Legal Aspects of Business
Midterm Exam
Course Introduction
Legal Aspects of Business provides an overview of the fundamental legal principles relevant to the operation and management of businesses. The course covers key topics such as the formation and enforcement of contracts, company law, intellectual property rights, employment law, dispute resolution mechanisms, and regulations concerning consumer protection. Students will gain an understanding of the legal environment in which businesses operate, explore the implications of non-compliance, and examine case studies highlighting how legal decisions impact business strategy and operations. This course is essential for anyone seeking to navigate legal challenges and make informed decisions in the corporate world.
Recommended Textbook
Business Law Principles for Todays Commercial Environment 5th Edition by Twomey
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Chapter 1: The Nature and Sources of Law
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Q1) A ______ is a legal principle expressed for the first time in court decision.
A) statutory law
B) stare decisis
C) case law
D) precedent Answer: D
Q2) Law is often defined as the body of principles that courts or administrative agencies will enforce.
A)True
B)False Answer: True
Q3) Procedural law specifies the steps that must be followed in enforcing those rights and liabilities.
A)True
B)False Answer: True
Q4) Procedural law creates legal rights and duties.
A)True
B)False Answer: True
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Chapter 2: The Court System and Dispute Resolution
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Q1) The person who initiates a civil lawsuit is called the:
A) defendant.
B) prosecutor
C) plaintiff.
D) judge.
Answer: C
Q2) The _____ rule(s)on the admissibility of evidence.
A) Judge
B) Jury
C) Attorneys
D) court clerk
Answer: A
Q3) A court that can only hear disputes involving damages of $5,000 or less has a limited jurisdiction.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Business Ethics, Social Forces and the Law
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Sample Questions
Q1) An ethical duty of confidentiality could be breached in any of the following situations except:
A) information obtained through research of the employer is disclosed.
B) customer lists or leads are disclosed to a competitor.
C) proprietary information or technology of a business is disclosed.
D) when a confidential informant tells government officials of illegal company activity.
Answer: D
Q2) Laws that prohibit mislabeling of food,speeding,and sale of alcohol to minors exist primarily:
A) for protection of the person.
B) for protection of public health, safety, and morals.
C) for protection of property.
D) for protection of the state.
Answer: B
Q3) The final question of the Blanchard-Peale "Three Part Test",has to do with conscience.
A)True
B)False
Answer: True
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Page 5
Chapter 4: The Constitution as the Foundation of the Legal Environment
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Q1) The power to tax income:
A) is possessed only by the federal government.
B) is possessed only by state governments.
C) may be exercised concurrently by both state and federal governments.
D) is controlled exactly like the power to wage war.
Q2) The commerce clause of the Constitution:
A) prohibits the U.S. government from engaging in interstate commerce.
B) prohibits the U.S. government from regulating interstate commerce.
C) has been expanded by Supreme Court interpretations to give the U.S. government the power to regulate the general welfare of the nation.
D) was declared unconstitutional in 1937.
Q3) The powers given by the federal government to the states are described as delegated powers.
A)True
B)False
Q4) A constitution is the written document that establishes the structure of the government and its relationship to the people.
A)True
B)False
6
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Chapter 5: Government Regulation of Competition and Prices
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Q1) The Clayton Act prohibits price discrimination between different buyers of like commodities when the effect may be to substantially lessen competition.
A)True
B)False
Q2) A manufacturer having a restriction on territories in the form of a sole outlet is a per se violation.
A)True
B)False
Q3) A violator of the Sherman Act may be subject to:
A) fine only.
B) imprisonment only.
C) both fine and imprisonment.
D) neither fine nor imprisonment.
Q4) The government can regulate not just businesses,but also business competition and prices.
A)True
B)False
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Chapter 6: Administrative Agencies
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Q1) An administrative agency cannot hold a hearing without a jury.
A)True
B)False
Q2) Before an agency can begin rulemaking proceedings it must be given jurisdiction:
A) by congressional enactment in the form of a statute.
B) granted by an executive order of the President of the United States.
C) from the United States Supreme Court.
D) From the voters in the district.
Q3) The public has access to the activity of administrative agencies in three ways: (1)open records,(2)open meetings,and (3)public announcement of agency guidelines.
A)True
B)False
Q4) If an agency causes a substantial loss to a business by enforcement of its laws,that business:
A) always can hold the agency liable for damages.
B) never can hold the agency liable for damages.
C) may seek damages if the agency acted in bad faith.
D) may seek damages if the agency complied with its own guidelines.
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Page 8
Chapter 7: Crimes
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Q1) "Mental state" does not require an awareness of guilt.
A)True
B)False
Q2) Corporations are entitled to Fifth Amendment protection.
A)True
B)False
Q3) If a person unlawfully gains access to a computer and fraudulently causes goods to be "lost" from their true destination,he might be guilty of _______.
A) circumventing logistics transfers.
B) computer raiding.
C) economic espionage by computer.
D) diverted delivery by computer.
Q4) Generally,misdemeanors are more serious than felonies.
A)True
B)False
Q5) Perjury occurs:
A) only in federal court.
B) only in written form.
C) only in state courts.
D) In both oral and written forms.
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Chapter 8: Torts
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Sample Questions
Q1) The tort of invasion of privacy includes all of the following except:
A) intrusion into private affairs.
B) public disclosure of private facts.
C) misappropriation of another's name.
D) defamation of privacy.
Q2) If the plaintiff has either engaged in or refrained from actions that are at least partially to blame for the injuries received,what negligence has occurred?
A) criminal
B) contributory
C) personal
D) prejudicial
Q3) Interactive web sites are immune from liability for content created by a third-party user,unless the web site actively edits the content.
A)True
B)False
Q4) Commercial exploitation,also called right of publicity,is a form of invasion of privacy.
A)True
B)False
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Chapter 9: Intellectual Property Rights and the Internet
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Q1) Copyright of a "work made for hire" runs for the life of the creator of the work plus 50 years.
A)True
B)False
Q2) In limited circumstances customer lists are protected under trade secret laws.
A)True
B)False
Q3) The best way to distribute and sell copyrighted computer programs is using:
A) copyright laws.
B) patent laws.
C) trade secret laws.
D) restrictive licensing.
Q4) Smarts and Then Some,Inc.developed a software program after several years of research and development.The particular software program was then test-marketed,at which point a competitor filed suit claiming that the Smarts and Then Some program violated the competitor's copyright on a program they too were test-marketing.What is the test to determine whether a copyright has been violated?
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Chapter 10: The Legal Environmental of International Trade
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Q1) Under which of the following doctrines is it held that a foreign sovereign cannot be sued unless it engages in illegal commercial conduct?
A) act-of-state
B) sovereign compliance
C) Timberlane
D) sovereign immunity
Q2) _________,very common in international business,is the granting of permission to use a trademark,trade name,or copyright under specified conditions.
A) Franchising.
B) Licensing.
C) Letters of credit.
D) Distribution.
Q3) Which of the following does not describe the European Union (EU)?
A) It was formerly known as the European Economic Community.
B) It had ten members sign on in 2004.
C) It eliminated internal barriers to the free movement of goods, persons, services, and capital between member countries.
D) It is administered solely by the heads of state of the member countries.
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12
Chapter 11: Nature and Classes of Contracts: Contracting
on the Internet
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Q1) A contract can only involve two parties: the promisor and the obligor.
A)True
B)False
Q2) The law requires parties to be fair and reasonable in the making of a contract.
A)True
B)False
Q3) Whenever a person receives a benefit for which payment has not been made,there is an unjust enrichment and the value of such benefit must be paid to the person conferring the benefit.
A)True
B)False
Q4) The effect of an implied contract is not the same as the effect of an express contract.
A)True
B)False
Q5) In some cases,third persons,such as third party beneficiaries or assignees,have rights on a contract.
A)True B)False
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Chapter 12: Formation of Contracts: Offer and Acceptance
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Q1) 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
Q2) If no time is stated for the duration of an offer,it continues indefinitely if the offer relates to durable goods or land.
A)True
B)False
Q3) 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
Q4) Frank is drunk and while laughing hysterically says to Hal "I'll sell you my truck for a buck".Frank has made a valid offer.
A)True B)False
Q5) An acceptance must be absolute and unconditional. A)True B)False
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Chapter 13: Capacity and Genuine Assent
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Q1) Judy,a widow,just sold a piece of property.She will live off that money during her retirement.Judy dotes on her son,Chris,who asks her to invest her money in his restaurant,which is faltering.He tells her that if she does not lend him the money she will never see him again.She is afraid of being alone and agrees to his request,but soon changes her mind and asks for her money back.Chris claims they have formed a binding contract.What is your conclusion?
A) The contract is voidable based on duress.
B) The contract is valid because it was a unilateral mistake.
C) The contract is voidable based on undue influence.
D) The contract is voidable based on fraud.
Q2) When necessary medical care is provided to a minor,a parent is liable at common law for the medical expenses provided the minor child.
A)True
B)False
Q3) Certain persons cannot make contracts that will bind them.
A)True
B)False
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Page 15
Chapter 14: Consideration
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Q1) True consideration occurs only when the value of one promise is equal to the value of the promise given by the other party.
A)True
B)False
Q2) Sara Student wished to pay off her $5,000 student loan.If she sends in a check for $3,000 and the creditor cashes the check,the debt will be fully satisfied provided the check is marked "paid in full."
A)True
B)False
Q3) Dave Tompkins was up late one night watching a television campaign for a charitable organization.The organization was seeking donations in order to construct a new building that would serve as the organization's headquarters.One of Tomkins' favorite performers appeared to promote the campaign,and this prompted Dave to telephone in a pledge.Tomkins pledged $10,000 to the charity and,feeling good about his action,finally went to sleep.The next morning,Tomkins regretted making the pledge because its enforcement would cause great personal financial hardship.Will the charity be able to legally enforce the pledge Tomkins made? If so,why might the charity choose not to enforce a lawful pledge?
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Page 16
Chapter 15: Legality and Public Policy
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Q1) An agreement to slander a third person would not be enforceable because slander is a(n):
A) crime.
B) civil wrong.
C) infringement of privacy.
D) restraint against trade.
Q2) When money is loaned at a greater rate of interest than is allowed by law,__________ is committed.
A) Usury
B) credit misfeasance
C) petty theft
D) credit malfeasance
Q3) In the sale of a business,all the following elements are necessary to create an enforceable noncompete clause,except:
A) not unduly burdensome on buyer
B) reasonable time limitation
C) estimated value of the seller's business
D) geographic restriction not overly broad
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Chapter 16: Writing, Electronic Forms, and Interpretation of Contracts
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Q1) If words and numbers contradict each other in a contract,the rule of construction favors the words.
A)True
B)False
Q2) A promise to grant a mortgage on real property does not require a writing because it is not a transfer of land.
A)True
B)False
Q3) A contract is created by which the terms are stated to be for consideration in the amount of $3,000.If typewritten in the contract is the term "four thousand dollars," while the amount of $3,000 is printed within the form:
A) the contract will be interpreted to be for $3,000.
B) the contract will be interpreted to be for $4,000.
C) there is a contract but the courts will not specify the dollar amount, as a conflict exists.
D) a compromise settlement amount of $3,500 will be used.
Q4) Parol evidence is not admissible to show fraud,duress or mistake.
A)True
B)False
Page 18
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Chapter 17: Third Persons and Contracts
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Q1) A third-party beneficiary contract may be amended:
A) without the consent of the beneficiary.
B) by operation of law.
C) regardless of whether the contract allows modifications without the beneficiary's consent.
D) automatically when either party dies.
Q2) In general,one may assign rights if that does not cause the obligor's duties to increase or change materially.
A)True
B)False
Q3) The right to file a legal claim may not be assigned.
A)True
B)False
Q4) A life insurance contract is a third-party:
A) beneficiary contract.
B) assignment contract.
C) payment contract.
D) performance contract.
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Chapter 18: Discharge of Contracts
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Q1) There is no exact standard or test by which to determine whether contractual performance is substantial.
A)True
B)False
Q2) The time for performance is typically essential in a contract for the sale of perishable property.
A)True
B)False
Q3) If the parties to a contract agree to undo the agreement and return any consideration involved,the contract is discharged by:
A) mutual cancellation
B) mutual rescission.
C) novation
D) accord and satisfaction
Q4) Generally,contracts are discharged by the performance of the terms of the contract.
A)True
B)False
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Chapter 19: Breach of Contract and Remedies
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Q1) The failure to act or perform in the manner called for by a contract is a:
A) waiver.
B) breach.
C) forbearance.
D) reservation of right.
Q2) Gregory,a comedy writer,entered into a contract with Wessel,a comedian.The contract provided that Gregory would provide Wessel with a 15-minute monologue for his upcoming appearance on Comedy Hour and that Wessel would pay Gregory $250.All performers on Comedy Hour make $500 per appearance.As Gregory knows,the last time Wessel appeared on Comedy Hour he was asked to make special guest appearances at three local comedy clubs using the same monologue.He earned a total of $750 for the three performances.Shortly before Wessel was scheduled to appear on Comedy Hour,Gregory informed him that he was unable to provide the monologue.As a result,Wessel was forced to cancel his appearance.Wessel sued Gregory for breach of contract and requested damages of $1,250.What will result?
Q3) An antimodification clause specifies that a waiver to any breach automatically modifies the contract.
A)True
B)False
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Page 21
Chapter 20: Personal Property and Bailments
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Q1) If while trespassing a hunter kills game,the game belongs to that hunter.
A)True
B)False
Q2) If a thief sells stolen property to a good-faith buyer,the buyer acquires title to the property.
A)True
B)False
Q3) Sylvia and Morris were married and owned their home as tenants by the entirety.When Morris died,his will said that he left his half of his home to his brother Tim.Who owns the home at Morris's death?
A) The home is now owned solely by Sylvia.
B) The home is now owned by a joint tenancy between Sylvia and Tim.
C) The home is now owned by a tenancy in common between Sylvia and Tim.
D) The home is now owned by Sylvia and the state, in equal and divisible shares.
Q4) In a bailment,the bailee does not necessarily have to be aware that the bailed goods were placed within the Bailee's exclusive possession or control.
A)True
B)False
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Page 22
Chapter 21: Legal Aspects of Supply Chain Management
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Q1) To be engaged in warehousing,an enterprise must have appropriate storage buildings.
A)True
B)False
Q2) The rights and duties of warehousers are regulated by the UCC.
A)True
B)False
Q3) A warehouser that holds itself out to serve the public generally without discrimination is called a(n):
A) public warehouser.
B) general warehouser.
C) nondiscriminatory warehouser.
D) ordinary warehouser.
Q4) A transferee's rights to a warehouse receipt may be defeated by a good-faith purchaser of the goods from the transferor of the receipt.
A)True
B)False
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Chapter 22: Nature and Form of Sales
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Q1) A sales agreement that does not satisfy the statute of frauds is:
A) a quasi contract.
B) criminal.
C) unenforceable.
D) unlawful.
Q2) As a general rule,courts will __________ in recovering money or property transferred under an illegal agreement.
A) assist a commercial buyer
B) assist a non-commercial buyer
C) assist an institutional buyer
D) not aid either party
Q3) The sale of goods is governed which article of the Uniform Commercial Code?
A) Article 6
B) Article 8
C) Article 2
D) Article 4
Q4) Defenses raised in a suit based on a sales contract differ greatly from defenses used in regard to any other type of contract.
A)True
B)False
Page 24
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Chapter 23: Title and Risk of Loss
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Q1) When a person picks out a custom necktie and purchases it,the transaction involves fungible goods.
A)True
B)False
Q2) __________ 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
Q3) In an FOB place of shipment contract,the seller's obligation ends when he delivers the goods to a carrier for shipment.
A)True
B)False
Q4) Fungible goods are always homogeneous.
A)True
B)False
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25
Chapter 24: Product Liability: Warranties and Torts
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Q1) An examination of goods excludes any implied warranty with respect to a defect that:
A) is apparent after a reasonable examination is made.
B) will not be apparent without chemical analysis.
C) will not be apparent until the goods are processed or used in manufacturing.
D) is unknown to all parties and is not detectable by reasonable examination.
Q2) An implied warranty arises automatically from the fact a sale has been made. A)True B)False
Q3) A disclaimer of warranties made in the manner specified by the Uniform Commercial Code is not unconscionable.
A)True B)False
Q4) The federal regulation of express warranties:
A) applies only to limited warranties.
B) applies to a seller who makes a written express warranty for a consumer product costing more than $10.
C) requires all express warranties to be full warranties.
D) requires an implied warranty to be designated as either full or limited.
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Chapter 25: Obligations and Performance
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Q1) To be adequate,after a proper demand an assurance of performance must:
A) include consideration.
B) allow for the additional examination of the goods.
C) be sufficient to assure a reasonable person that the contract will be performed.
D) be written.
Q2) The right to ___________ is a second chance for a seller to make a proper tender of conforming goods.
A) rehabilitate
B) repair
C) heal
D) cure
Q3) When a contract to sell identified goods does not specify a place of delivery,the goods are considered delivered at the seller's place of business.
A)True
B)False
Q4) Substantial impairment requires proof that goods are worthless.
A)True
B)False
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Chapter 26: Remedies for Breach of Sales Contracts
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Q1) The recovery of lost profits by the seller provides reimbursement for costs the seller incurred in gearing up for contract performance.
A)True
B)False
Q2) If goods are specially manufactured,unique,or rare,a buyer may have the right to specific performance.
A)True
B)False
Q3) If a buyer refuses to accept specially manufactured goods,the seller has the right to keep the goods,and recover the full purchase price as damages.
A)True
B)False
Q4) A buyer can revoke acceptance of the goods,if the seller does any of the following,except:
A) the seller fails to deliver conforming goods.
B) the seller has repudiated the contract.
C) the defective goods substantially impair value of the contract.
D) cancels the shipment while in transit.
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28
Chapter 27: Kinds of Negotiable Instruments and Negotiability
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Q1) If an instrument is negotiable,it is governed by Article 4 of the UCC.
A)True
B)False
Q2) Commercial paper facilitates the transfer of funds and payment.
A)True
B)False
Q3) Bruce agrees to buy Joe's ranch.They draw up a note,under which Bruce is to pay Joe in three installments,each payable on a specified date.Joe has concerns about Bruce's ability to pay on time,so he insists that the note include an acceleration clause.Such a clause would allow Joe to:
A) accelerate the sale of the ranch.
B) demand payment of the entire amount Bruce owes him if a certain event occurs.
C) extend the date of maturity on the note until a certain date in the future.
D) accelerate the statute of limitations in a case involving negotiable instruments
Q4) The drawee on a check can be a bank.
A)True
B)False
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Chapter 28: Transfers of Negotiable Instruments and Warranties
of Parties
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Q1) A blank indorsement turns a(n)__________instrument into a(n)__________ instrument.
A) negotiable; non-negotiable
B) non-negotiable; negotiable
C) bearer; order
D) order; bearer
Q2) Al was a well-respected attorney in a small town.A couple retained Al to represent them on the purchase of a home.Before closing,Al informed the couple of payments that they were required to make by check at the closing.Among the required payments the attorney told the couple to make were a check for $1,500 to Bob Brown and a check for $610 to Susan Lee.The attorney explained that the check to Brown was for a survey of the property and the check to Lee was for termite control work that the couple had authorized.??The checks were issued and taken by Al who promised to deliver them.Al did not,however,deliver them.Instead,Al forged the indorsements of the respective payees and cashed the checks.When Al was later arrested on a similar matter,the couple learned what had happened.??The couple made a claim against its bank for reimbursement,claiming the bank was not authorized to pay these checks because they had not been effectively negotiated to the bank.When the facts came to light,no person named Bob Brown had done a survey on the property,but the termite work had been done by Lee.Decide both cases.
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Chapter 29: Liability of the Parties Under Negotiable Instruments
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Q1) Which of the following will not be considered value in connection with determining holder in due course status?
A) performing the act for which the instrument was given
B) promising to perform an existing legal obligation
C) receiving the instrument as security for a loan
D) taking the instrument in payment of a debt
Q2) To have the status of a holder in due course,a person must first be a holder.
A)True
B)False
Q3) A person who acquires a negotiable instrument with notice of a defense:
A) has acted in bad faith.
B) has acted illegally.
C) cannot be a holder in due course.
D) has taken unfair advantage of the maker.
Q4) In 1976 the FTC adopted a rule that expands the rights of a holder in due course in a consumer credit transaction.
A)True B)False
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Chapter 30: Checks and Funds Transfers
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Q1) When a bank certifies a check,the amount involved in the certification will be debited in the depositor's account until payment of the certified check.
A)True
B)False
Q2) A thief stole Art's checkbook and forged Art's name as drawer of a check.The drawee paid the check in good faith and sent it to Art with the monthly statement on January 3,2013.The thief forged other checks during February and March of 2013,which the drawee in good faith paid.All paid checks were sent to Art with monthly statements.On May 25,2014,Art discovered all of the forgeries and notified the drawee.For which check(s)is Art entitled to be reimbursed?
A) none of them
B) all of them
C) the first check only
D) the last check only
Q3) A forged indorsement must be reported within:
A) forty (40)days.
B) six (6)months.
C) one (1)year.
D) three (3)years.
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Page 32
Chapter 31: Nature of the Debtor Creditor Relationship
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Q1) Suretyship and guaranty transactions have the common feature of a promise to answer for the debt or default of another.
A)True
B)False
Q2) The issuer of a letter of credit can revoke or modify the letter at any time without the consent of the beneficiary,even if that right is not expressly reserved in the letter.
A)True
B)False
Q3) A(n)__________is an undertaking by one person,for consideration,to pay another person a sum of money in the event of a specified loss.
A) absolute guaranty
B) indemnity contract
C) guaranty of payment
D) suretyship
Q4) If a debtor is about to leave the state,the surety may call on the creditor to take action against the debtor.
A)True
B)False
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Chapter 32: Consumer Protection
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Q1) An unsolicited distribution of credit cards to persons who have not applied for them is:
A) always allowed.
B) voidable.
C) illegal.
D) only allowed if the recipient is at least 21 years old.
Q2) Under the Equal Credit Opportunity Act,it is unlawful to discriminate against an applicant because all or part of the applicant's income is obtained from a public assistance program.
A)True
B)False
Q3) Pursuant to the CARD Act of 2009,all credit card companies must have bills in consumers' hands not less than __________ before the bill is due.
A) seven (7)days
B) fourteen (14)days
C) twenty-one (21)days
D) thirty (30)days
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Chapter 33: Secured Transactions in Personal Property
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Q1) Javier buys a 3D TV and a DVR from West Coast Sales.West Coast agrees to lend him 90 percent of the purchase price.Their agreement is known as a(n): ______.
A) a purchase money security interest.
B) a future transaction.
C) a floating lien.
D) transferred collateral interest.
Q2) Under Revised UCC Article 9,a financing statement must be signed by the debtor. A)True
B)False
Q3) A creditor must file a financing statement for a security interest to attach. A)True B)False
Q4) Consumer goods are classified into different categories based on the physical characteristics of the goods.
A)True B)False
Q5) Creditors cannot legally request collateral on a previously unsecured loan. A)True B)False
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Chapter 34: Bankruptcy
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Q1) Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005,a discharge is available only once every ten (10)years.
A)True
B)False
Q2) The filing of an involuntary bankruptcy case petition results in an order of relief.
A)True
B)False
Q3) A transfer of property by a debtor within ______ prior to filing with the intent to hinder,delay,or defraud creditors is called a(n)______.
A) 3 months, proof of claim.
B) 3 months, voidable preference
C) 12 months, proof of claim
D) 12 months, voidable preference.
Q4) Stockbrokers are eligible to fileChapter 11 bankruptcy.
A)True
B)False
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Page 36
Chapter 35: Insurance
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Q1) When a provision of an endorsement conflicts with a provision of a policy,the policy controls.
A)True
B)False
Q2) The person to whom an insurance promise is made is called: ______.
A) the insured.
B) the insurer.
C) the broker.
D) the agent.
Q3) An incontestability clause gives insurance companies a statutory period of time to pay the claims suffered by the insured.
A)True
B)False
Q4) Exceptions to coverage are generally strictly interpreted against the insurer.
A)True
B)False
Q5) Commercial General Liability (CGL)policies apply to trademark infringement suits.
A)True
B)False
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Chapter 36: Agency
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Q1) An agency coupled with an interest is not terminated by the death of the principal.
A)True
B)False
Q2) A person has apparent authority as an agent when the principal's words or conduct leads a third person to reasonably believe that the person has that authority and the third person relies on that appearance.
A)True
B)False
Q3) The scope of an agent's authority may be determined from all of the following except: ______.
A) express words of the principal.
B) actions of the principal.
C) customs of the trade or business.
D) consideration paid to agent
Q4) The term apparent authority is used when an appearance of authority has been created by a principal,but actual authority does not exist.
A)True
B)False
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Chapter 37: Third Persons in Agency
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Q1) 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
Q2) The employer of a salesperson:
A) is only bound by a contract if the employee is acting as a soliciting agent.
B) is not bound by a contract if the employee is acting as a contracting agent.
C) is not bound by a contract until the contract is accepted.
D) is always bound by contracts made by all employee salespersons.
Q3) If an agent's act causes loss to the third person,that third person may generally hold the agent liable for the loss.
A)True
B)False
Q4) A principal is not bound by statements made by an agent during the transaction of business that is within the scope of the agent's authority.
A)True
B)False
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Chapter 38: Regulation of Employment
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Q1) Unemployment compensation benefits will most likely be denied to all of the following groups of people except: ______.
A) an employee who steals company property and is fired.
B) full-time students.
C) an employee who quits a job without cause.
D) an employee who is injured on the job.
Q2) An employee has a "shop right" to use an employer's invention without consideration if the invention was made during working hours with the employer's material and equipment.
A)True
B)False
Q3) Which of the following categories of individuals are exempt from the minimum wage provisions of Fair Labor Standards Act (FLSA)?
A) executives
B) factory workers
C) full-time babysitters
D) housekeepers
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Chapter 39: Equal Employment Opportunity Law
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Q1) The Age Discrimination in Employment Act forbids discrimination by employers against persons over 30 years of age.
A)True
B)False
Q2) When an employee alleges religious discrimination because of an employee-observed religious practice:
A) the employer must bypass seniority rules to accommodate the employee.
B) the employee must honor all bona fide religious practices.
C) the employer must make reasonable efforts to accommodate religious beliefs.
D) the employer must call in a substitute worker at additional cost.
Q3) In a disparate impact case,the employer's proof that it did not intend to discriminate is a complete defense.
A)True
B)False
Q4) A party claiming discrimination must first file a complaint with a local or state EEOC office before filing a charge with the EEOC.
A)True
B)False
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Chapter 40: Types of Business Organizations
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Q1) Who serve as agents of the corporation and run the "day-to-day" operations of the business?
A) officers
B) directors
C) shareholders
D) employees
Q2) A joint venture typically relates to the carrying out of a single enterprise or transaction.
A)True
B)False
Q3) An arrangement in which the owner of a trademark licenses others,under specified conditions or limitations,to use the trademark in purveying goods or services is a(n): ______.
A) corporation.
B) limited partnership.
C) unincorporated association.
D) franchise.
Q4) Business corporations exist to make a profit.
A)True
B)False
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Chapter 41: Partnerships
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Q1) When a partner disassociates with a partnership,which of the following is true?
A) The partnership is no longer bound by acts of that partner, whether or not a notice is filed.
B) The disassociated partner is prohibited from competing with the partnership for a period of one year.
C) The disassociated partner may be liable for damages for breach of contract.
D) Notice need not be given to third parties.
Q2) A creditor of an individual partner cannot proceed against any specific items of partnership property,but can obtain a charging order against that partner's interest in the partnership.
A)True
B)False
Q3) In determining the rights of partner Dewey in the firm of Dewey,Cheatham,and Howe,the most important reference point is: ______.
A) the Uniform Partnership Act.
B) the partnership agreement.
C) the sworn testimony of Cheatham and Howe.
D) the customs and traditions of similar partnerships.
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Chapter 42: LPs, LLCs, and LLPs
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Q1) An LLC may be formed without filing formal articles of organization with the secretary of state.
A)True B)False
Q2) Courts tend to resolve ambiguities in limited partnership agreements against the general partners.
A)True B)False
Q3) Alice,Betty,and Cathy are interested in forming a business venture.Alice is quite wealthy and is ready to contribute money to the venture.Betty has a degree in business from an excellent university,worked for five years as a manager in a major corporation,and currently is a leadership/management consultant.Cathy is a scientist who has developed a process that will,according to her,"revolutionize cancer treatment throughout the world." Alice,Betty,and Cathy believe it is in their best interest to form a general partnership.Do you agree? Is there a more appropriate form of business you might recommend?
Q4) The general partner of a limited partnership may be a corporation.
A)True B)False
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Chapter 43: Corporate Formation
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Q1) For the purpose of suing a corporation in federal court,the corporation is a citizen in the state where it has its principal place of business.
A)True
B)False
Q2) In a merger situation,what is the right of a dissenting shareholder?
A) to block the merger until satisfied regarding its terms.
B) to have their shares appraised and purchased by the corporation.
C) to enforce a consolidation instead of a merger.
D) dissenting shareholders have no rights with respect to a merger.
Q3) When two corporations merge: ______.
A) their separate existences cease, and a new corporation is formed.
B) one of the corporations absorbs the other.
C) each corporation's stockholders keep their original shares of stock
D) a new charter is needed.
Q4) Private corporations are often called public in business circles when their stock is sold to the public.
A)True
B)False
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Chapter 44: Shareholder Rights in Corporations
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Q1) An individual who has been authorized to vote the share of another stockholder is said to be voting by: ______.
A) trust.
B) proxy.
C) estoppel.
D) agency.
Q2) An interest in a corporation is based on the ownership of one or more shares of stock of the corporation.
A)True
B)False
Q3) The RMBCA provides that shareholders: ______.
A) have no preemptive rights unless the articles of incorporation so provide.
B) have preemptive rights regardless of what the articles of incorporation provide.
C) cannot have preemptive rights.
D) only have preemptive rights with respect to the transfer of a block of stock as consideration.
Q4) All shares must have a par value of at least one dollar per share.
A)True
B)False
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Chapter 45: Securities Regulation
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Q1) The ______ requires the SEC to create a(n)______ exemption that would allow companies to raise $1 million in any 12-month period.
A) Rule 505, JOBS Act.
B) JOBS Act, accredited investor
C) Regulation A, JOBS Act.
D) JOBS Act, crowdfunding
Q2) The Securities Exchange Act of 1934 deals with the __________ distribution of securities.
A) primary
B) secondary
C) aftermarket
D) direct
Q3) A corporation or group of investors may seek to acquire control of another corporation by offering cash for all of its shares made available for sale by a certain date.This action is called a(n): ______.
A) cash tender offer.
B) stock redemption offer.
C) stock reclamation offer.
D) offer for value.
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Page 47
Chapter 46: Accountants' Liability and Malpractice
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Q1) A disclaimer that protects an accountant from liability for inaccurate reporting of certain specified financial information will be held valid if the accountant had no means of examining the information.
A)True
B)False
Q2) In some states,exculpatory clauses cannot protect the accountant from a suit brought by a third party.
A)True
B)False
Q3) When an accountant negligently prepares a financial statement knowing that the client intends to use it in obtaining a loan from a bank,the accountant will be liable to whichever lender actually makes the loan under the __________rule.
A) known user
B) contact
C) foreseeable user.
D) privity
Q4) Disclaimers are not enforceable unless they are clear and unambiguous.
A)True
B)False
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Chapter 47: Management of Corporations
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Q1) Officers have a fiduciary obligation not to make any secret financial gain at the expense of the corporation.
A)True
B)False
Q2) Application of the business judgment rule to a board's decision presumes all of the following except: ______.
A) that the board's decision was profitable to the corporation
B) that the board acted on an informed basis
C) that the board acted in good faith
D) that the board believe it was acting in the best interest of the corporation
Q3) The duties of officers of a corporation are generally set forth in the articles of incorporation.
A)True B)False
Q4) Although officers may be agents of the corporation,a third person suing the company has the burden of proving that a particular officer had the authority he purported to have.
A)True B)False
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Chapter 48: Real Property
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Q1) Like an easement,a license is a revocable interest in the land of another.
A)True
B)False
Q2) Which statement is incorrect concerning mortgages?
A) The mortgagee's interest terminates upon performance of the obligation secured by the mortgage.
B) The mortgagee has the right to enforce the mortgage by foreclosure upon default by the mortgagor.
C) The mortgagor must have complete or absolute ownership in the property.
D) Generally, no particular form of language is required to create a mortgage.
Q3) An unrecorded mortgage is not valid and binding between the parties.
A)True
B)False
Q4) A prescription is a right to use another's property that belongs to the land that is benefited.
A)True
B)False
Q5) Under race statutes,the first party to record the deed holds title to land.
A)True
B)False
50
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Chapter 49: Environmental Law and Land Use Controls
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Q1) When the desired use of land is in harmony with the general nature of surrounding areas,a zoning variance is usually granted.
A)True
B)False
Q2) Both companies and their employees are subject to criminal penalties for violations of federal environmental laws.
A)True
B)False
Q3) Spot zoning may result in such inequality as to be condemned by the courts.
A)True
B)False
Q4) A nuisance: ________.
A) is created by every interference that has an effect on others.
B) is established when the plaintiff shows harm as the result of the defendant's conduct.
C) arises only by an interference that is great enough to be condemned as unreasonable.
D) cannot arise from a lawful activity or business that is conducted in a lawful manner.
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Chapter 50: Leases
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Q1) For an implied warranty of habitability to be enforceable,it must be mentioned in the residential lease.
A)True B)False
Q2) In the event a tenant breaches the lease,a landlord has all of the following remedies except: ___________.
A) selling the tenant's personal property.
B) landlord's lien.
C) recovery of possession.
D) suit for rent.
Q3) If the sewer continually backed up through the toilets in the rented premises,the tenant could claim constructive eviction,but would be able to stay until the landlord fixed it.
A)True B)False
Q4) A provision in a residential lease stating that the landlord cutting off heat or water will not constitute an eviction is unconscionable.
A)True B)False
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Chapter 51: Decedents' Estates and Trusts
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Q1) State intestacy statutes commonly provide for distribution in the following order:
A) spouse, parents, lineals, collateral heirs.
B) spouse, lineals, collateral heirs, parents.
C) spouse,lineals, parents, collateral heirs.
D) spouse, lineals, collateral heirs, parents
Q2) A beneficiary of personal property by will may be called a devisee.
A)True
B)False
Q3) In certain instances statutes provide that a change of circumstances,such as the marriage of a testator,has the effect of a revocation.
A)True
B)False
Q4) Every trust must have a beneficiary.
A)True
B)False
Q5) The requirements to create a trust are uniform.
A)True
B)False
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