Entrepreneurship Law
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Course Introduction
Entrepreneurship Law explores the legal principles and frameworks essential for launching and operating new ventures. This course examines topics such as business formation, intellectual property protection, financing methods, regulatory compliance, contracts, employment law, and liability management. Through real-world case studies and practical scenarios, students gain an understanding of how legal considerations impact entrepreneurial decision-making, risk assessment, and long-term business success. The course equips aspiring entrepreneurs with the knowledge to identify legal challenges, evaluate various business structures, and effectively navigate the complex legal landscape to support sustainable innovation and growth.
Recommended Textbook
Business Law and the Legal Environment 7th Edition by Jeffrey F. Beatty
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Page 2
Chapter 1: Introduction to Law
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Q1) The doctrine of stare decisis
A)makes the legal process more expensive.
B)is an equitable remedy.
C)makes the law more predictable.
D)is unimportant to the common law.
Answer: C
Q2) Which of the following would be an example of a civil lawsuit?
A)George is being prosecuted for bank fraud.
B)The government has initiated an action against Jeff for operating a motor vehicle under the influence of alcohol.
C)Gretta hit Rita in a bar during happy hour. Rita is now suing for her injuries.
D)The district attorney is bringing Ali to court for violating the city's keg ordinance.
Answer: C
Q3) The doctrine of precedent is binding on all courts from county courts to the U.S.Supreme Court..
A)True
B)False
Answer: False
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3
Chapter 2: Business Ethics and Corporate Social Responsibility
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Q1) Jamal was recently hired as a sales representative for a pharmaceutical company.He notices that all the other sales reps "pad" their expense accounts by claiming meals with clients that never took place and then pocket the extra money.Jamal figures that since everyone else is cheating on their expense accounts,he might as well do the same.What ethics trap is Jamal falling into?
A)following orders
B)competition
C)conformity
D)lost in a crowd
Answer: C
Q2) Your text outlines three practices to help us avoid ethical traps: slow down,remember your Life Principles,and
A)focus on the matter at hand.
B)do not trust your first instinct.
C)think about what society expects.
D)go with your gut reaction.
Answer: B
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Chapter 3: International Law
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Q1) _______ is the term used to describe certain fundamental principles of international law that cannot be altered by custom or practice.
A)Extraterritoriality
B)Sovereign immunity
C)Gharar
D)Jus cogens
Answer: D
Q2) The Australian government has opened a for-profit tourist information center in New York City.If a dispute arises over the lease of the storefront,may the landlord sue the Australian government in the United States courts?
A)Yes, because the Australian government was engaged in a commercial activity.
B)No, because the Foreign Sovereign Immunities Act forbids U.S. courts from hearing any case (without exception) that involves a foreign government.
C)No, because the only way the Australian government can be sued is if it signed a written waiver of immunity.
D)Yes, because the Australian government violated international law.
Answer: A
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Chapter 4: Common Law, Statutory Law, and Administrative Law
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Q1) The purpose of the Freedom of Information Act (FOIA)is
A)to give the government access to information concerning citizens, businesses, and organizations.
B)to limit the amount of information that the government can collect about its citizens, businesses, and organizations.
C)to permit warrantless searches and seizures of evidence when necessary to ensure safety.
D)to give citizens, businesses, and organizations access to information that federal agencies are using.
Q2) Big Corporation is served with a subpoena to turn over business records to an administrative agency.What are three possible legal grounds the company can raise to avoid producing the requested records?
Q3) Define the common law.Discuss its conflicting goals and the doctrine created to serve one of these goals.
Q4) The doctrine of stare decisis,though vital to the creation of the common law when this country was settled,is not important to our modern,complex society.
A)True
B)False
Page 6
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Chapter 5: Constitutional Law
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Q1) The Pines,a small motel in central Georgia,may be subject to federal regulation even though it is not close enough to the state borders to have many guests from other states.
A)True
B)False
Q2) Hal was arrested for burning the United States' flag in a protest of governmental policy.His action is protected under the First Amendment's guarantee of free speech because the flag burning is considered symbolic speech.
A)True
B)False
Q3) The Fourth Amendment to the Constitution provides Robert,an employee of Mattax Paper Co.,due process protection from being fired without a hearing by a neutral fact finder.
A)True
B)False
Q4) The amendments to the U.S.Constitution protect the people from the power of state and federal governments.
A)True
B)False
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Chapter 6: Dispute Resolution
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Q1) 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.
Q2) In order for a federal court to have jurisdiction,there must be a federal question involved and at least $75,000 in dispute.
A)True
B)False
Q3) Generally,mandatory arbitration provisions in a contract are valid.
A)True
B)False
Q4) 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.
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Chapter 7: Crime
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Q1) In general,police do not need a warrant to find out what websites you have visited.
A)True
B)False
Q2) The parties to a criminal trial are the government and the defendant.
A)True
B)False
Q3) Criminal defendants have the right to a lawyer at all the important stages of the criminal process.
A)True
B)False
Q4) When a judge orders a criminal defendant to reimburse the victim,it is called
A)reimbursement.
B)restitution.
C)restraint.
D)retribution.
Q5) The Federal sentencing guidelines are just guidelines.Judges do not have to follow them.
A)True
B)False
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Chapter 8: Intentional Torts and Business Torts
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Q1) Did Adam commit the tort of intentional infliction of emotional distress?
A)Yes, as his conduct was intentional.
B)Yes, but only if Adam intended to cause Linda serious emotional distress.
C)No, since he was only playing a practical joke.
D)No, since Linda was not physically hurt by Adam.
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) Public officials can win a defamation case only by proving the defendant's actual malice.
A)True
B)False
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Chapter 9: Negligence, Strict Liability, and Product Liability
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Q1) In a strict liability case,the courts still consider if the defendant acted in a reasonable and prudent manner.
A)True
B)False
Q2) One morning,Miles accidentally dropped a thumbtack on the chair of the office manager where he worked.The office manager sat on the tack and two days later,was hospitalized with an infection caused by the tack.Which of the following is correct?
A)Miles actions were negligent.
B)No tort has been committed.
C)Miles committed an intentional tort.
D)Miles is strictly liable.
Q3) For the defendant to be liable in a negligence case,it must be proven that the type of harm caused by the defendant must have been reasonably foreseeable.This is referred to as
A)proximate cause.
B)duty of due care.
C)factual cause.
D)breach.
Q4) Discuss the concepts of contributory negligence and comparative negligence.
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Chapter 10: Cyberlaw and Privacy
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Q1) The European Union does not view privacy as a fundamental right of its citizens and the EU's policies toward privacy are limited.
A)True
B)False
Q2) Jorgeson Co.,on its website,promised the company would not give a customer's personal information to third parties without the customer's consent,but then gave out such information anyway.This practice violates Section 5 of the FTC Act.
A)True
B)False
Q3) Which statement regarding FIPS is true?
A)FIPS are only recommendations, not law.
B)FIPS originated from the Department of Justice.
C)FIPS has been ineffective in shaping privacy policies.
D)FIPS was established after the 9/11 terrorist attacks.
Q4) Under the ECPA,any intended recipient has the right to disclose the content of an email.
A)True
B)False
Q5) Explain the core principles in the Code of Fair Information Practices.
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Chapter 11: Introduction to Contracts
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Q1) One purpose of contract law is to determine which agreements are worthy of legal enforcement.
A)True
B)False
Q2) An agreement in which parties intend to form a valid bargain,but a court declares that some rule of law prevents enforcing it is called
A)a void agreement.
B)a voidable contract.
C)an unenforceable agreement.
D)a quasi-contract.
Q3) Lucy and Rick sign a contract in which Lucy agrees to deliver 10 boxes of chocolates in exchange for Rick's promise to pay $5 per box.Lucy delivers the candy.Rick pays for the goods.This contract is fully executory.
A)True
B)False
Q4) Paid surrogacy contracts are viewed by the legislative majority in all states as immoral and illegal.
A)True
B)False
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Chapter 12: Agreement
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Q1) If Morales and Rolfes Supply negotiate for the purchase and sale of a supply of fuel for a three-year period for Morales' business,
A)the contract may indicate a method for determining the price, without stating a definite price.
B)Morales and Rolfes must depend on the UCC's gap-filler provisions to determine a price since the fuel is a "good" covered by Article 2 of the UCC.
C)the contract price must remain the same for the entire three-year contractual period.
D)their contractual requirements regarding definiteness would be the same under the UCC and the common law.
Q2) You have placed an antique sofa up for auction and the auctioneer has not made any special announcements about the sale.You can withdraw the sofa at any time before the auctioneer closes the sale by announcement or by the fall of the hammer.
A)True
B)False
Q3) What elements are necessary for an offer to be valid? Give two examples of nonoffers.
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Page 14
Chapter 13: Consideration
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Q1) In the historic case of Hamer v.Sidway,the nephew
A)lost, as the Court found therewas no consideration.
B)lost, as the uncle was dead.
C)won, as the Court found therewas consideration.
D)won, as there was a completed gift.
Q2) Contracts in which one party agrees in good faith to buy all his requirements of certain goods from the other party are generally unenforceable because there is no definite amount.
A)True
B)False
Q3) The UCC requires consideration for agreements modifying contracts for the sale of goods.
A)True
B)False
Q4) Hilda owes Lex $3,000,which is an undisputed amount.If she offers him her car in full settlement of the debt and he accepts,the agreement is binding and he can no longer claim she owes him anything on the original debt.
A)True
B)False
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Chapter 14: Legality
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Q1) The UCC deals with unconscionability in a contract by providing that a court may:
A)refuse to enforce the contract.
B)enforce the remainder of the contract without the unconscionable clause.
C)limit the application of any unconscionable clause as to avoid any unconscionable result.
D)All of the above.
Q2) Larry has the largest pizza business in the city.He learns that Henry is thinking of opening a competing pizza and pasta delivery business.Larry gives Henry $25,000 to not open his proposed business in the same city.Which statement is correct?
A)The contract is voidable at Larry's option.
B)The contract is void for lack of consideration.
C)The contract is illegal and void.
D)The contract is enforceable.
Q3) If a contract is made with a person required by law to hold a license,and the purpose of the license is protection of the public,the contract made by an unlicensed person will generally be unenforceable.
A)True
B)False
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Page 16
Chapter 15: Capacity and Consent
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Q1) Deborah purchased a boat from Sun 'N Surf Marine.She later learned that the salesman had made misrepresentations to induce her to make the purchase.Under UCC Section 2-721,Deborah can rescind the contract
A)only if the misrepresentation was fraudulent.
B)and sue for damages if the misrepresentation was fraudulent. C)but cannot sue for damages even if the misrepresentation was fradulent.
D)but must forego all other remedies.
Q2) If a salesperson says,"This is a great car and it's really fun to drive," but the car turns out to be a lemon,the salesperson has committed fraud.
A)True
B)False
Q3) Travis had too many beers at the baseball game.Ed realized Travis was so intoxicated he wouldn't know what he was doing,so he got Travis to sign a promise to sell his motorcycle to Ed for $50.When Travis gets sober,he can attempt to void the contract.
A)True
B)False
Q4) Discuss the meaning of "material fact" in fraud situations.
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17
Chapter 16: Written Contracts
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Q1) List the types of agreements that are within the statute of frauds and explain the consequences if the parties do not comply with the requirements of the statute of frauds.
Q2) Vicki entered into a written contract to buy a car from Valley Motors.The written contract included a provision that stated,"This writing is the full and final expression of the parties' agreement;anything said before signing or while signing is irrelevant." This is
A)an integration clause.
B)a statute of frauds clause.
C)parol evidence.
D)an exculpatory clause.
Q3) 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
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18
Chapter 17: Third Parties
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Q1) Norm and Frank have a legal contract that is silent with regard to an assignment of the contract.In order for Norm to assign all or part of his rights under a contract,Frank must grant such permission to Norm.
A)True
B)False
Q2) Which statement most accurately describes third party beneficiary rights?
A)A beneficiary may enforce a contract if the parties intended to benefit him and if enforcing the promise will satisfy a duty of the promisee to the beneficiary.
B)If a promisee intended to make a gift to the beneficiary, the beneficiary may not enforce the contract.
C)An intended third party beneficiary has no enforceable rights in a contract.
D)Incidental beneficiaries have enforceable rights against both contracting parties.
Q3) If Ray agrees to rake leaves for Michelle in exchange for Michelle's promise to pay off the debt Ray owes to Dean,then Dean is a donee beneficiary of the agreement between Ray and Michelle.
A)True
B)False
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Page 19
Chapter 18: Performance, Breach and Discharge
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Q1) What does it mean if a party to a contract has been discharged?
A)It means that person has been "let go" and has terminated the contract.
B)It means that person has "transferred" by assigning his or her duties to another party.
C)It means that person is "finished" and has no more duties under the contract.
D)It means that person has "delegated" and chosen to give up his or her contract rights.
Q2) Buddy was hired to play drums for a rock group scheduled to tour the Midwest.Part way through the tour,Buddy was tragically killed in a plane crash.The tour had to be discontinued until a new drummer could be found.The band lost money on the tour.Is Buddy's estate or agent responsible for the loss to the band?
Q3) The statement,"You will have a job with Snelling & Snelling as long as you complete your degree in business administration this May" does not create a condition because it does not include the phrase "provided that."
A)True
B)False
Q4) Identify four factors courts consider in deciding the validity of commercial impracticability and frustration of purpose claims.
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Page 20
Chapter 19: Remedies
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Q1) Larry wanted to buy a 1957 Cadillac once owned by Reggie Jackson.Larry entered into a contract with the owner agreeing to pay $102,000.The owner subsequently changed his mind.If Larry sues,what remedies are potentially available?
Q2) In a construction contract,there is a $1000 per day estimate of damages for each day that the contract runs over the completion date.The contractor is 30 days late when the job is completed,resulting in a prospective damage award of $30,000.What is this type of clause,and when will it be enforced?
Q3) If a court awards nominal damages it will generally
A)award compensatory damages as well.
B)not make a determination as to whether there has been a breach of the contract.
C)award punitive damages for the intentional breach of the contract.
D)award a very small amount of money.
Q4) Most courts hold that a seller of goods is NOT entitled to consequential damages.
A)True
B)False
Q5) Discuss the purpose of an injunction and how the two types of injunctions covered in the textbook are used.
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Page 21
Chapter 20: Practical Contracts
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Q1) Lawyers prefer to negotiate touchy subjects as they arise rather than address them at the beginning of a relationship.
A)True
B)False
Q2) What is a force majeure event?
A)any action that makes the contract unprofitable for either party
B)any finding in a contract that shows a provision was deliberately left unclear
C)a disruptive, unexpected occurrence for which neither party is to blame that prevents one or both parties from complying with a contract
D)any happening that fulfills one of the conditions in the contract, making it enforceable
Q3) An honest effort to meet both the spirit and letter of the contract is termed
A)reasonable circumstances.
B)sole discretion.
C)honest representation.
D)good faith.
Q4) Compare and contrast the perspectives of a lawyer and a business client when approaching the negotiation of a contract.
Q5) Define and compare the terms "vagueness" and "ambiguity."
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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) Uncle Brandon promises to give his motorcycle to you for free at the end of the month.This transaction is governed by UCC,Article 2,because a motorcycle is within the definition of "goods."
A)True
B)False
Q3) Megan agrees to sell Nancy her Rolex watch but they do not specify a price.In such a case,the court would not enforce the agreement because all of the essential terms are not present.
A)True
B)False
Q4) The UCC does not apply to a contract for the sale of goods if the value of the goods is less than $500.
A)True
B)False
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Chapter 22: Ownership, Risk and Warranties
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Q1) Tuan,Inc.contracted to buy 200 monogrammed blankets from Titex,Inc.Before Titex segregated and monogrammed the blankets,Tuan filed for bankruptcy.Tuan does not own title to the blankets because
A)Tuan is a merchant.
B)the blankets were not identified to the contract.
C)Tuan became bankrupt after the contract was formed.
D)the goods were specially manufactured.
Q2) Bill is injured when his new motorcycle speeds out of control because of a defective part.In most jurisdictions,Bill
A)can sue the motorcycle manufacturer even though he does not have privity.
B)cannot sue the motorcycle manufacturer because his injuries are personal injuries as opposed to economic loss.
C)cannot sue the motorcycle manufacturer because the law requires arbitration.
D)cannot sue the motorcycle manufacturer because there is no privity of contract.
Q3) A tag attached to a tree in a nursery identifying the tree as a Southern Magnolia creates an express warranty.
A)True
B)False
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24
Chapter 23: Performance and Remedies
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Q1) "Course of dealing" refers to prior commercial transactions between the same parties.
A)True
B)False
Q2) If a buyer does not receive goods by the contract deadline,remedies available include all of the following EXCEPT A)incidental and consequential damages. B)cover.
C)damages for non-delivery.
D)cure.
Q3) A buyer who accepts goods but notifies the seller the goods are non-conforming A)cannot recover any damages.
B)can recover the difference between the goods as promised and as delivered, plus incidental and consequential damages.
C)cannot recover incidental damages.
D)cannot recover consequential damages.
Q4) Identify the possible remedies for a seller when the buyer breaches a contract.
Q5) Liquidated damages are not permitted under the UCC.
A)True
B)False
25
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Chapter 24: Secured Transactions
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Q1) Maddie enters into a secured consumer debt transaction with Friendly Bank.When Maddie pays the loan in full,Friendly Bank is required to file a statement indicating that it no longer claims a secured interest in the collateral.This statement must be filed within one month from the date the debt is fully paid.
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) Under Article 9 of the UCC,electronic chattel paper may be used as collateral in a secured transaction.
A)True
B)False
Q4) There is no way to attach a security interest in electronic chattel paper.
A)True
B)False
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Chapter 25: Creating a Negotiable Instrument
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Q1) Discuss the effect on an instrument of: (a)contradictory amounts between the numerals and amount written in words on a check;(b)the interest rate left blank on a promissory note;and (c)contradictory terms that are typed or printed onto a promissory note and terms that are handwritten.
Q2) The section of the UCC that governs negotiable instruments is
A)Article 3.
B)Article 2.
C)Article 6.
D)Article 9.
Q3) A possessor of non-negotiable commercial paper has the same rights as the person who made the original contract.
A)True
B)False
Q4) With non-negotiable commercial paper,a transferee's rights are conditional.
A)True
B)False
Q5) There are two types of commercial paper: express and implied.
A)True
B)False
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Chapter 26: Liability for Negotiable Instruments
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Q1) Check kiting is defined as
A)indorsing a check while knowing that the check is a stolen check.
B)carelessly paying an unauthorized instrument.
C)a scheme of overdrawing account "A" by depositing a check in account "B," then overdrawing account "B" to cover the insufficient funds in account "A."
D)issuing an instrument to an impostor who negotiates the instrument to a bank that is unaware of the fraud.
Q2) An indorser who writes "without recourse" next to her signature on a negotiable instrument is not liable for payment.
A)True
B)False
Q3) An accommodation party and a co-maker of a note have the same liability on an instrument.
A)True
B)False
Q4) Negotiable instruments are normally issued to fulfill a contract.
A)True
B)False
Q5) List the warranties a transferor of a negotiable instrument makes.
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Chapter 27: Accountants' Liability
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Q1) John is a CPA in charge of auditing his client,McMillen & Co.John's duty of care to McMillen will most likelybe breached if John
A)gives his client an oral report instead of a written report.
B)gives his client incorrect advice based on an honest error in judgment.
C)fails to give tax advice that would save his client money.
D)fails to follow generally accepted auditing standards (GAAS).
Q2) Discuss the advantages and disadvantages of using IFRS.
Q3) Auditors cannot protect themselves from liability to third parties by issuing a qualified or an adverse opinion.
A)True
B)False
Q4) An engagement letter is a written contract
A)between an accountant and client.
B)in anticipation of marriage.
C)between a corporation and the AICPA.
D)intended to create a fiduciary duty of an accountant to his client.
Q5) Accounting contracts can be either written or oral.
A)True
B)False
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Chapter 28: Agency Law
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Q1) An agent must obey all instructions of the principal. A)True
B)False
Q2) Larry decided to relocate to Germany.Larry hired Happy Homes,Inc.to find a buyer and contract for the sale of his house in the U.S.The agency relationship between Larry and Happy Homes must be evidenced with a written agreement.
A)True
B)False
Q3) Janet was employed as a sales representative for Esday,Inc.An appreciative customer gave her a diamond bracelet for all her hard work on a complicated contract.Can Janet keep the bracelet?
A)Yes.The bracelet was given to Janet personally and intended for her.
B)Yes, but only if she discloses the gift to Esday and Esday consents to her keeping the bracelet.
C)No. An agent is not allowed under any circumstances to personally profit as a result of the agency relationship.
D)No. The bracelet is regarded as an unfair trade practice and violates antitrust law.
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Chapter 29: Employment and Labor Law
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Q1) A union declares it will be engaging in a partial strike whereby its employees will alternate between working for a period of time and then walking off the job for an indefinite time.Thus,employees may work for a few days or only a few hours before walking off the job again.The employer claims the union does not have the legal right to engage in a partial strike.Which statement is correct?
A)The employer is correct.The union must either strike or work-it cannot alternate between working and striking.
B)The employer is correct only if the union does not state the specific hours or days workers will be off the job. The law requires the union to provide the employer with at least seven days' notice of when workers will be off the job.
C)The employer is not correct since the NLRA expressly states workers have a right to engage in a partial strike.
D)Whether the employer is correct depends on state law.
Q2) The Family and Medical Leave Act applies to
A)all companies, public or private, regardless of size.
B)companies with 50 or more employees.
C)companies with 100 or more employees.
D)any company engaged in interstate commerce.
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31
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) Retaliation means that an employer has done something that would deter a reasonable worker from complaining about discrimination.
A)True
B)False
Q3) Which of the following is TRUE about Affirmative Action?
A)Affirmative action is required by Title VII.
B)Affirmative action is prohibited by Title VII.
C)Affirmative action is allowed in goverment contracts if it can show the programs are needed to overcome specific past discrimination.
D)Affirmative action programs are usually voluntary on the part of employers, since courts have no power to order remedies for past discrimination.
Q4) What is the process for filing a suit under Title VII of the Civil Rights Act?
Q5) Discuss the two categories of sexual harassment.
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Chapter 31: Starting a Business: LLCs and Other Options
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Q1) Corporations have perpetual existence.
A)True
B)False
Q2) The phrase "piercing the company veil" applies to which type of organization?
A)a close corporation
B)a general partnership
C)a limited liability company
D)an S corporation
Q3) The most common form of business ownership is the corporation.
A)True
B)False
Q4) The corporate form of business
A)was first known and used by the Greeks and then spread through the Romans to England.
B)was not known until the advent of the Industrial Revolution.
C)was first allowed in the State of New York around 1811 and is considered to be an American creation.
D)is a relatively new concept developed shortly after the Great Depression.
Q5) Trudy wishes to buy a national franchise.What information is the seller legally required to provide before she buys the franchise?
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Chapter 32: Partnerships
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Q1) Belinda and Franco are partners in a jewelry business.Without Franco's knowledge,Belinda buys a ring from Janice for $2,200.Janice has no reason to question the transaction since she is a regular customer of the store and assumes Belinda has authority to buy her ring.When Franco finds out he is furious and does not want to honor the agreement.Which of the following is TRUE?
A)Belinda acted with absolute authority and the partnership must honor the transaction.
B)Belinda acted with actual authority and the partnership must honor the transaction.
C)Belinda acted with implied authority and the partnership must honor the transaction.
D)Belinda acted with apparent authority and the partnership must honor the transaction.
Q2) Ending a partnership involves which of the following three steps?
A)Dissolution, winding up, and termination
B)Dissociation, winding down, and consummation
C)Failure, dividing up, and paying off
D)Dissociation, agreement, and dissolution
Q3) Identify and briefly discuss the management rights and duties of a partner.
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Chapter 33: Life and Death of a Corporation
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Q1) Zach decided to incorporate his business under the name of "Zamm." In addition to "Zamm," the Model Act requires that Zach include one of the following words: "corporation," "incorporated," "limited," or "company" or an abbreviation thereof.
A)True
B)False
Q2) Fashions,Inc.has 12 shareholders.The company is subject to the Model Act.What officers is Fashions,Inc.required to have?
A)A president, secretary, and treasurer
B)A president and a secretary, and they can be the same person
C)A president, at least one vice-president, a secretary, and a chief financial officer
D)Whatever officers are described in the corporate bylaws
Q3) In Delaware,lawsuits involving corporations are tried in a special court called
A)corporate court.
B)CEO's court.
C)common court.
D)chancery court.
Q4) Discuss how a corporation is terminated.
Q5) What are some of the advantages for a business to incorporate in Delaware?
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Chapter 34: Management Duties
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Q1) What type of transaction employs special committees made up of disinterested board members who review the transaction to determine if it is entirely fair to the corporation?
A)Hostile takeover
B)Self-dealing
C)Rational business purpose
D)Corporate opportunity
Q2) If a court determines that a manager's corporate decision amounted to self-dealing,
A)the business judgment rule will not apply.
B)the transaction being challenged will be automatically voided.
C)the manager is automatically personally liable to the corporation.
D)the manager will automatically be fired.
Q3) A director violates the corporate opportunity doctrine if he or she competes with the corporation,unless the disinterested directors approve of the director's actions.
A)True
B)False
Q4) Major Corporation wants to acquire control of Forte Company.What are some legal steps Forte can take to resist a hostile takeover?
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36
Chapter 35: Shareholder Rights
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Q1) A proxy is a vote that is mailed in,like an absentee ballot.
A)True
B)False
Q2) Veritas,Inc.is planning its annual shareholder meeting on June 15.The company
A)need not send notices of the meeting to shareholders since it is the regularly scheduled, annual meeting, which Veritas always holds on the third Thursday of June.
B)must send notices to everyone who owns stock as of January 1.
C)must send notices to everyone who owns stock on the "record date," which can be no more than 70 days before the meeting.
D)is not required to have an annual shareholders meeting if the company is listed only on the NYSE.
Q3) Charles owns 1,000 shares of stock in Temperan,Inc.Charles wants to obtain corporate records including the corporation's minute book and accounting records.Under the Model Act,Charles is entitled to this information if he requests it in good faith and
A)he has a proper purpose.
B)he owns at least 1 percent of the company or $2,000 of stock.
C)he is an employee of Temperan.
D)he is a controlling shareholder.
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Page 37
Chapter 36: Bankruptcy
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Q1) Creditor claims are divided into classes and the highest class must be satisfied in full before going to the next category.
A)True
B)False
Q2) Chapters 11 and 13 are liquidation chapters.
A)True
B)False
Q3) Bankruptcy is regulated by federal law.
A)True
B)False
Q4) 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?
Q5) A trustee can void any transfer that meets all of the following requirements EXCEPT
A)if the transfer was to a creditor of the debtor.
B)if the pre-petition payment made in the ordinary course.
C)if the transfer was used to pay an existing debt.
D)if the debtor's liabilities exceeded assets at the time of the transfer.
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Chapter 37: Securities Regulation
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Q1) Jackie learned of insider trading information while talking to Mark,a director of a large corporation.She took advantage of the information to buy stock and make a huge financial gain.If she is accused of violating securities law,what must the government prove in order to gain a conviction against Jackie?
Q2) The 1933 Act prohibits fraud only in transactions involving registered securities.
A)True
B)False
Q3) Premier Enterprises sold Watson unregistered stock which was not exempt.The 1933 Act imposes liability on Premier,and Watson can demand rescission if he still owns the stock.
A)True
B)False
Q4) The 1933 Act exempts all but which of the following from its registration requirements?
A)Short-term notes
B)Treasury stock
C)Government securities
D)Annuity contracts
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Page 39
Chapter 38: Antitrust
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Q1) 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.
Q2) What type of collusion does the Supreme Court refer to as "the supreme evil of antitrust"?
A)Price fixing
B)Reciprocal dealing
C)Price discrimination
D)Vertical mergers
Q3) An advocate of the Chicago School's position on antitrust legislation would ask which of the following questions?
A)"Has a competitor been harmed?"
B)"Has competition been harmed?"
C)"Will competitors be allowed to freely enter the market?"
D)"Will interstate commerce be affected?"
Q4) Discuss when monopoly power is not a violation of Section 2 of the Sherman Act.
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Chapter 39: Consumer Protection
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Q1) Discuss the major provisions of the Credit CARD Act.
Q2) Ron's Furnace Repair advertised it would inspect any homeowner's furnace for free.Janet had Ron's come to inspect her furnace.The servicewoman dismantled the entire furnace then refused to put it back together unless Janet paid her $250.The FTC considers such a practice to be
A)an unfair practice.
B)a deceptive practice.
C)an act that violates public policy.
D)All the above.
Q3) 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
Q4) What are the three tests or elements used by the FTC to determine whether a particular act is an unfair trade practice?
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Chapter 40: Environmental Law
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Q1) We Care,a nonprofit environmental organization,believes that Quanaco is violating the Clean Air Act.The EPA has not taken any action against Quanaco.We Care can file a citizens' suit against the EPA.
A)True
B)False
Q2) As part of a compromise to the Endangered Species Act,the government allows developers to conserve some land in return for developing other property as they want.This is accomplished through
A)the Resource Conservation and Recovery Act.
B)the use of the Superfund.
C)the Habitat Conservation Plan.
D)an Environmental Impact Statement.
Q3) Discuss the major provisions of the Clean Air Act.
Q4) Which of the following is NOT a provision of the Clean Air Act?
A)Establishment of national ambient air quality standards
B)Prevention of significant deterioration (PSD) program
C)Regulation of stationary sources
D)Consolidation of environmental regulation under one agency
Q5) When must an environmental impact statement be prepared and what must it discuss?
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Chapter 41: Intellectual Property
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Q1) A design patent protects the appearance of an item and is valid for 14 years.
A)True
B)False
Q2) The requirements for a patent include all of the following EXCEPT
A)the invention must be novel.
B)the invention must be nonobvious.
C)the invention must be commercially valuable.
D)the invention must be useful.
Q3) What is the name of the treaty that allows American patents to be recognized and enforced in member countries?
A)The Paris Convention for the Protection of Industrial Property
B)The International Treaty of Trademarks and Patents
C)The World Agreement of London
D)The Berne Convention
Q4) A trademark lasts for
A)20 years after the application is filed.
B)70 years after the death of the creator.
C)10 years, but it can be renewed for an unlimited number of terms as long as it is used.
D)as long as it is kept confidential.
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Chapter 42: Real Property and Landlord Tenant
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Q1) Which of the following types of concurrent ownership does not provide for rights of survivorship?
A)Joint tenancy.
B)Tenancy in common.
C)Tenancy by the entirety.
D)All of these provide for rights of survivorship.
Q2) A covenant allows a landlord to evict a tenant if there is a violation of the lease.
A)True
B)False
Q3) Mark signs a periodic tenancy lease at the River's Edge Warehouse for one year.After the year expires,Mark stays in the warehouse and the landlord acquiesces.Mark
A)has a month-to-month periodic lease, which can be terminated by either party giving a 30-day notice.
B)has a tenancy at sufferance which is not a true tenancy at all.
C)has another one-year lease.
D)must move out when the landlord finds another tenant.
Q4) Discuss the tenant's and the landlord's basic duties under a landlord-tenant relationship.
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Page 44
Chapter 43: Personal Property and Bailment
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Q1) Distinguish between a contract and a gift.Give an example of each.
Q2) In January,Erwin told David,his nephew,that he would give him a car when he graduates from college.David graduated in May.If Erwin refuses to give David a car,David can sue him for breach of an inter vivos gift.
A)True
B)False
Q3) After a meeting with his advisor to register for a class at State University,Ron forgot his calculator in the dean's outer office.Theresa,another student,found the calculator.The calculator is treasure trove and Theresa may keep it.
A)True
B)False
Q4) A bailment was created for the parties' mutual benefit.This means that the bailee must use ordinary care with the property.
A)True
B)False
Q5) All bailments have to be by agreement between the bailor and bailee.
A)True
B)False
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Chapter 44: Planning for the Future: Estates and Insurance
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Q1) Sarah has car insurance.While driving her automobile,Sarah negligently ran a red light and hit Vi's car.Which type of coverage will pay for the damage done to Vi's car?
A)liability insurance
B)comprehensive insurance
C)accident insurance
D)uninsured motorist insurance
Q2) Dr.Gavornne advises his very ill patients to prepare a living will.The purpose of a living will is to
A)make a disposition of property.
B)express a desire not to have extreme medical treatment that would prolong their lives.
C)transfer life insurance.
D)consent to organ donation.
Q3) Per capita means each heir gets an equal share of an estate.
A)True
B)False
Q4) A later will revokes a prior will only if that revocation is clearly stated.
A)True
B)False
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