Legal Aspects of Business
Mock Exam
Course Introduction
Legal Aspects of Business provides students with a comprehensive understanding of the legal environment in which businesses operate. The course covers fundamental principles of business law, including contracts, agency, sale of goods, negotiable instruments, company law, and intellectual property rights. Students will explore the regulatory framework governing commercial transactions, corporate governance, dispute resolution, and the impact of legal obligations on managerial decision-making. Through real-life case studies and scenario analyses, this course equips learners with the knowledge to identify, assess, and manage legal risks in various business contexts.
Recommended Textbook
Andersons Business Law and the Legal Environment Comprehensive 23rd Edition by Twomey
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51 Chapters
2716 Verified Questions
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Chapter 1: The Nature and Sources of Law
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Sample Questions
Q1) The right to privacy means that individuals
A) cannot gossip about each other
B) cannot be lawfully searched.
C) can yell "Fire" in a crowded theater.
D) are protected against intrusions by others.
Answer: D
Q2) Administrative regulations generally do not have the force of law.
A)True
B)False
Answer: False
Q3) Substantive law:
A) specifies the steps to follow to enforce legal rights.
B) concerns equitable relief only.
C) creates, defines, and regulates rights and liabilities.
D) draws solely on English legal principles.
Answer: C
Q4) Statutory law includes U.S. Supreme Court opinions.
A)True
B)False
Answer: False
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Chapter 2: The Court System and Dispute Resolution
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Sample Questions
Q1) A probate court is an example of a general trial court.
A)True
B)False
Answer: False
Q2) Which is not considered an alternate means of dispute resolution?
A) civil lawsuit
B) arbitration
C) association tribunals
D) minitrial
Answer: A
Q3) The decision of an association tribunal is binding on both the association member and the consumer.
A)True
B)False
Answer: False
Q4) The mediator in a mediation has the power to force the parties to come to a settlement.
A)True
B)False
Answer: False
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Chapter 3: Business Ethics, Social Forces, and the Law
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Sample Questions
Q1) The Blanchard and Peale three-part test for resolving ethical dilemmas consists of the following questions:
A) Is it legal? Is it ethical? Is it moral?
B) Is it legal? Is it balanced? How does it make me feel?
C) Is it ethical? Is it right? Does it pass the "front page of the newspaper" test?
D) Is it right? Is it balanced? Is it fair?
Answer: B
Q2) Trust is a fundamental basis of the capitalist system that is central to the expectations of investors, customers, and other firm stakeholders.
A)True
B)False
Answer: True
Q3) Ethical egoists such as Ayn Rand hold that:
A) people always act in their own self-interest.
B) people do the most good for the most people.
C) ethical dilemmas are resolved according to time and place.
D) solving ethical dilemmas requires ethical training
Answer: A
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Chapter 4: The Constitution As the Foundation of the Legal Environment
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Q1) Which of the following is true about administrative agencies?
A) Administrative agencies exercise powers guaranteed to them in the U.S. Constitution.
B) Administrative agencies exercise powers allocated to them by the president.
C) Administrative agencies make decisions that are rarely reviewed by the courts.
D) Administrative agencies make decisions that are effectively reviewed by voters.
Q2) The greatest changes to the Constitution have been made by United States Supreme Court decisions.
A)True
B)False
Q3) Some of the powers delegated to the national government may be exercised by the states.
A)True
B)False
Q4) California passed a law prohibiting any transporting of nuclear waste in the state unless the company doing so is a resident or is owned by residents of California. What constitutional issues does this law raise?
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Page 6
Chapter 5: Government Regulation of Competition and Prices
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Q1) The United States Supreme Court generally has held that vertical merger agreements should not automatically be condemned as an unlawful restraint of interstate commerce merely because they create the potential to monopolize it.
A)True
B)False
Q2) An agreement between real estate brokers to never charge a commission less than 6% is not an example of price fixing.
A)True
B)False
Q3) Section __________ of the Sherman Act applies to agreements, conduct, or conspiracies to restrain trade, which can consist of price-fixing, typing, and monopolization.
A) A
B) B
C) 1
D) 2
Q4) Governments may regulate prices but not credit terms.
A)True
B)False
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Chapter 6: Administrative Agencies
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Q1) Which of the following is beyond the enforcement power of an agency?
A) requiring proof of compliance with agency regulations
B) issuing a cease-and-desist order
C) convicting of criminal violations
D) imposing civil penalties
Q2) The United States constitution places the most significant limitations on administrative investigation in the area of:
A) search and seizure of the person.
B) aerial inspection.
C) search and seizure of papers and records.
D) guarantee against self-incrimination.
Q3) 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.
Q4) An agency hearing is generally not subject to the rules of evidence.
A)True
B)False
Page 8
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Chapter 7: Crimes
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Q1) The Fifth Amendment to the United States Constitution's protection against self-incrimination applies to:
A) individuals only.
B) corporations only.
C) both individuals and corporations.
D) individuals, but only in their official capacity within a business.
Q2) A computer crime generally can only be committed by a person having some knowledge of the operation of a computer.
A)True
B)False
Q3) Larceny is best defined as the taking of personal property from the presence of the victim by the use of force or fear.
A)True
B)False
Q4) For business crimes, managers cannot be held criminally responsible for the conduct of their employees.
A)True
B)False
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Page 9
Chapter 8: Torts
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Sample Questions
Q1) Once the cause in fact is established, the plaintiff must establish ________, that is the harm by the injured person that was a foreseeable consequence of the defendant's negligent actions.
A) actual causation.
B) proximate causation.
C) but for causation.
D) the Palsgraf standard.
Q2) Torts arise from a violation of a ____ duty.
A) public
B) private
C) contractual
D) criminal
Q3) Governments are generally immune from tort liability.
A)True
B)False
Q4) People generally have a duty to act as a reasonably prudent person would in similar circumstances.
A)True
B)False
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Chapter 9: Intellectual Property Rights and the Internet
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Sample Questions
Q1) The Berne Convention requires all works published after March 1, 1989 to contain a notice of copyright.
A)True
B)False
Q2) Herman Corporation is engaged in preparing a marketing campaign consisting of electronic and print images. Drawings and photographs for the campaign are coming from a variety of sources, including popular magazines, international newspapers, and web sources. The marketing vice president asserts that the company may use the images under the fair use doctrine. What factors should be considered in the application of the fair use doctrine?
Q3) Three types of patents available under U.S. law are:
A) utility, product, design.
B) design, packaging, invention.
C) design, plant, utility.
D) utility, regulatory, common law.
Q4) The Sony Bono Copyright Extension Act of 1998 extended copyright protection to the life of the author plus 50 years.
A)True
B)False
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Chapter 10: The Legal Environment of International Trade
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Sample Questions
Q1) Blocking laws prohibit the disclosure, copying, inspection, or removal of documents located in the enacting country in compliance with orders from foreign authorities.
A)True
B)False
Q2) The use of agency arrangements allows a U.S. firm to avoid taxation on sales made in its agent's country.
A)True
B)False
Q3) The "Turtle Law" prohibits the importation of shrimp from countries that allow the harvesting of shrimp that could adversely affect endangered sea turtles.
A)True
B)False
Q4) A letter of credit agrees to provide the seller with needed currency exchanges when transactions with foreign buyers occur.
A)True
B)False
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Chapter 11: Nature and Classes of Contracts: Contracting on
the Internet
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Sample Questions
Q1) The elements for a valid contract do NOT include: A) a fair price.
B) capacity.
C) consideration. D) assent.
Q2) A contract of record is also referred to as a(n): A) recognizance.
B) reconnaissance.
C) recording contract.
D) implied contract.
Q3) The law requires parties to be fair and reasonable in the making of a contract.
A)True
B)False
Q4) A contract never can be both executory and unilateral.
A)True
B)False
Q5) A contract can only involve two parties: the promisor and the obligor.
A)True
B)False
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Chapter 12: Formation of Contracts: Offer and Acceptance
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Sample Questions
Q1) If no termination date is specified for an offer, the offer will remain open:
A) for one year.
B) for six months.
C) for a reasonable period of time.
D) until someone accepts the offer.
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) An agreement that consists of two or more parts and calls for corresponding performances of each part by the parties is called a:
A) partial contract.
B) divisible contract.
C) performance contract.
D) divided contract.
Q4) 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
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Chapter 13: Capacity and Genuine Assent
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Sample Questions
Q1) Roberta, an educated person, purchased real estate from Maurice. Roberta did not read entirely the contract that she signed. As a result, she did not notice the provision in the contract about the interest imposed on the unpaid portion of the purchase price. She refused to pay the interest specified in the contract. Maurice sued her. Could he recover?
Q2) Contractual capacity is the ability to:
A) read and write.
B) sign a written contract.
C) understand that a contract is being made and to understand its general nature.
D) understand the legal meaning of the contract being made.
Q3) Assume Harvey buys a bull from Mike for the purpose of breeding, and Mike was aware of Harvey's purpose in purchasing the bull. Later, the bull was discovered to be sterile, although at the time of sale both Harvey and Mike believed the bull was not sterile. The contract is:
A) voidable based on fraud.
B) voidable based on misrepresentation.
C) voidable based on bilateral mistake.
D) voidable based on economic duress.
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Page 15
Chapter 14: Consideration
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Q1) Damages recoverable in a case of promissory estoppel are determined by the profits that the promisee expected.
A)True B)False
Q2) When a debtor tenders a check stating "paid in full" and the creditor cashes the check, the debt:
A) is always discharged.
B) may be discharged if it is a liquidated debt.
C) may be discharged if it is a unliquidated debt.
D) is never discharged.
Q3) A landowner's promise to pay a contractor a bonus to complete construction of a building according to the terms of a pre-existing contract between the landowner and the contractor is:
A) binding if the promise is in writing.
B) binding, since the promise is made by a non-merchant.
C) binding, since the promise is made to a merchant.
D) ordinarily not binding on the promisor.
Q4) Consideration is the bargained-for exchange between the parties to a contract.
A)True B)False
Page 16
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Chapter 15: Legality and Public Policy
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Q1) An unlicensed doctor can sue a patient for the doctor's fee if the patient in fact recovered because of the doctor's care.
A)True
B)False
Q2) Sam Wilson often goes to the horse races, participates in his state's lottery, and invests heavily in the stock of major U.S. companies. At work, Wilson is approached by his coworkers and asked to participate in a football pool. "It's totally based upon skill," his friends claim. In addition, Wilson's philanthropic club is holding a raffle in which an individual could win a new car. Are these activities gambling and therefore illegal activities?
Q3) An agreement not to compete is enforceable:
A) in the sale of a business.
B) between competitors.
C) in contracts for the sale of goods.
D) in contracts for the sale of securities.
Q4) A noncompetition covenant may be held invalid because of vagueness concerning the duration and geographic area of the restriction.
A)True
B)False
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Chapter 16: Writing, Electronic Forms, and Interpretation of Contracts
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Sample Questions
Q1) A promise to pay a debt must be in writing if:
A) the debt is for more than $500.
B) the debt is now due and payable.
C) the promise is to pay the debt of another.
D) the debt owed is the promisor's.
Q2) The parol evidence rule generally excludes words spoken before or at the time a written contract was executed from contradicting the terms of the contract.
A)True
B)False
Q3) An oral contract can be enforced when it relates to:
A) the purchase of a television set for $200.
B) the sale of an interest in land for $400.
C) managing a factory for five years.
D) a promise to answer for the debt of another.
Q4) When an insurance policy is ambiguous, the policy is interpreted:
A) against the insurer.
B) in favor of the insurer.
C) according to the dictionary meaning of the words.
D) according to the meaning of the words in the insurance industry.
Page 18
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Chapter 17: Third Persons and Contracts
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Sample Questions
Q1) Which of the following is not a third-party beneficiary contract?
A) a contract in which A hires B to give A's niece piano lessons
B) a contract to repair sewers in front of Macy's Department Store
C) a life insurance contract with a named beneficiary
D) a contract between X and Y for Y to install a new door on Z's home
Q2) An assignment is valid only if:
A) it is in a particular form.
B) it is written.
C) there is a manifestation of the intent to assign.
D) the assignment is paid for by the assignee.
Q3) Whenever a contract is intended to benefit a third person, the third person is referred to as a delegator.
A)True
B)False
Q4) When a buyer assigns the right to goods under a contract, the buyer's liability to make payment to the seller is:
A) transferred to the third party.
B) terminated.
C) still in effect.
D) shared equally with the third party.
Page 19
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Chapter 18: Discharge of Contracts
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Q1) Which of the following events excuses a promisor from performing his or her contractual obligations?
A) a riot
B) a shortage of materials necessary for production of goods and/or provision of services called for under the contract
C) an unanticipated increase in the cost of performance
D) destruction of the subject matter through no fault of either party
Q2) In most bilateral contracts, the performances of the parties are concurrent conditions.
A)True
B)False
Q3) If a debtor with multiple debts specifies the debt to which a payment is to be applied and the creditor accepts the money, the creditor is bound to apply the money as specified.
A)True
B)False
Q4) Payment by check is a conditional payment.
A)True
B)False
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Chapter 19: Breach of Contract and Remedies
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Q1) A waiver of a breach may be either express or implied.
A)True
B)False
Q2) A provision stipulating the amount of money damages to be paid in the event of default or breach of contract is known as a __________ damages clause.
A) nominal
B) contract
C) liquidated
D) breach
Q3) Ordinarily, contracts for the performance of personal services are specifically ordered.
A)True
B)False
Q4) If one party to a contract breaks the contract, the other party generally is under a duty to stop any further performance to avoid sustaining greater damages.
A)True
B)False
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Chapter 20: Personal Property and Bailments
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Sample Questions
Q1) Most courts consider an engagement ring to be a conditional gift.
A)True
B)False
Q2) 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.
Q3) Personal property is tangible and immovable.
A)True
B)False
Q4) A person becomes a(n) __________ at the moment of taking possession of abandoned personal property.
A) bailor
B) bailee
C) constructive bailee
D) owner
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Chapter 21: Legal Aspects of Supply Chain Management
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Q1) The rights and duties of warehousers are regulated by the UCC.
A)True
B)False
Q2) The rights of a holder of a duly negotiated warehouse receipt are extinguished by the warehouser's surrender of goods to the depositor.
A)True
B)False
Q3) When consigned goods are sold by a factor:
A) When consigned goods are sold by a factor:
B) title passes even if the goods have been stolen, provided the factor is ignorant of this fact.
C) the sale passes the title of the owner to the buyer.
D) strict compliance with the Federal Factors Act is required to pass title.
Q4) The hotelkeeper owes a duty as a bailee of personal property in a(n) _______ to
A) bailment for the benefit of the bailor, transient guests.
B) mutual benefit bailment, transient guests.
C) bailment for the benefit of the bailor, permanent boarders.
D) mutual benefit bailment, permanent boarders.
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Chapter 22: Nature and Form of Sales
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Sample Questions
Q1) A merchant cannot revoke a firm offer to buy or sell goods if the merchant has:
A) promised to keep the offer open.
B) declared in the presence of two or more reputable witnesses that the offer will be kept open.
C) received consideration to keep the offer open.
D) stated in a signed letter that the offer would not be revoked for a specified period of time.
Q2) Goods physically existing and owned by a seller at the time of a transaction are called existing goods.
A)True
B)False
Q3) An agreement to periodically deliver home-heating oil to a residential customer that does not indicate the duration of the contract
A) is enforceable for a reasonable period of time.
B) lasts for one delivery only.
C) is not a legally-enforceable contract.
D) constitutes a bulk transfer.
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24
Chapter 23: Title and Risk of Loss
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Q1) Goods that are not yet in existence or are not yet owned by the seller are__________ goods.
A) fungible
B) nonexistent
C) future
D) contingent
Q2) In a consignment, the dealer-consignee is often referred to as a(n):
A) remainder.
B) factor.
C) quotient.
D) exponent.
Q3) __________ 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
Q4) A consignment sale is treated as a sale or return under UCC Article 2. A)True
B)False
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Chapter 24: Product Liability: Warranties and Torts
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Q1) Plaintiffs suing for damages caused by a defective product are limited to claims against the manufacturer(s) of such goods.
A)True
B)False
Q2) Arthur was looking for a Father's Day gift for his dad, Tony. Tony was a cigar smoker but Arthur was a nonsmoker. Arthur went to a cigar store and was looking around when the proprietor suggested Arthur try a new imported cigar. The proprietor touted this new cigar as "just like the great Cuban cigars." Arthur was reluctant but did light one of the cigars, which had a pleasant aromatic smell and took about five to six minutes to be consumed. On this basis, Arthur bought a box of the cigars and presented them to his father as a gift. When the father smoked one of the cigars, it gave off an acrid smell and was completely consumed in less than two minutes. When Arthur saw this, he was very upset and asked his father to try another. The same situation was repeated with the acrid odor and the cigar burning down very quickly like a cigarette.?After Arthur tried unsuccessfully to return the cigars for a refund, Arthur filed a small claims court action against the store. The case was based on the failure of the purchased cigars to conform to the sample, breach of the implied warranty of merchantability, and the misleading statement "just like the Cuban cigars." Discuss the probable outcome of the case.
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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 standard for determining commercial impracticability is objective, not subjective.
A)True
B)False
Q3) If the buyer has paid for the goods in advance but revokes his acceptance when the goods arrive, he:
A) can resell the goods.
B) must prove the nonconforming defect was known at the time of the original acceptance.
C) return them within ten (10) days and wait for the refund.
D) may retain possession of the goods as security until the refund has been paid.
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Chapter 26: Remedies for Breach of Sales Contracts
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Q1) The right of a buyer to cancel or rescind a sales contract is never impacted by a delay in exercising that right.
A)True
B)False
Q2) If a buyer procures the same or similar goods as those involved in the sales contract breached by the seller, the buyer:
A) loses all rights to prosecute for breach.
B) is said to have validated the seller's action.
C) is said to have covered.
D) is also in breach.
Q3) If a buyer refuses to pay for goods after an acceptance that was not revoked, the seller may bring action to recover the purchase price and any incidental damages.
A)True
B)False
Q4) 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
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28
Chapter 27: Kinds of Negotiable Instruments and Negotiability
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Q1) An action taken by a person on behalf of another is called:
A) agency.
B) negotiability.
C) representative capacity.
D) identification of principal.
Q2) A promissory note that is payable "on the date of my marriage" is nonnegotiable even if the maker of the note marries.
A)True
B)False
Q3) To be negotiable, an instrument must include all of the following, except:
A) a writing.
B) signature of the maker or drawer.
C) unconditional promise or order to pay.
D) holder in due course.
Q4) Which of the following terms would make an instrument nonnegotiable?
A) It is dependent upon an event.
B) It is undated.
C) It is payable in foreign money.
D) It gives the holder the right to receive interest.
29
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Chapter 28: Transfers of Negotiable Instruments and
Warranties of Parties
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Q1) Negotiation of order paper requires:
A) delivery only.
B) indorsement only.
C) both indorsement and delivery.
D) neither indorsement nor delivery.
Q2) An instrument may be transferred only by negotiation.
A)True
B)False
Q3) The order or bearer character of the paper determines how it may be:
A) assigned.
B) sold.
C) negotiated.
D) accepted.
Q4) If an instrument bears a restrictive indorsement, any further transfer or negotiation is effectively barred.
A)True
B)False
Q5) A holder is also known as an assignee of the paper A)True
B)False
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Chapter 29: Liability of the Parties Under Negotiable Instruments
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Q1) A holder is on notice that an instrument is defective when the holder:
A) demands payment.
B) brings suit for the collection of an instrument.
C) gives a discharge or release from liability on the instrument.
D) Has actual notice of a defect
Q2) The close-connection doctrine applies in circumstances that indicate there may be a problem with the instrument.
A)True
B)False
Q3) A holder becomes a holder in due course if they meet all the following requirements except:
A) Takes the instrument for value
B) Takes the instrument in good faith.
C) Takes an instrument with no notice of defects.
D) Takes an instrument that runs to him.
Q4) The FTC rule concerning holders in due course is confined to consumer credit transactions.
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) The drawer of a check is always a bank.
A)True
B)False
Q3) A notice of dishonor may be oral, written or electronic.
A)True
B)False
Q4) A bank must be given a reasonable amount of time to put a stop payment order into effect.
A)True
B)False
Q5) A check may be certified by a bank upon the request of the drawer or the holder. A)True
B)False
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Chapter 31: Nature of the Debtor Creditor Relationship
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Q1) If an issuer requests its correspondent bank where the beneficiary is located to notify the beneficiary of the issuance of a letter of credit, the correspondent bank is called a(n):
A) advising bank.
B) foreign bank.
C) consulting bank.
D) coissuer.
Q2) A guaranty of collection allows the creditor to firstproceed against the debtor before suing the guarantor.
A)True
B)False
Q3) An agreement or provision in an agreement that one party shall not be held liable for loss is:
A) contribution.
B) exoneration.
C) indemnity.
D) subrogation.
Q4) Letters of credit are a two-party agreement used for financing.
A)True B)False
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Chapter 32: Consumer Protection
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Q1) Pursuant to the Credit Repair Organization Act of 1996, credit repair organizations must be "non-profit."
A)True
B)False
Q2) Individuals can seek criminal and civil penalties against those who violate consumer protection statutes.
A)True
B)False
Q3) An auto dealer who does not actually know of a roll-back can use lack of knowledge as a defense against odometer fraud, regardless of the condition of the car.
A)True
B)False
Q4) The types of provisions that make contracts unconscionable include clauses that award excessive damages or the application of credit payments across purchases over time so that the consumer is never able to pay off any goods.
A)True
B)False
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Chapter 33: Secured Transactions in Personal Property
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Q1) When there are two perfected secured creditors in the same collateral: ______.
A) priority goes to the creditor who perfected first.
B) priority goes to the creditor who is owed the greatest amount of money.
C) each perfected secured creditor has a 50% interest in the collateral.
D) both perfected secured creditors are treated like unsecured creditors in regards to the collateral.
Q2) What is the purpose of a financing statement?
A) to meet UCC accounting requirements under Article 9
B) to create a security interest
C) to amend a security agreement
D) to alert third persons that a creditor has a security interest in the collateral described
Q3) The perfection obtained by filing a financing statement lasts for __________.
A) five (5) years, and is renewable.
B) five (5) years, and is non-renewable.
C) ten (10) years, and is renewable.
D) ten (10) years, and is non-renewable.
Q4) Secured transactions are governed by Article 2 of the Uniform Commercial Code.
A)True
B)False
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Chapter 34: Bankruptcy
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Q1) Debtor's exemptions are provided under federal law and thus are the same in each state.
A)True
B)False
Q2) A transfer made to a relative 6 months before filing a bankruptcy petition is most likely a preferential transfer.
A)True
B)False
Q3) Under no circumstances may a reorganization plan include executory contracts or collective bargaining agreements.
A)True
B)False
Q4) The filing of a bankruptcy petition operates as a(n) ______, which prevents creditors from taking action, such as filing suits or foreclosure actions, against the debtor.13
A) Reorganization
B) Order of Relief
C) Liquidation
D) Automatic Stay
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Chapter 35: Insurance
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Q1) Homeowner's insurance is a combination of the standard fire insurance policy and comprehensive personal liability insurance.
A)True
B)False
Q2) The coverage of the personal auto policy is limited to claims arising from the "use and operation" of an automobile.
A)True
B)False
Q3) Commercial General Liability (CGL) policies apply to trademark infringement suits.
A)True
B)False
Q4) The person to whom an insurance promise is made is called: ______.
A) the insured.
B) the insurer.
C) the broker.
D) the agent.
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Chapter 36: Agency
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Q1) A general agent is authorized by the principal to do all acts that can be delegated lawfully to a representative.
A)True
B)False
Q2) An agency coupled with an interest is not terminated by the death of the principal.
A)True
B)False
Q3) An agent is distinguished from an ordinary employee in that employees are always hired to represent the employer in dealings with third persons.
A)True
B)False
Q4) A third person who deals with a person claiming to be an agent has the right to rely on the statements made by the agent concerning the extent of the agent's authority.
A)True
B)False
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Chapter 37: Third Persons in Agency
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Q1) In which of the following situations is the principal - and not the agent - liable to a third party for breach of contact?
A) signature by partially disclosed principal
B) signature by undisclosed principal
C) ratification by disclosed principal
D) ratification by undisclosed principal
Q2) In which of the following scenarios is the agent exposed to the greatest risk of liability?
A) disclosed principal and authorized contract
B) undisclosed principal and authorized contract
C) partially disclosed principal and authorized contract
D) authorized receipt of money from third person remitted to disclosed principal
Q3) A third person dealing with the agent of a disclosed principal ordinarily intends to make a contract with the principal, not the agent.
A)True
B)False
Q4) Agents may intentionally make themselves contractually liable to third persons.
A)True
B)False
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Chapter 38: Regulation of Employment
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Q1) An employer is prohibited from requiring any documentation to determine a potential employee's work eligibility other than a driver's license and a social security card.
A)True
B)False
Q2) A person cannot be both an employee and an agent for a party at the same time.
A)True
B)False
Q3) Employers generally have the right to lay off an employee because of _____, sometimes referred to as reductions in force (RIFs).
A) economic conditions
B) nonperformance of duties by the employee
C) theft by the employee
D) possession of drugs by the employee
Q4) Under the common law, an employer is under a duty to furnish an employee with a sufficient number of competent fellow employees for the work involved.
A)True
B)False
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Page 40
Chapter 39: Equal Employment Opportunity Law
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Q1) The first action generally attempted by the EEOC is:
A) litigation.
B) conciliation.
C) mediation.
D) arbitration.
Q2) Hostile work environment sexual harassment:
A) cannot be created by unwelcome sexual flirtation and propositions.
B) cannot result in an injunction being granted against offensive conduct.
C) does not affect an employee's economic benefits but causes anxiety and "poisons" the work environment for the employee.
D) can result in the court ordering the business to be sold, upon proper notice, at a publicly-held auction.
Q3) Religious societies may not grant hiring preferences to members of their religion. A)True
B)False
Q4) A plaintiff in a Title VII lawsuit must belong to a protected class.
A)True
B)False
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Chapter 40: Types of Business Organizations
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Q1) The government's permission is required to create: ______.
A) sole proprietorships.
B) corporations.
C) partnerships.
D) unincorporated associations.
Q2) The people in a corporation responsible for the management of the business are the: ______.
A) partners.
B) shareholders.
C) board of directors.
D) licensees.
Q3) The death of a majority shareholder terminates a corporate enterprise.
A)True
B)False
Q4) A joint venture manufacturing agreement gives the manufacturer authority to manufacture products under a proprietary trademark.
A)True
B)False
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Chapter 41: Partnerships
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Q1) A combination of two or more persons for a common nonprofit purpose is commonly an unincorporated association.
A)True
B)False
Q2) Creditors of a firm have first claim on the assets of the partnership.
A)True
B)False
Q3) Dissolution of a partnership:
A) always means that the business has ended.
B) increases the authority of the partners.
C) is followed by a winding-up period.
D) means the partners' vested rights are extinguished.
Q4) A partner's authority to act for the partnership is similar to the authority of a(n):
A) agent to act for a principal.
B) independent contractor to act for an employer.
C) shareholder to act for a corporation.
D) employee to act for another employee.
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Chapter 42: LPs, LLCs, and LLPs
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Q1) Every limited partnership must have at least one general partner.
A)True
B)False
Q2) An LLC is a separate legal entity and may own property in its own name.
A)True
B)False
Q3) Limited partners may sue their partnership's general partner to protect the limited partners' interest.
A)True
B)False
Q4) Like a general partnership, LLC's are dissolved by all of the following situations except: _______.
A) by the consent of the members.
B) upon the death of a member.
C) upon the expulsion of a member.
D) when a derivative suit is filed.
Q5) A limited partner may bring a derivative claim against the limited partnership. A)True
B)False
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Chapter 43: Corporate Formation
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Q1) If two firms consolidate, the new corporation usually succeeds to the rights, powers and immunities of its component parts.
A)True
B)False
Q2) If a wire manufacturing company owned a mill to produce the metal used in making the wire, this relationship between the companies would be best be described as: ______.
A) a conglomerate.
B) a holding company.
C) an integrated industry.
D) a merger.
Q3) B-Corporations are for-profit corporations that create public benefits while providing economic returns to their investors.
A)True
B)False
Q4) Bylaws are typically adopted by the shareholders of a corporation and must be filed with the Secretary of State.
A)True
B)False
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Chapter 44: Shareholder Rights in Corporations
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Q1) A wasting asset corporation is designed to exhaust the assets of the corporation.
A)True
B)False
Q2) Outstanding shares of stock have been issued to stockholders.
A)True
B)False
Q3) Shares exist for only as long as the corporation exists.
A)True
B)False
Q4) If a shareholder borrows money and delivers stock as collateral security, the creditor has a perfected security interest in the stock without any filing by the creditor.
A)True
B)False
Q5) Under the RMBCA, a preincorporation subscription agreement is irrevocable for three (3) months unless the subscription agreement provides a longer or shorter period, or all of the subscribers agree to revocation.
A)True
B)False
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Chapter 45: Securities Regulation
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Q1) All of the following are elements of an "investment contract" except: ______.
A) an investment of money
B) a common enterprise
C) an expectation of future profits
D) a money-back guarantee
Q2) Which exemption to registration requirements exempts offerings of less than $5 million to no more than 35 nonaccredited purchasers over a 12-month period?
A) Rule 504 exemption
B) Rule 505 exemption
C) Rule 506 exemption
D) Rule 507 exemption
Q3) Investors who lack inside information and have sold their stock during the relevant time period may recover damages from insiders who have made use of the undisclosed information.
A)True
B)False
Q4) The Securities Act of 1933 prohibits "bad investment" offerings to the public.
A)True
B)False
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Chapter 46: Accountants Liability and Malpractice
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Q1) The statute of limitations in a breach of contract action for malpractice runs from:
A) the date when the contract is breached.
B) the date when the harm is discovered.
C) the date when the plaintiff determines the total amount of damages caused by the harm.
D) either the date when the harm occurs or when it is discovered, depending on the type of damages sustained.
Q2) For accountants, fraudulent malpractice always involves upgrading the financial condition of the firm.
A)True
B)False
Q3) Sarbanes-Oxley would prohibit which of the following individuals from serving on an audit committee of the company's board?
A) a director who accepts consulting fees from the company
B) a director who is affiliated with the company
C) a director who is affiliated with a subsidiary of the company.
D) all of these.
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Chapter 47: Management of Corporations
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Q1) A corporation is liable to a third person for the act of its agent: ______.
A) to the same extent as a natural person would be liable.
B) only if the agent was expressly authorized to perform the act.
C) only if the agent's act was a crime.
D) only if the agent's act was based on an intent to benefit the corporation.
Q2) Extraordinary matters requiring shareholder votes include all of the following except: ______.
A) sale of corporate assets outside the regular course of business.
B) amendment of bylaws.
C) corporate mergers.
D) corporate dissolution.
Q3) Shareholder control is generally limited to voting at shareholders' meetings to elect directors.
A)True
B)False
Q4) The business judgment rule is a defense that can be used by directors when their actions are challenged.
A)True
B)False
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Chapter 48: Real Property
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Q1) Any of the following can constitute an effective delivery of a deed except: ______.
A) a physical delivery.
B) a symbolic delivery.
C) a constructive delivery.
D) a recording of the deed.
Q2) Frank has two interests in property. On property "X," Frank has a life estate measured by the life of his Uncle Sal. On property "Y," Frank has a fee simple estate. Frank wishes to transfer, upon his death, his interest in the two properties to his wife, Samantha. Prior to Frank's executing his will, Uncle Sal dies. Frank still wishes to will the properties to his wife, but he now is uncertain whether he has the right to do so. Can Frank will the two property interests to Samantha?
Q3) Landowners owe no duty to licensees to warn of nonobvious dangers on their land.
A)True B)False
Q4) An unrecorded mortgage is not valid and binding between the parties.
A)True
B)False
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Chapter 49: Environmental Law and Land Use Controls
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Q1) The primary federal agency responsible for federal environmental laws is the EPA.
A)True
B)False
Q2) If a restrictive covenant is valid, it binds only the original grantee in the deed that created the covenant.
A)True
B)False
Q3) The Jarvis family owned its land for more than 150 years. The Jarvis family traditionally farmed the land and for that purpose maintained farm animals. As years passed, most of the surrounding farms were sold by the owners and the area turned out to be a close-in suburb of a major city. A zoning ordinance was passed that prohibited maintaining a barn or farmyard animals on the land. The Jarvis family was advised that they were unaffected by this ordinance because theirs would be considered a nonconforming use. The members of the Jarvis family lost interest in farming and sold off all their animals. Seven (7) years later, a family member desired to raise a few pigs on the property. Angry neighbors asserted that the family has lost the right to do so. What is your opinion?
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Chapter 50: Leases
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Q1) The assignment of a lease discharges the original tenant from the duty to pay rent.
A)True
B)False
Q2) If a tenant remains in possession after the termination of the lease without permission of the landlord, the landlord may treat the tenant as either a trespasser or a tenant. Until the landlord elects to do one or the other, a tenancy __________ exists.
A) at sufferance
B) at will
C) for years
D) from year to year
Q3) The lessor has the right to the exclusive possession of the premises during the term of the lease.
A)True B)False
Q4) Renewal provisions in a lease are strictly construed against the tenant.
A)True
B)False
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Chapter 51: Decedents Estates and Trusts
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Q1) An individual who desires to make provisions that will be effective only on her death is said to have: _______.
A) probationary intent.
B) a prejudicial interest.
C) testamentary intent.
D) attestation intent.
Q2) A trust can be terminated in any of the following manners, except: _______.
A) by its own terms
B) by impossibility of attaining the object of the trust
C) by revocation of the trust by the settlor
D) by a money judgment against the trustee
Q3) When a person dies with a will, usually the probate judge names who the administrator of the estate.
A)True
B)False
Q4) When a decedent dies without a valid will he is said to have died testate.
A)True
B)False
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