Legal Environment of Business
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Course Introduction
The Legal Environment of Business explores the fundamental principles and frameworks of law that impact the operation and management of businesses. This course introduces students to the American legal system, emphasizing the structure and function of courts, sources of law, and methods of dispute resolution. Key topics include contracts, torts, property law, and the regulatory environment, such as employment law, environmental regulations, and consumer protection statutes. Students gain an understanding of how legal considerations influence business decisions and the importance of ethical practices in navigating legal challenges within the business world.
Recommended Textbook Business Law Today Standard Text and Summarized Cases 10th Edition by Roger LeRoy Miller
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Chapter 1: The Legal Environment
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Sample Questions
Q1) State constitutions are supreme within their respective borders.
A)True
B)False
Answer: True
Q2) The Pennsylvania legislature enacts a state law that violates the U.S. Constitution. This law can be enforced by
A) no one.
B) the federal government only.
C) the state of Pennsylvania only.
D) the United States Supreme Court only.
Answer: A
Q3) Administrative law consists of the rules, orders, and decisions of administrative agencies. .
A)True
B)False
Answer: True
Q4) Damages are a remedy at law.
A)True
B)False
Answer: True
Page 3
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Chapter 2: Constitutional Law
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Sample Questions
Q1) The establishment clause of the U.S. Constitution prohibits the federal government from establishing a state-sponsored religion.
A)True
B)False
Answer: True
Q2) Martin, a U.S. citizen, feels that a recently enacted federal law is unfair. He assembles a group of friends and they write a petition to the government. Martin and friends then stand quietly in front of the White House with signs declaring their belief that the law is unfair. Under the First Amendment, Martin has a right to
A) petition the government, but not to assemble a group peaceably.
B) assemble peaceably, but not to petition the government.
C) both petition the government and assemble peaceably.
D) neither petition the government nor assemble peaceably.
Answer: C
Q3) The Fifth Amendment prohibits unreasonable searches and seizures of persons or property.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Courts and Alternative Dispute Resolution
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Sample Questions
Q1) A state long arm statute allows a court to exercise jurisdiction over out-of-state defendants based on activities that took place within the state.
A)True
B)False
Answer: True
Q2) Most online dispute resolution services apply general, universal legal principles to resolve disputes.
A)True
B)False
Answer: True
Q3) An answer never admits to the allegations made in a complaint.
A)True
B)False
Answer: False
Q4) There is at least one federal district court in every state.
A)True
B)False
Answer: True
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Chapter 4: Torts and Cyber Torts
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Sample Questions
Q1) Susan takes her car to Ken's repair shop and asks him to fix the car's brakes. Ken completes the work and sends Susan a bill for $100. Susan refuses to pay so Ken refuses to return Susan's car. Susan can probably successfully sue Ken for A) battery.
B) conversion.
C) trespass to property.
D) none of the choices.
Q2) Jean is playing a video game on a defective disk that melts in her game player, starting a fire that injures her hands. Jean files a suit against K-Tech, Inc., the game's manufacturer. K-Tech is held liable under the doctrine of strict liability. A significant application of this doctrine is in the area of
A) cyber torts.
B) intentional torts.
C) product liability.
D) unintentional torts.
Q3) Disparagement of property is another term for slander of quality.
A)True
B)False
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6
Chapter 5: Intellectual Property and Internet Law
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Sample Questions
Q1) 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.
Q2) A trade name can be protected if it is unusual or fanciful.
A)True
B)False
Q3) A trademark does not need to be registered to support a trademark infringement action.
A)True
B)False
Q4) A copyright owner must place a or an on the work to have the work protected from copyright infringement.
A)True
B)False
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Chapter 6: Criminal Law and Cyber Crime
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Sample Questions
Q1) Criminal law spells out the duties that exist between persons or between citizens and their governments.
A)True
B)False
Q2) Megan is charged with jaywalking, which is classified as
A) a misdemeanor.
B) a felony.
C) a petty offense.
D) no crime.
Q3) Bruno is a businessperson with investments in legal and illegal operations. Bruno may be subject to penalties under RICO
A) for making an unprofitable, but legal, investment.
B) for the commission of any business fraud.
C) only in a case involving a "racket."
D) only in a case involving organized crime.
Q4) The crime of bribery occurs when the bribe is offered.
A)True
B)False
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Chapter 7: Ethics and Business Decision Making
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Sample Questions
Q1) Duty-based ethical standards often come from religious precepts or through philosophical reasoning.
A)True
B)False
Q2) Megan is the ethics officer for Nature's Eggs, Inc., an organic egg raising company. In overseeing the application of the company's ethical code of conduct, Megan is most likely not in charge of
A) an ethics committee.
B) ethical training programs.
C) internal ethical audits.
D) ethical reviews of employees' family members.
Q3) Bilt-Well Construction Corporation makes a side payment to a government official in Nigeria to obtain a contract. In the United States, this is
A) illegal and unethical.
B) illegal but not unethical.
C) unethical but not illegal.
D) legal and ethical.
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Chapter 8: International Law in a Global Economy
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Sample Questions
Q1) In some cases, foreign states are not immune from the jurisdiction of U.S. courts. These circumstances are governed by the
A) Uniform Commercial Code.
B) Foreign Sovereign Immunities Act.
C) European Union.
D) North American Free Trade Agreement.
Q2) The act of state doctrine does not have important consequences for firms doing business in other countries.
A)True
B)False
Q3) Vieux Carré S.A., a French firm, imports its goods into the United States and offers those goods for sale at "less than fair value." "Fair value" is the price of
A) comparable goods in a select "basket" of other countries.
B) Vieux Carré's goods in France.
C) Vieux Carré's goods in the United States.
D) Vieux Carré's goods on the world market.
Q4) Dumping is the sale of imported goods at "less than fair value."
A)True
B)False
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Chapter 9: Nature and Classification
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Sample Questions
Q1) All contracts must be in writing to be enforceable.
A)True
B)False
Q2) In contract law, intent is determined by the objective theory of contracts.
A)True
B)False
Q3) On Monday, Neil tells Outdoor Landscaping, Inc., that he will pay Outdoor $500 if various tasks are completed by Friday. On Wednesday, when Outdoor has finished more than half of the work, Neil says that he has changed his mind. These parties had
A) an expired contract when Neil said that he had changed his mind.
B) a quasi contract when Neil said that he would pay for certain work.
C) a unilateral contract as soon as Outdoor began to perform.
D) no contract.
Q4) Jack promises to buy Lizette's used textbook for $60. Jack is
A) an executor.
B) an offeree.
C) a promisee.
D) a promisor.
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11
Chapter 9: Offer and Acceptance
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Sample Questions
Q1) The mirror image rule requires an acceptance to adhere exactly to an offer to create a contract.
A)True
B)False
Q2) In most states, revocation becomes effective on receipt.
A)True
B)False
Q3) Lovett County Bank offers to lend money to Kino, the owner of Java Stop, at 15 percent interest. Before Kino accepts, a state statute is enacted prohibiting loans at rates greater than 12 percent. Kino and the bank have
A) have a contract for a loan at 15 percent interest.
B) have a contract for a loan at 12 percent interest.
C) have a contract for a loan at 0 percent interest.
D) no contract for a loan.
Q4) A shrink-wrap agreement is an agreement whose terms are expressed inside a box in which the goods are packaged.
A)True
B)False
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Chapter 11: Consideration, Capacity, and Legality
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Sample Questions
Q1) At age seventeen, Daryl enters into a contract to buy a dozen movies from eHD TV Stream, Inc., an online video service. Soon after reaching the age of majority, Daryl attempts to disaffirm the contract. eHD files a suit against him. The court will most likely consider the contract ratified if it is
A) executed.
B) exculpatory.
C) express or implied.
D) emancipated.
Q2) Some states impose a duty on a minor who disaffirms a contract to restore the adult party to the position he or she held before the contract was made.
A)True
B)False
Q3) If a minor disaffirms a contract, he or she must disaffirm the entire contract. A)True
B)False
Q4) Forbearance is the act of refraining from doing something that one has a legal right to do.
A)True
B)False
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Chapter 12: Defenses to Contract Enforceability
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Sample Questions
Q1) A mistake in value will rarely enable a party to a contract to avoid the contract.
A)True
B)False
Q2) Prenuptial agreements are agreements made during a wedding ceremony that define each partner's duties to one another during the marriage.
A)True
B)False
Q3) A collateral promise is one made by a third party to assume the debts or obligation of a primary party to a contract if the primary party does not perform.
A)True
B)False
Q4) Scienter exists if a party makes a statement that he or she believes to be scientifically verifiable.
A)True
B)False
Q5) Under the Statute of Frauds, oral contracts are void.
A)True
B)False
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Chapter 13: Third Party Rights and Discharge
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Q1) Stephanie's sale of rights she has under a contract with Runway Retail, Inc., to buy the retailer's clothing overstock is
A) a delegation.
B) an assignment.
C) a third party beneficiary contract.
D) none of the choices.
Q2) A material breach occurs when performance is substantial, but not complete. A)True B)False
Q3) An assignment of rights in real estate often cannot be prohibited. A)True
B)False
Q4) Jen agrees to buy Kev's Dirt Bike business on the express condition that Valley Credit Union approves the financing. This approval is
A) a concurrent condition.
B) a condition precedent.
C) a condition subsequent.
D) an implied condition.
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Chapter 14: Breach and Remedies
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Sample Questions
Q1) Punitive damages are generally available in contract disputes.
A)True
B)False
Q2) Dondi contracts to buy a custom espresso maker from Caffee Specialties, Inc., for $4,500, but Caffee fails to deliver. Dondi buys the appliance elsewhere for $5,500. Dondi's measure of damages is
A) $1,000.
B) $1,000 plus incidental damages.
C) incidental damages only.
D) $0.
Q3) Beachside Pools, Inc., agrees to build a swimming pool for Candy, but fails to build it according to the contract specifications. Candy hires Do-We Fix-It Company to finish the project. Candy may recover from Beachside
A) the contract price less costs of materials and labor.
B) the contract price.
C) the costs needed to complete construction.
D) profits plus the costs incurred up to the time of the breach.
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Chapter 15: The Formation of Sales and Lease Contracts
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Sample Questions
Q1) Equipment Rental Corporation and Floodlights, Inc., are parties to an oral agreement for a lease of goods with payments in excess of $10,000. They may satisfy the Statute of Frauds by
A) mutually agreeing not to commit fraud.
B) restating the terms in a phone call.
C) setting out the terms in an e-mail.
D) shaking hands on the deal.
Q2) Summit Sales Corporation orders goods from OverStock Company. Summit plans to market the goods to consumers generally. OverStock identifies the goods. Before they are shipped to Summit, an insurable interest in the goods exists in
A) Summit and OverStock, but not consumers generally.
B) Summit, OverStock, and consumers generally.
C) Summit only.
D) OverStock only.
Q3) The contract term "delivery ex-ship" means that the risk of loss does not pass to the buyer until the goods are properly unloaded from the ship or other carrier.
A)True
B)False
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Chapter 16: Performance and Breach of Sales Lease Contracts
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Sample Questions
Q1) Under the UCC, a seller's tender of goods that do not conform in every way to a contract is still a valid tender.
A)True
B)False
Q2) Loomis Weaving Company contracts to sell sweaters to Style Mart stores. Before the sweaters are delivered, Style Mart indicates that it will not be able to pay. Loomis can resell the goods
A) either after finishing the job (and identifying the goods), or after stopping the job.
B) only after finishing the job and identifying the goods.
C) only if Loomis immediately stops the job.
D) under no circumstances.
Q3) On a lessee's insolvency, the lessor can stop delivery of the goods.
A)True
B)False
Q4) If a buyer repudiates a contract, the seller cannot recover damages.
A)True
B)False
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Chapter 17: Warranties and Product Liability
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Sample Questions
Q1) 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.
Q2) A design defect is not the sort of product defect that will support the imposition of liability on a strict product liability basis.
A)True
B)False
Q3) Mountain Bikes, Inc. (MBI), and Nero enter into a contract for a sale of a mountain bike. MBI, a merchant who deals in goods of the kind sold, makes implied and express warranties in connection with the sale. The Magnuson-Moss Warranty Act attempts to prevent deception in warranties by
A) displacing the UCC as the primary source of warranty rules.
B) making warranties easier to understand.
C) prohibiting disclaimers of warranties.
D) requiring sellers to give written warranties for consumer goods.
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Page 19
Chapter 18: Negotiable Instruments: Transferability Liability
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Sample Questions
Q1) On a trade acceptance, the drawer is also the payee.
A)True
B)False
Q2) An instrument "payable to bearer" is negotiated by delivery.
A)True
B)False
Q3) Maria signs an instrument payable to the order of National Loans, Inc., "on or before" June 15. This instrument is
A) negotiable.
B) nonnegotiable, because the maker can move up the payment date.
C) nonnegotiable, because moving up the payment date is optional.
D) nonnegotiable, because the exact payment date cannot be determined from the face of the instrument.
Q4) A bearer instrument is an instrument that does not designate a specific payee.
A)True B)False
Q5) To be negotiable, an instrument must be payable in a fixed amount.
A)True B)False
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Chapter 19: Checks and Banking in the Digital Age
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Sample Questions
Q1) Luc writes a check for $1,000 drawn on Ridgetop Bank and presents it to Bianca. Bianca presents the check for payment to Ridgetop Bank, which dishonors it for insufficient funds. The party most likely liable to Bianca is
A) Luc in a civil suit.
B) Luc in a criminal prosecution.
C) Ridgetop Bank in an administrative proceeding.
D) neither Luc nor Ridgetop Bank.
Q2) A check is a special type of draft.
A)True
B)False
Q3) A bank may not pay any checks on a customer's account after the date of the customer's death.
A)True B)False
Q4) Gaining unauthorized access to an electronic fund transfer system is a felony. A)True
B)False
Q5) The incompetence of a customer revokes a bank's authority to pay an item.
A)True
B)False
21
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Chapter 20: Secured Transactions
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Q1) Efrem owns Fans & Players, a retail sporting goods shop. When Great Hill Lodge, a new ski resort, is built in the area, Efrem decides to expand and borrows a large sum from Hometown Bank. The bank takes a security interest in Efrem's present inventory and any after-acquired inventory as collateral for the loan. The bank properly perfects the security interest by filing a financing statement. Efrem's business is profitable, and he begins doubling his inventory. A year later, an avalanche destroys the ski slope and lodge. Efrem's business takes a turn for the worse, and he defaults on his debt to the bank. The bank seeks possession of his entire inventory, even though the inventory is twice as large as it was when the loan was made. Efrem claims that the bank has rights to only half of his inventory. Is Efrem correct? Explain.
Q2) Sara needs $1,500 to buy textbooks and other school supplies. Tomas agrees to loan Sara $1,500, accepting as collateral Sara's car. They put their agreement in writing and sign it. Sara keeps possession of the car. Does Tomas have an enforceable security interest? How can Tomas let other creditors know of his interest in the car?
Q3) A debtor is the person in whose favor there is a security interest.
A)True B)False
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Page 22
Chapter 21: Creditors Rights and Bankruptcy
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Q1) Roland files for Chapter 7 bankruptcy. After all his assets have been sold and the proceeds distributed among his creditors, Roland's remaining debts
A) are discharged.
B) paid by the court.
C) must be paid by Roland.
D) are put on hold until Roland has sufficient means to pay them.
Q2) A mechanic's lien can be enforced to obtain payment for work that adds value to real property.
A)True
B)False
Q3) Checkerboard Pizza, Inc. (CPI), files for bankruptcy under Chapter 11. CPI's Chapter 11 plan must contain
A) a plan to turn over its future income to the trustee.
B) a certificate proving attendance at a credit-counseling briefing.
C) a provision of adequate means for the plan's execution. d a statement of preference for one creditor over another.
Q4) Concealing assets from a bankruptcy court is a crime.
A)True
B)False
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Chapter 22: Mortgages Foreclosures After the Recession
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Q1) Lenders are required to charge prepayment penalties on most subprime mortgages and home equity loans.
A)True
B)False
Q2) Refer to Fact Pattern 22-1. For Mai's loan, Northeast provides all required disclosures. Mai has a right to rescind the mortgage
A) at any time.
B) under no circumstances.
C) within three business days.
D) within whatever period is most rational and appropriate.
Q3) Virgil borrows $175,000 from United Finance Bank to buy a home. Federal law regulates primarily
A) mortgage terms that must be disclosed in writing.
B) oral representations with respect to the terms of a loan.
C) the lowest prices for which real property can be sold.
D) who can buy real property, where they can buy it, and why.
Q4) Lenders can require balloon payments for loans with terms of five years or less.
A)True
B)False
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Chapter 23: Agency Relationships in Business
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Q1) The equal dignity rule requires that a principal and agent treat each other with "equal dignity."
A)True
B)False
Q2) An agency relationship created for an illegal purpose is enforceable.
A)True
B)False
Q3) An agency can terminate once its purpose is achieved.
A)True
B)False
Q4) If a principal ratifies a contract without knowing all of the facts, the principal can rescind the contract.
A)True
B)False
Q5) An agency relationship can only be formed with a written agreement.
A)True
B)False
Q6) Authority declared in clear, direct, definite terms is express authority.
A)True
B)False
Page 25
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Chapter 24: Employment, Immigration, and Labor Law
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Q1) An employer can refuse to bargain collectively with a duly designated employee representative.
A)True
B)False
Q2) Sunny Energy Company wants to genetically test its workers for potentially significant, future health problems. Sunny may
A) discharge employees who test "positive."
B) discriminate against job applicants who test "positive."
C) deny group health insurance for its employees who test "positive."
D) not make employment decisions based on genetic testing.
Q3) A whistleblower is an employee who reveals confidential information about a fellow employee to an employer.
A)True B)False
Q4) An employer may not hire an illegal immigrant under any circumstances.
A)True
B)False
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Chapter 25: Employment Discrimination and Diversity
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Q1) Melanie files an employment discrimination suit against Natural Gas Industries Corp. under Title VII on a disparate-impact theory. To succeed, Melanie must show that a protected group of people are adversely affected by any of the following except the employer's
A) practices.
B) procedures.
C) tests.
D) seniority system.
Q2) Title VII of the Civil Rights Act of 1964 applies to which of the following?
A) An employer with five employees
B) An employer with ten employees
C) A labor union with twenty-five members
D) A labor union with twelve members
Q3) An employer may be liable for the harassment by nonemployees if the employer knew about the harassment and failed to take corrective action.
A)True
B)False
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Chapter 26: Sole Proprietorships and Private Franchises
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Q1) Star Resorts Corporation wants to terminate its franchise arrangement with Tony. Their contract does not provide for notice of termination or set a time for winding up the business. This means that to wind up, Tony
A) has a reasonable time, with notice.
B) has whatever time A determines, with or without notice.
C) is entitled to notice, but nothing more.
D) must close immediately.
Q2) Jack buys a Kitchens, Inc., franchise, which the franchisor later terminates. In determining whether the termination was proper, a court will generally A) balance the rights of both parties.
B) emphasize the right of Kitchens, Inc., to its business operation.
C) focus on the right of Jack to be dealt with fairly.
D) underscore the interest of consumers in affordability.
Q3) In a sole proprietorship, the owner receives 90 percent of the profits and the government receives 10 percent.
A)True
B)False
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Chapter 27: All Forms of Partnership
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Q1) Venture Capital, LP, is a limited partnership. Its limited partners include more than 150 sophisticated investors and investment professionals. A Venture limited partner loses his or her limited liability if he or she
A) acts as the firm's manager.
B) does not participate in the firm's management.
C) invests in Unified Fund, one of Venture's competitors.
D) votes on the firm's sale or dissolution.
Q2) If a partnership's liabilities are greater than its assets, the partners bear the losses.
A)True
B)False
Q3) A partner is a co-owner of partnership property.
A)True
B)False
Q4) Each partner is deemed to be an agent of the other partners and of the partnerships.
A)True
B)False
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Chapter 28: Limited Liability Companies Special Business
Forms
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Q1) Exotic Stuff Company and First Pier, Inc., form a business organization to engage in importing and exporting. Its property is held in the names of the members and its shareholders have personal liability. This business organization is
A) a business trust.
B) a joint stock company.
C) a joint venture.
D) a syndicate.
Q2) Owen, Paula, Quinn, and Rita combine to finance the building of Super Stores, a shopping mall. Their selected form of business organization is an investment group, or A) a business trust.
B) a joint stock company.
C) a joint venture.
D) a syndicate.
Q3) A joint stock company is a hybrid of a partnership and a corporation.
A)True
B)False
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Chapter 29: Corporate Formation, Merger, and Termination
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Q1) Mall Stores Corporation owns 95 percent of the shares of Niche Retail Corporation. Mall Stores combines with Niche Retail, but only Mall Stores continues to exist. This transaction was
A) a consolidation.
B) a tender offer.
C) a short-form merger.
D) a termination.
Q2) The day-to-day business of a corporation is managed by officers employed by the board of directors.
A)True
B)False
Q3) Myron and Norah would like to form Originals, Inc., to do business in the art market. Generally, the articles of incorporation for a corporation do not include
A) the corporate name.
B) the nature and purpose of the corporation.
C) the capital structure of the corporation.
D) the minutes of the first organizational meeting.
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Chapter 30: Management and Ownership of a Corporation
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Q1) Nina is a director of Omega, Inc. Under the standard of due care owed by directors of a corporation, Nina's decisions must be
A) ambiguous and questionable.
B) arguable and defensible.
C) informed and reasonable.
D) perfect and unassailable.
Q2) Some states permit a corporate board to have fewer than three directors. A)True
B)False
Q3) Refer to Fact Pattern 30-1. Any damages recovered by Ray's suit will go to A) Ray.
B) SBC.
C) SBC's directors.
D) the state in which SBC is incorporated.
Q4) Bea is a shareholder of Candy Confections Corporation. The right to inspect corporate books and records is
A) held by Bea only if she is a director.
B) held by Bea, without restrictions.
C) held by Bea, with some restrictions.
D) not held by Bea.
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Chapter 31: Investor Protection, Insider Trading, Corp Gov
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Q1) The Securities Exchange Act of 1934 provides for continuous, periodic disclosures by publicly held corporations.
A)True
B)False
Q2) GR8 Stuf Company files a registration statement with the SEC before making an offering to the general public. The registration contains false, immaterial statements of which the investors are unaware. GR8 Stuf is charged with violating the Securities Act of 1933. GR8 Stuf's best defense is
A) the investors were not aware of the misrepresentations.
B) the issuer reasonably believed the misstatements were true.
C) the offering was made available to the general public.
D) the untrue statements were not material.
Q3) Players Video Game Centers, Inc., wants to issue stock of $1 million in a single offering. Players must provide all investors with material information about itself, its business, and its securities if
A) all investors are accredited.
B) under any circumstances.
C) any investors are accredited.
D) any investors are unaccredited.
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Page 33
Chapter 32: Promoting Competition
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Q1) Market concentration refers to the number of firms in the market.
A)True
B)False
Q2) A divestiture is an order to a company to cease, or divest itself of, its anticompetitive conduct.
A)True
B)False
Q3) North Mining Company and South Excavation Company agree to abide by the decisions of East Coast Financial Corporation as to their respective levels of production, markets, and prices, effectively reducing competition and increasing profits. This is most likely
A) a common, legal, time-honored type of business arrangement.
B) an illegal restraint on trade.
C) an innovative, legally efficient approach to doing business.
D) an outdated, but legal business trust.
Q4) A price-fixing agreement that is reasonable does not violate antitrust law.
A)True
B)False
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Page 34
Chapter 33: Consumer and Environmental Law
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Q1) Milo buys an all-terrain-vehicle (ATV) from No-Limit Toys, Inc., on credit but makes no payments on the account. Odell, the owner of No-Limit Toys, calls Milo at home on a Monday morning at three a.m. Odell represents himself as PayNow Collection Agency and demands payment "or else." The next day, Odell sends Milo notice that he has thirty days in which to request verification of the debt and that its payment will be suspended during that time, but that if he does not pay the full amount due within five business days, Odell will arrange for the "destruction of Milo's good credit rating." Which laws has Odell violated, if any, and in what ways?
Q2) The key federal statute regulating the credit and credit-card industries is basically a disclosure law.
A)True
B)False
Q3) Manufacturers are required to report on any products intended for sale if the products have proved to be hazardous.
A)True
B)False
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Page 35
Chapter 34: Liability of Accountants Other Professionals
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Q1) A client's negligence is never a defense to a charge of negligence against an accountant.
A)True
B)False
Q2) Ezra, an accountant, intentionally misstates a material fact to mislead Fruit Packing Industries, Inc., a client. Fruit Packing justifiably relies on the misstatement to its detriment. Ezra is most likely liable for A) actual fraud.
B) constructive fraud.
C) destructive fraud.
D) virtual fraud.
Q3) Professionals are obligated to adhere to standards of performance generally accepted within their profession.
A)True
B)False
Q4) Attorneys are required to be familiar with well-settled principles of law applicable to a case.
A)True B)False
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Chapter 35: Personal Property and Bailments
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Q1) Roslyn is an inventor. She has many tools, including a hammer, a handsaw and a drill. Roslyn has a patent on her most recent invention and she owns stock in Handy Appliances, Inc., which is a company that often uses her inventions. Roslyn's tangible personal property includes the
A) hammer, handsaw and drill.
B) Handy Appliances stock only.
C) patent on her invention only.
D) Handy Appliances stock and the patent on her invention.
Q2) Gilbert finds an iPad on the counter at Starbucks. He takes the iPad to the police station's lost and found desk. The officer at the desk tells Gilbert that if the iPad is not claimed in a certain amount of time, Gilbert can obtain title to it. This is an example of acquiring possession by
A) an estray statute.
B) a bailment.
C) confusion.
D) production.
Q3) In a bailment, possession of the property is transferred to the bailee.
A)True
B)False
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Page 37
Chapter 36: Real Property and Landlord-Tenant Law
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Q1) Refer to Fact Pattern 36-1. Nika conveys some of her land to Reggie with the right to possess and use the property for a certain period of time. Nika has given Reggie
A) a fee simple absolute.
B) a leasehold estate.
C) a life estate.
D) an easement.
Q2) Plant life is not considered to be real property.
A)True
B)False
Q3) Jacob owns five acres of land in northern California. On his land Jacob has a house and a toolshed. There are ten large maple trees around the house that were there when Jacob bought the land. Since buying the land, Jacob has planted an apple tree. Jacob's real property includes
A) the house and toolshed only.
B) the house only.
C) the house, toolshed and maple trees only.
D) the house, toolshed, maple tress and apple tree.
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Page 38
Chapter 37: Insurance, Wills, and Trusts
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Q1) To execute a valid will, a testator must remember the "natural objects of his or her bounty."
A)True
B)False
Q2) Lost in a canyon near Gila, Arizona, Hester writes her will in crayon, on a paper bag, while Ivan states orally how he wants his estate distributed. Most states do not permit
A) an olographic will.
B) a nuncupative will.
C) a will written on a paper bag.
D) a will written in crayon.
Q3) Reno is the beneficiary of a life insurance policy on Sula's life obtained from Traditional Insurance Company. The underwriter of this policy is A) Reno.
B) Sula.
C) Traditional.
D) the agent or broker through whom the policy was obtained.
Q4) Dieter's will provides for a distribution of his assets on his death. Who will "distribute" Dieter's property, and what are the steps involved?
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