Law for Managers Final Exam Questions
Course Introduction
Law for Managers is designed to provide future business leaders and managers with a foundational understanding of the legal principles that govern organizational operations. The course examines key areas such as contract law, employment law, intellectual property, corporate governance, regulatory compliance, and dispute resolution. By exploring real-world legal scenarios and case studies, students gain practical insights into how legal considerations impact business decisions, risk management, and ethical conduct. This knowledge equips managers with the tools needed to navigate the complexities of the modern business environment while fostering an awareness of the legal implications associated with managerial actions.
Recommended Textbook Business Law and the Legal Environment 21st Edition by David P. Twomey
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Chapter 1: The Nature and Sources of Law
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Q1) Several layers of law are enacted at different levels of government to provide the framework for business and personal rights and duties. At the base of this framework of laws is constitutional law.
A)True
B)False
Answer: True
Q2) Courts can create law.
A)True
B)False
Answer: True
Q3) Interpretations of aspects of the right to privacy are often found in:
A) statutes.
B) customs.
C) societal guidelines.
D) none of the above.
Answer: A
Q4) Administrative regulations are a type of law.
A)True
B)False
Answer: True
Page 3
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Chapter 2: The Court System and Dispute Resolution
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Q1) Reversible errors are commonly made by supreme courts.
A)True
B)False
Answer: False
Q2) When arbitration is mandatory under a statute, the losing party generally can appeal from such arbitration to a court.
A)True
B)False
Answer: True
Q3) An example of limited or special jurisdiction courts would include:
A) probate courts.
B) juvenile courts.
C) equity courts.
D) all of the above.
Answer: D
Q4) If questions of fact are involved, the court will decide the case based on the pleadings alone.
A)True
B)False
Answer: False
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Chapter 3: Business Ethics, Social Forces, and the Law
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Q1) Unwillingness of businesses to voluntarily improve the ethics of their practices has little practical effect on the regulatory environment.
A)True
B)False
Answer: False
Q2) Mortgages, security interests, and surety relationships are legal mechanisms created primarily to promote stability and flexibility in trade.
A)True
B)False
Answer: False
Q3) An ethical duty of confidentiality could be breached where:
A) information obtained through research of the employer is disclosed.
B) customer lists or leads are disclosed to a competitor.
C) proprietary information or technology of a business is disclosed.
D) all of the above.
Answer: D
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Chapter 4: The Constitution As the Foundation of the Legal Environment
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Q1) 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
Q2) Which of the following powers is not reserved solely to the national government?
A) power to regulate interstate commerce
B) power to tax
C) power to coin money
D) power to borrow money on the credit of the United States
Q3) 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.
Q4) Administrative agencies are, in effect, a fourth branch of the government.
A)True B)False
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Chapter 5: Government Regulation of Competition and
Prices
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Q1) __________ laws seek to guard against unfairness in corporate takeover situations.
A) Interceder
B) Invader
C) Raider
D) Takeover
Q2) The federal government may regulate any area of business to advance the nation's economic needs.
A)True
B)False
Q3) When the effect of an antitrust violation is to raise prices:
A) damages are automatically considered doubled.
B) each plaintiff must sue individually.
C) imprisonment for the guilty is mandatory.
D) the state attorney general may bring a class action suit for damages.
Q4) The Sherman Antitrust Act does not prohibit:
A) a manufacturer from having a natural monopoly over its own product.
B) a seller to dominate a market because of superior product or business.
C) a manufacturer to sell only through a particular distributor.
D) all of the above.
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Chapter 6: Administrative Agencies
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Q1) Which statement is true concerning administrative hearings?
A) An existing business has the right to challenge the granting of a license to a potential competitor.
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.
Q2) An administrative agency:
A) is not empowered to act as a court with regard to its own regulations.
B) acts as a specialized court of limited jurisdiction.
C) can hear complaints only in the presence of a jury.
D) cannot impose penalties for violation of its regulations.
Q3) The Freedom of Information Act:
A) is to be strictly construed to prevent unauthorized disclosures.
B) has too many exemptions to be of any use.
C) is intended to subject agency action to public scrutiny.
D) puts the burden of proof upon the person requesting the information.
Q4) Administrative agencies generally are not subject to the rules of evidence.
A)True
B)False
Page 8
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Chapter 7: The Legal Environment of International Trade
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Q1) A letter of credit agrees to provide the seller with needed currency exchanges when transactions with foreign buyers occur.
A)True
B)False
Q2) A direct sale to customers abroad by an American firm, with terms of payment commonly based on an irrevocable letter of credit, is an import sale.
A)True
B)False
Q3) The International Bank for Reconstruction and Development, also known as the World Bank, facilitates the lending of money by capital surplus countries to countries needing economic help and wanting foreign investments.
A)True
B)False
Q4) The interests of the less-developed nations of the world are represented by the UNCTAD.
A)True
B)False
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Chapter 8: Crimes
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Q1) Which of the following statements is true?
A) Felonies are less serious than misdemeanors.
B) Felonies involve white-collar crimes only.
C) Felonies are more serious than misdemeanors.
D) Felonies are federal crimes only.
Q2) Economic espionage is against the law.
A)True
B)False
Q3) Several states have adopted statutes providing a limited degree of indemnification to victims of crime.
A)True
B)False
Q4) Due process rights apply to:
A) individuals only.
B) corporations only.
C) both individuals and corporations.
D) individuals, but only in their official capacity within a business.
Q5) A crime consists of three elements: the mental state, the intent, and the act.
A)True
B)False
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Chapter 9: Torts
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Sample Questions
Q1) A person who makes public information stored in a computer can never be held liable for invasion of privacy.
A)True
B)False
Q2) The use of someone's car without that person's permission is a trespass to personal property.
A)True B)False
Q3) Comparative negligence:
A) has been rejected by most of the states.
B) allows a comparison of negligence between plaintiff and defendant.
C) has been held to be applicable in all states, regardless of the extent of the plaintiff's own negligence.
D) is a bar to recovery under common law.
Q4) Concerning torts and crimes, choose the correct statement:
A) Every tort is a crime.
B) Every crime is a tort.
C) No crime is a tort.
D) A crime may also be a tort.
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Chapter 10: Intellectual Property Rights
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Q1) Once a mark is registered in accordance with federal law, the holder of the mark has the exclusive right to use the mark in perpetuity.
A)True B)False
Q2) Generic terms that refer to a type or class of goods are never subject to trademark protection.
A)True B)False
Q3) In determining whether limited use of copyrighted material may be permitted as "fair use," courts will consider:
A) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes.
B) the nature of the copyrighted work.
C) the amount and substantiality of the portion used in relation to the copyrighted work as a whole.
D) all of the above.
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Chapter 11: Cyberlaw
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Q1) Existing securities laws apply to securities transactions over the Internet.
A)True
B)False
Q2) Bon, located in Florida, desires to enter into a contract with Jon, a resident of Maine. Neither wishes to meet face-to-face, as both are busy with a variety of business interests. Instead, they wish to form a contract over the Internet. Would a contract formed over the Internet be valid?
Q3) The term "cyberspace" describes the World Wide Web and Internet communication.
A)True
B)False
Q4) The formation of contracts in cyberspace is governed today largely by:
A) international contract law principles.
B) traditional contract law principles.
C) federal contract law principles.
D) uniform state laws.
Q5) Generally, speech on the Internet is not entitled to First Amendment free speech protection.
A)True
B)False
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Chapter 12: Nature and Classes of Contracts: Contracting on the Internet
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Q1) Negotiable instruments are:
A) formal contracts.
B) informal contracts.
C) option contracts.
D) first-refusal agreements.
Q2) 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.
Q3) A contract under which one or both parties have not yet fully performed is termed a(n):
A) void agreement.
B) executory contract.
C) executive contract.
D) executed contract.
Q4) An offeror makes an offer to an offeree.
A)True
B)False
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Chapter 13: Formation of Contracts: Offer and Acceptance
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Q1) Acceptance of an offer to form a unilateral contract need not be communicated to the offeror to be effective.
A)True
B)False
Q2) An offer is terminated upon rejection by the offeree unless:
A) the period of time for which the offeror agreed to keep the offer open has not yet expired.
B) the offeror renews the offer.
C) the offeree revokes the rejection.
D) the offeree makes a counteroffer.
Q3) If either the offeror or offeree dies or becomes mentally incompetent before the offer is accepted, the offer is automatically terminated.
A)True
B)False
Q4) At an auction sale, each bid is:
A) a counteroffer to the auctioneer's offer of the merchandise.
B) an acceptance of the auctioneer's offer.
C) an invitation to negotiate.
D) an offer.
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Chapter 14: Capacity and Genuine Assent
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Q1) A person lacks contractual capacity if:
A) the person is a chronic alcoholic.
B) the person is a drug addict.
C) because of mental impairment, the person does not comprehend that a contract is being made or understand its consequences.
D) all of the above.
Q2) An incompetent person may ordinarily avoid a contract in the same manner as a minor.
A)True
B)False
Q3) Contractual capacity is the ability to:
A) read and write.
B) sign a written contract.
C) understand that a contract is being made and to understand its general nature.
D) understand the legal meaning of the contract being made.
Q4) John, a 17-year-old, purchased a ping-pong table and four new ping-pong paddles. A week after he turned 18, John tried to return the ping-pong paddles. He told the seller that he had decided to keep the table. Can John avoid the contract in this way?
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Chapter 15: Consideration
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Q1) Damages recoverable in a case of promissory estoppel are determined by the profits that the promisee expected.
A)True
B)False
Q2) With regard to an unliquidated debt, payment by the debtor of less than the amount claimed by the creditor is consideration for the latter's agreement to release or settle the claim.
A)True
B)False
Q3) An agreement to pay reasonable additional compensation to a contractor for the performance of a pre-existing contract when the contractor faces extraordinary circumstances caused by unforeseen difficulties is called a:
A) good-faith adjustment.
B) bribe.
C) compensatory allowance.
D) relief payment.
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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Q1) Which party to an illegal agreement may get relief from the court?
A) plaintiff
B) defendant
C) the less-guilty party, when public interest is advanced by granting relief
D) a doctor who was unlicensed at the time of the making of an agreement for the provision of medical services, but who later obtained a proper license
Q2) Unconscionability and fraud are synonymous terms.
A)True
B)False
Q3) Legislation commonly requires that an installment-sale contract specify the cash price, down payment, finance charges, and insurance costs.
A)True
B)False
Q4) Fees charged by a lender for the reasonable expense of making a loan, such as the cost of appraising property, are treated as interest for purposes of the usury law.
A)True
B)False
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Chapter 17: Writing, Electronic Forms, and Interpretation of Contracts
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Q1) A signed letter from an employer setting forth details of an oral contract of employment satisfies the statute of frauds.
A)True
B)False
Q2) Provisions of a contract will be considered separately and not as a whole.
A)True
B)False
Q3) Under the statute of frauds, an oral contract must be completed within one year after performance begins.
A)True
B)False
Q4) The parol evidence rule:
A) applies to complete written contracts.
B) prevents proof of fraud.
C) applies to incomplete contracts.
D) is not designed to preserve the integrity of written contracts.
Q5) A writing required by the statute of frauds may be in any form.
A)True B)False
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Chapter 18: Third Persons and Contracts
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Q1) In general, one may assign rights if that does not cause the obligor's duties to increase or change materially.
A)True
B)False
Q2) An assignment is a transfer of rights, and a delegation is a transfer of duties.
A)True
B)False
Q3) An incidental beneficiary of a contract:
A) can sue to enforce the contract.
B) cannot sue to enforce the contract.
C) is a beneficiary specifically named in the contract.
D) is an assignee of the direct beneficiary.
Q4) If an obligor could successfully defend against a suit brought by the assignor:
A) the obligor will also prevail against the third-party beneficiary.
B) the obligor will also prevail against the assignee.
C) the obligor will also prevail against the incidental beneficiary.
D) none of the above.
Q5) Generally, an assignment may be in any form.
A)True
B)False
Page 20
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Chapter 19: Discharge of Contracts
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Q1) A contract to build a house is deemed performed when:
A) there has been substantial performance of the contract.
B) the house is approved by the city housing inspectors.
C) the house is approved by the owner's architect.
D) the house is approved by the owner.
Q2) By operation of law, a party can be discharged in bankruptcy from debts.
A)True
B)False
Q3) If a debtor 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; therefore, if a debtor specifies that a payment is to be made for a current purchase, the creditor may not apply the payment to an older balance.
A)True
B)False
Q4) The federal Consumer Credit Protection Act gives the debtor the right to rescind a credit transaction within three (3) business days when the transaction would impose a lien on the debtor's home.
A)True
B)False
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Chapter 20: Breach of Contract and Remedies
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Q1) An action for injunctive relief may be granted:
A) if money is due and payable.
B) if the breach consists of doing a prohibited act.
C) if the breach would cause nominal damages.
D) if the breach would cause consequential damages.
Q2) The party that breaks a contract may be required to pay damages to the other party to compensate for:
A) losses that could have been avoided by hiring someone else to perform the contract.
B) emotional disturbance caused by the breach of contract.
C) a heart attack induced by the emotional disturbance caused by the breach of contract.
D) damages resulting necessarily and directly from the breach of contract.
Q3) Damages in excess of actual loss are called:
A) punitive damages.
B) compensatory damages.
C) restitution.
D) nominal damages.
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22
Chapter 21: Personal Property and Bailments
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Q1) An ordinary bailment can arise without an agreement between the parties.
A)True
B)False
Q2) In common usage today, there is no distinction between real and personal property.
A)True
B)False
Q3) In states that follow the community property tradition, property acquired after the marriage belongs solely to the party who acquired it.
A)True
B)False
Q4) The legal concept of property is limited to tangible physical objects.
A)True
B)False
Q5) Unclaimed property is often transferred to the government under the concept of escheat.
A)True
B)False
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Page 23
Chapter 22: Legal Aspects of Supply Chain Management
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Q1) 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
Q2) A negotiable warehouse receipt that provides for delivery of the goods to the order of Jill Jones may be negotiated by delivery of the document to the purchaser.
A)True
B)False
Q3) A common carrier of goods has the right to:
A) make reasonable and necessary rules for the conduct of its business.
B) charge a rate that enables a fair return.
C) charge demurrage.
D) all of the above.
Q4) A warehouse receipt is considered a document of title.
A)True B)False
Q5) A warehouser is an insurer of goods.
A)True B)False
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Chapter 23: Nature and Form of Sales
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Q1) An output or requirement contract is not enforceable unless the parties include an estimate of prospective amounts.
A)True
B)False
Q2) The provisions of Article 6 concerning bulk transfers are designed to protect creditors.
A)True
B)False
Q3) Sales law includes special rules that apply to merchants.
A)True
B)False
Q4) To satisfy the statute of frauds, the writing must be signed and must include the price of the goods.
A)True
B)False
Q5) When an oral contract is made to sell a television set for $600, payment and acceptance of part of the purchase price avoids the bar of the statute of frauds.
A)True
B)False
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Chapter 24: Title and Risk of Loss
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Q1) Under a CF contract, the seller must get the goods to a carrier and buy an insurance policy in the buyer's name to cover the goods while in transit.
A)True
B)False
Q2) "Without reserve" auctions give the auctioneer the right to withdraw the goods from the sale process if the bids are not high enough.
A)True
B)False
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 consignment, the dealer-consignee is often referred to as a(n):
A) remainder.
B) factor.
C) quotient.
D) exponent.
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Chapter 25: Product Liability: Warranties and Torts
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Q1) An examination of goods excludes any implied warranty with respect to a defect that:
A) is apparent after a reasonable examination is made.
B) will not be apparent without chemical analysis.
C) will not be apparent until the goods are processed or used in manufacturing.
D) is unknown to all parties and is not detectable by reasonable examination.
Q2) A disclaimer or exclusion of the warranty of merchantability will be invalid if:
A) the goods cost $500 or more.
B) the defects in the goods are obvious to all buyers.
C) it is made at the time of the sale.
D) it is not conspicuously set forth in a writing.
Q3) With used or secondhand goods, what is fit for normal use will be:
A) a higher standard than with new goods.
B) a lower standard than with new goods.
C) the same standard as with new goods.
D) a non-applicable standard, as the goods are not new.
Q4) A statement by a seller relating to goods that is part of the basis of the bargain is an express warranty.
A)True
B)False
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Chapter 26: Obligations and Performance
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Q1) In a cash sale that does not require the physical moving of the goods, the:
A) parties are required to perform concurrently.
B) seller is required to tender the goods before the buyer must pay for them.
C) buyer must pay for the goods in advance.
D) buyer must actually receive the goods before he or she is required to pay for them.
Q2) The right to ___________ is a second chance for a seller to make a proper tender of conforming goods.
A) rehabilitate
B) repair
C) heal
D) cure
Q3) 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
Q4) Jared agrees to purchase twelve computers from Zack Enterprises, Inc. for sale in Jared's department store. Twelve boxes from Zack Enterprises have just arrived at the department store. What are Jared's rights and responsibilities?
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Chapter 27: Remedies for Breach of Sales Contracts
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Q1) The giving of notice to a seller within a reasonable time after a breach of warranty has been discovered by the buyer is a condition precedent to a suit by the buyer for breach of warranty.
A)True
B)False
Q2) A buyer is not barred from revoking acceptance of goods because the buyer has delayed until attempts of the seller to correct the defects proved unsuccessful.
A)True
B)False
Q3) A buyer may sue the seller for damages caused by the seller's fraud even if the buyer is barred by the UCC from suing for damages for breach of warranty.
A)True
B)False
Q4) An action for breach of warranty generally must be brought within three (3) years of the breach.
A)True
B)False
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Chapter 28: Kinds of Instruments, Parties, and Negotiability
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Q1) An unconditional written promise made by one person to another, signed by the maker, that promises to pay on demand a specific sum of money to the bearer is a:
A) negotiable draft.
B) bill of exchange.
C) promissory note.
D) certificate of deposit.
Q2) An endorsement that does not name the person to whom the paper is negotiated is called a(n):
A) incomplete endorsement.
B) empty endorsement.
C) unnamed endorsement.
D) blank endorsement.
Q3) Revised UCC Article 3 refers to drawers, indorsers, and accommodation parties as "secondary obligors."
A)True
B)False
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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Q1) It is worse for the holder to lose order paper than to lose bearer paper.
A)True
B)False
Q2) If an assignment of an instrument takes place, the assignee:
A) has greater rights than the assignor.
B) has the same rights as the assignor.
C) is in possession of a negotiable instrument.
D) is in possession of a nonnegotiable instrument.
Q3) The situation in which an individual impersonates the holder of a savings account and, by presenting a forged withdrawal slip to the savings bank, receives from the bank a check payable to the bank's customer, is covered by the:
A) impostor rule.
B) negotiation rule.
C) assignment rule.
D) bank rule.
Q4) When a negotiable instrument is transferred by negotiation, the transferee is recognized as the holder 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 holder having the rights of a holder in due course is subject to the defense of fraud in the inducement.
A)True
B)False
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) Illegality is a universal defense regardless of whether the illegality voids an instrument.
A)True
B)False
Q4) Which of the following is not a universal defense available against all holders?
A) fraud as to the nature or essential terms of the instrument
B) forgery or lack of authority
C) fraud in the inducement
D) duress depriving control
32
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Chapter 31: Checks and Funds Transfers
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Q1) If a bank pays a check whose face has been altered to increase the amount above that which the drawer intended to pay, the bank:
A) is liable to the drawer for the amount of the increase.
B) has defenses against the drawer's claims.
C) incurs liability only if it failed to examine the check before payment. D) incurs liability only if the drawer made the alteration.
Q2) Sondra realized on Tuesday that she had dropped her bank EFT card after using it at an automatic teller machine. She telephoned the bank on the following Monday to notify it of the loss. By that time, someone had used the card to withdraw $800 from Sondra's account. The bank said it would cover $300 of that amount. Sondra sued for the full amount, claiming that she had exercised reasonable care in reporting the loss, especially because the card was lost on bank premises. Will she be able to recover the full $800?
Q3) Where a depositor receives a bank statement and the checks the bank has paid, the failure to notify the bank within a reasonable time of forgeries of the depositor's signature may preclude recovery for other forged checks thereafter paid by the bank.
A)True
B)False
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33
Chapter 32: Nature of the Debtor-Creditor Relationship
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Q1) The issuer of a letter of credit must verify that the underlying transaction has been performed.
A)True
B)False
Q2) If the issuer of a letter of credit dishonors a draft without justification, it is liable to its customer for:
A) fiduciary default.
B) breach of contract.
C) fiduciary peril.
D) monetary malfeasance.
Q3) In a guaranty contract, the obligor is called a:
A) surety.
B) principal.
C) guarantor.
D) creditor.
Q4) If a debtor is about to leave the state, the surety may call on the creditor to take action against the debtor.
A)True
B)False
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Chapter 33: Consumer Protection
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Q1) The policing of fraudulent advertising is entrusted to which of the following administrative agencies?
A) IRS
B) FTC
C) UCCC
D) FDA
Q2) Corrective advertising required by the FTC also is called retroactive advertising.
A)True
B)False
Q3) The owner of a lost credit card is:
A) liable for all purchases made by its finder if the card was lost through negligence.
B) not liable for any purchases if the card was lost despite the exercise of reasonable care by the cardholder.
C) liable for all purchases if the card originally had been sent to the cardholder without any prior request and never was used by such holder.
D) not liable for more than $50 for the unauthorized use of the card.
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Chapter 34: Secured Transactions in Personal Property
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Q1) In a security agreement, the creditor and the debtor agree that the creditor has a security interest.
A)True
B)False
Q2) The property that is subject to the security interest is called collateral.
A)True
B)False
Q3) A security interest may be possessory or nonpossessory.
A)True
B)False
Q4) Wellfix Corporation manufactures electric toasters and sells them to retail appliance stores. Which of the following statements is true?
A) The toasters are considered equipment in the hands of the appliance stores that purchase them.
B) The toasters are considered inventory in the hands of Wellfix.
C) The toasters are considered equipment in the hands of Wellfix.
D) The toasters are considered consumer goods in the hands of Wellfix.
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Chapter 35: Bankruptcy
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Q1) Bankruptcy law does not regulate the manner in which the assets of the debtor are distributed; instead, distribution of the debtor's assets is solely within the discretion of the trustee.
A)True
B)False
Q2) If a trustee is not elected by creditors, an interim trustee will be appointed by the court.
A)True
B)False
Q3) A debtor is presumed to be insolvent on and during what number of days immediately preceding the date of the filing of a bankruptcy petition?
A) 30
B) 60
C) 90
D) 120
Q4) A discharge will release a debtor from liability for alimony and child support.
A)True
B)False
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Chapter 36: Insurance
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Q1) Insurance is a contract by which one party for a stipulated consideration promises to pay another party a sum of money on the destruction of, loss of, or injury to something in which the other party has an interest, or to indemnify that party for any loss or liability to which that party is subjected.
A)True
B)False
Q2) If an insurer denies liability for a loss, the insured or the beneficiary of the policy has the burden of proving that there was a loss that came within the coverage of the policy.
A)True
B)False
Q3) 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.
Q4) A contract of insurance ordinarily is stated in a writing called a policy.
A)True
B)False
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Page 38
Chapter 37: Agency
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Q1) An agency coupled with an interest is an exception to the general rule regarding termination of the agency and the agent cannot be discharged or fired before the expiration of the interest.
A)True
B)False
Q2) An agent's implied authority to perform any act reasonably necessary to execute express authority is called __________ authority.
A) express
B) customary C) apparent
D) incidental
Q3) 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
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Page 39
Chapter 38: Third Persons in Agency
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Q1) In which of the following scenarios is the agent exposed to the greatest risk of liability?
A) disclosed principal and authorized contract
B) undisclosed principal and authorized contract
C) partially disclosed principal and authorized contract
D) authorized receipt of money from third person remitted to disclosed principal
Q2) When a tort or crime is committed by an employee:
A) the principal is vicariously liable.
B) the principal is not vicariously liable.
C) vicarious liability cannot be imposed on the employer because an employee is not an agent.
D) vicarious liability could be imposed on the employer if the act was committed within the course of employment.
Q3) An agent should never sign a contract using "by" or "per" and then his or her name.
A)True
B)False
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Chapter 39: Regulation of Employment
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Q1) ERISA establishes an insurance plan to protect employees when the employer goes out of business. To provide this protection, the statute created a:
A) pension surety system.
B) Pension Benefit Guaranty Corporation.
C) Pension Accrual Compensation System.
D) bond system of payment.
Q2) Grievance procedures established in most collective bargaining agreements provide a means by which persons claiming the contract has been violated may have their cases decided by impartial third parties.
A)True
B)False
Q3) The rights of an employee to be compensated are governed primarily by the same principles that apply to the compensation of a(n):
A) partner.
B) stockholder.
C) agent.
D) court-appointed trustee.
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Chapter 40: Equal Employment Opportunity Law
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Q1) An affirmative action plan that "unnecessarily trammels" the interests of nonminority employees:
A) is an example of reverse discrimination.
B) is lawful if women are the favored group.
C) is lawful to aid in the hiring of blacks and Native Americans.
D) is unlawful unless the favored group has been severely disadvantaged.
Q2) Title VII requires that employers make reasonable efforts to accommodate their employees' religious practices.
A)True
B)False
Q3) What is the principal law regulating equal employment opportunity in the United States?
A) Title VII of the Civil Rights Act of 1964
B) The United States Constitution
C) The Fair Labor Standards Act
D) The Equal Pay Act
Q4) Title VII does not protect members of all nationalities from employment discrimination.
A)True
B)False
Page 42
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Chapter 41: Types of Business Organizations
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Q1) An arrangement in which the owner of a trademark licenses others, under specified conditions or limitations, to use the trademark in purveying goods or services is a(n):
A) corporation.
B) limited partnership.
C) unincorporated association.
D) none of the above.
Q2) Franchisors may be found liable for the wrongful conduct of their franchisees on an apparent authority theory when the conduct of the franchisor creates an appearance of authority.
A)True
B)False
Q3) In a joint venture, the parties:
A) combine their labor or property for a single undertaking and share profits and losses equally.
B) combine their labor or property for a continuing business and share profits and losses equally.
C) assume no personal liability beyond the risk of losing their initial investment.
D) none of the above.
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43
Chapter 42: Partnerships
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Q1) When a partnership is dissolved by the act of a partner, notice:
A) is not required.
B) must be given to the other partners only.
C) must be given to third persons only.
D) must be given to both other partners and third persons.
Q2) Persons who are in a partnership are called __________ partners.
A) general
B) silent
C) secret
D) nominal
Q3) The rights of partners are determined by the partnership agreement.
A)True
B)False
Q4) In the absence of a contrary agreement, each partner has which of the following rights?
A) the right to receive compensation for services performed for the partnership
B) the right to a share of the partnership profits
C) the right to take an equal part in transacting the business of the firm
D) both b. and c.
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Chapter 43: LPs, LLCs, and LLPs
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Q1) Both general partnerships and limited partnerships are created only through the process of executing a certificate.
A)True
B)False
Q2) A limited liability company may hold property in its own name.
A)True
B)False
Q3) Limited liability is not a feature of general partnership law.
A)True
B)False
Q4) Under the Revised Uniform Limited Partnership Act:
A) the words "limited partnership" must appear without abbreviation in the firm name.
B) a limited partner may contribute services, cash or property to the limited partnership.
C) Both a. and b.
D) none of the above.
Q5) A limited partner can never lose money.
A)True
B)False
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Chapter 44: Corporate Formation
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Q1) The Revised Model Business Corporation Act:
A) has eliminated the need for a certificate of incorporation.
B) has made the process of obtaining a certificate of incorporation more difficult.
C) states that corporate existence begins when the secretary of state issues a certificate of incorporation.
D) has eliminated the need for articles of incorporation.
Q2) A corporation must have:
A) a name.
B) more than one incorporator.
C) a corporate seal.
D) none of the above.
Q3) The corporate form of business continues regardless of changes in stock ownership.
A)True B)False
Q4) Shareholders ordinarily cannot be sued for corporate liabilities. A)True B)False
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Chapter 45: Shareholder Rights in Corporations
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Q1) Until a transfer is recorded on its books, a corporation is entitled to treat the person whose name is on its books as the owner of its stock.
A)True
B)False
Q2) The RMBCA provides that shareholders:
A) have no preemptive rights unless the articles of incorporation so provide.
B) have preemptive rights regardless of what the articles of incorporation provide.
C) cannot have preemptive rights.
D) have preemptive rights with respect to the transfer of a block of stock as consideration.
Q3) Membership in a corporation is based on the ownership of one or more shares of stock of the corporation.
A)True
B)False
Q4) To correctly transfer shares of stock, a delivery from the owner of the shares directly to the transferee is required.
A)True
B)False
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Chapter 46: Securities Regulation
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Q1) In every 10b-5 situation, the plaintiff must show "reliance" on the misrepresentation and a resulting injury.
A)True
B)False
Q2) The Securities Act of 1933 imposes civil and criminal penalties for the making of fraudulent statements in a registration statement.
A)True
B)False
Q3) Liability under the 1933 Act applies only to sellers of securities who utilize untrue statements, not to those who merely offer to sell securities using untrue statements.
A)True
B)False
Q4) Any shareholder owning more than five (5) percent of any class of the corporation's equity securities is statutorily defined as an insider and must file with the SEC a disclosure statement regarding such ownership and all related transactions. A)True
B)False
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Chapter 47: Accountants Liability and Malpractice
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Q1) 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
Q2) Unidentified members of a certain class may sue for negligent malpractice in states that follow the __________ rule.
A) contact
B) known user.
C) unidentified user
D) foreseeable user
Q3) The privity rule has been:
A) relaxed in its application by some courts.
B) abandoned by all states.
C) retained by all states.
D) none of the above.
Q4) A disclaimer based on lack of knowledge will always protect an accountant from liability.
A)True
B)False
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Chapter 48: Management of Corporations
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Q1) A corporation may be convicted of a criminal offense if it is shown beyond a reasonable doubt that the offense was committed by its agent acting within the scope of the agent's authority.
A)True
B)False
Q2) Action at a shareholders' meeting can be taken only while a quorum is present.
A)True
B)False
Q3) Eligibility for membership on a board of directors is determined by all of the following except:
A) statute.
B) certificates of filing.
C) articles of incorporation.
D) bylaws.
Q4) The courts have traditionally viewed it as their responsibility to sit in judgment on the wisdom of decisions made by corporate directors.
A)True
B)False
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Page 50
Chapter 49: Real Property
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Q1) Characteristics of the fee simple estate include all of the following except:
A) it is alienable during life.
B) it is not subject to rights of the owner's surviving spouse.
C) it is alienable by will.
D) it can be attached or used to satisfy the owner's debts before or after the owner's death.
Q2) Liens on land may be created voluntarily by the owner of land or involuntarily against the wishes of the owner.
A)True
B)False
Q3) A deed is not effective to pass title unless it is properly recorded.
A)True
B)False
Q4) Real property includes land, buildings and fixtures, and rights in the land of another.
A)True
B)False
Q5) A deed, like a contract, must be supported by consideration to be effective. A)True
B)False
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Chapter 50: Environmental Law and Land Use Controls
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Q1) Nuisances may be classified as either private nuisances or public nuisances.
A)True
B)False
Q2) Conduct that unreasonably interferes with the enjoyment of land is a nuisance.
A)True
B)False
Q3) Both the Secretary of Commerce and the Secretary of the Interior are given responsibilities under the Endangered Species Act.
A)True
B)False
Q4) Public zoning and restrictive covenants in deeds have a similar purpose, but each has a different source of authority.
A)True
B)False
Q5) The EPA is the primary federal agency responsible for the enforcement of environmental laws.
A)True
B)False
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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) In a residential lease, it is commonly held that there is an implied warranty of habitability.
A)True
B)False
Q3) Generally, the tenant has the right to the exclusive possession of the premises during the term 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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Page 53
Chapter 52: Decedents Estates and Trusts
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Q1) State intestacy statutes commonly provide for distribution in the following order:
A) spouse, parents, lineals, collateral heirs.
B) spouse, lineals, collateral heirs, parents.
C) spouse and children, other lineals, parents, collateral heirs.
D) spouse and lineals equally, parents, collateral heirs.
Q2) A written will must be signed by the testator at the bottom or end of the will.
A)True
B)False
Q3) 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.
Q4) Generally, the right to make a will is limited to persons 18 or older.
A)True
B)False
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