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 foundational legal principles relevant to commercial activities, including contract law, agency, partnership, company law, intellectual property rights, regulatory compliance, and dispute resolution mechanisms. Students will learn how legal frameworks shape business decision-making, mitigate risks, and ensure ethical conduct. Through case studies and real-world examples, the course equips students with the knowledge to identify legal issues in business scenarios and make informed, lawful decisions that support organizational objectives.
Recommended Textbook
Business Law Principles for Todays Commercial Environment 4th Edition by David P. Twomey
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52 Chapters
2754 Verified Questions
2754 Flashcards
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Chapter 1: The Nature and Sources of Law
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Sample Questions
Q1) Uniform State Laws are used as a basis for laws by which of the following entities?
A)Congress
B)international trade associations
C)state legislatures
D)local governmental entities
Answer: C
Q2) Sheriff Jane desires to search your home.What law requires that the sheriff obtain a search warrant?
A)the Fourth Amendment of the United States Constitution
B)the Equal Protection Clause
C)state statute
D)local uniform police ordinances
Answer: A
Q3) The right to privacy applies to protect you from unreasonable searches:
A)to you personally.
B)to your home.
C)to your business.
D)all of the above.
Answer: D
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Page 3
Chapter 2: The Court System and Dispute Resolution
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Sample Questions
Q1) Chandra sues Martin for breach of contract.Both parties have completed discovery.Chandra now wants her attorney to file a motion to have the judge rule in her favor without having to proceed further.Chandra does not know whether the motion to dismiss or the motion for a summary judgment is proper.Which motion is proper and why?
Answer: As between the motion to dismiss and the motion for summary judgment,Chandra's attorney should file a motion for summary judgment,since the parties are beyond the pleadings stage of litigation,and since they have completed discovery. Using evidence gathered during discovery,such as affidavits and/or deposition testimony,Chandra's attorney could argue that there are no material issues of fact disputed by the parties,and that Chandra is entitled to judgment as a matter of law.
Q2) The types of civil cases that can be brought in federal district courts include:
A)cases in which any state in the United States is one of the parties . B)cases between citizens of different states that involve damages of $75,000 or more. C)cases brought by the citizen of one state against the state government of the same state.
D)all of the above.
Answer: B
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Page 4
Chapter 3: Business Ethics, social Forces, and the Law
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Sample Questions
Q1) Despite the importance of ethical behavior for business success,few Fortune 500 companies have codes of ethics to resolve ethical dilemmas.
A)True
B)False
Answer: False
Q2) The importance of trust as a fundamental principle underlying business transactions is illustrated by expectations that:
A)investors will be able to earn a return on their investments.
B)employees may be discharged at any time for any reason without notice.
C)litigation is inevitable because parties to agreements usually break promises.
D)insider trading proves that the economic system underlying business is flawed.
Answer: A
Q3) Laws that prohibit defamation,invasions of privacy,and reputation 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: A
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Chapter 4: The Constitution As the Foundation of the Legal Environment
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Sample Questions
Q1) The living Constitution has as a characteristic a strong president.
A)True
B)False
Q2) The power of the states to adopt laws to protect the general welfare of the people is called police power.
A)True
B)False
Q3) Federal law __________ conflicting state regulation when a federal law regulates that particular subject.
A)coincides with
B)is subordinate to C)parallels
D)preempts
Q4) 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.
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Chapter 5: Government Regulation of Competition and Prices
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Sample Questions
Q1) Vertical mergers:
A)occur between firms that have a competitor relationship.
B)occur between firms that have buyer and seller relationships.
C)are not covered by the Clayton Act.
D)are always protected by the federal government.
Q2) Tying:
A)is a violation of the Sherman Act.
B)occurs when sellers require buyers to purchase an unwanted product to get a wanted one.
C)both of the above.
D)none of the above.
Q3) The Clayton Act prohibits:
A)all unfair methods of competition.
B)conspiracies in restraint of trade.
C)attempts to monopolize.
D)price discrimination between buyers of like commodities.
Q4) Under the Sherman Act competitors are permitted to agree not to deal with certain buyers.
A)True
B)False
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Chapter 6: Administrative Agencies
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Sample Questions
Q1) An administrative agency is barred from examining the records of a business enterprise by the constitutional guarantee against unreasonable searches and seizures.
A)True
B)False
Q2) An administrative agency:
A)is not empowered to act as a court with regard to its own regulations.
B)acts as a specialized court of limited jurisdiction.
C)can hear complaints only in the presence of a jury.
D)cannot impose penalties for violation of its regulations.
Q3) Within the area in which the administrative agency is authorized to make decisions,the agency can be regarded as a specialized court or court of limited jurisdiction.
A)True
B)False
Q4) Regulations properly adopted by agencies are important,but they do not have the full force of law as do statutes.
A)True
B)False
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Page 8
Chapter 7: The Legal Environment of International Trade
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Sample Questions
Q1) The goal of the North American Free Trade Agreement (NAFTA)is to eliminate all tariffs between the United States and Europe.
A)True
B)False
Q2) Companies with concerns over the possibility of expropriation could lessen the harm or the likelihood of this occurring by:
A)fully investigating a host government's stability.
B)establishing treaty commitments.
C)obtaining insurance.
D)all of the above.
Q3) A common barrier to the free movement of goods across borders is the tariff barrier.
A)True
B)False
Q4) A direct sale by an American firm to a customer abroad,with terms of payment commonly based on an irrevocable letter of credit,is an import sale.
A)True
B)False
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Chapter 8: Crimes
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Sample Questions
Q1) A person may be held criminally liable for acts committed by another.
A)True
B)False
Q2) The Sarbanes-Oxley Act (SOX)made minor adjustments to penalties and prison sentences for executives of companies.
A)True
B)False
Q3) An act that is a felony in one state be a felony in all states.
A)True
B)False
Q4) For business crimes,managers cannot be held criminally responsible for the conduct of their employees.
A)True
B)False
Q5) Due process includes the right to be heard,question witnesses,and present evidence.
A)True
B)False
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Page 10
Chapter 9: Torts
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Sample Questions
Q1) To determine whether the defendant is liable for negligence,a reasonable person standard is employed.
A)True
B)False
Q2) Truth is not a defense to defamation.
A)True
B)False
Q3) Careless actions that result in injuries to others usually are not deemed to be torts.
A)True
B)False
Q4) Concerning torts and crimes,choose the correct statement:
A)Every tort is a crime.
B)Every crime is a tort.
C)No crime is a tort.
D)A crime may also be a tort.
Q5) Today,the widest range of tort liability arises in the field of negligence.
A)True
B)False
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Chapter 10: Intellectual Property Rights
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Sample Questions
Q1) All types of patents available under U.S.law are entitled to the same quality and duration of protection once initial filing is perfected with the Patent and Trademark Office in Washington,D.C.
A)True
B)False
Q2) Descriptive terms such as locations and colors are never subject to trademark protections.
A)True
B)False
Q3) In order to protect themselves from disclosure of proprietary or confidential information,businesses may:
A)implement security measures to prevent access by outsiders.
B)enforce contractual nondisclosure agreements against departing employees.
C)limit disclosure of such information to those with a need to know.
D)all of the above.
Q4) 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.
Page 12
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Chapter 11: Cyberlaw
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Sample Questions
Q1) Employers are required to give notice to employees that they will monitor their employees' e-mail.
A)True
B)False
Q2) Sock-puppeting is anonymous blogging that flatters the blogger's company and bashes one or more competitors.
A)True
B)False
Q3) Employee e-mail is:
A)spontaneous.
B)candid.
C)discoverable.
D)all of the above.
Q4) Potential employers are free to do pre-hiring monitoring of applicants without their knowledge.
A)True
B)False
Q5) Employers have access and control rights to their employees' e-mail.
A)True
B)False
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Chapter 12: Nature and Classes of Contracts: Contracting on
the Internet
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Sample Questions
Q1) A contract is essentially an agreement that creates an obligation.
A)True
B)False
Q2) A void contract is one that is otherwise valid but may be rejected or set aside by one of the parties.
A)True
B)False
Q3) The promisor in a contract may also be called the:
A)obligor.
B)grantor
C)obligee
D)grantee
Q4) A contract is:
A)a binding agreement.
B)an agreement creating an obligation.
C)an agreement that creates enforceable duties and obligations.
D)all of the above.
Q5) A bilateral contract is essentially an exchange of promises. A)True
B)False
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Chapter 13: Formation of Contracts: Offer and Acceptance
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Q1) Contractual intention is determined by objective standards.
A)True
B)False
Q2) An otherwise vague contract may be clarified by references in the contract to other documents or agreements.
A)True
B)False
Q3) 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.
Q4) 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.
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Chapter 14: Capacity and Genuine Assent
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Sample Questions
Q1) A young stockbroker was rather overwhelmed by a flood of new clients.Assunta,one of his clients,had purchased XYZ Corp.stock through the broker at a price of $35 per share.The price had gone down to $29 by the time Assunta telephoned the broker.Assunta told the broker that she wanted to sell the stock if it went below $30 and inquired as to the price.The broker did not check the price,but thinking it could not have fallen below the $30 threshold,simply reassured Assunta that it was still "in the low 30s." Marta,Assunta's cousin,also had purchased XYZ stock at $35 per share and made a similar call to the broker and received the same response.Marta,however,coincidentally saw the price on a stock ticker tape when she hung up and realized the broker had made an error.Both Assunta and Marta held the stock and did not sell.
Later that same day,the stock price fell an additional $7 per share.Facing sizable losses,both Assunta and Martha decided to sue for fraud when Marta told Assunta of the broker's misstatement.Discuss the probable outcome of the lawsuits.
Q2) Fraud requires a misstatement of either a fact or an opinion. A)True
B)False
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Chapter 15: Consideration
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Sample Questions
Q1) Past benefits already received by a promisor cannot be consideration for a later promise.
A)True
B)False
Q2) Forbearance may constitute consideration.
A)True
B)False
Q3) When there is no consideration for a promise,the agreement is:
A)a quasi contract.
B)equitable.
C)not binding.
D)unethical.
Q4) Ordinarily,doing or promising to do what one is already under a legal obligation to do is not consideration.
A)True
B)False
Q5) Consideration is what a promisor demands and receives as the price for a promise.
A)True
B)False
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Chapter 16: Legality and Public Policy
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Sample Questions
Q1) Agreements not to compete are always void.
A)True
B)False
Q2) Fees charged by a lender for the reasonable expense of making a loan,such as the cost of appraising property,are treated as interest for purposes of the usury law. A)True
B)False
Q3) An agreement between Jim and his 18-year-old daughter,Betty,provides that he will give her $25,000 if she does not marry until after her 22nd birthday.One month after reaching the age of 22,Betty,still unmarried,claims the $25,000. Jim refuses to pay,claiming that the agreement was illegal.Is Jim correct?
Q4) In every contract there exists an expressed covenant of good faith and fair dealing. A)True B)False
Q5) An agreement that calls for the commission of a civil wrong is illegal and void. A)True B)False
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Page 18
Chapter 17: Writing, electronic Forms, and Interpretation of Contracts
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Sample Questions
Q1) Under the majority view,a contract that does not satisfy the statute of frauds is not enforceable.
A)True
B)False
Q2) Through incorporation by deference,a contract can consist of both the original document and the detailed statement that is incorporated in it.
A)True
B)False
Q3) An oral agreement to supply a line of credit for two (2)years cannot be enforced because of the statute of frauds.
A)True
B)False
Q4) An oral understanding is not binding if:
A)the services performed were not to the satisfaction of the other party.
B)the amount agreed to be paid for services rendered was not a fair and reasonable amount.
C)the parties intended to formalize their understanding with a written agreement. D)the understanding may be terminated at will by either party.
Page 19
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Chapter 18: Third Persons and Contracts
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Sample Questions
Q1) When duties under a contract are delegated,the party making the delegation remains responsible for the performance of the contract just as though no delegation had been made.
A)True
B)False
Q2) If an obligor could successfully defend against a suit brought by the assignor:
A)the obligor will also prevail against the third-party beneficiary.
B)the obligor will also prevail against the assignee.
C)the obligor will also prevail against the incidental beneficiary.
D)none of the above.
Q3) The party making an assignment is called the:
A)assignee.
B)assignor.
C)obligor.
D)successor.
Q4) When a lease is assigned,the assignee becomes the sole obligor for rent payments,and the original lessee is discharged from the lease.
A)True
B)False
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Chapter 19: Discharge of Contracts
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Sample Questions
Q1) A Federal Trade Commission regulation gives a buyer three (3)business days in which to cancel a home-solicited sale of goods or services costing more than:
A)$25.
B)$50.
C)$100.
D)$500.
Q2) A typical situation where the doctrine of economic frustration applies is when the party suffers a loss when a gain was expected.
A)True
B)False
Q3) A condition subsequent can alter but not terminate a contract.
A)True
B)False
Q4) A person who substantially performs a contract is liable for damages to the other party.
A)True
B)False
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Chapter 20: Breach of Contract and Remedies
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Sample Questions
Q1) An injured party that does not suffer an actual loss from the breach of a contract is entitled to nominal damages.
A)True
B)False
Q2) Whether there has been a waiver is a question of fact.
A)True
B)False
Q3) The normal remedy for breach of contract where the plaintiff has suffered a loss is compensatory damages.
A)True
B)False
Q4) A party must mitigate damages at all costs.
A)True
B)False
Q5) An action for injunctive relief may be granted:
A)if money is due and payable.
B)if the breach consists of doing a prohibited act.
C)if the breach would cause nominal damages.
D)if the breach would cause consequential damages.
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Chapter 21: Personal Property and Bailments
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Q1) If a thief sells stolen property to a good-faith buyer,the buyer acquires title to the property.
A)True
B)False
Q2) An ordinary gift made between two living persons is an inter vivos gift.
A)True
B)False
Q3) The legal relation that arises when one person delivers possession of personal property to another under an express or implied agreement to return the property at a later date is called a:
A)tenancy agreement.
B)bailment.
C)rental agreement.
D)trust arrangement.
Q4) Vacarro gave her son Mark a car on the day Mark left for college.Vacarro told Mark that she expected him to use the car for school purposes and to earn good grades.Mark flunked out of college in his second semester.Vacarro sued to regain title to the car on the ground that the gift was conditional on Mark's earning good grades and remaining in college.Will Vacarro win the case?
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Chapter 22: Legal Aspects of Supply Chain Management
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Q1) If a warehouse receipt provides for the delivery of the goods "to the bearer," the receipt may be negotiated by transfer of the document.
A)True
B)False
Q2) The common law rights and duties of a warehouser,in the absence of modifying statutes,are for the most part those of a bailee in:
A)a bailment for the sole benefit of the bailee.
B)an ordinary mutual-benefit bailment.
C)a bailment for the sole benefit of the bailor.
D)none of the above.
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) The rights and duties of warehousers are regulated by the UCC.
A)True
B)False
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Chapter 23: Nature and Form of Sales
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Sample Questions
Q1) A writing that is offered to satisfy the statute of frauds must have been written for that purpose.
A)True
B)False
Q2) Goods physically existing and owned by a seller at the time of a transaction are called existing goods.
A)True
B)False
Q3) A bill of sale can be used as proof of an otherwise oral agreement.
A)True
B)False
Q4) The UCC permits a court to refuse to enforce a sales contract that it finds to be unconscionable.
A)True
B)False
Q5) When the price of the goods is $500 or more,a writing signed by the defendant is required in all cases.
A)True
B)False
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Chapter 24: Title and Risk of Loss
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Q1) The expense and the risk of return in a sale or return situation is on the:
A)seller.
B)buyer.
C)lienholder.
D)secured creditor.
Q2) Someone who finds and resells stolen property passes on a good title to a good faith purchaser.
A)True
B)False
Q3) In the case of a nonshipment contract,risk of loss passes to the buyer upon actual receipt of goods:
A)only if the seller is a merchant
B)only if the seller is a nonmerchant
C)only if the buyer has already paid for them
D)in all nonshipment contracts
Q4) A seller's insurable interest in goods always terminates with the passage of the title to the buyer.
A)True
B)False
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Chapter 25: Product Liability: Warranties and Torts
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Q1) Unless otherwise agreed,every merchant seller warrants that goods are sold free of any rightful claim by any third party.
A)True
B)False
Q2) The warranties of both merchantability and fitness for a particular purpose exist under the Convention on Contracts for the International Sale of Goods (CISG).
A)True B)False
Q3) A disclaimer or exclusion of the warranty of merchantability will be invalid if:
A)the goods cost $500 or more.
B)the defects in the goods are obvious to all buyers.
C)it is made at the time of the sale.
D)it is not conspicuously set forth in a writing.
Q4) By the mere act of selling,a warranty is made that the:
A)goods are the finest available.
B)seller's title is good and the transfer is rightful.
C)price is the lowest available.
D)all of the above.
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Chapter 26: Obligations and Performance
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Q1) In a cash sale that does not require the physical moving of the goods,the:
A)parties are required to perform concurrently.
B)seller is required to tender the goods before the buyer must pay for them.
C)buyer must pay for the goods in advance.
D)buyer must actually receive the goods before he or she is required to pay for them.
Q2) When a buyer demonstrates in some way that the goods conform to the contract,the buyer has made a(n):
A)acceptance of the goods.
B)assignment of the goods.
C)substitution of the goods.
D)avoidance of the contract.
Q3) The standard for determining commercial impracticability is objective,not subjective.
A)True
B)False
Q4) A buyer has the right to accept some commercial units of a shipment and reject other commercial units.
A)True
B)False
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Chapter 27: Remedies for Breach of Sales Contracts
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Q1) A buyer who cancels a sales contract because the seller fails to deliver the goods is entitled to recover as much of the purchase price as had been paid.
A)True
B)False
Q2) Consequential damages are available to the buyer but not to the seller.
A)True
B)False
Q3) Proof of substantial impairment of the value of a contract to the buyer is required to justify revocation of acceptance.
A)True
B)False
Q4) When goods are sold for consumer use and personal injuries are sustained,a total exclusion of liability in the sales contract is:
A)enforceable.
B)unenforceable.
C)unconscionable.
D)both b.and c.
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Chapter 28: Kinds of Instruments, parties, and Negotiability
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Q1) If an order or promise is not for money,the instrument is not negotiable.
A)True
B)False
Q2) The requirement of a sum certain in money is fulfilled even though the interest rate changes at maturity.
A)True
B)False
Q3) An authorized agent signing an instrument will not be liable on the instrument if the agent discloses on the paper either the identity of the principal or the fact that the agent has signed in a representative capacity.
A)True
B)False
Q4) Commercial paper facilitates the transfer of funds and payment.
A)True
B)False
Q5) Antedating an instrument affects an instrument's negotiability.
A)True
B)False
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Chapter 29: Transfers of Negotiable Instruments and Warranties
of Parties
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Q1) In the case of a check,when the impostor rule applies:
A)the drawer of the check can successfully raise the defense of the forged indorsement.
B)the forged indorsement is effective to negotiate the instrument.
C)the forged indorsement is ineffective to negotiate the instrument.
D)the instrument becomes nonnegotiable.
Q2) 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
Q3) A __________ indorsement consists of the signature of the indorser and words specifying the person to whom the indorser makes the instrument payable.
A)qualified
B)restrictive
C)special
D)blank
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Chapter 30: Liability of the Parties Under Negotiable Instruments
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Q1) Bill decided that it was time to remodel his home.Among the features that Bill had included in his remodeling plan was the addition of several very large picture windows.Because of the great expense of the windows,Bill financed the cost through the issuance of a promissory note.The manufacturer of the windows sold the promissory note to a bank.Just after the promissory note matured,the windows began to leak badly.Bill refused to pay on his promissory note and brought action against the manufacturer for breach of contract.Will the bank recover on the promissory note?
Q2) A holder through a holder in due course is subject to limited defenses.
A)True
B)False
Q3) Generally defenses that could be raised in a breach of contact claim cannot be raised against a holder in due course.
A)True
B)False
Q4) A person cannot become a holder through a holder in due course unless that person satisfies the requirements for holder in due course status.
A)True
B)False
Page 32
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Chapter 31: Checks and Funds Transfers
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Q1) Morris issued a check to Al in payment of a debt.There were sufficient funds in Morris' account to cover the check when it was presented for payment.However,due to an error,the bank dishonored the check.Which of the following parties is/are potentially liable to the holder?
A)the drawee bank only
B)Morris and the drawee bank
C)Morris only
D)the drawee bank and any collecting bank
Q2) Customers are precluded from asserting unauthorized signatures or alterations if they do not report them within __________ from the time the bank statement is received.
A)fourteen (14)days
B)forty (40)days
C)six (6)months
D)one (1)year
Q3) Most states provide that if a dishonored check is not made good within a stated period of time,it will be presumed that the check was originally issued with the intent to defraud.
A)True
B)False
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Chapter 32: Nature of the Debtor-Creditor Relationship
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Q1) Consideration is not required to establish or modify a letter of credit.
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) Suretyship and guaranty transactions have the common feature of a promise to answer for the debt or default of another.
A)True
B)False
Q4) An agreement under which one party agrees to pay drafts drawn by a creditor is called a:
A)contract of surety.
B)guaranty contract.
C)letter of credit.
D)debtor's agreement.
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Chapter 33: 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) The FTC requires that only descriptive and non-ambiguous terms such as jumbo,giant,or full be used in product labeling.
A)True
B)False
Q3) Consumer protection even protects a consumer from the consumer's own negligence.
A)True
B)False
Q4) Consumer protection laws,which commonly regulate the form of consumer contracts,provide that back-page disclaimers are void if the front page of a contract does not call attention to the presence of the terms on the back page.
A)True B)False
Q5) A consumer may waive all defenses otherwise provided for by law. A)True
B)False
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Chapter 34: Secured Transactions in Personal Property
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Q1) A security agreement must:
A)identify the parties involved.
B)contain a reasonable description of the collateral.
C)demonstrate that the parties intended for the creditor intends to have a security interest.
D)all of the above.
Q2) Collateral may change its form and character during the course of a security agreement.
A)True
B)False
Q3) A security interest needs to be perfected,whether or not there are competing claims for the collateral.
A)True
B)False
Q4) If a breach of the peace might occur:
A)self-help repossession is the only option available to obtain the collateral.
B)the creditor must use court action to obtain the collateral.
C)the creditor is barred from repossessing the collateral.
D)the collateral reverts to the debtor.
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Chapter 35: Bankruptcy
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Q1) A payment by a debtor in the ordinary course of business,such as the payment of a utility bill,will not be set aside by the bankruptcy trustee.
A)True
B)False
Q2) Creditors who hold security for payment,such as a lien or a mortgage on the debtor's property,are less affected by the debtor's bankruptcy.
A)True
B)False
Q3) The debtor will be denied a discharge if:
A)the debtor had been extravagant.
B)the debtor incurred debts because of negligence.
C)the debtor received a discharge ten (10)years previously.
D)the debtor refused to obey a lawful order of the court.
Q4) By operation of law,the trustee automatically becomes the owner of all of the debtor's property in excess of the property to which the debtor is entitled under exemption laws.
A)True
B)False
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Chapter 36: Insurance
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Q1) Armenia purchased life insurance on her life.Regarding the beneficiary:
A)Armenia must name a person with a pecuniary interest in her life.
B)Armenia must name a close relative.
C)Armenia must name a close relative or business associate.
D)Armenia may name whomever she wishes.
Q2) An insured person is generally allowed,by policy provision or statute,a grace period of what length of time in which to make the payment of a premium due on a life insurance policy?
A)14 to 15 days
B)30 to 31 days
C)60 to 61 days
D)90 days
Q3) An insurance broker generally is an independent contractor who is not employed by any one insurance company.
A)True
B)False
Q4) Generally,the terms broker and agent are synonymous because both work directly for the insurer.
A)True
B)False
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Chapter 37: Agency
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Q1) A third person who deals with a person claiming to be an agent:
A)can rely on the statements made by the agent regarding the extent of the authority.
B)cannot ignore any knowledge regarding a limitation of the agent's authority.
C)is not required to take notice of any acts clearly adverse to the interest of the principal.
D)all of the above.
Q2) The employer of an independent contractor does not have control over the performance of the work by the independent contractor.
A)True
B)False
Q3) The principal must:
A)perform the contract according to its terms.
B)compensate the agent for services.
C)indemnify the agent for loss in some circumstances.
D)all of the above.
Q4) The scope of an agent's authority is always known by the third party.
A)True
B)False
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Chapter 38: Third Persons in Agency
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Q1) Payment to an authorized agent is:
A)payment to the principal only if the agent remits the payment.
B)payment to the principal if the third person informs the principal.
C)payment to the principal,provided the agent does not misappropriate the payment.
D)payment to the principal.
Q2) An agent's liability as a party to a contract with a third person is not affected by the degree of disclosure.
A)True
B)False
Q3) An agent should never sign a contract using "by" or "per" and then his or her name.
A)True
B)False
Q4) An agent who commits a crime is:
A)always liable.
B)only liable if acting in self-interest.
C)only liable if the act is done to advance the interest of the principal.
D)never liable when acting in the role of an agent .
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Chapter 39: Regulation of Employment
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Q1) Employers are required to maintain records of certain occupational illnesses and injuries by:
A)ECHO.
B)ESCHA.
C)OSHA.
D)ECOT.
Q2) Employment law is based on a combination of contract law and the law established by courts,lawmakers,and administrative agencies.
A)True
B)False
Q3) Any adversely affected person may challenge the validity of an Occupational Safety and Health Administration (OSHA)standard in a U.S.Court of Appeals.
A)True
B)False
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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Chapter 40: Equal Employment Opportunity Law
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Q1) Women who are unable to work as a result of pregnancy,childbirth,or related medical conditions must be provided the same benefits as all other workers.Such benefits include temporary disability insurance,long-term disability insurance,and sick leave.
A)True
B)False
Q2) "Race norming," a process whereby the results of hiring and promotion tests are adjusted to ensure that a minimum number of minorities are included in application pools,is a lawful form of affirmative action.
A)True
B)False
Q3) Employers may avoid liability for "hostile work environment" sexual harassment by following a program that includes expressing strong disapproval of such conduct,advising employees how to inform the employer of complaints,and disciplining wrongdoers.
A)True B)False
Q4) Generally,the EEOC attempts to remedy an unlawful practice through conciliation.
A)True
B)False
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Chapter 41: Types of Business Organizations
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Q1) The process of incorporation involves the expenditure of funds for organizational expenses.
A)True
B)False
Q2) A corporation is a separate legal entity capable of owning property,contracting,and being sued in its own name.
A)True
B)False
Q3) A limited liability partnership:
A)is taxed like a corporation.
B)provides limited liability for all partners.
C)shields innocent partners from personal liability beyond their investment.
D)All of the above.
Q4) A sole proprietorship is taxed:
A)only on a personal.
B)only on the corporate level.
C)on a personal and a corporate level.
D)none of the above.
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Chapter 42: Partnerships
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Q1) Partners have the implied authority to bind the partnership by contracts of surety for any and all purposes.
A)True
B)False
Q2) When a partnership is dissolved by the act of a partner,notice:
A)is not required.
B)must be given to the other partners only.
C)must be given to third persons only.
D)must be given to both other partners and third persons.
Q3) When a person who performs continuing services for another receives a fixed payment that does not depend on the existence of profit and is not affected by losses,that person is a partner.
A)True
B)False
Q4) Each partner is an agent of the partnership.
A)True
B)False
Q5) Bankruptcy of only one of the partners does not cause dissolution of the firm.
A)True
B)False
44
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Chapter 43: LPs, LLCs, and LLPs
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Q1) It is expected that in the future,the limited liability company will in many instances replace which of the following forms of business ownership?
A)the general partnership
B)the limited partnership
C)the close corporation
D)all of the above
Q2) A limited liability company is identical to a Subchapter S corporation.
A)True
B)False
Q3) Limited partners may contribute cash or property as their capital contributions.
A)True
B)False
Q4) A limited liability company:
A)must have at least one member that is subject to unlimited liability.
B)member may actively participate in control of the business without losing limited liability status.
C)both a.and b.
D)neither a.nor b.
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Chapter 44: Corporate Formation
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Q1) A corporation must have:
A)a name.
B)more than one shareholder.
C)a corporate seal.
D)all of the above.
Q2) The Revised Model Business Corporation Act:
A)has eliminated the certificate of incorporation.
B)has made the process of incorporation more difficult.
C)states that corporate existence begins when the secretary of state issues a certificate of incorporation.
D)has eliminated the need for articles of incorporation.
Q3) Under recent statutes,the articles of incorporation must contain all of the following except the:
A)name of the corporation.
B)name and address of each incorporator.
C)purpose for which the corporation is organized.
D)number of shares the corporation is authorized to issue.
Q4) Subject to constitutional limitations,corporations may be regulated by statutes.
A)True
B)False
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Chapter 45: Shareholder Rights in Corporations
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Q1) Preferred stock is ordinarily nonvoting stock.
A)True
B)False
Q2) A shareholder may make an absolute transfer of stock or may transfer it merely as collateral to secure the payment of a debt.
A)True
B)False
Q3) To correctly transfer shares of stock,a delivery from the owner of the shares directly to the transferee is required.
A)True
B)False
Q4) A provision giving a corporation the right to purchase a shareholder's shares on the death of the shareholder is invalid.
A)True
B)False
Q5) Shares of stock that have been issued to stockholders in a corporation are said to be outstanding.
A)True
B)False
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Chapter 46: Securities Regulation
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Q1) Any shareholder owning more than five (5)percent of any class of the corporation's equity securities is statutorily defined as an insider and must file with the SEC a disclosure statement regarding such ownership and all related transactions.
A)True
B)False
Q2) An accountant who prepares any statement,opinion or other legal paper filed with the SEC with the preparer's consent is deemed to be practicing before the SEC.
A)True
B)False
Q3) Under the United States Supreme Court's definition,an investment contract exists if the following elements are present: (1)an investment of money,(2)a common enterprise,and (3)an expectation of future profits from the efforts of others.
A)True
B)False
Q4) Rule 10b-5 only applies to registered securities.
A)True
B)False
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Chapter 47: Accountants Liability and Malpractice
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Q1) Misrepresentation:
A)is the same as fraud.
B)is a false statement of fact made with the intent to deceive.
C)is a false statement of fact made without any intent to deceive.
D)can be used as a limitation to excuse an accountant from liability.
Q2) The "known user" rule imposes liability on the accountant for negligent malpractice when he or she can foresee the parties who will rely on his work in the financial statements.
A)True
B)False
Q3) An entity not in privity with an accountant is prohibited from recovering against the accountant for malpractice when the accountant had no knowledge of any use that could affect the party.
A)True
B)False
Q4) The contact rule applies in which of the following states?
A)Alabama
B)Indiana
C)New York
D)All of the above
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Chapter 48: Management of Corporations
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Q1) A quorum is broken if shareholders leave and those remaining are not sufficient to constitute a quorum.
A)True
B)False
Q2) A corporate officer,while still employed by his or her firm,may be in breach of the officer's fiduciary duty of __________ by recruiting key management employees to join a competing company.
A)obedience
B)loyalty
C)conflict of interest
D)confidentiality
Q3) Shareholder control is generally limited to voting at shareholders' meetings to elect directors.
A)True
B)False
Q4) Most states permit action to be taken by the board of directors without holding an actual meeting.
A)True
B)False
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Chapter 49: Real Property
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Q1) A covenant that passes with the land so that whoever owns the land is bound by or entitled to the benefit of the covenant
A)is a covenant of seisin.
B)is a covenant of further assurances.
C)is a covenant of quiet enjoyment.
D)is said to run with the land.
Q2) Tucker and Hankey were adjoining property owners.Tucker claimed that the fence separating their properties was not located properly and that it should be moved back onto Hankey's land.Hankey claimed that he owned the strip between the fence and the alleged boundary line by adverse possession.He proved that for forty (40)years there had been on the strip in question a barn with a cement floor,which had been built by the person from whom he purchased his land,and that he had been told by the former owner that the fence was the boundary line.The fence consisted of five-foot-high barbed wire set in cement.Did Hankey own the strip by adverse possession?
Q3) Under a freehold estate,a person owns property only for a specified number of years.
A)True
B)False
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Chapter 50: Environmental Law and Land Use Controls
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Q1) The object of zoning is to ensure an orderly physical development of the geographic area that is regulated.
A)True
B)False
Q2) The Endangered Species Act gives which of the following cabinet-level officers the authority to protect various species?
A)the Secretary of the Interior only
B)the Secretary of Commerce only
C)both the Secretary of the Interior and the Secretary of Commerce
D)none of the above
Q3) __________ of the federal environmental laws carry criminal penalties for violations.
A)All
B)Most
C)Very few
D)None
Q4) Nuisances may be classified as either private nuisances or public nuisances.
A)True
B)False
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Chapter 51: Leases
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Q1) Generally,the tenant has the right to the exclusive possession of the premises during the term of the lease.
A)True
B)False
Q2) In a lease agreement,the person who owns the real property and permits the occupation of the premises is known as the __________,and the person who occupies the property is known as the __________.
A)lessor; lessee
B)lessee; lessor
C)grantor; grantee
D)grantee; grantor
Q3) Renewal provisions in a lease are strictly construed against the tenant.
A)True
B)False
Q4) A provision in a lease giving the landlord the right to terminate the lease by notice is strictly construed against the tenant.
A)True
B)False
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Chapter 52: Decedents Estates and Trusts
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Q1) Which of the following is generally not required for the testator to have testamentary capacity?
A)The testator knows the exact value of his or her estate.
B)The testator understands the writing to be a will.
C)The testator has a reasonable appreciation of the identity of relatives and friends.
D)The testator has a reasonable appreciation of the extent of the property that may exist at death.
Q2) Testate distribution describes the distribution that is made when the decedent leaves an invalid will.
A)True
B)False
Q3) A holographic will is an unwitnessed will that is written by the testator entirely by hand.
A)True
B)False
Q4) A will,to be effective,always must be dated.
A)True
B)False
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