Introduction to Business Law
Review Questions
Course Introduction
Introduction to Business Law provides students with a foundational understanding of the legal principles that shape and govern the business environment. The course covers key topics such as the formation and types of business entities, contracts, agency relationships, employment law, intellectual property, and the regulatory framework within which businesses operate. Emphasizing both theory and practical application, students will learn to identify potential legal issues, understand their implications, and recognize the ethical considerations relevant to business decision-making. This course is designed to prepare students for more advanced business studies and to make informed and ethical choices in their future careers.
Recommended Textbook
Business Law Principles for Todays Commercial Environment 4th Edition by David P. Twomey
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Chapter 1: The Nature and Sources of Law
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Q1) In addition to state legislatures and the United States Congress,all cities,counties,and other governmental subdivisions have some power to adopt ordinances within their sphere of operation.
A)True
B)False
Answer: True
Q2) Rights guaranteed in the United States Constitution are accompanied by duties.
A)True
B)False
Answer: True
Q3) ______ is a body of law that provides justice when the law does not offer an adequate remedy.
A)Ethics
B)Regulations
C)Equity
D)None of the above.
Answer: C
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Page 3
Chapter 2: The Court System and Dispute Resolution
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Q1) Once a lawsuit is commenced,the case must go to the jury.
A)True
B)False
Answer: False
Q2) The answer to the complaint is filed by the:
A)defendant.
B)prosecutor .
C)plaintiff.
D)judge.
Answer: A
Q3) A deposition:
A)is the testimony of a witness taken under oath.
B)is conducted outside of the courtroom.
C)can be used to impeach a witness.
D)all of the above.
Answer: D
Q4) All federal courts are expressly created by the United States Constitution.
A)True
B)False
Answer: False
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Chapter 3: Business Ethics, social Forces, and the Law
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Q1) Federal laws on the disclosure in the sales of securities and shareholder relations were developed following the stock market crash of 1929.
A)True
B)False
Answer: True
Q2) Trust is a fundamental basis of the capitalist system that is central to the expectations of investors,customers,and other firm stakeholders.
A)True
B)False
Answer: True
Q3) Immanuel Kant's categorical imperative theory:
A)requires that we avoid one-sided benefits as a result of ethical decisions.
B)makes it easier to settle international business ethical decisions.
C)believes you have to be fair and ethical whether you want to be or not.
D)all of the above.
Answer: A
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Chapter 4: The Constitution As the Foundation of the Legal Environment
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Q1) Which of the following is true about administrative agencies?
A)Administrative agencies exercise powers guaranteed to them in the U.S.Constitution.
B)Administrative agencies exercise powers allocated to them by the president.
C)Administrative agencies make decisions that are rarely reviewed by the courts.
D)Administrative agencies make decisions that are effectively reviewed by voters.
Q2) Administrative agencies are,in effect,a fourth branch of the government.
A)True
B)False
Q3) The Constitution prohibits state governments from denying any person the equal protection of the law.
A)True
B)False
Q4) The greatest change to the Constitution has been made by the United States Supreme Court through interpretation.
A)True
B)False
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Chapter 5: Government Regulation of Competition and Prices
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Q1) The government can regulate not just businesses,but also business competition and prices.
A)True
B)False
Q2) The Sherman Act applies to:
A)buying activities.
B)selling activities.
C)production activities.
D)all of the above.
Q3) A price reduction to one customer is lawful when it is made because of the deteriorated condition of the goods sold to that customer.
A)True
B)False
Q4) The Sherman Act applies only to buying and selling activities,not manufacturing and production activities.
A)True
B)False
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Chapter 6: Administrative Agencies
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Q1) The Freedom of Information Act provides access to any information upon request.
A)True
B)False
Q2) Administrative agencies never allow members of the industry that is to be regulated to participate in rule-making deliberations.
A)True
B)False
Q3) An administrative agency can be created to perform:
A)only one of the three functions of government (executive,legislative,or judicial).
B)any two of the three functions of government.
C)all three of the functions of government.
D)none of the three functions of government.
Q4) Which statement is true concerning administrative hearings?
A)The findings are turned over to a court of law for the final decision.
B)Denial of a jury trial is a denial of due process.
C)It is generally necessary to give notice of an administrative hearing and to allow affected persons to be present.
D)Traditional courtroom rules of evidence must be applied.
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Chapter 7: The Legal Environment of International Trade
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Q1) Which of the following statements is true regarding the World Trade Organization (WTO)?
A)The WTO has been in place since 1947.
B)The WTO coordinates its activities with GATT.
C)It provides a dispute settlement body to promote the resolution of trade disputes.
D)It has the ability to impose criminal penalties.
Q2) Licensing involves the transfer of title of goods to a distributor who bears the financial and commercial risks for the subsequent sale of the goods.
A)True
B)False
Q3) The World Trade Organization (WTO)provides a Dispute Settlement Body (DSB)to enable member countries to resolve trade disputes rather than engage in unilateral trade sanctions or a trade war.
A)True
B)False
Q4) The U.S.dollar is considered the international currency.
A)True
B)False
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Chapter 8: Crimes
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Q1) The Racketeer Influenced and Corrupt Organizations (RICO)Act authorizes both criminal and civil actions.
A)True
B)False
Q2) For business crimes,managers cannot be held criminally responsible for the conduct of their employees.
A)True
B)False
Q3) Computer crimes include:
A)theft of hardware.
B)theft of software.
C)intentional damage to information stored on a computer.
D)all of the above.
Q4) The Foreign Corrupt Practices Act applies to businesses with their principal offices located in the United States.
A)True
B)False
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Chapter 9: Torts
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Sample Questions
Q1) Which of the following is a defense to defamation?
A)Slander
B)Libel
C)Truth
D)All of the above.
Q2) Commercial exploitation is a form of invasion of privacy.
A)True
B)False
Q3) A tort is a wrong arising from a violation of a public duty.
A)True
B)False
Q4) John was driving his car in a careless way,failing to drive as a reasonably prudent person would under the driving conditions.Ramona was crossing the street in a careless way,failing to cross as a reasonably prudent person would.John struck and injured Ramona with the car John was driving.At trial,it was determined that John was 80 percent at fault and that Ramona was 20 percent at fault.The injuries sustained amounted to $100,000.Explain how much,if any,recovery Ramona would receive in a state that applies the contributory negligence rule.Do the same thing for a state that applies the comparative negligence rule.
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Chapter 10: Intellectual Property Rights
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Sample Questions
Q1) Computer programs are subject to protection in the U.S.under:
A)copyright laws.
B)patent laws.
C)trade secret laws.
D)all of the above.
Q2) To analyze a copyright infringement claim in the context of computer programs,courts will primarily examine:
A)the total number of program steps that are substantially similar.
B)the number of significant program steps that are substantially similar.
C)whether the programs appear substantially similar in ordinary language.
D)whether the programs appear substantially similar in machine language.
Q3) An owner of a copyright may license some of his or her rights to another in exchange for royalty payments.
A)True
B)False
Q4) The Semiconductor Chip Protection Act provides that an infringer will:
A)be liable for actual damages
B)forfeit its profits to the owners
C)both a.and b.
D)neither a.nor b.
Page 12
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Chapter 11: Cyberlaw
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Q1) __________ is a federal law that recognizes digital signatures as authentic for purposes of contract formation.
A)Cyber-sign
B)We-sign
C)Electra-sign
D)E-sign
Q2) The tort of invasion of privacy has some application to cyberspace communication.
A)True
B)False
Q3) Cyberlaw is a completely new area of law,unrelated to any established field of law.
A)True
B)False
Q4) Misrepresentation and fraud on the Internet raises a variety of new legal issues.
A)True
B)False
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Chapter 12: Nature and Classes of Contracts: Contracting
on the Internet
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Q1) An executory contract is an agreement by which something remains to be done by one or both parties.
A)True
B)False
Q2) Because transfer of value is essential to a valid contract,contracts cannot arise in the performance of personal services.
A)True
B)False
Q3) Only the parties who signed the original contract can have rights with respect to that contract.
A)True
B)False
Q4) A contract is:
A)a binding agreement.
B)an agreement creating an obligation.
C)an agreement that creates enforceable duties and obligations.
D)all of the above.
Q5) A contract can only involve two parties. A)True B)False
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Chapter 13: Formation of Contracts: Offer and Acceptance
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Q1) A counteroffer is a(n):
A)acceptance of the original offer.
B)rejection of the original offer.
C)acceptance of the original offer and an invitation to further negotiate.
D)a revocation of the original offer.
Q2) Under the Uniform Commercial Code (UCC),a firm offer applies to:
A)a written,signed offer by a merchant to buy or sell goods.
B)an unwritten but definite offer to buy or sell goods.
C)a written,signed offer by anyone to buy or sell goods.
D)an unlimited,stipulated period of time.
Q3) An agreement that consists of two or more parts and calls for corresponding performances of each part by the parties is called a:
A)partial contract.
B)divisible contract.
C)performance contract.
D)divided contract.
Q4) An otherwise vague contract may be clarified by references in the contract to other documents or agreements.
A)True
B)False
Page 15
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Chapter 14: Capacity and Genuine Assent
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Q1) Fraud requires a misstatement of either a fact or an opinion.
A)True
B)False
Q2) The seller of a painting is not bound by the sales contract if the painting purchased was considered of little value and only later discovered to be valuable to the surprise of both buyer and seller.
A)True
B)False
Q3) An apparently voluntary agreement may in fact not be voluntary if:
A)undue influence is present.
B)physical duress is present.
C)economic duress is present.
D)all of the above.
Q4) A contract based on a mutual mistake in judgment is:
A)voidable by the adversely affected party.
B)not voidable by the adversely affected party.
C)void ab initio.
D)none of the above.
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Chapter 15: Consideration
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Q1) Sara Student wished to pay off her $5,000 student loan.If she sends in a check for $3,000 and the creditor cashes the check,the debt will be fully satisfied provided the check is marked "paid in full."
A)True
B)False
Q2) Ordinarily,a promise to perform an existing legal obligation is:
A)not consideration.
B)binding if the promisor promises to perform with extra care.
C)binding if the promisor promises to perform to suit the personal satisfaction of the promisee.
D)binding if the promisee would experience substantial loss due to breach of the promise.
Q3) The doctrine of promissory estoppel is also known as the doctrine of beneficial reliance.
A)True
B)False
Q4) Forbearance may constitute consideration.
A)True
B)False
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Chapter 16: Legality and Public Policy
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Q1) Dealing honestly,reasonably,and in good faith:
A)is implied in every contract for services.
B)is implied in every contract for the sale of goods.
C)is an expressed obligation in every contract.
D) both a and
Q2) In every contract there exists an expressed covenant of good faith and fair dealing.
A)True
B)False
Q3) When a court finds a clause of a contract unconscionable at the time it was made,it may enforce the remainder of the contract.
A)True
B)False
Q4) If a contract appears to be legal on its face,it will be enforceable even if it was entered into for an illegal purpose.
A)True
B)False
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Chapter 17: Writing, electronic Forms, and Interpretation of Contracts
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Q1) The standard statute of frauds:
A)requires full disclosure in the case of consumer sales on credit.
B)requires a seller of real estate to obtain a broker's license.
C)specifies the punishment of perjury.
D)requires that a contract for the sale of land be evidenced by a writing.
Q2) A promise to pay an attorney a fee owed by a third person can be enforced without a writing.
A)True
B)False
Q3) If a contract is unclear,it will be interpreted against the party who drafted it. A)True B)False
Q4) The parol evidence rule generally excludes words spoken before or at the time a written contract was executed from contradicting the terms of the contract. A)True
B)False
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Page 19
Chapter 18: Third Persons and Contracts
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Q1) A person entitled to receive money may generally assign that right to another person.
A)True
B)False
Q2) When work is guaranteed by one who repairs a building,the owner,on selling the building,may assign the guarantee to the buyer.
A)True
B)False
Q3) When a buyer assigns the right to goods under a contract,the buyer's liability to make payment to the seller is:
A)transferred to the third party.
B)terminated.
C)still in effect.
D)shared equally with the third party.
Q4) When a lease is assigned,the assignee becomes the sole obligor for rent payments,and the original lessee is discharged from the lease.
A)True
B)False
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Chapter 19: Discharge of Contracts
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Q1) If a debtor with multiple debts specifies the debt to which a payment is to be applied and the creditor accepts the money,the creditor is bound to apply the money as specified.
A)True
B)False
Q2) If no time period for performance is specified in a contract:
A)the contract is unenforceable.
B)time shall be of the essence.
C)a reasonable time for performance will be implied.
D)the time for performance will be ignored by the courts.
Q3) An offer to perform is known as a(n)__________.
A)rendering
B)offering
C)tinder
D)tender
Q4) A contract provision requiring that suit be brought within one (1)year does not violate public policy,although the statute of limitations would allow two (2)years in the absence of such a contract limitation.
A)True
B)False
21
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Chapter 20: Breach of Contract and Remedies
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Q1) An antimodification clause specifies that a waiver to any breach automatically modifies the contract .
A)True
B)False
Q2) In some cases the court may require specific performance when there is a breach of contract.
A)True
B)False
Q3) When a party expressly declares before the time for performance arrives that the contract will not be performed,such a declaration is called an anticipatory repudiation.
A)True
B)False
Q4) Damages in excess of actual loss are called:
A)punitive damages.
B)compensatory damages.
C)restitution.
D)nominal damages.
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Chapter 21: Personal Property and Bailments
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Q1) A person becomes a(n)__________ at the moment of taking possession of abandoned personal property.
A)Bailor
B)Bailee
C)constructive bailee
D)Owner
Q2) If a maintenance employee at a hotel finds a pocketbook with $500 in cash while cleaning an empty guest room,the employee:
A)is entitled to keep the property,because the employee has the legal status of a "finder."
B)must give the property to the manager of the hotel to be kept for the owner.
C)must place an advertisement in a local newspaper,and if the property is not claimed within seven (7)business days,the employee is entitled to keep it.
D)can retain possession of the property until the owner establishes ownership.
Q3) Bailments may be:
A)created orally or through a writing.
B)created for either real or personal property.
C)created for nonpossessory personal property.
D)made only after delivery to the bailor is accomplished.
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Chapter 22: Legal Aspects of Supply Chain Management
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Q1) The storage of goods in a warehouse and the shipment of goods by a common carrier are examples of special bailments.
A)True
B)False
Q2) All bailments are created equally.
A)True
B)False
Q3) Contract clauses that limit a common carrier's liability are void as contrary to public policy.
A)True
B)False
Q4) With respect to property expressly entrusted to a hotelkeeper's care,the hotelkeeper has a bailee's liability.
A)True
B)False
Q5) A common carrier transporting goods under a COD shipment is liable if it takes a check in payment and the check bounces.
A)True
B)False
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Chapter 23: Nature and Form of Sales
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Q1) An agreement to periodically deliver home-heating oil to a residential customer that does not indicate the duration of the contract
A)is enforceable for a reasonable period of time.
B)lasts for one delivery only.
C)is not a legally-enforceable contract.
D)constitutes a bulk transfer.
Q2) A merchant cannot revoke a firm offer to buy or sell goods if the merchant has:
A)promised to keep the offer open.
B)declared in the presence of two or more reputable witnesses that the offer will be kept open.
C)received consideration to keep the offer open.
D)stated in a signed letter that the offer would not be revoked for a specified period of time.
Q3) The parol evidence rule does not apply to the sale of goods.
A)True
B)False
Q4) A bill of sale can be used as proof of an otherwise oral agreement.
A)True
B)False
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Chapter 24: Title and Risk of Loss
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Q1) When goods are sold at an auction in separate lots,the title to each lot passes:
A)when the winning bidder tenders payment for the lot.
B)when the lot is received by the winning bidder.
C)only when all lots have been sold.
D)when the auctioneer announces that the lot in question has been sold to the bidder.
Q2) In the case of a nonshipment contract,risk of loss passes to the buyer upon actual receipt of goods:
A)only if the seller is a merchant
B)only if the seller is a nonmerchant
C)only if the buyer has already paid for them
D)in all nonshipment contracts
Q3) The expense and the risk of return in a sale or return situation is on the:
A)seller.
B)buyer.
C)lienholder.
D)secured creditor.
Q4) In a self-service store a sale cannot occur until the goods are paid for.
A)True
B)False
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Chapter 25: Product Liability: Warranties and Torts
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Q1) Which of the following must be proven by a plaintiff to recover for strict liability in tort?
A)negligence of the seller or manufacturer
B)recklessness of the seller or manufacturer
C)unreasonably dangerous defects in goods that cause harm
D)privity of contract between the manufacturer and the buyer
Q2) A warranty is limited if:
A)only the original buyer is covered by the warranty.
B)the buyer must pay any cost for repair or replacement of a defective product.
C)it covers only part of the product purchased.
D)all of the above.
Q3) Whenever a sale of goods is made,certain warranties are implied unless they are expressly excluded.
A)True
B)False
Q4) A warranty may be express or implied.
A)True
B)False
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Chapter 26: Obligations and Performance
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Q1) The statement,"I doubt that I can perform the contract," is a repudiation of the contract.
A)True
B)False
Q2) Which method of payment gives the buyer credit by postponing the time for payment?
A)a promissory note
B)a check
C)a draft
D)a certified check
Q3) A delivery is sufficient if it is made in accordance with the terms of the contract to sell.
A)True B)False
Q4) The standard for determining commercial impracticability is objective,not subjective.
A)True B)False
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Page 28
Chapter 27: Remedies for Breach of Sales Contracts
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Q1) When a buyer has possession of goods after rightfully rejecting them,the buyer is treated:
A)the same as a seller in the possession of goods after default by a buyer.
B)as being strictly liable for the safety of the goods.
C)the same as if an entrustment had been created.
D)as an insurer of the goods until the seller retakes possession.
Q2) A buyer may reject the goods or revoke the acceptance for any defects in the goods.
A)True
B)False
Q3) Under the CISG,a buyer may reject goods
A)consistent with the right of rejection set forth in the UCC.
B)if the goods are nonconforming to the contract in any way.
C)only if the tender is a fundamental breach of the contract.
D)only if the tender is illegal in subject matter and/or purpose.
Q4) The statute of limitations for breach of a sales contract:
A)may be reduced between merchants to one year.
B)may be expanded by the buyer and the seller to six years.
C)begins to run from the signing of the contract.
D)always requires a notice to the seller to activate the statute.
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Chapter 28: Kinds of Instruments, parties, and Negotiability
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Q1) Which of the following terms would make an instrument nonnegotiable?
A)It is dependent upon an event.
B)It is undated.
C)It is payable in foreign money.
D)It gives the holder the right to receive interest.
Q2) If an instrument is negotiable,it is governed by Article 2 of the UCC.
A)True
B)False
Q3) A check that is postdated ceases to be order paper.
A)True
B)False
Q4) George was the maker of a written promissory note that stated that $500 would be paid on the sale of George's automobile.George initialed the note instead of writing his full name.The promissory note stated that it would be payable six months from the date.The promissory note was not dated.You now have come into possession of this note.Is this note negotiable? Discuss the elements of negotiability and whether each one has been met.
Q5) The person on whom the order to pay a draft is made is called a drawer.
A)True
B)False
Page 30
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Chapter 29: Transfers of Negotiable Instruments and
Warranties of Parties
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Q1) A special indorsement consists of the signature of the indorser and the words identifying the person to whom the indorser makes the instrument payable.
A)True
B)False
Q2) A payee or indorsee whose name is misspelled may indorse the wrong name,the correct name,or both.
A)True
B)False
Q3) An instrument may be transferred by negotiation or by assignment.
A)True
B)False
Q4) The warranty liability of a qualified indorser is the same as that of an unqualified indorser.
A)True
B)False
Q5) Bearer paper may only be negotiated by the actual transfer of possession of the instrument.
A)True
B)False
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Chapter 30: Liability of the Parties Under Negotiable Instruments
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Q1) A taker of an instrument who is a holder in due course at the time of the transfer but who thereafter learns of a defense:
A)becomes a holder through a holder in due course.
B)becomes an ordinary holder.
C)remains a holder in due course.
D)becomes an assignee.
Q2) Economic duress,in the form of a reluctance to enter into a financially demanding instrument,is a universal defense.
A)True
B)False
Q3) In general,transferees who are aware of facts that would make a reasonable person ask questions are deemed to know what they would have learned if they had asked questions.
A)True
B)False
Q4) Drawers are secondary parties on a note.
A)True
B)False
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Chapter 31: Checks and Funds Transfers
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Q1) A bank will not be liable for payment of a check on which the drawer's signature has been forged if:
A)the bank could not have detected the forgery through a reasonable investigation.
B)there are more than two prior indorsers of the check.
C)the bank gives a cashier's check in payment of the depositor's check.
D)the drawer's negligence contributed substantially to the forging of the signature.
Q2) A bank's customer whose signature has been forged may be barred from holding the bank liable if the customer's negligence substantially contributed to the making of the forgery.
A)True
B)False
Q3) A tender occurs when the holder of a check or other consumer transaction authorization demands payment.
A)True
B)False
Q4) The drawee of a check is always a bank.
A)True
B)False
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33
Chapter 32: Nature of the Debtor-Creditor Relationship
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Q1) Suretyship and guaranty transactions have the common feature of a promise to answer for the debt or default of another.
A)True
B)False
Q2) An agreement under which one party agrees to pay drafts drawn by a creditor is called a:
A)contract of surety.
B)guaranty contract.
C)letter of credit.
D)debtor's agreement.
Q3) Exoneration is an agreement that a party shall not be liable for loss.
A)True
B)False
Q4) Bailment given as security for the payment of a debt is a(n):
A)pledge
B)contribution
C)guaranty
D)indemnity
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34
Chapter 33: Consumer Protection
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Q1) Individuals can seek criminal and civil penalties against those who violate consumer protection statutes.
A)True
B)False
Q2) Automobile lemon laws protect only persons buying automobiles for personal,family,or household use.
A)True B)False
Q3) Pursuant to the Credit Repair Organization Act of 1996,credit repair organizations must be "non-profit."
A)True
B)False
Q4) Anyone promoting the sale of a real estate development that is divided into fifty (50)or more parcels of less than five (5)acres each must file a development statement with the secretary of Housing and Urban Development.
A)True
B)False
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Page 35
Chapter 34: Secured Transactions in Personal Property
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Q1) The steps in terminating a financing transaction upon full payment by the debtor include the preparation of a termination statement by the creditor and the presentation of the statement to the filing officer,who marks the record "terminated."
A)True
B)False
Q2) The property that is subject to the security interest is called collateral.
A)True
B)False
Q3) Grund,a night club performer,financed the purchase of a drum set to be used in his night club act.The collateral is classified as a consumer good.
A)True
B)False
Q4) For a security interest to attach,the creditor must file a financing statement. A)True
B)False
Q5) Collateral may change its form and character during the course of a security agreement.
A)True
B)False
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Chapter 35: Bankruptcy
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Q1) Which of the following is a correct legal conclusion regarding reorganization bankruptcy?
A)Individuals,partnerships,and corporations in business may be reorganized.
B)A plan for reorganization may be filed only by a committee of creditors.
C)When a reorganization plan is confirmed by the court,the creditors can revert back to their original position if they are not satisfied with the plan.
D)Individuals within a particular class of creditors can be treated differently if they object to the reorganization plan.
Q2) In order to be eligible for Chapter 13 bankruptcy an individual must have less than $1,081,400 in unsecured debt.
A)True
B)False
Q3) The filing of a voluntary,but not an involuntary,petition operates as an automatic stay.
A)True
B)False
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Chapter 36: Insurance
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Q1) For the purposes of fire insurance,all fires that cause damage are considered hostile fires.
A)True
B)False
Q2) Under no-fault insurance,an insurer is obligated to pay an injured person without regard to whose fault caused the harm.
A)True
B)False
Q3) After the expiration of the incontestability period of a life insurance policy,the insurer must pay the face amount of the policy when the insured dies and cannot claim that in obtaining the policy,the insured had been guilty of misrepresentation,fraud,or any other conduct that would entitle it to avoid the contract of insurance.
A)True B)False
Q4) An insurer who wrongfully refuses to defend the insured is liable for:
A)breach of contract.
B)insurance fraud.
C)the tort of wrongful interference with contractual relations.
D)the tort of malicious prosecution.
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Chapter 37: Agency
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Q1) The scope of an agent's authority is always known by the third party.
A)True
B)False
Q2) An agent is distinguished from an ordinary employee in that employees are hired to represent the employer in dealings with third persons.
A)True
B)False
Q3) A third person who deals with a person claiming to be an agent has the right to rely on the statements made by the agent concerning the extent of the agent's authority.
A)True
B)False
Q4) Agency is a relationship by which the principal is authorized to act on behalf of an agent in negotiating and making contracts with third persons.
A)True
B)False
Q5) A written authorization of agency is called a power of attorney.
A)True
B)False
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Chapter 38: Third Persons in Agency
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Q1) A third person dealing with the agent of a disclosed principal ordinarily intends to make a contract with the principal,not the agent.
A)True
B)False
Q2) The fact that a tort or crime is committed by an employee imposes vicarious liability on an employer.
A)True
B)False
Q3) An agent making a proper contract with a third person on behalf of a disclosed principal:
A)has no personal liability on the contract.
B)is liable only to the principal on the contract.
C)is liable only to the third party on the contract.
D)is personally liable to both the principal and the third person on the contract.
Q4) If an agent's act causes loss to the third person,that third person may generally hold the agent liable for the loss.
A)True
B)False
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Chapter 39: Regulation of Employment
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Q1) The rights of an employee with respect to compensation are governed in general by the same principles that apply to the compensation of an agent.
A)True B)False
Q2) Collective bargaining agreements generally are subject to a ratification vote by the employees.
A)True B)False
Q3) The NLRA prohibits discrimination against employees for engaging in union activities even if they are warned of the possible consequences of their union activities.
A)True
B)False
Q4) A defined contribution plan is an employer commitment to make specific future payments to participants upon retirement.
A)True B)False
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Chapter 40: Equal Employment Opportunity Law
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Q1) Cameo Industries desired a workplace free from all forms of sexual harassment.Accordingly,Cameo developed guidelines for its workers that specifically forbade sexual harassment.The guidelines gave examples of conduct that would not be tolerated,provided penalties,designated a company official as the proper person to whom complaints should be brought,investigated complaints thoroughly,and maintained an educational policy designed to remind employees of the policy. Maureen,a Cameo Industries employee,made a complaint of sexual harassment,charging that her supervisor had demanded sexual favors.An investigation was performed and the charge was substantiated.The supervisor was warned not to continue this conduct,but it happened again.The supervisor was again issued a warning.Finally,Maureen brought a court action against the supervisor and Cameo.Cameo defended on the ground that it had done all in its power to rectify the situation.Decide.
Q2) Title VII of the Civil Rights Act of 1964 applies to:
A)the hiring process.
B)discipline.
C)discharge
D)all of the above.
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Page 42
Chapter 41: Types of Business Organizations
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Q1) Sally Gomez is interested in starting a new business.Although Gomez has developed her business plan and is ready to implement her ideas,she lacks the necessary finances to begin her new business.Along with a lack of finances,Gomez worries about the potential liability involved with starting a new business.Gomez would hate to lose all that she has personally accumulated to date in the event of a successful lawsuit against her.She is considering a sole proprietorship,a partnership,or a corporation as the organizing structure of her new venture.Which type of business would best serve Gomez's needs at this given time?
Q2) A limited liability company is treated like a partnership under federal tax law and has the limited liability feature of corporations.
A)True
B)False
Q3) Franchise agreements frequently contain an arbitration provision under which a neutral party is to make a final and binding determination whether there has been a breach of the contract sufficient to justify cancellation of the franchise.
A)True
B)False
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Chapter 42: Partnerships
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Q1) Theo,a member of TGI partnership,withdrew from the partnership and duly notified the other members.The firm was an at-will partnership and the parties parted amicably,posting a notice in the local newspaper of the dissolution of their firm.Cosmo,a customer who had conducted business with Theo several times,did not see the newspaper notice and was not informed of the dissolution.Later,Theo approached Cosmo concerning a transaction similar to those Cosmo had engaged in before with Theo acting on behalf of TGI.Cosmo placed an order,gave a substantial down payment to Theo,and received a receipt on TGI stationery from him.Theo thereafter absconded with the down payment,and TGI failed to honor the contract.Cosmo sued the other members of TGI partnership.Discuss their potential liability.
Q2) Partnership property is only that property contributed by the partners.
A)True
B)False
Q3) A partner cannot make a general assignment of firm property for the benefit of creditors unless authorized by the other partners or unless they have abandoned the business.
A)True
B)False
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Page 44
Chapter 43: LPs, LLCs, and LLPs
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Q1) Courts tend to resolve ambiguities in limited partnership agreements against the general partners.
A)True
B)False
Q2) Which of the following statements regarding limited partnerships is true?
A)The words limited partnership or simply LP must appear in the firm's name.
B)General partners cannot avoid personal liability by incorporating.
C)Limited partners can lose their liability limitation if they participate in the control of the business.
D)All of the statements are true.
Q3) In a limited partnership,general partners are not responsible for the debts of the firm.
A)True
B)False
Q4) If a limited partnership certificate is never filed,all partners are treated as limited partners.
A)True
B)False
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Chapter 44: Corporate Formation
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Q1) The shares of a close corporation are always held by a single individual.
A)True
B)False
Q2) After a corporate charter has been forfeited,the owners and officers of the dissolved corporation are __________ shielded from personal liability by using the corporate name when making contracts.
A)still
B)conditionally
C)not
D)retroactively
Q3) What is not a correct statement concerning promoters?
A)Promoters are generally active before the corporation is formed.
B)Two (2)or more promoters are required to form a corporation.
C)Promoters are fiduciaries with respect to the corporation and its shareholders.
D)Promoters are liable for any torts that they commit while promoting the corporation.
Q4) A merger is subject to antitrust law,while a consolidation is not.
A)True
B)False
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46
Chapter 45: Shareholder Rights in Corporations
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Q1) Delivering stock to a creditor as security for a debt owed by the shareholder:
A)transfers ownership rights.
B)gives rise to a perfected security interest.
C)makes the creditor a perfected party after filing.
D)makes the debtor a perfected party after filing.
Q2) A contract for the sale of shares must be evidenced in writing.
A)True B)False
Q3) Each shareholder owns a proportionate share of the property of the corporation. A)True B)False
Q4) Corporate securities evidenced by a certificate are negotiable. A)True B)False
Q5) Dividends are payable in: A)money.
B)products manufactured by the corporation.
C)shares of other corporations held by the corporation.
D)all of the above.
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Chapter 46: Securities Regulation
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Q1) Under the 1990 Remedies Act,the SEC may start administrative proceedings against any person or entity,whether regulated by the SEC or not.
A)True
B)False
Q2) Under Regulation D,Rule 506,sales may be made to:
A)an unlimited number of accredited investors
B)an unlimited number of unaccredited investors
C)no more than 500 accredited investors
D)no more than 35 unaccredited investors
Q3) Federal regulation of the sale of securities is based on the:
A)Securities Act of 1933 and the Securities Exchange Act of 1934.
B)Securities Act of 1933 and the Federal Trade Act of 1936.
C)Federal Trade Act of 1936 and the Blue Sky Act of 1933.
D)Fair Stock Act of 1932 and the Investment Securities Act of 1934.
Q4) The Securities Act of 1933 prohibits the offering or sale of securities to the public in interstate commerce before a registration statement has been filed with the Securities and Exchange Commission (SEC).
A)True
B)False
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Chapter 47: Accountants Liability and Malpractice
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Q1) An accountant may be able to raise the defense of lack of privity in a malpractice suit:
A)brought under federal securities statutes.
B)based on negligence.
C)based on fraud.
D)all of the above.
Q2) An accountant guilty of malpractice can be sued:
A)for breach of contract only.
B)for negligence only.
C)for breach of contract or for tort liability.
D)in federal court only if the suit is brought by a third person.
Q3) New York follows the "contact" rule in determining when third persons can sue accountants for negligence.
A)True
B)False
Q4) When the privity rule is applied,a bank lending money to the client of an accountant cannot sue the accountant for malpractice.
A)True
B)False
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Chapter 48: Management of Corporations
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Q1) A valid meeting of the voting shareholders of a corporation requires the presence of a:
A)quorum.
B)forum.
C)majority.
D)voting majority.
Q2) Corporations may ________ officers,directors,employees,and agents when they act in good faith,in a manner not opposed to corporate interests and with no reason to believe their conduct was unlawful.
A)ratify
B)breach
C)indemnify
D)authorize
Q3) According to the RMBCA,shareholders may,by majority vote,remove a director with or without cause unless the articles of incorporation provide that directors may be removed only for cause.
A)True
B)False
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Chapter 49: Real Property
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Q1) A condominium and a cooperative are essentially the same.
A)True
B)False
Q2) A condominium is a combination of co-ownership and individual ownership.
A)True
B)False
Q3) An easement may be created only by deed.
A)True
B)False
Q4) What type of deed merely transfers whatever interest,if any,the grantor may have in the property,without specifying that interest in any way?
A)common law
B)statutory
C)quitclaim
D)warranty
Q5) A license may be terminated at the will of the licensor.
A)True
B)False
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Chapter 50: Environmental Law and Land Use Controls
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Q1) The bubble concept:
A)refers to dirty areas that do not meet federal standards under the Clear Air Act.
B)controls whether new factories can be built in a nonattainment area.
C)is a method for determining total emissions in one area.
D)all of the above.
Q2) A criminal nuisance may be terminated by:
A)abatement.
B)closure by government authority.
C)abatement or closure by government authority.
D)none of the above,since the law only recognizes civil (not criminal)remedies for nuisance.
Q3) The object of zoning is to ensure an orderly physical development of the geographic area that is regulated.
A)True
B)False
Q4) A method for determining total emissions in one area is referred to as the emissions offset concept.
A)True
B)False
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Chapter 51: Leases
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Q1) A provision in a residential lease stating that the landlord cutting off heat or water will not constitute an eviction is:
A)valid.
B)a stipulation.
C)a covenant.
D)unconscionable.
Q2) If a lease is assigned,who is liable for the rent?
A)the assignor
B)the assignee
C)either the assignor or the assignee,but not both
D)the landlord can collect from both the assignor and the assignee
Q3) If a leased building is destroyed,the lease is not terminated,and the landlord has a duty to restore the building to its former condition.
A)True
B)False
Q4) Under the common law,the reason a landlord terminates a lease by notice is immaterial.
A)True
B)False
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Chapter 52: Decedents Estates and Trusts
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Q1) A written will must be signed by the testator at the bottom or end of the will.
A)True
B)False
Q2) Which of the following is not a duty of a trustee?
A)to use reasonable skill
B)to keep accurate records
C)to invest trust assets
D)to deliver possession of trust assets to the settlor for the trust period
Q3) A bequest of a pearl necklace is a:
A)general legacy.
B)specific legacy.
C)specific ademption.
D)residuary ademption.
Q4) Probate is the act by which:
A)the court declares an instrument is a valid will.
B)a qualified person may contest the will.
C)the witnesses sign an attestation clause.
D)publication of the will takes place.
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54