Regulation of Business Study Guide Questions
Course Introduction
Regulation of Business explores the legal and regulatory frameworks that govern commercial enterprises, focusing on how laws shape business practices, market behavior, and organizational responsibilities. The course examines federal, state, and international regulations affecting businesses, including antitrust laws, securities regulation, consumer protection, environmental rules, and labor standards. Students analyze case studies to understand regulatory compliance, the impact of government intervention on business strategy, and the mechanisms for resolving disputes between businesses and regulatory authorities. Emphasis is placed on ethical considerations, policy rationales, and the dynamic relationship between business innovation and regulatory oversight.
Recommended Textbook
Business Law and the Legal Environment 21st Edition by David P. Twomey
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Page 2
Chapter 1: The Nature and Sources of Law
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Sample Questions
Q1) One advantage of our current legal system is that the growth of technology has not created many new laws.
A)True
B)False
Answer: False
Q2) Courts can create law.
A)True
B)False
Answer: True
Q3) Uniform State Law generally is not applicable to business.
A)True
B)False
Answer: False
Q4) Statutory law is created by:
A) Congress.
B) state legislatures.
C) local governments.
D) all of the above.
Answer: D
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Chapter 2: The Court System and Dispute Resolution
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Sample Questions
Q1) An ombudsman:
A) is usually a government official.
B) is often appointed by a judge.
C) receives a large amount of judicial power.
D) none of the above.
Answer: A
Q2) Which is not considered an alternate means of dispute resolution?
A) civil lawsuit
B) arbitration
C) association tribunals
D) minitrial
Answer: A
Q3) A peremptory challenge to a prospective juror generally can be exercised without giving a reason.
A)True
B)False
Answer: True
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4
Chapter 3: Business Ethics, Social Forces, and the Law
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Sample Questions
Q1) Regulation of the Federal Reserve system, negotiable instruments, and installment credit transactions are designed largely to facilitate trade.
A)True
B)False
Answer: True
Q2) Which of the following has been linked with the long-term growth and profitability of business organizations?
A) high standards for product quality
B) high standards for employee welfare
C) high standards for customer service
D) all of the above
Answer: D
Q3) Recognizing that an ethical dilemma exists is usually far more difficult than resolving the dilemma once its existence is recognized.
A)True
B)False
Answer: False
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Chapter 4: The Constitution As the Foundation of the Legal Environment
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Sample Questions
Q1) One of the characteristics of the "living" Constitution is limited government.
A)True
B)False
Q2) The U.S. Constitution is a document that:
A) is clear in allocating the rights and responsibilities of people and our government.
B) can be interpreted only according to the bedrock principles of 1776.
C) can be interpreted only in accordance with current values.
D) must be interpreted to accommodate both stability and flexibility.
Q3) Administrative agencies are, in effect, a fourth branch of the government.
A)True
B)False
Q4) The purpose of the first ten amendments to the Constitution was to enlarge the power of the federal government.
A)True
B)False
Q5) The states may coin money as long as it is backed by gold.
A)True
B)False
6
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Chapter 5: Government Regulation of Competition and Prices
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Sample Questions
Q1) The Sherman Antitrust Act does not prohibit:
A) a manufacturer from having a natural monopoly over its own product.
B) a seller to dominate a market because of superior product or business.
C) a manufacturer to sell only through a particular distributor.
D) all of the above.
Q2) The Federal Trade Commission has taken enforcement steps against refusals to sell, boycotts, market restrictions, disparagement of competitors' products, and unlawful methods of billing and collection.
A)True
B)False
Q3) What types of restraints of trade are unlawful?
A) Voluntary
B) Binding
C) Unreasonable.
D) Interbrand.
Q4) State governments may regulate business in all of its aspects, even if such regulation imposes a burden on interstate commerce.
A)True
B)False
7
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Chapter 6: Administrative Agencies
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Sample Questions
Q1) The United States constitution places the most significant limitations on administrative investigation in the area of:
A) search and seizure of the person.
B) aerial inspection.
C) search and seizure of papers and records.
D) guarantee against self-incrimination.
Q2) Members of administrative agencies are ordinarily
A) pre-selected.
B) elected.
C) assigned.
D) appointed.
Q3) The Sunshine Act requires most meetings of major administrative agencies to be open to the public.
A)True
B)False
Q4) An administrative agency:
A) is not empowered to act as a court with regard to its own regulations.
B) acts as a specialized court of limited jurisdiction.
C) can hear complaints only in the presence of a jury.
D) cannot impose penalties for violation of its regulations.
Page 8
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Chapter 7: The Legal Environment of International Trade
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Sample Questions
Q1) Under GATT, the principle of trade without discrimination is embodied in the most favored nation clause.
A)True B)False
Q2) The use of agency arrangements allows a U.S. firm to avoid taxation on sales made in its agent's country.
A)True B)False
Q3) Which of the following actions is not prohibited by The Foreign Corrupt Practices Act?
A) offers of payments to government officials to influence a decision on behalf of the firm making the payment
B) payments to government officials to influence a decision on behalf of the firm making the payment
C) payments to low-level officials for expediting the performance of routine government services
D) all of the above actions are prohibited by The Foreign Corrupt Practices Act
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Chapter 8: Crimes
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Sample Questions
Q1) Computer crimes include:
A) theft of hardware.
B) theft of software.
C) intentional damage to information stored on a computer.
D) all of the above.
Q2) An act that is a felony in one state will necessarily be a felony in another.
A)True
B)False
Q3) The Foreign Corrupt Practices Act does not prohibit facilitation payments.
A)True
B)False
Q4) The Fourth Amendment to the United States Constitution's protection against unreasonable searches applies to:
A) personal homes only.
B) businesses only.
C) both homes and businesses.
D) none of the above.
Q5) Embezzlement always involves a bank account.
A)True
B)False
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Chapter 9: Torts
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Sample Questions
Q1) Defamation of a public figure requires what additional element?
A) intent
B) malice
C) causation
D) none of the above
Q2) Which of the following is a defense to defamation?
A) slander
B) libel
C) truth
D) none of the above
Q3) In order to establish the tort of false imprisonment, a person must show imprisonment for:
A) any amount of time.
B) at least one minute.
C) at least ten minutes
D) at least one hour.
Q4) The concept of strict liability is applied without regard to whether the defendant was at fault.
A)True
B)False
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Chapter 10: Intellectual Property Rights
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Sample Questions
Q1) Generic terms that refer to a type or class of goods are never subject to trademark protection.
A)True
B)False
Q2) Trademarks may be used to protect the exclusive right to identify either products or services.
A)True
B)False
Q3) Under the Computer Software Copyright Act of 1980, a written program:
A) must be written in object code in order to be protected.
B) must be written in source code in order to be protected.
C) is protected as any other copyrighted material, even if it is in written form.
D) is protected as any other copyrighted material, but only if it is in written form.
Q4) Once a mark is registered in accordance with federal law, the holder of the mark has the exclusive right to use the mark in perpetuity.
A)True
B)False
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Chapter 11: Cyberlaw
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Sample Questions
Q1) The formation of contracts in cyberspace is governed today largely by:
A) international contract law principles.
B) traditional contract law principles.
C) federal contract law principles.
D) uniform state laws.
Q2) The law of real property is included in those categories of legal issues covered by cyberlaw.
A)True
B)False
Q3) The taking of an image, likeness, or name for purposes of commercial advantage is protected by :
A) contract law.
B) tort law.
C) criminal law.
D) none of the above.
Q4) The elements of defamation remain the same in cyberspace
A)True
B)False
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Page 13
Chapter 12: Nature and Classes of Contracts: Contracting on
the Internet
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Sample Questions
Q1) A right of __________ refusal is the right of a party to meet the terms of a proposed contract before it is executed, such as a real estate purchase agreement.
A) concomitant
B) conditional
C) formal
D) first
Q2) Quasi-contractual liability will generally be imposed when the cost of performing a contract is greater than had been expected.
A)True
B)False
Q3) An implied contract is shown by:
A) a writing.
B) the acts and conduct of the parties.
C) statements made in open court.
D) an exchange of oral promises.
Q4) An express contract is one in which the agreement is shown by the acts and conduct of the parties.
A)True
B)False
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Chapter 13: Formation of Contracts: Offer and Acceptance
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Sample Questions
Q1) An offer is terminated upon rejection by the offeree unless:
A) the period of time for which the offeror agreed to keep the offer open has not yet expired.
B) the offeror renews the offer.
C) the offeree revokes the rejection.
D) the offeree makes a counteroffer.
Q2) An offer gives the offeror the power to bind the offeree by contract.
A)True
B)False
Q3) An agreement cannot be enforced if it does not set forth every contractual detail. A)True
B)False
Q4) In general, an acceptance occurs when:
A) a particular form of words is stated to the offeror.
B) a particular mode of expression is made to the offeror.
C) the offeree reserves the right to reject the offer.
D) a clear expression of the offeree's agreement to be bound by the terms of the offer occurs.
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Page 15
Chapter 14: Capacity and Genuine Assent
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Sample Questions
Q1) Ordinarily, a party to a contract has no duty to volunteer information to the other party.
A)True
B)False
Q2) A factual incapacity may exist when, because of a mental condition caused by medication, drugs, alcohol, illness, or age, a person does not understand that a contract is being made or understand its general nature.
A)True
B)False
Q3) A person who is unable to read is bound by signing a contract without obtaining an explanation of it, unless:
A) the other contracting party later becomes aware of the signer's inability to read.
B) the other party is similarly lacking in education.
C) the other contracting party knows of the signer's disability.
D) none of the above; an illiterate person is always bound by a contract he or she chooses to sign without obtaining an explanation.
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16
Chapter 15: Consideration
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Sample Questions
Q1) A contract in which one party agrees to purchase goods from another contingent upon the purchaser's ability to locate suitable financing is said to:
A) be illegal.
B) result from undue influence.
C) contain a waiver.
D) contain a conditional promise.
Q2) A promise to make a gift is enforceable.
A)True
B)False
Q3) What damages are recoverable in a case of promissory estoppel?
A) profits that the promisor expected
B) profits that the promisee expected
C) an amount necessary to restore the promisee to the position he or she would have been in had the promisee not relied on the promise
D) an amount necessary to restore the promisor to the position he or she would have been in had the promisor not relied on the promise
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Chapter 16: Legality and Public Policy
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Sample Questions
Q1) Fees charged by a lender for the reasonable expense of making a loan, such as the cost of appraising property, are treated as interest for purposes of the usury law.
A)True
B)False
Q2) An agreement to slander a third person would not be enforceable because slander is a(n):
A) crime.
B) civil wrong.
C) infringement of privacy.
D) assault.
Q3) An agreement to restrain trade may be void on the grounds that it is:
A) fraudulent.
B) contrary to public policy.
C) illegal lobbying.
D) unfair to merchants.
Q4) In every contract there exists an expressed covenant of good faith and fair dealing.
A)True
B)False
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Chapter 17: Writing, Electronic Forms, and Interpretation of Contracts
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Sample Questions
Q1) The writing required by the statute of frauds in the case of a contract for the sale of land must:
A) be addressed to the other party to the contract.
B) be made with the intent to create a writing to satisfy the statute of frauds.
C) be signed at the end of the writing.
D) describe the land to be sold.
Q2) The parol evidence rule may not apply if:
A) the contract is materially incomplete.
B) the parties disagree on the meaning of the contract.
C) there is no ambiguity regarding the terms of the contract.
D) one party is unable to perform the contractual obligations.
Q3) The statute of frauds applies to:
A) a contract of indefinite duration that is terminable at will by either party.
B) a promise made directly to a debtor that the promisor will pay the creditor of the debtor what is owed.
C) a promise by an executor to pay a claim against the estate out of his or her personal funds.
D) mutual promises to marry.
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Chapter 18: Third Persons and Contracts
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Sample Questions
Q1) The modern trend is to consider a general assignment to be:
A) a transfer of property only.
B) both a transfer of rights and a delegation of duties.
C) a delegation of duties only.
D) a transfer of rights only.
Q2) A person who has a right to buy on credit can transfer that right to a close relative.
A)True
B)False
Q3) Only written words that show an intention to transfer or assign will be given the effect of an assignment.
A)True
B)False
Q4) The party making an assignment is called the:
A) assignee.
B) assignor.
C) obligor.
D) successor.
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Chapter 19: Discharge of Contracts
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Q1) If a debtor specifies the debt to which a payment is to be applied and the creditor accepts the money, the creditor is bound to apply the money as specified; therefore, if a debtor specifies that a payment is to be made for a current purchase, the creditor may not apply the payment to an older balance.
A)True
B)False
Q2) The parties may decide that their contract is not the one they want. They may then replace it with another contract. If they do, the original contract is discharged by
A) solution
B) elocution
C) retribution
D) substitution
Q3) In most bilateral contracts, the performances of the parties are __________.
A) conditions precedent
B) conditions subsequent
C) recurrent conditions
D) concurrent conditions
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21
Chapter 20: Breach of Contract and Remedies
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Sample Questions
Q1) When one party breaks the contract, the contract is said to be breached.
A)True
B)False
Q2) The measure of monetary damages when there has been a breach of contract is the sum of money that will place the injured party in the same position that would have been attained if the contract had been performed.
A)True
B)False
Q3) The remedy of specific performance will most likely be granted in the case of a(n):
A) employment contract.
B) contract to buy shares of publicly-traded stock.
C) contract for the sale of a business.
D) contract for the sale of Florida oranges.
Q4) When one party commits a non-material breach of contract, the other party may rescind the contract.
A)True
B)False
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Chapter 21: Personal Property and Bailments
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Sample Questions
Q1) A gift requires intent to transfer title and delivery.
A)True
B)False
Q2) When a bailor sues the bailee for damages to the bailed property, who has the burden of proving fault and that such fault was the proximate cause of the bailor's loss?
A) the person in possession of the property
B) the bailor
C) the bailee
D) the jury
Q3) Most courts consider an engagement ring to be a conditional gift.
A)True
B)False
Q4) Vacarro gave her son Mark a car on the day Mark left for college. Vacarro told Mark that she expected him to use the car for school purposes and to earn good grades. Mark flunked out of college in his second semester. Vacarro sued to regain title to the car on the ground that the gift was conditional on Mark's earning good grades and remaining in college. Will Vacarro win the case?
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Chapter 22: Legal Aspects of Supply Chain Management
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Sample Questions
Q1) A warehouser is an insurer of goods.
A)True
B)False
Q2) A transferee of a nonnegotiable warehouse receipt acquires only the title and rights that the transferor had actual authority to transfer.
A)True
B)False
Q3) A bill of lading will be negotiable if its terms are that the goods are to be delivered to "bearer" or to "the order of" a named person.
A)True
B)False
Q4) The rights of a holder of a duly negotiated warehouse receipt are extinguished by the warehouser's surrender of goods to the depositor.
A)True
B)False
Q5) A warehouse receipt is considered a document of title.
A)True
B)False
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Chapter 23: Nature and Form of Sales
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Sample Questions
Q1) The term "course of dealing" refers to the language and customs of an industry.
A)True
B)False
Q2) Article 2 of the Uniform Commercial Code applies to the sale of:
A) corporate stocks.
B) U.S. Treasury bonds.
C) goods.
D) insurance policies.
Q3) A sale of goods is defined under UCC Article 2 as transfer of title to intangible property for a price.
A)True
B)False
Q4) Which of the following can satisfy the statute of frauds writing requirement?
A) bills of sale
B) letters
C) telegrams
D) all of the above
Q5) The parol evidence rule does not apply to the sale of goods.
A)True
B)False
25
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Chapter 24: Title and Risk of Loss
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Q1) When particular goods have been selected by either the buyer or the seller, or both, as being the goods called for by the sales contract, the goods are said to be A) identified.
B) actualized.
C) realized.
D) materialized.
Q2) __________ reserve auctions are those in which the goods must be sold regardless of whether the auctioneer is satisfied with the levels of the bids.
A) With
B) Without
C) Unqualified
D) Unrestricted
Q3) __________ goods are goods that, when mixed together, are indistinguishable.
A) Tangible
B) Intangible
C) Heterogeneous
D) Fungible
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26
Chapter 25: Product Liability: Warranties and Torts
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Sample Questions
Q1) Any warranty that does not provide the complete protection of a full warranty is called a warranty in breach.
A)True
B)False
Q2) An express warranty is basically any statement of fact or promise made about the goods that becomes part of the basis of the bargain.
A)True
B)False
Q3) A statement by a seller relating to goods that is part of the basis of the bargain is an express warranty.
A)True
B)False
Q4) Whenever a sale of goods is made, certain warranties are implied unless they are expressly excluded.
A)True B)False
Q5) Express warranties may be made before, during, but not after the sale of goods. A)True B)False
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Chapter 26: Obligations and Performance
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Q1) Unless otherwise specified, the place of delivery is the seller's place of business.
A)True
B)False
Q2) In a cash sale not requiring the movement of goods, each party has the right to demand that the other perform at the same time.
A)True
B)False
Q3) The obligation of all parties to perform in good faith is the same because everyone is required to be honest.
A)True
B)False
Q4) A buyer always has a right to examine the goods to determine if, in fact, the goods conform to the contract.
A)True
B)False
Q5) A buyer has a right to insist that all the goods be delivered at one time.
A)True
B)False
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Chapter 27: Remedies for Breach of Sales Contracts
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Q1) A seller may not sue the buyer for the full purchase price if:
A) the goods are resold at one-third of the contract price.
B) the goods cannot be resold.
C) the goods have been accepted.
D) the goods have been damaged after the risk of loss passed to the buyer.
Q2) The statute of limitations for breach of a sales contract:
A) may be reduced by the buyer and the seller to one year.
B) may be expanded by the buyer and the seller to six years.
C) begins to run from the signing of the contract.
D) always requires a notice to the seller to activate the statute.
Q3) A buyer may sue the seller for damages caused by the seller's fraud even if the buyer is barred by the UCC from suing for damages for breach of warranty.
A)True
B)False
Q4) If a buyer refuses to pay for goods after an acceptance that was not revoked, the seller may bring action to recover the purchase price and any incidental damages.
A)True
B)False
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Page 29
Chapter 28: Kinds of Instruments, Parties, and Negotiability
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Sample Questions
Q1) A promissory note that is payable "on the date of my marriage" is nonnegotiable even if the maker of the note marries.
A)True
B)False
Q2) Revised UCC Article 3 refers to drawers, indorsers, and accommodation parties as "secondary obligors."
A)True
B)False
Q3) Revised UCC Article 3 refers to which of the following parties as secondary obligors?
A) drawers
B) indorsers
C) accommodation parties
D) all of the above
Q4) An instrument is conditional if:
A) it contains an order for the payment of money out of a particular fund.
B) it is to be paid from the assets of an existing trust.
C) it is to be paid from the assets of an existing estate.
D) none of the above.
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30
Chapter 29: Transfers of Negotiable Instruments and
Warranties of Parties
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Q1) Order paper can be converted into bearer paper by the holder's blank endorsement.
A)True
B)False
Q2) A __________ indorsement consists of the signature of the indorser and words specifying the person to whom the indorser makes the instrument payable.
A) qualified
B) restrictive
C) special
D) blank
Q3) A forged or unauthorized endorsement is by definition:
A) an endorsement of the person by whom it appears to have been made.
B) no endorsement of the person by whom it appears to have been made.
C) binding on the party who refuses to ratify the instrument.
D) incapable of being ratified.
Q4) When a special endorsement is made, the instrument becomes order paper and may be negotiated only by an endorsement and delivery.
A)True
B)False
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Chapter 30: Liability of the Parties Under Negotiable Instruments
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Sample Questions
Q1) A taker of a negotiable instrument may be denied the status and protection of a holder in due course where:
A) one party is a consumer.
B) the close-connection doctrine applies.
C) the instrument is bearer paper.
D) none of the above.
Q2) The FTC rule concerning holders in due course is confined to consumer credit transactions.
A)True
B)False
Q3) For the purposes of determining holder in due course status, the requirement of value is similar to consideration.
A)True
B)False
Q4) The Federal Trade Commission expands the rights of a holder in due course in a consumer credit transaction.
A)True
B)False
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Chapter 31: Checks and Funds Transfers
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Q1) When a bank certifies a check, the amount involved in the certification will be retained in the depositor's account until payment of the certified check.
A)True
B)False
Q2) The duties of a drawee bank include all of the following except to:
A) maintain security concerning information relating to the depositor-bank relationship.
B) pay on demand all checks to the extent of the bank's assets.
C) exercise reasonable care in the payment of checks.
D) generally refuse to pay any checks after the drawer has died.
Q3) Checks that involve amounts of more than $1,000 generally trigger the bank reporting requirements under the USA Patriot Act.
A)True
B)False
Q4) Although a drawer has stopped payment on a check, the drawer still may be held liable on the check unless the drawer has a defense that will defeat the holder in a lawsuit.
A)True
B)False
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Chapter 32: Nature of the Debtor-Creditor Relationship
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Q1) Sureties have no rights to protect them from loss, to obtain their discharge because of the conduct of others that would be harmful to them, or to recover money that they were required to pay because of the debtor's breach.
A)True
B)False
Q2) If there are two or more sureties and one pays more than its proportionate share of the debt, such surety has the right against the cosureties known as: A) indemnity.
B) exoneration.
C) subrogation.
D) contribution.
Q3) The creditor's failure to give the surety notice of default is not a defense. A)True B)False
Q4) A letter of credit cannot extend for a period of more than five (5) years. A)True
B)False
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Chapter 33: Consumer Protection
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Q1) Pursuant to the CARD Act of 2009, all credit card companies must have bills in consumers' hands not less than __________ before the bill is due.
A) seven (7) days
B) fourteen (14) days
C) twenty-one (21) days
D) one (1) month
Q2) Consumer protection legislation regulates the prices that sellers may charge consumers.
A)True
B)False
Q3) __________ lending is a practice on the part of the subprime lending market whereby lenders take advantage of less sophisticated consumers or those who are desperate for funds by using the lenders' superior bargaining positions to obtain credit terms that go well beyond compensating them for their risks.
A) Predatory
B) Dilatory
C) Confiscatory
D) None of the above
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Chapter 34: Secured Transactions in Personal Property
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Q1) Perfection can occur merely by possession of the collateral by the creditor.
A)True
B)False
Q2) Consumer goods are classified into different categories based on the debtor's intended use, not the physical characteristics of the goods.
A)True
B)False
Q3) Upon the debtor's default, the creditor may sell the collateral at a public or private sale, or lease it to a third party.
A)True
B)False
Q4) UCC Article 9 makes a statutory lien for repairs or storage subordinate to a perfected security interest in the same collateral.
A)True
B)False
Q5) Under Revised UCC Article 9, a financing statement must be signed by the debtor.
A)True
B)False
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Chapter 35: Bankruptcy
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Q1) A debtor is presumed to be insolvent in the 180 days prior to declaration of bankruptcy.
A)True
B)False
Q2) The status of a trustee in a bankruptcy proceeding is best described as the:
A) prosecutor of the debtor.
B) successor to the debtor.
C) defender of the debtor.
D) protector of the debtor.
Q3) Nonprofit corporations are exempt from involuntary proceedings.
A)True
B)False
Q4) An automatic stay:
A) arises only upon the filing of a voluntary petition.
B) prevents any further interest from accruing on a debtor's outstanding debts.
C) prevents creditors from taking action outside of the bankruptcy proceeding against a debtor.
D) ends if a debtor attempts to incur additional debt after a petition has been filed.
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Chapter 36: Insurance
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Q1) After the expiration of the incontestability period of a life insurance policy, the insurer must pay the face amount of the policy when the insured dies and cannot claim that in obtaining the policy, the insured had been guilty of misrepresentation, fraud, or any other conduct that would entitle it to avoid the contract of insurance.
A)True
B)False
Q2) The coverage of the Personal Auto Policy (PAP) is limited to claims arising from the "use and operation" of an automobile.
A)True
B)False
Q3) An insured person is generally allowed, by policy provision or statute, a grace period of what length of time in which to make the payment of a premium due on a life insurance policy?
A) 2 weeks
B) 30 to 31 days
C) 2 months
D) 15 days
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Chapter 37: Agency
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Q1) The intention to ratify an unauthorized act may be expressed by words or conduct.
A)True
B)False
Q2) A __________ is authorized by the principal to handle a definite business transaction or to do a specific act.
A) special
B) general
C) secret
D) universal
Q3) The scope of an agent's authority may be determined from the:
A) express words of the principal.
B) words or deeds of the principal.
C) customs of the trade or business.
D) all of the above.
Q4) An agent is authorized to make contracts for, and is under the control of, the principal.
A)True
B)False
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Page 39
Chapter 38: Third Persons in Agency
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Q1) When a tort or crime is committed by an employee:
A) the principal is vicariously liable.
B) the principal is not vicariously liable.
C) vicarious liability cannot be imposed on the employer because an employee is not an agent.
D) vicarious liability could be imposed on the employer if the act was committed within the course of employment.
Q2) The agent of a disclosed principal is liable for harm caused to third persons by:
A) the fraudulent acts of the agent.
B) the malicious acts of the agent.
C) both a and b
D) none of the above.
Q3) When a third person makes payment to an authorized agent, such payment is deemed made to the principal as of the time when the agent remits the payment to the principal.
A)True
B)False
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Chapter 39: Regulation of Employment
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Q1) In the absence of an express or implied agreement to the contrary, the inventions of an employee belong to:
A) the employer.
B) the employee.
C) the employer, if the time and the property of the employer is involved.
D) none of the above.
Q2) An employer may be justified in discharging an employee because of the employee's:
A) nonperformance of duties.
B) incompetency.
C) serious misconduct.
D) all of the above.
Q3) The NLRA does not prohibit discrimination against employees for engaging in union activities, provided that employees are warned of the possible consequences of their union activities.
A)True
B)False
Q4) The sole issue addressed in the Fair Labor Standards Act is child labor.
A)True
B)False
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Chapter 40: Equal Employment Opportunity Law
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Q1) In a disparate impact case, proof that the employer did not intend to discriminate is a complete defense.
A)True
B)False
Q2) An affirmative action plan that "unnecessarily trammels" the interests of nonminority employees:
A) is an example of reverse discrimination.
B) is lawful if women are the favored group.
C) is lawful to aid in the hiring of blacks and Native Americans.
D) is unlawful unless the favored group has been severely disadvantaged.
Q3) Equal employment opportunity laws provide protection for minorities and women, but the disabled are not within the protection of the laws.
A)True B)False
Q4) Under Title VII, whites are protected against discrimination because of race and color.
A)True
B)False
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Page 42
Chapter 41: Types of Business Organizations
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Q1) The Federal Trade Commission has adopted a franchise disclosure rule that requires franchisors to give prospective franchisees a full disclosure statement thirty (30) days before a franchisee signs a contract or pays any money for a franchise.
A)True
B)False
Q2) Government grants create:
A) sole proprietorships.
B) corporations.
C) partnerships.
D) unincorporated associations.
Q3) Who serve as agents of the corporation and run the "day-to-day" operations of the business?
A) officers
B) directors
C) shareholders
D) employees
Q4) Corporations are subject to a form of double taxation.
A)True
B)False
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Chapter 42: Partnerships
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Q1) A partner has the authority to do those acts that are customary for a member of a partnership conducting the particular business of that partnership.
A)True
B)False
Q2) The mere fact that an enterprise is described as a partnership is not controlling or binding regarding its true business form.
A)True
B)False
Q3) Partnership property is only that property contributed by the partners.
A)True
B)False
Q4) In a partnership of four physicians, a decision to buy an office copier for the partnership must be approved by:
A) all of the partners.
B) at least three of the partners.
C) at least two of the partners.
D) one partner.
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Chapter 43: LPs, LLCs, and LLPs
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Q1) Under the Revised Uniform Limited Partnership Act, a limited partner may contribute:
A) cash only.
B) property only.
C) services only.
D) cash, property, and services.
Q2) A limited liability company may be classified as a partnership for tax purposes if:
A) such an election is made by "checking the box" for partnership tax treatment on the appropriate Internal Revenue Service form.
B) such an election is made in the operating agreement.
C) such an election is made in the articles of incorporation.
D) a majority of its members petition the Internal Revenue Service for partnership tax treatment.
Q3) The spread of limited liability corporation statutes resulted from:
A) a United States Supreme Court decision.
B) an Internal Revenue Service ruling.
C) a Wyoming Supreme Court decision.
D) a Securities and Exchange Commission ruling.
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Chapter 44: Corporate Formation
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Q1) The Miller family, who operates a musical instrument manufacturing concern, has decided to incorporate. The three (3) members of the Miller family, Mary, Mark and Sue, would like to become a corporation and obtain limited liability; however, taxation at the corporate level would be very costly for them. If possible, Mary Miller would rather be taxed as a partnership. Mark Miller is worried about the additional paperwork and meetings that incorporation would surely bring. Sue Miller does not want a large board of directors to be formed. Sue fears that the board would somehow detract from the family goals and orientation the business has always enjoyed. In light of these concerns, is there a corporate form that would better suit the Miller family?
Q2) The shares of a close corporation are always held by a single individual.
A)True
B)False
Q3) Subchapter S corporations have the benefits of limited liability as in partnerships and are taxed as corporations.
A)True
B)False
Q4) A business corporation may legally merge with a charitable corporation.
A)True
B)False
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Chapter 45: Shareholder Rights in Corporations
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Q1) Preferred stock is ordinarily nonvoting stock.
A)True
B)False
Q2) Until a transfer is recorded on its books, a corporation is entitled to treat the person whose name is on its books as the owner of its stock.
A)True
B)False
Q3) Shareholders exercise direct control over their corporation.
A)True
B)False
Q4) Restrictions on the transfer of stock are valid if they are not unreasonable.
A)True
B)False
Q5) The two most common instruments used to provide the capital structure of a corporation are stocks and bonds.
A)True
B)False
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Page 47
Chapter 46: Securities Regulation
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Q1) Liability under the 1933 Act applies only to sellers of securities who utilize untrue statements, not to those who merely offer to sell securities using untrue statements.
A)True
B)False
Q2) Investors who lack inside information and have sold their stock during the relevant time period may recover damages from insiders who have made use of the undisclosed information.
A)True
B)False
Q3) No private or limited offerings of securities are exempt from the SEC registration requirements.
A)True
B)False
Q4) Any shareholder owning more than five (5) percent of any class of the corporation's equity securities is statutorily defined as an insider and must file with the SEC a disclosure statement regarding such ownership and all related transactions.
A)True
B)False
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Chapter 47: Accountants Liability and Malpractice
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Q1) Breach of contract remedies are available to third parties against accountants because they are ordinarily considered third-party beneficiaries of contracts with accountants.
A)True
B)False
Q2) All negligence malpractice suits by third persons are prohibited by courts that follow the:
A) contract rule.
B) contact rule.
C) privity rule.
D) direct parties rule.
Q3) Sarbanes-Oxley would prohibit which of the following individuals from serving on an audit committee of the company's board?
A) a director who accepts consulting fees from the company
B) a director who is affiliated with the company
C) a director who is affiliated with a subsidiary of the company.
D) all of the above.
Q4) General causation principles of negligence apply to the law of malpractice. A)True
B)False
Page 49
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Chapter 48: Management of Corporations
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Q1) The powers of the officers of a corporation are controlled by the laws of agency.
A)True
B)False
Q2) What is not part of the presumptions of the business judgment rule concerning directors?
A) that the decision they reached was profitable to the corporation
B) that they acted on an informed basis
C) that they acted in good faith
D) that they acted in the honest belief that the action taken was in the best interest of the corporation
Q3) The courts have traditionally viewed it as their responsibility to sit in judgment on the wisdom of decisions made by corporate directors.
A)True
B)False
Q4) The authority of corporate employees and other officers is generally limited to the duties of their offices.
A)True
B)False
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Chapter 49: Real Property
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Q1) Which is <u>not</u> a correct statement about deeds?
A) The grantor must sign the deed.
B) A deed must be recorded to effectively pass title.
C) The fact that a deed is recorded provides notice to the world about who holds title.
D) A deed must be delivered to be effective.
Q2) Which of the following statements is incorrect about fixtures?
A) Personal property may become a fixture by annexation to the realty.
B) Personal property may become a fixture by adaptation to the realty.
C) Personal property may become a fixture based on the intent of the person affixing the personal property to the realty.
D) Personal property that is readily removable from the realty is generally a fixture.
Q3) The general view is that although the owner of land owns the space above the land, such ownership is entirely subject to the rights of flying aircraft, even if the aircraft should interfere with the use of the land and represent a danger to persons or property on the land.
A)True
B)False
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Page 51
Chapter 50: Environmental Law and Land Use Controls
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Q1) "Superfund" is another name for a hazardous waste fund.
A)True
B)False
Q2) Which statement is incorrect concerning the law of nuisance?
A) Not every interference with the use or enjoyment of property is a nuisance.
B) Even if an activity is otherwise lawful, it is the effect on others that determines whether there is a nuisance.
C) The proper use of land does not constitute a nuisance as to a neighbor, even though the neighbor does not like the use.
D) A plaintiff may obtain damages from the party who has committed a nuisance, but the plaintiff cannot have the nuisance enjoined.
Q3) The first federal legislation that dealt with air pollution was the Air Pollution Control Act of 1955, which was simply a statutory recognition of a concern about air quality.
A)True
B)False
Q4) Nuisances may be classified as either private nuisances or public nuisances.
A)True
B)False
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Chapter 51: Leases
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Q1) Making improvements is a duty that falls on the tenant.
A)True
B)False
Q2) If taxes or assessments on leased premises are increased because of improvements made by the tenant that remain with the property, the:
A) landlord is liable for such increases.
B) landlord is liable for such increases only if the tenant was under a duty to make the improvements.
C) landlord is liable for such increases only to the extent that the improvements actually increase the fair market value of the property.
D) tenant is liable for such increases.
Q3) Under the common law, the reason a landlord terminates a lease by notice is immaterial.
A)True
B)False
Q4) In a residential lease, it is commonly held that there is an implied warranty of habitability.
A)True
B)False
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Chapter 52: Decedents Estates and Trusts
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Q1) The relatives of an individual who dies without a valid will may acquire title to the decedent's property through:
A) intestate succession.
B) the right of replevin.
C) testate succession.
D) the right of acquisition.
Q2) Margo had only one son, and her husband had predeceased her. The son was reckless and extravagant, but Margo loved him dearly. She left all her property to a trustee in trust for her son and provided that the trust was a spendthrift trust. Margo further provided that the income from the trust was to be paid to her son quarterly until he reached the age of 30 at which time the full trust corpus was to be paid over to him. After Margo's death and before the son had reached the age of 30, the son signed a contract that purported to transfer the entire trust corpus to a finance company. The son was paid for this. The son had also run up many unpaid bills on which he was sued and judgments entered against him. The finance company and the other judgment creditors are seeking to compel the trustee to turn over the trust corpus to them. Decide.
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54