Business and Society
Exam Answer Key
Course Introduction
Business and Society explores the intricate relationship between businesses and the broader societal context in which they operate. This course examines the ethical, legal, social, and environmental responsibilities of organizations and investigates how business decisions impact stakeholders including employees, consumers, communities, and the environment. Students will analyze contemporary issues such as corporate social responsibility, ethical leadership, sustainability, and stakeholder management while learning frameworks for making responsible business decisions that balance profit with social good. Through case studies and real-world examples, the course prepares students to critically assess the role of businesses in shaping societal outcomes and to become responsible leaders in the global economy.
Recommended Textbook
Essentials of Business Law and the Legal Environment 11th Edition by Richard A. Mann
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Chapter 1: Introduction to Law
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Sample Questions
Q1) What is the supreme law of the land in the United States?
A)Federal statutes.
B)Treaties.
C)Case law as developed through the U.S. Supreme Court.
D)The U.S. Constitution.
Answer: D
Q2) Which of the following is correct regarding the decisions of state trial courts?
A)They are generally not reported.
B)They are reported in regional reports.
C)They are reported in state court reports.
D)They are binding upon lower courts based upon the principle of stare decisis.
Answer: A
Q3) Substantive law creates,defines,and regulates legal rights and duties.
A)True
B)False
Answer: True
Q4) In the United States,treaties are not subject to judicial review.
A)True
B)False
Answer: False
Page 3
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Chapter 2: Business Ethics
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Sample Questions
Q1) A major criticism of utilitarianism as an ethical theory is that:
A)it is rigid.
B)in some important instances it ignores justice.
C)it results in the judgment that a person's actions are always moral for that person and therefore exempt from punishment.
D)it is excessively formal.
Answer: B
Q2) What is unjust to a social egalitarian will also be unjust to a libertarian.
A)True
B)False
Answer: False
Q3) To a __________ ,whether telling a lie in a given instance would produce greater pleasure than telling the truth is less important than deciding if a general practice of lying would maximize society's pleasure.
A)deontologist
B)rule utilitarian
C)ethical fundamentalist
D)ethical relativist
Answer: B
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Page 4
Chapter 3: Civil Dispute Resolution
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Sample Questions
Q1) When a trial is conducted with a jury,the judge determines issues of __________ and the jury determines questions of __________.
A)evidence, law
B)law, evidence
C)law, fact
D)fact, law
Answer: C
Q2) The legal concept which deals with the location where a lawsuit should be brought is:
A)venue.
B)in personam jurisdiction.
C)subject matter jurisdiction.
D)stare decisis.
Answer: A
Q3) The U.S.Supreme Court:
A)has only appellate jurisdiction, as the nation's highest tribunal.
B)must accept for review any decision appealed under a writ of certiorari.
C)has original jurisdiction over certain types of cases.
D)hears most of its cases through an appeal by right.
Answer: C
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Chapter 4: Constitutional Law
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Sample Questions
Q1) In relation to the Takings Clause,public use has been held to be synonymous with public purpose.
A)True
B)False
Q2) John is a Haitian who has obtained U.S.citizenship.State X passes a law that all Haitian-born citizens must submit to AIDS testing.The courts will review this law based on:
A)deferring to the legislature to determine whether such a classification of persons is constitutionally permissible.
B)clear and convincing evidence that there is no reasonable basis for the legislation.
C)the rational relationship test.
D)the strict scrutiny test.
Q3) The Contract Clause of the Constitution prevents states from retroactively modifying public charters and private contracts.
A)True
B)False
Q4) What rights are protected by the First Amendment? What sorts of speech are constitutionally protected?
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6
Chapter 5: Administrative Law
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Sample Questions
Q1) The legislature may exercise control of administrative agencies in various ways.These are:
A)through its budgetary power.
B)through the power to appoint and remove chief administrators.
C)by amending an enabling statute to increase, modify, or decrease an agency's authority.
D)All of the above.
E)(a) and (c), but not (b).
Q2) The Freedom of Information Act and the Government in the Sunshine Act are different names for the same statute.
A)True
B)False
Q3) After an FOIA request has been made,an agency has __________ working days within which to indicate whether it intends to comply.
A)3
B)10
C)21
D)30
Q4) Discuss the role of judicial review in relation to administrative agencies.
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Chapter 6: Criminal Law
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Sample Questions
Q1) Civil law is a part of public law,whereas criminal law is a part of private law.
A)True
B)False
Q2) Murder is a mala prohibita type of crime.
A)True
B)False
Q3) Anita tells Bob that unless Bob pays her $5,000,she will tell his customers that he was once arrested for shoplifting as a teenager.The fact that Bob shoplifted as a teenager is true.
A)In most jurisdictions Anita has committed the crime of extortion.
B)Anita has committed the crime of defamation.
C)Anita has committed the crime of bribery.
D)In all jurisdictions in the United States, Anita would have to have received the money from Bob to be charged with a crime.
Q4) There are no federal common law crimes.
A)True
B)False
Q5) The defendant must testify in a criminal proceeding.
A)True
B)False
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Chapter 7: Intentional Torts
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Sample Questions
Q1) An absolute privilege exists to protect which of the following defendants in defamation cases?
A)Members of Congress on the floor of Congress.
B)Statements made by the President of the U.S. in the discharge of official duty.
C)Statements about a third party made to one's spouse when the couple is alone.
D)All of the above.
Q2) In the Ferrell v.Mikula case,the Georgia Court of Appeals said that:
A)false imprisonment is the unlawful detention of the person of another for an unreasonable length of time.
B)the essential elements of an action for false imprisonment include detention, unlawfulness, and malice.
C)the elements of a cause of action for intentional infliction of emotional distress include either intentional or reckless conduct that is extreme and outrageous, a causal connection between the wrongful conduct and the emotional distress, and severe emotional distress.
D)to constitute the tort of intentional infliction of emotional distress, action must be intentional, not merely reckless.
Q3) Identify the elements of a tort and the objectives of tort law.
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Page 9
Chapter 8: Negligence and Strict Liability
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Sample Questions
Q1) A(n)__________ is a sudden,unexpected event calling for immediate action,that is considered when determining whether conduct was reasonable in a negligence lawsuit.
A)res ipsa loquitur.
B)duty to act.
C)emergency.
D)None of the above.
Q2) Under the Second Restatement,the duty of a possessor of land to persons who come on the land usually depends on whether those persons are:
A)invitees, trespassers, or licensees.
B)reasonable persons.
C)fiduciaries.
D)involved in abnormally dangerous activities.
Q3) If a person's 150-pound sheep dog has a propensity to jump enthusiastically on visitors,the animal's keeper would be liable for any damages done by the dog's playfulness.
A)True
B)False
Q4) Identify the elements a plaintiff must prove in an action for negligence.
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Page 10
Chapter 9: Introduction to Contracts
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Sample Questions
Q1) If Anna by mistake delivers to Bob a plain,unaddressed envelope containing $50 intended for Cora:
A)Bob is under no obligation to return the money.
B)Bob is under a contractual obligation to return the money.
C)Bob's obligation to return the money is quasi-contractual.
D)Bob's obligation to return the money is implied in fact.
Q2) In addition to the four basic requirements of a contract,which of the following must also occur in order to have a valid contract?
A)The agreement must always be in writing.
B)There must be evidence of undue influence.
C)There must be an absence of invalidating conduct.
D)A legal remedy must be available for there to be a breach.
Q3) The Weichert Co.Realtors v.Ryan case found that the parties formed an express contract by mutually manifesting assent to the essential terms.
A)True
B)False
Q4) What are the essential elements of a contract? List and discuss them.
Q5) What is the doctrine of promissory estoppel,and when is it used?
Q6) What is the difference between a valid contract and a void contract?
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Chapter 10: Mutual Assent
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Sample Questions
Q1) A conditional acceptance:
A)generally accepts the original offer, but provides a way to later avoid contractual obligations.
B)is a common type of counteroffer.
C)operates as a rejection and not a new offer.
D)cannot exist because an acceptance is, by definition, an act that manifests the offeree's willingness to enter into a contract on the terms of the offer.
Q2) Bailey attended an auction and bid $150 on an antique dresser.No one else made a higher bid.Discuss the effect of (a)the designation that the auction is without reserve, (b)the advertisement that the auction is with reserve,and (c)the lack of any announcement or advertisement as to whether the auction is with or without reserve.
Q3) A contract that binds the offeror to keep an offer open for a specified period of time is known as:
A)a offer with reserve.
B)an option.
C)promissory estoppel.
D)a unilateral contract.
Q4) Discuss silence as acceptance of an offer.
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Page 12
Chapter 11: Conduct Invalidating Assent
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Sample Questions
Q1) A contract induced by threatening to bring a civil suit against an individual is prohibited:
A)if the threat is an abuse of process.
B)if the suit is to recover a debt, whether the debt is valid or in controversy.
C)under no circumstances.
D)Both (a) and (b).
Q2) A basic element of fraud is a false representation or a misrepresentation. A)True B)False
Q3) There are two distinct types of fraud. A)True B)False
Q4) Scienter is the element of fraud that requires that the misrepresentation must have been known by the one making it to be false and must have been made with an intent to deceive.
A)True
B)False
Q5) What are the two types of fraud and what is the effect of each on the contract involved? Give an example of each type of fraud.
Page 13
Q6) What elements need to be proved to establish each type of fraud?
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Chapter 12: Consideration
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Q1) Which of the following are the two basic elements to consideration?
A)Bargained-for exchange and legal sufficiency.
B)Legal detriment and legal benefit.
C)Legal sufficiency and legal adequacy.
D)Promise and forbearance.
Q2) Andrew agreed to exchange something clearly without value to enter a contract with Milt.The contract will not fail for lack of consideration because,if the parties agree to the exchange,the courts will not be concerned about whether the consideration is "adequate."
A)True
B)False
Q3) Legal detriment means the obtaining by the promisor of that which he had no prior legal right to obtain.
A)True
B)False
Q4) What transactions are enforceable even though they are not supported by consideration?
Q5) Define a substituted contract and explain how it affects an agreement.
Q6) Define legal detriment.
Q7) Is a promise to pay a pre-existing moral obligation enforceable?
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Chapter 13: Illegal Bargains
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Sample Questions
Q1) Which of the following would always be considered to be contrary to public policy?
A)A contract which contains a covenant not to compete.
B)A contract offered on a take-it-or-leave-it basis.
C)An agreement to pay someone to make false statements about a competitor's product.
D)An agreement which contains an exculpatory clause.
Q2) Bargains are illegal if they violate a crime or tort but not if they are merely against public policy.
A)True
B)False
Q3) A bargain by a candidate for public office to make a certain appointment following the election is legal.
A)True
B)False
Q4) An agreement for the purchase of an illegal substance will be enforced by the courts if all other elements of the contract are present.
A)True
B)False
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Page 15
Chapter 14: Contractual Capacity
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Sample Questions
Q1) Under the Uniform Commercial Code,when the minor has sold goods and the buyer has resold them to a good faith purchaser for value:
A)the minor can disaffirm and recover the property.
B)both the purchaser from the minor and the good faith purchaser for value acquire legal title.
C)the good faith purchaser for value acquires legal title.
D)the good faith purchaser for value receives a voidable title.
Q2) Harold,a minor,decided to trade his 1992 truck on a new car at the local dealership.One week after driving the new car,Harold decides that he cannot afford the payments.Harold now wishes to disaffirm his purchase and get his old truck back.The dealer informs Harold that the truck has been sold.Can Harold get the old truck back and disaffirm his contract with the dealer?
Q3) Discuss a minor's duty to a seller upon disaffirmance of a contract for the sale of goods.
Q4) Ratification of a contract,once effected,is final and cannot be withdrawn.
A)True
B)False
Q5) What are the two tests for mental competency?
Q6) What is the doctrine of liability for a tort connected with a contract?
Page 16
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Chapter 15: Contracts in Writing
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Sample Questions
Q1) The executor-administrator provision applies to promises of an executor of a decedent's estate to the decedent's creditors.
A)True
B)False
Q2) Clara types a letter to David setting forth the terms of their contract that falls within the statute of frauds.At the end of the letter,she types her name but does not sign her signature to it.If David wants to use the letter to satisfy the writing requirement,he may do so.
A)True
B)False
Q3) Under E-Sign,an electronic agent:
A)is a computer program or other automated means used independently to initiate an action or respond to electronic records or performances.
B)is an individual who uses electronic means to initiate an action or respond to electronic records or performance.
C)is an electronic sound, symbol, or process attached to or logically associated with a contract or other record.
D)may not form a contract without an individual's reviewing the terms.
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Chapter 16: Third Parties to Contracts
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Sample Questions
Q1) When the rights under a contract are highly personal,they are not assignable.
A)True
B)False
Q2) Assignments that materially increase the risk,duty,or burden on the obligor will nonetheless remain effective and enforceable.
A)True
B)False
Q3) Which of the following is NOT true concerning the requirements for an effective assignment?
A)The assignment must be voluntary.
B)Consideration is required.
C)There must be an intention to make the assignee the owner of the right.
D)The assignment may be either written or oral.
Q4) To protect the obligor or the public interest,some contract rights are not assignable.
A)True
B)False
Q5) A party delegating his duty to a third party is known as a delegator.
A)True
B)False
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Chapter 17: Performance, Breach, and Discharge
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Sample Questions
Q1) In the case of Michael Silvestri v.Optus Software,Inc.,the court held:
A)an objective standard is typically applied to satisfaction clauses in employment contracts.
B)an objective standard must be used in determining what is satisfactory performance in any "satisfaction" contracts.
C)idiosyncratic judgments as to what constitutes satisfactory employee performance are inherently unfair and should not be allowed.
D)in judging a high-level manager's satisfactory performance, a subjective test is appropriate.
Q2) Which of the following is true with respect to substantial performance?
A)It has particular importance in the construction industry.
B)Substantial performance does not defeat the purpose of the contract.
C)When one party to a contract has substantially performed, the other party cannot recover damages for the imperfect performance.
D)All of the above.
E)Two of the above, (a) and (b) are correct.
Q3) What is a condition? Give an example of each of the following types of conditions: condition precedent,condition concurrent,conditions subsequent.
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19
Chapter 18: Contract Remedies
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Sample Questions
Q1) A small breach of contract damage amount fixed without regard to the amount of loss is known as:
A)reliance damages.
B)out-of-pocket damages.
C)nominal damages.
D)None of the above.
Q2) The majority of states follow the __________ rule in awarding damages for fraud.
A)benefit-of-the-bargain
B)out-of-pocket
C)liquidated
D)restitution
Q3) Vladimir entered into a contract to buy Daniel's collection of rare stamps.Vladimir mailed payment of $10,000 for the stamps to Daniel,but now Daniel tells Vladimir,"I'll never part with these stamps." Are the following remedies available to Vladimir?
A)Restitution: Yes; Specific Performance: Yes
B)Restitution: Yes; Specific Performance: No
C)Restitution: No; Specific Performance: Yes
D)Restitution: No; Specific Performance: No
Q4) Explain three limitations on monetary damages.
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Chapter 19: Introduction to Sales and Leases
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Sample Questions
Q1) Under Article 2A:
A)a court faced with an unconscionable contract or clause must refuse to enforce the entire contract.
B)consumers in an unconscionable consumer lease contract receive an additional remedy over consumers in unconscionable sales contracts. Reasonable attorneys' fees may be awarded.
C)there is no provision for relief for unconscionable conduct in the collection of a claim arising from a consumer lease contract.
D)lessees under all types of leases of personal property have the same protections against unconscionable contracts.
Q2) Edie telephoned the office supply store and agreed to buy a dozen ink cartridges at $26 each.She then realized what a good buy this was and called the store with a request to modify the contract to read two dozen.What is the consequence?
A)The modified contract is unenforceable.
B)The modified contract is void.
C)The modified contract is valid and enforceable.
D)There is no consideration, so the contract is void.
Q3) Discuss the concept of freedom of contract under Articles 2 and 2A of the UCC.
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Chapter 20: Performance
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Q1) Les contracts to the sell and deliver to Chan 300 rolls of insulation.Unless the parties agree otherwise,Les must tender all 300 rolls in a single delivery,and Chan's payment is due at the time of the tender.
A)True
B)False
Q2) Tender of delivery requires:
A)only that the seller put and hold goods that conform to the contract at the buyer's disposition.
B)that the goods be made available to the buyer for at least one week if they are not perishable.
C)that the seller give the buyer reasonable notice of the tender.
D)that tender occur during the buyer's normal business hours.
Q3) In a sale of goods,the seller's tender of performance does not have to conform to the Code's perfect tender rule.
A)True
B)False
Q4) Seller,through no fault of its own,is unable to deliver the goods to buyer because the agreed type of carrier is unavailable.Explain what the Code requires.
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Page 22
Chapter 21: Transfer of Title and Risk of Loss
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Q1) Article 6 of the Code does not:
A)apply to sales of goods in the ordinary course of business.
B)define "bulk transfer" as any transfer in bulk and not in the ordinary course of business.
C)apply to merchants whose principal business is the sale of merchandise from stock.
D)include the transfer of a substantial part of equipment as a bulk transfer under any circumstances.
E)All of the above.
Q2) The UCC and the common law are essentially the same in regard to their treatment of risk of loss or damage to identified goods.
A)True
B)False
Q3) Brett contracts to purchase a particular Chevrolet from Johnson's car lot.Brett obtains a "special property interest" in the car when:
A)the contract is made.
B)the car is tendered to Brett.
C)Brett pays for the car.
D)Brett accepts the car.
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Chapter 22: Product Liability: Warranties and Strict Liability
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Q1) Hubert bought heavy-duty,sharp hedge clippers to trim the hedges in his yard.In the process of using the clippers,he severely cut his hand.He is now suing the manufacturer because the clippers are unreasonably dangerous.Can he recover?
Q2) The liability of manufacturers and sellers of goods for a defective product or for its failure to perform adequately may be based on one or more of the following: negligence,misrepresentation,violation of a statutory duty,warranty,and strict liability in tort.
A)True
B)False
Q3) The main provision of the Restatement (Third)of Torts,Section 2,recognizes three types of product defects: manufacturing defects,design defects,and failure to warn,but it imposes strict liability only for manufacturing defects.
A)True
B)False
Q4) The Code requires that the affirmations,promises,or descriptions the seller makes be relied on by the buyer to be an express warranty.
A)True
B)False
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Page 24
Chapter 23: Sales Remedies
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Q1) Under the CISG,if the contract is avoided and the seller has resold the goods in a reasonable manner and within a reasonable time after avoidance,the seller may recover:
A)the difference between the contract price and the resale price.
B)incidental damages only.
C)consequential damages.
D)Both (a) and (c).
Q2) When the buyer breaches a sales contract,if the difference between the contract price and the market price will not place the seller in as good a position as performance would have,then the seller may recover the lost profit.
A)True
B)False
Q3) After a breach by the seller,buyer may replevy the goods after identification if:
A)he acts within 30 days.
B)he cannot, after a reasonable effort, buy replacement goods.
C)the seller is insolvent.
D)he cannot buy replacement goods or the seller is insolvent.
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Chapter 24: Form and Content
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Q1) Carol buys some items at the drugstore and writes a check to the store on her account at First Bank.Who is the drawee?
A)Carol.
B)The drugstore.
C)First Bank.
D)There is none.
Q2) Carlos wrote a check with the numbers $4500 and the written amount as forty-five dollars.Explain how the ambiguity will be resolved.
Q3) The UCC states that an instrument fulfills the requirements of being payable to bearer if it:
A)states it is payable to bearer or the order of bearer.
B)does not state a payee.
C)states it is payable to "cash" or to the order of "cash."
D)All of the above.
Q4) What are the requirements of negotiability under the Code? List and briefly summarize them.
Q5) The drawee is the individual who signs a check and promises to pay.
A)True
B)False
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Chapter 25: Transfer and Holder in Due Course
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Q1) In a nonconsumer transaction,a holder in due course takes the instrument free from:
A)all claims on the part of any person.
B)all defenses of any party with whom he has not dealt, except for a limited number of defenses that are available against anyone, including a holder in due course.
C)the defense of incapacity, duress, or illegality that renders the obligation void.
D)Both (a) and (b) are correct.
Q2) Jennifer,who stole a check "payable to cash," cannot be a holder since she did not receive possession by voluntary transfer.
A)True
B)False
Q3) The principal advantage of negotiable instruments is their legitimacy.
A)True
B)False
Q4) An indorsement "for deposit" is a collection indorsement.
A)True
B)False
Q5) What is negotiation? How does one become a "holder" of an instrument?
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Chapter 26: Liability of Parties
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Q1) Transferor's warranties and presenter's warranties are implied warranties imposed only on those who sign an instrument.
A)True
B)False
Q2) By paying the holder on an instrument,a party may be discharged from liability.
A)True
B)False
Q3) Unauthorized signatures include both forgeries and signatures made by an agent without authority.
A)True
B)False
Q4) A drawee bank's refusal to certify a check constitutes dishonor of the instrument.
A)True
B)False
Q5) An acceptor should always indicate on the instrument the amount accepted. A)True
B)False
Q6) List and generally explain the warranties on presentment.
Q7) Discuss the effect of an unauthorized signature on an instrument.
Page 28
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Chapter 27: Bank Deposits, Collections, and Funds Transfers
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Q1) The duty of care exercised by a collecting bank in handling an item transferred to it for collection does not include:
A)taking care in presenting the item.
B)that it must act within a reasonable time after receipt of the bank item.
C)taking care in routing.
D)taking care in selecting intermediary banks.
E)All of the above are duties of care of collecting banks.
Q2) The Check Clearing for the 21st Century Act requires banks to accept checks in electronic form.
A)True
B)False
Q3) On April 6,Ellen sends a check out to a magazine publisher and then discovers she has already paid for the subscription.She calls her bank and orders that the bank not make payment.That order will be good until:
A)April 13.
B)October 6.
C)April 13 if confirmed in writing.
D)October 6 if confirmed in writing.
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Chapter 28: Relationship of Principal and Agent
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Q1) Whether an agency relationship has been created is determined by using a subjective test.
A)True
B)False
Q2) A person who engages an independent contractor to do a specific job has the right to control the details of the conduct and activities of the independent contractor as it applies to the specific job.
A)True
B)False
Q3) A(n)__________ is a person in a position of trust and confidence who has a duty of utmost loyalty and good faith.
A)fiduciary
B)servant
C)independent contractor
D)principal
Q4) When the agency terminates,the agent's duty of confidentiality continues.
A)True
B)False
Q5) Discuss the nature of agency,including the scope of agency purposes.
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Chapter 29: Relationship With Third Parties
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Q1) Under the Second Restatement,the bankruptcy of the principal terminates,without notice,the power of an agent to affect the principal's property that passes to the bankruptcy trustee.
A)True
B)False
Q2) A principal is contractually bound to a third party if the agent acts without any authority but the principal ratifies the contract.
A)True
B)False
Q3) For a ratification to be effective,the principal:
A)must have knowledge of all material facts concerning the transaction.
B)must communicate her intent to ratify to the third party.
C)must have been in existence when the act was done.
D)Both (a) and (c) are correct.
Q4) Gerald,an agent,who makes a contract with Adele on behalf of Leon,an unidentified principal,may maintain in Gerald's own name a breach of contract action against Adele.
A)True
B)False
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Chapter 30: Formation and Internal Relations of General Partnerships
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Q1) A person who receives a share of profits of a business is presumed to be a partner. A)True B)False
Q2) Ed,Vivian,and Pablo enter a partnership.Identify the source of the duties among the partners and whether these can be waived or varied.Name the principal duties Ed,Vivian,and Pablo have to each other and to the partnership.
Q3) Sole proprietors have limited liability for the sole proprietorship's debts. A)True B)False
Q4) Bert and Philip have decided to form a partnership to operate a lawn care service.Discuss whether they should name the business and,if so,what considerations affect the name they might choose.
Q5) A judicial lien against a partner's transferable interest in a partnership is known as: A)a legal aggregate.
B)a delegation of assets.
C)a charging order.
D)an assignment.
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Chapter 31: Operation and Dissolution of General Partnerships
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Q1) The actual express authority of partners must be specifically set forth in the partnership agreement.
A)True
B)False
Q2) A person admitted into an existing partnership is personally liable for all of the obligations of the partnership arising before his admission.
A)True
B)False
Q3) Much of the law of partnership is the law of agency.
A)True
B)False
Q4) Under the RUPA,a partner in a term partnership who wrongfully dissociates before the end of a definite term cannot receive payment of a portion of the buyout price before the expiration of the term.
A)True
B)False
Q5) The UPA marshaling of assets doctrine is abolished by the RUPA.
A)True
B)False
Page 33
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Chapter 32: Limited Partnerships and Limited Liability Companies
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Q1) The general partners of a limited partnership have almost exclusive control and management of the limited partnership.
A)True
B)False
Q2) When were the last amendments made to the RULPA?
A)1976
B)1985
C)2001
D)2003
Q3) All of the states have enacted statutes enabling the formation of limited liability partnerships (LLPs).
A)True
B)False
Q4) A limited partnership agreement may not provide that limited partners have the right to vote on matters as a class separate from the general partners.
A)True
B)False
Q5) Describe an LLC and the rights of its members.
Q6) Discuss the duties of general partners to limited partners.
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Chapter 33: Nature and Formation of Corporations
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Q1) A corporation is considered to be a person within the meaning of the Fifth Amendment protection against self-incrimination.
A)True
B)False
Q2) Identify and give the basic characteristics of each of the following specialized types of corporations.
a.Professional corporations
b.Public corporations
c.Nonprofit corporations
Q3) A corporation has perpetual existence unless otherwise stated in its articles of incorporation.
A)True
B)False
Q4) Opal,a promoter of Victory Corporation,has a fiduciary duty to:
A)any other promoters of Victory Corporation.
B)only Victory Corporation.
C)the initial shareholders of Victory Corporation.
D)Both (a) and (c).
Q5) What are the consequences of a defective incorporation?
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Chapter 34: Financial Structure of Corporations
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Q1) The MBCA as amended in 1980 and the Revised Act have adopted a net asset test for the issuance of dividends.
A)True
B)False
Q2) A corporation may purchase its own shares only out of earned surplus unless the articles of incorporation or the shareholders permit purchase out of capital surplus.
A)True
B)False
Q3) The Ajax Corporation issues bonds that pay a minimum of 6% interest but that can pay more if corporate earnings reach certain specified levels.The holder of the bond may exchange it for stock of the corporation.This bond would be a:
A)callable income bond.
B)convertible participating bond.
C)convertible unsecured bond.
D)convertible secured bond.
Q4) Under the Revised Act,dividends must always be paid in money.
A)True
B)False
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Chapter 35: Management Structure of Corporations
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Q1) As the shareholders' elected representatives,the board of directors are delegated the power to direct the business of the corporation.
A)True
B)False
Q2) Assuming no special provision in the articles of incorporation,special shareholder meetings may be called by:
A)the president of the company.
B)any individual director.
C)any individual shareholder.
D)holders of at least 10% of shares.
Q3) How does the management structure of a closely held corporation differ from that of a publicly traded corporation?
Q4) In which of the following areas does the board determine corporate policy?
A)Selecting and removing officers.
B)Determining the corporation's capital structure.
C)Initiating fundamental changes and declaring dividends.
D)Setting management compensation.
E)All of the above.
Q5) Discuss the business judgment rule.
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Chapter 36: Fundamental Changes of Corporations
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Q1) A court may dissolve a corporation in a proceeding brought by a shareholder when:
A)the corporate assets are being misapplied.
B)the directors are deadlocked and the shareholders are unable to break the deadlock.
C)the shareholders are deadlocked and have failed to elect directors for at least two consecutive annual meetings.
D)All of the above.
Q2) A creditor may petition the court to judicially dissolve a corporation if he has an unsatisfied judgment against the corporation and:
a.the corporation is insolvent.
b.the creditor will become insolvent if not paid.
c.the debt is over $5,000.
d.All of the above.
Q3) A court may not dissolve a corporation in a proceeding brought by a shareholder if it is only established that the acts of the directors are merely oppressive and not destructive.
A)True
B)False
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Chapter 37: Secured Transactions and Suretyship
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Q1) The UCC defines a debtor's "rights in collateral" in Article 9. A)True
B)False
Q2) Tony is a surety for Monica on a debt she owes to Francis.If Monica properly tenders full payment and Francis refuses it,both Monica and Tony are discharged from the debt. A)True
B)False
Q3) A security interest in electronic chattel paper is perfected by automatic perfection. A)True B)False
Q4) Mr.Chickilini is a surety for Wayne on a debt owed to Melvin.If Wayne fails to pay,what is Mr.Chickilini's defense to avoid payment of the debt?
Q5) The promise of a surety is binding even without consideration. A)True B)False
Q6) Explain how the 1998 Revisions to Article 9 facilitate electronic filing of a financing statement.
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Page 39
Chapter 38: Bankruptcy
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Q1) A bankruptcy petition may be filed by one creditor of a debtor as long as the debtor owes him $14,425 or more in undisputed unsecured claims and the debtor has fewer than 12 creditors.
A)True
B)False
Q2) The estate of a debtor includes wages earned after commencement of a Chapter 7 liquidation proceeding.
A)True
B)False
Q3) More than 99 percent of all bankruptcy petitions are filed voluntarily.
A)True
B)False
Q4) Within each federal district court is established a bankruptcy court staffed by bankruptcy judges.
A)True
B)False
Q5) A debtor may not convert a Chapter 7 case to a Chapter 11 or 13 case. A)True
B)False
Q6) Bankruptcy legislation serves a dual purpose.What are these purposes?
Page 40
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Chapter 39: Securities Regulation
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Q1) A registration statement generally includes all of the following EXCEPT a:
A)financial statement certified by an independent public accountant.
B)description of the business.
C)description of the management.
D)projection of future growth potential.
Q2) Under the Dodd-Frank Act,the SEC must issue rules requiring issuers to disclose in annual proxy statements the reasons the issuer has chosen to combine or separate the positions of CEO and chairman of the board of directors.
A)True
B)False
Q3) The Sarbanes-Oxley Act requires either the chief executive officer or the chief financial officer of a company issuing securities to certify information in the issuer's annual and quarterly reports.
A)True
B)False
Q4) The Securities Act of 1933 is also called the "Truth in Securities Act."
A)True
B)False
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Chapter 40: Intellectual Property
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Q1) The Wal-Mart Stores,Inc.v.Samara Brothers,Inc.case involved which of the following?
A)Infringement of unregistered trade dress.
B)Infringement of a registered symbol.
C)Use of a certification mark.
D)Use of a collective mark.
Q2) Federal trademark protection may be obtained for the symbol of the U.S.flag.
A)True
B)False
Q3) A design patent:
A)has a duration of 14 years.
B)refers to ornamental designs for manufactured products.
C)requires a showing of novelty, ornamentality, and nonobviousness.
D)All of the above.
Q4) An example of a "certification mark" would be:
A)Holiday Inns.
B)Xerox.
C)Real Cheese.
D)Nabisco.
Q5) Identify the three types of patents,their requirements,and duration.
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Chapter 41: Employment Law
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Q1) Which of the following would be illegal under the NLRA?
A)Tek Computer Company refuses to allow notice of union meetings to be posted at work.
B)Tek Computer Company refuses to pay .50 per hour more to union employees.
C)Tek Computer Company fires Billy because he filed charges against the company with the NLRB.
D)All of the above.
E)Both (a) and (c) above are correct.
Q2) The Civil Rights Act of 1964 would scrutinize which of the following situations?
A)A woman engineer was denied a job for which she was qualified.
B)A short man was denied employment as a busboy.
C)A two-man partnership with two employees refused to hire a qualified black attorney.
D)Both (a) and (c) above are correct.
Q3) Victims of racial discrimination are entitled to recover unlimited compensatory and punitive damages even after the Civil Rights Act of 1991.
A)True
B)False
Q4) What are the remedies available for violations of the Civil Rights Act of 1964?
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Page 43
Chapter 42: Antitrust
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Q1) The courts have interpreted the Sherman Act as prohibiting contracts that unreasonably restrain trade.
A)True
B)False
Q2) Which of the following remedies is available under the Sherman Act?
A)Injunctions.
B)Consequential damages.
C)Restitution.
D)None of the above.
Q3) A restraint involving collaboration among competitors at the same level in the chain of distribution is:
A)a vertical restraint.
B)a horizontal restraint.
C)price fixing.
D)a trust.
Q4) Section 1 of the Sherman Act does not prohibit concerted action.
A)True
B)False
Q5) What are the major functions of the Federal Trade Commission (FTC)and what power does the FTC have?
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Chapter 43: Accountants Legal Liability
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Q1) Martin agrees to perform an audit within 30 days,knowing that time is of the essence.After the 30 days,Martin has only performed 60% of the audit.Martin has materially breached his contract.
A)True
B)False
Q2) In which of the following types of cases can issues of accountant-client confidentiality arise?
A)Civil litigation.
B)Criminal cases.
C)Tax cases.
D)All of the above are situations where it can arise.
Q3) An accountant's records,including the data-gathering process followed and the information and conclusions drawn therefrom,are known as:
A)tax returns.
B)working papers.
C)rough drafts.
D)privileged communication.
Q4) List the services that the Sarbanes-Oxley Act prohibits accounting firms from performing for audit clients.
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Chapter 44: Consumer Protection
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Q1) The Equal Credit Opportunity Act prohibits discrimination based on what factors in the extension of credit?
A)Sex, marital status, or race.
B)Religion, national origin, and age.
C)Income, occupation, or apparent stability.
D)Both (a) and (b).
Q2) A warranty creates a duty on the seller's part that the goods and services she sells will conform to certain qualities,characteristics,or conditions.
A)True
B)False
Q3) The Federal Trade Commission Act allows the FTC to:
A)determine what constitutes deceptive advertising practices.
B)prohibit all advertising in certain professions.
C)require advertisers to contribute to a fund to reimburse injured consumers.
D)require the independent testing of consumer goods.
Q4) Discuss the role of the state attorneys general in consumer protection.
Q5) A typical automobile financing agreement would be a closed-end credit agreement.
A)True
B)False
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Chapter 45: Environmental Law
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Q1) Private tort actions have been quite successful in controlling environmental damage.
A)True
B)False
Q2) The scope of an EIS:
A)does not apply to psychological effects.
B)does not apply to the urban environment.
C)is narrowly construed.
D)applies to a broad range of types of effects.
Q3) Discuss common problems related to private causes of action with reference to the environment.
Q4) In order for Beth to receive a permit for her plastics factory in a nonattainment area,she must show that the factory's emission rates will be within the average range for the industry.
A)True
B)False
Q5) The Clean Water Act imposes civil penalties but not criminal penalties for violations of the Act.
A)True
B)False
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Chapter 46: International Business Law
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Q1) Why do governments impose tariffs?
A)To protect domestic industries from foreign competition.
B)To raise revenues.
C)To attempt to improve their balance of trade.
D)Governments impose tariffs for all of the above reasons.
Q2) The ICJ is:
A)the Internal Court of Jurisdiction of the U.N. to deal with disputes within the United Nations organization.
B)a U.S. court created specifically to deal with international contracts.
C)the judicial branch of the United Nations, which has advisory jurisdiction if requested by a U.N. organ or specialized U.N. agency.
D)one of the many regional trade communities.
Q3) Fines imposed on individuals for violating the Foreign Corrupt Practices Act may be paid,either directly or indirectly,by the domestic concern on whose behalf they acted.
A)True
B)False
Q4) Azurzerapi Corporation plans to start marketing products worldwide.What forms of multinational business enterprise should it consider?
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Page 48
Chapter 47: Introduction to Property, property Insurance,
Bailments, and Documents of Title
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Q1) Insurance companies have been successful in limiting the authority of local selling agents to bind the company through waiver or estoppel.
A)True
B)False
Q2) Bailed property must be tangible.
A)True
B)False
Q3) A gift causa mortis is a gift:
A)made by a donor after death in her will.
B)that is conditional.
C)made in the contemplation of the donor's imminent death.
D)Both (b) and (c) are correct.
E)Both (a) and (b) are correct.
Q4) Patent rights are considered to be personal property.
A)True
B)False
Q5) An heir of a person who dies receives title to the property of the decedent by reason of a gift.
A)True
B)False
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Chapter 48: Interests in Real Property
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Q1) Barton granted his neighbor,Mullins,the right to graze her cattle on Barton's land.Identify the type of property interest Mullins has in Barton's land and explain how such interests are created.
Q2) A freehold estate is:
A)a gratuitous leasehold interest in real property.
B)a right of ownership of real property for an indefinite time (fee estate).
C)a right of ownership of real property for the life of a person (life estate).
D)Both (b) and (c) are correct.
Q3) If Karen assigns her lease to Henry,Karen and Henry are both liable to the landlord for the rent.
A)True
B)False
Q4) A condominium differs from a cooperative in that a tenant in the latter:
A)rents his apartment from the cooperative.
B)owns his apartment in cooperation with corporate owner.
C)owns all the space except the common areas.
D)owns only the internal space.
Q5) Explain what is meant by an implied warranty of habitability and how this doctrine has changed the common law approach with respect to residential leases.
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Chapter 49: Transfer and Control of Real Property
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Q1) A deed of trust is almost identical to a warranty deed.
A)True
B)False
Q2) Sam has agreed to sell a warehouse to Jordan for $150,000.The contract says that Sam will convey to Jordan whatever interest he has in the property,but does not state that he has any interest.Jordan is entitled to a(n):
A)insurable deed.
B)quitclaim deed.
C)general warranty deed.
D)special warranty deed.
Q3) Someone who expressly assumes a mortgage is personally obligated to pay it.
A)True
B)False
Q4) Foreclosure is an action through which the mortgage holder takes the property from the mortgagor,ends the mortgagor's rights in the property,and sells the property to pay the mortgage debt.
A)True
B)False
Q5) Discuss the types of deeds that can be used to transfer title.
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Chapter 50: Trusts and Wills
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Q1) In the case of Keeney v.Keeney,the court found:
A)a constructive trust is created by equity regardless of the intention of the parties to create a trust where legal title to property is obtained through fraud or undue influence rendering it unconscionable for the holder of legal title to retain the property.
B)intention of the parties is the sole consideration in determining the existence of a trust.
C)the existence of a confidential relationship prohibits the trustee from seeking any personal benefit.
D)a totten trust is a tentative trust and the transfer of ownership becomes complete only upon the depositor's death.
Q2) A witness to a will who is "interested" will be disinherited or disqualified.
A)True
B)False
Q3) A codicil to the will must be executed with all the formal requirements of a will. A)True
B)False
Q4) Under what conditions do courts impose a constructive trust?
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