A)True
B)False
Q2) Franchise disclosures are not required under federal law.
A)True
B)False
Q3) Partnership agreements allow individuals to conduct their business without the requirement of a formal organizational structure.
A)True
B)False
Q4) The death of a majority shareholder terminates a corporate enterprise.
A)True
B)False
Q5) Arnold was the sole shareholder,president,and chief executive officer of Algernon Enterprises,Inc.Acting on behalf of Algernon,Arnold negotiated the credit purchase of inventory from Amax.The contract was signed in the name of Algernon Enterprises.Algernon never paid the sums due on the contract,and Arnold and the corporation were sued.Is Arnold personally liable to Amax?
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Chapter 42: Partnerships
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Q1) When a person who performs continuing services for another receives a fixed payment that does not depend on the existence of profit and is not affected by losses,that person is a partner.
A)True
B)False
Q2) Creditors of a firm have first claim on the assets of the partnership.
A)True
B)False
Q3) Rundles,Kreiger,and Larson formed a partnership to breed and show horses.Rundles and Kreiger each contributed $25,000 to the partnership.Larson contributed four (4)horses valued at $25,000.The partnership agreement provided that the partners would share profits equally.When the horses failed to perform as expected,Rundles and Kreiger decided to reduce Larson's share of the profits.Larson claims that this decision must be unanimous to be binding.How will the case be decided?
Q4) Bankruptcy of only one of the partners does not cause dissolution of the firm.
A)True
B)False
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Chapter 43: LPs, LLCs, and LLPs
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Q1) The partners who manage the limited partnership and are personally liable for the firm debts are __________ partners.
A)general
B)active
C)licensed
D)unreserved
Q2) Managers of an LLC have the same fiduciary duties to the entity as corporate officers have to a corporation.
A)True
B)False
Q3) A limited partner may never sue the business.
A)True
B)False
Q4) A limited liability company may be managed directly by the owners.
A)True
B)False
Q5) All owners of a limited liability company are known as officers.
A)True
B)False
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Chapter 44: Corporate Formation
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Q1) A quasi-public corporation is one that is organized for charitable or benevolent purposes.
A)True
B)False
Q2) A corporation is considered a person for purposes of the due process clause of the United States Constitution.
A)True
B)False
Q3) A holder of a single share of stock who objects to a merger has the power to stop the merger.
A)True
B)False
Q4) Corporations may avoid liability for the obligations of a predecessor corporation by treating a consolidation or merger as a sale of assets.
A)True
B)False
Q5) Subject to constitutional limitations,corporations may be regulated by statutes. A)True
B)False
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Chapter 45: Shareholder Rights in Corporations
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Q1) Donna called her stockbroker Henry and told him to purchase 300 shares of Royex Corporation shares at $15 per share,the current market price.Henry agreed to do so,but became distracted and failed to do so.The price of the shares rose $3 in price that day.In the evening,Donna in a telephone conversation agreed to sell 300 shares of Royex to Sid.Assuming Henry and Donna dispute the validity of the contracts,which of the contracts are enforceable in court?
Q2) A preincorporation subscription to stock is generally treated as an offer to the corporation to buy the stock when the corporation is formed and the stock is thereafter issued.
A)True
B)False
Q3) A contract for the sale of shares must be evidenced in writing.
A)True B)False
Q4) Dividends are payable in: A)money.
B)products manufactured by the corporation.
C)shares of other corporations held by the corporation. D)all of the above.
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Chapter 46: Securities Regulation
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Q1) The SEC requires that annual shareholder reports be submitted to shareholders in any proxy solicitation on behalf of management.
A)True
B)False
Q2) At least 30 days must elapse from the date of a company's filing a registration statement with the SEC to the date the registration becomes effective.
A)True
B)False
Q3) The Insider Trading and Securities Fraud Enforcement Act of 1988 gave the SEC authority to bring an action against an individual purchasing or selling a security while in possession of material,inside information.
A)True
B)False
Q4) Under the Litigation Reform Act of 1995,issuers of forward-looking statements that were not knowingly false when made have a safe harbor from related lawsuits if appropriate cautionary language was included.
A)True
B)False
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Page 48
Chapter 47: Accountants Liability and Malpractice
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Q1) In contrast to contributory negligence principles,comparative negligence principles are never applied to malpractice situations.
A)True
B)False
Q2) In order to be valid,an accountant's disclaimer of liability must be (1)clear and unambiguous and (2)non-conspicuous.
A)True B)False
Q3) Professionals who fail to exercise normal care and skill in the performance of a contract for their services may be sued for a special type of breach described as:
A)sub par performance.
B)illegal practice.
C)malpractice.
D)competence reservation.
Q4) Some courts have rejected the requirement of privity for malpractice and instead approach each situation on a case-by-case basis.
A)True
B)False
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Chapter 48: Management of Corporations
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Q1) A quorum is broken if shareholders leave and those remaining are not sufficient to constitute a quorum.
A)True
B)False
Q2) All states stipulate that there shall be no fewer than three directors for each corporation.
A)True
B)False
Q3) Regular meetings of shareholders are:
A)held at a time and place set forth in a notice given to all shareholders.
B)held at a time and place prescribed by the articles of incorporation or the bylaws.
C)called by the directors.
D)limited to the election of directors.
Q4) A stockholder-approved amendment to the certificate of incorporation may indemnify directors who:
A)acted in bad faith.
B)acted negligently.
C)breached their duty of loyalty.
D)gained an improper personal benefit.
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Chapter 49: Real Property
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Q1) Personal property that has become a fixture is still classified as personal property.
A)True
B)False
Q2) Property may be taken from its private owner and the title acquired by the taking government or public authority under the power of:
A)a restrictive covenant.
B)eminent domain.
C)an affirmative covenant.
D)restraint.
Q3) Personal property that is attached to the earth or placed in a building in such a way or under such circumstances that it is deemed part of the real property is called a(n): A)asset.
B)estate.
C)easement.
D)fixture.
Q4) A condominium is a combination of co-ownership and individual ownership. A)True
B)False
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Chapter 50: Environmental Law and Land Use Controls
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Q1) It is probable that a zoning variance would be granted:
A)even though many of the neighboring property owners object.
B)on the grounds of hardship,regardless of who created the hardship.
C)to an outside advertiser to build a billboard.
D)when the desired use of the land is in harmony with the general nature of the surrounding areas.
Q2) Megan owns a manufacturing business in a nonattainment area under federal air pollution law.She wishes to triple the size of the manufacturing operation using land she just purchased next to her current location.What must Megan demonstrate in order to secure a permit to operate in the nonattainment area?
Q3) The federal government is not subject to any type of environmental quality regulation
A)True
B)False
Q4) Funds from the Superfund are used to pay the cost of eliminating or containing condemned waste sites.
A)True
B)False
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Chapter 51: Leases
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Q1) Rent is automatically increased:
A)if the lessor makes expensive improvements to the property.
B)when the cost of living increases.
C)if the lease contains an escalation clause.
D)if the lessor's taxes on the rented property are increased.
Q2) The rights and duties of the landlord and tenant are based on principles of real estate law and contract law.
A)True
B)False
Q3) The covenant of quiet enjoyment protects the tenant from interference with possession by the landlord or the landlord's agent,and it also imposes liability on the landlord for the unlawful acts of third persons.
A)True
B)False
Q4) Renewal provisions in a lease are strictly construed against the tenant. A)True
B)False
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Chapter 52: Decedents Estates and Trusts
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Q1) Every trust must have a beneficiary.
A)True
B)False
Q2) A trustee can delegate the performance of personal duties.
A)True
B)False
Q3) Which of the following is generally not required for the testator to have testamentary capacity?
A)The testator knows the exact value of his or her estate.
B)The testator understands the writing to be a will.
C)The testator has a reasonable appreciation of the identity of relatives and friends.
D)The testator has a reasonable appreciation of the extent of the property that may exist at death.
Q4) One desiring to leave the balance of an estate to a specified person or group after specific bequests are satisfied may do so by making a residuary bequest in a will.
A)True
B)False
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