Legal Aspects of Business Practice Questions
Course Introduction
Legal Aspects of Business explores the fundamental legal principles and frameworks that govern business activities. The course covers topics such as contract law, company law, intellectual property rights, employment law, consumer protection, and corporate governance. Students will gain an understanding of how legal issues affect businesses and how to identify and manage legal risks in various organizational contexts. Through case studies and real-life examples, the course emphasizes the importance of legal compliance, ethical decision-making, and the impact of regulatory environments on business operations, equipping students with practical knowledge to navigate the legal landscape of the business world.
Recommended Textbook Business Law and the Legal Environment 7th Edition by Jeffrey F. Beatty
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Page 2
Chapter 1: Introduction to Law
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Q1) In 1992,the North Carolina Supreme Court ruled in a case entitled Goodman v.Wenco Foods,Inc.,that when a substance in food causes injury to a consumer of the food,it is not a bar to recovery against the seller that the substance was natural to the food.If,in a 2008 case involving a consumer's injury caused by a fish bone in a bowl of fish chowder,the court followed the decision in Goodman v.Wenco Foods,Inc.,the court's action in the second case is an example of A)stare decisis.
B)statutory law.
C)public law.
D)criminal law.
Answer: A
Q2) The President of the United States
A)creates federal common law.
B)can veto Congressional legislation.
C)determines the constitutionality of statutes.
D)passes statutes.
Answer: B
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Chapter 2: Business Ethics and Corporate Social Responsibility
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Q1) John Johnson is a customer of company ABC.As such,John is a(n)
A)shareholder.
B)customer and stakeholder.
C)customer only.
D)stakeholder only.
Answer: B
Q2) Deontologists would agree that the increasing medical concern over obesity in the United States justifies federal regulation of high fat,high sugar,low nutrition food advertising during children's television programs.
A)True
B)False
Answer: True
Q3) What is ethics?
A)Always telling the truth
B)The study of how people should behave
C)Following the law
D)The rules by which you live your life
Answer: B
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Chapter 3: International Law
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Q1) Which principle of Islamic law prohibits any contract gain that is not clearly outlined at the time of contract,especially when it involves risk and deception?
A)gharar
B)ijtihad
C)shari'a
D)jus cogens
Answer: A
Q2) Which of the following statements best describes common law?
A)Common law is law that is the same or similar in all states.
B)Common law is derived from statutes and codes made by legislatures.
C)Common law is based on Justinian and Napoleonic codes.
D)Common law requires judges to base their decisions on prior cases.
Answer: D
Q3) The United Nations Security Council,comprised of all its member nations,is the UN's lawmaking body.
A)True
B)False
Answer: False
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5
Chapter 4: Common Law, Statutory Law, and Administrative Law
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Q1) SharCo and Blyron Productions are each applying for a television license.In deciding which applicant is better qualified,the FCC will hold an initial hearing before A)the OSHA.
B)an administrative law judge.
C)an administrative mediator.
D)a House-Senate Conference Committee.
Q2) Public hearings are required in formal administrative agency rulemaking.
A)True
B)False
Q3) The last protected trait added by Congressman Smith of Virginia to the bill which became Title VII of the Civil Rights Act of 1964 was A)sex (gender).
B)sexual orientation.
C)national origin.
D)race.
Q4) The majority of work done by legislative bodies is performed in committees.
A)True
B)False
Page 6
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Chapter 5: Constitutional Law
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Q1) Congress passed the federal OSHA establishing job safety standards.Illinois passed its own statute,which had slightly more lenient standards.Illinois workers are only held to the state standards unless they are involved in interstate commerce.
A)True
B)False
Q2) Identify the basic job of a President of the United States,the source of executive power,and three key powers associated with the position of President.
Q3) Eminent domain refers to the government's ability to take private property for public use.
A)True
B)False
Q4) Discuss the Miller test to determine if a creative work is obscene.
Q5) The idea that courts should not be heavily involved in lawmaking,but rather should only rule in cases where the constitutionality is clear is known as A)judicial review. B)judicial activism.
C)judicial reform.
D)judicial restraint.
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Chapter 6: Dispute Resolution
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Q1) After the plaintiff has presented her case,the defendant may be granted a A)directed verdict.
B)summary judgment.
C)judgment NOV
D)judgment on the pleadings.
Q2) If Lorenzo is seeking an injunction against Brenda to prevent her from selling materials that infringe his copyright,he is entitled to a jury trial if the value of the materials is over $100.
A)True
B)False
Q3) Briefly describe the process of jury selection.
Q4) Emails and their attachments are not subject to pretrial discovery.
A)True
B)False
Q5) A civil case generally proceeds as follows:
A)answer, complaint, discovery, trial, verdict.
B)complaint, answer, trial, discovery, verdict.
C)complaint, answer, discovery, trial, verdict.
D)discovery, complaint, answer, trial, verdict.
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Chapter 7: Crime
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Q1) The fraudulent conversion of property which is already in the defendant's possession is
A)money laundering.
B)exclusion.
C)embezzlement.
D)trespassory taking.
Q2) Which of the following does NOT violate the Foreign Corrupt Practices Act?
A)a U.S.company bribes a government official in order to influence a governmental decision.
B)A publicly traded company that does not engage in international trade refuses to allow its company records to be inspected by U.S. officials.
C)A U.S. company promises to pay a bribe to a foreign company, but is unsuccessful in gaining any benefits from that company.
D)A company allows a grease or facilitating payment for a routine governmental action.
Q3) Taking a personal property without paying for it is a common type of larceny.
A)True
B)False
Q4) What is the exclusionary rule and what are the three exceptions to the rule?
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Chapter 8: Intentional Torts and Business Torts
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Q1) Angela sued Tom for battery.Angela was awarded $30,000 for future medical expenses.Five years after the award,Angela realizes that her medical expenses will far exceed $30,000.Under the single recovery principle,
A)Angela will be able to submit the additional medical bills to the court for payment.
B)Tom will have to pay the additional medical bills.
C)Tom will have a qualified privilege and only have to pay a portion of the additional medical expenses.
D)Angela will have no recourse against Tom or the court for the medical expenses as long as the original award was reasonable.
Q2) The elements in a defamation case are:
A)defamatory statement; falsity; communication; and injury.
B)a contract; knowledge of the contract; improper inducement; injury.
C)false or misleading fact statements; statements in commercial advertising; likelihood of harm.
D)duty; breach of duty; proximate causation; and damages.
Q3) A witness testifying in a court or legislature may never be sued for defamation.
A)True
B)False
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Page 10
Chapter 9: Negligence, Strict Liability, and Product Liability
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Q1) List and discuss the elements necessary to establish negligence.
Q2) One morning,Miles accidentally dropped a thumbtack on the chair of the office manager where he worked.The office manager sat on the tack and two days later,was hospitalized with an infection caused by the tack.Which of the following is correct?
A)Miles actions were negligent.
B)No tort has been committed.
C)Miles committed an intentional tort.
D)Miles is strictly liable.
Q3) In a comparative negligence state,if the plaintiff in a negligence lawsuit is found to be 30 percent negligent,the plaintiff would recover
A)70 percent of the damages.
B)all of the damages.
C)none of the damages.
D)30 percent of the damages.
Q4) A landowner's highest duty is owed to licensees.
A)True
B)False
Q5) Discuss the concepts of contributory negligence and comparative negligence.
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Chapter 10: Cyberlaw and Privacy
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Q1) The CAN-SPAM Act
A)applies to virtually all promotional e-mails, whether or not the sender has a pre-existing relationship with the recipient.
B)requires senders of promotional e-mails to offer an opt-in system to recipients.
C)requires recipients of unsolicited, pornographic e-mails to notify the Justice Department.
D)requires senders of promotional e-mails to provide a valid return address, which may be a post office box or a specific physical location.
Q2) The Children's Online Privacy Protection Act
A)deals only with the collection of data that will be disclosed to children.
B)restricts the use of social media sites by children.
C)regulates the activities of Internet operators with regard to collecting information from children.
D)is enforced by the EEOC.
Q3) Section 5 of the FTC Act requires all websites to have a privacy policy.
A)True
B)False
Q4) Explain the core principles in the Code of Fair Information Practices.
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Page 12
Chapter 11: Introduction to Contracts
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Q1) The courts will find an implied contract when A)justice demands it.
B)conduct of the parties indicates they intended an agreement.
C)there is promissory estoppel.
D)there is undue influence.
Q2) Which of the following represents a unilateral offer?
A)"I will pay you $50 if you mow my lawn."
B)"I will pay you $50 if you promise to trim that tree."
C)"I will pay you $50 for your CD player."
D)"I will pay you $50 for your backpack."
Q3) An express contract
A)must be in writing.
B)may be inferred by the conduct of the parties involved.
C)has both parties setting forth their intentions.
D)is not valid in many states.
Q4) Lucy and Rick sign a contract in which Lucy agrees to deliver 10 boxes of chocolates in exchange for Rick's promise to pay $5 per box.Lucy delivers the candy.Rick pays for the goods.This contract is fully executory.
A)True
B)False
Page 13
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Chapter 12: Agreement
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Q1) Acme Co.offers to buy 1000 widgets from Widget World Co.The written offer provides for 1000 at $10 per widget,to be delivered May 1.The offer has no other provisions.Widget World sends a written acceptance.However,the acceptance also states that if any claim arises under this contract,Widget World must be notified within 10 days.Acme does not object to this provision.Both parties are merchants.Which of the following best describes this situation?
A)No contract exists.The purported acceptance contains additional terms, so it is a counteroffer, which has not been accepted.
B)No contract exists. The terms materially alter the original offer.
C)A contract exists. The additional terms are not material, they are part of the contract.
D)A contract exists, but the additional terms are not part of the contract no matter what.
Q2) You have placed an antique sofa up for auction and the auctioneer has not made any special announcements about the sale.You can withdraw the sofa at any time before the auctioneer closes the sale by announcement or by the fall of the hammer.
A)True
B)False
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Page 14
Chapter 13: Consideration
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Q1) Pastor Tom was employed by the First Church for 40 years.On Pastor Tom's retirement there was no adequate pension plan.Two months after the retirement,a wealthy parishioner,in consideration for Pastor Tom's 40 years of faithful service and for being such a "sweet" man,promised to pay him $500 per month for the rest of his life.This promise probably is not enforceable.
A)True
B)False
Q2) Agreeing not to open a competing business could be consideration.
A)True
B)False
Q3) Billy owes a liquidated debt of $3000 to Rayna,his personal weight trainer.Billy sends Rayna a check for $300 on which he has marked,"Payment in Full." If Rayna cashes the check she will not be able to successfully sue Billy for the remainder of the debt.
A)True
B)False
Q4) The two basic elements of consideration are intention and agreement.
A)True
B)False
Q5) What is consideration and what are the two basic elements of consideration?
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Chapter 14: Legality
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Q1) A gambling contract is illegal unless it is a type of wagering specifically authorized by state statute.
A)True
B)False
Q2) Larry has the largest pizza business in the city.He learns that Henry is thinking of opening a competing pizza and pasta delivery business.Larry gives Henry $25,000 to not open his proposed business in the same city.Which statement is correct?
A)The contract is voidable at Larry's option.
B)The contract is void for lack of consideration.
C)The contract is illegal and void.
D)The contract is enforceable.
Q3) An exculpatory clause is generally unenforceable when
A)it attempts to release a party from liability for ordinarily negligent behavior.
B)it involves public transportation.
C)it is written clearly and in bold, large print.
D)the affected activity is a recreational activity.
Q4) Differentiate between licensing requirements designed to protect the public and those designed to generate revenue.
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Page 16
Chapter 15: Capacity and Consent
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Q1) If a minor can cancel a contract,it can be done at any time before the minor reaches the age of majority or within a reasonable time after reaching majority age.
A)True
B)False
Q2) Mark's home had burned to the ground.When he met with his insurance adjuster,she accused him of burning down the house,and said she would have him criminally prosecuted if he didn't settle the claim for much less than the house was worth.Mark agreed to the settlement.If he changed his mind,he can probably rescind the settlement on the basis of
A)fraud.
B)duress.
C)undue influence.
D)mistake.
Q3) If Jane persuades Linda to buy her horse by telling Linda that the horse runs "like the wind," then Jane's statement is A)fraud.
B)reckless misrepresentation.
C)a unilateral mistake.
D)puffery.
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Page 17
Chapter 16: Written Contracts
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Q1) Bry,Inc.and Gangl Co.entered into an oral agreement for the sale of 3,000 sweaters.Both parties performed as required under the contract.Bry delivered the sweaters and Gangl accepted and paid for them.Since the contract is fully executed,it makes no difference that it was an oral agreement.
A)True
B)False
Q2) Tuan is president and sole shareholder of Entertainment, Inc. Entertainment, Inc. wishes to borrow money, but to do so, the bank requires Tuan to orally agree to personally pay the debt of the corporation if Entertainment, Inc. cannot. Tuan's guarantee to repay is
A)enforceable under the parol evidence rule.
B)unenforceable because there is no insurable interest.
C)enforceable because of the leading object rule.
D)unenforceable because it is a collateral promise.
Q3) The original statute of frauds is the English law that began the practice of requiring written evidence of certain kinds of contracts,but now the British government has repealed the writing requirement for most contracts.
A)True
B)False
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Page 18
Chapter 17: Third Parties
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Q1) Shirley is an actress under contract with Twentieth Century.Shirley agreed to perform the lead role in a musical to be filmed in Hollywood by Twentieth Century.At the last minute,Twentieth Century decided to scrap the musical and assigned its rights in Shirley to MGM.MGM was planning to film a western in Australia requiring Shirley to spend six months filming in Australia.Can Shirley successfully prevent this assignment?
Q2) A donee beneficiary
A)is not entitled to enforce a contract against either party.
B)usually does not give consideration in return for the gift.
C)will generally become a creditor beneficiary after his or her rights vest.
D)is an incidental beneficiary.
Q3) Johann,a well-known musician,agrees to give ten guitar lessons to Elton for $2,000.Nothing in the contract itself prohibits a delegation.If Johann delegates his obligation to Eugene,a second-year musical student and enthusiastic guitar player,then the delegation will probably be
A)permitted because contracts may be freely delegated.
B)permitted because the contract is just for music lessons.
C)prohibited because the contract is for service from a specific person.
D)prohibited by the UCC because this is a sale of services.
Q4) Briefly discuss the enforceability of contracts by third parties.
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Chapter 18: Performance, Breach and Discharge
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Q1) Which of the following events would have the best chance of excusing performance of a contract based on commercial impracticability?
A)The price of a raw material increases slightly so that the contract will not be as profitable.
B)An unforeseeable trade embargo causes prices to triple.
C)The promisor of personal services dies.
D)The subject matter of the contract is destroyed.
Q2) Which of the following statements is accurate regarding a condition?
A)A condition is created only when the phrase "provided that" or a similar phrase introduces it.
B)A condition is an event that must occur before a party becomes obligated under a contract.
C)A condition must be expressly stated in order to be enforced.
D)A condition will not be enforced by the courts unless formal language is used, regardless of the intent of the parties to create a condition.
Q3) Identify four factors courts consider in deciding the validity of commercial impracticability and frustration of purpose claims.
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Chapter 19: Remedies
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Q1) Which of the following is an example of incidental damages you might be awarded if you are wrongfully terminated from your job?
A)The costs of psychological counseling.
B)The costs of mailing resumes to prospective employers.
C)The costs of a new wardrobe for future interviews.
D)The costs of cosmetic surgery.
Q2) The concept that an injured party may recover consequential damages only if the breaching party should have foreseen them was established in A)Bi-Economy Market, Inc.v.Harleysville Ins.Co.of New York.
B)Putnam Construction & Realty Co. v. Byrd.
C)Hadley v. Baxendale.
D)Toscano v. Greene Music.
Q3) In a construction contract,there is a $1000 per day estimate of damages for each day that the contract runs over the completion date.The contractor is 30 days late when the job is completed,resulting in a prospective damage award of $30,000.What is this type of clause,and when will it be enforced?
Q4) Discuss the purpose of an injunction and how the two types of injunctions covered in the textbook are used.
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Page 21
Chapter 20: Practical Contracts
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Q1) In the case of a typo,a court will reform a contract if there is clear and convincing evidence that the allegedmistake does not actually reflect the true intent of the parties.
A)True
B)False
Q2) When a party to a contract intentionally makes the terms of a contract unclear,it is called
A)vagueness.
B)duress.
C)ambiguity.
D)a mistake.
Q3) Two parties are debating whether or not to put their contract into writing.In making their determination,which of the following factors would normally NOT be considered?
A)whether or not the agreement falls within the Statute of Frauds
B)the complexity of the agreement
C)the length of time covered by the agreement
D)the relationship between the two parties
Q4) Identify and explain at least four situations where a written contract is either necessary or recommended.
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Chapter 21: Introduction to Sales
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Q1) The UCC imposes a duty of good faith in the performance of all contracts.
A)True
B)False
Q2) To simplify,clarify,and modernize the law governing commercial transactions,the UCC permits the use of "open terms" in sales contracts.In the use of "open terms," which of the following is TRUE?
A)The court will use market value and other comparable sales to determine what a reasonable price would have been at the time of delivery if the parties have not settled the price in the contract.
B)If time of payment is not mentioned in the contract, payment within a commercially reasonable time is presumed.
C)If the contract permits the buyer or seller to determine the price during contract performance, the UCC requires the party to do so in good faith.
D)All of the above are true.
Q3) Lian contracted for financial services from E-wise.This contract is governed by Article 2 of the UCC.
A)True
B)False
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Chapter 22: Ownership, Risk and Warranties
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Q1) Bill is injured when his new motorcycle speeds out of control because of a defective part.In most jurisdictions,Bill
A)can sue the motorcycle manufacturer even though he does not have privity.
B)cannot sue the motorcycle manufacturer because his injuries are personal injuries as opposed to economic loss.
C)cannot sue the motorcycle manufacturer because the law requires arbitration.
D)cannot sue the motorcycle manufacturer because there is no privity of contract.
Q2) On impulse,you purchase a travel trailer and ask your acquaintance,Max,if you can leave the trailer at the edge of his restaurant's parking lot until you can have a concrete pad built to store the trailer on your property.Max agrees.When you return for the trailer the next week,it is gone and you find out that Max sold it.You can
A)recover the trailer because Max did not have any ownership interest to pass.
B)recover, but only if Max bought insurance to cover the trailer while it was on his property.
C)not recover because you "entrusted" the trailer to Max, who then had a right to sell it.
D)not recover because Max had only a voidable title to transfer.
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Chapter 23: Performance and Remedies
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Q1) What is the difference between incidental damages and consequential damages?
Q2) When a party to a contract notifies the other party that it will not perform the contract as agreed,this conduct is referred to as
A)specific performance.
B)cover.
C)repudiation.
D)assurance.
Q3) Wimble ordered 1,000 pro-quality luminescent orange tennis balls from Sports Unlimited at a cost of $800.On June 1,Sports Unlimited shipped standard white tennis balls,but Wimble rejected them.Wimble bought the same number of pro-quality luminescent orange balls from another supplier the same day for $650.In a suit against Sports Unlimited,Wimble may recover $800.
A)True
B)False
Q4) Identify the possible remedies for a buyer when the seller breaches a contract.
Q5) Under the "perfect tender rule" the buyer may reject the goods if they fail in any respect to conform to the contract.
A)True
B)False
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Chapter 24: Secured Transactions
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Q1) Under Article 9 of the UCC,electronic chattel paper may be used as collateral in a secured transaction.
A)True
B)False
Q2) In terms of collateral,which of the following would be categorized as "equipment"?
A)a mowing tractor used to mow personal property
B)crops produced by a farming operation
C)goods held by someone for sale or lease
D)a computer system used in a retail store
Q3) Article 9 applies to any transaction intended to create a security interest in personal property or fixtures.
A)True
B)False
Q4) Pharm-Ace holds a patent on a drug.Pharm-Ace used the patent (evidenced by the patent certificate)to secure a $1 million loan from First Bank.The patent is chattel paper.
A)True
B)False
Q5) Explain the difference between attachment and perfection.
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Chapter 25: Creating a Negotiable Instrument
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Q1) Discuss the effect on an instrument of: (a)contradictory amounts between the numerals and amount written in words on a check;(b)the interest rate left blank on a promissory note;and (c)contradictory terms that are typed or printed onto a promissory note and terms that are handwritten.
Q2) It was payday.Navidida decided to run some errands and then deposit her check in the bank over her lunch hour.So that she wouldn't have to spend too long at the bank,Navidida indorsed the back of the paycheck as follows,"Navidida Jones," before leaving work.While window shopping,Navidida lost the check.Roger finds Navidida's paycheck.
(A)Will Roger be able to cash Navidida's check?
(B)How could have Navidida indorsed the check so that she would not have to be concerned about losing the check?
Q3) Margo is in possession of a check issued to her by Felix.The check states,"Pay to the order of Margo." If Margo wishes to transfer the check to Pete to pay a debt she owes him,all she needs to do is strike out her name on the front of the check,write in Felix's name and give it to him.
A)True
B)False
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Chapter 26: Liability for Negotiable Instruments
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Q1) Lana wrote a check knowing that she did not have sufficient funds in her account.What is this practice called?
A)check kiting
B)bouncing a check
C)check forgery
D)check covering
Q2) A drawee has primarily liability on a draft.
A)True
B)False
Q3) What term is used to indicate the termination of liability on an instrument?
A)Collection
B)Discharge
C)Accommodation
D)Conversion
Q4) Micah signed a check in the lower right-hand corner and Andrew signed on the back.The presumption is that
A)Micah is the issuer.
B)Micah is the acceptor.
C)Andrew is the drawer.
D)Andrew is the maker and Micah is an indorser.
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Chapter 27: Accountants' Liability
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Q1) Accounting contracts can be either written or oral.
A)True
B)False
Q2) Who owns and controls an accountant's working papers?
A)The client, in practice
B)The IRS
C)The accountant, in theory and practice
D)The client, in theory
Q3) Sally prepared financial statements for MegaCorp knowing that the company would be using her statements when applying for a loan at Big Bank.It is discovered she was negligent in preparing the statements and Big Bank sued her.Sally is liable under the A)Ultramares doctrine.
B)foreseeable doctrine.
C)Restatement doctrine.
D)All the above.
Q4) After completing an audit,the most unfavorable opinion an auditor can issue is a disclaimer of opinion.
A)True
B)False
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Chapter 28: Agency Law
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Q1) If Denise is hired to work as a cashier,she has the implied authority to do acts reasonably necessary to carry out her job.
A)True
B)False
Q2) An agent may not engage in inappropriate behavior that reflects badly on the principal.This rule applies to conduct
A)during working hours.
B)during off-duty time.
C)during both working hours and off-duty time.
D)only by public officials.
Q3) An agency relationship can be created
A)by the conduct of the parties.
B)only by the meeting of all the standards of contract law.
C)only by a written agreement.
D)only if the agent is paid.
Q4) If a person accepts the benefits of an unauthorized transaction,or fails to repudiate it,then he is bound by the act as if he had originally authorized it.
A)True
B)False
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Chapter 29: Employment and Labor Law
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Q1) Connie and her fellow union employees went out on strike when the company refused to meet the union's demands for higher wages and better benefits.Shortly thereafter,the company began hiring permanent replacement workers.After a hard eight-month strike,the union and the company reached an agreement.When the strike was over,Connie was upset that she was not given her job back.The replacement worker that took over her job was retained.She believes she has a legal right to her job,especially since she was a faithful employee for over 20 years.Is Connie right? Explain.
Q2) Jenna works for Mega Corp as a production employee.She is paid an hourly wage.She wishes to negotiate her own employment contract with management since she does not agree with the terms of her union's collective bargaining agreement.Can Jenna negotiate her own contract? Explain.
Q3) The Employee Retirement Income Security Act (ERISA)requires employers to establish pension plans for employees.
A)True
B)False
Q4) Some courts have held that employee handbooks create binding contract terms.
A)True B)False
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Chapter 30: Employment Discrimination
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Q1) Explain the Title VII requirements on affirmative action,and identify three sources of affirmative action programs.
Q2) Which of the following traits is NOT currently protected under Title VII?
A)National origin
B)Sexual orientation (homosexual vs. heterosexual)
C)Gender (male vs. female)
D)Family responsibility (mothers vs. fathers)
Q3) Which of the following is TRUE about Affirmative Action?
A)Affirmative action is required by Title VII.
B)Affirmative action is prohibited by Title VII.
C)Affirmative action is allowed in goverment contracts if it can show the programs are needed to overcome specific past discrimination.
D)Affirmative action programs are usually voluntary on the part of employers, since courts have no power to order remedies for past discrimination.
Q4) Which of the following would be a reasonable accommodation under the ADA?
A)modifying a job description and job duties to accommodate the disabled worker
B)assigning a shadow employee to work with the disabled worker
C)providing part-time schedules to accommodate the disabled worker
D)creating a new job that the disabled worker can perform
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Chapter 31: Starting a Business: LLCs and Other Options
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Q1) The business form that offers the limited liability of a corporation and the tax status of a flow-through entity is
A)a close corporation.
B)a sole proprietorship.
C)a limited liability company.
D)a general partnership.
Q2) An S Corporation cannot have more than ____ shareholders.
A)100
B)75
C)50
D)25
Q3) All the business forms listed below have limited liability EXCEPT the A)limited liability company.
B)general partnership.
C)"S" corporation.
D)corporation.
Q4) No formal steps are necessary to create a sole proprietorship.
A)True
B)False
Q5) Briefly discuss the the major restrictions placed on an "S" corporation.
Page 33
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Chapter 32: Partnerships
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Q1) Charles and Becky are partners.If they have a disagreement,the Uniform Partnership Act will govern their respective rights with each other
A)despite any written partnership agreement they may have signed.
B)only if they do not have a written partnership agreement that addresses the issue of dispute.
C)only if they agree to be bound by the UPA.
D)only if their written partnership agreement states that they will be bound by the terms of the UPA.
Q2) At what stage are the partnership debts paid and the proceeds distributed to the partners?
A)During dissolution
B)During winding-up
C)During termination
D)During dissociation
Q3) Brock and Heidi agree to jointly run a fundraiser for the nonprofit children's hospital.Even if they don't have a formal,written agreement,they have formed a partnership.
A)True
B)False
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Chapter 33: Life and Death of a Corporation
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Q1) Incorporators of Maizey Co.signed and delivered the corporate charter to the proper office,but due to inefficiencies in the government office,the filing was delayed.During the period between the delivery of the charter and the filing,a promoter of Maizey Co.entered a contract for the delivery of goods using the corporate name.The supplier,if it finds out the filing had not been completed when the contract was entered,may hold the promoter personally liable on the contract.
A)True
B)False
Q2) Under corporate law,a corporation that officially states its purpose is "to engage in any lawful activity for which corporations may be organized under the General Corporation Law of Idaho" is too broad.A corporation's purpose must be more narrowly defined.
A)True
B)False
Q3) When a corporation accepts legal responsibility for a contract,it is called novation.
A)True
B)False
Q4) Discuss how a corporation is terminated.
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Chapter 34: Management Duties
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Q1) A finding by a court that a manager's decision had a rational business purpose does not necessarily protect the manager from a finding that he breached a duty of care.
A)True
B)False
Q2) A fundamental problem of the modern corporation is the conflict of interests between managers,shareholders,and stakeholders.
A)True
B)False
Q3) A manager who first offers an opportunity to disinterested directors or shareholders who turn it down has the right to take advantage of the opportunity herself.
A)True
B)False
Q4) One of the directors of Independent Pallet Mill purchases 100 acres of timberland.In order for him to sell the timber from this land to Independent,what must he do? If he does not act properly in this situation,what duty would he violate,and what would be the result?
Q5) What is the definition of the business judgment rule?
Q6) Discuss the purposes of the "business judgment rule."
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Chapter 35: Shareholder Rights
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Q1) In a derivative lawsuit,any proceeds awarded by the court must be paid to the corporation,not the shareholders themselves.
A)True
B)False
Q2) Alfrieda purchased an ownership interest in a corporation.This gives her the right to use the equipment owned by the corporation,as long as her usage does not interfere with the normal operation of the business.
A)True
B)False
Q3) Larry has owned $5,000 of stock in E-prise,Inc.for the past 18 months.Under SEC rules,Larry can require that one proposal be placed in the company's proxy statement to be voted on at the shareholder meeting.
A)True
B)False
Q4) A "fundamental change" in a corporation would be illustrated by A)E-prise, Inc.merging with Vitta Corporation.
B)E-prise electing new members to the board.
C)Vitta Corporation adding a new product to its product line.
D)Vitta Corporation setting the date for its annual meeting.
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Chapter 36: Bankruptcy
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Q1) Which of the following statements concerning a Chapter 11 reorganization plan is true?
A)A reorganization plan will be confirmed by the court only if a majority of each class of creditors votes in favor of the plan.
B)A reorganization plan can be confirmed by the court over objections of some creditors if the court determines that the plan is feasible and fair.
C)Only the bankruptcy court has the authority to confirm or reject the reorganization plan. Creditors do not have a right to vote on the plan.
D)A reorganization plan binds only the debtor and not the creditors.
Q2) Chapter 13 bankruptcy
A)is used by businesses to reorganize their financial situations.
B)is an involuntary bankruptcy.
C)can be used only by individuals with a regular source of income.
D)is used by businesses to liquidate their debts.
Q3) What are the three main purposes of the federal Bankruptcy Code? How are these purposes supported and fostered in the Code?
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Chapter 37: Securities Regulation
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Q1) Pursuant to a public offering,a CPA firm audited the financial statements.After the offering,omissions and misstatements were found.The CPA firm is now being sued by the purchasers of the stock.The purchasers are alleging that the erroneous financial statements in the registration statement caused them to suffer a monetary loss.The CPA firm can avoid liability if it can prove
A)that it used due diligence in auditing the financial statements.
B)the corporation was the party who made misstatements and omissions.
C)the firm believed that the statements were accurate.
D)None of the above will avoid liability.
Q2) The Securities Act of 1933 established the Securities and Exchange Commission. A)True
B)False
Q3) Discuss the process an issuer follows for either an IPO or a secondary offering.
Q4) The SEC has enforcement powers,including the power to issue cease and desist orders,to levy fines,and to confiscate profits from illegal transactions.
A)True
B)False
Q5) What are the purposes of a registration statement and what information must it contain?
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Chapter 38: Antitrust
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Q1) The Sherman Act was designed to prevent extreme concentrations of economic power.
A)True
B)False
Q2) An agreement to sell a product on the condition that a buyer also purchases another,usually less desirable,product is referred to as
A)a tying arrangement.
B)price fixing.
C)resale price maintenance.
D)market division.
Q3) The most accurate statement about the Robinson-Patman Act is
A)It has rarely been enforced in recent years.
B)The U.S. government has stepped up its enforcement during the last decade.
C)It has been declared unconstitutional.
D)It was repealed by Congress in 1998.
Q4) Per se violations are subject to both civil and criminal penalties.
A)True
B)False
Q5) Discuss when monopoly power is not a violation of Section 2 of the Sherman Act.
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Chapter 39: Consumer Protection
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Q1) The Trimbles apply to Community Bank for an installment loan of $20,000 to remodel their bathroom.Discuss the disclosures Community Bank is required to make.
Q2) "Bait and switch" is
A)advertising a product for sale and then giving the customer a rain check.
B)placing the store brand and the national brand side-by-side in a store to confuse customers.
C)selling the store brand at a lower price than the national brand.
D)advertising certain goods and then pressuring the customer to buy different, more expensive goods.
Q3) Consumers have a right to
A)exclude as obsolete information about a bankruptcy discharge seven years previously.
B)know the name of anyone to whom credit information has been supplied by a consumer reporting agency within the last three years.
C)have their own version of a disputed credit situation included in their credit file.
D)have investigative reports become obsolete after 1 year.
Q4) Discuss the major provisions of the Credit CARD Act.
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Chapter 40: Environmental Law
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Q1) The Toxic Substances Control Act regulates
A)chemicals other than pesticides, foods, drugs, and cosmetics.
B)insecticides.
C)natural gas.
D)pesticides.
Q2) Truan,Inc.has decided to market a new pesticide.Truan must register the pesticide with the EPA.
A)True
B)False
Q3) Trent was the production manager at HGB,Inc.Under his supervision,HGB filled in an area of wetlands on the company's property without a permit.Has Trent violated the law? What penalties might he face?
Q4) An Environmental Impact Statement must be prepared for every major federal action that significantly affects the quality of the environment.
A)True
B)False
Q5) Foiler Manufacturing,a new corporation,estimates it may generate approximately 200 kilograms of hazardous waste each month.Discuss the EPA requirements it faces in relation to this waste.
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Chapter 41: Intellectual Property
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Q1) McDonald's famous golden arches and other marks used by the company illustrate a
A)suggestive mark.
B)service mark.
C)certification mark.
D)collective mark.
Q2) A new savings and loan bank,called Federal Deposit Bank,applied for a trademark of its name.Why will this bank probably not receive trademark approval?
A)It is similar to an existing mark.
B)It is a generic trademark.
C)It is a deceptive mark.
D)It is a scandalous or immoral mark.
Q3) If Cub Cadet wins a trademark infringement suit by proving the defendant's trademark,Kub Kadet,is likely to deceive customers about who made the goods,Cub Cadet is entitled to
A)up to twice the actual damages.
B)an injunction to prevent further infringement.
C)any profits Kub Kadet makes on its infringing product going forward.
D)a public apology.
Q4) Briefly define patent,copyright,and trademark,and explain how long they last.
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Chapter 42: Real Property and Landlord Tenant
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Q1) Whether or not the zoning board will grant a request for a variance depends upon
A)the type of the proposed building.
B)the reaction of the neighbors.
C)the reason the owner claims she or he is harmed by the zoning ordinance.
D)All of the above.
Q2) Pamela owns a small bakery that specializes in gluten-free products.She installed commercial ovens and refrigerators in the kitchen.The ovens and refrigerators are ?________,and therefore can be removed if Pamela moves her bakery to a new location.
A)trade fixtures
B)convertable fixtures
C)nonfixed appliances
D)personal property
Q3) Christy's new office lease states that rent will increase by 2% per year to cover tax increases.This is known as
A)a tax mitigation.
B)an escalator clause.
C)a fee escalation.
D)a tax abatement.
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Chapter 43: Personal Property and Bailment
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Q1) Jody loaned her neighbor,Phil,her snow blower.Phil set it near his driveway,and later accidentally ran over and destroyed it.In a suit to recover damages,Jody as plaintiff has the burden of proving that Phil was negligent and caused the destruction of her snow blower.
A)True
B)False
Q2) In January,Erwin told David,his nephew,that he would give him a car when he graduates from college.David graduated in May.If Erwin refuses to give David a car,David can sue him for breach of an inter vivos gift.
A)True
B)False
Q3) If property is mislaid,the finder of the property will have a superior claim to possession of the property against everyone except the true owner.
A)True
B)False
Q4) All bailments have to be by agreement between the bailor and bailee.
A)True
B)False
Q5) Distinguish between a contract and a gift.Give an example of each.
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Chapter 44: Planning for the Future: Estates and Insurance
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Q1) The percentage of a decendent's estate that a spouse can claim is called a forced share.
A)True
B)False
Q2) Dr.Gavornne advises his very ill patients to prepare a living will.The purpose of a living will is to
A)make a disposition of property.
B)express a desire not to have extreme medical treatment that would prolong their lives.
C)transfer life insurance.
D)consent to organ donation.
Q3) Per capita means each heir gets an equal share of an estate.
A)True
B)False
Q4) A trust created in a will is
A)an inter vivos trust.
B)a constructive trust.
C)a testamentary trust.
D)a probate trust.
Q5) Identify four ways a trust can be terminated.
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