Legal Environment of Business
Final Exam
Course Introduction
The Legal Environment of Business explores the fundamental legal principles and regulations that influence commercial activities and managerial decision-making. This course examines key areas such as the structure of the U.S. legal system, contract law, torts, intellectual property, employment law, and the ethical dimensions of business conduct. Students gain an understanding of how laws and government agencies affect business operations, risk management, and corporate governance. Through case studies and real-world examples, the course prepares students to identify legal issues in business scenarios and make informed, ethical decisions within the bounds of the law.
Recommended Textbook Business Law and the Regulation of Business 10th Edition by Richard A. Mann
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Chapter 1: Introduction to Law
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Sample Questions
Q1) The terms "law" and "justice" are interchangeable.
A)True
B)False
Answer: False
Q2) The person who files or commences a civil lawsuit is the: A)plaintiff.
B)defendant.
C)prosecuting attorney.
D)attorney general.
Answer: A
Q3) Which of the following terms correctly describes the law?
A)Pervasive.
B)Permissive, in some instances.
C)Prohibitory, in all instances.
D)All of the above.
E)Both (a) and (b).
Answer: E
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Chapter 2: Business Ethics
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Sample Questions
Q1) To a libertarian, it is unjust for a society to take wealth earned by one citizen and to distribute it to others who did not earn it.
A)True
B)False
Answer: True
Q2) Situational ethics, unlike ethical relativism, judges a person's ethics, but first looks at the decision or act from the perspective of the actor.
A)True
B)False
Answer: True
Q3) In what way or ways are situational ethics and ethical relativism similar?
A)They both look to a central authority or set of rules to guide ethical decision-making.
B)They both assess each separate act according to whether it maximizes pleasure over pain.
C)They both judge actions from the perspective of the actor.
D)All of the above.
Answer: C
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Chapter 3: Civil Dispute Resolution
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Sample Questions
Q1) Compare and contrast a summary judgment and a directed verdict.
Answer: Both a summary judgment and a directed verdict are final, binding judicial determinations on the merits of a case.However, a summary judgment is made by the judge before a trial and a directed verdict is made by the judge after a trial has begun but before the jury renders a verdict.A summary judgment is granted if the evidence disclosed by discovery is so clear that a trial to determine facts is unnecessary.A summary judgment is a determination that the moving party should prevail as a matter of law because there are no issues of fact to be determined by trial.With a directed verdict, if the judge concludes that the evidence, which is assumed for the purposes of the motion to be True, would not be sufficient for the jury to find in favor of the plaintiff, then the judge will grant a directed verdict in favor of the defendent.
Q2) Which of the following is NOT a way in which a case can reach the United States Supreme Court?
A)Appeal by right.
B)Stare decisis.
C)Writ of certiorari.
D)All of the above are ways for a case to reach the U.S.Supreme Court.
Answer: B
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Chapter 4: Constitutional Law
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Sample Questions
Q1) Which of the following is correct with regard to the powers of government in the United States?
A)The federal government is a government of enumerated powers.
B)The federal government is all-powerful except in cases of state criminal law.
C)Legislation enacted by Congress does not need to be based on a specific power granted to the federal government by the Constitution.
D)Congress may not enact legislation that affects the states.
Q2) The U.S.Constitution was adopted in 1791 by representatives of the thirteen newly created states.
A)True
B)False
Q3) Judicial review is another phrase for an appeal of a lower court's judgment.
A)True
B)False
Q4) According to the U.S.Supreme Court, the "necessary and proper" clause gives Congress the authority to legislate in areas not mentioned in the list of enumerated powers if the legislation reasonably relates to an enumerated power.
A)True
B)False
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Chapter 5: Administrative Law
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Sample Questions
Q1) After an FOIA request has been made, an agency has __________ working days within which to indicate whether it intends to comply.
A)3
B)10
C)21
D)30
Q2) The __________ is the federal public records statute requiring most records in agency files to be open to the public.
A)FOIA
B)APA
C)ALJ
D)Government in the Sunshine Act
Q3) Interpretative rules of administrative agencies are automatically binding on the private parties the agency regulates.
A)True
B)False
Q4) What is an administrative agency? What powers does an administrative agency possess? How does an administrative agency utilize its powers?
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Page 7
Chapter 6: Criminal Law
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Sample Questions
Q1) Anita tells Bob that unless Bob pays her $5,000, she will tell his customers that he was once arrested for shoplifting as a teenager.The fact that Bob shoplifted as a teenager is true.
A)In most jurisdictions Anita has committed the crime of extortion.
B)Anita has committed the crime of defamation.
C)Anita has committed the crime of bribery.
D)In all jurisdictions in the United States, Anita would have to have received the money from Bob to be charged with a crime.
Q2) Robbery is a larceny accompanied by force or a threat of force.
A)True
B)False
Q3) White-collar crime is defined as a nonviolent crime usually involving deceit, corruption, or breach of trust.
A)True
B)False
Q4) Some states still recognize common law crimes.
A)True
B)False
Q5) Briefly discuss legislation relating to computer crimes.
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Chapter 7: Intentional Torts
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Sample Questions
Q1) Unauthorized use of another person's name for one's own benefit is an invasion of the person's right to privacy.
A)True
B)False
Q2) Each person is legally responsible for the damages proximately caused by his or her tortious conduct, and businesses that conduct activities through employees are also liable for the torts their employees commit in the course of employment.
A)True
B)False
Q3) A newspaper article hints that a certain corporation is a front for illegal activity.The corporation:
A)will lose a defamation suit because only natural persons can successfully bring defamation suits.
B)will likely win a defamation suit if the statement is untrue.
C)will likely lose a defamation suit because the press has an absolute privilege in this type of case.
D)can win an invasion of privacy suit even if the statement is true.
Q4) Identify the elements of a tort and the objectives of tort law.
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Chapter 8: Negligence and Strict Liability
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Sample Questions
Q1) battery
Q2) Henry was burning leaves in his backyard.One of the burning leaves was lifted by the wind into Bob's yard next door.It landed on the lawn mower which exploded, setting fire to the wooden lawn furniture.Henry's best argument against liability to Bob would be: A)the leaf was not a substantial factor in causing the damage. B)the gasoline in the lawn mower is a superseding cause of the damage. C)it was not foreseeable that the lawn mower would explode. D)the damage was not caused by the leaf but by the gasoline.
Q3) A tiger gets loose from the tent of a circus and mauls a passerby.The circus claims it has always treated the animal well and that it was not at all negligent in its handling of the animal.The circus has no liability for the injury caused by the animal.
A)True
B)False
Q4) disparagement
Q5) felony
Q6) stare decisis
Q7) intermediate test
Q8) arbitration
Page 10
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Chapter 9: Introduction to Contracts
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Sample Questions
Q1) In order to be legally binding, a contract must be in writing.
A)True
B)False
Q2) Steven makes a material misrepresentation of fact regarding his motorcycle to Thelma who agrees to buy the motorcycle based upon the misrepresentation.This contract is:
A)void.
B)voidable.
C)executed.
D)unenforceable.
Q3) A contract in which both parties exchange promises is a:
A)voidable contract.
B)bilateral contract.
C)unilateral contract.
D)quasi contract.
Q4) If it is unclear whether the parties formed a unilateral or bilateral contract, the courts presume the parties intended a unilateral contract.
A)True
B)False
Q5) What are the essential elements of a contract? List and discuss them.
Page 11
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Chapter 10: Mutual Assent
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Sample Questions
Q1) Marilyn read an ad in the school newspaper offering a $1,000 swimming scholarship to anyone who could swim 500 laps in the school pool.Marilyn called the advertiser and began swimming.She has reached lap number 460; she feels great and is sure she can make it all the way.The advertiser:
A)may revoke the offer since there has not yet been an acceptance.
B)may not revoke the offer since Marilyn has already accepted it.
C)must permit Marilyn the opportunity to finish her attempt to swim the 500 laps, or pay damages if he interferes with the completion of the laps.
D)must pay Marilyn $920, because she has performed 92% of the offer.
Q2) To be effective, an offer must:
A)be sufficiently definite and certain.
B)be communicated to the offeree.
C)manifest an intent to enter into a contract.
D)All of the above.
E)None of the above.
Q3) The person to whom an offer is made is an offeree.
A)True
B)False
Q4) What are the ways in which an offer may be terminated?
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Chapter 11: Conduct Invalidating Assent
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Sample Questions
Q1) Ben and Kate had been negotiating Ben's employment contract in conversations over the phone for a couple of weeks.Finally, they agreed on some contract terms.Kate offered to create a draft of the contract for Ben to read over.On the same day Ben was fired from his job.Afraid he would be unemployed, Ben signed Kate's draft without reading it.In this example Ben:
A)can avoid the contract because of mistake by failure to read.
B)can avoid the contract because he was the victim of economic duress.
C)cannot avoid the contract because of economic duress or failure to read.
D)may rescind the contract because of unilateral mistake.
Q2) Al owns a farm that he believes is worth $150,000.Betty knows that there is oil under the farm and offers Al $160,000 for it.Al accepts and sells the farm to Betty.Al later realizes that the land was worth more than $160,000.Al can have the contract avoided based upon fraud.
A)True
B)False
Q3) To sustain a case of fraud in the inducement, the injured party must prove that he actually relied upon the false representation.
A)True
B)False
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Page 13
Chapter 12: Consideration
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Sample Questions
Q1) An agreement to sell the entire production of a particular plant is a requirements contract.
A)True
B)False
Q2) An output contract is a special form of an illusory contract.
A)True
B)False
Q3) Legal sufficiency of consideration and adequacy of consideration are virtually synonymous terms.
A)True
B)False
Q4) A modification of a preexisting contract occurs when the parties agree to change one or more of its terms.
A)True
B)False
Q5) The requirement of legally sufficient consideration is concerned with whether the bargain was good.
A)True
B)False
Q6) Define legal detriment.
Page 14
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Chapter 13: Illegal Bargains
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Sample Questions
Q1) Non-compete agreements drafted for employees of Internet companies:
A)are no different in enforceability than non-compete agreements for other types of companies.
B)are subject to smaller geographic restrictions than for other types of companies.
C)have been held subject to larger geographic restrictions than for other types of companies.
D)have not yet been the subject of litigation.
Q2) What is the legal effect of an agreement that is criminal, tortious, or otherwise contrary to public policy, and why does it have that effect?
Q3) Which of the following is true with regard to an exculpatory clause?
A)An exculpatory clause excuses one party from liability for her own tortious conduct.
B)Where one party has a superior bargaining position that has enabled him to impose an exculpatory clause upon the other, the courts are inclined to nullify the provision.
C)An exculpatory clause may be unenforceable for unconscionability.
D)All of the above are true.
Q4) Distinguish between procedural and substantive unconscionability.
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Page 15
Chapter 14: Contractual Capacity
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Sample Questions
Q1) Compare the liability of an intoxicated person to that of a person who is mentally ill.How are their situations similar? How are they different with regard to contractual capacity?
Q2) The minority of states require that the minor, when effecting a disaffirmance of the contract, pay at least a reasonable amount for the use of the property or the amount by which the property depreciated while in the hands of a minor.
A)True
B)False
Q3) A mental condition that impairs a person's ability to act in a reasonable manner is one type of mental incompetence.
A)True
B)False
Q4) At common law, a minor was a person who was under the age of twenty-one years. A)True
B)False
Q5) In general, a minor may only disaffirm a contract after he has reached the age of majority.
A)True
B)False
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Chapter 15: Contracts in Writing
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Sample Questions
Q1) Under the Code an oral contract for specially manufactured goods costing $500 is enforceable even if the seller has not begun their manufacture.
A)True
B)False
Q2) All contracts do not have to be in writing to be enforceable.
A)True
B)False
Q3) Which of the following is untrue with regard to the interpretation of contracts?
A)Express terms prevail over course of performance, and course of performance prevails over course of dealing.
B)Technical terms will always be given technical meaning and language that has a commonly accepted meaning is always interpreted in accordance with that meaning.
C)Handwritten or typed terms are given greater weight than preprinted terms.
D)All writings that are part of the same transaction are interpreted together.
Q4) On April 2, Derrick hires JoAnn to work for ten months starting on June 10.Does the employment contract have to be written? Explain.
Q5) Define the statute of frauds and give an example of what is covered.
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Page 17
Chapter 16: Third Parties to Contracts
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Sample Questions
Q1) Darrell owns a parcel of land that is encumbered by a mortgage held by the First National Bank.Darrell agrees to sell the land to Paul for $50,000.Darrell and Paul together go to the First National Bank to discuss the sale and purchase with the banker.Darrell, Paul, and the banker sign an agreement stating that Paul will assume the mortgage and that Darrell will be discharged from all further liability on the mortgage.In this case:
A)the bank is a third party donee beneficiary.
B)the bank can collect from Darrell if Paul defaults.
C)Darrell is a third party beneficiary of the agreement between Paul and the bank. D)the agreement among the three is a novation.
Q2) A person who owes a duty under a contract is an obligee.
A)True
B)False
Q3) Unless otherwise provided by statute, an assignment may be made orally.
A)True
B)False
Q4) Contract rights are generally assignable.
A)True
B)False
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Page 18
Chapter 17: Performance, Breach, and Discharge
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Sample Questions
Q1) In the case of Hochster v.De La Tour the plaintiff was allowed to treat the repudiation by De La Tour as breach of contract and immediately bring suit.
A)True
B)False
Q2) Which of the following is correct with regard to conditions subsequent?
A)Conditions subsequent are quite common in contracts.
B)A "sale or return" contract is an example of a contract with a condition subsequent.
C)A condition subsequent must occur before performance is due under a contract.
D)All of the above are correct.
Q3) A breach of contract always discharges the injured party from performance under the contract.
A)True
B)False
Q4) Implied-in-fact conditions must fully and literally occur, and they are understood by the parties to be part of the agreement.
A)True
B)False
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Chapter 18: Contract Remedies
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Sample Questions
Q1) voidable contract
Q2) breach
Q3) The process whereby a court "rewrites" or "corrects" a written contract to make it conform to the true intentions of the parties is:
A)injunction.
B)reformation.
C)specific performance.
D)rescission.
Q4) Incidental damages include lost profits and injury to person or property resulting from defective performance.
A)True
B)False
Q5) quasi contract
Q6) Equitable remedies will not be granted when:
A)the terms of the contract are fair.
B)monetary damages would adequately compensate the injured party.
C)fraud, duress, undue influence, or mistake are not present.
D)All of the above.
Q7) option contract
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Chapter 19: Introduction to Sales and Leases
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Sample Questions
Q1) Substantive unconscionability involves scrutiny by the court for "bargaining naughtiness."
A)True
B)False
Q2) Shannon orally agrees to buy 500 telephone answering machines from Thomas for $25,000.Thomas delivers 300 answering machines to Shannon, who receives and accepts them.Which of the following is correct with regard to this transaction?
A)Shannon can enforce the contract for the additional 200 machines.
B)The contract is enforceable to the extent of the 300 machines that have been received and accepted.
C)The entire contract is in violation of the statute of frauds and cannot be enforced.
D)This is a bad deal, and is therefore commercially unconscionable from the beginning and unenforceable.
Q3) Which of the following is correct with regard to Article 2(a) of the Code?
A)Article 2(a) affords special treatment for consumer leases.
B)Article 2(a) covers minerals prior to their extraction.
C)All states have now adopted Article 2(a).
D)All of the above are correct.
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Chapter 20: Performance
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Sample Questions
Q1) In a sale of goods, the seller's tender of performance does not have to conform to the Code's perfect tender rule.
A)True
B)False
Q2) Which of the following terms would indicate a destination contract?
A)F.O.B.city of buyer.
B)F.O.B.city of seller.
C)C.I.F.
D)F.A.S.seller's port.
Q3) Seller, through no fault of its own, is unable to deliver the goods to buyer because the agreed type of carrier is unavailable.Explain what the Code requires.
Q4) If a contract contains the term "no arrival, no sale," title and risk of loss do not pass to the buyer until the seller makes a tender of the goods after they arrive at their destination.
A)True B)False
Q5) The Code excuses performance based upon commercial impracticability.
A)True B)False
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Chapter 21: Transfer of Title and Risk of Loss
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Sample Questions
Q1) A void title may allow good title to pass in special circumstances.
A)True
B)False
Q2) Tom makes pottery in his spare time.Jackie asks if he'd sell her a covered bowl.Later that day, he telephones her and says she can have it for $50.She agrees, so he tells her he'll wrap it up for her and it will be ready in half an hour.Six days later, Jackie had not yet come for the bowl when a dog knocks the box off the shelf and breaks the bowl.Who is liable?
A)Tom, because Jackie had not yet received the bowl.
B)Tom, because the bowl was in his possession when the dog broke it.
C)Jackie, because she had identified the bowl.
D)Jackie, because Tom had tendered the bowl to her nearly a week earlier.
Q3) A "buyer in the ordinary course of business" is necessarily a "good faith purchaser for value."
A)True
B)False
Q4) Except in a finance lease, risk of loss passes to the lessee and is not retained by the lessor.
A)True
B)False
Page 23
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Chapter 22: Product Liability: Warranties and Strict Liability
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Sample Questions
Q1) Discuss the various means by which states have limited the punitive damages a plaintiff can collect in a product liability lawsuit.
Q2) Which of the following is NOT included within the Code definition of merchantability?
A)Reasonably fit for the ordinary purposes for which the goods are used.
B)Pass without objection in the trade under the contract description.
C)In the case of fungible goods that they be of a quality that exceeds the description and be above average.
D)Be of fair, average quality.
Q3) An implied warranty exists by operation of law.
A)True
B)False
Q4) The Code does not label the warranty of title as an implied warranty, despite the fact that it arises out of the sale and not from the words or conduct of the parties.
A)True
B)False
Q5) Define and discuss horizontal and vertical privity.Explain the effect of the Code and the courts on the concept of privity of contract.
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Page 24
Chapter 23: Sales Remedies
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Sample Questions
Q1) The fair market value of a 10-foot fishing boat is $1,000.In a special promotion, J's Marina purchases a 10-foot fishing boat for $900.The boat is badly scratched when it arrives.J's Marina, however, accepts the shipment and notifies the seller of the defect.The boat as delivered has a value of $800.If the damaged boat is a breach of warranty by the seller, the buyer may recover from the seller:
A)$100.
B)$100 plus incidental and consequential damages.
C)$200.
D)$200 plus incidental and consequential damages.
Q2) destination contract
Q3) Under the CISG, avoidance of a contract cancels any provision for settlement of disputes.
A)True
B)False
Q4) disclaimer
Q5) bulk transfer
Q6) substantive unconscionability
Q7) merchant
Q8) privity
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Chapter 24: Form and Content
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Q1) Revised Article 3 eliminates the particular fund doctrine by providing that a promise or order is not made conditional because payment is to be made only out of a particular fund.
A)True
B)False
Q2) Bill's car broke down on a dark, rainy night.Along came Andy in his service station's four-wheel drive truck with tools and supplies in the back.Bill didn't have any credit cards and only $3.25 cash, so Andy told him to write a check or an IOU.Neither Andy nor Bill had any paper, so Bill wrote on the cover of Andy's lunchbox: "If my car is fixed right by Andy Walcott, I will pay him $150.(Signed) Bill Boyd." Andy indorses the note and takes it to a commercial factor for negotiation.The factor refuses, saying it is non-negotiable because it:
A)is written on a lunchbox.
B)is conditional on satisfactory repair of the car.
C)mentions the existence of a contract to repair the car.
D)None of the above.
Q3) The drawee is the individual who signs a check and promises to pay.
A)True
B)False
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Page 26
Chapter 25: Transfer
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Q1) "Order paper" is negotiated by delivery only.
A)True
B)False
Q2) An allonge is a piece of paper affixed to the instrument.
A)True
B)False
Q3) A holder of an instrument with a blank indorsement may protect herself by writing over the signature of the indorser words identifying herself as the person to whom the instrument is payable.
A)True
B)False
Q4) Ricardo is the holder of a check that contains the indorsement "Without Recourse, (signed) Mary Roberts." This indorsement:
A)makes further indorsement impossible.
B)requires a special indorsement by the transferee.
C)limits the liability of Mary Roberts.
D)limits the liability of all subsequent holders, including Ricardo.
Q5) Is the negotiation of an instrument ever valid even though the transaction in which it occurs is voidable or even void? Explain.
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Chapter 26: Holder in Due Course
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Sample Questions
Q1) Buying an instrument at a discounted price demonstrates a lack of good faith.
A)True
B)False
Q2) Real defenses include all but which of the following?
A)Forgery of instrument.
B)Minority of the maker.
C)Fraudulent alteration.
D)Theft of a bearer instrument.
Q3) In the Triffin v.Cigna Insurance Co.case, the court:
A)dealt with the issue of whether a payee could be a holder in due course.
B)ruled on a case involving the shelter provision of the UCC.
C)stated that negotiation is only one of three ways for a holder to claim the status of holder in due course.
D)found that the party seeking holder in due course status did not take the instrument for value.
Q4) The revised Article 3 of the UCC does not define the concept of good faith.
A)True
B)False
Q5) Define notice according to the Code, and explain how notice relates to the concept of holder in due course.
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Chapter 27: Liability of Parties
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Q1) Misty wrote a check to Acme for $220.She is discharged from liability on the check if Acme does not present the check for payment within 30 days after the date the check was signed.
A)True
B)False
Q2) Discuss the reasons (explained in the "Business Law in Action" feature in the textbook) most banks instruct their tellers to obtain indorsements on all checks, including those made payable to "Cash."
Q3) Dishonor of an instrument involves which of the following?
A)A demand note is dishonored if the maker does not pay it on the day of presentment.
B)An accepted demand draft is dishonored if the drawer does not pay it on the day of presentment.
C)If a check is presented for payment directly to the payor/drawee bank for immediate payment, a refusal to pay the check within seven business days of presentment constitutes dishonor.
D)All of the above.
Q4) Discuss the effect of an unauthorized signature on an instrument.
Q5) List and generally explain the warranties on presentment.
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Chapter 28: Bank Deposits, Collections, and Funds
Transfers
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Q1) Theresa has just started working for First Bank as a teller.A man comes into the bank with a $100 check that is 8 months old.She goes to the manager to ask whether she should pay it.If you were the manager, what would you advise her? Explain.
Q2) acceptor
Q3) A check drawn on a bank is an order to pay a sum of money and an authorization to charge the amount to the drawer's account.The drawer may countermand this order by which of the following?
A)A canceled check.
B)A stop payment order.
C)A banker's acceptance.
D)A time draft.
Q4) An oral stop payment order is binding on the drawee bank for 14 calendar days.
A)True
B)False
Q5) A payor bank is under no obligation to its customer to pay an uncertified check that is more than six months old.
A)True
B)False
Q6) order paper
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Chapter 29: Relationship of Principal and Agent
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Q1) The agent may be subject to liability to her principal for breach of the duty of obedience if she:
A)entered into an authorized contract and the principal has changed her mind.
B)delegates her authority in any way and under any circumstances.
C)committed a tort for which the principal is now liable.
D)All of the above.
Q2) A gratuitous agency is not a true agency because it is not formed by contract.
A)True
B)False
Q3) The duty of obedience owed by an agent to a principal is not breached and will not result in liability to the principal by an agent's refusal to do an illegal or tortious act for the principal.
A)True
B)False
Q4) The agency relationship involves three basic elements: assent, control by the principal, and the agent's acting on behalf of the principal.
A)True
B)False
Q5) Discuss the nature of agency, including the scope of agency purposes.
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Chapter 30: Relationship With Third Parties
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Q1) The contractual liability of the principal may depend upon whether the principal is disclosed, unidentified, or undisclosed.
A)True
B)False
Q2) Under the Second Restatement, an agent representing an undisclosed principal is discharged from liability if the third party:
A)gets a judgment against the principal.
B)becomes aware of the principal.
C)gets a judgment against the agent.
D)He is never discharged from liability.
Q3) Jack was fired by Pedro but decided to try to win back his job as agent by getting a big new contract.He approached Sharon, a new client, and made a pitch to sell Pedro's product.Sharon agreed to buy 100.Jack tells Pedro.What are the legal consequences?
A)Pedro has to hire Jack again and then make the deal.
B)Pedro would have to ratify the deal to get the benefit of the contract.
C)Pedro would have to negotiate the deal with Sharon himself.
D)Jack would forfeit his commission if Pedro took the contract.
Q4) undisclosed principal
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Chapter 31: Formation and Internal Relations of General Partnerships
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Q1) Corporations today outnumber unincorporated business associations plus sole proprietorships.
A)True
B)False
Q2) Under the UPA, a partner's ownership interest in any specific item of partnership property is that of a tenant in partnership.
A)True
B)False
Q3) Under the RUPA, a partner is a co-owner of partnership property.
A)True
B)False
Q4) Partners can be classified as either general or limited.
A)True
B)False
Q5) Which of the following would be the most convincing evidence of a partnership?
A)An agreement to share in the management of a business.
B)Agreements to share gross returns.
C)An agreement to share profits and losses.
D)An agreement to pay a firm manager a percentage of the profits for his salary.
Q6) What are the ways the RUPA recognizes a partnership as an entity? Page 33
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Chapter 32: Operation and Dissolution of General Partnerships
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Q1) Under the UPA, neither a partner who causes dissolution by wrongfully withdrawing nor a partner expelled pursuant to the partnership agreement can force liquidation of the partnership.
A)True
B)False
Q2) Authority that a third person, in view of the circumstances, the conduct of the parties, and a lack of notice or knowledge to the contrary, may reasonably consider to exist is known as:
A)actual implied.
B)apparent.
C)actual express.
D)None of the above.
Q3) A partner may bind the partnership by her act if she has:
A)actual authority, express or implied, to perform the act.
B)apparent authority to perform the act.
C)Both (a) and (b) are correct.
D)None of the above.
Q4) Define dissolution under the UPA and discuss its three causes.
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Chapter 33: Limited Partnerships and Limited Liability Companies
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Q1) False statements in a limited partnership's certificate or amendment that cause loss to third parties who rely on the statement may result in liability for the general partners.
A)True
B)False
Q2) All statutes require LLPs to:
A)designate themselves as LLPs.
B)register or obtain a certificate of authenticity if they are foreign LLPs.
C)make a new filing with the secretary of state after any change in membership. D)follow the laws of the jurisdiction under which they are registered regarding internal affairs and organization.
Q3) A limited partner will not lose his limited status because of voting on an amendment to the partnership agreement allowing a new business venture.
A)True
B)False
Q4) Unlike general partnerships, limited partnerships are statutory creations.
A)True
B)False
Q5) Describe an LLC and the rights of its members.
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Chapter 34: Nature and Formation of Corporations
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Q1) Courts have responded by piercing the veil when the shareholders have:
A)not followed the formalities of corporate procedures.
B)not provided an adequate financial basis for the business.
C)used the corporation to defraud.
D)All of the above.
E)(a) and (c) only.
Q2) Under which of the following provisions of the U.S.Constitution is a corporation not a "person"?
A)The Fifth Amendment Due Process Clause.
B)The Fourteenth Amendment Due Process Clause.
C)The Fourteenth Amendment Equal Protection Clause.
D)The Fifth Amendment right against self-incrimination.
E)The Fourth Amendment protection against unreasonable searches and seizures.
Q3) Bylaws are rules governing a corporation's internal management.
A)True
B)False
Q4) Title to corporate property belongs to the shareholders.
A)True
B)False
Q5) What are the consequences of a defective incorporation?
Page 37
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Chapter 35: Financial Structure of Corporations
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Q1) Warrick makes a $10,000 investment in a debenture issued by Wryteway Company.Warrick is now an unsecured creditor of Wryteway Company.
A)True
B)False
Q2) Yukon Corporation purchases 1,000 shares of its own stock from Jones at a price of $50 a share.These shares, which are now issued but not outstanding, are known as:
A)treasury shares.
B)preemptive shares.
C)preferred stock.
D)no par stock.
Q3) A corporation may purchase its own shares only out of earned surplus unless the articles of incorporation or the shareholders permit purchase out of capital surplus.
A)True
B)False
Q4) An investor has the right to transfer his investment securities by sale, gift, or pledge.
A)True
B)False
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Chapter 36: Management Structure of Corporations
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Q1) A proxy is effective until the shareholder revokes it.
A)True
B)False
Q2) In most states, a corporation may, with shareholder approval, limit the liability of directors for some breaches of the duties which they owe to the corporation.
A)True
B)False
Q3) Shareholders normally have the right to do all but which one of the following?
A)Elect the directors.
B)Elect the officers
C)Approve the sale of a major division.
D)Meet at least once a year.
Q4) Most states, as well as the Revised Act, hold that the test for the duty of diligence requires a director or officer to discharge corporate duties:
A)in good faith.
B)with a high degree of care.
C)without a conflict of interest.
D)through a named attorney or legal firm.
E)All of the above.
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Chapter 37: Fundamental Changes of Corporations
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Q1) preemptive right
Q2) If Sean, a shareholder, dissents to a corporate merger, his appraisal remedies will be:
A)fair value of his shares as of the day the corporation agrees to purchase the shares.
B)fair value of the shares as of the time immediately before the action to which he objects is taken.
C)average purchase price for the shares during the preceding 30 days.
D)None of the above.
Q3) Statutory provisions do not protect creditors upon the dissolution of a corporation.
A)True
B)False
Q4) A shareholder who dissents to a merger and is entitled to the appraisal remedy generally does not have the right to attack the validity of the corporate action.
A)True
B)False
Q5) delectus personae
Q6) winding up
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Chapter 38: Secured Transactions and Suretyship
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Q1) Diane, who is seventeen years old, purchased an auto from Elvira on credit.Florence agreed to act as surety and signed a written surety agreement.At the time of purchase, Diane specifically asked Elvira about the condition of the car's motor and was told that it had just been replaced with a new one and was in fine condition.This was blatantly untrue, because Elvira knew it was in terrible shape and would only last a short time.The auto has now stopped running and Diane refuses to make any more payments.Elvira is now proceeding against Diane and Florence.What defenses, if any, are available to (a) Diane and (b) Florence?
Q2) The Code provides:
A)parties to a security agreement have a great deal of freedom in drafting their agreement.
B)security agreements may not contain a provision for acceleration, at the secured party's option, of all payments upon default in any payment by the debtor.
C)that if the secured party becomes insecure about the prospects of future payments, the only recourse is to require the debtor to name a surety for the remaining debt.
D)a security agreement may describe the collateral as "all my personal property."
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Chapter 39: Bankruptcy
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Q1) Edward's Excursions Inc.filed for Chapter 7 bankruptcy.It has $100,000 in assets.The outstanding debts include:
$50,000 to Arthur secured by a boat worth $25,000.$30,000 to Bradley secured by a truck worth $30,000.$20,000 to Clarence unsecured.The month before Edward's closed and filed for bankruptcy, its employees earned $10,000 for which they did not get paid.They also should have been credited with $3,000 for their pension plan.Edward's owes $4,000 in back taxes.In the process of administering the estate, the trustee paid $5,000 in attorney fees.In what order will these claims be paid?
Q2) A debtor who files for bankruptcy can keep up to $1,350 in jewelry and all social security, veteran's and disability benefits under the exemptions found in the Bankruptcy Code.
A)True
B)False
Q3) If the debtor contests the involuntary petition for bankruptcy, the court must enter an order for relief against the debtor.
A)True
B)False
Q4) assignment for benefit of creditors
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Chapter 40: Securities Regulation
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Q1) In 1996, Congress enacted the National Securities Markets Improvements Act which preempted state regulation of certain securities.
A)True
B)False
Q2) The 1933 Securities Act defines the term "security." The courts have generally interpreted the statutory definition to include non-traditional forms of investments.The Supreme Court of the United States has adopted a two-tier analysis of what constitutes a security.Within this analysis the Court has used a three-part test to determine whether a non-traditional financial transaction constitutes an investment contract and thus a security.Explain (a) the 1933 Act's statutory definition of security, (b) the courts' general interpretation of the 1933 Act's definition and (c) the Supreme Court's two-tier test.Use case law to illustrate your explanation, if appropriate.Also, why do you think the Supreme Court had to devise such an analysis?
Q3) A registration statement must be signed by its issuer, its CEO, CFO, CAO and majority of its board of directors.
A)True
B)False
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Chapter 41: Intellectual Property
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Q1) The duration of a copyright is the same whether the copyright is owned by the author or if it is a work for hire.
A)True
B)False
Q2) Federal trademark protection:
A)lasts for ten years after registration.
B)can be renewed an unlimited number of times.
C)can be abandoned by non-use.
D)All of the above.
Q3) The Trademark Cyberpiracy Prevention Act of 1999:
A)protects the owner of a trademark or service mark from any person who registers or uses a domain name which, at the time of its registration, is a protected trademark, word, or name.
B)includes an element of bad faith intent for violators.
C)provides for injunctive relief as the sole remedy.
D)All of the above.
Q4) The Lanham Act recognizes five types of trade symbols or marks.
A)True
B)False
Q5) Discuss the concept of fair use in relation to copyright law.
Page 44
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Chapter 42: Employment Law
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Q1) Which of the following are prohibited under Title VII of the 1964 Civil Rights Act?
A)Seniority systems.
B)Affirmative action programs.
C)Disparate impact.
D)All of the above.
Q2) Which of the following would violate the Taft-Hartley Act?
A)Union officials boycotting meetings with Tel Ko Computer Corp.representatives.
B)Union officials meeting on Tel Ko Computer Corporation's property.
C)Union members striking to gain more fringe benefits.
D)Union members wearing membership badges.
E)Both (a) and (d) above are correct.
Q3) The Equal Pay Act requires equal pay for men and women based upon the concept of "substantially equal" rather than identical work.
A)True
B)False
Q4) A union shop contract requires the employer to hire only union members.
A)True
B)False
Q5) What are the powers of the Equal Employment Opportunity Commission (EEOC)?
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Chapter 43: Antitrust
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Q1) Which of the following is correct regarding the Clayton Act?
A)It deals with price discrimination, tying contracts, and mergers.
B)It added criminal sanctions to the Sherman Act.
C)It repealed the Robinson-Patman Act.
D)It included labor organizations in its coverage.
Q2) It is per se illegal under the Sherman Act for sellers to agree to a maximum price, but not a minimum price.
A)True
B)False
Q3) If United Widgets lowers its price to all buyers of 10 or more widgets, it is not a violation of the Robinson-Patman Act.
A)True
B)False
Q4) In an attempt to limit the power of large purchasers, Congress amended Section 2 of the Clayton Act in 1936 by adopting the:
A)Sherman Act.
B)Federal Trade Commission Act.
C)Robinson-Patman Act.
D)All of the above.
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Chapter 44: Accountants Legal Liability
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Q1) Under the 1934 Act, an accountant's liability for false or misleading statements is based on a good faith negligence standard.
A)True
B)False
Q2) Which of the following defenses may be raised by an accountant under Section 11 of the 1933 Securities Act?
A)Privity and due diligence.
B)Privity, but not due diligence.
C)Due diligence, but not privity.
D)Neither privity nor due diligence.
Q3) A group of investors brings a class action lawsuit against the Z & R Accounting Firm under SEC Rule 10b-5.Angela, an accountant with the firm, had done an audit of the Pennymart Inc.books.The audit failed to disclose that Orrin, the president of Pennymart, had stolen large amounts of cash from the firm.Pennymart eventually filed for bankruptcy as a result of the thefts.What is the likely result of the suit?
Q4) What are the requisite elements of fraud?
Q5) Upon what is an accountant's potential criminal liability in rendering professional services based?
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Chapter 45: Consumer Protection
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Q1) A warranty creates a duty on the seller's part that the goods and services she sells will conform to certain qualities, characteristics, or conditions.
A)True
B)False
Q2) Holly, who is married to Grant, applies for a credit card from Marlin's Department Store.She is turned down because she is a married woman and the store's policy is to only issue cards in the name of the husband in such situations.What are her legal rights in this situation?
Q3) Some states have broadened their lemon law coverage to include used cars and motorcycles.
A)True
B)False
Q4) The Federal Consumer Credit Protection Act:
A)sets limits on garnishment proceedings.
B)requires creditors to disclose finance charges.
C)does not yet require disclosure on credit extension charges.
D)Both (b) and (c) are correct.
E)Both (a) and (b) are correct.
Q5) Discuss ARMs and their regulation.
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Chapter 46: Environmental Law
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Q1) For an activity to be treated as a public nuisance there must be some interference with the health, safety, or comfort of the public.
A)True
B)False
Q2) A detailed statement concerning the environmental impact of a proposed federal action is:
A)a National Ambient Air Quality Standard.
B)an Environmental Impact Statement.
C)an environmental assessment.
D)an Environment Interior Standards Review.
Q3) The Clean Air Act requires the EPA Administrator to do what, regarding new stationary sources?
A)Establish federal standards of performance that reflect the best technological system of emission reduction.
B)Establish performance standards that will match emissions from existing sources.
C)Allow no discharge of any pollutants.
D)All of the above.
Q4) What is the purpose of the Montreal Protocol?
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Chapter 47: International Business Law
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Q1) The Foreign Corrupt Practices Act of 1977 (FCPA):
A)makes it unlawful for an American company or its agents to offer or give anything of value to a foreign official for the purpose of influencing the official's acts or decisions.
B)requires that American companies in foreign countries adhere to the same health and safety standards in that country as they do in the U.S.
C)outlaws American business from engaging in business in countries, which, as determined by the Department, have governments "repugnant to American law and social values."
D)None of the above.
Q2) Sovereign immunity is absolute immunity from the courts of a host country. A)True
B)False
Q3) The flow of trade is affected by trade barriers on imports and exports. A)True
B)False
Q4) Azurzerapi Corporation plans to start marketing products worldwide.What forms of multinational business enterprise should it consider? What are the main characteristics of each form?
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Chapter 48: Introduction to Property, Property Insurance,
Bailments, and Documents of Title
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Q1) Intangible property does not exist in a physical form.
A)True
B)False
Q2) A bailment may be made of either real or personal property.
A)True
B)False
Q3) If Harold buys a tomato plant, he owns the tomatoes produced by the plant based on "confusion."
A)True
B)False
Q4) At the end of a bailment, a bailee may correctly deliver the bailed property to a third party (other than the bailor) in certain cases.
A)True
B)False
Q5) Melissa cannot transfer control of the goods held by a bailee by transferring a document of title.
A)True
B)False
Q6) Why are delivery and acceptance both necessary for a valid gift? Explain.
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Chapter 49: Interests in Real Property
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Q1) The Arbor Apartments can legally restrict tenants to those who are married couples.
A)True
B)False
Q2) The greatest ownership interest a person may have in real property is:
A)fee simple absolute.
B)tenancy by the entireties.
C)life estate.
D)vested remainder.
Q3) Marco conveyed his half-acre lot "to Earl Snyder forever." This language conveys:
A)full and absolute title.
B)a fee simple estate.
C)a reversion.
D)Both (a) and (b).
E)no title since Marco's intent is not clear from the language used.
Q4) If Dan sublets his apartment to Susan for the summer, Susan is primarily liable to pay the landlord the rent.
A)True
B)False
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Chapter 50: Transfer and Control of Real Property
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Q1) If Stan's land is condemned in order to build a subway system for the city, he must be given:
A)the fair market value of the property as of the time of the taking.
B)equivalent property.
C)the option of keeping the property.
D)his price for the property.
Q2) A right of redemption of a mortgage cannot be defeated by operation of law.
A)True
B)False
Q3) Controls that apply to the use of privately owned property include:
A)zoning.
B)eminent domain.
C)restrictive covenants.
D)All of the above.
Q4) Title insurance policies may be issued to protect the interests of mortgagees or tenants of property.
A)True
B)False
Q5) Discuss the types of deeds that can be used to transfer title.
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Chapter 51: Trusts and Wills
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Q1) A statement signed by the required number of witnesses who observe the execution of a valid will is called a(n):
A)validity clause.
B)ambulatory clause.
C)attestation clause.
D)fiduciary clause.
Q2) mortgage
Q3) fee simple
Q4) A trust will fail for lack of:
A)consideration.
B)a trustee.
C)definite and specific property forming the trust corpus.
D)All of the above.
Q5) In order to use the money in a spendthrift trust as collateral, the beneficiary requires prior approval of the trustee.
A)True
B)False
Q6) intangible property
Q7) profit à prendre
Q8) zoning
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