Legal Environment of Business
Final Test Solutions
Course Introduction
The Legal Environment of Business explores the framework of laws and regulations that impact businesses and their day-to-day operations. This course covers essential topics such as contract law, torts, agency relationships, property law, and the legal structures of business organizations. Students will examine the role of government agencies, regulatory compliance, and ethical considerations in the business context. By understanding the legal environment, aspiring professionals will gain the knowledge necessary to make informed decisions, mitigate legal risks, and conduct business responsibly within the bounds of the law.
Recommended Textbook
Business Law Text and Exercises 7th Edition by
Roger LeRoy Miller
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Page 2
Chapter 1: Introduction to the Law and Our Legal System
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Q1) Stare decisis is a doctrine obligating judges to help persons who have failed to protect their own rights.
A)True
B)False
Answer: False
Q2) Judge Julia decides that the precedent for the case she is hearing is no longer correct due to technological changes.She overturns the precedent when she decides the case.It is likely that her case will
A)go unnoticed by the public.
B)be thrown out of court.
C)receive a great deal of publicity.
D)be ignored by the media.
Answer: C
Q3) Miley and Otis are involved in a case.The best definition of a case is
A)a criminal prosecution,not a civil proceeding.
B)a failure to perform a legal obligation.
C)a judicial proceeding for the resolution of a dispute.
D)a type of regulation applied to a business.
Answer: C
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Chapter 2: Ethics in Business
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Q1) In a corporation,managers are often faced with ethical trade-offs when a certain decision will benefit one group,but harm another.
A)True
B)False
Answer: True
Q2) Applied Business Corporation makes and markets its products nationwide.Under the stakeholder approach,to be considered socially responsible when making a business decision,Applied must take into account the needs of
A)its consumers,the community,and society only.
B)its employees and owners only.
C)its employees,owners,consumers,the community,and society.
D)no one.
Answer: C
Q3) Ethical codes of conduct can set the ethi?cal tone of a firm.
A)True
B)False
Answer: True
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Chapter 3: The Courts and Alternative Dispute Resolution
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Sample Questions
Q1) Small claims courts hear both civil and criminal cases.
A)True
B)False
Answer: False
Q2) Carol files a suit against Andy in a state trial court and loses.Carol
A)cannot take her case any higher in the court system.
B)can insist that the United States Supreme Court hear her case.
C)can plead her case before an appellate court.
D)can plead her case before a small claims court.
Answer: C
Q3) Hua,a resident of Illinois,owns a warehouse in Indiana.A dispute arises over the ownership of the warehouse with Jac,a resident of Kentucky.Jac files a suit against Hua in Indiana.Regarding this suit,Indiana has
A)federal jurisdiction.
B)in personam jurisdiction.
C)in rem jurisdiction.
D)no jurisdiction.
Answer: C
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5
Chapter 4: Constitutional Law
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Sample Questions
Q1) The First Amendment protects corporate political speech.
A)True
B)False
Q2) The commerce clause of the U.S.Constitution is found in
A)Article I,Section 8.
B)Article I,Section 2.
C)Article VIII,Section 1.
D)Article II,Section 8.
Q3) The commerce clause's express grant of exclusive authority to regulate commerce that substantially affects trade and commerce among states is referred to as the
A)dormant aspect of the commerce clause.
B)positive aspect of the commerce clause.
C)negative aspect of the commerce clause.
D)exclusive aspect of the commerce clause.
Q4) The President appoints federal judges with the advice and consent of the Senate. A)True
B)False
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6
Chapter 5: Torts and Cyber Torts
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Sample Questions
Q1) Jim is an appliance salesperson.To make a sale,he asserts that a certain model of a Kitchen Helper refrigerator is the "best one ever made." This is
A)fraud if the statement is the truth.
B)fraud if Jim believes that this statement is not true.
C)fraud if Jim is stating his opinion,not the facts.
D)not fraud.
Q2) Ralph,a van driver for Speedy Delivery Company,causes a multi-vehicle accident on a city street.Ralph and Speedy are liable to
A)all those who were injured.
B)only those who were uninsured.
C)only those whose injuries could have been reasonably foreseen.
D)only those whose vehicles were closest to Ralph's van.
Q3) Unlawfully taking personal property is conversion.
A)True
B)False
Q4) Class-action lawsuits are suits in which a number of persons join together to bring an action.
A)True
B)False
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Chapter 6: Intellectual Property and Internet Law
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Q1) Canada and the United States are signatories of the Berne Convention. Doug,a citizen of Canada,publishes a book first in Canada and then in the United States.Doug's copyright must be recognized by
A)all of the signatories of the Berne Convention.
B)Canada and the United States only.
C)Canada only.
D)none of the signatories of the Berne Convention.
Q2) Billy opens a bicycle shop that sells an innovative new kind of bicycle.He decides to call the bicycles "Bicycles." Billy extensively markets his product,has a high sales volume and becomes well known for selling Bicycles.The term Bicycle
A)is automatically protected against trademark infringement.
B)receives no protection against trademark infringement.
C)can be registered as a trademark to obtain protection against trademark infringement.
D)can be registered as a certification mark.
Q3) A copy need not be exactly the same as the original to infringe a copyright.
A)True
B)False
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Chapter 7: Criminal Law and Cyber Crime
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Sample Questions
Q1) Alan,the president of Bayside Investments,Inc.,and Colin,Bayside's accountant,are charged with a crime,after the police search Bayside's offices.Under the exclusionary rule
A)certain Bayside records are excluded from subpoena.
B)certain parties to a criminal action may be excluded from a trial.
C)illegally obtained evidence must be excluded from a trial.
D)persons who have biases that would prevent them from fairly decid?ing the case may be excluded from the jury.
Q2) Scott,a State Bank employee,deposits into his account checks that are given to him by bank customers to deposit into their accounts.This is
A)embezzlement.
B)larceny.
C)money laundering.
D)no crime.
Q3) Counterfeiting is robbery.
A)True
B)False
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Chapter 8: Introduction to Contracts
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Sample Questions
Q1) Livewire Company and McCoy's Candy,Inc.,sign a document that states Livewire agrees to design a We
A)an actual contract.
B)a fictional contract.
C)an implied contract.
D)a quasi contract.
Q2) The intention to enter into a con?tract is judged by objective facts as interpreted by a reasonable person.
A)True
B)False
Q3) An implied contract is implied from the conduct of the parties.
A)True
B)False
Q4) Tania promises to buy Saki's handheld game-player for $40.Saki is
A)an executee.
B)an offeror.
C)a promisee.
D)a promisor.
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Page 10
Chapter 9: Offer and Acceptance
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Q1) Andy offers to sell Carol 10 acres of land with a barn.Carol says she will pay Andy's price,but she wants his tractor included.Carol is now the A)offeror.
B)offeree.
C)promisee.
D)auctioneer.
Q2) On May 1,Brand Name Industries,Inc.(BNI),sent Carol a letter,via overnight delivery,offering to employ her to audit BNI's financial state?ments for the current year for $10,000.In the letter,BNI stated that Carol had ten days to accept.On May 5,Carol sent BNI a fax that stated,"The price for the audit seems too low.Would you consider paying $12,000?" BNI received the fax.The next day,Dan offered to conduct the audit for $8,000.On learning of Dan's offer,Carol immediately e-mailed BNI,agree?ing to do the work for $10,000.BNI received this e-mail on May 7.Explain why BNI and Carol do,or do not,have a contract.
Q3) Most advertisements-"this property for sale"-are offers.
A)True B)False
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Chapter 10: Consideration
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Q1) Dave's uncle tells Dave that if "he feels that Dave deserves it," he will give Dave $1,000 when Dave graduates from college.Dave's uncle's promise is A)illusory.
B)enforceable.
C)a forbearance.
D)a preexisting duty.
Q2) Refer to Fact Pattern 10-4.In Carmen's suit against Dex to recover her repair and medical expenses,Carmen will most likely recover
A)half the amount to pay the costs over what Dex already paid Carmen.
B)nothing.
C)the estimated amount to pay those costs and any other liability.
D)the exact amount to pay those costs and no more.
Q3) Refer to Fact Pattern 10-1.Dave's discount is legally sufficient consid?eration
A)because it is a promise of something of value.
B)only if Dave adds a cash rebate.
C)only if Estelle uses it.
D)under no circumstances.
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Chapter 11: Capacity
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Q1) A person who is intoxicated when he or she signs a contract can void the contract only if the intoxication was involuntary.
A)True
B)False
Q2) Loans are usually viewed as necessaries if they are obtained for the purpose of purchasing other necessaries,such as food.
A)True
B)False
Q3) Ruthie,a minor,charges the cost of an expensive leather jacket at a Girl's Trend store.Two nights later,Ruthie loses the jacket at Minors Only Club.She disaf?firms the jacket's purchase.Ruthie owes Girl's Trend the reasonable value of the jacket
A)if it is deemed a "necessary."
B)if it is deemed unnecessary.
C)under any circumstances.
D)under no circumstances.
Q4) Food is one of the things that courts de?fine as a necessary.
A)True
B)False
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Chapter 12: The Legality of Agreements
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Q1) Adhesion contracts are usually not held to be contrary to public policy.
A)True
B)False
Q2) Gambling debts will be enforced even if their enforcement violates a statute.
A)True
B)False
Q3) Only someone with an insurable interest can enter into an insurance contract.
A)True
B)False
Q4) A tortious contract calls for an action that is contrary to public policy.
A)True
B)False
Q5) Volume Sales Corporation directs its marketing of discounted products to less educated consumers.In considering the unconscionability of a Volume contract,a court will NOT likely consider
A)a buyer's level of education.
B)the parties' relative bargaining power.
C)the price of the products.
D)the seller's level of education.
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Chapter 13: Mistakes and Other Contract Defects
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Sample Questions
Q1) Seth offers to buy a house from Tia for less than Tia paid for it,stating that he would "hate to see anything bad happen to Tia or her house." Tia agrees to sell. Regarding this agreement,a court would likely
A)enforce it.
B)not enforce it.
C)rescind it.
D)order the parties to renegotiate it.
Q2) Refer to Fact Pattern 13-2.Because of the parties' belief about the adjacency of the property,their contract is
A)unavoidable.
B)unconscionable.
C)unenforceable.
D)voidable.
Q3) A unilateral mistake always gives the mistaken party a right to relief from the contract.
A)True
B)False
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Chapter 14: Written Contracts
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Q1) An oral contract for a sale of goods for more than $5,000 is NOT enforceable even if the parties to it admit to its existence in court.
A)True
B)False
Q2) Theo and Uma orally agree on the sale of Theo's Fitness Center to Uma and note the terms on a sheet of the center's stationery,which includes the Center's letterhead and which only Theo signs.This agreement is most likely enforceable against A)neither Theo nor Uma.
B)Theo and Uma.
C)Theo only.
D)Uma only.
Q3) To be enforceable,a contract for a sale of goods priced at $500 or more should be in writing.
A)True
B)False
Q4) An integrated contract is a contract with more than one subject or part.
A)True
B)False
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Page 16
Chapter 15: Third Party Rights
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Q1) Rural Development Corporation (RDC) and Sid enter into a contract for the clear-cutting of RDC's fifty-acre tract for which RDC agrees to pay Sid.Sid transfers his duty to log the tract under the contract to Timber Logging Company.Timber is
A)a delegatee.
B)an assignee.
C)an obligee.
D)a third party beneficiary.
Q2) A contract cannot prevent the assignment of the right to receive funds.
A)True
B)False
Q3) Refer to Fact Pattern 15-1.The value of Eatery's property will increase after Carol's store is remodeled.Eatery is
A)a delegatee.
B)an assignee.
C)an incidental beneficiary.
D)an intended beneficiary.
Q4) All rights can be assigned.
A)True
B)False
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Chapter 16: Contract Discharge and Remedies
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Q1) A party is entitled to cancel a contract based on the other party's material breach.
A)True
B)False
Q2) Objective impossibility discharges a contract.
A)True
B)False
Q3) If one party's performance is substantial,the other party's duty to perform remains absolute.
A)True
B)False
Q4) A novation requires the existence of a previous,valid obligation.
A)True
B)False
Q5) In a contract for a sale of goods,the usual measure of compensatory dam?ages is the difference between the contract price and the market price.
A)True
B)False
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Page 18
Chapter 17: E-Contracts
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Q1) A shrink-wrap agreement is normally enforced.
A)True
B)False
Q2) Contracts entered into in e-commerce are known as e-contracts.
A)True
B)False
Q3) The primary purpose of the Uniform Electronic Transactions Act is to remove barriers to e-commerce by giving the same legal effect to electronic records and e-signatures as is given to paper documents and signatures.
A)True
B)False
Q4) Cool Fruit,Inc.,ships a boxcar-load of fruit cross-country to Dandy Grocers,Inc.,for $8,000.Cool e-mails that it will accept $7,000 in full pay?ment.After Dandy pays $7,000,Cool files a suit against Dandy for another $1,000.Under the E-SIGN Act,Cool is most likely enti?tled to
A)an additional $15,000.
B)an additional $7,000.
C)an additional $1,000.
D)nothing more.
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Chapter 18: Introduction to Sales and Lease Contracts
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Q1) VuTech Company agrees to sell digital video equipment to Home & Business Stores,Inc.,for Home & Business to sell to its customers.Their contract will not be en?forceable unless it includes
A)the duration of the deal.
B)the price of the goods.
C)the quantity of the goods.
D)the requirements of OSI's customers.
Q2) The rules governing firm offers apply to all merchants.
A)True
B)False
Q3) At common law,if a contract is unilateral,an offeror must be notified of the offeree's performance.
A)True B)False
Q4) Under the "partial performance" exception to the UCC,an oral contract for goods worth more than $500 is enforceable if the goods are specially manufactured for a particular buyer.
A)True
B)False
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Chapter 19: Title and Risk of Loss
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Q1) In the following situations,two parties claim the same goods.Who is most likely to prevail in each circumstance? Explain.
(a) Olan steals Phil's television set and sells it to Quincy,an innocent purchaser,for value.Phil learns Quincy has the set and demands its return.
(b) Riley takes his television set for repair to Slick,a merchant who sells new and used television sets.By accident,one of Slick's employees sells the set to Tuna,an innocent purchaser-customer,who takes possession.Riley wants his set back from Tuna.
Q2) Twyla buys an HD TV from Viewpoint Electronics store,which agrees to keep the TV for Twyla until she picks it up.Before she gets the TV,a fire destroys the store and the set.The loss is suffered by
A)neither Twyla nor Viewpoint
B)Twyla and Viewpoint.
C)Twyla only.
D)Viewpoint only.
Q3) A bill of lading serves as a con?tract for the transportation of goods.
A)True
B)False
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Page 21
Chapter 20: Performance and Breach
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Q1) An installment contract is a single contract that requires or authorizes delivery in two or more separate lots to be paid for in one payment.
A)True B)False
Q2) Tender of delivery requires that the seller or lessor hold the goods at the buyer's or lessee's disposal,but not that the goods be conforming.
A)True B)False
Q3) Genuine Seed Company and Hillside Farmers Cooperative enter into a contract for a sale of hybrid seeds.Under the perfect tender rule,Genuine Seed must ship or tender seeds to Hillside that
A)approximately conform to all of the details of the contract.
B)entirely conform to the contract except in one or two details.
C)exactly conform to the contract in every detail.
D)substantially conform to the contract in most details.
Q4) A shipment contract requires that the seller deliver the goods to a particular location.
A)True B)False
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Chapter 21: Warranties and Product Liability
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Q1) Strict liability depends on privity of contract between an injured party and a seller.
A)True
B)False
Q2) Barry buys a bulldozer from Big Sandbox Equipment Company.Barry is unaware that there is a lien against the bulldozer when he buys it.Under the UCC,if the creditor reposes the bulldozer,Barry
A)can recover from Big Sandbox Equipment for breach of warranty.
B)can do nothing.
C)can file criminal charges against Big Sandbox Equipment.
D)can recover damages from the creditor.
Q3) A seller need not use words such as "warrant" to make an express warranty. A)True
B)False
Q4) Implied warranties can arise from a "course of dealing."
A)True
B)False
Q5) A seller does not have to provide a written warranty for consumer goods.
A)True
B)False
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Chapter 22: Consumer Protection
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Q1) Fiona goes to GreatNuTech,a consumer electronics store in Houston,Texas,to buy a pocket calculator.Ilsa,the salesperson,sells Fiona a top-of-the-line home theater,which Fiona does not need and cannot af?ford.This is a violation of A)no federal or state law.
B)the Consumer Sales Act.
C)the Texas Deceptive Trade Practices Act.
D)the Truth-in-Lending Act.
Q2) Telephone solicitation using an automatic dialing system is NOT prohibited. A)True
B)False
Q3) The Truth-in-Lending Act applies to persons who,in the ordinary course of their business,lend money,sell on credit,or arrange for the extension of credit.
A)True B)False
Q4) Package labels must use words that the ordinary consumer understands. A)True B)False
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Chapter 23: The Essentials of Negotiability
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Q1) Ewa signs an instrument unconditionally promising to pay to "First State Bank" $5,000 with interest in installments with the final payment due June 1,2014.The instrument that Ewa signed is most likely
A)a certificate of deposit.
B)a draft.
C)an order to pay.
D)a promissory note.
Q2) A certificate of deposit is a type of promissory note.
A)True
B)False
Q3) On the back of an envelope,Phoebe writes,"I promise to pay Quint or bearer $600 on de?mand.[Signed] Phoebe." What type of instrument is this? Is it nego?tiable? If not,why not?
Q4) For a certificate of deposit to be negotiable,it must be signed by the maker.
A)True
B)False
Q5) The writing evidencing a negotiable instrument must be on material that lends itself to permanence.
A)True
B)False
Page 25
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Chapter 24: Transferability and Liability
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Q1) A drawer who is induced by an imposter to issue a check in the name of an impersonated payee can avoid payment on the check to an innocent holder.
A)True
B)False
Q2) Jill,in good faith and for value,gets from Kiley a negotiable bearer in?stru?ment.Jill does not know that Kiley stole the instrument.Jill is
A)an HDC.
B)not an HDC,because Kiley did not acquire the instrument for value.
C)not an HDC,because Kiley did not acquire the instrument in good faith.
D)not an HDC,because the instrument is a bearer instrument.
Q3) One of the transfer warranties is that the instrument has not been materially altered. A)True
B)False
Q4) An instrument is defective if it has been previ?ously dis?honored.
A)True
B)False
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Page 26
Chapter 25: Checks and Banking in the Digital Age
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Q1) Hoppy steals two checks from Eagle Retail Stores,Inc.-a blank check and a check payable to the order of General Supplies Company (GSC),drawn on Eagle's account with First National Bank.Hoppy forges Eagle's signa?ture on the blank check and makes it payable to himself.Hoppy forges GSC's indorsement on the back of the check payable to GSC,and adds "Pay to the order of Hoppy." At Friendly Credit,Inc.,Hoppy indorses the back of both checks with his own name and gives them to Friendly for cash.Friendly does not know about the theft or the forged signatures and presents the checks to First National,which pays them.Eagle,which was not negli?gent,discovers the forgeries and asks First National to recredit its ac?count.Who suffers the loss on each check?
Q2) E-Bank,an online financial institution,gives financial information about Paula and other customers to a federal agency without the cus?tomers' permission.E-Bank may be liable under
A)the Federal Trade Commission Act.
B)the Financial Services Modernization Act.
C)the Right to Financial Privacy Act.
D)the Uniform Electronic Transactions Act.
Q3) A point-of-sale system is a type of electronic fund transfer system.
A)True
B)False
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Page 27
Chapter 26: Agency
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Q1) Lather Up Soap Products Company grants its agent Kathy an exclusive terri?tory in which to sell Lather Up products.The firm cannot compete with Kathy in that territory under the principal's duty of A)avoidance.
B)cooperation.
C)indemnification.
D)reimbursement.
Q2) If a principal does not ratify an unauthorized contract,the principal is not bound. A)True
B)False
Q3) The equal dignity rule requires that a principal and agent treat each other with "equal dignity."
A)True B)False
Q4) An agency relationship created for an illegal purpose is enforceable. A)True B)False
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28
Chapter 27: Employment and Immigration Law
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Q1) Tyrone is seventeen years old. Under the Fair Labor Standards Act,he
A)cannot work in a hazardous occupation.
B)cannot work during school hours.
C)must obtain a permit to work.
D)none of the choices.
Q2) Hoppy,who works as an employee for Imperial Power Corporation,suf?fers an injury in an accident.Hoppy will be compen?sated under state work?ers' compensation laws
A)only if the injury occurred during working hours.
B)only if the injury occurred off the job.
C)only if the injury occurred on the job.
D)whenever and wherever the injury occurred.
Q3) State workers' compensation laws establish a procedure for employees injured on the job to sue their employers.
A)True
B)False
Q4) Children fourteen years of age and older can work during school hours.
A)True
B)False
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Chapter 28: Discrimination and Labor Law
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Q1) Clerical Workers Union represents the employees of Miracle Medical Research Company.The management of the firm refuses to bargain with the union over the hiring of unnecessary workers.This violates A)federal labor law.
B)state right-to-work laws.
C)federal employment discrimination law.
D)no federal or state law.
Q2) Dag is an employee of Ridge Mining Company.Under federal labor law,Dag and other employees have the right to
A)negotiate collectively with Ridge over employment conditions.
B)insist that Ridge require union membership as a condition of work.
C)interfere with the efforts of others to form labor organizations.
D)refuse to bargain with Ridge through their representatives.
Q3) Title VII of the Civil Rights Act only prohibits intentional discrimination.
A)True
B)False
Q4) A union may threaten an employee with the loss of a job for failure to join the union.
A)True
B)False
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Chapter 29: Sole Proprietorships,partnerships, Limited
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Q1) Robert owns Textbooks Plus,a sole proprietorship that sells textbooks.When Robert dies,Textbooks Plus will
A)be automatically dissolved.
B)pass directly to his oldest child.
C)pass directly to the state.
D)be evenly divided among all Robert's heirs.
Q2) An oral agreement to form a partnership can never be enforced. A)True
B)False
Q3) The maximum amount of money at risk by a limited partner is the amount of his or her contribution to the limited partnership.
A)True
B)False
Q4) Kelly,the owner of Llama Farms,a sole proprietorship,wants to obtain additional busi?ness capital but to maintain control.This can best be accomplished by A)borrowing funds.
B)bringing in partners.
C)issuing stock.
D)selling the business.
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Chapter 30: Formation and Termination of a Corporation
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Q1) Appraisal rights are often extended to regular mergers and consolidations.
A)True
B)False
Q2) Raven is a shareholder of Quantum Mechanix Corporation.Raven could normally ex?er?cise appraisal rights if Quantum participated in A)a consolidation.
B)a dissolution.
C)a liquidation.
D)a winding up.
Q3) Giant Lift Corporation purchases all of the assets of Heavy Hydraulics Corporation.With respect to Heavy Hydraulics's liabilities,Giant Lift is A)automatically responsible.
B)not responsible under any circumstances.
C)responsible if Heavy Hydraulics is a competitor of Giant Lift.
D)responsible if the sale is in fact a merger or consolidation.
Q4) A corporation whose shares are all held by a single person is called a close corporation.
A)True
B)False
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Chapter 31: Management and Ownership of a Corporation
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Q1) Mitch is a director and officer of Numero Uno,Inc.Mitch makes a market?ing decision that results in a dramatic decrease in profits for Numero Uno and its shareholders.The shareholders accuse Mitch of breaching his fiduci?ary duty to the corporation.What is Mitch's best defense against this ac?cu?sation? Later,the Numero Uno board considers a resolution for the firm to compete with One-of-a-Kind Corporation.Mitch is a director and shareholder of One-of-a-Kind.What is Mitch's responsibility in this situation?
Q2) Rosa and Sean are directors of Tech,Inc.Rosa's written authorization to Sean to vote Rosa's shares at a Tech shareholders' meeting is
A)a violation of the duty of care.
B)a preemptive right.
C)a proxy.
D)a quorum.
Q3) Cole is a shareholder of Donut Holes,Inc.Cole will be deemed to have a fiduci?ary duty to Donut Holes and its minority share?holders if he has A)a restriction on the transferability of his shares.
B)a right of first refusal.
C)a sufficient number of shares to exercise de facto control.
D)voting rights.
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Chapter 32: Secured Transactions
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Q1) A buyer in the ordinary course of business cannot know about the existence of a perfected security interest.
A)True
B)False
Q2) City Bank's financing statement in collateral owned by Delta Waters Corporation will expire in less than a year.Filed timely,a continuation statement could extend the effectiveness of the financing statement for A)one year.
B)two years.
C)five years.
D)ten years.
Q3) A security interest is not enforceable after the creditor's rights have at?tached to the collateral.
A)True
B)False
Q4) The person who owes the payment of a secured obligation is the secured party. A)True
B)False
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Page 34
Chapter 33: Creditors Rights and Remedies
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Q1) Portia owes Bon $500 on their contract,but refuses to pay.To collect,Bon files a me?chanic's lien,under which security for the debt is repre?sented by
A)Portia's personal property.
B)Portia's real estate.
C)the $500 owed under the contract.
D)the contract.
Q2) Khali's debt to Lew is past due.Lew obtains a judgment against Khali to collect the debt,but Khali refuses to pay.Lew asks the court to order Khali's employer to pay a portion of Khali's paycheck to Lew.This is a request for
A)an exemption from most federal limits on creditors' actions.
B)an order of garnishment.
C)an order that would violate most state laws.
D)a right of contribution.
Q3) Creditors can agree with a debtor to discharge the debtor's debts on payment of a sum less than that owed.
A)True
B)False
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Page 35
Chapter 34: Bankruptcy
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Q1) Kofi files a petition for bankruptcy.Kofi must include with the petition
A)a plan to turn over his future income to the trustee.
B)a certificate proving attendance at a credit-counseling briefing.
C)a provision of adequate means for the petition's execution. d a statement of preference for one creditor over another.
Q2) Norma Jean files for Chapter 7 bankruptcy.She turns her assets over to Addie,who sells the assets and then distributes the proceeds to Norma Jean's creditors.Addie is a A)creditor.
B)federal judge.
C)bankruptcy trustee.
D)debtor.
Q3) Some student loans are dischargeable in a Chapter 7 bankruptcy.
A)True
B)False
Q4) One goal of bankruptcy law is to encourage the continued use of credit.
A)True
B)False
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36
Chapter 35: Insurance
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Q1) Mena applies for a homeowners' insurance policy on her house with Neighbors Insurance Company through Obie,an agent who works for Neighbors.In this transaction,Obie is
A)an agent for both parties.
B)Mena's agent,and not Neighbors's agent.
C)Neighbors's agent,and not Mena's agent.
D)not an agent.
Q2) Burt obtains from Capital Insurance Company a policy that provides that if the parties cannot agree on the amount of a loss covered by the policy,an estimate of the value by an impartial third party can be de?manded.This is
A)an antilapse clause.
B)an arbitration clause.
C)an appraisal clause.
D)an incontestability clause.
Q3) The words used in an insurance contract are interpreted against the party who applied for the policy.
A)True
B)False
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Chapter 36: Morgages and Foreclosures
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Q1) A power of sale foreclosure gives a borrower more protection than a judicial foreclosure.
A)True
B)False
Q2) Most creditors will require borrowers to purchase mortgage insurance if the borrower's down payment,in relation to the purchase price,is less than
A)50 percent.
B)60 percent.
C)30 percent.
D)20 percent.
Q3) The annual percentage rate of a loan is the actual cost of the loan on a yearly basis.
A)True
B)False
Q4) Consumers can only obtain damages up to half the amount of all finance charges and fees paid if a lender violates the Home Ownership and Equity Protection Act.
A)True
B)False
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Chapter 37: Personal Property and Bailments
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Q1) Mallory's sister gives Mallory a leather working kit for Christmas.Mallory uses the kit to make a saddle.Mallory's acquisition of the saddle is by A)a bailment.
B)accession.
C)confusion.
D)production.
Q2) Uri discovers a boat adrift,and retrieves and anchors it.The boat features a number on its side and other evidence pointing to its owner,Vera.This is A)a constructive bailment.
B)a voluntary bailment.
C)an express bailment.
D)no bailment.
Q3) Fred and Joanne are married.Joanne purchases a car.Fred and Joanne each technically own an undivided one-half interest in the car.This is A)a joint tenancy.
B)fee simple ownership.
C)community property.
D)illegal.
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Chapter 38: Real Property
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Q1) Grant wants to transfer the ownership of his warehouse to Hal by deed.To do so requires
A)the grantee's signature only.
B)the grantor's signature only.
C)the grantee's and the grantor's signatures.
D)a judge's signature.
Q2) In a fee simple absolute,the owner has the greatest aggregation of rights,privi?leges,and power possible.
A)True
B)False
Q3) Fee simple ownership rights can be limited by zoning,noise and environmental laws. A)True
B)False
Q4) Lucky owns Mud Flats Ranch,which is situated on certain Nevada acreage.The exterior boundaries of the land extend
A)100 feet into the earth and 100 feet into the atmosphere.
B)one mile into the earth and one mile into the atmosphere.
C)to infinity and beyond.
D)to the center of the earth and up to the sky.
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Chapter 39: Landlord and Tenant
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Q1) Andy leases to Burgertown Franchise Corporation a 10,000 square-foot building under a written lease with a twenty-year term,rent payable an?nually.The lease includes a clause stating that Burgertown is re?sponsi?ble for making all necessary repairs,including rebuilding the structure after its destruction by any cause beyond Andy's control.The lease does not include a clause concerning its assignment.One day after the tenth rental payment,Burgertown,without Andy's knowledge or consent,as?signs its interest in the lease to Chicken Hut Restaurants,Inc.Mean?while,Andy dies and Dotty inherits Andy's interest in the building.Without the knowledge or consent of either Burgertown or Chicken Hut,Dotty sells the building to Earnest Investments,Inc.The next month,the building is destroyed in the flood of a nearby river.Burgertown rebuilds it and files a suit against Earnest for the expense.Earnest responds that the lease has terminated.Is Earnest correct? If so,when did the lease termi?nate? If not,is Earnest liable for the cost of re?building the structure? Why or why not?
Q2) A landlord is usually required to give some period of notice to terminate a periodic tenancy.
A)True B)False
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Page 41
Chapter 40: Wills and Trusts
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Q1) Lani is asked to serve as a witness to Mona's will. To qualify,Lani must be
A)a collateral heir.
B)a lineal descendant.
C)eighteen years of age or older.
D)mentally competent.
Q2) Ruth executes a will in 2009 naming her nephew Stan as sole bene?fici?ary.In 2011,Ruth executes another will,naming her niece Tammy as sole beneficiary,but does not state that she is revok?ing the previous will.On Ruth's death
A)Stan and Tammy will share the estate in equal shares.
B)Stan will be the sole heir.
C)Tammy will be the sole heir.
D)the estate will pass as if there were no will.
Q3) A decedent is a person who has died.
A)True
B)False
Q4) In most states,a person must be eighteen years of age to execute a valid will.
A)True
B)False
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Page 42
Chapter 41: Administrative Law
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Q1) Executive agencies are NOT subject to the authority of the president.
A)True
B)False
Q2) The Food and Drug Administration (FDA) is a federal agency.The regulations that the FDA issues are part of the body of
A)administrative law.
B)common law.
C)trade law.
D)international law.
Q3) Final administrative rules have binding legal effect unless the courts later overturn them.
A)True
B)False
Q4) State legislatures create state agencies through
A)enabling acts,similar to federal enabling legislation.
B)the Federal Trade Commission,through the rulemaking process.
C)the president,through an executive order.
D)the governor,through a petition.
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Page 43
Chapter 42: Antitrust Law
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Q1) A court deems an agreement between Silver Saddles Saddlery and Time Tested Tack,Inc.to be a per se violation of the Sherman Act.The court is
A)prevented from determining whether the agreement's benefits outweigh its anticompetitive effects.
B)required to unanimously decide whether the agreement's benefits outweigh its anticompetitive effects.
C)required to apply the rule of reason.
D)required to issue a formal complaint against Silver Saddles and Time Tested Tack.
Q2) A single seller acting unilaterally is free to deal,or not to deal,with anyone it chooses.
A)True
B)False
Q3) The offense of monopolization does NOT require the intent to monopolize.
A)True
B)False
Q4) No person may be a director for two competing corporations at the same time.
A)True
B)False
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44
Chapter 43: International Law
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Q1) Expropriation occurs when a government seizes private property for a proper pur?pose and awards just compensation.
A)True B)False
Q2) The simplest way for a U.S.firm to do business in a foreign mar?ket is to ex?port its products directly to that market.
A)True B)False
Q3) Wytex,Inc.,a U.S.firm,and Findora Commercial,a Nigerian firm,are parties to a contract that specifies that the official language of the contract is English.This is
A)a choice-of-forum clause.
B)a choice-of-language clause.
C)a choice-of-law clause.
D)an arbitration clause.
Q4) When a U.S.firm wishes to increase its involvement in an international market,it normally establishes an agency relationship with a foreign firm.
A)True
B)False
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