Business and Society Exam Preparation Guide
Course Introduction
Business and Society examines the complex relationship between businesses, their stakeholders, and the broader social environment. The course explores the ethical, legal, and social responsibilities of organizations; the impact of corporate decision-making on communities and the environment; and the role of business in advancing social good. Students will analyze case studies, current events, and theoretical frameworks to understand how businesses respond to societal expectations, address global challenges, and drive sustainable value for all stakeholders.
Recommended Textbook
Andersons Business Law and the Legal Environment Comprehensive 23rd Edition by Twomey
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51 Chapters
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2716 Flashcards
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Chapter 1: The Nature and Sources of Law
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Sample Questions
Q1) Law is:
A) a body of religious principles held by all members of society.
B) a body of principles that society establishes to keep things running smoothly.
C) always the result of case-law decisions.
D) derived solely from the United States Constitution.
Answer: B
Q2) Law consists of:
A) principles that govern conduct.
B) mere guidelines.
C) arbitrary rules.
D) traditions.
Answer: A
Q3) A right can exist:
A) by itself.
B) only if created by a court.
C) only if there is a corresponding duty.
D) only under local law.
Answer: C
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Chapter 2: The Court System and Dispute Resolution
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Q1) An en banc decision within a U.S. Court of Appeal only requires a panel of three judges.
A)True
B)False
Answer: False
Q2) If there is a reference to a third party to determine a dispute, in most cases the decision is binding.
A)True
B)False
Answer: True
Q3) The federal court system consists of three levels.
A)True
B)False Answer: True
Q4) Courts have increasingly set aside arbitration clauses involving small businesses or consumers.
A)True
B)False Answer: False
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Chapter 3: Business Ethics, Social Forces, and the Law
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Q1) Which of the following is not a question business ethicist Laura Nash has developed to help businesspeople reach the right decision in ethical dilemmas?
A) Have you defined the problem accurately?
B) How would you define the problem if you stood on the other side of the fence?
C) How did the situation occur in the first place?
D) Does your proposed solution to the problem effectively balance the competing objectives of ethical decision-making and corporate profitability?
Answer: D
Q2) There is no evidence that commitment to ethical values is linked with financial performance of business organizations.
A)True
B)False
Answer: False
Q3) Ethical violations can cause lasting detriment to a company's ability to do business through impacts on the company's reputation.
A)True
B)False
Answer: True
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5
Chapter 4: The Constitution As the Foundation of the Legal Environment
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Q1) A school district supplied school bus service for all children 12 years of age or under who lived at least one mile from school. This service was provided for transportation to and from school. Joanna was a 13-year-old student who lived in that school district. Joanna's home was 1.2 miles from school. Her parents brought suit against the school district alleging that Joanna was entitled to school bus service and the failure to provide such service denied her the equal protection of the law. Discuss the probable outcome of the lawsuit.
Q2) The Second Amendment provides for the right to keep and bear arms.
A)True
B)False
Q3) The "living-document" view of the Constitution has all of the following characteristics except:
A) strong federal government
B) strong president
C) various administrative agencies with significant power
D) constructionist view of the Bill of Rights.
Q4) The United States utilizes a bicameral division of government.
A)True
B)False
Page 6
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Chapter 5: Government Regulation of Competition and Prices
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Q1) Unfair competition is controlled by:
A) statutes.
B) administrative agencies.
C) administrative regulations.
D) all of these.
Q2) For violation of the Sherman Act, the maximum fine that may be imposed on a natural person is:
A) $1 million.
B) $500,000.
C) $0.
D) $100 million.
Q3) A price reduction to one customer is lawful when it is made because of the deteriorated condition of the goods sold to that customer.
A)True
B)False
Q4) Price discrimination is not permitted even when it can be justified on the basis of a difference in grade, quality, or quantity.
A)True
B)False
Page 7
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Chapter 6: Administrative Agencies
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Q1) The Federal Trade Commission suspects Billy Williams of unlawful trade activities and has obtained evidence, claimed to be proof of unlawful activity, by way of aerial photography. The FTC is also currently seeking the submission of various documents, within Williams' place of business, for additional evidence. Williams refuses to submit to the demands to produce the documents and claims that this demand and the aerial photos are direct violations of his constitutional rights. Williams also demands a jury trial to clear him of charges levied. Comment on Williams' claims.
Q2) The ____________ protection against self-incrimination cannot be invoked by a corporate officer when an agency has subpoenaed corporate records.
A) Sixth Amendment.
B) First Amendment.
C) Fifth Amendment.
D) Fourth Amendment
Q3) A federal agency planning to adopt a new regulation must give public notice of such intent and then hold a hearing at which members of the public may express their views and make suggestions.
A)True
B)False
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Chapter 7: Crimes
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Q1) Criminal penalties for corporations are based on a percentage of sales.
A)True
B)False
Q2) Failure to give ______ means that a defendant's statements or confession cannot be used as evidence against that individual.
A) the Miranda warnings
B) the Sarbanes-Oxley warnings
C) the Fourth Amendment warnings
D) the Fifth Amendment warnings
Q3) The Racketeer Influenced and Corrupt Organizations (RICO) Act was designed primarily to prevent individuals involved in organized crime from investing money obtained through racketeering in legitimate businesses.
A)True
B)False
Q4) Crimes are generally defined and their punishments specified by:
A) trial court judges.
B) appellate judges.
C) codes and statutes.
D) the United States Constitution.
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Chapter 8: Torts
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Q1) Libel is the printed equivalent of the spoken form of defamation known as slander.
A)True
B)False
Q2) The shopkeeper's privilege gives store managers the absolute right to detain anyone they believe has shoplifted.
A)True
B)False
Q3) Once the cause in fact is established, the plaintiff must establish ________, that is the harm by the injured person that was a foreseeable consequence of the defendant's negligent actions.
A) actual causation.
B) proximate causation.
C) but for causation.
D) the Palsgraf standard.
Q4) Commercial exploitation, also called right of publicity, is a form of invasion of privacy.
A)True
B)False
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Page 10
Chapter 9: Intellectual Property Rights and the Internet
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Q1) Three types of patents available under U.S. law are:
A) utility, product, design.
B) design, packaging, invention.
C) design, plant, utility.
D) utility, regulatory, common law.
Q2) The Digital Millennium Copyright Act :
A) made notice of copyrights no longer mandatory.
B) changed the life of a copyright.
C) was enacted to curb the pirating of software and other pirated works.
D) provided a safe harbor for copyright infringers.
Q3) A copyright bestows upon the creator of an artistic or literary work a federal statutory right to exclusively:
A) use the work.
B) reproduce the work.
C) display the work.
D) All of these
Q4) Written computer programs are not given the same protection as other copyrighted material.
A)True
B)False
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Chapter 10: The Legal Environment of International Trade
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Q1) Which of the following allows a domestic firm to maintain the greatest control over its foreign operations?
A) wholly-owned subsidiaries
B) licensing
C) foreign distributorships
D) agency arrangements
Q2) The most common method used by countries to restrict foreign imports is the ______, which is essentially a(n) ______ placed on goods as they move into or out of a country.
A) quota, tax.
B) tariff, tax.
C) license, tax.
D) computed value, quota.
Q3) When an international sale is made, the parties often set forth in their contract which country's law will govern a dispute.
A)True
B)False
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Chapter 11: Nature and Classes of Contracts: Contracting on
the Internet
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Q1) A person who makes a promise is the promisor, while a person to whom the promise is made is the promisee.
A)True
B)False
Q2) The law requires parties to be fair and reasonable in the making of a contract.
A)True
B)False
Q3) A contract of record is also referred to as a(n):
A) recognizance.
B) reconnaissance.
C) recording contract.
D) implied contract.
Q4) When Gordon told Hanson that he was considering selling his house, Hanson offered to buy it. Gordon and Hanson entered into a contract in which Hanson paid Gordon $1,000 in cash for the right to buy Gordon's house for $150,000 in the event Gordon decided to sell it. Two weeks later, Jones offered Gordon $200,000 for his house, and Gordon agreed to sell it to her for that amount. Hanson sued Gordon to force Gordon to sell the house to him for $150,000, rather than to Jones for $200,000. Identify the probable result of the action. What type of contract, if any, was entered into between Gordon and Hanson?
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Chapter 12: Formation of Contracts: Offer and Acceptance
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Q1) A said to B, "I'll give you $100 for that bracelet." B replied, "$135." A said, "No thanks." B then said that B accepted the $100, but A was no longer interested and said there was no contract. B insists there is a contract. Result?
A) A's offer of $100 was open and accepted by B, thereby forming a contract.
B) B's counteroffer of $135 terminated A's offer of $100.
C) B's statement, "$135" was a negotiating statement that did not terminate A's original offer of $100.
D) A's offer of $100 was irrevocable.
Q2) Under the Uniform Commercial Code (UCC), a firm offer applies to:
A) a written, signed offer by a merchant to buy or sell goods.
B) an unwritten but definite offer to buy or sell goods.
C) a written, signed offer by anyone to buy or sell goods.
D) an unlimited, stipulated period of time.
Q3) An offer is effective only if it is communicated by the offeror in person.
A)True
B)False
Q4) A requirements contract is too vague to be a legally-enforceable agreement.
A)True
B)False
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Chapter 13: Capacity and Genuine Assent
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Q1) The seller of a painting is bound by the sales contract if the painting purchased was considered of little value and only later discovered to be valuable to the surprise of both buyer and seller.
A)True
B)False
Q2) Marquez agrees to buy Dale's pickup truck so he can pull his trailer. Both Marquez and Dale believe that the truck is big enough to do the job. After they complete the deal, Marquez finds that the truck is not strong enough to handle the trailer. The contract between Marquez and Dale can be rescinded because of:
A) a unilateral mistake.
B) a defective acceptance.
C) a mutual mistake.
D) negligent misrepresentation.
Q3) Ratification consists of any words or conduct of a former minor manifesting an intent to be bound by the terms of a contract made while a minor.
A)True
B)False
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Chapter 14: Consideration
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Q1) John received a promotion at work and felt new clothes would be necessary in the new position. John went to a local store and charged three ties on his charge account at a cost of $60 each. Bill, a friend of John's, saw a sidewalk vendor selling ties at a cost of three for $10 and bought three at that price. The friends compared purchases that night and found that they had purchased identical ties. John became enraged and said that he would not pay the charge-account bill because the ties were clearly not worth $60 each. Bill indicated that he would testify on John's behalf if litigation ensued. What would be the probable outcome of the lawsuit?
Q2) When there is no consideration for a promise, the agreement is:
A) a quasi contract.
B) equitable.
C) not binding.
D) unethical.
Q3) Damages recoverable in a case of promissory estoppel are determined by the profits that the promisee expected.
A)True
B)False
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Page 16
Chapter 15: Legality and Public Policy
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Q1) Public policy:
A) can be precisely defined
B) is frequently used by the courts as a reason to invalidate contracts
C) is protections from that which violates any established interest of society
D) is policy that is made during a trial.
Q2) An agreement is illegal only when either its performance is a crime.
A)True
B)False
Q3) Legislation commonly requires that an installment-sale contract specify the cash price, down payment, finance charges, and insurance costs.
A)True
B)False
Q4) Which party to an illegal agreement may get relief from the court?
A) Plaintiff
B) Defendant
C) the less-guilty party, when public interest is advanced by granting relief
D) a doctor who was unlicensed at the time of the making of an agreement for the provision of medical services, but who later obtained a proper license
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Chapter 16: Writing, Electronic Forms, and Interpretation of Contracts
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Q1) Parol evidence generally is admissible to explain:
A) ambiguous terms.
B) why signatures are missing.
C) why a contract was not performed.
D) implied terms.
Q2) The parol evidence rule does not apply to changes made after the signing of the contract.
A)True
B)False
Q3) No writing is required for a service contract that can be performed within one year after the date of the agreement.
A)True
B)False
Q4) 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.
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Chapter 17: Third Persons and Contracts
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Q1) Alberto enters into a contract with a contractor to build a parking garage in Gotham City. Stop-N-Go will greatly benefit from this contract since Alberto's parking garage is adjacent to Stop-n-Go. In this scenario Stop-n-Go is:
A) an incidental beneficiary.
B) a partial beneficiary.
C) a donee beneficiary.
D) an implied beneficiary:
Q2) Whenever a contract is intended to benefit a third person, the third person is referred to as a delegator.
A)True
B)False
Q3) A third person automatically has the status of an intended third-party beneficiary regardless of the parties' intentions at the time of contracting.
A)True
B)False
Q4) An assignment is a transfer of duties, and a delegation is a transfer of rights.
A)True
B)False
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Chapter 18: Discharge of Contracts
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Q1) Unless a contract so provides, time is ordinarily not of the essence, and performance within a reasonable time is sufficient.
A)True
B)False
Q2) Sam Student had borrowed $1,000 from his cousin. Sam and the cousin became involved in a heated disagreement when the cousin began to press Sam for repayment of the loan. Finally, Sam wrote a check for $190 to the cousin and conspicuously wrote on the check in big letters that it was full and final payment of the $1,000 loan. In need of money, the cousin cashed the check and demanded the remaining $810 from Sam. Sam refused to pay, claiming that they had entered into an accord and satisfaction that discharged Sam's obligation to pay anything more. The cousin sued Sam. Discuss the probable outcome.
Q3) In the absence of an agreement to the contrary, weather conditions constitute a risk that is assumed by a contracting party.
A)True
B)False
Q4) By operation of law, a party can be discharged in bankruptcy from debts.
A)True
B)False
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Chapter 19: Breach of Contract and Remedies
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Q1) A reservation of rights is an assertion by a party to a contract that even though a tendered performance is accepted, the right to damages for the nonconformity to the contract is reserved.
A)True
B)False
Q2) Punitive damages are generally recoverable in contract actions.
A)True
B)False
Q3) A contractual provision which states that a waiver of rights will not constitute a modification to the contract is:
A) not enforceable as being in bad faith.
B) not enforceable as a violation of law.
C) enforceable by one party only.
D) enforceable.
Q4) Only direct losses from a breach of contract may be recovered by an injured party. A)True
B)False
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Chapter 20: Personal Property and Bailments
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Q1) A bailee's duty of care for bailed property depends on the type of bailment.
A)True
B)False
Q2) If Susan rents a locked space in a U-Haul storage facility, she and U-Haul:
A) have created a mutual benefit bailment.
B) have not created a bailment until she pays the first month's storage fee.
C) have not created a bailment because there was no delivery of goods.
D) have created a constructive bailment.
Q3) If a maintenance employee at a hotel finds a pocketbook with $500 in cash while cleaning an empty guest room, the employee:
A) is entitled to keep the property, because the employee has the legal status of a "finder."
B) must give the property to the manager of the hotel to be kept for the owner.
C) must place an advertisement in a local newspaper, and if the property is not claimed within seven (7) business days, the employee is entitled to keep it.
D) can retain possession of the property until the owner establishes ownership.
Q4) The intent to make a gift requires an intent to transfer title at that time.
A)True
B)False
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Chapter 21: Legal Aspects of Supply Chain Management
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Q1) The rights of a holder of a warehouse receipt depend on whether the receipt is:
A) negotiable.
B) rescissory.
C) notarized as a document of title.
D) notarized as a bill of lading.
Q2) The purchase of a warehouse receipt by due negotiation eliminates all prior claims.
A)True
B)False
Q3) The Willett Seed Company stored its goods with the Augusta Warehouse Company and received a negotiable warehouse receipt. The Willett Seed Company then borrowed money from the Georgia Railroad Bank and pledged the warehouse receipt as security. The seed company defaulted, and the bank demanded the goods from the warehouse. The warehouse stated that it already had delivered the goods to the seed company on the strength of that company's promise that it would surrender the receipt shortly thereafter. The bank sued the warehouse for the value of the goods. Will the bank win?
Q4) A sale by a factor can pass title to goods from the consignor to the purchaser.
A)True
B)False
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Page 23
Chapter 22: Nature and Form of Sales
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Q1) A bailment is a special form of a sale of goods in which possession is transferred to a bailee.
A)True B)False
Q2) An offer to buy or sell goods may be accepted in any manner that is reasonable under the circumstances.
A)True B)False
Q3) Suppose a merchant is about to transfer his entire inventory as part of an annual clearance action. This transfer is called a bulk transfer.
A)True
B)False
Q4) A contract of indefinite duration may be terminated by notice from either party to the other party.
A)True B)False
Q5) A bill of sale can be used as proof of an otherwise oral agreement. A)True B)False
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Chapter 23: Title and Risk of Loss
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Q1) In a non-shipment contract involving a merchant-seller, risk of loss passes to the buyer when he actually receives the goods from the merchant.
A)True
B)False
Q2) Bob Corporation entered into a contract to sell parts to Zeck. The contract provided that the goods would be shipped "FOB Bob's warehouse." Bob shipped parts to Zeck that were stolen from the carrier. When Zeck checked the invoice, Zeck discovered that Bob had sent Model #20B instead of Model #20A, which the contract required. Whose loss? Why?
Q3) In a sale or return transaction, until the actual return of the goods is made, title and risk of loss remain with the buyer.
A)True
B)False
Q4) COD is a shipping term that requires the buyer to pay in order to gain physical possession of the goods.
A)True
B)False
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Chapter 24: Product Liability: Warranties and Torts
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Q1) The warranties of both merchantability and fitness for a particular purpose exist under the Convention on Contracts for the International Sale of Goods (CISG).
A)True
B)False
Q2) An express warranty is a statement of fact about the product that becomes part of the basis of the bargain.
A)True
B)False
Q3) All of the following are product liability theories except:
A) express warranty
B) implied warranty
C) strict tort liability
D) assumption of the risk
Q4) A catalog illustration can become the basis of an express warranty.
A)True
B)False
Q5) A defective product can injure intangible economic interests.
A)True
B)False
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Chapter 25: Obligations and Performance
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Q1) The person on whom a demand for assurance is made, must reply in writing for the assurance to be deemed "adequate."
A)True
B)False
Q2) A buyer has the right to accept some commercial units of a shipment and reject other commercial units.
A)True B)False
Q3) Unless otherwise agreed by the parties, payment by a buyer requires payment either in cash or by certified check.
A)True
B)False
Q4) Under Revised Article 2, a repudiation occurs when the repudiating party furnishes a record with express language of repudiation.
A)True B)False
Q5) An acceptance of goods can be done either expressly or by implication. A)True B)False
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Chapter 26: Remedies for Breach of Sales Contracts
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Q1) A buyer may reject a tender of delivery:
A) if the goods do not conform to the contract in some way.
B) only if the goods have a substantial defect.
C) unless the seller promises to cure the defective tender.
D) unless the goods have been sold on credit.
Q2) Rejection of an improper tender of goods constitutes terminates the buyer's options for recovery.
A)True
B)False
Q3) Consequential damages are available to the buyer but not to the seller.
A)True
B)False
Q4) If a seller elects to resell the goods remaining in the seller's possession after the buyer breaks the contract, the seller:
A) must always give notice of the sale to the original buyer.
B) is never required to give notice of the sale to the original buyer.
C) is required to follow strict standards in the resale of the goods.
D) is not required to give notice of the sale to the original buyer when the goods are perishable.
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Chapter 27: Kinds of Negotiable Instruments and Negotiability
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Q1) Revised UCC Article 3 refers to all of the following as secondary obligors, except: A) drawers
B) indorsers
C) accommodation parties
D) acceptors
Q2) In a negotiable instrument, the promise or order to pay must be unconditional.
A)True
B)False
Q3) Bruce agrees to buy Joe's ranch. They draw up a note, under which Bruce is to pay Joe in three installments, each payable on a specified date. Joe has concerns about Bruce's ability to pay on time, so he insists that the note include an acceleration clause. Such a clause would allow Joe to:
A) accelerate the sale of the ranch.
B) demand payment of the entire amount Bruce owes him if a certain event occurs.
C) extend the date of maturity on the note until a certain date in the future.
D) accelerate the statute of limitations in a case involving negotiable instruments
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Chapter 28: Transfers of Negotiable Instruments and Warranties
of Parties
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Q1) If an instrument is drawn in favor of a named officer of a corporation, the instrument is payable only to that officer. .
A)True
B)False
Q2) Al was a well-respected attorney in a small town. A couple retained Al to represent them on the purchase of a home. Before closing, Al informed the couple of payments that they were required to make by check at the closing. Among the required payments the attorney told the couple to make were a check for $1,500 to Bob Brown and a check for $610 to Susan Lee. The attorney explained that the check to Brown was for a survey of the property and the check to Lee was for termite control work that the couple had authorized.??The checks were issued and taken by Al who promised to deliver them. Al did not, however, deliver them. Instead, Al forged the indorsements of the respective payees and cashed the checks. When Al was later arrested on a similar matter, the couple learned what had happened.??The couple made a claim against its bank for reimbursement, claiming the bank was not authorized to pay these checks because they had not been effectively negotiated to the bank. When the facts came to light, no person named Bob Brown had done a survey on the property, but the termite work had been done by Lee. Decide both cases.
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Page 30
Chapter 29: Liability of the Parties Under Negotiable Instruments
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Q1) The FTC rule, which provides that a notice provision must be included in all consumer credit contracts, requires that the notice:
A) limit recovery under the contract to amounts paid by the debtor plus a reasonable charge for incidental damages.
B) be in italic type.
C) be at least 20 points in size.
D) has the effect that no subsequent person can be a holder in due course of the instrument.
Q2) The primary party on a certificate of deposit is the drawer.
A)True
B)False
Q3) A person cannot become a holder through a holder in due course unless that person satisfies the requirements for holder in due course status.
A)True
B)False
Q4) Parties with rights in a negotiable instrument can be assignees or holders.
A)True
B)False
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Chapter 30: Checks and Funds Transfers
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Q1) Which of the following statements describes a check?
A) The drawer is always a bank.
B) The maker is always a bank.
C) A check is generally payable on demand.
D) A check is a particular kind of note.
Q2) Morris issued a check to Al in payment of a debt. There were sufficient funds in Morris' account to cover the check when it was presented for payment. However, due to an error, the bank dishonored the check. Which of the following parties is/are potentially liable to the holder?
A) the drawee bank only
B) Morris and the drawee bank
C) Morris only
D) the drawee bank and any collecting bank
Q3) A forged indorsement must be reported within:
A) forty (40) days.
B) six (6) months.
C) one (1) year.
D) three (3) years.
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Chapter 31: Nature of the Debtor Creditor Relationship
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Q1) A guaranty of collection allows the creditor to firstproceed against the debtor before suing the guarantor.
A)True
B)False
Q2) A surety is discharged if the creditor substitutes a different debtor.
A)True
B)False
Q3) Under the independence rule banks cannot, except in limited circumstances, delve into the underlying contract issues and must only focus on the terms of the letter of credit.
A)True
B)False
Q4) Letters of credit are a two-party agreement used for financing.
A)True
B)False
Q5) If a debtor is about to leave the state, the surety may call on the creditor to take action against the debtor.
A)True
B)False
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Chapter 32: Consumer Protection
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Q1) Consumer protection laws, which commonly regulate the form of consumer contracts, provide that back-page disclaimers are void if the front page of a contract does not call attention to the presence of the terms on the back page.
A)True
B)False
Q2) An unsolicited distribution of credit cards to persons who have not applied for them is:
A) always allowed.
B) voidable.
C) illegal.
D) only allowed if the recipient is at least 21 years old.
Q3) Consumer title loans, made in exchange for title to a car if the borrower defaults, are also called predatory loans and are illegal per se.
A)True
B)False
Q4) Corrective advertising required by the FTC also is called retroactive advertising.
A)True
B)False
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Page 34
Chapter 33: Secured Transactions in Personal Property
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Q1) Javier buys a 3D TV and a DVR from West Coast Sales. West Coast agrees to lend him 90 percent of the purchase price. Their agreement is known as a(n): ______.
A) a purchase money security interest.
B) a future transaction.
C) a floating lien.
D) transferred collateral interest.
Q2) Upon a default by a buyer, the secured seller may resell the collateral:
A) not less than three (3) months after the buyer's default.
B) not less than six (6) months after the buyer's default.
C) only at a public sale.
D) at either a public or a private sale.
Q3) If two creditors have a security interest in the same collateral, their priority is determined according to the "last in-first out" provision.
A)True
B)False
Q4) Claim in a changing or shifting stock of the buyer's goods is known as after-acquired goods.
A)True
B)False
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Chapter 34: Bankruptcy
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Q1) A voluntary petition in bankruptcy may not be filed by any of the following except a(n): ______.
A) husband and wife.
B) railroad company.
C) insurance company.
D) municipality
Q2) If there are twelve (12) or more creditors, at least __________ of those creditors whose unsecured and undisputed claims total __________ or more must sign the involuntary petition.
A) one (1); $14,425
B) three (3); $15,325
C) one (1); $15,575
D) three (3); $15,575
Q3) Bankruptcy law does not regulate the manner in which the assets of the debtor are distributed; instead, distribution of the debtor's assets is solely within the discretion of the trustee.
A)True
B)False
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Chapter 35: Insurance
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Q1) An incontestability clause gives insurance companies a statutory period of time to pay the claims suffered by the insured.
A)True
B)False
Q2) If an insured person tells her current husband that she is going to name him as beneficiary of her life insurance in place of her former husband and dies a year later without having taken any further steps with respect to the change of the policy beneficiary, the insurance company must pay the proceeds of the policy to:
A) the former husband.
B) the current husband.
C) the children by the first marriage.
D) the children by the second marriage.
Q3) To collect on property insurance, an insurable interest in the property must exist at the time that the loss is suffered.
A)True
B)False
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Chapter 36: Agency
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Q1) John's son was not his agent but contracted to purchase a computer in John's name. When John learned of this, John sternly rebuked his son but continued to use the computer for several weeks. After losing interest in the computer, John offered to return it, saying that the purchase was unauthorized. John:
A) is not liable on the purchase.
B) expressly ratified the purchase.
C) is liable because all children have the apparent authority to contract for their parents.
D) ratified the purchase by John's conduct.
Q2) A special agent is authorized by the principal to transact all affairs in connection with a particular type of business or trade or to transact all business at a certain place. A)True
B)False
Q3) The scope of an agent's authority is always known by the third party. A)True
B)False
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Chapter 37: Third Persons in Agency
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Q1) If an agent's act causes loss to the third person, that third person may generally hold the agent liable for the loss.
A)True
B)False
Q2) An implied warranty arises when a person purports to act as an agent for a principal.
A)True
B)False
Q3) Modern law holds that an employer is liable for an intentional tort committed by an employee for the purpose of furthering the employer's business.
A)True
B)False
Q4) Payment to an authorized agent is:
A) payment to the principal only if the agent remits the payment.
B) payment to the principal if the third person informs the principal.
C) payment to the principal, provided the agent does not misappropriate the payment.
D) payment to the principal.
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Chapter 38: Regulation of Employment
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Q1) To be eligible for FMLA leave, an employee must have been employed by a covered employer for at least __________ months and have worked at least __________ hours during the 12-month period preceding the leave.
A) 6; 1,250
B) 6; 1,500
C) 12; 1,250
D) 12; 1,500
Q2) A dispute arose in a small factory and the workers decided to strike concerning the firing of an employee for union-organizing activity. As the strike wore on without resolution, the employer hired what the employer called permanent replacements for the strikers. Eventually, the strike was settled. Are the fired workers entitled to getting their jobs back?
Q3) An agreement by an employee to refrain from disclosing trade secrets is generally not binding.
A)True
B)False
Q4) A person cannot be both an employee and an agent for a party at the same time.
A)True
B)False
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Chapter 39: Equal Employment Opportunity Law
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Q1) Failing to hire an individual who does not have English language skills violates Title VII unless those language skills have a clear connection to the successful performance of the job to which it is applied.
A)True
B)False
Q2) In a disparate impact case, the employer's proof that it did not intend to discriminate is a complete defense.
A)True
B)False
Q3) It is unlawful for employers to undertake special recruiting efforts to hire and train minorities and women in an effort to have a diverse workforce.
A)True
B)False
Q4) Proof of an employer's discriminatory motive is immaterial in a disparate treatment case.
A)True
B)False
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Chapter 40: Types of Business Organizations
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Q1) A joint venture typically relates to the carrying out of a single enterprise or transaction.
A)True
B)False
Q2) If the negligence of the franchisee causes harm to a third person, the franchisor is not liable because the franchisee is an independent contractor.
A)True B)False
Q3) Business corporations exist to make a profit.
A)True
B)False
Q4) A corporation has perpetual life, until one of its shareholder dies.
A)True
B)False
Q5) The government's permission is required to create: ______.
A) sole proprietorships.
B) corporations.
C) partnerships.
D) unincorporated associations.
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Chapter 41: Partnerships
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Q1) The assignee of a partner's interest in the partnership becomes a partner only with the consent of the other partners.
A)True
B)False
Q2) A registration certificate for a partnership's fictitious name contained the names of Barry, Boyd, and Swartz. Bank or America extended credit to the firm in reliance in part on the certificate that named Swartz as a partner. Swartz, in fact, had no knowledge of the certificate and never had agreed to be a partner. Because of BOA's reliance on the certificate and the statement that Swartz was a partner, Swartz has a partner's liability insofar as Cruise is concerned.
A)True
B)False
Q3) In determining the rights of partner Dewey in the firm of Dewey, Cheatham, and Howe, the most important reference point is: ______.
A) the Uniform Partnership Act.
B) the partnership agreement.
C) the sworn testimony of Cheatham and Howe.
D) the customs and traditions of similar partnerships.
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Chapter 42: LPs, LLCs, and LLPs
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Q1) You are asked to provide two friends who are in business together with advice regarding what they need to do to legally in order to form a limited liability company. Although your friends like the general notion of limited liability in the operation of their business, they are totally unfamiliar with the legal processes for forming a LLC, so you need to provide them with the basic requirements for LLC creation. What specific advice would you give them?
Q2) Under the RULPA, a limited partner probably will not lose his limited liability in any of the following circumstances unless: ______.
A) the limited partner becomes a contractor for, or an agent or employee of, the limited partnership or of a general partner.
B) the limited partner consults with and advises a general partner regarding the partnership business.
C) the limited partner votes on partnership matters, such as dissolving and winding up the limited partnership or removing a general partner.
D) the partners fail to file a limited partnership certificate.
Q3) Limited partners are personally liable for debts of the business.
A)True
B)False
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44
Chapter 43: Corporate Formation
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Q1) A corporation may exercise its power to borrow money by issuing bonds.
A)True
B)False
Q2) Which of the following is a correct statement concerning the incorporation process?
A) Each application for incorporation is reviewed by the appropriate state legislature.
B) The incorporation process is essentially a matter of filing the correct papers and fees with the designated government official.
C) Most applications for incorporation are rejected.
D) Incorporator(s) are never required to give public notice of the intent to form a corporation.
Q3) _________ of a corporation may occur when management is deadlocked and the deadlock cannot be broken by the shareholders.
A) Bankruptcy
B) Consolidation
C) Reinstatement
D) Judicial dissolution
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Chapter 44: Shareholder Rights in Corporations
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Q1) 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
Q2) When a shareholder brings a _______ action, he is suing on behalf of the corporation itself to enforce a right.
A) primary
B) derivative
C) deferential
D) preemptive
Q3) A shareholder has: ______.
A) an absolute right to dividends.
B) a right to dividends when declared.
C) a right to insist that dividends be declared.
D) to share equally all dividends with fellow shareholders.
Q4) If a share certificate is lost, destroyed, or stolen, the ownership of the shareholder is destroyed.
A)True B)False
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Chapter 45: Securities Regulation
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Q1) The Securities Act of 1933 prohibits "bad investment" offerings to the public.
A)True
B)False
Q2) A "short-swing" profit is realized by a corporate insider from selling corporate securities less than one (1) year after purchase.
A)True
B)False
Q3) The Securities Act of 1933 act applies all of the following instruments and transactions except: ______.
A) stocks.
B) corporate bonds.
C) variable annuities.
D) cashier checks.
Q4) 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
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Chapter 46: Accountants Liability and Malpractice
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Q1) The Public Company Oversight Board:
A) is a governmental body.
B) must have at least three board members that are CPAs.
C) enforces professional rules that ensure audit quality and auditor independence.
D) is an agency within the IRS.
Q2) Under the known-user rule the identity of the particular user must be known to hold the accountant liable for malpractice.
A)True
B)False
Q3) The contact rule applies in which of the following states?
A) Alabama
B) Indiana
C) New York
D) Texas
Q4) In some states an exculpatory clause protects the accountant from a malpractice suit brought by a third party but not from a suit brought by a client.
A)True
B)False
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Chapter 47: Management of Corporations
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Q1) Officers have a fiduciary obligation not to make any secret financial gain at the expense of the corporation.
A)True
B)False
Q2) Under the responsible corporate officer doctrine a CEO could be criminally liable for failure to prevent the commission of a crime.
A)True
B)False
Q3) If an officer diverts a corporate opportunity, the corporation may recover from the officer:
A) triple damages for breach of a fiduciary duty.
B) the profits of which the corporation has been deprived.
C) past wages for the time period in question.
D) any and all funds used to divert the corporate opportunity.
Q4) State laws that attempt to indemnify corporate directors against personal monetary liability for gross negligence are void as contrary to public policy.
A)True
B)False
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Page 49
Chapter 48: Real Property
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Q1) A deed is not effective to pass title unless it is properly recorded.
A)True
B)False
Q2) A condominium and a cooperative are essentially the same.
A)True
B)False
Q3) A trade fixture is a fixture that is traded in by the owner when purchasing new fixtures.
A)True
B)False
Q4) An easement by prescription is created by an adverse or contrary use of the true owner's land for a statutory period.
A)True
B)False
Q5) Under race statutes, the first party to record the deed holds title to land.
A)True
B)False
Q6) Like an easement, a license is a revocable interest in the land of another. A)True
B)False
Page 50
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Chapter 49: Environmental Law and Land Use Controls
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Q1) The current EPA standard for coal-fired power plants is maximum achievable control technology (MACT).
A)True
B)False
Q2) If any uncertainty exists in the interpretation of a restrictive covenant, the covenant will be construed strictly in favor of the free use of the land.
A)True
B)False
Q3) A civil nuisance may be terminated by abatement or closure by government authority, while a criminal nuisance is not subject to such action.
A)True
B)False
Q4) Valid restrictive covenants will bind future owners of the land if:
A) they are published in the Federal Register.
B) there is a notation in the deed referencing the restrictive covenants.
C) they are published in a newspaper of general circulation.
D) they are filed with the attorney general of the state in which the land is located.
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Chapter 50: Leases
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Q1) If a lease is assigned, who is liable for the rent?
A) the assignor
B) the assignee
C) either the assignor or the assignee, but not both
D) the landlord can collect from both the assignor and the assignee
Q2) For a tenant to claim constructive eviction she must also physically vacate the premises.
A)True
B)False
Q3) Rent is automatically increased:
A) if the lessor makes expensive improvements to the property.
B) when the cost of living increases.
C) if the lease contains an escalation clause.
D) if the lessor's taxes on the rented property are increased.
Q4) A provision in a residential lease stating that the landlord cutting off heat or water will not constitute an eviction is unconscionable.
A)True
B)False
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Page 52
Chapter 51: Decedents Estates and Trusts
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Q1) When property is transferred to a trust, the trustee has legal title and the beneficiary has equitable title.
A)True
B)False
Q2) Eccentric behavior means that the testator cannot have testamentary capacity.
A)True
B)False
Q3) A will may be contested on any of the following grounds except: __________.
A) lack of mental capacity of the testator.
B) undue influence, duress, or mistake.
C) forgery.
D) appointment of a personal representative.
Q4) 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.
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