Principles of Law for Business Review Questions
Course Introduction
Principles of Law for Business introduces students to the fundamental legal concepts and frameworks that govern commercial activities. The course explores key topics such as contract formation and enforcement, types of business organizations, the regulation of trade and competition, and the rights and responsibilities of employers and employees. Students gain an understanding of how law influences business decision-making and operations, with an emphasis on risk management, dispute resolution, and ethical considerations. Throughout the course, real-world cases and examples are used to illustrate how legal principles are applied in the modern business environment.
Recommended Textbook
Business Law Today Text and Summarized Cases E Standard 9th Edition by Roger LeRoy Miller
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Chapter 1: The Legal Environment
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Q1) Jill is an appellate court judge.In this capacity,Jill establishes a rule of law.Under the doctrine of stare decisis,the principle must be adhered to by
A) all courts.
B) courts of lower rank only.
C) that court and courts of lower rank.
D) that court only.
Answer: C
Q2) Rules and regulations adopted by federal administrative agencies are compiled in the Code of Federal Regulations.
A)True
B)False
Answer: True
Q3) The River City Council,the Santa Clara County Board,the Texas state legislature,and the U.S.Congress enact laws.These laws constitute
A) administrative law.
B) case law.
C) stare decisis.
D) statutory law.
Answer: D
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Page 3
Chapter 2: Constitutional Law
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Q1) A law that restricts a fundamental right violates substantive due process regardless of the type of state interest that the law "promotes."
A)True
B)False
Answer: False
Q2) When there is a direct conflict between a federal and a state law,the state law is rendered invalid.
A)True
B)False
Answer: True
Q3) Machismo Motor Sales Corporation regularly advertises its off-the-road and all-terrain vehicles and other products.Under the First Amendment,these ads and other commercial speech are given
A) less protection than noncommercial speech.
B) more protection than symbolic speech.
C) no protection.
D) the same protection as defamatory speech.
Answer: A
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Chapter 3: Courts and Alternative Dispute Resolution
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Q1) Minimum contacts with a jurisdiction are never enough to support jurisdiction over a nonresident defendant.
A)True
B)False
Answer: False
Q2) Refer to Fact Pattern 3-1.If Java and Kaffe have a long-standing business relationship that they would like to continue,a preferred method of settling their dispute may be mediation because
A) the case will be heard by a mini-jury.
B) the dispute will eventually go to trial.
C) the process is not adversarial.
D) the resolution of the dispute will be decided an expert.
Answer: C
Q3) A business firm may have to comply with the laws of any jurisdiction in which it actively targets customers.
A)True
B)False
Answer: True
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Chapter 4: Torts and Cyber Torts
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Sample Questions
Q1) Louis-larger and stronger than Mica-threatens to hit Mica before hitting and injuring him.Mica files a suit against Louis for assault and battery.Mica will most likely recover for A) assault and battery.
B) assault but not battery.
C) battery but not assault.
D) neither assault nor battery.
Q2) An Iowa state statute requires amusement parks to maintain equipment in specific condition for the protection of patrons.Jack's Fun Park fails to maintain its equipment.Key,a patron,is injured.Jack's has committed A) a dram shop act.
B) contributory negligence.
C) negligence per se.
D) res ipsa loquitur.
Q3) If it can be shown that a trespass to personal property was warranted,a complete defense exists.
A)True
B)False
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Chapter 5: Intellectual Property and Internet Law
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Q1) Standard Corporation can not claim a trademark in the phrase "Quality Is Standard" if the phrase
A) has a secondary meaning.
B) is descriptive.
C) is generic.
D) means nothing.
Q2) Diamond Financial Planners employs Ella,who is the firm's most productive performer.Ella,dissatisfied with the commission structure,quits to work for Feldstar Investments,Inc.She takes her list of Diamond clients to induce them to switch to Feldstar.Trade secrets law covers
A) Diamond's list of clients.
B) Ella's performance.
C) Feldstar's commission structure.
D) none of the choices.
Q3) A certification mark distinguishes products approved,or "certified," by the government.
A)True
B)False
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Chapter 6: Criminal Law
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Q1) The police arrest Lou,who confesses to a crime.Later,Lou refutes the confession and demands a trial,at which witnesses testify they saw him commit the crime.Lou is convicted and sentenced.The U.S.Constitution provides safeguards against all of the following except
A) deprivations of life or liberty without due process of law.
B) not being allowed to question witnesses.
C) punishment.
D) self-incrimination.
Q2) Embezzlement can be committed only by physically taking property from the possession of another.
A)True
B)False
Q3) Britney,an employee of Computer Associates,is arrested at work.A grand jury issues a formal charge against Britney for larceny.This charge is
A) an arraignment.
B) an indictment.
C) an information.
D) an inquisition.
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Chapter 7: Cyber Crime
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Q1) Hacking is not widespread.
A)True
B)False
Q2) Impersonating Sophie,Ralph makes provocative comments online that deceive others into threatening Sophie,putting her in reasonable fear for her safety.Under federal law,this is
A) a crime only if a person who believes the comments acts on them.
B) a crime only if Sophie and Ralph are in the same jurisdiction.
C) not a crime.
D) a crime.
Q3) Vishing is phishing that involves voice communication.
A)True
B)False
Q4) Most cyber crimes are new crimes.
A)True
B)False
Q5) The anonymous nature of technology helps in the prosecution of cyber crime.
A)True
B)False
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Chapter 8: Ethics and Business Decision Making
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Q1) Kennedy Capital Corporation provides other firms with funds to expand operations.If Kenney strictly complies with existing laws,the firm will
A) fulfill all business ethics obligations.
B) fulfill no business ethics obligations.
C) fulfill some business ethics obligations.
D) not need to fulfill any business ethics obligations.
Q2) Olaf,an executive with Pharma Product Distribution,Inc.,has to decide whether to market a product that might have undesirable side effects for a small percentage of users.How should Olaf decide whether to sell the product? How does the standard of ethics that is applied affect this answer?
Q3) Lia works for Media Marketing Company.Her job includes putting "spin" on the firm's successes and failures.In this context,ethics consist of
A) "bad" versus "good" publicity.
B) questions of rightness and wrongness.
C) the firm's quarterly revenue.
D) whatever is legal.
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Chapter 9: Nature and Classification
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Q1) Cory enters into a contract with Dian to act as her personal sports trainer.If they later dispute the meaning,and the contract contains unclear terms,the rules of contract interpretation will give effect to
A) the parties' intent as expressed in their contract.
B) what the defendant claims was the parties' intent.
C) what the plaintiff claims was the parties' intent.
D) what the parties now agree they intended.
Q2) Some promises are not legally binding contracts.
A)True
B)False
Q3) A check,like other negotiable instruments,is a formal contract.
A)True
B)False
Q4) Employment Sources,Inc.,enters into a contract with Fred.If Fred is a minor,this contract is most likely
A) enforceable.
B) unenforceable.
C) void.
D) voidable.
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Chapter 10: Agreement in Traditional and E-Contracts
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Q1) State law other than the UETA always determines the effect of an error on an agreement between contracting parties.
A)True
B)False
Q2) Lightspeed Corporation makes computers,each of which is packaged with a shrink-wrap agreement.Milo buys a Lightspeed desktop.The shrink-wrap agreement is most likely enforceable if
A) Milo buys the computer directly from Lightspeed.
B) Milo expressly agrees to the terms in the shrink-wrap agreement.
C) Milo reads the shrink-wrap agreement.
D) the terms in the shrink-wrap agreement concern warranties.
Q3) Mica buys "Nature," a movie,through Open View,an online entertainment vendor.Before completing the purchase and downloading "Nature," Mica must review a warning not to make and sell a copy of it.This warning is
A) a browse-wrap term.
B) a click-on agreement.
C) a shrink-wrap agreement.
D) none of the choices.
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Chapter 11: Consideration, capacity, and Legality
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Q1) Elmo,a minor,misrepresents his age to be twenty-one and contracts to buy a car from Fine New Autos.Ordinarily,Elmo can disaffirm the contract
A) only if he can prove that Fine New Autos did not know his true age.
B) only if he can prove that Fine New Autos knew his true age.
C) under any circumstances.
D) under no circumstances.
Q2) An illegal contract is valid if the parties to it were unaware of the illegality.
A)True
B)False
Q3) Fay is mentally incompetent but has not been so adjudged by a court.Any contract Fay enters into is
A) voidable if Fay has a lucid interval at the time of contracting.
B) voidable if Fay lacks the capacity to comprehend the consequences.
C) voidable if the other party does not realize that Fay is incompetent.
D) unavoidable.
Q4) A usurious contract involves the purchase and sale of usable goods.
A)True
B)False
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Page 13
Chapter 12: Defenses to Contract Enforceability
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Q1) Joy induces Kelly to enter into a contract for the purchase of a condominium about which Joy knowingly misrepresents a number of material features.When Kelly discovers the truth,Kelly can
A) enforce the contract and seek damages.
B) enforce the contract but not seek damages.
C) neither enforce the contract nor seek damages.
D) seek damages but not enforce the contract.
Q2) Elle buys a new textbook for $100 and a used car for $5,000,and signs a one-year lease for an apartment for $1,000 monthly rent to start at the beginning of the next month.The Statute of Frauds covers
A) the apartment lease, and the textbook and car purchases.
B) the apartment lease and the car purchase only.
C) the apartment lease only.
D) the textbook and car purchases only.
Q3) Oral evidence of the meaning of a contract with incomplete terms can be introduced at a trial.
A)True
B)False
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Chapter 13: Third Party Rights and Discharge
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Q1) Refer to Fact Pattern 13-1.With respect to Mutual's duties,Neil's performance most likely
A) discharges Mutual from the contract.
B) has no effect on Mutual's performance.
C) increases Mutual's duties under the contract.
D) suspends Mutual's duty to perform.
Q2) Concurrent conditions occur only when the parties to a contract are required to perform their respective duties simultaneously.
A)True
B)False
Q3) An assignment of a negotiable instrument is generally prohibited.
A)True
B)False
Q4) The most common way to discharge a contract is by breach.
A)True
B)False
Q5) A transfer of contract rights to a third party is an assignment.
A)True
B)False
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Chapter 14: Breach and Remedies
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Q1) Hybrid Corporation enters into a contract with Insure Service,Inc.(ISI),to obtain health insurance for Hybrid employees.If ISI breaches the contract and Hybrid is awarded compensatory damages,the purpose would be to
A) establish, as a matter of principle, that ISI acted wrongfully.
B) provide Hybrid with funds for a foreseeable loss beyond the contract.
C) provide Hybrid with funds for its loss of the bargain.
D) punish ISI and set an example to deter others from similar acts.
Q2) A contract may include a clause stating that no damages can be recovered for a certain type of breach.
A)True
B)False
Q3) Consequential damages are awarded to cover all of the remote consequences of whatever injury a nonbreaching party suffers.
A)True
B)False
Q4) Compensatory damages are foreseeable damages that arise from a party's breach of a contract.
A)True
B)False
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Chapter 15: The Formation of Sales and Lease Contracts
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Q1) Quik Sales Corporation orders goods from Re Stock Company.Re plans to market the goods to consumers generally.Re identifies the goods.Before they are shipped to Quik,an insurable interest in the goods exists in
A) Quik and Re, but not consumers generally.
B) Quik only.
C) Quik, Re, and consumers generally.
D) Re only.
Q2) Stocks are an example of property that does not come under UCC Article 2.
A)True
B)False
Q3) Identification takes place when specific goods are designated as the subject matter of a sales or lease contract.
A)True
B)False
Q4) The rules governing firm offers apply to all merchants.
A)True
B)False
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Chapter 16: Performance Breach of Sales Lease Contracts
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Q1) The term cure refers to the right of the seller to reject,adjust,or replace nonconforming goods.
A)True
B)False
Q2) BBQ,Inc.,makes and sells grills to Grill Mart,a retailer,which sells one of the grills to Hope,a consumer.BBQ and Grill Mart include in their contracts a limitation on consequential damages for personal injuries arising from a breach of warranty.This is prima facie unconscionable with respect to A) all of these parties.
B) BBQ and Grill Mart, but not Hope.
C) Hope only.
D) none of these parties.
Q3) An installment contract is breached if a seller tenders any nonconforming goods. A)True B)False
Q4) If the parties to a sales contract state that a certain remedy is exclusive,then it is the sole remedy.
A)True
B)False
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Chapter 17: Warranties and Product Liability
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Q1) A product liability action may be based on warranty theory.
A)True
B)False
Q2) Refer to Fact Pattern 17-1.The court is most likely to rule in favor of
A) Concrete, because Bret's statement was an expression of opinion.
B) Concrete, because DCC chose Concrete's product voluntarily.
C) DCC, because Bret's statement was an express warranty.
D) DCC, because Concrete's product is not fit for its purpose.
Q3) A product is unmerchantable if an accident could arise in connection with the goods.
A)True
B)False
Q4) Merchants are required to warrant that the goods they sell are fit for their ordinary purpose.
A)True
B)False
Q5) A contract cannot contain both implied and express warranties.
A)True
B)False
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Chapter 18: Negotiable Instrument: Transferability Liability
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Q1) A person who in good faith acquires a negotiable instrument from a thief cannot become an HDC.
A)True
B)False
Q2) To pay for a new desk bought at Office Outlet,Pete makes a check payable to "Offs Outlet." A proper indorsement of the check is
A) "Office Outlet" only.
B) "Offs Outlet" only.
C) "Office Outlet" or "Offs Outlet."
D) "Pete" only.
Q3) A person who receives an instrument as a gift normally possesses the rights of an HDC.
A)True
B)False
Q4) Pola wants to transfer a check to Quin.The check is defective if it
A) has been previously dishonored.
B) has no irregularities on its face.
C) is not overdue.
D) is so complete that no element of negotiability is lacking.
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Chapter 19: Checks and Banking in the Digital Age
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Q1) Thelma signs a check "pay to the order of Uri" drawn on Thelma's account in Verity Bank.Thelma has $400 in her account but the amount of the check is $500,which the bank pays.This is
A) a dishonored check.
B) an overdraft.
C) a postdated check.
D) a stale check.
Q2) A stale check is one that has been outstanding for longer than one month.
A)True
B)False
Q3) Refer to Fact Pattern 19-2.When Digital's bank received the check,it was required to pass it on
A) before midnight of the next banking day.
B) before midnight of the next day, even if it was not a "banking" day.
C) before noon of the next banking day.
D) within five business days.
Q4) Certified checks are instruments that have been accepted for payment by the institutions on which they are drawn.
A)True
B)False
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Chapter 20: Security Interests in Personal Property
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Q1) Lena borrows from Mac and Nicol,using the same collateral for both loans.Only Nicol has a perfected security interest.Lena defaults on both loans.The party with first rights to the collateral is
A) Lena.
B) Mac and Nicol, in proportion to Lena's debt to each.
C) Mac only.
D) Nicol only.
Q2) The state office in which a financing statement should be filed depends on the creditor's location.
A)True
B)False
Q3) Quotient Financial Corporation is a secured party with a security interest in property owned by Retail Sales Company.Perfection of this security interest may not protect Quotient Financial against the claim of A) a bank.
B) a buyer in the ordinary course of business.
C) a subsequent lien creditor.
D) a trustee in bankruptcy.
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Chapter 21: Creditors Rights and Bankruptcy
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Q1) Natural Resources,Inc.(NRI),files for bankruptcy under Chapter 11 and assumes the role of a debtor in possession.In this role,NRI is similar to
A) a creditor at a Chapter 7 creditors' meeting.
B) a family farmer after a discharge under Chapter 12.
C) a secured creditor in possession of collateral under Chapter 13.
D) a trustee in a liquidation proceeding under Chapter 7.
Q2) If the proceeds of a foreclosure sale cover the costs and the mortgage debt,any surplus is a windfall to the creditor.
A)True
B)False
Q3) The principal duty of a trustee is to liquidate and close up the debtor's estate as quickly as possible.
A)True
B)False
Q4) A corporate debtor must be "out of business" before it can file a bankruptcy petition for reorganization under Chapter 11.
A)True
B)False
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Chapter 22: International Law in a Global Economy
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Q1) A U.S.citizen can bring a civil suit in a U.S.court against a U.S.entity for a tort allegedly committed overseas.
A)True
B)False
Q2) The act of state doctrine provides that only a head of state can make treaties with another nation.
A)True
B)False
Q3) Fabiola,or any foreign citizen,can bring a civil suit in a U.S.court for
A) a violation of a treaty of the United States only.
B) a violation of a treaty of the United States or of the law of nations.
C) a violation of the law of nations only.
D) no purpose.
Q4) A foreign citizen can bring a civil suit in a U.S.court for a violation of a treaty of the United States.
A)True
B)False
Q5) Tariffs are imposed only on exports.
A)True
B)False
Page 24
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Chapter 23: Agency Relationships in Business
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Q1) A principal is liable for harm caused to a third party by an agent who commits a tort while acting in the scope of his or her employment.
A)True
B)False
Q2) An agency relationship can be formed without consideration.
A)True
B)False
Q3) An agent is authorized to act on behalf of a principal in doing business with third parties.
A)True
B)False
Q4) A disclosed principal is not liable to a third party for contracts made by the agent acting outside the scope of his or her authority.
A)True
B)False
Q5) A principal is not liable for an agent's fraud unless the agent has the apparent authority to commit torts.
A)True
B)False
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Chapter 24: Employment,immigration,and Labor Law
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Q1) Employee contributions to pension plans vest immediately.
A)True
B)False
Q2) Link and Meryl are employees of Natural Resources,Inc.(NRI).When Odel,the president of NRI,learns that Link and Meryl are active in union activities,he discharges them.Link and Meryl may bring an action against NRI under
A) federal labor law.
B) federal or state unemployment law.
C) state workers' compensation law.
D) the employment at-will doctrine.
Q3) Myron is an employee of Nero.Either party can terminate the employment relationship at any time for any reason without liability.With respect to the employment-at-will doctrine,this is
A) an example of the doctrine.
B) an exception based on contract theory.
C) an exception based on public policy.
D) an exception based on tort theory.
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Chapter 25: Employment Discrimination
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Q1) Research Statistics Corporation uses a merit system to pay its employees according to their job performance.Suki,a female,and Troy,a male,are Research employees with comparable jobs.Due to superior performance,Suki is paid more than Troy.This is
A) disparate-impact discrimination.
B) gender discrimination.
C) not discrimination.
D) reverse discrimination.
Q2) An employer can be liable for an employee's sexual harassment of a member of the same gender.
A)True
B)False
Q3) Cora,a female,and Dom,a male,are employees of Equipment Leasing Corporation.Cora regularly e-mails sexually explicit images to Dom via Equipment Leasing's computer network.Dom finds this offensive.This is A) hostile-environment harassment.
B) not harassment or any form of discrimination.
C) quid pro quo harassment.
D) reverse discrimination.
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Chapter 26: Sole Proprietorships and Private Franchises
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Q1) Worldwide Realtors,Inc.,sells a franchise to XL Sales Company.XL is
A) a franchisee.
B) a franchisor.
C) an agent.
D) a principal.
Q2) One of the disadvantages of a sole proprietorship is that the owner is liable for the losses of the business.
A)True
B)False
Q3) A franchisor can suggest retail prices but cannot mandate them.
A)True
B)False
Q4) A sole proprietorship's income is taxed as the owner's personal income.
A)True
B)False
Q5) Normally,a franchisee determines the territory that it will serve.
A)True
B)False
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Chapter 27: All Forms of Partnerships
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Q1) Refer to Fact Pattern 27-1.Hal signs a contract with Lycra Chips,a retail component supplier,allegedly on Kappa's behalf.The contract is binding on
A) Hal, Ira, Jill, and Kappa.
B) Hal only.
C) Kappa only.
D) no one.
Q2) Ben,who runs a livestock breeding business,owes the Circle C Ranch $40,000.Ben agrees to pay the Circle C a percentage of his profits each month until the debt is paid.Because of this agreement,the Circle C is
A) Ben's creditor and partner.
B) Ben's creditor only.
C) Ben's partner only.
D) neither Ben's creditor nor his partner.
Q3) A limited liability partnership can be formed in virtually any state.
A)True
B)False
Q4) An association cannot be a partnership without an express agreement.
A)True
B)False
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Chapter 28: Limited Liability Companies Special Business
Forms
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Q1) A limited liability company is operated in compliance with state law.
A)True
B)False
Q2) QuizBooks LLC is a limited liability company.Like any other LLC,unless QuizBooks chooses otherwise,the firm will be taxed as
A) a corporation.
B) a joint venture.
C) a partnership.
D) a sole proprietorship.
Q3) Federal law dictates the requirements for the formation of a limited liability company.
A)True
B)False
Q4) Petra,Queenie,and Randall want to form Sales-to-Infinity,LLC (limited li?ability company).What should they provide in their operating agreement? If they fail to include some important operating details,what determines these details?
Q5) In a limited liability company,members cannot participate in its management.
A)True
B)False
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Chapter 29: Corporate Formation, merger, and Termination
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Q1) A firm named Scientific Discovery Corporation (SDC)makes an attempt to incorporate for a purpose other than making a profit.SDC is
A) a foreign corporation.
B) an alien corporation.
C) a nonprofit corporation.
D) not a corporation.
Q2) A shareholder in a professional corporation can be liable for malpractice arising from the rendering of professional services.
A)True
B)False
Q3) After a merger,a disappearing corporation's preexisting rights disappear.
A)True
B)False
Q4) A corporate director is an "owner" of the corporation.
A)True
B)False
Q5) A corporation whose shares are held by relatively few persons is a partnership. A)True
B)False
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Chapter 30: Corporate Directors, officers, Shareholders
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Q1) Shares issued for more than their fair market value are known as watered stock.
A)True
B)False
Q2) Mitch is a director and officer of Numero Uno,Inc.Mitch makes a marketing decision that results in a dramatic decrease in profits for Numero Uno and its shareholders.The shareholders accuse Mitch of breaching his fiduciary duty to the corporation.What is Mitch's best defense against this accusation? 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?
Q3) A corporate officer is not expected to be informed on corporate matters.
A)True
B)False
Q4) Orin is a shareholder of Pinkwater Corporation.In some states,Orin might incur personal liability for unpaid Pinkwater debts if he A) accepts a dividend knowing that it was paid from retained earnings.
B) buys stock for less than its fair-market value.
C) fails to fulfill his fiduciary duty to the majority shareholders.
D) sells his shares.
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Chapter 31: Investor Protection, insider Trading, Corp Gov
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Q1) Heavy Hauling,Inc.,is a public company whose shares are traded in the public securities markets.Under the Sarbanes-Oxley Act of 2002,to ensure that Heavy Hauling's financial results are accurate and timely,the firm's senior officers must set up and maintain
A) internal "disclosure controls and procedures."
B) external "release and reveal timetables."
C) personal "peruse and review liability policies."
D) public "information and discussion forums."
Q2) Generally,stock offerings that involve a small dollar amount are not exempt from the registration requirement.
A)True
B)False
Q3) Corporations' chief executive officers are directly accountable for the accuracy of financial statements filed with the Securities and Exchange Commission.
A)True
B)False
Q4) Most securities can be resold without registration.
A)True
B)False
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Chapter 32: Promoting Competition
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Q1) No person may be a director for two competing corporations at the same time.
A)True
B)False
Q2) Minimum resale price maintenance agreements are subject to analysis under the rule of reason.
A)True
B)False
Q3) Imperio Caffeine Corporation makes and sells coffee under a variety of brand names.Imperio wants to merge with Java Company,its main competitor.In weighing a challenge to the deal,a court looks at the relevant product market.This most likely includes coffee and
A) no other products.
B) products that are not identical but are related, such as spin-offs.
C) products that are reasonably interchangeable.
D) products with identical attributes only.
Q4) A market division by class of customer between rival firms violates antitrust law.
A)True
B)False
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Chapter 33: Consumer and Environmental Law
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Q1) Miracle Products,Inc.,engages in deceptive advertising when it markets its product Weight-Off as able to help consumers lose weight in their sleep.Miracle is ordered to include in all future advertising of Weight-Off the statement,"Weight-Off will not cause anyone to lose weight in their sleep." This is
A) a counteradvertising order.
B) a multiple product order.
C) bait-and-switch advertising.
D) excessive abuse of authority.
Q2) Once the government begins to clean up a waste disposal site,only the party who generated the waste must contribute to the cost.
A)True
B)False
Q3) Kristen receives unsolicited merchandise in the mail.Kristen
A) may keep the merchandise without any obligation to the sender.
B) must return the merchandise within five days to avoid payment.
C) must return the merchandise within fifteen days to avoid payment.
D) must return the merchandise within thirty days to avoid payment.
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Chapter 34: Liability of Accountants Other Professionals
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Q1) In a few states,communications between an accountant and his or her client are privileged.
A)True
B)False
Q2) Pat,an accountant,includes a false statement in a report for Quantity Overstock,Inc.,that is filed with the Securities and Exchange Commission.Quantity publishes a misleading ad about its future prospects.Rita sees the ad and calls Stan,who buys stock in Quantity.Under Section 18 of the Securities Exchange Act of 1934,liability may attach to
A) Pat's report.
B) Quantity's ad.
C) Rita's call.
D) Stan's purchase.
Q3) Under the Restatement (Second)of Torts,accountants can be held liable for negligence to any third parties.
A)True
B)False
Q4) Each state establishes rules that govern the conduct of attorneys
A)True
B)False
Page 36
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Chapter 35: Personal Property and Bailments
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Q1) Idaho Farms mistakenly puts its potatoes in Jackson Co-op's storage bin,which already contains Kelly Spud Farm's potatoes.It is impossible to tell which potatoes originally belonged to which party.This is
A) a bailment.
B) accession.
C) confusion.
D) production.
Q2) Property voluntarily placed somewhere by its owner and inadvertently forgotten is lost property.
A)True
B)False
Q3) Helen owns heavy construction equipment and the tools to service it,as well as office furniture,including computers.Ilya owns a number of patents,trademarks that identify the products made under those patents,and stock in the company that sells those products.Personal property includes the items owned by
A) Helen and Ilya.
B) Helen only.
C) Ilya only.
D) neither Helen nor Ilya.
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Page 37
Chapter 36: Real Property and Landlord-Tenant Law
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Q1) Kasper,the owner of Lakeview Farm,and Milt,the tenant of the farmhouse on the property,may create a tenancy for years by A) deed.
B) express contract.
C) implication.
D) sufferance.
Q2) Taking private property for public use requires the payment of "just compensation."
A)True
B)False
Q3) Adverse possession is a means of obtaining title to property without the delivery of a deed.
A)True
B)False
Q4) In most states,the seller of a new house warrants that it is fit for habitation.
A)True
B)False
Q5) A fixed-term tenancy is created when a lease does not specify its duration. A)True
B)False
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Chapter 37: Insurance, wills, and Trusts
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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) Bret obtains a fire insurance policy on his rental house with Continental Insurance Company.Like all insurance,this policy is an arrangement for
A) avoiding the assumption of responsibility.
B) predicting a potential loss based on unknown factors.
C) shifting the imposition of liability.
D) transferring and allocating risk.
Q3) An insurer has a duty to avoid the payment of claims.
A)True
B)False
Q4) The word "Mom" can qualify as a signature on a will.
A)True
B)False
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