Law for Managers Exam Practice Tests
Course Introduction
Law for Managers provides an essential overview of legal principles and frameworks relevant to business operations and decision-making. The course covers key topics such as contract law, employment law, intellectual property, corporate governance, and regulatory compliance. By examining real-world case studies and practical scenarios, students learn to identify legal risks, understand their rights and obligations, and apply legal reasoning to everyday management challenges. This foundational knowledge equips aspiring managers to navigate the complexities of the legal environment, make informed decisions, and foster ethical business practices.
Recommended Textbook Business Law and the Legal Environment 21st Edition by David P. Twomey
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52 Chapters
2751 Verified Questions
2751 Flashcards
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Page 2
Chapter 1: The Nature and Sources of Law
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56 Verified Questions
56 Flashcards
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Sample Questions
Q1) Law may be classified in terms of principles of law and principles of equity.
A)True
B)False
Answer: True
Q2) Administrative regulations are a type of law.
A)True
B)False
Answer: True
Q3) State legislatures, not Congress, enact statutory law.
A)True
B)False
Answer: False
Q4) Administrative regulations:
A) are essentially industry advisories.
B) are case-law precedents.
C) have the force of statute.
D) are Constitutional principles.
Answer: C
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Page 3
Chapter 2: The Court System and Dispute Resolution
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57 Verified Questions
57 Flashcards
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Sample Questions
Q1) An ombudsman:
A) is usually a government official.
B) is often appointed by a judge.
C) receives a large amount of judicial power.
D) none of the above.
Answer: A
Q2) The defendant in a civil case is the party who is suing.
A)True
B)False
Answer: False
Q3) Who is entitled to file a motion to dismiss?
A) defendant only
B) plaintiff only
C) both plaintiff and defendant
D) none of the above
Answer: A
Q4) A family law court is an example of a specialty court.
A)True
B)False
Answer: True
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Chapter 3: Business Ethics, Social Forces, and the Law
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52 Verified Questions
52 Flashcards
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Sample Questions
Q1) Laws that prohibit mislabeling of food, speeding, and sale of alcohol to minors exist primarily:
A) for protection of the person.
B) for protection of public health, safety, and morals.
C) for protection of property.
D) for protection of the state.
Answer: B
Q2) In attempting to fulfill the ethical category of promise-keeping, it is important to avoid multiple conflicting commitments because:
A) it will not always be possible to pay dividends.
B) promises to pay taxes can only be subordinated to secured debt.
C) repeatedly breaking promises will cost a business its reputation in the long run.
D) stakeholders will relax their expectations if they know you are overextended.
Answer: C
Q3) Civil disobedience is the remedy natural law proponents use to change positive law. A)True B)False
Answer: True
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5
Chapter 4: The Constitution As the Foundation of the Legal Environment
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57 Verified Questions
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Sample Questions
Q1) The living Constitution has as a characteristic a strong president.
A)True
B)False
Q2) A school district supplied school bus service for all children 12 years of age or under who lived at least one mile from school. This service was provided for transportation to and from school. Joanna was a 13-year-old student who lived in that school district. Joanna's home was 1.2 miles from school. Her parents brought suit against the school district alleging that Joanna was entitled to school bus service and the failure to provide such service denied her the equal protection of the law. Discuss the probable outcome of the lawsuit.
Q3) The Fifth and Fourteenth Amendments prohibit the national and state governments from depriving any person of property without due process of law.
A)True
B)False
Q4) Which of the following is not characteristic of the "living" Constitution?
A) strong government
B) strong President
C) administrative agencies
D) states' powers equal to federal powers
Page 6
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Chapter 5: Government Regulation of Competition and Prices
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48 Verified Questions
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Sample Questions
Q1) In order to show a per se violation of the Sherman Act, plaintiff must demonstrate:
A) a substantial potential for impact on competition.
B) actual or likely impact on a market.
C) any agreement tending to fix prices.
D) none of the above.
Q2) The government may require licenses to be able to deal in certain goods, and these licenses may be revoked for improper conduct or violations of statutes and regulations.
A)True
B)False
Q3) Section __________ of the Sherman Act applies to agreements, conduct, or conspiracies to restrain trade, which can consist of price-fixing, typing, and monopolization.
A) A
B) B
C) 1
D) 2
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Chapter 6: Administrative Agencies
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58 Verified Questions
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Sample Questions
Q1) Meetings are to be open to the public under the guidelines of the Sunshine Act of 1976. Meetings include:
A) those of federal administrative agencies.
B) those of state administrative agencies.
C) those actions that are deemed "meetings" by the agency.
D) both a and b
Q2) Ordinarily, a court will __________ an agency's decision to do nothing about a particular complaint.
A) not reverse
B) reverse
C) remand
D) none of the above
Q3) In an emergency, an administrative agency can act beyond the scope of the statute that created it.
A)True
B)False
Q4) The Freedom of Information Act provides access to any information upon request.
A)True
B)False
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Chapter 7: The Legal Environment of International Trade
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57 Verified Questions
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Sample Questions
Q1) Which is a correct statement about arbitration of contractual disputes regarding international trade?
A) It is done in court.
B) There is extensive judicial review of the decision.
C) Parties frequently arbitrate in neutral countries.
D) It is not available in disputes of more than $1 million.
Q2) The use of import quotas represents the most common form of tariff barrier.
A)True
B)False
Q3) When an international sale is made, the parties often set forth in their contract which country's law will govern a dispute.
A)True
B)False
Q4) Under GATT, the principle of trade without discrimination is embodied in the most favored nation clause.
A)True
B)False
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Chapter 8: Crimes
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Sample Questions
Q1) Corporations are entitled to Fifth Amendment protection.
A)True
B)False
Q2) The criminal law of all states is the same because all states have adopted a uniform criminal code.
A)True
B)False
Q3) An act that is a felony in one state will necessarily be a felony in another.
A)True
B)False
Q4) "Mental state" does not require an awareness of guilt.
A)True
B)False
Q5) Larceny is best defined as the taking of personal property from the presence of the victim by the use of force or fear.
A)True
B)False
Q6) Extortion and blackmail are exactly the same.
A)True
B)False
Page 10
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Chapter 9: Torts
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58 Verified Questions
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Sample Questions
Q1) Where the lawsuit is based on negligence, the defendant has the burden of proving himself or herself free of negligence.
A)True
B)False
Q2) The degree of care required of a person is:
A) that degree of care the person exercised in the situation at hand.
B) that degree of care an extraordinary person would exercise under similar circumstances.
C) that degree of care an ordinarily prudent person would exercise under similar circumstances.
D) none of the above.
Q3) Governments are generally immune from tort liability.
A)True
B)False
Q4) A wrong that arises from a violation of a private duty is called a:
A) criminal action.
B) tort.
C) crime.
D) de mala.
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Chapter 10: Intellectual Property Rights
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52 Verified Questions
52 Flashcards
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Sample Questions
Q1) Descriptive terms such as locations and colors are never subject to trademark protections.
A)True
B)False
Q2) Under the Semiconductor Chip Protection Act's __________ exemption, competitors may not only study mask works, but they may also use the results of that study to design their own semiconductor chip products embodying their own original masks, even if the masks are substantially similar, so long as their products are the result of substantial study and analysis and not merely the result of plagiarism.
A) reverse racketeering
B) forward engineering
C) reverse engineering
D) forward racketeering
Q3) The Semiconductor Chip Protection Act provides the owner of a mask work fixed in semiconductor chip products the exclusive right for twenty (20) years to reproduce and distribute the products in the United States and to import them into the United States.
A)True
B)False
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12
Chapter 11: Cyberlaw
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52 Verified Questions
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Sample Questions
Q1) Copyright protection is not possible for materials located on the Internet.
A)True
B)False
Q2) Employers are required to give notice to employees that they will monitor their employees' e-mail.
A)True
B)False
Q3) Identity theft is a type of Internet fraud.
A)True
B)False
Q4) Describe the rights of employers to monitor the e-mail of employees who are using their employers' email system.
A) Employers may monitor employees' e-mails, but only if the employees have consented.
B) Employers may monitor employees' e-mails, regardless of whether employees have consented.
C) Employers may monitor employees' e-mails, but only if notice is given.
D) Employers may not monitor employees' e-mails.
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Page 13
Chapter 12: Nature and Classes of Contracts: Contracting on
the Internet
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53 Verified Questions
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Sample Questions
Q1) An executory contract is an agreement by which something remains to be done by one or both parties.
A)True
B)False
Q2) A bilateral contract is essentially an exchange of promises.
A)True
B)False
Q3) The effect of an implied contract is not the same as the effect of an express contract.
A)True
B)False
Q4) A contract of record is also referred to as a:
A) recognizance.
B) reconnaissance.
C) recording contract.
D) none of the above.
Q5) Quasi-contractual liability will generally be imposed when the cost of performing a contract is greater than had been expected.
A)True
B)False
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Chapter 13: Formation of Contracts: Offer and Acceptance
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Sample Questions
Q1) Bart owned 100 shares of a stock that was actively traded on a national stock exchange. Bart wanted to sell the shares but felt that his profit would be seriously diminished by selling through a broker and paying the customary brokerage commission. Bart offered the 100 shares to any of a group of six people in a conversation at a party. The offered price was $72.50 per share, the price at which the shares had closed that day. No one really responded to the offer at that time. Ten days later when the shares were trading at $76.25, Marie, one of the offerees at the party, appeared at Bart's office saying that she accepted the offer. Bart claimed the offer no longer was available. Evaluate the legal outcome of this dispute.
Q2) Acceptance of an offer to form a unilateral contract need not be communicated to the offeror to be effective.
A)True
B)False
Q3) An option contract is a binding promise to keep an offer open for a stated period of time or until a specified date.
A)True
B)False
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Page 15
Chapter 14: Capacity and Genuine Assent
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44 Verified Questions
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Sample Questions
Q1) A contract made by an incompetent person after a guardian has been appointed is voidable.
A)True
B)False
Q2) Jack sells Jim a used car that Jack falsely described as having been driven only 12,000 miles. Fraud has occurred if:
A) Jim bought the car solely because of its color.
B) Jim knew that the mileage was more than 12,000 miles.
C) Jim relied upon Jack's statement.
D) Jack is a merchant.
Q3) Ordinarily, a party to a contract has no duty to volunteer information to the other party.
A)True
B)False
Q4) As a general rule, the nondisclosure of information that is not asked for does not impose fraud liability or impair the validity of a contract.
A)True
B)False
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Page 16
Chapter 15: Consideration
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Sample Questions
Q1) Generally, a promise is legally enforceable even if nothing is given or received for the promise.
A)True
B)False
Q2) The effect of the making of a partial payment to satisfy an admitted debt is an example of the rule that:
A) past benefits cannot be consideration for a later promise.
B) a conditional promise may be consideration.
C) doing what one is already under a legal obligation to do is not consideration.
D) consideration must be adequate to be binding.
Q3) There is consideration for a partial payment by a debtor in satisfaction of a debt when the payment is made before the debt is due.
A)True
B)False
Q4) A binding contract cannot contain a cancellation provision.
A)True
B)False
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Chapter 16: Legality and Public Policy
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Sample Questions
Q1) Which of the following is not an example of an agreement injuring public service?
A) agreements to sell public offices
B) agreements to obtain pardons through offers of money
C) agreements to submit a bid on a construction project
D) agreements by public officers to accept less in pay than stipulated by law
Q2) Which of the following is not an example of a state penalty for violating usury law?
A) restricting the lender to the recovery of the loan but no interest whatsoever
B) allowing the lender to recover the loan principal and interest up to the maximum contract rate
C) restricting the lender to the recovery of the loan plus seventy-fifty percent (75%) of the interest
D) requiring the lender to pay, as a penalty, double the interest the borrower paid on a usurious loan
Q3) Even if part of a contract is illegal, the court may enforce a divisible, legal part of the contract.
A)True
B)False
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Chapter 17: Writing, Electronic Forms, and Interpretation of Contracts
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59 Verified Questions
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Sample Questions
Q1) An oral contract containing a promise by an executor to pay estate debts from estate funds is:
A) binding.
B) voidable by the executor or administrator.
C) enforceable against the executor only if the executor signs written proof of the agreement.
D) enforceable against the other contracting party only if that party signs a written agreement.
Q2) The statute of frauds applies to:
A) the lease of an apartment on a month-to-month basis.
B) the cancellation of a written agreement for the sale and purchase of land.
C) an employment agreement.
D) the sale of goods priced at less than $500.
Q3) A court may not imply a term:
A) governing the details of performance.
B) governing the time of performance.
C) limiting the cost in a cost-plus contract to 10 percent of the estimated cost.
D) requiring good faith.
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Chapter 18: Third Persons and Contracts
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Sample Questions
Q1) A third person does not have the status of an intended third-party beneficiary unless it is clear at the time the contract was formed that the parties intended to impose a direct obligation with respect to the third person.
A)True
B)False
Q2) An obligor may delegate his or her duties to perform under a contract when the:
A) performance of the duty is standardized and nonpersonal.
B) obligor is unable to perform his or her duties.
C) contract is silent as to the right of assignment.
D) obligor is an expert in his or her specialized duties under the contract.
Q3) The making of an assignment relieves the assignor of any and all obligations existing under the original contract.
A)True
B)False
Q4) An assignee's rights are the same as those that had been possessed by the assignor.
A)True
B)False
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20
Chapter 19: Discharge of Contracts
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Sample Questions
Q1) Through which of the following circumstances may a contract be discharged?
A) mutual cancellation
B) mutual rescission
C) accord and satisfaction
D) all of the above
Q2) To establish impossibility a party must show (1) the unexpected occurrence of an intervening act; (2) that the risk of the unexpected occurrence was not allocated by agreement or custom; and (3) that the occurrence made performance impossible.
A)True
B)False
Q3) Generally, contracts are discharged by the performance of the terms of the contract.
A)True
B)False
Q4) A homeowner who supplies the specifications for poured cement walls can hold a contractor liable for damages when the walls that are poured in exact compliance with those specifications prove defective.
A)True
B)False
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Chapter 20: Breach of Contract and Remedies
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58 Verified Questions
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Sample Questions
Q1) The remedy of specific performance will most likely be granted in the case of a(n):
A) employment contract.
B) contract to buy shares of publicly-traded stock.
C) contract for the sale of a business.
D) contract for the sale of Florida oranges.
Q2) A reservation of rights is an assertion by a party to a contract that even though a tendered performance is accepted, the right to damages for the nonconformity to the contract is reserved.
A)True
B)False
Q3) When an anticipatory repudiation of a contract occurs, the aggrieved person's option(s) include:
A) doing nothing and waiting for performance per the contract.
B) immediately declaring a breach of contract.
C) considering the contract cancelled.
D) all of the above.
Q4) A waiver of a breach may be either express or implied.
A)True
B)False
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Chapter 21: Personal Property and Bailments
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Sample Questions
Q1) Barry and Eldridge owned Blueacre as tenants in common. Eldridge died. Blueacre is owned:
A) solely by Barry because of the survivorship feature.
B) jointly by Barry and the state because of escheat.
C) by Barry and Eldridge's heirs.
D) solely by Eldridge's heirs.
Q2) The Uniform Anatomical Gift Act permits persons sixteen (16) years of age or older to make gifts of their bodies or any parts thereof.
A)True
B)False
Q3) A person becomes a(n) __________ at the moment of taking possession of abandoned personal property.
A) bailor
B) bailee
C) constructive bailee
D) owner
Q4) A gift requires intent to transfer title and delivery.
A)True
B)False
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Chapter 22: Legal Aspects of Supply Chain Management
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Sample Questions
Q1) A warehouser is an insurer of goods.
A)True
B)False
Q2) The rights of a holder of a duly negotiated warehouse receipt are extinguished by the warehouser's surrender of goods to the depositor.
A)True
B)False
Q3) Bob Brown entered the Hotel Lux to attend a conference being held within the hotel. Sam Smith had arrived to attend the same conference, had registered at the front desk, and had obtained a room. Sally Jones also intended to participate in the conference and was in essence living at the hotel at the time. What relationship exists between the hotel and each of these individuals? What can be said of the hotel's obligations to each individual under these circumstances?
Q4) Which is not a true statement about a warehouser?
A) A warehouser is a bailee.
B) A warehouser may issue a negotiable or nonnegotiable receipt.
C) A warehouser is an insurer of the goods.
D) A warehouser is liable for damaged goods if damage is caused by the warehouser's negligence.
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Chapter 23: Nature and Form of Sales
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Sample Questions
Q1) A contract for the sale of goods is not enforceable unless the contract clearly expresses the price.
A)True
B)False
Q2) A gift is a free transfer of the title to property.
A)True
B)False
Q3) A merchant is about to transfer his entire inventory as part of an annual clearance action. This transfer is called a bulk transfer.
A)True
B)False
Q4) The UCC permits a court to refuse to enforce a sales contract that it finds to be unconscionable.
A)True
B)False
Q5) A firm offer is effective only if the merchant receives consideration to keep the offer open.
A)True
B)False
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Chapter 24: Title and Risk of Loss
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Sample Questions
Q1) COD is a shipping term that requires the buyer to pay in order to gain physical possession of the goods.
A)True
B)False
Q2) In a __________, no sale takes place (meaning there is no transfer of title) until the buyer approves, or accepts, the goods.
A) conditional sale
B) contingency sale
C) sale or return
D) sale on approval
Q3) When goods are existing and identified to the contract and there is no document of title, the title to the goods passes to the buyer at the time of the transaction.
A)True
B)False
Q4) If a contract contains a delivery term of FOB place of shipment, the seller's obligation under the contract is to deliver the goods to a carrier for shipment.
A)True
B)False
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Chapter 25: Product Liability: Warranties and Torts
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Sample Questions
Q1) The defendant in a defective product suit may be:
A) the seller.
B) the manufacturer.
C) the manufacturer of a component part.
D) all of the above.
Q2) The theories of product liability
A) are mutually exclusive.
B) are not mutually exclusive.
C) are set forth exclusively in the UCc.
D) are set forth exclusively in the common law.
Q3) Whenever a sale of goods is made, certain warranties are implied unless they are expressly excluded.
A)True
B)False
Q4) Only the parties to a sales contract could sue each other under the traditional concept of:
A) exclusivity of contract.
B) privity of contract.
C) privacy of contract.
D) priority of contract.
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Chapter 26: Obligations and Performance
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Sample Questions
Q1) A party to a sales contract who is afraid that the other party will not perform may seek to gain additional confidence by demanding some form of:
A) bailment.
B) security.
C) assurance.
D) assignment.
Q2) In a cash sale not requiring the movement of goods, each party has the right to demand that the other perform at the same time.
A)True
B)False
Q3) When a method of transportation called for by a contract becomes unavailable for any reason, the contract is automatically voided.
A)True
B)False
Q4) The UCC imposes a higher degree of good faith on a merchant seller or buyer of goods than on a nonmerchant seller or buyer of goods.
A)True
B)False
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Chapter 27: Remedies for Breach of Sales Contracts
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Sample Questions
Q1) A buyer may reject the goods or revoke the acceptance for any defects in the goods.
A)True
B)False
Q2) A seller may cancel a sales contract if the buyer:
A) wrongfully rejects the goods.
B) repudiates the contract.
C) fails to make a payment due on or before delivery.
D) all of the above.
Q3) A cured transaction is a pledge of property by the buyer-debtor that enables the seller to take possession of the goods if the buyer fails to pay the amount owed.
A)True
B)False
Q4) Under both the CISG and the UCC, a buyer may reject goods only if the tender of the goods is a fundamental breach of the contract.
A)True
B)False
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Chapter 28: Kinds of Instruments, Parties, and Negotiability
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Sample Questions
Q1) Conville signed a note as an officer of the Hughesville Manufacturing Corporation, but she did not name the corporation in the note or indicate that she was acting as an officer for it. Later, she was sued by the Grange National Bank, the holder of the note. She raised the defense that the corporation was liable on the note. Who was liable?
Q2) Article 3 of the UCC establishes a __________-year statute of limitations for most actions involving negotiable instruments.
A) one
B) two
C) three
D) four
Q3) To be negotiable, an instrument must:
A) be in writing.
B) be signed by the maker or the drawer. C) contain a promise or order to pay.
D) all of the above.
Q4) Instruments are negotiable when they contain the terms required by contract law.
A)True
B)False
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Chapter 29: Transfers of Negotiable Instruments and
Warranties of Parties
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Sample Questions
Q1) A restrictive indorsement reduces the risk of theft or unauthorized transfer by eliminating the bearer quality of a blank indorsement.
A)True
B)False
Q2) When a negotiable instrument is negotiated by delivery without indorsement, the warranty liability of the transferor runs:
A) only to the immediate transferee.
B) not to the immediate transferee, but to all subsequent transferees.
C) to both the immediate transferee and all subsequent transferees.
D) neither to the immediate transferee, nor to any subsequent transferees.
Q3) An endorsement "for deposit only" is:
A) restrictive.
B) qualified.
C) special.
D) blank.
Q4) A payee or endorsee whose name is misspelled may endorse the wrong name, the correct name, or both.
A)True
B)False
31
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Chapter 30: Liability of the Parties Under Negotiable Instruments
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Q1) Manuel sued Patricia on a promissory note. Patricia admitted signing the note, but raised the defense that Manuel was not a holder in due course. Can Manuel recover without proving that he is a holder in due course?
Q2) If a negotiable instrument is endorsed to a specific person but never delivered to that person:
A) the maker is guilty of fraud in the inducement.
B) there is no negotiation because there has been no delivery.
C) the instrument is canceled.
D) the maker's obligation is automatically revoked.
Q3) For the purposes of determining holder in due course status, the requirement of value is similar to consideration.
A)True
B)False
Q4) Under the "close-connection" doctrine, a holder has taken so many instruments from its transferor or is so closely connected with the transferor that any knowledge the transferor has is deemed transferred to the holder, preventing holder in due course status.
A)True
B)False
Page 32
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Chapter 31: Checks and Funds Transfers
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Q1) If a bank improperly refuses to make payment of checks for which its customer has sufficient funds on deposit, it is liable to the drawer for damages sustained by the drawer in consequence of such dishonor.
A)True
B)False
Q2) A bank's liability to the drawer of a check for wrongfully dishonoring a check is based largely on contract law.
A)True
B)False
Q3) 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
Q4) Most states provide that if a dishonored check is not made good within a stated period of time, it will be presumed that the check was originally issued with the intent to defraud.
A)True B)False
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Chapter 32: Nature of the Debtor-Creditor Relationship
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Q1) The issuer of a letter of credit:
A) is obligated to honor drafts drawn under the letter if the conditions specified in the letter have been met.
B) has no duty to verify that the papers are properly supported by facts.
C) has no duty to verify that the underlying transaction has been performed.
D) all of the above.
Q2) A surety may raise the defense of lack of capacity of parties, absence of consideration, fraud, or mistake.
A)True
B)False
Q3) The issuer of a letter of credit is in effect the obligor on a third-party beneficiary contract made for the benefit of the beneficiary of the letter.
A)True
B)False
Q4) The issuer of a letter of credit must verify that the underlying transaction has been performed.
A)True
B)False
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34
Chapter 33: Consumer Protection
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Q1) The FTC requires advertisers to maintain records of the data used as support for statements made in the ads that deal with the safety, performance, efficacy, quality, or comparative price of an advertised product.
A)True
B)False
Q2) The Fair Credit Reporting Act applies only to consumer credit.
A)True
B)False
Q3) Consumer protection even protects a consumer from the consumer's own negligence.
A)True
B)False
Q4) Consumer protection laws, which commonly regulate the form of consumer contracts, provide that back-page disclaimers are void if the front page of a contract does not call attention to the presence of the terms on the back page.
A)True
B)False
Q5) A consumer may waive all defenses otherwise provided for by law.
A)True
B)False
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Chapter 34: Secured Transactions in Personal Property
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Q1) A debtor may redeem collateral at any time prior to the time that the secured party has disposed of the collateral or entered into a binding contract for resale by tendering the entire obligation that is owed plus any legal costs and expenses incurred by the secured party.
A)True
B)False
Q2) Upon the debtor's default, the creditor may sell the collateral at a public or private sale, or lease it to a third party.
A)True
B)False
Q3) Mark purchased a very expensive automobile on credit. Within a week, Mark discovered that a tune-up was necessary, for he was in the habit of driving at an excessive rate of speed. When the car was repaired, the bill was more than $1,000. Mark does not have the money to pay for the car repairs or the monthly car payments. The credit company as well as the repair shop are concerned over who has priority of repayment. Who has priority and why?
Q4) Attachment provides creditors with rights.
A)True
B)False
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Chapter 35: Bankruptcy
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Q1) A voluntary petition in bankruptcy may be filed by a(n):
A) husband and wife.
B) railroad company.
C) insurance company.
D) all of the above.
Q2) A court can dismiss an individual debtor's petition if the debtor does not satisfy the means test.
A)True
B)False
Q3) If there are twelve (12) or more creditors, at least __________ of those creditors whose unsecured and undisputed claims total __________ or more must sign the involuntary petition.
A) one (1); $13,475
B) three (3); $13,475
C) one (1); $14,575
D) three (3); $14,575
Q4) If a trustee is not elected by creditors, an interim trustee will be appointed by the court.
A)True
B)False
Page 37
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Chapter 36: Insurance
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Q1) What is a correct statement concerning burden of proof?
A) The insured has the burden of proving that the loss was a covered loss.
B) The insurer has the burden of proving that the loss was not covered.
C) Exceptions to coverage are liberally interpreted in favor of the insurer.
D) Exceptions to coverage are disregarded in life insurance matters.
Q2) An insurer's bad faith refusal to pay a claim generally is considered to be any frivolous or unfounded refusal to comply with the demand of a policyholder to pay according to the policy.
A)True
B)False
Q3) The person to whom an insurance promise is made is called: A) the insured.
B) the insurer.
C) the policyholder.
D) both a. and c.
Q4) A contract of insurance is to be interpreted as it would be understood by a person with technical knowledge of the law or of insurance.
A)True
B)False
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Chapter 37: Agency
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Q1) A __________ is authorized by the principal to handle a definite business transaction or to do a specific act.
A) special
B) general
C) secret
D) universal
Q2) Ames, an agent for Baker Antiques, had the authority to purchase early 20th-century American furniture costing a maximum of $1,500 per piece. Ames bought a 19th-century French desk for $3,000 from Carter. Baker was furious when she saw the desk, and she fired Ames. Nevertheless, she put the desk on display in the shop with a $5,000 price tag. When the best offer she got for the desk was $2,500, Baker returned the desk to Carter. Baker told Carter that Ames had exceeded his authority in purchasing the desk, and she demanded that Carter refund the $3,000 that Ames had paid for the desk. Will Carter have to do so?
Q3) It is the duty of an agent to act with the care that:
A) the principal would exercise under the circumstances.
B) a reasonable principal would exercise under the circumstances.
C) a reasonable juror would exercise under the circumstances.
D) a reasonable person would exercise under the circumstances.
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Page 39
Chapter 38: Third Persons in Agency
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Q1) An owner ordinarily is not liable for harm caused a third person by the negligence of an employee of an independent contractor.
A)True B)False
Q2) The principal is bound by knowledge but not by notice of any fact that is acquired by an agent while acting within the scope of actual or apparent authority.
A)True B)False
Q3) In a simple contract made by an authorized agent on behalf of a disclosed principal, the third person may sue either the agent or the principal in the event of a breach.
A)True
B)False
Q4) In the partially disclosed principal situation, the agent is considered a party to the contract.
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) Under the employment-at-will doctrine, the employer has historically been allowed to terminate the employment contract at any time for any reason or for no reason.
A)True
B)False
Q3) ERISA requires that employers make contributions to their pension funds on a basis that is actuarially determined so that the pension fund will be large enough to make the payments that will be required of it.
A)True
B)False
Q4) An agreement by an employee to refrain from disclosing trade secrets is binding.
A)True
B)False
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Chapter 40: Equal Employment Opportunity Law
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Q1) Generally, the EEOC attempts to remedy an unlawful practice through conciliation.
A)True
B)False
Q2) The Pregnancy Discrimination Act does not:
A) require employers to treat pregnancy as other disabilities are treated.
B) require women disabled by pregnancy to be provided with the same benefits as other disabled workers.
C) require an employer to provide paid sick leave benefits to pregnant women if it does not provide them to other disabled workers.
D) apply to sick leave programs.
Q3) When an employee alleges religious discrimination because of an employee-observed religious practice:
A) the employer must bypass seniority rules to accommodate the employee.
B) the employee must honor all bona fide religious practices.
C) the employer must make reasonable efforts to accommodate religious beliefs.
D) the employer must call in a substitute worker at additional cost.
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42
Chapter 41: Types of Business Organizations
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Q1) Unincorporated associations are generally formed to further a common purpose.
A)True
B)False
Q2) Franchise disclosures are not required under federal law.
A)True
B)False
Q3) The relationship between the franchisor and the franchisee is ordinarily an arm's-length employment relationship.
A)True
B)False
Q4) The principal forms of business organization are:
A) sole proprietorships, joint ventures, and corporations.
B) unincorporated associations, partnerships, and corporations.
C) unincorporated associations, limited partnerships, and corporations.
D) sole proprietorships, partnerships, and corporations.
Q5) The process of incorporation involves the expenditure of funds for organizational expenses.
A)True
B)False
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Chapter 42: Partnerships
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Q1) Persons who are not partners under appropriate circumstances may be held liable to third persons as though they were partners.
A)True
B)False
Q2) Partners are not entitled to compensation for services performed for the partnership unless:
A) the services are performed by a surviving partner in winding up the partnership affairs.
B) the services are unusual or more extensive than services rendered by other partners.
C) due to the illness of a partner, the other partners have to perform the services ordinarily performed by that partner.
D) the services rendered by the partner are such that they ordinarily would be rendered with the expectation of compensation.
Q3) Partners have no authority after dissolution to create new obligations, but they do retain authority to perform any acts necessary to wind up the business.
A)True B)False
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Page 44
Chapter 43: LPs, LLCs, and LLPs
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Q1) Limited partners may contribute cash or property as their capital contributions.
A)True
B)False
Q2) A limited liability company may be managed directly by the owners.
A)True
B)False
Q3) A limited liability company may be classified as a partnership for tax purposes if:
A) such an election is made by "checking the box" for partnership tax treatment on the appropriate Internal Revenue Service form.
B) such an election is made in the operating agreement.
C) such an election is made in the articles of incorporation.
D) a majority of its members petition the Internal Revenue Service for partnership tax treatment.
Q4) A general partner within a limited partnership may be a corporation.
A)True B)False
Q5) A limited liability company pays federal income tax.
A)True B)False
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Chapter 44: Corporate Formation
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Q1) A de facto corporation is accorded legal recognition despite some recognized defect in its incorporation.
A)True
B)False
Q2) Under recent statutes, the articles of incorporation must contain all of the following except the:
A) name of the corporation.
B) name and address of each incorporator.
C) purpose for which the corporation is organized.
D) number of shares the corporation is authorized to issue.
Q3) If two firms consolidate, the new corporation usually succeeds to the rights, powers and immunities of its component parts.
A)True
B)False
Q4) Debts of a corporation are not the debts of the persons running the corporation or owning shares of stock in it.
A)True
B)False
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Chapter 45: Shareholder Rights in Corporations
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Q1) Shares can exist for only as long as the shareholder is alive.
A)True
B)False
Q2) Which of the following is not a factor that may lead to "piercing the corporate veil" and imposing liability on corporate owners (shareholders)?
A) grossly inadequate capitalization of the corporation
B) formation of the corporation to avoid personal liability for business obligations
C) formation of the corporation to perpetuate a fraud or conceal illegality
D) shareholder diversion of corporate funds or assets
Q3) Under the RMBCA, a preincorporation subscription agreement is irrevocable for six (6) months unless the subscription agreement provides a longer or shorter period, or all of the subscribers agree to revocation.
A)True
B)False
Q4) Shareholders exercise direct control over their corporation.
A)True
B)False
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Chapter 46: Securities Regulation
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Q1) State laws designed to protect the public from the sale of worthless stocks and bonds are known as "clear sky" laws.
A)True
B)False
Q2) An investment contract exists if which of the following elements are present?
A) an investment of money
B) a common enterprise
C) an expectation of future profits
D) all of the above
Q3) Securities acquired under a SEC Regulation D exemption from registration are considered restricted securities, and their resale may require registration.
A)True
B)False
Q4) In every 10b-5 situation, the plaintiff must show "reliance" on the misrepresentation and a resulting injury.
A)True
B)False
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Chapter 47: Accountants Liability and Malpractice
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Q1) To ensure that audit partners do not become entrenched, Sarbanes-Oxley requires audit firms to change audit partners at least once every __________ years.
A) three (3)
B) five (5)
C) seven (7)
D) ten (10)
Q2) An entity not in privity with an accountant is prohibited from recovering against the accountant for malpractice when the accountant had no knowledge of any use that could affect the party.
A)True
B)False
Q3) Sarbanes-Oxley would prohibit which of the following individuals from serving on an audit committee of the company's board?
A) a director who accepts consulting fees from the company
B) a director who is affiliated with the company
C) a director who is affiliated with a subsidiary of the company.
D) all of the above.
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Chapter 48: Management of Corporations
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Q1) A corporation is liable to a third person for the act of its agent:
A) to the same extent as a natural person would be liable.
B) only if the agent was expressly authorized to perform the act.
C) only if the agent's act was a crime.
D) only if the agent's act was based on an intent to benefit the corporation.
Q2) The notice of a special meeting of shareholders must include a statement of the nature of the business to be transacted and no other business may be transacted at such a meeting.
A)True
B)False
Q3) The authority of corporate employees and other officers is generally limited to the duties of their offices.
A)True
B)False
Q4) A stockholder-approved amendment to the certificate of incorporation may indemnify directors who:
A) acted in bad faith.
B) acted negligently.
C) breached their duty of loyalty.
D) gained an improper personal benefit.
Page 50
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Chapter 49: Real Property
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Q1) Personal property generally becomes a fixture if it is so attached to the realty that it cannot be removed without materially damaging the realty.
A)True
B)False
Q2) A license is different from an easement in that it is a personal, revocable privilege to do something on the land of another.
A)True
B)False
Q3) Which of the following statements is incorrect about fixtures?
A) Personal property may become a fixture by annexation to the realty.
B) Personal property may become a fixture by adaptation to the realty.
C) Personal property may become a fixture based on the intent of the person affixing the personal property to the realty.
D) Personal property that is readily removable from the realty is generally a fixture.
Q4) A condominium and a cooperative are essentially the same.
A)True B)False
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Chapter 50: Environmental Law and Land Use Controls
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Q1) Both the Secretary of Commerce and the Secretary of the Interior are given responsibilities under the Endangered Species Act.
A)True
B)False
Q2) The Noise Control Act sets the standards for lawn mowers, automobiles, and other devices often found in suburban neighborhoods.
A)True
B)False
Q3) A right to a nonconforming use of land cannot be lost through abandonment.
A)True
B)False
Q4) A nuisance:
A) is created by every interference that has an effect on others.
B) is established when the plaintiff shows harm as the result of the defendant's conduct.
C) arises only by an interference that is great enough to be condemned as unreasonable.
D) cannot arise from a lawful activity or business that is conducted in a lawful manner.
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Chapter 51: Leases
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Q1) Unless restricted in the lease, a tenant may generally use the premises for any lawful purpose for which they are adapted.
A)True
B)False
Q2) A provision in a lease giving the landlord the right to terminate the lease by notice is strictly construed against the tenant.
A)True
B)False
Q3) Under the common law and the majority rule, a landlord has no duty to mitigate damages when the tenant abandons the premises before the expiration of the lease.
A)True
B)False
Q4) An express promise by a landlord to not disturb the tenant's possession of the land is known as the covenant of:
A) domesticity.
B) tranquil possession.
C) quiet enjoyment.
D) unfettered use.
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Chapter 52: Decedents Estates and Trusts
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Q1) Letters testamentary:
A) are given to an administrator.
B) are given to an executor.
C) require a bond to be filed by the person to whom they are given if the will exempts the requirement.
D) none of the above.
Q2) Every trust must have a beneficiary.
A)True
B)False
Q3) A trust may be terminated:
A) in accordance with its terms.
B) by merger of all interests in the same person.
C) via revocation by the settlor if allowed by the terms of the trust.
D) all of the above.
Q4) A will, to be effective, always must be dated.
A)True
B)False
Q5) A trustee can delegate the performance of personal duties.
A)True
B)False
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