Legal Aspects of Business Exam Review
Course Introduction
Legal Aspects of Business explores the fundamental legal principles and frameworks governing business operations. This course covers key topics such as contract law, company law, intellectual property rights, employment law, consumer protection, and alternative dispute resolution mechanisms. Students will gain an understanding of how laws affect commercial transactions, the formation and management of business entities, regulatory compliance, and the legal implications of digital business. Through case studies and real-world examples, the course emphasizes the importance of legal awareness and ethical decision-making in business environments.
Recommended Textbook Essentials of Business Law and the Legal Environment 11th Edition by Richard A. Mann
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50 Chapters
4286 Verified Questions
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Page 2
Chapter 1: Introduction to Law
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Sample Questions
Q1) Glenna has been charged with arson of a storage building.The prosecutor must prove Glenna's guilt:
A)by a preponderance of the evidence.
B)by the greater weight of the evidence.
C)beyond a reasonable doubt.
D)beyond shadow of a doubt.
Answer: C
Q2) The business law topics of contracts,agency,property,and trusts are governed primarily by the common law.
A)True
B)False
Answer: True
Q3) Which of the following is not ordinarily a part of a reported opinion?
A)The essential facts.
B)The names of the attorneys representing the parties.
C)What pleadings are material to the issues.
D)The application of legal principles involved in the case.
Answer: B
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Chapter 2: Business Ethics
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Sample Questions
Q1) Corporations are subject to a higher standard of accountability than are public bodies.
A)True
B)False
Answer: False
Q2) In some respects,Kant's categorical imperative is a variation of the Golden Rule.
A)True
B)False Answer: True
Q3) Intuitionism holds that rational persons possess inherent powers to assess the correctness of actions.
A)True
B)False Answer: True
Q4) Like legal analyses,analyses of ethics have a central authority and follow clear-cut,universal standards.
A)True
B)False Answer: False
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Chapter 3: Civil Dispute Resolution
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Sample Questions
Q1) What are the ways that cases may reach the U.S.Supreme Court?
A)Appeal by right.
B)Writ of certiorari.
C)Writ in personam.
D)(a) and (b), but not (c)
Answer: D
Q2) Arbitration is a commonly used technique for resolving international disputes.
A)True
B)False
Answer: True
Q3) A case before a U.S.Court of Appeals is generally heard by all judges of the circuit sitting en banc.
A)True
B)False
Answer: False
Q4) In the United States,there is a right to a jury trial in any federal civil case at common law,regardless of the amount of money involved.
A)True
B)False
Answer: False
Page 5
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Chapter 4: Constitutional Law
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Sample Questions
Q1) The State of Hawaii enacts a piece of legislation that taxes all airplanes that land in the state.Several airlines challenge the legislation as unconstitutional.What is the likely result of the court case?
Q2) Under the Equal Protection Clause,all governmental action that treats two classes of citizens differently will be invalid.
A)True
B)False
Q3) The Supreme Court has defined the scope of the Commerce Clause narrowly and,therefore,has restricted the powers of the federal government to regulate business.
A)True
B)False
Q4) There is no state action where a court orders enforcement of a private agreement among property owners since the property owners were private individuals.
A)True
B)False
Q5) Briefly discuss the Contract Clause of the Constitution.
Q6) Identify the purpose of the U.S.Constitution as stated in its preamble.
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Page 6
Chapter 5: Administrative Law
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Sample
Questions
Q1) Where there has been informal rulemaking or informal adjudication by an administrative agency and the decision by that agency is then appealed to the courts,the court will generally apply what standard in reviewing factual determinations?
A)The unwarranted by the facts standard.
B)The substantial evidence standard.
C)The arbitrary and capricious standard.
D)The beyond a reasonable doubt standard.
Q2) Administrative agencies operate only at the federal level.
A)True
B)False
Q3) An important and fundamental part of administrative law is the limits imposed by judicial review upon the activities of administrative agencies.
A)True
B)False
Q4) (a) What is the purpose of the Freedom of Information Act?
(b) To what categories of records does the FOIA allow denial of access?
Q5) Explain what is considered a "major rule" and the effect of an administrative rule's being in this category.
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Chapter 6: Criminal Law
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Sample Questions
Q1) Under what circumstances has it been held that a search warrant is not necessary?
Q2) In general,a crime consists of two elements: (1)the wrongful or overt act and (2)the criminal or mental intent.Discuss the following concepts of criminal law and how and why the general elements of criminal action are altered,extended,or eliminated.In addition,give examples corresponding to each concept of the type of conduct that could be a criminal act.
a.Objective fault
b.Vicarious liability
c.Corporate liability
Q3) How much force may an individual use to protect her property?
A)As much as is necessary.
B)Deadly force.
C)Reasonable force, but not deadly force.
D)All of the above are correct.
Q4) The state may appeal a verdict of "not guilty" if there is an error in the trial.
A)True
B)False
Q5) What six elements must be present for the crime of larceny to exist?
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Chapter 7: Intentional Torts
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Sample Questions
Q1) Infliction of emotional distress occurs when a person by extreme and outrageous conduct intentionally or recklessly causes severe emotional distress to another person.
A)True
B)False
Q2) X knows that Y has offered to sell wheat to Z at a certain price per bushel.Hoping to get Z for a customer,X offers Z wheat at $.50 less a bushel than Y offered.X gets the contract.X is liable to Y for the tort of interference with contractual relations.
A)True
B)False
Q3) Francenie was digging a trench to install a drainage pipe along her property line and she accidentally tunneled under a small area on her neighbor's property.The entry onto the neighbor's property:
A)cannot be a trespass because it was beneath the surface of the land.
B)is not a trespass unless there was some actual damage to the neighbor's land. C)is a trespass.
D)is not a trespass because Francenie was under the reasonable belief that she owned all of the land on which she was digging.
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Page 9
Chapter 8: Negligence and Strict Liability
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Sample Questions
Q1) By law,all apartment buildings in the state where Mary lives must have smoke alarms in the ceilings.Mary suffers smoke inhalation because the smoke alarm in her apartment building was not yet installed.To win a negligence action against the building owner,Mary would have to prove:
A)a duty existed toward her.
B)a breach of that duty.
C)injury and causation.
D)All of the above.
Q2) In some instances,people may be held liable for injuries they have caused even though they have not acted intentionally or negligently.
A)True
B)False
Q3) Mark is out sailing in his boat one evening when he hears a young girl crying for help in the middle of the lake.Which of the following is true?
A)Mark must help the girl or he will be liable for negligence.
B)Mark must help the girl only if he knows her.
C)Mark must help the girl if he is the girl's uncle.
D)Mark must help the girl if he begins to rescue her and increases her danger.
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Chapter 9: Introduction to Contracts
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Sample Questions
Q1) __________ is/are any property other than an interest in real property.
A)Goods.
B)Personal property.
C)Tangible property.
D)None of the above.
Q2) Contracts are governed primarily by statute,including the UCC.
A)True
B)False
Q3) Mike,a plumbing contractor,was hired to correct a stoppage in the sewer line at Sarah's house.During his work,he discovered numerous leaks in a rusty,defective water pipe that ran parallel with the sewer line.To meet public regulations,the water pipe had to be replaced either then or later,when the yard would have to be redug.Mike replaced the water pipe and Sarah inspected the work daily and did not object to the extra work.When Mike finished,Sarah refused to pay for the water pipe replacement since that was not what she originally hired Mike to do and she had never specifically agreed to that work.Sarah must pay Mike for his labor and materials costs for both the sewer and water line repair.
A)True
B)False
Q4) What is the difference between a valid contract and a void contract?
Page 11
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Chapter 10: Mutual Assent
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Sample Questions
Q1) Under the UCC,an acceptance must always be identical to an offer for a valid contract to be formed.
A)True
B)False
Q2) Lyle offers to sell his house to Dennis for $95,000.Dennis responds,"I will pay you $95,000 for the house if you first paint the second floor." This response could best be described as:
A)an acceptance.
B)a counteroffer.
C)a rejection.
D)an invitation.
Q3) The UCC provides missing contract terms in which of the following instances?
A)The contract fails to specify the price.
B)The contract fails to specify the place of delivery.
C)Both (a) and (b).
D)The UCC cannot provide missing contract terms; only the parties can provide terms.
Q4) An acceptance is generally effective upon dispatch.
A)True
B)False
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Chapter 11: Conduct Invalidating Assent
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Sample Questions
Q1) Relationships that may lead to a court's careful scrutinization of contracts between the parties to make sure undue influence was not present include all but:
A)agent and principal.
B)salesperson and customer.
C)parent and child.
D)doctor and patient.
Q2) Which of the following is NOT an element of fraud?
A)Material misrepresentation.
B)Competent parties.
C)Knowledge of falsity.
D)Justifiable reliance.
Q3) Acts constituting duress are necessarily crimes or torts in themselves.
A)True B)False
Q4) Scienter is the element of fraud that requires that the misrepresentation must have been known by the one making it to be false and must have been made with an intent to deceive.
A)True B)False
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Chapter 12: Consideration
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Sample Questions
Q1) What transactions are enforceable even though they are not supported by consideration?
Q2) Legal sufficiency of consideration and adequacy of consideration are virtually synonymous terms.
A)True
B)False
Q3) Legal detriment means the obtaining by the promisor of that which he had no prior legal right to obtain.
A)True
B)False
Q4) Under the common law,in order to be enforceable,a modification of an existing contract must be supported by mutual consideration.
A)True
B)False
Q5) An agreement to sell the entire production of a particular plant is a requirements contract.
A)True
B)False
Q6) Discuss the concept of adequacy of consideration.
Page 14
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Chapter 13: Illegal Bargains
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Sample Questions
Q1) Before granting an injunction enjoining a former employee from competing in a described territory,the courts insist that the employer demonstrate that the restriction is __________ to protect the employer's legitimate interest.
A)exculpatory
B)unconscionable
C)necessary
D)usurious
Q2) Nell gives Big Al $50 in return for Al's promise to defame Sara.Nell hopes to ruin Sara's chances at a promotion.Nell finds out that Al did not hold up his end of the agreement.Which of the following statements is true?
A)Nell can get the money back from Al through litigation.
B)Nell can get the money back and force Al to do as he promised.
C)Legally, Nell can neither get the money back nor force Al to do as he promised.
D)Nell can force Al to act through an appeal to the courts, but Al gets to keep the $50.
Q3) Courts usually will require evidence for a transaction to be usurious.What factors will the courts require as evidence of usury?
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Page 15
Chapter 14: Contractual Capacity
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Sample Questions
Q1) In general,if a minor lies about her age in order to induce the seller to contract with her,she cannot disaffirm that contract.
A)True
B)False
Q2) Courts treat contracts of incompetents and intoxicated persons essentially the same,except they are stricter with intoxicated persons because of its voluntary nature.
A)True
B)False
Q3) A disaffirmance must come either during a minor's minority or within a reasonable time after he reaches majority.
A)True
B)False
Q4) Discuss a minor's duty to a seller upon disaffirmance of a contract for the sale of goods.
Q5) A binding promise or agreement requires that the parties to the agreement have contractual capacity.
A)True B)False
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Chapter 15: Contracts in Writing
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Sample Questions
Q1) On April 2,Derrick hires JoAnn to work for ten months starting on June 10.Does the employment contract have to be written?
Q2) An example of language creating a suretyship as meant under the statute of frauds would be the following: "If my business partner does not write out the check for the supply bill for our company,I will."
A)True
B)False
Q3) An example of an unenforceable oral contracts is:
A)an oral promise to guarantee the additional duties of another.
B)an oral agreement to substitute different land for that described in the original lease contract.
C)an oral agreement to extend an employee's contract for six months to a total of two years.
D)All of the above.
E)(a) and (c), but not (b)
Q4) A collateral promise is an undertaking to be primarily liable for the principal debtor's debt.
A)True
B)False
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Chapter 16: Third Parties to Contracts
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Sample Questions
Q1) In some states,the vesting of a third party's rights occurs only when the third party learns of the contract and assents to it.
A)True
B)False
Q2) Third party rights in contracts can arise by assignment of rights,delegation of duties,or in third party beneficiary contracts.
A)True B)False
Q3) A duty may not be delegated if there is an express provision in a contract against delegation.
A)True
B)False
Q4) List the implied warranties imposed by law on an assignor who has received value for the assignment.
Q5) Courts will enforce contracts for the benefit of all but which of the following?
A)Donee beneficiaries.
B)Creditor beneficiaries.
C)Incidental beneficiaries.
D)Intended beneficiaries.
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Chapter 17: Performance, Breach, and Discharge
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Sample Questions
Q1) Marie owes Nathan $900 and the parties agree that Marie will paint Nathan's house in satisfaction of the debt.The debt is not discharged until Marie performs the substituted agreement by painting Nathan's house.
A)True
B)False
Q2) The Restatement and the Code have made the traditional test of objective impossibility more stringent by requiring that the performance must be actually or literally impossible in order to excuse a party from contractual duties.
A)True
B)False
Q3) An implied-in-law condition need only be substantially performed.
A)True
B)False
Q4) All contractual promises are absolute promises to perform.
A)True
B)False
Q5) What is a condition? Give an example of each of the following types of conditions: condition precedent,condition concurrent,conditions subsequent.
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Chapter 18: Contract Remedies
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Sample Questions
Q1) The costs or losses an injured party avoids by not having to perform are not figured in the computation of damages.
A)True
B)False
Q2) In the case of Hadley v.Baxendale,the plaintiff was seeking damages for:
A)restitution.
B)lost profits.
C)failure to convey land.
D)failure to specifically perform a contract.
Q3) Equitable remedies are available any time the plaintiff chooses them over money damages.
A)True
B)False
Q4) The majority of states follow the __________ rule in awarding damages for fraud.
A)benefit-of-the-bargain
B)out-of-pocket
C)liquidated
D)restitution
Q5) When will a court enforce a liquidated damage clause? When will a court refuse to enforce one?
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Chapter 19: Introduction to Sales and Leases
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Sample Questions
Q1) Which of the following is not true about auctions?
A)The UCC provides that if an auction sale is advertised or announced in explicit terms to be with reserve, the auctioneer may not withdraw the article put up for sale unless no bid is made within a reasonable time.
B)Unless an auction is advertised as being without reserve, the sale is with reserve.
C)Whether an auction is with or without reserve, a bidder may retract his bid at any time prior to acceptance by the auctioneer.
D)If the auctioneer knowingly receives a bid on behalf of the seller and notice has not been given that the seller reserves the right to bid at the sale, the bidder to whom the goods are sold can avoid the sale.
Q2) Contracts containing unconscionable clauses are void and unenforceable.
A)True
B)False
Q3) The purpose of Article 2 of the UCC is to modernize,clarify,simplify,and make uniform the law of sales.
A)True
B)False
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Chapter 20: Performance
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Sample Questions
Q1) Which of the following is correct with respect to the Code's approach to impossibility of performance?
A)A significant drop in demand for the goods will excuse the buyer's performance.
B)Increased production costs will excuse performance by the seller.
C)Performance will be excused when it is impractical as a result of one or more unforeseen supervening events that are more than mere hardship or increased cost of performance.
D)All of the above are correct.
Q2) In which of the following situations does the seller have the right to cure?
A)Where the time for performance under the contract has not yet expired.
B)After the time for performance has expired if the seller had reasonable grounds for believing the buyer would accept a nonconforming tender with or without monetary adjustment.
C)Where the buyer has revoked acceptance.
D)Two of the above, (a) and (b).
Q3) Rejection is ineffective unless the buyer notifies the seller.
A)True
B)False
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22
Chapter 21: Transfer of Title and Risk of Loss
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Sample Questions
Q1) If the owner of goods entrusts them to a merchant,the merchant can transfer good title to the goods to a buyer in the ordinary course of business even if the original owner does not want to sell the goods.
A)True
B)False
Q2) Explain what a trial sale is.Identify the two types of trial sales recognized by the UCC and explain the test for distinguishing between the two types.Discuss transfer of title and risk or loss with each type of trial sale.
Q3) In a contract where the buyer is to pick up the goods at the seller's place of business and the seller is a merchant,the risk of loss passes to the buyer when the goods are tendered to the buyer.
A)True
B)False
Q4) A void title may allow good title to pass in special circumstances.
A)True
B)False
Q5) The risk of loss for "sale or return" is the same as for a sale "on approval."
A)True
B)False
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Chapter 22: Product Liability: Warranties and Strict Liability
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Sample Questions
Q1) Leslie purchased 100 flower pots from a local merchant.Warranties which are not included in her sales contract,but exist by "operation of law," are the:
A)express warranties.
B)exclusive warranties.
C)quasi warranties.
D)implied warranties.
Q2) Greg has been in the business of selling collectible figurines for twenty years.Margaret agreed to buy a set if Greg would also bring her a display case for them.Greg bought one and sold it to Margaret along with the figurines.While placing the figurines in the display case,she ran her hand over the back edge of one of its shelves and cut herself severely.The wood was not finished on that side and nails were protruding through the shelf.Can Margaret sue Greg under strict liability?
A)Yes, because the display case was in an unreasonably dangerous condition.
B)Yes, because the display case was defective.
C)No, because she was not a true consumer under Sec. 402A.
D)No, because Greg is not a seller under Sec. 402A.
Q3) Horizontal privity pertains to remote sellers within the chain of distribution.
A)True
B)False
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Page 24
Chapter 23: Sales Remedies
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Sample Questions
Q1) The buyer's incidental damages resulting from the seller's breach include:
A)expenses reasonably incurred in inspection of rightfully rejected goods.
B)any commercially reasonable charges or commissions in connection with obtaining cover.
C)any reasonable expenses connected to the delay.
D)All of the above
E)None of the above.
Q2) If the buyer makes a wrongful rejection,the seller may resell the goods in good faith and in a commercially reasonable manner and the seller may recover from the buyer the difference between the contract price and the resale price,plus any incidental damages,minus expenses saved.
A)True
B)False
Q3) Under the CISG,if the buyer fails to perform contractual obligations,the seller may require the buyer to:
A)pay the price.
B)take delivery.
C)perform the contractual obligations.
D)All of the above.
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Page 25
Chapter 24: Form and Content
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Q1) Paper payable "on demand" fails the test of negotiability in that it does not contain a specific time.
A)True
B)False
Q2) A __________ is a specialized form of promise to pay money given by a maker in which the bank is the maker.
A)note
B)certificate of deposit
C)trade acceptance
D)cashier's check
Q3) References to other agreements in negotiable instruments:
A)destroy negotiability unless the recital makes the instrument subject to, or governed by, the terms of another agreement.
B)do not destroy negotiability in any circumstances.
C)do not destroy negotiability unless the recital makes the instrument subject to or governed by the terms of another agreement.
D)None of the above.
Q4) What are the requirements of negotiability under the Code? List and briefly summarize them.
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Chapter 25: Transfer and Holder in Due Course
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Q1) A forged or otherwise unauthorized signature necessary to negotiation breaks the chain of title to the instrument.
A)True
B)False
Q2) Every indorsement is either blank or special.
A)True
B)False
Q3) An executory promise,which is valid consideration to support a contract,is also the giving of value to support holder in due course status.
A)True
B)False
Q4) Which of the following is required regarding indorsements?
A)An indorsement must be written on the back side of the instrument.
B)Indorsements must comply with Federal Reserve Board guidelines in order for the instrument to be negotiable.
C)Indorsements must be made on a separate sheet of paper stapled to the instrument.
D)None of the above.
Q5) What is negotiation? How does one become a "holder" of an instrument?
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Chapter 26: Liability of Parties
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Sample Questions
Q1) A signature may be made by an individual herself or by an authorized agent.
A)True
B)False
Q2) The UCC excuses presentment for payment or acceptance if:
A)the person who is entitled to enforce the instrument cannot, with reasonable diligence, present the instrument.
B)the maker or acceptor of the instrument has repudiated the obligation to pay, is dead, or is in insolvency proceedings.
C)the drawer or indorser has waived the rights of presentment.
D)the drawee was not obligated to the drawer to pay the draft.
E)All of the above.
Q3) Indorsers of all instruments incur primary liability on the instrument.
A)True
B)False
Q4) An accommodation party is a direct beneficiary of the value received from lending her credit on an instrument.
A)True
B)False
Q5) Discuss the effect of an unauthorized signature on an instrument.
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Chapter 27: Bank Deposits, Collections, and Funds Transfers
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Q1) If First Bank receives a check for collection on Friday at 4:30 p.m.,it does not have to present the check to the payor bank by midnight Saturday.
A)True
B)False
Q2) A check drawn on a bank is an order to pay a sum of money and an authorization to charge the amount to the drawer's account.The drawer may countermand this order by which of the following?
A)A canceled check.
B)A stop payment order.
C)A banker's acceptance.
D)A time draft.
Q3) A payment order for a wholesale funds transfer must:
A)be communicated in writing.
B)contain no condition to payment other than the time of payment.
C)be transmitted by the sender directly to the receiving bank.
D)All of the above.
Q4) What is electronic funds transfer? Why do banks like it? What provisions are in the law to protect the customer who uses electronic funds transfer?
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Chapter 28: Relationship of Principal and Agent
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Q1) What is an independent contractor? Can an independent contractor also be an agent?
Q2) An agency agreement must always be in writing.
A)True
B)False
Q3) When the agency terminates,the agent's duty of confidentiality continues.
A)True
B)False
Q4) The duty of obedience owed by an agent to a principal is not breached and will not result in liability to the principal by an agent's refusal to do an illegal or tortious act for the principal.
A)True
B)False
Q5) An agent will not be authorized to act for a principal unless he receives some consideration for the task.
A)True
B)False
Q6) Agency law is basic to almost every other branch of business law.
A)True
B)False
Page 30
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Chapter 29: Relationship With Third Parties
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Questions
Q1) Nell exceeds her authority when making a contract for Denver.If he ratifies the contract, both Nell and Denver are in the same position as the one they would have been in had Denver actually authorized the act originally except that Nell is not entitled to compensation.
A)True B)False
Q2) An employer may have criminal liability for the acts of an employee.
A)True B)False
Q3) Constructive notice may occur by publication in a newspaper of general circulation. A)True B)False
Q4) No apparent authority exists where the third party knows that the agent has no actual authority.
A)True B)False
Q5) Apparent authority is not actual authority. A)True B)False
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Chapter 30: Formation and Internal Relations of General Partnerships
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Q1) Under the UPA,a partner's ownership interest in any specific item of partnership property is that of a tenant in partnership.
A)True
B)False
Q2) Alice and Brad enter into a partnership,which becomes insolvent,as does Brad.Alice is fully liable for the debts of the partnership.
A)True
B)False
Q3) Which of the following would be the most convincing evidence of a partnership?
A)An agreement to share in the management of a business.
B)Agreements to share gross returns.
C)An agreement to share profits and losses.
D)An agreement to pay a firm manager a percentage of the profits for his salary.
Q4) A partnership agreement should include all but which one of the following?
A)The duties of the partners.
B)The capital contribution of the partners.
C)The agreement for dividing tax liability of the partnership.
D)The division of profits and losses.
Q5) What are the ways the RUPA recognizes a partnership as an entity?
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Chapter 31: Operation and Dissolution of General Partnerships
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Q1) Under the RUPA,a judgment creditor of a partnership may first attempt to enforce a judgment against either the separate assets of a partner or the partnership itself.
A)True
B)False
Q2) Under the RUPA,it is possible to cure an illegality within 90 days after notice to the partnership of the event dissolving the partnership for illegality.
A)True
B)False
Q3) Upon dissolution,a partner still has authority to complete existing contracts.
A)True
B)False
Q4) The liability of partners for a tort or breach of trust committed by any partner is unlimited,personal liability.
A)True
B)False
Q5) Partners are not required to participate in winding up the partnership.
A)True
B)False
33
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Chapter 32: Limited Partnerships and Limited Liability Companies
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Q1) The death or bankruptcy of a limited partner will dissolve the partnership.
A)True
B)False
Q2) The 1976 RULPA and the 1985 RULPA are supplemented by the Uniform Partnership Act,which applies to limited partnerships in any case for which the Limited Partnership Act does not provide.
A)True
B)False
Q3) Most statutes and the amended ULLCA make an LLC member's dissociation a mandatory cause of dissolution.
A)True
B)False
Q4) Which of the following need NOT be included in the certificate filed by a limited partnership?
A)The name of the limited partnership.
B)The name and address of the agent for service of process.
C)The names and addresses of each of the limited partners.
D)The name and business address of each general partner.
Page 34
Q5) Discuss the duties of general partners to limited partners.
Q6) What are the liabilities of a limited partner in a limited partnership?
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Chapter 33: Nature and Formation of Corporations
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Q1) A corporation formed in substantial compliance with the incorporation statute and the required organizational procedures is a:
A)de facto corporation.
B)de jure corporation.
C)corporation by estoppel.
D)private corporation.
Q2) Zeron Corporation is incorporated in the state of West Virginia.It now wants to open a retail outlet in Kentucky.Zeron must obtain a certificate qualifying it to do business in the state of Kentucky.
A)True
B)False
Q3) A promoter is a person who takes the preliminary steps to organize a corporation.
A)True
B)False
Q4) Define "promoter" in reference to a corporation.
Q5) Title to corporate property belongs to the shareholders.
A)True B)False
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Chapter 34: Financial Structure of Corporations
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Q1) The board of directors may issue bonds without the authorization or consent of the shareholders.
A)True
B)False
Q2) An investor has the right to transfer his investment securities by sale,but not by gift or pledge.
A)True
B)False
Q3) The shareholders normally determine the price for which shares will be issued unless the charter permits the board of directors to set the price.
A)True
B)False
Q4) If a "liquidation preference" is provided,preferred stock usually has priority over common stock to the extent the articles of incorporation state.
A)True B)False
Q5) Discuss the use of and types of stock options.
Q6) How does the Revised Act define the term "distribution"?
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Chapter 35: Management Structure of Corporations
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Q1) A voting trust permits a concentration of corporate control in one or more persons.
A)True
B)False
Q2) If Marilyn and George form a corporation under the Revised Act with Marilyn as president and George as treasurer,Marilyn cannot also be corporate secretary.
A)True
B)False
Q3) Directors are elected at the annual meeting of shareholders.
A)True
B)False
Q4) Voting trusts generally are effective for one year.
A)True
B)False
Q5) One difference between large,publicly held corporations and closely held corporations is that more of the shares of closely held corporations are held by institutional investors.
A)True
B)False
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Chapter 36: Fundamental Changes of Corporations
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Q1) If Able Corporation purchases all of the stock of Beta Corporation rather than all of its assets,there is now a change in Beta Corporation's legal status.
A)True
B)False
Q2) A(n)__________ is a general invitation to all of the shareholders of a target company to tender their shares for sale at a specified price.
A)compulsory share exchange.
B)tender offer.
C)buyout.
D)None of the above.
Q3) Any method of combination of corporations that involves shares,proxy solicitations,or tender offers may be subject to federal securities regulation.
A)True
B)False
Q4) A purchaser of all the assets normally does not assume the liabilities of that company.
A)True
B)False
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Page 39
Chapter 37: Secured Transactions and Suretyship
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Q1) First Bank loaned $100,000 to Central Office Supply Store to purchase computers for its inventory.Central signed a financing agreement,which First Bank duly filed in the appropriate public office.Lynn came into Central's store and purchased a computer that was subject to the security interest held by First Bank.Assuming that Lynn is a buyer in the ordinary course of business,whose interest in the computer has priority?
Q2) The right of a surety who has paid the creditor to be repaid by the principal debtor is: A)exoneration.
B)subrogation.
C)reimbursement.
D)None of the above.
Q3) The principal debtor's lack of capacity due to his status as a minor may be used by the surety to avoid payment of the obligation.
A)True
B)False
Q4) Explain how the 1998 Revisions to Article 9 facilitate electronic filing of a financing statement.
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Chapter 38: Bankruptcy
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Q1) An employee of a bankrupt company could be able to receive up to $11,725 in unpaid wages and up to $11,725 in contributions to employee benefit plans,for a total of $23,450 before any money is paid to a consumer to compensate for deposits paid to the company for goods which were never delivered because of the company's going bankrupt.
A)True
B)False
Q2) Ken loaned Barbara $8,000 and took back a note secured by Barbara's car.If Barbara files for bankruptcy when the value of the car is $4,500,what is Ken's status? He has a (n):
A)secured claim for $4,500.
B)unsecured claim for $8,000.
C)unsecured claim for $4,500.
D)secured claim for $8,000.
Q3) Which of the following is both a prejudgment and a postjudgment remedy for a creditor?
A)Writ of execution.
B)Garnishment.
C)Attachment.
D)Supplementary proceeding.
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Chapter 39: Securities Regulation
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Q1) Section 16(b)of the 1934 Act differs from Rule 10b-5 in that the latter:
A)applies to transfers within 6 months of each other.
B)only applies to officers, directors, and 10% shareholders.
C)requires material inside information.
D)All of the above.
Q2) The provisions of Section 17(a)of the 1933 Act:
A)primarily allow for a private right of action for persons injured by the act.
B)make it unlawful to engage in any transaction, practice, or course of business that operates as deceit upon the issuer.
C)make it unlawful in the offer or sale of any securities to obtain property by any statement that omits a material fact without which the information is misleading.
D)None of the above.
Q3) In 2006,the SEC abolished the requirement that a registration statement disclose compensation paid to senior executives and directors.
A)True
B)False
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Chapter 40: Intellectual Property
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Q1) The owner of a collective mark is the producer of the goods it seeks to mark.
A)True
B)False
Q2) A person is a direct infringer if he knowingly sells or supplies a part or component of a patented invention.
A)True
B)False
Q3) Goods bearing a counterfeit mark may be destroyed without compensation to the owner of the goods.
A)True
B)False
Q4) Identify the following trade symbols according to their type.
a.The Underwriter's Laboratory Mark.
b.The apple used by Apple Computers.
c.The "GM" symbol that appears on General Motors' automobiles.
d.The "A" symbol used by American Airlines.
e.The Muppets characters Miss Piggy and Kermit the Frog.
f. The union-made symbol.
Q5) Identify the three types of patents,their requirements,and duration.
Q6) Discuss the concept of fair use in relation to copyright law.
Page 43
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Chapter 41: Employment Law
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Q1) The Equal Pay Act requires that employees of Native American ancestry and employees of Italian ancestry be paid equally for equal work.
A)True
B)False
Q2) Which of the following would violate the Taft-Hartley Act?
A)Union officials boycotting meetings with Tel Ko Computer Corp. representatives.
B)Union officials meeting on Tel Ko Computer Corporation's property.
C)Union members striking to gain more fringe benefits.
D)Union members wearing membership badges.
E)Both (a) and (d) above are correct.
Q3) Which of the following are prohibited under Title VII of the 1964 Civil Rights Act?
A)Seniority systems.
B)Affirmative action programs.
C)Disparate impact.
D)All of the above.
Q4) Title VII of the Civil Rights Act of 1964 prohibits discrimination based on age.
A)True
B)False
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Chapter 42: Antitrust
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Q1) A "Vertical Restraint Index" is a measure of relative market share.
A)True
B)False
Q2) Failure to comply with Section 1 or 2 of the Sherman Act:
A)is a felony and can result in imprisonment.
B)may subject an individual to a fine of up to $1 million per violation.
C)may subject a corporation to a fine of $100 million per violation.
D)All of the above.
Q3) With tying arrangements,the courts may establish a seller's economic power by showing that:
A)the seller occupied a dominant position in the tying market.
B)the seller's product enjoys an advantage not shared by its competitors in the tying market.
C)a substantial number of customers have accepted the tying arrangement and the only explanation for their willingness to comply is the seller's economic power in the tying market.
D)All of the above.
E)(a) and (c), but not (b)
Q4) What are the major functions of the Federal Trade Commission (FTC)and what power does the FTC have?
Page 45
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Chapter 43: Accountants Legal Liability
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Q1) Which of the following could give rise to an accountant's criminal liability?
A)Falsely completing a tax return.
B)Tampering with accounting records.
C)Advising a client to falsely complete his own tax return.
D)All of the above could subject an accountant to criminal liability.
Q2) What is the basis of an accountant's potential criminal liability in rendering professional services?
Q3) When can an accountant release audit working papers?
A)When a client consents.
B)When a court orders disclosure.
C)At any time at the discretion of the accountant.
D)Both (a) and (b).
Q4) Martin agrees to perform an audit within 30 days,knowing that time is of the essence.After the 30 days,Martin has only performed 60% of the audit.Martin has materially breached his contract.
A)True
B)False
Q5) What are the requisite elements of fraud?
Q6) List the services that the Sarbanes-Oxley Act prohibits accounting firms from performing for audit clients.
Page 46
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Chapter 44: Consumer Protection
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Q1) Which of the following acts requires disclosure of finance charges in terms of an annual percentage rate and requires that interest rates be calculated in a uniform manner in consumer credit transactions?
A)Equal Credit Opportunity Act
B)Fair Credit Billing Act
C)Truth-in-Lending Act
D)FTC Act
Q2) The Interstate Land Sales Full Disclosure Act has been repealed because it was no longer needed.
A)True
B)False
Q3) Discuss ARMs and their regulation.
Q4) Under the Fair Credit Reporting Act,a consumer has the right to have inaccurate information removed from his consumer credit report.
A)True
B)False
Q5) A typical automobile financing agreement would be a closed-end credit agreement.
A)True
B)False
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Chapter 45: Environmental Law
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Q1) Because private causes of action have proved to be inadequate to recompense and prevent environmental damage,the federal,state,and local governments have enacted statutes designed to protect the environment.
A)True
B)False
Q2) The United States Congress overwhelmingly ratified the Kyoto Protocol relating to multi-national reduction of greenhouse gases.
A)True
B)False
Q3) NEPA imposes the responsibility for maintaining the environment on all federal agencies.
A)True
B)False
Q4) Private tort actions have been quite successful in controlling environmental damage.
A)True
B)False
Q5) What is the Council on Environmental Quality?
Q6) What is the purpose of the Montreal Protocol?
Page 48
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Chapter 46: International Business Law
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Q1) Which of the following is correct with respect to the act of state doctrine?
A)It allows foreign countries to be liable for their torts.
B)It allows state governments in the United States to ignore treaties entered into by the United States.
C)It provides that the judicial branch of a nation should not question the validity of actions taken by a foreign government within that foreign sovereign's own borders.
D)It is a very recent addition to U.S. law.
Q2) Under the Foreign Sovereign Immunities Act a foreign sovereign is:
A)immune from all suits in the United States.
B)immune from suits in the United States involving sovereign or public acts, but not private or commercial acts.
C)not immune from any type of suit in the United States.
D)None of the above.
Q3) A country may issue to foreign citizens visas that permit them to enter the country for identified purposes or for specific periods of time.
A)True
B)False
Q4) What is the basic purpose of the World Trade Organization (WTO)?
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Chapter 47: Introduction to Property, property Insurance,
Bailments, and Documents of Title
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Q1) Explain the difference between lost,mislaid,and abandoned property and who has rights to it.
Q2) The basic principles of contract law apply to insurance policies.
A)True
B)False
Q3) Insurance protects a business from:
A)tort liability.
B)strict liability.
C)negligence.
D)damage from natural causes.
E)All of the above.
Q4) Harold says in the presence of three other people that he is giving his automobile to his nephew,and then hands the keys to the car to the nephew.Delivery of the auto has taken place.
A)True
B)False
Q5) Property insurance may be either a valued policy or an open policy.
A)True
B)False
Page 50
Q6) Why are delivery and acceptance both necessary to have a valid gift?
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Chapter 48: Interests in Real Property
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Q1) If a landlord furnishes heat in the summer in order to force his tenant to move and the tenant does in fact move,a court of law will probably decide that:
A)waste has occurred.
B)there has been an unreasonable abandonment of the premises.
C)a constructive eviction has taken place.
D)vacating of the premises constituted an assignment.
Q2) Mother conveyed her lakefront property to her daughter,Ellen,for life and then to Ellen's children,but if Ellen had no children,to Mark.Mark has a contingent remainder.
A)True
B)False
Q3) Under the common law,a landlord is under an obligation to provide or maintain the premises in a livable condition.
A)True
B)False
Q4) A tenancy by the entireties,created only by a conveyance to a husband and wife,is terminated by divorce.
A)True
B)False
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Chapter 49: Transfer and Control of Real Property
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Q1) When a contract involving the sale of real estate calls for the delivery of the deed in return for the purchase price on a certain day,this performance is known as:
A)foreclosure.
B)warranty deed day.
C)contract day.
D)the closing.
Q2) Which of the following would be an invalid restrictive covenant in a deed?
A)A requirement that all buildings are of a certain style.
B)A requirement that all homes contain a double garage.
C)An agreement not to sell to African-Americans.
D)An agreement requiring a minimum size for homes.
Q3) Which of the following carries with it no warranties or guarantees of title?
A)Warranty deed.
B)Quitclaim deed.
C)Special warranty deed.
D)All types of deeds carry a warranty of title.
Q4) A mortgage creates a security interest in real property.
A)True
B)False
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Chapter 50: Trusts and Wills
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Q1) An express trust is a trust:
A)established by law through the courts when the parties' conduct seems to warrant the creation of a trust.
B)established by voluntary action.
C)represented by a written document, oral statements, or the conduct of the settlor.
D)All of the above.
E)Both (b) and (c).
Q2) A completely handwritten will is valid only if witnessed.
A)True
B)False
Q3) For a memorandum to be incorporated into a will,which of the following conditions must be met? The memorandum must be:
A)in writing.
B)in existence when the will is executed.
C)adequately described in the will.
D)All of the above.
Q4) There is no such thing as an irrevocable will.
A)True
B)False
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