Legal Aspects of Business Exam Preparation Guide
Course Introduction
Legal Aspects of Business provides students with a foundational understanding of the legal environment in which businesses operate. The course covers key topics such as contract law, agency, partnership and company law, intellectual property rights, consumer protection, and the legal framework governing commercial transactions. Emphasis is placed on practical applications of legal principles to real-world business situations, enabling students to recognize and analyze legal risks, comply with regulations, and make informed managerial decisions. Through case studies and discussions, students will develop the skills necessary to identify legal issues relevant to business operations and contribute to ethical and legally sound organizational practices.
Recommended Textbook
Business Law Principles for Todays Commercial Environment 4th Edition by
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David P. Twomey
Chapter 1: The Nature and Sources of Law
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Sample Questions
Q1) Rights guaranteed in the United States Constitution are accompanied by duties.
A)True
B)False
Answer: True
Q2) Technology:
A)has not created situations that require the application of new rules of law.
B)has indeed created situations that require the application of new rules of law.
C)has done away with the right of privacy.
D)has made it easier to identify when one's privacy has been invaded.
Answer: B
Q3) Your private life is protected from intrusions by other people by:
A)the Fourth Amendment of the United States Constitution.
B)the Equal Protection Clause.
C)court decisions of the United States Supreme Court.
D)local ordinance.
Answer: C
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Chapter 2: The Court System and Dispute Resolution
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Q1) One of the motions that can be made after a verdict has been entered is a motion for a:
A)mistrial.
B)summary judgment.
C)directed verdict.
D)judgment notwithstanding the verdict.
Answer: D
Q2) Once a lawsuit is commenced,the case must go to the jury.
A)True
B)False
Answer: False
Q3) Which of the following is an example of limited or special jurisdiction court?
A)Probate court
B)Juvenile court
C)Domestic Relations court
D)All of the above.
Answer: D
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Chapter 3: Business Ethics, social Forces, and the Law
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Sample Questions
Q1) 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
Q2) Unfortunately,there is no evidence that commitment to ethical values is linked with financial performance of business organizations.
A)True
B)False
Answer: False
Q3) Individual intentions,as expressed in contracts and wills,will not be given effect in the United States unless expressly authorized by law.
A)True
B)False
Answer: False
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Page 5
Chapter 4: The Constitution As the Foundation of the Legal Environment
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Q1) The states may coin money as long as it is backed by gold.
A)True
B)False
Q2) Within the past five years,the U.S Supreme Court has:
A)placed some limitations on the commerce clause.
B)increased Congressional authority for all activities that have economic impact.
C)given states the ability to override the federal government on interstate commerce issues.
D)all of the above
Q3) One of the characteristics of the "living" Constitution is limited government.
A)True
B)False
Q4) Silence of Congress indicates that Congress is unwilling to make changes to an existing law.
A)True
B)False
Q5) Ex post facto laws can be adopted by either states or the national government.
A)True
B)False
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Chapter 5: Government Regulation of Competition and Prices
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Q1) Requiring buyers to purchase one product in order to get another is acceptable practice and not a violation of the Sherman Act.
A)True
B)False
Q2) Criminal penalties are possible under the Sherman Act.
A)True
B)False
Q3) A "suggested retail price" is not a violation of the antitrust laws.
A)True
B)False
Q4) A person who attempts to monopolize any part of the trade or commerce among the states:
A)is guilty of a misdemeanor.
B)is guilty of a felony.
C)can be fined up to $500,000.
D)none of the above.
Q5) A manufacturer having a restriction on territories in the form of a sole outlet is a per se violation.
A)True
B)False
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Chapter 6: Administrative Agencies
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Q1) Agency investigations of possible violations of agency rules are handled through independent enforcement agencies.
A)True
B)False
Q2) A subpoena to testify or to produce records:
A)is prohibited by the constitutional guarantee against unreasonable searches and seizures.
B)is an illegal attempt to gain information by compulsion.
C)cannot be opposed on the grounds that such a request constitutes an unreasonable search and seizure.
D)must be approved by corporate officers to be effective.
Q3) An administrative agency has the power to investigate,to require persons to appear as witnesses,to require witnesses to produce relevant papers and records,and to bring proceedings against those who violate the law.
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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Q1) A common barrier to the free movement of goods across borders is the tariff barrier.
A)True
B)False
Q2) The United Nations Conference on Trade and Development (UNCTAD):
A)represents the interests of less developed countries.
B)arbitrates trade disputes between countries.
C)furnishes letters of credit to expedite trade.
D)all of the above.
Q3) The Securities and Exchange Commission (SEC)is not limited to litigation when a securities law enforcement investigation runs into secrecy or blocking laws.
A)True
B)False
Q4) When a foreign government takes over an American business that is being conducted in the foreign country,this is called:
A)expropriation.
B)dollar credits.
C)suspension agreement.
D)antidumping.
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Chapter 8: Crimes
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Sample Questions
Q1) A person who did not necessarily commit the crime can still be held criminally responsible for acts committed by others __________.
A)only for non-business crimes
B)only for business crimes
C)both a.and b.
D)neither a.nor b.
Q2) The Sarbanes-Oxley Act (SOX)made minor adjustments to penalties and prison sentences for executives of companies.
A)True
B)False
Q3) The Fourth Amendment warrant requirement does not apply to businesses.
A)True
B)False
Q4) Knowingly making false statements in a loan application to a federally insured bank:
A)is a form of embezzlement
B)is a federal crime.
C)is a crime in the state the bank operates in.
D)all of the above.
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Chapter 9: Torts
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Sample Questions
Q1) In terms of defamation liability,members of the United States Congress enjoy an absolute privilege when they are speaking on the floor of the Senate or the House of Representatives.
A)True
B)False
Q2) Libel is the printed equivalent of the spoken form of defamation known as slander.
A)True
B)False
Q3) Truth is not a defense to defamation.
A)True
B)False
Q4) For tort liability to be imposed,the perpetrator of the tort must have acted with the intent to do wrong.
A)True
B)False
Q5) If a crime does not hurt an identifiable person,it is not a tort.
A)True
B)False
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Chapter 10: Intellectual Property Rights
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Sample Questions
Q1) Generic terms that refer to a type or class of goods are never subject to trademark protection.
A)True
B)False
Q2) Trade dress refers to the packaging look and overall image of a product.
A)True
B)False
Q3) To be patentable,an invention must be new and not obvious to a person of ordinary knowledge and skill in the art or technology to which the invention is related.
A)True
B)False
Q4) Under the Computer Software Copyright Act of 1980,a written program:
A)must be written in object code in order to be protected.
B)must be written in source code in order to be protected.
C)is protected as any other copyrighted material,even if it is in written form.
D)is protected but does not receive the same protections as other copyrighted materials.
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Page 12
Chapter 11: Cyberlaw
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Sample Questions
Q1) Employee e-mail is:
A)spontaneous.
B)candid.
C)discoverable.
D)all of the above.
Q2) The key to being able to have Internet Service Providers (ISPs)release identities of those who post statements on the Internet is whether the posters were engaged in illegal or harmful activities.
A)True
B)False
Q3) The term "cyberspace" describes the World Wide Web and Internet communication.
A)True
B)False
Q4) Federal law now recognizes the validity of electronic signatures.
A)True
B)False
Q5) The formation of contracts in cyberspace is always governed by the law of the United States.
A)True
B)False
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Chapter 12: Nature and Classes of Contracts: Contracting
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Sample Questions
Q1) A void contract is one that is otherwise valid but may be rejected or set aside by one of the parties.
A)True
B)False
Q2) An executory contract is an agreement by which something remains to be done by one or both parties.
A)True
B)False
Q3) An offer of a reward for the arrest and conviction of a criminal is an example of a:
A)unilateral contract.
B)bilateral contract.
C)quasi contract.
D)formal contract.
Q4) Negotiable instruments are:
A)formal contracts.
B)informal contracts.
C)option contracts.
D)first-refusal agreements.
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Chapter 13: Formation of Contracts: Offer and Acceptance
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Q1) Offers,acceptances of offers,and revocations of offers are all effective when mailed in a properly-addressed envelope bearing the proper amount of postage.
A)True
B)False
Q2) Contractual intention is determined by objective standards.
A)True
B)False
Q3) If an offeree accepts an offer before it is effectively revoked:
A)a void contract is formed.
B)a voidable contract is formed.
C)an unenforceable contract is formed.
D)a valid contract is formed.
Q4) An agreement cannot be enforced if it does not set forth every contractual detail. A)True
B)False
Q5) A "best efforts" clause is always deemed too indefinite to be enforceable.
A)True
B)False
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Chapter 14: Capacity and Genuine Assent
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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) The maximum amount of time that a minor has to disaffirm a contract is:
A)one year from the date of the agreement.
B)30 days from learning of his or her right to disaffirm.
C)the age of majority.
D)a reasonable period of time after reaching the age of majority.
Q3) Ratification consists of any words or conduct of a former minor manifesting an intent to be bound by the terms of a contract made while a minor.
A)True
B)False
Q4) The key time for determining whether a party lacked contractual capacity is:
A)the time the contract was made.
B)the time the value of the bargain becomes clear.
C)the time set for performance of the contract.
D)the time the plaintiff expresses dissatisfaction with the contract terms.
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Page 16
Chapter 15: Consideration
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Sample Questions
Q1) John received a promotion at work and felt new clothes would be necessary in the new position.John went to a local store and charged three ties on his charge account at a cost of $60 each.Bill,a friend of John's,saw a sidewalk vendor selling ties at a cost of three for $10 and bought three at that price.The friends compared purchases that night and found that they had purchased identical ties.John became enraged and said that he would not pay the charge-account bill because the ties were clearly not worth $60 each.Bill indicated that he would testify on John's behalf if litigation ensued.What would be the probable outcome of the lawsuit?
Q2) Consideration is:
A)the concern shown by the other contracting party.
B)what is demanded by the promisor as the price for the promise.
C)a stated number of dollars.
D)the concern of both contracting parties for the protection of the environment.
Q3) Under the doctrine of promissory estoppel,a promisor may be prevented from asserting that his or her promise is unenforceable because the promisee gave no consideration for the promise.
A)True
B)False
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Chapter 16: Legality and Public Policy
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Q1) Courts are quick to invalidate contracts on the ground that they are contrary to public policy because such contracts are so offensive to society.
A)True
B)False
Q2) Sam Wilson often goes to the horse races,participates in his state's lottery,and invests heavily in the stock of major U.S.companies.At work,Wilson is approached by his coworkers and asked to participate in a football pool."It's totally based upon skill," his friends claim.In addition,Wilson's philanthropic club is holding a raffle in which an individual could win a new car.Are these activities gambling and therefore illegal activities?
Q3) An agreement that calls for the commission of a civil wrong is illegal and void.
A)True
B)False
Q4) Agreements not to compete are always void.
A)True
B)False
Q5) Agreements that are contrary to public policy are not binding.
A)True
B)False
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Chapter 17: Writing, electronic Forms, and Interpretation of Contracts
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Q1) A writing required by the statute of frauds may be a signed note or memorandum. A)True
B)False
Q2) Bart was a self-made millionaire who had earned his fortune by dedicated hard work.Bart had worked so hard that he never had developed much of a social life.Bart met Linda and fell in love with her.When Bart proposed to Linda,she told him that she needed time before making such an important decision.Pressing her for a favorable response,Bart telephoned Linda and promised her $100,000 if she would marry him.Linda then accepted the proposal.
Bart contracted with Quick Builders for the construction of a home Bart intended to move into with Linda after their marriage.Construction by Quick was not very quick because Quick was not paying subcontractors the sums that they were owed.They,in turn,were not completing their work.To expedite matters,Bart called the subcontractors and assured them that Bart would pay any sums that Quick Builders did not pay if they would complete the construction.
Bart and Linda married and the subcontractors completed the work.Quick Builders did not pay the subcontractors in full.Bart failed to pay Linda the $100,000.Both Linda and the subcontractors sued Bart.Discuss the probable outcome of the lawsuits.
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Chapter 18: Third Persons and Contracts
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Q1) When work is guaranteed by one who repairs a building,the owner,on selling the building,may assign the guarantee to the buyer.
A)True
B)False
Q2) It is necessary that a third-party beneficiary be identified by name.
A)True
B)False
Q3) The substitution of an old contract for a new one that replaces an obligation or a party for another is a:
A)novation.
B)warranty.
C)assignment.
D)delegation of duties.
Q4) An assignment,if otherwise valid,takes effect the moment it is made.
A)True
B)False
Q5) A person who has a right to buy on credit can transfer that right to a close relative. A)True
B)False
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Chapter 19: Discharge of Contracts
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Q1) In most bilateral contracts,the performances of the parties are concurrent conditions.
A)True
B)False
Q2) Payment by check is a conditional payment.
A)True
B)False
Q3) 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
Q4) In which case will performance on the exact date specified in the contract most likely be deemed essential?
A)a sale of goods that fluctuate rapidly in value.
B)a sale of goods that remain stable in value.
C)a sale of real estate.
D)a sale of goods where no harm results from a delay in performance.
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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 damages that are typically recoverable when a contract has been breached and one party has suffered loss are called:
A)punitive damages.
B)emotional distress damages.
C)compensatory damages.
D)liquidated damages.
Q3) An injured party who rescinds a contract after having performed services may recover the reasonable value of the performance rendered under restitutionary or quasi-contractual damages.
A)True
B)False
Q4) Punitive damages are generally recoverable in contract actions.
A)True
B)False
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Chapter 21: Personal Property and Bailments
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Q1) The bailor must both inform the bailee of known defects and make a reasonable investigation to discover defects in a:
A)mutual benefit bailment.
B)Bailment for the sole benefit of the bailee.
C)both a.and b.
D)neither a.nor b.
Q2) 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.
Q3) Nelson took her computer to ABC Computer for repairs.ABC repaired the computer at a cost of $350 and informed Nelson that her computer was ready.Before Nelson came to pick up her computer,ABC was burglarized and Nelson's computer was taken.ABC had a commonly-used alarm system that was operating properly on the night of the burglary,and all the doors and windows were properly secured.Nelson sued ABC for the cost of the computer.ABC denied any liability and counterclaimed for the $350 in repairs.Who will win?
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Chapter 22: Legal Aspects of Supply Chain Management
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Q1) A warehouse receipt is not considered a document of title.
A)True
B)False
Q2) Bob Brown entered the Hotel Lux to attend a conference being held within the hotel.Sam Smith arrived to attend the same conference,registered at the front desk,and 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?
Q3) General contract law determines whether a limitation clause is a part of the contract between the warehouser and the customer.
A)True
B)False
Q4) In most states,statutes limit or provide a method of limiting the common law liability of a hotelkeeper.
A)True
B)False
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24
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) All goods other than those existing and owned by a seller at the time of a transaction are called:
A)existing goods.
B)tangible goods.
C)future goods.
D)intangible goods.
Q3) When the price of the goods is $500 or more,a writing signed by the defendant is required in all cases.
A)True
B)False
Q4) Article 2 of the Uniform Commercial Code applies to the sale of:
A)corporate stocks.
B)U.S.Treasury bonds.
C)goods.
D)insurance policies.
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Chapter 24: Title and Risk of Loss
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Q1) If a seller under a shipment contract sends nonconforming goods,the risk of loss in transit is on the buyer.
A)True
B)False
Q2) In the case of a nonshipment contract,risk of loss passes to the buyer upon actual receipt of goods:
A)only if the seller is a merchant
B)only if the seller is a nonmerchant
C)only if the buyer has already paid for them
D)in all nonshipment contracts
Q3) In a self-service store a sale cannot occur until the goods are paid for.
A)True
B)False
Q4) A seller's insurable interest in goods always terminates with the passage of the title to the buyer.
A)True
B)False
Q5) Future goods can be identified before they are manufactured.
A)True
B)False
26
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Chapter 25: Product Liability: Warranties and Torts
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Q1) The theories of product liability are mutually exclusive.
A)True
B)False
Q2) When a buyer makes a purchase without relying on the seller's skill and judgment,no warranty of fitness for a particular purpose exists.
A)True
B)False
Q3) A warranty may be express or implied.
A)True
B)False
Q4) An implied warranty arises automatically from the fact a sale has been made.
A)True
B)False
Q5) Which of the following statements made by the seller does not likely constitute an express warranty?
A)"This looks beautiful on you."
B)"This is 100 percent wool."
C)"This motor generates 100 horsepower."
D)"This is a 3.2 liter rotary engine."
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Chapter 26: Obligations and Performance
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Q1) A delivery is sufficient if it is made in accordance with the terms of the contract to sell.
A)True
B)False
Q2) The standard for commercial impracticability is:
A)hypothetical.
B)conjectural.
C)objective.
D)subjective.
Q3) A buyer has the right to accept some commercial units of a shipment and reject other commercial units.
A)True
B)False
Q4) A party to a sales contract may demand at any time that the other party provide adequate assurance of performance.
A)True
B)False
Q5) The standard for rejection requires that any defect in the good be material.
A)True
B)False
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Chapter 27: Remedies for Breach of Sales Contracts
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Q1) A buyer may reject the goods or revoke the acceptance for any defects in the goods.
A)True
B)False
Q2) A seller's right to retain possession of goods until the seller has been paid is called a:
A)seller's lien.
B)buyer's lien.
C)merchandise estoppel.
D)nonpayment tort.
Q3) 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
Q4) To revoke acceptance of goods:
A)any defect or nonconformity must be discovered.
B)the goods must be dangerously defective.
C)the nonconformity must substantially impair the value of the goods.
D)action must be taken by the buyer within 60 days of delivery.
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Chapter 28: Kinds of Instruments, parties, and Negotiability
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Q1) If an order or promise is not for money,the instrument is not negotiable.
A)True
B)False
Q2) A payee has no rights in an instrument until:
A)the drawer or the maker has delivered the instrument to the payee.
B)an acceptor has been established.
C)an accommodation party has signed the instrument.
D)a guarantor has signed the instrument.
Q3) The drawee on a check is a bank.
A)True
B)False
Q4) An instrument is payable on demand if it is payable:
A)on or before a stated date.
B)at sight or presentation.
C)at a fixed time after acceptance.
D)all of the above.
Q5) If an instrument is negotiable,it is governed by Article 2 of the UCC.
A)True
B)False
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Chapter 29: Transfers of Negotiable Instruments and
Warranties of Parties
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Q1) If an instrument is payable to bearer,it may be negotiated by transfer of possession alone.
A)True
B)False
Q2) The warranties made by an unqualified indorser guarantee that payment of the instrument will be made.
A)True
B)False
Q3) A special indorsement consists of the signature of the indorser and the words identifying the person to whom the indorser makes the instrument payable.
A)True
B)False
Q4) A qualified indorsement qualifies the effect of a blank or special indorsement by disclaiming certain liabilities of the indorser to a maker or drawee.
A)True
B)False
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Chapter 30: Liability of the Parties Under Negotiable Instruments
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Q1) The FTC rule,which provides that a notice provision must be included in all consumer credit contracts,requires that the notice:
A)limit recovery under the contract to amounts paid by the debtor plus a reasonable charge for incidental damages.
B)be in italic type.
C)be at least 20 points in size.
D)has the effect that no subsequent person can be a holder in due course of the instrument.
Q2) Bad faith sometimes exists just because a transferee takes an instrument under odd circumstances.
A)True
B)False
Q3) A holder who is neither a holder in due course nor a holder through a holder in due course is subject to every defense,just as though the instrument were not negotiable.
A)True
B)False
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Chapter 31: Checks and Funds Transfers
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Q1) A check is drawn on the assumption that the bank has sufficient funds in the drawer's account for payment.
A)True
B)False
Q2) If oral,a stop payment order is binding on the bank for __________ days unless confirmed in writing within that time.
A)five (5)
B)seven (7)
C)fourteen (14)
D)thirty (30)
Q3) Certification of a check at the request of a holder:
A)releases all prior secondary parties.
B)releases the drawer but not prior indorsers.
C)releases prior indorsers,but not the drawer.
D)does not release all prior secondary parties.
Q4) A forged endorsement must be reported within one year of the time that the bank statement is received.
A)True
B)False
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Chapter 32: Nature of the Debtor-Creditor Relationship
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Q1) A letter of credit:
A)is an advance arrangement for financing.
B)is used only in domestic sales.
C)involves only two parties.
D)all of the above.
Q2) An agreement or provision in an agreement that one party shall not be held liable for loss is:
A)contribution.
B)exoneration.
C)indemnity.
D)subrogation.
Q3) A surety is liable from the moment of default whereas a guarantor is ordinarily only liable if the creditor cannot collect from the principal debtor.
A)True
B)False
Q4) Suretyship is a pledge to pay one's own debts and obligations.
A)True
B)False
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Chapter 33: Consumer Protection
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Q1) 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.
Q2) The CARD Act substantially restricts the solicitation of credit card accounts for those under the age of 18.
A)True
B)False
Q3) When improper collection methods are used,it is no defense to the creditor that the improper acts were performed by an agent,an employee,or any other person acting on behalf of the creditor.
A)True
B)False
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Chapter 34: Secured Transactions in Personal Property
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Q1) When the filing of a financing statement is defective:
A)the security interest is lost.
B)the filing fails to perfect the security interest.
C)the security interest is perfected through the court's application of equitable principles.
D)the public notice of the creditor's interest is still effective.
Q2) For a security interest to attach,the creditor must file a financing statement. 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) Under Revised UCC Article 9,a financing statement must be signed by the debtor. A)True
B)False
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Chapter 35: Bankruptcy
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Q1) Where the debtor has fewer than twelve (12)creditors,how many must sign an involuntary petition?
A)one (1),assuming that the creditor's unsecured claim is at least $14,425
B)one (1),assuming that the creditor's secured claim is at least $15,575
C)three (3),assuming that the creditors' unsecured claims total at least $14,425
D)three (3),assuming that the creditors' secured claims total at least $15,575
Q2) Which of the following is a preferential transfer?
A)a transaction for present consideration
B)a payment in the ordinary course of business
C)both a.and b.are preferential transfers
D)neither a.nor b.are preferential transfers
Q3) The holder of a claim that is the subject of a bona fide dispute may be counted as a petitioning creditor.
A)True
B)False
Q4) If the debtor is generally not paying debts as they become due,the debtor may be subject to an involuntary bankruptcy petition.
A)True
B)False
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Chapter 36: Insurance
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Q1) For the purposes of Personal Auto Policy (PAP)coverage,an insured person "uses" an automobile by unloading groceries from the car while it is parked in the garage.
A)True
B)False
Q2) Under no-fault insurance,an insurer is obligated to pay an injured person without regard to whose fault caused the harm.
A)True
B)False
Q3) The formation of a contract of insurance is governed by the general principles applicable to contracts.
A)True
B)False
Q4) When a provision of an endorsement conflicts with a provision of a policy,the endorsement controls.
A)True B)False
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Page 38
Chapter 37: Agency
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Q1) The term apparent authority is used when an appearance of authority has been created by a principal,but actual authority does not exist.
A)True
B)False
Q2) When a person is authorized by the principal to transact all affairs in connection with a particular type of business or trade or to transact all business at a certain place,that person is a __________ agent.
A)general
B)perfected
C)special
D)universal
Q3) By virtue of an agency,one person can make contracts at numerous places with many different parties at the same time.
A)True
B)False
Q4) An agency may arise by appointment,conduct,ratification,or operation of law.
A)True
B)False
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Chapter 38: Third Persons in Agency
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Q1) Agents are liable for harm caused third persons by the agents' fraudulent,intentional,or negligent acts.
A)True
B)False
Q2) Apparent authority has the same effect as:
A)undisclosed authority.
B)actual authority.
C)partially disclosed authority.
D)none of the above.
Q3) 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
Q4) In general,a principal is liable for crimes of the agent committed while acting within the scope of the agency,even if the principal did not authorize commission of the crimes.
A)True
B)False
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Chapter 39: Regulation of Employment
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Q1) Collective bargaining agreements generally are subject to a ratification vote by the employees.
A)True
B)False
Q2) A dispute arose in a small factory and the workers decided to strike concerning the firing of an employee for union-organizing activity.As the strike wore on without resolution,the employer hired what the employer called permanent replacements for the strikers.Eventually,the strike was settled.Are the fired workers entitled to getting their jobs back?
Q3) "Right-to-know" laws in some states guarantee employees the right to know if there are hazardous substances in their workplaces.
A)True
B)False
Q4) Deductions from wages for cash or merchandise shortages are legal even if they reduce an employee's wages below the minimum wage.
A)True
B)False
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Chapter 40: Equal Employment Opportunity Law
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Q1) When an employer intentionally treats some employees less favorably than others,the legal theory that applies is:
A)disparate impact.
B)affirmative action.
C)reverse discrimination.
D)disparate treatment.
Q2) The Equal Pay Act prohibits variation in wage rates paid to men and women based solely on gender.
A)True
B)False
Q3) Title VII of the Civil Rights Act of 1964 applies to:
A)the hiring process.
B)discipline.
C)discharge
D)all of the above.
Q4) To be lawful,affirmative action must be time-limited .
A)True
B)False
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Page 42
Chapter 41: Types of Business Organizations
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Q1) 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
Q2) The death of a majority shareholder terminates a corporate enterprise.
A)True
B)False
Q3) Partnership agreements allow individuals to conduct their business without the requirement of a formal organizational structure.
A)True
B)False
Q4) Unincorporated associations are generally formed to further a common purpose.
A)True
B)False
Q5) If there is a joint venture,the fault or negligence of one venturer will not be imputed to the other venturers.
A)True
B)False
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Chapter 42: Partnerships
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Q1) Prohibited transactions by a partner without the consent of other partners include:
A)a contract that makes it impossible for the firm to conduct its usual business.
B)submitting controversies of the firm to arbitration.
C)making a general assignment of firm property for the benefit of creditors
D)all of the above.
Q2) The sharing of profits and losses is conclusive evidence of partnership.
A)True
B)False
Q3) A partner admitted as a partner into an existing partnership has unlimited liability for all obligations of the partnership arising before such admission.
A)True
B)False
Q4) When a partner executes an agreement outside the limitations of that partner's agreed scope of power,the other partners are always able to set aside the contract.
A)True B)False
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Chapter 43: LPs, LLCs, and LLPs
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Q1) The spread of limited liability corporation statutes resulted from:
A)a United States Supreme Court decision.
B)an Internal Revenue Service ruling.
C)a Wyoming Supreme Court decision.
D)a Securities and Exchange Commission ruling.
Q2) A limited partnership can be formed by one (1)or more __________ partners and one (1)or more __________ partners.
A)unreserved; reserved
B)active; silent
C)licensed; unlicensed
D)general; limited
Q3) A limited liability company may hold property in its own name.
A)True
B)False
Q4) The partners who manage the limited partnership and are personally liable for the firm debts are __________ partners.
A)general
B)active
C)licensed
D)unreserved
Page 45
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Chapter 44: Corporate Formation
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Q1) An enterprise that conducts business following a merger or consolidation succeeds to:
A)all of the rights of the predecessor.
B)all of the property of the predecessor.
C)all of the debts and liabilities of the predecessor.
D)all of the above.
Q2) In a merger or consolidation,the surviving corporation generally succeeds to all the rights and property of the predecessor.
A)True
B)False
Q3) A corporation may be judicially dissolved when its management is deadlocked and the deadlock cannot be broken by the shareholders.
A)True
B)False
Q4) For the purpose of determining the right to bring a lawsuit in federal court,a corporation is a citizen of any state in which it has been incorporated and of the state where it has its principal place of business.
A)True
B)False
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Chapter 45: Shareholder Rights in Corporations
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Q1) The Toy Corporation issued 200 shares of stock with no par value.The articles of incorporation provided that the board of directors had the right to fix the value of the stock.Through subscription agreements between the directors and two subscribers,101 shares were issued to Maria Perez for $5,000,and 99 shares were issued to Ken Pilar for $15,000.Toy is now insolvent and is unable to pay the $6,000 it owes to Pine,its major supplier.Pine has brought suit against Perez,claiming that the subscription agreement was invalid.How will the case be decided?
Q2) Corporate securities evidenced by a certificate are negotiable.
A)True
B)False
Q3) A provision giving a corporation the right to purchase a shareholder's shares on the death of the shareholder is invalid.
A)True
B)False
Q4) When an individual owns a share of stock in a corporation,that individual:
A)has an ownership interest in the corporation.
B)is a creditor of the corporation.
C)generally has no voting rights.
D)is in possession of a debt security.
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Chapter 46: Securities Regulation
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Q1) The Litigation Reform Act of 1995 was passed because of:
A)congressional concern over an excess of frivolous private securities lawsuits.
B)the financial burdens placed on accountants and other professional advisors due to an excess of frivolous private securities lawsuits.
C)concern that the investors in a class action lawsuit have their interests fairly represented.
D)all of the above.
Q2) Federal regulation of the sale of securities is based on the:
A)Securities Act of 1933 and the Securities Exchange Act of 1934.
B)Securities Act of 1933 and the Federal Trade Act of 1936.
C)Federal Trade Act of 1936 and the Blue Sky Act of 1933.
D)Fair Stock Act of 1932 and the Investment Securities Act of 1934.
Q3) Which of the following acts was passed to ensure that public shareholders faced with a cash tender offer would not be required to respond without sufficient information?
A)the Mann Act
B)the Robinson-Patman Act
C)the Williams Act
D)the SEC Act
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Chapter 47: Accountants Liability and Malpractice
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Q1) Professionals who fail to exercise normal care and skill in the performance of a contract for their services may be sued for a special type of breach described as:
A)sub par performance.
B)illegal practice.
C)malpractice.
D)competence reservation.
Q2) The "known user" rule imposes liability on the accountant for negligent malpractice when he or she can foresee the parties who will rely on his work in the financial statements.
A)True
B)False
Q3) One of the concerns reflected in Sarbanes-Oxley was that auditors were not exercising sufficient discretion and independence in conducting audits of their clients.
A)True
B)False
Q4) Malpractice is both a form of negligence and a tort.
A)True
B)False
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Chapter 48: Management of Corporations
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Q1) A board of directors' oversight responsibilities for its company's business affairs do not include evaluating management's performance.
A)True
B)False
Q2) Which of the following is an incorrect statement about officers?
A)Their duties are generally set forth in the corporation's bylaws.
B)They have a fiduciary obligation to the corporation.
C)They are agents of the corporation.
D)Their authority as agents is increased if they are shareholders.
Q3) The relationship between a corporation and its agents is governed by the:
A)statute under which the corporation was formed.
B)corporate charter.
C)corporate bylaws.
D)same rules as are applicable when the principal is a natural person.
Q4) Corporate officers may avail themselves of all business opportunities that come to them in an individual capacity regardless of whether or not the opportunity lies within their field of duty.
A)True
B)False
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Chapter 49: Real Property
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Q1) A promise that the grantor of an interest in land will execute any additional documents required to perfect the title of the grantee is known as a covenant:
A)of seisin.
B)of further assurances.
C)against encumbrances.
D)of quiet enjoyment.
Q2) 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.
Q3) A trade fixture is a fixture that is traded in by the owner when purchasing new fixtures.
A)True
B)False
Q4) A condominium is a combination of co-ownership and individual ownership.
A)True
B)False
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Chapter 50: Environmental Law and Land Use Controls
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Q1) Valid restrictive covenants will bind future owners of the land if:
A)they are published in the Federal Register.
B)there is a notation in the deed referencing the restrictive covenants.
C)they are published in a newspaper of general circulation.
D)they are filed with the attorney general of the state in which the land is located.
Q2) Nuisances may be classified as either private nuisances or public nuisances.
A)True
B)False
Q3) Due diligence is the process by which the buyer of property conducts a thorough investigation of the property and its uses to determine whether environmental or nuisance problems exist.
A)True
B)False
Q4) __________ of the federal environmental laws carry criminal penalties for violations.
A)All
B)Most
C)Very few
D)None
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Chapter 51: Leases
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Q1) A tenancy for an indefinite time period that may be terminated at any time by landlord or tenant is called a tenancy:
A)at will.
B)for years.
C)at sufferance.
D)from year to year.
Q2) A landlord has the right to enter a leased premises without notice:
A)for emergency purposes.
B)for repairs and evaluations.
C)both a.and b.
D)none of the above.
Q3) A tenancy for years terminates at the expiration of the specified term,regardless of whether one party gives the other any notice of termination.
A)True
B)False
Q4) Renewal provisions in a lease are strictly construed against the tenant.
A)True
B)False
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Chapter 52: Decedents Estates and Trusts
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Q1) The judge,not the decedent,has the privilege of naming who is to administer the estate of a person who has died with a will.
A)True
B)False
Q2) Generally,the right to make a will is limited to persons 18 or older.
A)True
B)False
Q3) Which of the following is generally not required for the testator to have testamentary capacity?
A)The testator knows the exact value of his or her estate.
B)The testator understands the writing to be a will.
C)The testator has a reasonable appreciation of the identity of relatives and friends.
D)The testator has a reasonable appreciation of the extent of the property that may exist at death.
Q4) Testamentary intent makes the provisions of the testator effective and binding during the testator's life.
A)True
B)False
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54