Legal Aspects of Business Exam Review
Course Introduction
Legal Aspects of Business examines the fundamental principles and frameworks governing the legal environment of business. The course explores key topics such as contracts, agency, employment law, company formation and regulation, intellectual property, and dispute resolution. Through real-world case studies and legal analysis, students learn to identify legal risks and obligations, understand statutory and regulatory compliance, and appreciate the role of the judiciary in business operations. By the end of the course, students will have developed the ability to analyze legal issues critically and make informed business decisions within the context of relevant laws and ethical standards.
Recommended Textbook
Business Law and the Legal Environment 21st Edition by David P. Twomey
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52 Chapters
2751 Verified Questions
2751 Flashcards
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Chapter 1: The Nature and Sources of Law
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56 Verified Questions
56 Flashcards
Source URL: https://quizplus.com/quiz/39898
Sample Questions
Q1) Treaties made by the United States are not deemed part of the law.
A)True
B)False
Answer: False
Q2) In the United States today, we generally have one law court and one equity court.
A)True
B)False Answer: False
Q3) One of our most important rights is the right of privacy.
A)True
B)False
Answer: True
Q4) A right is defined as:
A) an obligation.
B) a legal capacity to require another party to perform.
C) any written promise.
D) none of the above.
Answer: B
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Page 3
Chapter 2: The Court System and Dispute Resolution
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57 Verified Questions
57 Flashcards
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Sample Questions
Q1) Documents filed by both parties at the beginning of a lawsuit are called the pleadings.
A)True
B)False
Answer: True
Q2) The United States Supreme Court was created by:
A) Congress.
B) the President.
C) the Uniform State Law Commission.
D) none of the above.
Answer: D
Q3) Generally, the prevailing party in a lawsuit will be awarded the costs of the action, including witness fees and jury fees.
A)True
B)False
Answer: True
Q4) The Uniform Arbitration Act requires a written agreement to arbitrate an issue.
A)True
B)False
Answer: True
Page 4
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Chapter 3: Business Ethics, Social Forces, and the Law
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52 Verified Questions
52 Flashcards
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Sample Questions
Q1) The importance of trust as a fundamental principle underlying business transactions is illustrated by expectations that:
A) investors will be able to earn a return on their investments.
B) employees may be discharged at any time for any reason without notice.
C) litigation is inevitable because parties to agreements usually break promises.
D) insider trading proves that the economic system underlying business is flawed.
Answer: A
Q2) Over half of all Fortune 500 firms train their employees to recognize and deal with particular types of behavior that breach their ethical codes.
A)True
B)False
Answer: True
Q3) Ethics is a philosophical concept that deals with values related to the nature of human conduct.
A)True
B)False Answer: True
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Chapter 4: The Constitution As the Foundation of the Legal Environment
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57 Verified Questions
57 Flashcards
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Sample Questions
Q1) Which of the following is true about administrative agencies?
A) Administrative agencies exercise powers guaranteed to them in the U.S. Constitution.
B) Administrative agencies exercise powers allocated to them by the president.
C) Administrative agencies make decisions that are rarely reviewed by the courts.
D) Administrative agencies make decisions that are effectively reviewed by voters.
Q2) The living Constitution has as a characteristic a strong president.
A)True
B)False
Q3) The Constitution prohibits discrimination based on reasonable classification.
A)True
B)False
Q4) The "living" Constitution has which of the following characteristics?
A) strong federal government
B) a strong president
C) diminution of state powers relative to those of the federal government
D) all of the above
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Page 6
Chapter 5: Government Regulation of Competition and Prices
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48 Verified Questions
48 Flashcards
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Sample Questions
Q1) Price discrimination is not permitted even when it can be justified on the basis of a difference in grade, quality, or quantity.
A)True
B)False
Q2) State governments may regulate business in all of its aspects, even if such regulation imposes a burden on interstate commerce.
A)True
B)False
Q3) The Federal Trade Commission has taken enforcement steps against refusals to sell, boycotts, market restrictions, disparagement of competitors' products, and unlawful methods of billing and collection.
A)True
B)False
Q4) A state may prohibit a seller from selling below cost if the purpose is to harm competitors.
A)True
B)False
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Chapter 6: Administrative Agencies
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58 Verified Questions
58 Flashcards
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Sample Questions
Q1) Ordinarily, a court will __________ an agency's decision to do nothing about a particular complaint.
A) not reverse
B) reverse
C) remand
D) none of the above
Q2) 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.
Q3) The Federal Register lists all administrative regulations, presidential proclamations, and executive orders on a semiannual basis.
A)True
B)False
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Chapter 7: The Legal Environment of International Trade
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57 Verified Questions
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Sample Questions
Q1) A letter of credit agrees to provide the seller with needed currency exchanges when transactions with foreign buyers occur.
A)True
B)False
Q2) The GATT:
A) is a multilateral treaty
B) is subscribed to by the United States
C) has as its goal the liberalization of world trade
D) all of the above
Q3) In antidumping cases:
A) The International Trade Administration determines whether foreign goods are being sold in the United States at less than fair value (LTFV).
B) The International Trade Commission determines if there is an injury to a U.S. industry as a result of such sales.
C) Remedial action will be taken only if findings of both LTFV sales and injury are present.
D) All of the above
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Chapter 8: Crimes
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57 Verified Questions
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Sample Questions
Q1) An innocent person convicted of a crime is never able to receive compensation for the wrong.
A)True
B)False
Q2) "Mental state" does not require an awareness of guilt.
A)True
B)False
Q3) For an act to be considered a crime, it is necessary that some person be harmed.
A)True
B)False
Q4) Bribery requires the use of violence.
A)True
B)False
Q5) Money __________ involves the knowing and willful participation in a financial transaction involving unlawful proceeds when the transaction is designed to conceal or disguise the source of the funds.
A) ironing
B) vacuuming
C) laundering
D) cooking
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Chapter 9: Torts
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58 Verified Questions
58 Flashcards
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Sample Questions
Q1) The tort of intentional infliction of emotional distress requires proof of outrageous conduct and resulting emotional distress in the victim.
A)True
B)False
Q2) A wrong that arises from a violation of a private duty is called a:
A) criminal action.
B) tort.
C) crime.
D) de mala.
Q3) The media enjoy a qualified privilege for stories that turn out to be false.
A)True
B)False
Q4) Maria intentionally attempts to have Patty break a contract Patty has with Alfred. Maria will be liable under which theory of tort?
A) libel
B) product disparagement
C) contract interference
D) intentional infliction of emotional distress
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Chapter 10: Intellectual Property Rights
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52 Verified Questions
52 Flashcards
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Sample Questions
Q1) Computer programs are subject to trade secrets protection.
A)True
B)False
Q2) The typical U.S. copyright now runs for 28 years, with a right of renewal for an additional 28 years.
A)True
B)False
Q3) Computer programs are subject to copyright protection.
A)True
B)False
Q4) 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
Q5) A copyright owner may prohibit even limited use of copyrighted material if it is used for parody or criticism.
A)True
B)False
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Chapter 11: Cyberlaw
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52 Verified Questions
52 Flashcards
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Sample Questions
Q1) Individuals who post defamatory messages in a "chat room" are protected from liability for defamation.
A)True
B)False
Q2) What areas of law are covered within "Cyberlaw"?
A) tort only.
B) contract only.
C) constitutional only.
D) tort, contract, and constitutional.
Q3) The remedy for misrepresentation and fraud on the Internet is the same as the remedy for misrepresentation and fraud committed on paper.
A)True
B)False
Q4) Intellectual property rights, even in cyberspace, are protected for the sake of:
A) government regulation.
B) the integrity of contract law.
C) the wealthy.
D) innovation.
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Page 13
Chapter 12: Nature and Classes of Contracts: Contracting on
the Internet
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53 Verified Questions
53 Flashcards
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Sample Questions
Q1) The elements of a contract include all of the following except:
A) an agreement.
B) two or more competent parties.
C) consideration.
D) an illegal purpose.
Q2) An executed contract is an agreement that has been completely performed.
A)True
B)False
Q3) A contract never can be both executory and unilateral.
A)True
B)False
Q4) A party to a contract may be:
A) an individual.
B) a partnership.
C) a corporation.
D) all of the above.
Q5) With regard to a unilateral contract, the offeree does not accept the offer by express agreement, but rather by performance.
A)True
B)False
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Chapter 13: Formation of Contracts: Offer and Acceptance
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Sample Questions
Q1) A firm offer is an offer that states that it is to be irrevocable, or irrevocable for a stated period of time.
A)True
B)False
Q2) Under the Uniform Commercial Code (UCC), a firm offer applies to:
A) a written, signed offer by a merchant to buy or sell goods.
B) an unwritten but definite offer to buy or sell goods.
C) a written, signed offer by anyone to buy or sell goods.
D) an unlimited, stipulated period of time.
Q3) An option contract is a binding promise to keep an offer open for a stated period of time or until a specified date.
A)True
B)False
Q4) A(n) __________ contract is a contract to buy all requirements of the buyer from the seller.
A) output
B) essentials
C) necessaries
D) requirements
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Chapter 14: Capacity and Genuine Assent
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44 Verified Questions
44 Flashcards
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Sample Questions
Q1) An incompetent person may ordinarily avoid a contract in the same manner as a minor.
A)True
B)False
Q2) A party who speaks with a reckless disregard for the truth not knowing of the falsity of his or her words cannot be liable for fraud.
A)True
B)False
Q3) As a general rule, the nondisclosure of information that is not asked for does not impose fraud liability or impair the validity of a contract.
A)True
B)False
Q4) 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
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Chapter 15: Consideration
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Sample Questions
Q1) What damages are recoverable in a case of promissory estoppel?
A) profits that the promisor expected
B) profits that the promisee expected
C) an amount necessary to restore the promisee to the position he or she would have been in had the promisee not relied on the promise
D) an amount necessary to restore the promisor to the position he or she would have been in had the promisor not relied on the promise
Q2) Charitable subscriptions by which individuals make pledges to finance the construction of a college building, a church or another structure for charitable purposes are binding to the extent that the donor should have reasonably realized that the charity was relying on the promise in undertaking the building program.
A)True
B)False
Q3) One promise may serve as consideration for many return promises.
A)True
B)False
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17
Chapter 16: Legality and Public Policy
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48 Verified Questions
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Sample Questions
Q1) One element involved in the determination of unconscionability is:
A) the comparative bargaining power of the parties.
B) the opportunity to make a contract for better terms with someone else.
C) the course of the economy after the contract is made.
D) whether a loss will be sustained by performance of the contract.
Q2) An illegal provision in a contract:
A) causes the entire contract to be voidable.
B) causes the entire contract to be rescinded.
C) can be ignored by the parties in their performance of the remaining provisions of the contract, assuming that the remaining portions of the contract can stand on their own.
D) can be ignored by the parties, because an illegal provision in a contract is not deemed substantial.
Q3) In an employment contract, agreements not to compete are:
A) illegal.
B) uniformly held to be in the public interest and therefore legal.
C) never questioned by the court.
D) valid, if the restriction is reasonable and necessary for the protection of the benefited party.
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Chapter 17: Writing, Electronic Forms, and Interpretation of Contracts
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59 Verified Questions
59 Flashcards
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Sample Questions
Q1) When a contract may be terminated at will by either party, the statute of frauds is not applicable because the contract may be terminated within one year.
A)True
B)False
Q2) When an insurance policy is ambiguous, the policy is interpreted:
A) against the insurer.
B) in favor of the insurer.
C) according to the dictionary meaning of the words.
D) according to the meaning of the words in the insurance industry.
Q3) The statute of frauds applies to:
A) a contract of indefinite duration that is terminable at will by either party.
B) a promise made directly to a debtor that the promisor will pay the creditor of the debtor what is owed.
C) a promise by an executor to pay a claim against the estate out of his or her personal funds.
D) mutual promises to marry.
Q4) Customs and trade usage can override the express provisions of a contract.
A)True
B)False
Page 19
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Chapter 18: Third Persons and Contracts
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51 Verified Questions
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Sample Questions
Q1) Generally, only the parties to a contract may sue on it.
A)True
B)False
Q2) The beneficiary of a life insurance policy is not subject to any policy restrictions that had been agreed to between the insured and the insurance company.
A)True
B)False
Q3) If there is a time limitation or any other restriction in a contract, a third-party beneficiary:
A) may ignore it.
B) may void it.
C) is bound thereby.
D) must consent to be bound thereby before it is effective.
Q4) An assignment is valid only if:
A) it is written.
B) it is written and sworn to before a notary public.
C) there is a manifestation of the intent to assign.
D) the assignment is paid for by the assignee.
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Page 20
Chapter 19: Discharge of Contracts
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Sample Questions
Q1) A typical situation where the doctrine of economic frustration applies is when the party suffers a loss when a gain was expected.
A)True
B)False
Q2) For the parties to enter into an accord and satisfaction that discharges the original obligation, there must be a bona fide dispute.
A)True
B)False
Q3) Unless a contract so provides, time is ordinarily not of the essence, and performance within a reasonable time is sufficient.
A)True
B)False
Q4) In a mutual rescission, both parties, acting in good faith, renew their commitment to perform all obligations set forth in their original agreement.
A)True
B)False
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Page 21
Chapter 20: Breach of Contract and Remedies
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Sample Questions
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 rule of mitigation of damages requires that a party injured by a breach of contract must:
A) take any and all steps possible to reduce the damages that will be sustained because of the breach.
B) discharge the contract before filing suit for breach.
C) hire someone else to perform the contract.
D) take reasonable steps to reduce the damages that would otherwise be sustained because of the breach.
Q3) If a plaintiff's loss involves damaged property, it is described as liquidated damages.
A)True
B)False
Q4) When one party breaks the contract, the contract is said to be breached.
A)True
B)False
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Chapter 21: Personal Property and Bailments
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Sample Questions
Q1) A bailee's __________ gives the bailee the right to maintain possession of the bailed property until reasonable storage and/or repair charges are paid.
A) reversionary interest
B) lien
C) remainder interest
D) mortgage
Q2) 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
Q3) Humberto called his friend John and asked him to come over immediately because Humberto had suffered a stroke and might be dying. In their telephone conversation, Humberto advised John that he wanted to give John his gold watch. Immediately after their telephone conversation, Humberto wrote out a will that left his share in Blackacre to John. Blackacre was the marital home of Humberto and Connie, who owned the home as tenants by the entirety. Humberto died before John arrived at Blackacre. John claims the watch and a share in the home. Connie contests both matters. Decide.
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Page 23
Chapter 22: Legal Aspects of Supply Chain Management
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Sample Questions
Q1) What is not included in a common carrier's lien on goods that it transports?
A) consequential damages
B) demurrage
C) costs of preserving the goods
D) costs of a sale to enforce the lien
Q2) The legal definition of a guest of a hotel requires that the person:
A) live at least five miles from the hotel.
B) is a guest of a registered occupant of the hotel.
C) is a transient.
D) stay at the hotel for at least 22 hours.
Q3) A warehouser is an insurer of goods.
A)True
B)False
Q4) The term special bailee is an historical term, but a special bailee has no greater duty than any other bailee.
A)True
B)False
Q5) Unlike warehouse receipts, bills of lading and airbills are documents of title.
A)True
B)False
24
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Chapter 23: Nature and Form of Sales
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Sample Questions
Q1) The Uniform Commercial Code applies to:
A) new goods only.
B) used goods only.
C) both new and used goods.
D) none of the above.
Q2) If a contract calls for both rendering services and supplying materials to be used in performing the services, the contract is classified according to its dominant element.
A)True
B)False
Q3) Under Article 2 of the UCC, in a situation where it is clear that the parties intended a contract, but a term in the acceptance conflicts with a term in the offer:
A) there is no contract.
B) the acceptance is viewed entirely as a counteroffer.
C) there is a contract for the terms of the offer and acceptance that are consistent, but the conflicting terms cancel out.
D) there is a contract, and the conflicting term in the offer is part of the contract.
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Chapter 24: Title and Risk of Loss
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Sample Questions
Q1) If a contract contains a delivery term of FOB place of shipment, the seller's obligation under the contract is to deliver the goods to a carrier for shipment.
A)True
B)False
Q2) Heterogeneous goods are goods that, when mixed together, are indistinguishable.
A)True
B)False
Q3) If a buyer purchases goods on approval, the buyer's creditors cannot reach such goods until there is an approval.
A)True
B)False
Q4) __________ reserve auctions are those in which the goods must be sold regardless of whether the auctioneer is satisfied with the levels of the bids.
A) With
B) Without
C) Unqualified
D) Unrestricted
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Chapter 25: Product Liability: Warranties and Torts
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Sample Questions
Q1) The warranty of merchantability guarantees that the:
A) party in question is a merchant.
B) product is fit for the ordinary purposes for which it is sold.
C) product will remain fit for its normal use for the applicable statute of limitations period.
D) product can be resold by the buyer if the buyer does not want to keep it.
Q2) Plaintiffs suing for damages caused by a defective product are limited to taking action only against the manufacturer(s) of such goods.
A)True
B)False
Q3) Under what type of warranty is the seller obligated to fix or replace a defective product within a reasonable time at no cost to the buyer?
A) full
B) express
C) limited
D) implied
Q4) An express warranty can be made orally or in writing.
A)True
B)False
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Chapter 26: Obligations and Performance
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Sample Questions
Q1) A party to a sales contract may demand at any time that the other party provide adequate assurance of performance.
A)True
B)False
Q2) If a contractually-specified mode of transportation is not available, the:
A) contract is automatically voided.
B) seller must make delivery by a commercially-reasonable substitute.
C) buyer must arrange to pick up the goods.
D) seller must make personal delivery.
Q3) A party to a sales contract who is afraid that the other party will not perform may seek to gain additional confidence by demanding some form of: A) bailment.
B) security.
C) assurance.
D) assignment.
Q4) When an anticipatory repudiation has occurred, the aggrieved party has been notified that the contract will never be performed.
A)True
B)False
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Chapter 27: Remedies for Breach of Sales Contracts
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Sample Questions
Q1) The statute of limitations for breach of a sales contract:
A) may be reduced by the buyer and the seller to one year.
B) may be expanded by the buyer and the seller to six years.
C) begins to run from the signing of the contract.
D) always requires a notice to the seller to activate the statute.
Q2) An action for breach of warranty generally must be brought within three (3) years of the breach.
A)True
B)False
Q3) A buyer may reject a tender of delivery:
A) unless it is perfect.
B) unless the goods substantially conform to the contract.
C) unless the seller promises to cure the defective tender.
D) unless the goods have been sold on credit.
Q4) Under UCC Article 2, specific performance is a remedy available only to buyers in those circumstances in which the goods are specially manufactured, unique, or rare.
A)True
B)False
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Chapter 28: Kinds of Instruments, Parties, and Negotiability
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Sample Questions
Q1) The person on whom the order to pay a draft is made is called a drawer.
A)True
B)False
Q2) Conville signed a note as an officer of the Hughesville Manufacturing Corporation, but she did not name the corporation in the note or indicate that she was acting as an officer for it. Later, she was sued by the Grange National Bank, the holder of the note. She raised the defense that the corporation was liable on the note. Who was liable?
Q3) Omitting a date of execution affects an instrument's negotiability.
A)True
B)False
Q4) If an instrument is nonnegotiable, the rights of the parties are governed by the general principles of contract law.
A)True
B)False
Q5) When a drawee has signified in writing on a draft the willingness to make a specified payment, the drawee is called the acceptor.
A)True
B)False
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Chapter 29: Transfers of Negotiable Instruments and
Warranties of Parties
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Sample Questions
Q1) A qualified indorsement is given by using the phrase __________.
A) "as is"
B) "without recourse"
C) "with all faults"
D) "buyer beware"
Q2) Under the UCC, a negotiation is not effective when it is made by a minor or any other person lacking capacity.
A)True
B)False
Q3) An instrument may be transferred by negotiation or by assignment.
A)True
B)False
Q4) Order paper is negotiated by the indorsement of the holder and delivery.
A)True
B)False
Q5) If an instrument is drawn in favor of an officer of a named corporation, the instrument is payable to the corporation, the officer, or any successor to such officer.
A)True
B)False
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Chapter 30: Liability of the Parties Under Negotiable Instruments
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Sample Questions
Q1) To have the status of a holder in due course, a person must first be a holder. A)True
B)False
Q2) A person who buys a note from a holder in due course knowing that the maker has a defense will not be a holder through a holder in due course.
A)True
B)False
Q3) Fraud in the inducement is a:
A) limited defense not available against a holder in due course.
B) universal defense available against all holders.
C) limited defense available against all holders.
D) universal defense not available against a holder in due course.
Q4) For the purposes of determining holder in due course status, the requirement of value is similar to consideration.
A)True
B)False
Q5) Manuel sued Patricia on a promissory note. Patricia admitted signing the note, but raised the defense that Manuel was not a holder in due course. Can Manuel recover without proving that he is a holder in due course?
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Chapter 31: Checks and Funds Transfers
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Q1) Ordinarily, the drawee bank is liable to the drawer when it pays a check on which the drawer's signature has been forged.
A)True
B)False
Q2) A "tender" occurs when the holder of a check or other consumer transaction authorization demands payment.
A)True
B)False
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
Q4) A bank's liability to the drawer of a check for wrongfully dishonoring a check is based largely on contract law.
A)True
B)False
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Page 33
Chapter 32: Nature of the Debtor-Creditor Relationship
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Q1) Which of the following contract defenses cannot be raised as a defense against suretyship obligations?
A) lack of capacity
B) fraud
C) mistake
D) The surety may raise any defense that a party to an ordinary contract may raise.
Q2) If there are two or more sureties and one pays more than its proportionate share of the debt, such surety has the right against the cosureties known as:
A) indemnity.
B) exoneration.
C) subrogation.
D) contribution.
Q3) A surety primarily is liable; ordinarily, a guarantor is only secondarily liable.
A)True
B)False
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34
Chapter 33: Consumer Protection
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Q1) Those who are liable for violations of consumer protection situations are persons or enterprises that regularly enter into the type of transaction in which the injured consumer was involved.
A)True
B)False
Q2) The FTC requires that only descriptive and non-ambiguous terms such as jumbo, giant, or full be used in product labeling.
A)True
B)False
Q3) To be found guilty of violating a consumer protection statute or a deceptive trade practices act, a defendant must be proven guilty of fraud.
A)True
B)False
Q4) Who may bring an action for relief under consumer protection legislation?
A) the Federal Trade Commission
B) a state attorney general
C) the consumer
D) all of the above
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Page 35
Chapter 34: Secured Transactions in Personal Property
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Q1) When a seller sells on credit and is given a security interest in the goods, that interest is called:
A) a purchase money security interest.
B) a future transaction.
C) a floating lien.
D) none of the above.
Q2) Perfection can occur merely by possession of the collateral by the creditor.
A)True
B)False
Q3) In a security agreement, the creditor and the debtor agree that the creditor has a security interest.
A)True
B)False
Q4) What is the purpose of a financing statement?
A) to meet UCC accounting requirements under Article 9
B) to create a security interest
C) to amend a security agreement
D) to alert third persons that a creditor has a security interest in the collateral described
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Page 36
Chapter 35: Bankruptcy
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Q1) The filing of an involuntary case petition automatically constitutes an order for relief if the debtor fails to contest the petition within the time specified by the Bankruptcy Code.
A)True
B)False
Q2) The trustee may void any fraudulent transfer made by the debtor within two (2) years of bankruptcy when the debtor's actual intent was to hinder, delay, or defraud creditors by engaging in the transfer.
A)True
B)False
Q3) Which of the following is not a preferential transfer?
A) a transaction for present consideration
B) a payment in the ordinary course of business
C) a. and b.
D) Both a. and b. likely constitute preferential transfers
Q4) The filing of a voluntary, but not an involuntary, petition operates as an automatic stay.
A)True
B)False
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Chapter 36: Insurance
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Q1) Sylvia Jurgen operates a florist shop. During a particularly busy day, she allowed one of her employees, Terry Lioni, to use her (Jurgen's) personal car to assist with deliveries. Lioni had just obtained his driver's license. Lioni was involved in an accident that was his fault. Would Jurgen's liability insurance pay in this situation?
Q2) Exceptions to coverage are generally strictly interpreted against the insurer.
A)True
B)False
Q3) 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
Q4) A person has an insurable interest in property if destruction of that property would cause a monetary or pecuniary loss to that person.
A)True
B)False
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Chapter 37: Agency
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Q1) In performing agency duties, the agent must exercise the care that a reasonably prudent person would exercise under the same circumstances.
A)True
B)False
Q2) An agency may be created to perform almost any act that a principal could lawfully do.
A)True B)False
Q3) A principal may ratify an action taken by an agent that the principal would not have been capable of authorizing at the time that the action was taken.
A)True
B)False
Q4) A special agent 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.
A)True B)False
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Page 39
Chapter 38: Third Persons in Agency
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Q1) Apparent authority has the same effect as:
A) undisclosed authority.
B) actual authority.
C) partially disclosed authority.
D) none of the above.
Q2) The liability of a buyer for the purchase price of goods is terminated by the fact that the buyer gave the buyer's agent the purchase price to remit to the seller.
A)True
B)False
Q3) An agent should never sign a contract using "by" or "per" and then his or her name.
A)True
B)False
Q4) The rule of law imposing vicarious liability on an innocent employer for the wrong of an employee is known as the doctrine of respondeat superior.
A)True
B)False
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Page 40
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) The Federal __________ Act makes it unlawful to intercept oral and electronic communications and provides for __________ against the violator.
A) Wiretapping; civil damages
B) Wiretapping; criminal liability and civil damages
C) Homeland Security; civil damages
D) Homeland Security; criminal liability and civil damages
Q3) Algonquin Industries was a small business that hired mostly recent immigrants to the United States and paid them a minimum wage. The business prospered and people began to come around to organize the workers into a union. Officials of Algonquin spoke against the advisability of joining the union. Finally, a date for a certification vote was set. In the days leading up to the vote, Algonquin officials began to intimate that those workers who voted against the union would receive overtime opportunities "as they became available." A charge has been brought that this is an unfair labor practice. Decide.
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Chapter 40: Equal Employment Opportunity Law
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Q1) When supervisors seek sexual favors in return for job benefits, the practice is called:
A) quid pro quo sexual harassment.
B) hostile work environment sexual harassment.
C) res ipsa loquitur sexual harassment.
D) none of the above.
Q2) To successfully pursue a Title VII lawsuit, the plaintiff generally must belong to a protected class.
A)True
B)False
Q3) An employer can be held liable for the sexual harassment of an employee by a supervisor.
A)True
B)False
Q4) 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.
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Chapter 41: Types of Business Organizations
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Q1) Most courts hold that joint ventures are not subject to the same principles of law as partnerships.
A)True
B)False
Q2) Theoretically, the relationship between a franchisor and a franchisee is one of:
A) parent and subsidiary.
B) an "arm's-length" relationship between two (2) independent contractors.
C) an "arm's-length" relationship between two (2) partners.
D) an "arm's-length" relationship between two (2) joint tenants.
Q3) Corporations are subject to a form of double taxation.
A)True
B)False
Q4) The principal forms of business organization are:
A) sole proprietorships, joint ventures, and corporations.
B) unincorporated associations, partnerships, and corporations.
C) unincorporated associations, limited partnerships, and corporations.
D) sole proprietorships, partnerships, and corporations.
Q5) A partnership is dissolved by the death of a partner.
A)True
B)False
Page 43
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Chapter 42: Partnerships
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Q1) The assignee of a partner's interest in the partnership becomes a partner only with the consent of the other partners.
A)True
B)False
Q2) In the absence of an express agreement permitting continuation of the business by the surviving partners, they must wind up the business and account for the share of any partner who has:
A) withdrawn.
B) died.
C) been expelled.
D) all of the above.
Q3) Persons who are not partners under appropriate circumstances may be held liable to third persons as though they were partners.
A)True
B)False
Q4) A majority action of partners is not binding if it contravenes the partnership agreement.
A)True
B)False
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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) In a limited partnership, the most limited partners can lose is:
A) their preferred (not common) stock shares.
B) $1,000,000.
C) their investment in the limited partnership.
D) their investment in the limited partnership, as well as all of their personal assets, since the term "limited" refers to the limited partners' managerial obligations, rather than to their liability exposure.
Q3) 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
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Chapter 44: Corporate Formation
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Q1) The corporate form of business continues regardless of changes in stock ownership.
A)True
B)False
Q2) Because nonprofit corporations have a more restricted range of powers than business corporations, actions not authorized by the charters of nonprofit corporations are more likely to be found ultra vires.
A)True
B)False
Q3) ____ of a corporation may occur when management is deadlocked and the deadlock cannot be broken by the shareholders.
A) Bankruptcy
B) Consolidation
C) Reinstatement
D) Judicial dissolution
Q4) A de facto corporation is accorded legal recognition despite some recognized defect in its incorporation.
A)True
B)False
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Page 46
Chapter 45: Shareholder Rights in Corporations
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Q1) Cumulative voting:
A) decreases the voting power of minority shareholders.
B) is a form of voting trust.
C) generally is required or allowed in the election of corporate directors.
D) is a right given to participating preferred shareholders.
Q2) Preferred stock is ordinarily nonvoting stock.
A)True
B)False
Q3) Which of the following is an effective means of notice to purchasers of shares that there are restrictions on the sale?
A) notation in the bylaws
B) resolution of the shareholders at a shareholders' meeting
C) notation on the stock certificate
D) resolution of the directors at a directors' meeting
Q4) A shareholder does not:
A) qualify as a member of the corporation.
B) own any specific property of the corporation.
C) have a fractional interest in the total property of the corporation.
D) all of the above.
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Chapter 46: Securities Regulation
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Q1) A prospectus sets forth the key information contained in the registration statement.
A)True
B)False
Q2) Under Regulation D, Rules 505 and 506, sales may be made to how many accredited investors?
A) an unlimited number
B) fewer than fifty (50)
C) fewer than thirty-five (35)
D) three (3) whose net assets collectively total at least $100 million
Q3) An unlawful sale under the Insider Trading Sanctions Act of 1984 can result in a civil penalty of up to how many times the profit gained or loss avoided?
A) two (2)
B) three (3)
C) four (4)
D) five (5)
Q4) Persons or firms can be sued for false statements in a registration statement.
A)True
B)False
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Page 48
Chapter 47: Accountants Liability and Malpractice
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Q1) 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
Q2) An exculpatory clause most likely would be held to limit or disclaim liability for malpractice:
A) in an action based on fraud.
B) in a suit brought by a third person.
C) when the accountant can reasonably be expected to stand behind the information in question.
D) when the clause is conspicuous, unambiguous, and clear.
Q3) Breach of contract remedies are available to third parties against accountants because they are ordinarily considered third-party beneficiaries of contracts with accountants.
A)True
B)False
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Chapter 48: Management of Corporations
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Q1) A corporation generally may avoid a transaction because of a director's secret disqualification, such as a conflict of interest.
A)True
B)False
Q2) Electing directors who most reflect the shareholders' interests and attitudes is the most effective form of shareholder control.
A)True
B)False
Q3) The notice of a special meeting of shareholders must include a statement of the nature of the business to be transacted and no other business may be transacted at such a meeting.
A)True
B)False
Q4) Regular meetings of shareholders are:
A) held at a time and place set forth in a notice given to all shareholders.
B) held at a time and place prescribed by the articles of incorporation or the bylaws.
C) called by the directors.
D) limited to the election of directors.
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Page 50
Chapter 49: Real Property
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Q1) What type of deed merely transfers whatever interest, if any, the grantor may have in the property, without specifying that interest in any way?
A) common law
B) statutory
C) quitclaim
D) warranty
Q2) A condominium and a cooperative are essentially the same.
A)True
B)False
Q3) 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.
Q4) The right to cut firewood from another's property would constitute a profit.
A)True
B)False
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Chapter 50: Environmental Law and Land Use Controls
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Q1) Spot zoning may result in such inequality as to be condemned by the courts.
A)True
B)False
Q2) The EPA is the primary federal agency responsible for the enforcement of environmental laws.
A)True
B)False
Q3) It is probable that a zoning variance would be granted: A) even though many of the neighboring property owners object.
B) on the ground of hardship, regardless of whether the landowner created the hardship. C) to an outside advertiser to build a billboard that would make the advertiser more money.
D) when the desired use of the land is in harmony with the general nature of the surrounding areas.
Q4) The federal government is not subject to any type of environmental quality regulation
A)True
B)False
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Page 52
Chapter 51: Leases
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Q1) A landlord who sells his property transfers the __________ interest in the leased premises to the buyer.
A) diversionary
B) reversionary
C) subversionary
D) reciprocal
Q2) An act or omission of the landlord that substantially deprives the tenant of the use and enjoyment of the premises is a constructive eviction.
A)True
B)False
Q3) If taxes or assessments on leased premises are increased because of improvements made by the tenant that remain with the property, the:
A) landlord is liable for such increases.
B) landlord is liable for such increases only if the tenant was under a duty to make the improvements.
C) landlord is liable for such increases only to the extent that the improvements actually increase the fair market value of the property.
D) tenant is liable for such increases.
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53
Chapter 52: Decedents Estates and Trusts
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Q1) A trust may be terminated:
A) in accordance with its terms.
B) by merger of all interests in the same person.
C) via revocation by the settlor if allowed by the terms of the trust.
D) all of the above.
Q2) A bequest of a pearl necklace is a:
A) general legacy.
B) specific legacy.
C) specific ademption.
D) residuary ademption.
Q3) When specifically bequeathed property is sold or given away by the testator prior to death, the bequest is considered "redeemed."
A)True
B)False
Q4) 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.
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