Introduction to Business Law Pre-Test
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Course Introduction
Introduction to Business Law offers a foundational overview of the legal principles relevant to the business environment. This course covers topics such as the structure and sources of law, contract formation and enforcement, torts, agency relationships, and the legal forms of business organizations. Students will learn how law influences business decisions, explore the implications of regulatory compliance, and analyze real-world cases to understand how legal concepts apply to practical business scenarios. The course aims to equip students with the knowledge necessary to identify legal risks and to make informed decisions within a business context.
Recommended Textbook
Business Law Text and Cases 13th Edition by ClarksonMiller
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Page 2
Chapter 1: Law and Legal Reasoning
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Sample Questions
Q1) Dave and Ellen enter into a contract via e-mail. When a dispute arises over the performance of the deal, Dave files a suit against Ellen. The emerging body of law that governs transactions conducted via the Internet is referred to by the term A) cyberlaw.
B) civil law.
C) equitable maxims.
D) IRAC.
Answer: A
Q2) Charles is a federal judge whose judicial decisions are part of case law, which does not include interpretations of A) regulations created by administrative agencies. B) constitutional provisions. C) statutes enacted by legislatures.
D) sound bites in the media.
Answer: D
Q3) A citation identifies the publication in which a legal authority can be found. A)True
B)False
Answer: True
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Page 3
Chapter 2: Courts and Alternative Dispute Resolution
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Q1) Transcontinental Tours, a U.S. firm, and Victoria Hotels, Ltd., a Canadian firm, enter into a contract that does not have a forum-selection or choice-of-law clause. Litigation between Transcontinental and Victoria over a dispute involving this contract may occur in
A) Canada only.
B) Canada or the United States, but not both.
C) Canada, the United States, or both.
D) the United States only.
Answer: C
Q2) Arnold loses his suit against Buffy in a Colorado state trial court. Arnold ap?peals to a state intermediate court of appeals and loses again. Arnold would appeal next to
A) a U.S. district court.
B) the Colorado Supreme Court.
C) the United States Supreme Court.
D) the U.S. Court of Appeals for the Ninth Circuit.
Answer: B
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4
Chapter 3: Court Procedures
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Sample Questions
Q1) Either party may appeal a jury's verdict but only the defendant may appeal a judge's ruling.
A)True
B)False
Answer: False
Q2) Posy brings a lawsuit against Quisa over a sale of 350 acres of farmland. During the trial, Quisa's attorney asks questions of the plaintiff's witness Raina. This is
A) a cross-examination.
B) a deposition.
C) a direct examination.
D) an interrogatory.
Answer: A
Q3) Neville files a suit against Olina. If Olina fails to respond,
A) Neville must appeal the case to a different court.
B) Olina's failure to respond will be considered to be a denial.
C) Neville will not be awarded the remedy sought.
D) Olina will have a default judgment entered against her.
Answer: D
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Chapter 4: Business and the Constitution
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Q1) Taco Hot Dogs, Inc., regularly advertises its products. Under the First Amendment, in comparison with noncommercial speech, the protection given these ads is
A) equally extensive.
B) less extensive.
C) more extensive.
D) non-existent.
Q2) According to the United States Supreme Court, the First Amendment prevents limits from being placed on independent political expenditures by corporations.
A)True
B)False
Q3) The Pennsylvania Consumer Protection Agency (PCPA) investigates the marketing practices of Respond Now!, Inc. The PCPA serves a subpoena on Respond Now!, ordering the firm to provide certain business records, including its marketing agreements with other companies. Respond Now! refuses to comply with the subpoena. On what is the company most likely basing its refusal? Is a court likely to support this position? Why or why not?
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Chapter 5: Business Ethics
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Q1) Ricardo suspects his supervisor Simone of unethical accounting practices. But Ricardo does not want to report Simone if she will find out who reported her and fire Ricardo. An important feature of online reporting systems like EthicsPoint is that an employee reporting unethical behavior
A) can do so anonymously.
B) is financially compensated if he or she is fired as a result of a report.
C) must fully identify themselves when making a report.
D) must have additional employee support to make a report.
Q2) Ryland, an officer for Sports Park, Inc., attempts to apply a duty-based approach to ethical reasoning in conflicts that occur on the job. This approach is based on the idea that a person must
A) achieve the greatest good for the most people.
B) avoid unethical behavior regardless of the consequences.
C) conform to society's ethical standards.
D) place his or her employer's interest first.
Q3) Unless a corporation violates a law, its actions do not raise questions about the role of corporations and the effect of corporate ethics on profit.
A)True
B)False
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Page 7
Chapter 6: Torts
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Sample Questions
Q1) For fraud to occur, seller's talk must be involved.
A)True
B)False
Q2) Failure to live up to a standard of care may be an act or an omission.
A)True
B)False
Q3) Oakes enters Parnell's property to read an electric meter. Parnell asks Oakes to leave. Oakes refuses. Oakes has most likely committed
A) trespass to land.
B) trespass to personal property.
C) slander of title.
D) no tort.
Q4) Rafi, a van driver for Speedy Delivery Company, causes a multi-vehicle accident on a city street. Rafi and Speedy are liable to
A) all those who were injured.
B) only those who were uninsured.
C) only those whose injuries could have been reasonably foreseen.
D) only those whose vehicles were closest to Rafi's van.
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Chapter 7: Strict Liability and Strict Liability
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Q1) Generally, the strict liability of manufactures and other sellers does not extend to injured bystanders.
A)True
B)False
Q2) Manufacturers must use due care in selecting the materials to be used in a product.
A)True
B)False
Q3) Garage Magic, Inc., contracts for the sale of a certain number of garage door openers to Home & Yard Hardware stores. Ian buys one of openers. The applicable statute of limitations prescribes a period of four years. To bring a product liability claim against Garage Magic, Ian must file a suit within four years of
A) Ian's discovery of an injury caused by the opener.
B) Garage Magic's sale of the opener to Home & Yard.
C) Garage Magic's design of the opener.
D) Home & Yard's sale of the opener to Ian.
Q4) The extreme risk of an activity is a defense against imposing strict liability.
A)True
B)False
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Chapter 8: Intellectual Property Rights
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Sample Questions
Q1) Giancarlo copies Hedrick's book, Information Free, in its entirety and sells it to Justice Fair Books, Inc., without Hedrick's permission. Justice Fair publishes it under Giancarlo's name. This is
A) copyright infringement.
B) fair use.
C) licensing.
D) protected expression.
Q2) Trademarks may be registered only with the federal government.
A)True
B)False
Q3) In 2014, Cloud Computing Corporation registers its trademark as provided by federal law. After the first renewal, this registration
A) is renewable every ten years.
B) is renewable every twenty years.
C) runs for the life of the corporation plus seventy years.
D) runs forever.
Q4) A service mark distinguishes products used by those in public service.
A)True
B)False
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Chapter 9: Internet Law, Social Media, and Privacy
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Q1) It is frequently the companies rather than courts or legislatures that are defining the privacy rights of their online users.
A)True
B)False
Q2) The law does not restrict the "fair use" of methods for the circumvention of encryption software or other technological antipiracy protection for educational and other noncommercial purposes.
A)True
B)False
Q3) Cybersquatting occurs when key words are inserted into the hyper text markup language code to tell Internet browsers specific information about a We
A)True
B)False
Q4) Federal law permits the sending of unsolicited commercial e-mail and does not prohibit spamming activities.
A)True
B)False
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11
Chapter 10: Criminal Law and Cyber Crime
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Sample Questions
Q1) Farouk uses his computer to break into Global Financial Center's computer. Farouk is a
A) hacker.
B) virus.
C) phisher.
D) worm.
Q2) In the event of a RICO violation, the government can seek the divestiture of a defendant's interest in a business.
A)True
B)False
Q3) Laird is an employee of Motor Parts, an auto parts store. On the orders of his employer, he switches trademarks on parts that come into the store to be sold to consumers. This is most likely A) forgery.
B) larceny.
C) robbery.
D) obtaining goods by false pretenses.
Q4) Falsifying public records or altering a legal document is larceny. A)True
B)False
Page 12
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Chapter 11: Nature and Terminology
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Sample Questions
Q1) A void contract imposes certain legal obligations on the parties but is not otherwise enforceable.
A)True
B)False
Q2) A letter-of-credit agreement between Rural Feed Corporation and Soybean Farms, Inc., requires Rural Feed's bank to pay Soybean Farms on receipt of invoices. This letter of credit is
A) a formal contract.
B) no contract.
C) an implied contract.
D) a quasi contract.
Q3) Jonah tells Levi he will give him an Xbox if Levi does Jonah's chores for a month. Levi promises to do the chores. Jonah and Levi have formed a
A) a bilateral contract.
B) a formal contract.
C) a unilateral contract.
D) no contract.
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Chapter 12: Agreement in Traditional and E-Contracts
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Q1) Under federal law, an e-document is not as enforceable as a paper one.
A)True
B)False
Q2) An important rule to keep in mind is that the offeree (the buyer) controls the acceptance and thus the resulting contract.
A)True
B)False
Q3) Lon says to Milli, "I would like to sell you my comic book collec?tion." This is not an offer because it
A) does not describe the subject matter specifically.
B) does not include a price term.
C) only expresses an opinion.
D) only invites Milli to negotiate.
Q4) Liz offers to sell Max her iPad for $200. Max says, "Okay, but only if you include the case and other accessories." Max has
A) accepted the offer.
B) made a counteroffer without rejecting the offer.
C) rejected the offer and made a counteroffer.
D) rejected the offer without making a counteroffer.
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Chapter 13: Consideration
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Q1) A determination of whether consideration exists depends on a comparison of the values of the things exchanged.
A)True
B)False
Q2) After an accident with a vehicle licensed to Guardian Security Company, Heidi signs a covenant not to sue Guardian Security for damages in a tort action if it pays for the damage to her car. This covenant is
A) a bar to recovery only if Guardian Security pays.
B) an illusory contract.
C) barred by the preexisting duty rule.
D) barred by the doctrine of promissory estoppel.
Q3) In many states, a release contract must be in a signed writing.
A)True
B)False
Q4) An obligation is enforceable only if it is made in return for actions or events that have already taken place.
A)True
B)False
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Chapter 14: Capacity and Legality
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Q1) A minor who enters into a contract for necessaries may disaffirm the contract but remains liable for the reasonable value of the goods.
A)True
B)False
Q2) Rosalind, a seventeen-year-old, signs a contract to sell her car to Street Fleet Used Cars. The next day, Rosalind tells Street Fleet that she's decided not to sell the car. Rosalind is liable to Street Fleet for A) the cost of a car of comparable value.
B) the value of her performance under the contract.
C) the amount of its profit on the deal.
D) nothing.
Q3) A contract entered into by an intoxicated person is never valid.
A)True B)False
Q4) If the illegal part of a bargain has not yet been performed, the party rendering performance must fulfill the contract before seeking damages.
A)True
B)False
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Chapter 15: Mistakes, Fraud, and Voluntary Consent
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Sample Questions
Q1) Misrepresentation of a material fact cannot occur through conduct alone.
A)True
B)False
Q2) Ray buys a rural vineyard from Sergio, who claims that it would be a prime site for a housing subdivision. Ray later learns that the law does not permit the land to be used for housing. Ray may
A) not rescind the contract.
B) rescind the contract only if Ray did not know the law before the deal.
C) rescind the contract only if Sergio knew about the law before the deal.
D) rescind the contract only if the law is not common knowledge.
Q3) Mona is induced by her guardian Newt to sign a contract to invest her student loan funds in Overseas Bank through Newt's investment firm. Unknown to Mona, Newt realizes ongoing commissions from the investment. Most likely, Mona may
A) not rescind the contract.
B) rescind the contract on the basis of undue influence.
C) rescind the contract on the basis of mistake.
D) rescind the contract on the basis of unconscionability.
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Page 17
Chapter 16: The Writing Requirement and Electronic Records
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Sample Questions
Q1) Hal's True Hardware Stores and Ideal Tools, Inc., sign a written con?tract for a sale of goods. To be enforceable, this written contract must include
A) a correct title, such as "Purchase Order" or "Sales Invoice."
B) a date, such as "October 2014" or "10/2014."
C) a quantity term, such as "50 hammers" or "100 boxes of assorted nails."
D) the parties' contact information.
Q2) To be enforceable, a memorandum evidencing an oral contract that would otherwise be unenforceable must include all essential and non-essential terms.
A)True
B)False
Q3) Refer to Fact Pattern 16-B1. Brie later disputes some of the provisions of the deal with Alain. If the dispute results in litigation, a court will most likely admit evidence of additional terms that are A) ambiguous.
B) consistent.
C) contradictory.
D) clear.
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Page 18
Chapter 17: Third Party Rights
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Q1) Devon and Edmond enter into a contract for the closing of a sale of Devon's recording studio. When Edmond's schedule conflicts, he asks Ferdie to perform his duties at the closing. This transfer of duties is A) a delegation.
B) an assignment. C) prohibited. D) a negotiation.
Q2) Intended beneficiaries can sue to enforce a contract. A)True
B)False
Q3) Motors Repair Company contracts to sell a car to Nikki for $3,500. Nikki gives Motors Repair a worth?less check for the price. Nikki assigns her right to the car to Opie. If Motors Repair refuses to deliver the car to Opie and Opie sues, can Motors Repair raise Nikki's fraud as a defense against deliv?ery of the car to Opie? Explain.
Q4) Banks may not assign their loan contracts to other firms. A)True B)False
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Chapter 18: Performance and Discharge in Traditional
E-Contracts
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Q1) Drainage & Irrigation Equipment, Inc., contracts to sell its assets to Earth & Sky Aquatic Corpo?ration. Before either party has performed, rescission of this con?tract requires
A) a mutual agreement to rescind.
B) an accord and satisfaction.
C) a novation.
D) a settlement agreement.
Q2) When an anticipatory repudiation occurs, it is treated as a material breach of a contract.
A)True
B)False
Q3) Nina contracts with Office Suites Corporation to buy a suite in its Prospect Point Tower at a premium for its view of Quay Harbor. Unforeseeably, the town of Quay Harbor changes its zoning law, and Resort Hotels, Inc., constructs Seaview Resort, blocking what would have been Nina's view. Nina's best argument for a change in the Office Suites contract or its price is
A) frustration of purpose.
B) objective impossibility of performance.
C) anticipatory repudiation.
D) commercial impracticability.
Page 20
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Chapter 19: Breach of Contract and Remedies
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Q1) Whether a contract's limitation-of-liability clause will be enforced depends on the type of breach that is excused by the provision.
A)True
B)False
Q2) Isaac holds one ton of perishable fruit in storage for Juice Smoothies Corpo?ration. Juice Smoothies does not pay for the storage. Isaac sells the fruit to Kayo Beverage Company. This sale represents
A) a breach of contract.
B) a mitigation of damages.
C) liquidated damages.
D) a quasi contract.
Q3) Refer to Fact Pattern 19-B1. If Ambrose breaches the contract, Belle Vista's remedy would most likely be
A) a certain ratio of the amount that Ambrose expected to invest in the project.
B) a percentage of Ambrose's unrealized profit.
C) the difference between the land's contract and market prices.
D) specific performance.
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21
Chapter 20: Formation of Sales and Lease Contracts
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Q1) On May 1, Newtown Motors, a used-car dealer, wrote a letter to O'Reilly, which stated, "We have a 1969 Pontiac Firebird in mint condition that we will sell you for $12,500 at any time before June 1. [Signed] Newtown Motors." By May 15, having heard nothing from O'Reilly, Newtown Motors sold the Firebird to another party. On May 25, O'Reilly told Newtown Motors that he accepted the offer and tendered $12,500. When Newtown Motors told O'Reilly it had sold the car to another party, O'Reilly claimed Newtown Motors had breached their contract. Is Newtown Motors in breach? Explain.
Q2) Over the course of a year, Suites & Sets Corporation sells household furnishings to customers to whom it extends credit. Suites & Sets orders the furnishings from The Storage Depot's warehouse, from which the items are shipped via common carrier to Suites & Sets customers. Article 2 of the UCC governs
A) all of the parties' sales of the goods.
B) Suites & Sets' extension of credit.
C) The Storage Depot's storage of the goods.
D) each company's management of its operations.
Q3) The UCC applies only to the extent that it has been adopted a state.
A)True
B)False
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Chapter 21: Title, Risk, and Insurable Interest
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Q1) A bill of lading is a receipt signed by a warehouse for goods stored in a warehouse.
A)True
B)False
Q2) QuickFreeze Storage, a bailee, holds goods for Restaurant Purveyor, Inc., which has contracted to sell the goods to Seafood Dining Company. The goods are to be delivered without being moved. The risk of loss will pass to Seafood Dining when it receives
A) a copy of Restaurant Purveyor's contract with QuickFreeze Storage.
B) a copy of Restaurant Purveyor's contract with Seafood Dining.
C) a negotiable document of title.
D) a notice that Seafood Dining's payment for the goods has cleared.
Q3) Johan steals Krispin's car and sells it to Lemar. Krispin can recover the car from Lemar
A) only if Lemar did not know that the car was stolen.
B) only if Krispin pays to Lemar the amount that Lemar paid to Johan for the car.
C) only if Lemar knew that the car was stolen.
D) under any circumstances.
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Page 23
Chapter 22: Performance Breach of Sales Lease Contracts
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Q1) If a buyer wrongfully refuses to accept goods, the seller can bring an action to recover the damages sustained.
A)True
B)False
Q2) Oh! Wow! Markets, Inc., rejects a shipment of turkey that does not conform to its contract with Poultry Processing Corporation, but is unable to obtain instructions from the seller. Oh! Wow! Markets can
A) destroy the goods.
B) cure the goods to make them conform to the contract.
C) retain the goods without paying for them.
D) reship or store the goods for the seller.
Q3) A buyer's failure to cover will bar him or her from using any other remedies available under the UCC.
A)True
B)False
Q4) The doctrine of commercial impracticability does not extend to problems that could have been foreseen.
A)True
B)False
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Chapter 23: Warranties
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Q1) An implied warranty or merchantability and an implied warranty of fitness for a particular purpose cannot exist in a single transaction.
A)True
B)False
Q2) Watercourse Pipe Company includes in its contracts a provision that reads, in large red letters, "There are no warranties that extend beyond the description on the face hereof." This disclaimer negates
A) the implied warranty of fitness for a particular purpose.
B) the implied warranty of merchantability.
C) the implied warranty of title.
D) none of the choices.
Q3) Livestock Feedlot orders one hundred sacks of cattle feed from MegaNutrient Feed, Inc. Each sack is stamped with the phrase "Twenty percent protein." This is
A) an express warranty.
B) an implied warranty.
C) a warranty of title.
D) puffery.
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Chapter 24: International Law in a Global Economy
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Q1) The management of Sweet Soft Drinks Corporation, a U.S. firm, wants to expand into foreign investment and employment markets. They are considering ei?ther opening their own production facility in a foreign country or enter?ing into a licensing agreement with a foreign firm. What are the advan?tages and disadvantages of each of these courses of action?
Q2) Miranda is a U.S. citizen working in Europe for Tourist Vacations, Inc., a U.S. travel agency. Tourist fires Miranda for reasons that she believes vio?late U.S. antidis?crimination laws. Those laws apply
A) extraterritorially.
B) only to signatories of the North American Free Trade Agreement.
C) only to members of the World Trade Organization.
D) only within U.S. borders.
Q3) Mountain Mining Company, a U.S. firm, owns property in Bolivia. The government of Bolivia seizes the property for an illegal purpose without paying just compensation. This is
A) confiscation.
B) defalcation.
C) dumping.
D) expropriation.
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Page 26
Chapter 25: The Function Creation of Negotiable Instruments
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Q1) To be negotiable, an instrument cannot be portable.
A)True
B)False
Q2) To obtain a business license, Bess writes a check to a certain state agency. Bess is A) the drawee.
B) the drawer.
C) the indorser.
D) the payee.
Q3) On a certificate of deposit, the bank is the maker and the depositor is the payee.
A)True
B)False
Q4) With respect to negotiability, an order on an instrument may be addressed to one person or to more than one person, either jointly or alternatively.
A)True
B)False
Q5) A symbol can serve as a valid signature.
A)True
B)False
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Chapter 26: Transferability and Holder in Due Course
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Q1) Mortimer negotiates an instrument to Nadia. Negotiation is the transfer of an instrument
A) for valuable consideration under a contract.
B) in such form that the transferee becomes a holder.
C) pursuant to preliminary contract discussions.
D) without the payment of a recognized medium of exchange.
Q2) Discount Retail Warehouse Corporation pays its employees every two weeks. Ethel, a Discount Retail employee, receives her paycheck and indorses the back ("Ethel Smith"), but loses the check before cashing it or depositing it. Garth finds it. Has the check been nego?tiated to Garth? If Garth signs the back of the check beneath Ethel's signature, can he cash it? If so, what might Ethel have done to avoid the loss?
Q3) Dane transfers a draft by signing it and delivering it to Ebony. Ebony is
A) an indorser.
B) an indorsee.
C) a promisee.
D) a promisor.
Q4) For a check, a "reasonable time" is ninety days after the date of the check.
A)True
B)False
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Chapter 27: Liability, Defenses, and Discharge
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Q1) Lewis makes a note payable to MaxiFinance Corporation. MaxiFinance indorses the back of the note and negotiates it to Notes & Drafts Investments, Inc. Primarily liable on the note is
A) none of the choices.
B) MaxiFinance.
C) Notes & Drafts Investments.
D) Lewis.
Q2) Under the fictitious payee rule, the payee's indorsement is not treated as a forgery, and an innocent holder can hold the maker or drawer liable on the instrument.
A)True
B)False
Q3) Employment Personnel Company draws a check payable to Felix. Felix indorses the back and negotiates the check to Guaranty Bank. Primarily liable on the check is A) Employment Personnel.
B) Felix.
C) Guaranty Bank.
D) none of the choices.
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29
Chapter 28: Banking in the Digital Age
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Q1) Refer to Fact Pattern 28-2B. Capital Credit, Belle's bank, is A) the cashing bank.
B) the depositary bank.
C) the intermediary bank.
D) the payor bank.
Q2) Cleo writes a check for $100 drawn on Debit & Credit Bank and presents it to Elegant Jewelers for payment. If the check is not backed by sufficient funds, Cleo may be prosecuted for A) forgery.
B) fraud.
C) negligence.
D) nothing.
Q3) If a bank pays a check in spite of a stop-payment order, the bank is liable only for amount of the actual loss suffered by the drawer because of the wrongful payment. A)True
B)False
Q4) Checks are usually three party instruments.
A)True
B)False
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Chapter 29: Creditors Rights and Remedies
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Q1) Liens generally take priority over other claims against the same property.
A)True
B)False
Q2) A guaranty contract between the guarantor and the creditor need not be in writing or electronically recorded to be enforceable unless the main purpose exception applies.
A)True
B)False
Q3) Jordan is a surety for Kelly's loan from Lenders Credit Corporation. When the loan comes due, Kelly tries to pay Lenders Credit, but the creditor rejects the payment. Jordan is
A) released from any obligation on the debt.
B) required to pay the amount of the debt to Lenders Credit.
C) required to pay up to half of the amount of the debt to Lenders Credit.
D) required to pay the amount of the debt to Kelly.
Q4) Recording a mortgage perfects the lender's security interest in the mortgaged property.
A)True
B)False
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Chapter 30: Secured Transactions
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Q1) A purchase-money security interest in consumer goods is perfected automatically at the time it is created.
A)True
B)False
Q2) The UCC requires that a financing statement be filed under the name of the creditor.
A)True
B)False
Q3) A security agreement need not be in writing if the collateral is transferred to the secured party.
A)True
B)False
Q4) Home2U Stores, Inc., sells household consumer goods. To create a pur?chase-money security interest, Home2U must
A) assign, to a collecting agent, a portion of its accounts payable.
B) assign, to a collecting agent, a portion of its accounts receivable.
C) extend credit for part or all of the purchase price of the goods.
D) refer purchasers to a third-party lender.
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Chapter 31: Bankruptcy Law
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Q1) To adjust debts and institute a repayment plan that is less expensive and less complicated than other options, Buffalo n' Beef Bar-B-Q Restaurant, a small business, may file a petition in bankruptcy for relief through
A) a liquidation.
B) a reorganization.
C) a repayment plan.
D) a family-farmer bankruptcy plan.
Q2) The right to petition for bankruptcy relief under federal law is an essential aspect of our capitalistic society.
A)True
B)False
Q3) Daniel is a trustee for a federal bankruptcy court. Daniel's duties include
A) collecting the debtor's available estate.
B) establishing priority for the payment of unsecured creditors.
C) operating a debtor's business to obtain maximum profit for creditors.
D) submitting to an examination under oath by the creditors.
Q4) Rulings from bankruptcy courts are final-they cannot be appealed.
A)True
B)False
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Chapter 32: Agency Formation and Duties
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Q1) A principal has a duty to cooperate with the agent and to assist the agent in performing his or he duties.
A)True
B)False
Q2) An agency by estoppel arises when the principal's actins have created the appearance of an agency that does not in fact exist.
A)True
B)False
Q3) Yoshi contracts with Zach to buy a certain pub, Aficionado's, for Yoshi, who asks Zach not to reveal her identity. Zach makes a deal with Burcet, the owner of the pub, and makes a down payment. Yoshi fails to pay the rest of the price, and does not pay Zach for his services. Does Zach have any recourse against Yoshi? If so, on what basis and to what extent?
Q4) Refer to Fact Pattern 32-1B. At the shop, Margo is
A) an independent contractor.
B) Neon's employee only.
C) Neon's employee and agent.
D) Neon's principal.
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Page 34
Chapter 33: Agency Liability and Termination
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Q1) Nuncio serves in a representative capacity for Obadiah. With respect to binding Obadiah to contracts, Nuncio's authority
A) may be actual or apparent.
B) must be actual and apparent.
C) must be actual and not apparent.
D) cannot be actual or apparent.
Q2) Reliable Insurance Company employs Stuart as an agent. To terminate Stuart's authority, Reliable Insurance must notify A) only third parties who are aware of the agency relationship. B) the public generally.
C) Stuart and any third parties who are aware of the agency relationship.
D) Stuart only.
Q3) Lena is a salesperson for Musical Instruments, Inc. She tells Nayda, a customer, that an instrument has a certain quality when, as Lena knows, it does not. In reliance, Nayda buys the instrument. Liable for this misrepresen?ta?tion is A) no one.
B) Lena.
C) Musical Instruments.
D) Nayda.
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Page 35
Chapter 34: Employment, Immigration, and Labor Law
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Q1) If an employee presents false documentation of eligibility to work in the United States, his or her employer is subject to deportation.
A)True
B)False
Q2) Generally, under employment-at-will doctrine, an employer may fire an employee even if doing so would violate a federal or state statute.
A)True
B)False
Q3) Bank Professionals Union represents the workers of Commerce Bank. The bank refuses to bargain with the union over the economic consequences to the employees of management's decision to shut down some facilities. This most likely violates A) federal labor law.
B) state right-to-work laws.
C) federal wage-and-hour laws.
D) no federal or state law.
Q4) Children under fourteen years of age are not allowed to work.
A)True
B)False
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Chapter 35: Employment Discrimination and Diversity
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Q1) Any federal, state, or local affirmative action program that uses racial or ethnic classifications as the basis for making decisions is subject to strict scrutiny by the courts.
A)True
B)False
Q2) Refer to Fact Pattern 35-1B. Lomax believes that he has been discriminated against on the basis of his age. For the Age Dis?crimination in Employment Act of 1967 to apply
A) Kyla must be forty years of age or younger.
B) Kyla must be forty years of age or older.
C) Lomax must be forty years of age or older.
D) Lomax must have been MVMC's employee for at least forty years.
Q3) Emylee, an employee of Farm Supplies, Inc., files a sexual-harassment suit against Gowan, her supervisor. Emylee wins. Farm Supplies may also be liable if it had effective harassment policies and complaint procedures, and A) none of the employees followed them.
B) Emylee followed them.
C) all of the employees were aware of them.
D) Gowan followed them.
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Page 37
Chapter 36: Sole Proprietorships and Franchises
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Q1) Mix n' Match Clothing Corporation gives notice to Neely that Mix n' Match is terminating their franchise arrangement. Winding up the business requires
A) a new franchise agreement.
B) nothing more than closing immediately.
C) Neely's death, disability, or insolvency.
D) the return of Mix n' Match's property.
Q2) A franchise agreement between Grid Tools Company and Hometown Hardware, Inc., is silent on a time for termination of the franchise. Grid Tools may A) never terminate.
B) terminate at any time.
C) terminate on reasonable notice.
D) terminate on three days notice.
Q3) If a franchisor's decision to terminate a franchise is made in the normal course of business and reasonable notice is given, it is less likely that the termination will be considered wrongful.
A)True
B)False
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Chapter 37: Partnerships and Limited Liability Partnerships
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Q1) On dissolution, the creditors of the partnership, but not the creditors of the individual partners, can make claims on the partnership's assets.
A)True
B)False
Q2) On a partner's dissociation, the partner's duty of loyalty ends.
A)True
B)False
Q3) In a limited partnership, a general partner's dissociation from the firm normally will lead to dissolution unless all partners agree to continue the business.
A)True
B)False
Q4) Refer to Fact Pattern 37-1B. Bryn, Cornell, and Duke decide to admit Giselle as a new partner in Equity Lending. Giselle's liability for partnership debts incurred before her admission is
A) limited to her capital contribution to the firm.
B) limited to her personal assets.
C) nothing.
D) unlimited.
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Chapter 38: Other Organizational Forms for Small Businesses
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Q1) If a member's dissociation from a limited liability company is rightful, normally the dissociated member has the right to force the LLC to dissolve.
A)True
B)False
Q2) Lauren, Marcella, and Norell form a syndicate to buy a professional soccer franchise. This syndicate could be set up as
A) a joint venture.
B) a corporation.
C) a sole proprietorship.
D) a limited liability company.
Q3) Dreem Land Corporation and EZ Investments Company transfer their property to Financial Managers, Inc., which manages the property and distributes the profits to Dreem and EZ. This form of a business organization is
A) a business trust.
B) a joint stock company.
C) a joint venture.
D) a syndicate.
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Page 40
Chapter 39: Corporate Formation and Financing
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Q1) Dollars & Sense, Inc., is incorporated in the state of New Jersey and is doing busi?ness in the state of New York. In New York, Dollars & Sense is properly referred to as A) a domestic corporation.
B) a foreign corporation.
C) an alien corporation.
D) a public corporation.
Q2) A corporation has perpetual existence unless the articles of incorporation state otherwise.
A)True
B)False
Q3) In the absence of express constitutional, statutory, or other provisions, the corporation has no implied powers.
A)True
B)False
Q4) In corporate law, acts of a corporation that are beyond its express or implied powers are de facto or de jure acts.
A)True
B)False
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Chapter 40: Corporate Directors, Officers, Shareholders
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Q1) Directors cannot use corporate funds or confidential corporate information for personal advantage.
A)True
B)False
Q2) Mieko is a shareholder of Natural Gas, Inc. Natural Gas uses cumulative voting to elect directors. This means that the number of Mieko's votes is determined by the number of
A) years that Mieko has been a shareholder.
B) members of the board to be elected multiplied by the total number of voting shares that Mieko holds.
C) shareholders present at the shareholders' meeting.
D) shareholders' meetings that Mieko has attended.
Q3) Kelly transfers shares of stock that she owns in Lone Starz Company to Max. A shareholders' meeting takes place before Max's ownership is entered in Lone Starz's stock book. A vote at the meeting can be cast by
A) Kelly and Max.
B) Kelly only.
C) Max only.
D) neither Kelly nor Max.
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Page 42
Chapter 41: Mergers and Takeovers
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Q1) A merger involves the legal combination of two or more corporations, after which both continue to exist.
A)True
B)False
Q2) Refer to Fact Pattern 41-2B. Quality Films issues shares that its shareholders can exchange for cash if a takeover is successful, intending to make Popular Movies's takeover attempt too expensive. This is a
A) crown jewel defense.
B) Pac-Man defense.
C) poison pill defense.
D) white knight defense.
Q3) Ramon is a shareholder of Quantum Mechanix Corporation. Ramon could normally ex?er?cise appraisal rights if Quantum participated in A) a consolidation.
B) a dissolution.
C) a liquidation.
D) a winding up.
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Chapter 42: Securities Law Corporate Governance
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Q1) The Securities and Exchange Commission cannot exempt persons, securities, and transactions from the requirements of the securities laws.
A)True
B)False
Q2) Global Trade Corporation is a public company that is poised to issue securities that do not qualify for an exemption from registration. This means that Global Trade must A) file a registration statement with the SEC. B) issue the securities through an online registration site. C) refrain from issuing the securities to unregistered investors. D) register the securities with a national stock exchange.
Q3) Securities generally do not include any documents evidencing corporate ownership or debt.
A)True B)False
Q4) The Securities Exchange Act of 1934 applies to companies that have assets in excess of $5 million and five hundred or more employees. A)True B)False
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Page 44
Chapter 43: Administrative Agencies
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Q1) Administrative agencies generally have no discretion over the type of hearing procedures that they use.
A)True
B)False
Q2) A failure of the U.S. Drug Enforcement Administration to comply with a request under the Freedom of Information Act (FOIA) may be challenged in
A) a federal district court.
B) a hearing before the U.S. Freedom of Information Agency.
C) a meeting with Congress's FOIA subcommittee.
D) a special conference with the president of the United States.
Q3) Information Security Inc. pays income and other taxes collected by the Internal Revenue Service (IRS). Like other federal administrative agencies, the IRS was created by
A) Congress, through enabling legislation.
B) the courts, through the adjudicatory process.
C) the U.S. Constitution, in Article I, Section 8.
D) the president, through an executive order.
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Chapter 44: Consumer Law
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Q1) Nature's Food Market sells groceries. Metro Snacks & Drug Store sells groceries and fills prescriptions. The party with the chief responsibility to prevent unsafe food and drugs from being sold is
A) Nature's Food Market and Metro Snacks & Drug Store.
B) Metro Snacks & Drug Store only.
C) the Federal Trade Commission.
D) the Food and Drug Administration.
Q2) The Federal Reserve Board of Governors has issued a regulation that governs credit provisions associated with sales contracts-Regulation Z.
A)True
B)False
Q3) A sanction known as counteradvertising requires a company to advertise anew to inform the public about earlier misinformation.
A)True
B)False
Q4) Merchants must issue a refund within a specified period of time when a consumer cancels an order.
A)True
B)False
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Chapter 45: Environmental Law and Sustainability
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Q1) The National Pollutant Discharge Elimination System focuses on industrial wastewater and storm water discharges.
A)True
B)False
Q2) Condos & Course Development, Inc., fills a wetlands area that it owns without a permit from the U.S. Army Corps of Engineers. Condos & Course Development plan to build a golf course and residences on the site. Under the Clean Water Act, this is most likely
A) a violation.
B) not a violation because a permit is not needed to fill wetlands.
C) not a violation because the area was filled before construction.
D) not a violation because there was no discharge of pollution.
Q3) Grease & Lubricants Inc. makes its products without required pollution control technology, causing a discharge of oily waste into the nearby Holly Lake. This activity can re?sult in
A) a criminal fine or imprisonment only.
B) a criminal fine, imprisonment, or an injunction only.
C) a criminal fine, imprisonment, an injunction, or damages.
D) an injunction only.
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Page 47
Chapter 46: Antitrust Law
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Q1) Disc & Shoe Brakes Corporation, a brake manufacturer, sells its products to Eastside Motors, a retailer, at lower prices than it charges Fast Brake, a com?peti?tive re?tailer. This price discrimination is legal
A) under any circumstances.
B) unless its effect is to cause a competitor a loss of any business.
C) unless its effect is to substantially lessen competition.
D) unless there is no effect on a competitor.
Q2) Under what circumstances would Quality Market, a small store in Rustic, an isolated town, be considered a mo?nopoly? If Quality Market is a monopoly, is it in violation of antitrust law?
Q3) Any agreement that restricts output among competitors is a per se violation of Section 1 of the Sherman Act.
A)True
B)False
Q4) Refer to Fact Pattern 46-1B. The Natural Gas and Olio Energy deal is
A) a deal that neither restrains trade nor harms competition.
B) a legal restraint of trade.
C) a per se violation of antitrust law.
D) subject to analysis under the rule of reason.
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Chapter 47: Professional Liability and Accountability
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Q1) Finola, a certified public accountant, provides accounting serv?ices to Global Trade Corporation. The services include preparing Global Trade's financial re?ports and issuing opinion letters based on the reports. In 2014, Global Trade falls into serious financial trouble, but neither Finola's reports nor her opinion let?ters indicate this situation. Relying on Finola's portrayal of Global Trade's finan?cial situation, the firm borrows a large sum of money to build a new ship?ping facility. In lending Global Trade the money, Harbor City Bank relies on Finola's opinion letter. Finola is aware of this reliance. If Finola did not en?gage in intentional fraud but was negligent, what is her potential liability?
Q2) Under the Sarbanes-Oxley Act of 2002, accountants need not retain working papers relating to an audit or review.
A)True
B)False
Q3) Professionals are required to deliver services but the competency of the services is never an issue.
A)True
B)False
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Chapter 48: Personal Property and Bailments
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Q1) Gene leaves her Honda Fit with Intown Motors for routine maintenance. On its return, the interior of the car is greasy and the exterior is scratched and dented. Who suffers the loss and why?
Q2) Quentin wants to give Rowena a pearl necklace that he has in his safe de?posit box at Security Bank. The bank is closed for a holiday. Quentin gives Rowena a key to the box and tells her to go to the bank after the holi?day and take the necklace. Rowena does this. The next day, Quentin dies unex?pectedly. His heirs want the necklace. What type of gift was this? Can Rowena keep the necklace?
Q3) Randall steals a damaged, broken bike that is parked, unlocked, in a dorm bike rack. He repairs, paints, and replac?es parts on the bike un?til it is like new. The original owner, Sabi, then claims it. The bike be?longs to
A) John and Kim in equal measure.
B) John because he made substantial improvements to it.
C) the state under the applicable estray statute.
D) Kim because John stole it.
Q4) A bailee must exercise reasonable care in preserving the bailed property.
A)True
B)False
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Page 50
Chapter 49: Real Property Landlord-Tenant Law
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Q1) To acquire the ownership of Bart's mountain cabin by ad?verse possession, Cody must occupy the cabin exclusively, continuously, and peaceably for a specified period of time
A) in an, open, hostile, and adverse manner.
B) until Bart files a suit.
C) without Bart's knowledge.
D) with the state's permission.
Q2) Qiana and Rex take title to a Shakes n' Burgers restaurant in such a way that if one dies, the other will be the sole owner. Qiana and Rex own the restaurant as
A) co-owners in fee simple.
B) joint tenants.
C) tenants by the entirety.
D) tenants in common.
Q3) A quitclaim deed offers the most protection against defects in the title.
A)True
B)False
Q4) Lamar owns a field behind Megan's house and property. The only access to the field is Megan's driveway, which Lamar uses to get to his field. If Lamar sells the field, can the buyer use the right-of-way across Megan's property?
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Chapter 50: Insurance
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Q1) A broker is not an agent of the insurance company or the applicant.
A)True
B)False
Q2) The Fish House, a seafood restaurant, obtains from Guaranty Insurance Company a policy that pro?vides if a dispute arises between the parties concerning the settle?ment of a claim, the dispute must be submitted to an impartial third party, not a court, for resolution. This is
A) an antilapse clause.
B) an arbitration clause.
C) an appraisal clause.
D) an incontestability clause.
Q3) A business organization cannot obtain insurance on the life of a person, even on the life of an individual who is important to that organization.
A)True
B)False
Q4) A person who is obtaining insurance from an insurance company's agent is not usually protected until a formal written policy is issued.
A)True
B)False
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Chapter 51: Wills and Trusts
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Q1) Ortensia is married to Paolo. Ortensia executes a will, leaving certain property to Paolo and other property to Quito, who is unrelated to Ortensia and Paolo. On Ortensia's death, the share of property given under the will can be renounced by
A) neither Paolo nor Quito.
B) Paolo and Quito.
C) Paolo but not Quito.
D) Quito but not Paolo.
Q2) Kim is asked to serve as a witness to Lian's will. To qualify, Kim must be
A) a collateral heir.
B) a lineal descendant.
C) at least eighteen years old.
D) mentally competent.
Q3) A "living will" is a will drafted and executed during a decedent's life.
A)True
B)False
Q4) A resulting trust arises from the conduct of the parties.
A)True
B)False
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Page 53