Commercial Law
Final Test Solutions
Course Introduction
Commercial Law examines the legal principles and regulations governing business and commercial transactions. This course covers key topics such as contract formation and enforcement, sale of goods, negotiable instruments, agency relationships, secured transactions, and insolvency. Students will analyze case law and statutory frameworks that impact commerce, learning how legal rules affect day-to-day business operations and dispute resolution. Emphasis is placed on understanding the rights and obligations of parties engaged in trade, as well as the legal mechanisms available to protect commercial interests in local and international contexts.
Recommended Textbook Essentials of Business Law 4th Edition by
Jeffrey F. Beatty
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34 Chapters
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Page 2
Chapter 1: Introduction to Law
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Q1) Identify and discuss the primary sources of contemporary U.S.law.
Answer: The primary sources of U.S.law include:
1.United States Constitution (the supreme law of the land)and state constitutions,which establish state governments;
2.Statutes,which are drafted by the legislatures;
3.Common law,which is the body of cases decided by judges,as they follow earlier cases,known as precedent;
4.Administrative law,the rules and decisions made by federal and state administrative agencies.
Q2) Which of the following would be an example of a civil lawsuit?
A)George is being prosecuted for bank fraud.
B)The government has initiated an action against Jeff for operating a motor vehicle under the influence of alcohol.
C)Gretta hit Rita in a bar during happy hour.Rita is now suing for her injuries.
D)The district attorney is bringing Ali to court for violating the city's keg ordinance.
Answer: C
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3
Chapter 2: Business Ethics and Social Responsibility
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Q1) E-presto,Inc.has established an EthicsLine.EthicsLine is a toll-free phone number that employees can call any time of the day,any day of the week to discuss ethics and report suspected unethical or improper conduct.Why would E-presto establish the EthicsLine?
A)Ethical behavior improves productivity.
B)Ethical behavior increases job stability.
C)Unethical behavior can destroy a business.
D)All of the above are reasons that would justify establishing an EthicsLine.
Answer: D
Q2) A manager making a decision without fraud,prejudice,or favoritism is exhibiting the value of:
A)compassion.
B)integrity.
C)fairness.
D)responsibility.
Answer: C
Q3) Compassion and integrity are generally not considered universal.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Dispute Resolution
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Q1) After the plaintiff has presented her case,the defendant may be granted a:
A)directed verdict.
B)summary judgment.
C)judgment n.o.v.
D)judgment on the pleadings.
Answer: A
Q2) Emails and their attachments are not subject to pretrial discovery.
A)True
B)False
Answer: False
Q3) Briefly describe the process of jury selection.
Answer: the process of jury selection is called voir dire.the court's goal is to select an impartial jury.through a series of questions,attorneys for each side attempt to get the most favorable jury for their position.As potential jurors are questioned,either side may exclude a juror for cause (some reason to think the person may not be impartial)or via a limited number peremptory challenges,in which no reason must be stated for excluding a juror.
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5
Chapter 4: Common Law, statutory Law, and Administrative Law
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Q1) Administrative agency rules consist of:
A)executive and independent rules.
B)legislative and interpretive rules.
C)informal and "notice and comment" rules.
D)promulgated and unpromulgated rules.
Q2) Which statement is correct concerning judicial review of an administrative agency's action?
A)Courts usually accept the facts of the case as determined by the agency and often defer to the agency's interpretation of the law.
B)Courts conduct a de novo review of the case.
C)Courts ignore the facts of the case.
D)Courts substitute their opinion for that of the agency.
Q3) The doctrine of stare decisis,though vital to the creation of the common law when this country was settled,is not important to our modern,complex society.
A)True
B)False
Q4) Statutory law is a minor source of US law.
A)True
B)False
Page 6
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Chapter 5: Constitutional Law
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Q1) Edwin moved into an apartment complex.The rules of the complex prohibit unmarried men and women from living together in the same apartment.When Edwin's friend,Barbara,moved into the apartment he was served with eviction papers.Edwin claims the apartment complex is violating his constitutional rights since it allows married couples to live together.Is Edwin right?
A)Yes.His equal protection rights have been violated.
B)No.His rights under the Due Process Clause have not been violated.
C)Yes.His First Amendment rights have been violated.
D)No.Constitutional protections do not extend to privately owned apartment complexes.
Q2) The issue of the constitutional protections afforded flag burning was addressed in: A)Texas v.Johnson.
B)United States v.Lopez.
C)Marbury v.Madison.
D)Palmore v.Sidoti.
Q3) Misleading commercial speech may be outlawed altogether without violating the Constitution.
A)True
B)False
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Chapter 6: Torts
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Q1) Tom was exposed to asbestos on his job in an demolition project.In a lawsuit against his employer,the court must decide the full extent of both present and future damages rather than allowing Tom to return to court years later if medical problems develop at that time.
A)True
B)False
Q2) A tort action differs from a contract action in which of the following ways?
A)How the obligation is enforced.
B)How the obligation is created.
C)Monetary damages cannot be awarded.
D)All of the answers are correct.
Q3) David,a salesclerk at Chic Apparel Store observed Jennifer,a customer,remove a scarf from a rack and put it in her purse.In most states,Chic:
A)cannot detain Jennifer but can alert the police.
B)can reasonably detain Jennifer for suspicion of shoplifting.
C)cannot detain Jennifer but once she leaves the store, the salesclerk can make a citizen's arrest.
D)cannot detain the customer or the store will be liable for false imprisonment.
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Chapter 7: Crime
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Q1) Diane,a police officer,stops Tim's car for a traffic offense.While talking to Tim,she shines a flashlight into the passenger compartment of Tim's car and sees evidence of drug paraphernalia.Which statement is correct?
A)Diane may search the passenger compartment of the car and any place else in the car, including the trunk, without Tim's consent.
B)Diane may search the passenger compartment of the car without Tim's consent; however, she may not search the trunk of the car without his consent or without a search warrant.
C)Diane may not search the passenger compartment of the car (nor any place else) without Tim's consent or a search warrant.However, she can require Tim to remain parked until the search warrant is brought to her.
D)Under the above circumstances, Diane can write Tim a traffic citation but cannot search the vehicle.
Q2) The burden of proof required in a criminal case is:
A)clear and convincing.
B)a preponderance.
C)beyond a reasonable doubt.
D)highest degree of honesty.
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Page 9
Chapter 8: International Law
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Q1) Lindell,Inc.,a U.S.company,and Halden,AG,a German company,entered into a contract under which Halden is to ship party supplies to Lindell.One of the terms of the contract states,"Any disputes that arise under this contract will be resolved in the courts of Germany." This contract term is:
A)a forum selection clause.
B)a choice of law clause.
C)an arbitration clause.
D)not enforceable.
Q2) Although the United States government officially signed the GATT treaty,the United States Congress has refused to ratify the agreement.
A)True
B)False
Q3) Benton Corporation imports European made goods from Fouchard SA into the United States.Who is required to pay the duty on the imported goods?
A)The importer, Benton Corporation.
B)The exporter of the goods, Fouchard SA.
C)Each party pays one-half of the duty.
D)No one as the US and the EU signed a free trade agreement.
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Chapter 9: Introduction to Contracts
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Sample Questions
Q1) Which of the following statements about an express contract is true?:
A)It must be in writing.
B)It may be inferred by the conduct of the parties involved.
C)The two parties explicitly state all important terms of their agreement.
D)None of the above.
Q2) Explain what the Restatement of Contracts is and describe the role it plays in contract law.
Q3) Walter enters a dentist office and points to a damaged tooth.The dentist,Matt,treats the tooth.If Walter refused to pay and Matt sued:
A)Walter would win as there was no contract.
B)Walter would win because of the UCC.
C)Matt would win; this is an implied contract.
D)Matt would win in quantum meruit.
Q4) The common law governs contracts for:
A)services.
B)real estate.
C)employment.
D)All of the above.
Q5) Discuss the requirements of promissory estoppel.
Q6) List and briefly describe the basic elements of a contract.
Page 11
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Chapter 10: Agreement
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Q1) On January 8,Quastrar,Inc.sent Hylavian Company a letter offering to sell $10,000 in restaurant supplies.On January 18,Hylavian mailed a letter to Quastrar accepting the offer.Quastrar received the acceptance letter on January 20.On January 17,Quastrar sent a letter revoking the offer.Hylavian received this letter on January 21.A contract between Quastrar and Hylavian:
A)was not formed because the revocation was effective before the acceptance was sent.
B)was not formed because the revocation was effective before the acceptance was received.
C)was formed on January 18.
D)was formed on January 20.
Q2) Which of the following offers are considered to be irrevocable for a given period?
A)Firm offers.
B)Option contracts.
C)A writing signed by a merchant offering to hold open an offer for the sale of goods for a stated period.
D)All of the above.
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Page 12
Chapter 11: Consideration
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Q1) Zoe hired Shiny Pool Co.to install a swimming pool on her property for $13,000.They both thought the soil and subsoil were normal for the area,but after they started digging,Shiny found a layer of rock that required them to rent a special piece of equipment from a drilling company.Two extra days of work were going to be necessary.Shiny demanded an extra $4,000 to complete the job.Discuss whether Zoe is liable for the additional $4,000.
Q2) Ann owes a liquidated debt of $3000 to Platinum Body Shop for the work done on her car.She sends Platinum a check for $1000 on which she has marked,"Payment in Full." If Platinum cashes the check,they will not be able to successfully sue Ann for the remainder of the debt.
A)True
B)False
Q3) Which of the following statements describes a requirements contract?
A)The seller guarantees to sell 100% of its production to one buyer.
B)The buyer agrees to buy 100% of the seller's production.
C)The buyer agrees to purchase 100% of her goods from one seller.
D)It is usually not valid due to lack of consideration.
Q4) Courts normally require adequate consideration.
A)True
B)False
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Chapter 12: Legality
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Q1) Eintz Corp.hired Jose to bribe a foreign government official.Eintz gave Jose $10,000 in cash to make the bribe payment and $2000 for Jose's efforts.Instead of paying the bribe,Jose pocketed all of the money.If Eintz sues Jose,Eintz will:
A)be able to recover the $12,000.
B)be able to recover the $10,000, but not the $2,000.
C)be able to recover the $2,000 but not the $10,000.
D)not be able to recover the $12,000.
Q2) An insurance contract is not considered to be a legalized form of gambling because: A)one must have an insurable interest in the person being insured.
B)insurance contracts are underwritten by reputable companies.
C)insurance activities are regulated by the state department of insurance.
D)All of the above.
Q3) John did not have a license to practice medicine in Florida.Nevertheless,when he retired to Florida,he started providing medical services to the people in his condo.Isaac,John's next-door neighbor,owed John $2000 for medical services.John will not be able to enforce the contract he made with Isaac.
A)True
B)False
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Chapter 13: Capacity and Consent
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Q1) Greg purchased a used car from Knutson's Auto Mart for $12,000.As Greg was writing the check,Knutson told Greg that the car was featured in a Clint Eastwood's movie.Greg later found out that the car had not appeared in the movie.If Greg seeks to rescind the deal based on Knutson's statement,Greg will:
A)win because Knutson's statement was fraudulent.
B)win because there was a misrepresentation of a material fact.
C)lose because he will not be able to prove reliance on the misrepresentation.
D)lose because Knutson's statement was innocent.
Q2) Which of the following situations may render a contract voidable?
A)A mistake made by both parties.
B)A party was unduly influenced by the other.
C)A party signed the contract under duress.
D)All of the above.
Q3) Sam,a minor,contracted to sell his computer to Cheryl,a 28-year-old.Sam later refused to complete the sale.If Cheryl sues to enforce the contract,she will:
A)win because Ryan breached the contract.
B)win because minors can only avoid contracts when they are the buyers.
C)lose, as the contract is void because of Sam's lack of capacity
D)lose, because the contract is voidable by Sam.
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Page 15
Chapter 14: Written Contracts
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Q1) Explain the reason behind having a statute of frauds and give arguments for and against having such a statute.
Q2) For statute of frauds purposes,an interest in land includes:
A)a house.
B)a real estate mortgage.
C)an easement.
D)All of the above.
Q3) parole evidence refers to anything (other than the written contract itself)that was said,done,or written before or as the parties signed the contract.
A)True
B)False
Q4) Amanda,a recent university graduate,needed a car to get to her new job.To help Amanda secure a loan for the car,Ted,a friend,agreed to pay the loan should Amanda default.Ted's promise to pay the loan is a collateral promise.His promise must be in writing to be enforceable.
A)True
B)False
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16
Chapter 15: Third Parties
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Q1) Amanda buys a vacuum cleaner to use in her home from retailer Andy.Amanda promises to pay for it in six monthly installment of $50 each.Andy assigns the contract to Big Finance Co.who paid value and took without notice of any defense.Big Finance Co.sues Amanda for nonpayment.Amanda has stopped making payments because the vacuum stopped working and Andy refuses to honor the express warranty he made to her at the time of the sale.Generally,any defense that Amanda may have against Andy is good against Big Finance Co.
A)True
B)False
Q2) Claims for personal injury are generally assignable.
A)True
B)False
Q3) Robert hired James,a CPA,to prepare his tax returns.James was too busy and delegated the work to Sara,also a CPA.This delegation is:
A)enforceable, as Sara is also a CPA.
B)enforceable, as there was no expectation James would do the work.
C)not enforceable, as Robert hired James to perform personal services.
D)not enforceable, as this violates public policy.
Q4) Discuss the potential liability differences between a delegation and a novation.
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Chapter 16: Performance and Discharge
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Q1) Ron operates a garbage pickup business.He contracts to pick up garbage from an apartment complex for the next 52 weeks at a price of $150 per week.Unexpectedly,the landfill center where Ron takes the garbage to dispose of it,files for bankruptcy.As a result,Ron must travel an additional 100 miles to the nearest landfill center,turning Ron's expected profit into a loss of $40 per week.Ron's best argument in support of his petition to be discharged from the contract is:
A)the mail box rule.
B)commercial impracticability.
C)frustration of purpose.
D)true impossibility.
Q2) On March 14,Greg orders $2500 of wine from Cork It,Inc.to be delivered on April 28 for a party scheduled on May 1.On April 15,Cork It notifies Greg that it will not be able to perform the contract as agreed.How will the law characterize Cork It's actions? Does Greg have to wait until April 28 before buying wine from another supplier?
Q3) A court may never discharge a party who has not performed.
A)True
B)False
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Page 18
Chapter 17: Remedies
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Q1) Nominal damages are awarded to parties who have experienced an injury to their legal rights but have no actual loss.
A)True
B)False
Q2) Ralph is a professional football player.He signs a valid contract with the Jets.Later,the Giants offer him more money,so he signs a contract with them.If the Jets sue Ralph,the most likely result would be?
A)The court will order Ralph to play with the Jets.
B)The court will order Ralph to play with the Jets, but Ralph is entitled to be paid the amount he negotiated under the Giants contract.
C)The court will enjoin Ralph from playing with any team other than the Jets.
D)The court will order Ralph to pay compensatory damages in the amount of the difference between the two contracts.
Q3) Damages must be established with reasonable certainty.
A)True
B)False
Q4) Discuss the purpose of an injunction and how the two types of injunctions covered in the textbook are used.
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Page 19
Chapter 18: Introduction to Sales
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Q1) Stanziano Construction needs a backhoe to complete a project.If it pays Hofmann Rentals for temporary use of the equipment,the transaction will be governed by:
A)Article 2 of UCC.
B)Article 2A of the UCC.
C)Article 3 of the UCC.
D)common law
Q2) The UCC does not apply to contracts for the sale of goods if the value of the goods is less than $500.
A)True
B)False
Q3) Harriett raises and sells hippos.In order to keep her hippos happy and healthy,she feeds them Hippo Chow,which she buys from the local pet store.Under the UCC,Harriett is:
A)a merchant of both hippos and Hippo Chow.
B)a merchant of hippos, but not of Hippo Chow.
C)a merchant of Hippo Chow, but not of hippos.
D)not a merchant of either hippos or Hippo Chow.
Q4) Discuss open price under the UCC.
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Page 20
Chapter 19: Ownership and Risk
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Q1) More than one party can have an interest in particular goods.
A)True
B)False
Q2) Regardless of the language of the contract,title to goods passes to the buyer at the time and place at which the seller physically delivers the goods.
A)True
B)False
Q3) Discuss the concept of insurable interests.
Q4) Under the UCC,the party who has title to the goods always has the risk of loss.
A)True
B)False
Q5) The term F.O.B.:
A)can indicate a destination or shipment contract.
B)stands for "freight on board."
C)requires the seller to insure the goods for the buyer's benefit.
D)shifts the risk of loss to the buyer when the goods are identified.
Q6) Explain the concept and significance of identification of goods.Discuss how identification takes place.
Q7) Discuss the concept of entrustment.
Page 21
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Chapter 20: Warranties and Product Liability
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Q1) Many states prohibit a seller from disclaiming implied warranties in the sale of consumer goods.
A)True
B)False
Q2) Daddy buys an electric car for his 10-year-old son.Daddy follows the directions for assembly carefully,but the son gets an injuring shock when he sits in the car.If Daddy and son sue the manufacturer for negligence,they will:
A)be successful only if they can prove that the car manufacturer knew of the defect and failed to correct it.
B)be successful only if they can prove that the car manufacturer failed to use reasonable care in designing, manufacturing, or warning the purchasers about intended uses and foreseeable misuses.
C)lose, because the son has no privity of contract and therefore no standing to sue.
D)not be successful if the car was sold "AS IS."
Q3) In a tort case,the statute of limitations runs from the time the defect was discovered.
A)True
B)False
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Chapter 21: Performance and Remedies
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Q1) A buyer has an absolute right to reject goods as long as the rejection is timely.
A)True
B)False
Q2) A buyer may revoke an acceptance of goods if:
A)the nonconformity does not impair the value of the goods.
B)the buyer had a legitimate reason for the initial acceptance.
C)the buyer knew the nonconformity could not be cured.
D)the buyer thought they could easily cover.
Q3) Which of the following statements is not true regarding the buyer's right to cover?
A)The buyer must cover.
B)The measure of damages in a cover is the difference between the cover price and the contract price.
C)Cover must be done by reasonably obtaining substitute goods.
D)Consequential damages can be recovered in addition to the cover damages.
Q4) Identify six possible remedies for a seller when the buyer breaches a contract.
Q5) Discuss the UCC rules on the limitation of damages in a contract.
Q6) Identify seven possible remedies for a buyer when the seller breaches a contract.
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Page 23
Chapter 22: Creating a Negotiable Instrument
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Q1) In good faith,Clinton gave Jane $500 for a negotiable promissory note made out to Jane for $550.She needed some money before the due date on the note,and Clinton had no notice of outstanding claims or other defects of the note.Clinton:
A)has more rights than Jane.
B)has the same rights as Jane.
C)has only conditional rights because they depend on Jane's rights.
D)cannot transfer the note to anyone else.
Q2) A possessor of non-negotiable paper has the same rights as the person who made the original contract.
A)True
B)False
Q3) Define commercial paper and explain what it is used for.
Q4) Which of the following requirements must an instrument meet in order to be negotiable?
A)It must be in writing.
B)It must contain an unconditional promise to pay.
C)It must be signed by the drawe.
D)All of the above.
Q5) Explain the shelter rule.
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Chapter 23: Liability for Negotiable Instruments
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Q1) A person who adds her signature to an instrument for the purpose of being liable on it is an accommodation party.
A)True
B)False
Q2) Tom indorsed a check made payable to the order of Tom Jones as follows: Pay Raymond Berry /s/ Tom Jones
Raymond negotiated the check to his landlord for his rent.Raymond indorsed the check as follows:
Without Recourse /s/ Raymond Berry
A)Tom has secondary contractual liability on the check as an indorser.
B)Tom has no contractual liability on the check because he is the payee.
C)Tom has primary contractual liability on the check as payee.
D)Tom eliminated his liability as an indorser by the type of indorsement he used.
Q3) Explain when presentment warranties apply.Identify the presentment warranties on a check and a promissory note.
Q4) List the warranties a transferor of a negotiable instrument makes.
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Chapter 24: Liability for Negotiable Instruments: Banks and Their Customers
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Q1) Beth holds a check from Bob,whose account is with USA Bank.To receive payment,Beth must personally present the check to USA Bank.
A)True
B)False
Q2) TriColor instructed Great State Bank to wire $3,578,900 to Betovon,Inc.Great State Bank issued the payment order to Vetobon,Inc.,instead of Betovon.Great State Bank is liable to TriColor for the full amount.
A)True
B)False
Q3) In the Seigel v.Merrill Lynch,Pierce,Fenner & Smith,Inc.case,the court addressed the issue of:
A)the bank's liability in case of theft of an ATM card.
B)the bank's liability in case of payment of a check despite a valid stop payment order.
C)the customer's liability in case of a returned check of over $500.
D)the bank's liability concerning stale checks.
Q4) Discuss warranty liability of a bank that transfers or presents an electronic or substitute check.
Q5) Discuss a bank's liability for both stale checks and post-dated checks.
Page 26
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Chapter 25: Secured Transactions
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Q1) To perfect a security interest in a negotiable instrument,Second State Savings and Loan should:
A)file a financing statement.
B)take possession of the instrument.
C)do nothing.Perfection is automatic.
D)secure a court order.
Q2) Which of the following is an example of a purchase money security interest in consumer goods?
A)A doctor purchasing a computer on credit to create a Webpage to make services and information available to her patients.
B)A doctor purchasing on credit a blood glucose monitor to check his own blood sugar levels.
C)A doctor purchasing a TV/VCR unit on credit to place in her office waiting room.
D)A doctor purchasing an exercise bike for his employees to use over the lunch hour.
Q3) For a security interest to attach,there must be an agreement.
A)True
B)False
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Chapter 26: Bankruptcy
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Q1) Forever Yours,Inc.has a secured and perfected security interest in Sally's big-screen TV.On the filing date of Sally's Chapter 7 petition,the balance of the debt owed to Forever Yours is $2,000.The value of the TV is estimated at $1,500.This means that Forever Yours: A)is secured for the entire debt, $2,000.
B)is unsecured for $500, the excess of the debt over the value of the TV.
C)has a high priority claim of $500.This means that Forever Yours, Inc.will be allowed $500 worth of other unsecured property before other unsecured creditors get anything.
D)is unsecured for the entire debt.
Q2) In Chapter 11 both creditors and debtor can propose plans of reorganization.
A)True
B)False
Q3) Which of the following is a primary goal of bankruptcy:
A)to preserve as much of the debtor's property as possible.
B)to divide the debtor's assets fairly between the debtor and the creditors.
C)to divide the debtor's assets fairly among the creditors.
D)All of the above.
Q4) What is a voidable preference? What requirements must be met in order for a preference to be voided?
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Page 28
Chapter 27: Agency
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Q1) One potential remedy for an agent's breach of duty is that a principal can recover from the agent any damages the breach has caused.
A)True
B)False
Q2) Rob agrees to act as an agent for Diane in selling her car.Diane has a duty of loyalty to Rob.
A)True
B)False
Q3) Janet was employed as a sales representative for Esday,Inc.An appreciative customer gave her a diamond bracelet for all her hard work on a complicated contract.Can Janet keep the bracelet?
A)Yes.The bracelet was given to Janet personally and intended for her.
B)Yes, but only if she discloses the gift to Esday and Esday consents to her keeping the bracelet.
C)No.An agent is not allowed under any circumstances to personally profit as a result of the agency relationship.
D)No.The giving of the bracelet is regarded as an unfair trade practice and violates antitrust law.
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Chapter 28: Employment Law
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Q1) Firing an employee for her refusal to violate the law would raise a claim of wrongful discharge.
A)True
B)False
Q2) Sandy worked for a small printing company.She found a new job that would pay much more.In accordance with company policy,she gave her employer a two-week notice that she would be leaving.Her employer was upset she was quitting,so he terminated her employment immediately.Sandy was upset because she thought she had acted properly by giving her employer two weeks' notice.Her new employer will not be able to employ her for two weeks.Sandy believes her employer has breached the employment agreement and she should be paid for the two weeks between jobs.Is she right? Explain.
Q3) The National Labor Relations Act allows employers to penalize workers who engage in union activity.
A)True
B)False
Q4) Hanson Corporation is concerned that its employees are spending too much work time talking on the telephone,sending e-mails,and using the Internet for personal uses.Discuss what steps Hanson may legally pursue to protect its interests in productivity.
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Chapter 29: Starting a Business: Llcs and Other Options
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Q1) Which of the following characteristics is that of a closely held corporation?
A)the shares are not publicly traded.
B)the corporation can typically operate without a board of directors.
C)the shareholders usually restrict share transfer.
D)all of the above
Q2) What are the advantages of electing Subchapter S status? What are the requirements?
Q3) The advantage of a corporation over a partnership is:
A)shares are easily transferable to another person.
B)perpetual existence.
C)it is easier to raise funds.
D)All the above.
Q4) Becoming a franchisee is a compromise between being an entrepreneur and being an employee.
A)True
B)False
Q5) What is a limited liability company? Explain the advantages and disadvantages of this type of business ownership.
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Chapter 30: Corporations
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Q1) Better Built Storage Buildings,Inc.wants to incorporate in Delaware but has no office there.It must:
A)open an office so it has an official address in Delaware where the Secretary of State can contact the business.
B)hire a registered agent to serve as its official presence in Delaware.
C)incorporate only where it actually does business so anyone who wants to sue the corporation can serve the complaint in-state.
D)give the Secretary of State of Delaware the address and phone number of its corporate office and a list of its top executives so the Secretary of State of Delaware can make sufficient contact out of state.
Q2) Shareholders have the right to manage the day-to-day business of the company. A)True
B)False
Q3) What is the business judgment rule and what is its purpose?
Q4) The Brooks v.Becker case addressed the issue of liability of promoters priot to the formation of the corporation.
A)True
B)False
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Page 32
Chapter 31: Securities Regulation
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Q1) The 1933 Act exempts all but which of the following from its registration requirements?
A)Short-term notes.
B)Long-term notes.
C)Government securities.
D)Annuity contracts.
Q2) Which of the following requires companies to file annual reports containing audited financial statements?
A)The 1933 Act.
B)The 1934 Act.
C)Regulation A.
D)Regulation B.
Q3) Premier Enterprises sold Watson unregistered stock which was not exempt.The 1933 Act imposes liability on Premier,and Watson's sole remedy is damages.
A)True
B)False
Q4) What are the three primary ways the SEC creates law?
Q5) What is the purpose of a registration statement and what information must be contained in it?
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Chapter 32: Property
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Q1) In order to constitute a valid gift:
A)the donor must intend to transfer ownership of property immediately.
B)the donee must accept the gift.
C)the donor must deliver the gift property to the donee.
D)All of the above are necessary for a valid gift.
Q2) The case Mitchell v.Bank of America National Association addressed which of the following?
A)Easement.
B)Landlord's liability as to the safety of the premises.
C)Bailment.
D)Tenant's duty to pay rent.
Q3) Sandra and Joe own a hobby farm as tenants in common.They also own a vacation home as joint tenants.What is the difference between the tenancy in common and joint tenancy?
Q4) Liz grants property "to AA so long as no alcohol is ever consumed on the premises; if so,then to Maria and her heirs." AA has a fee simple defeasible.
A)True
B)False
Q5) Identify and explain the different types of tenancy.
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Chapter 33: Cyberlaw
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Q1) The case United States of America v.Angevine discussed the application of:
A)COPPA
B)the Communications Decency Act.
C)the Fourth Amendment.
D)the Gramm-Leach-Biley Privacy Act.
Q2) The Children's Online Privacy Protection Act:
A)deals only with the collection of data that will be disclosed to children.
B)deals only with collecting, from children, information that will be disclosed publicly.
C)regulates the activities of Internet operators.
D)is enforced by the EEOC.
E)Both b and
Q3) "Hacking" is:
A)gaining unauthorized access to a computer system.
B)a major crime.
C)illegal under the federal Computer Fraud and Abuse Act, which applies to any computer attached to the Internet.
D)All of the above are correct.
Q4) Discuss the European Directive on the protection of personal Data.
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Chapter 34: Intellectual Property
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Q1) Anderson Corp.owns a very long customer list which it guards because it gives the company a competitive advantage.If Alice willfully misappropriates the list,a court may hold her liable to Anderson for double damages.
A)True
B)False
Q2) Which of the following is an advantage of trademark registration?
A)potential damages are higher.
B)after five years the mark becomes almost impossible to challenge.
C)the mark is valid nationally.
D)all of the above
Q3) If a trademarked name acquires a generic meaning,the owner of the trademark loses protection.
A)True
B)False
Q4) A color cannot be trademarked since it cannot be kept from use by other businesses.
A)True
B)False
Q5) Describe what copyright infringement means.
Q6) Briefly discuss a patent,copyright,and trademark.
Page 36
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