Corporate Law Practice Exam
Course Introduction
Corporate Law is a comprehensive course that examines the legal framework governing the formation, management, and dissolution of corporations. It explores foundational principles such as corporate personality, limited liability, the duties and liabilities of directors and officers, shareholder rights, and the roles of other stakeholders. The course also addresses issues related to corporate governance, securities regulation, mergers and acquisitions, and compliance with statutory and regulatory requirements. Through case studies and analysis of statutory materials, students gain practical insight into the intersection of law and business in the corporate context, preparing them for careers in legal practice, management, or corporate consultancy.
Recommended Textbook
Andersons Business Law and the Legal Environment 22nd Edition by David P. Twomey
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Chapter 1: The Nature and Sources of Law
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Q1) Substantive law:
A) specifies the steps to follow to enforce legal rights.
B) concerns equitable relief only.
C) creates,defines,and regulates rights and liabilities.
D) draws solely on English legal principles.
Answer: C
Q2) Rights guaranteed in the United States Constitution are accompanied by duties.
A)True
B)False
Answer: True
Q3) Statutes are the only source of law.
A)True
B)False
Answer: False
Q4) Our rights flow from:
A) the Constitution.
B) federal statutes.
C) city ordinances.
D) all of the above.
Answer: D
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Chapter 2: The Court System and Dispute Resolution
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Sample Questions
Q1) Service of process refers to:
A) a demand letter sent by the plaintiff to the defendant.
B) a reply sent to the plaintiff by the defendant.
C) giving the defendant proper notice that a legal action is pending.
D) a record of the court's preliminary hearing.
Answer: C
Q2) A court is a tribunal established by:
A) the parties to a lawsuit.
B) the government.
C) the parties to a contract.
D) none of the above.
Answer: B
Q3) Costs generally are awarded to the prevailing party in litigation.Those costs usually include:
A) filing fees.
B) service-of-process fees.
C) deposition transcript costs.
D) all of the above.
Answer: D
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Page 4
Chapter 3: Business Ethics, Social Forces, and the Law
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Q1) Laws that prohibit theft,operation of a factory in areas zoned residential,and copyright infringement exist primarily:
A) for protection of the person.
B) for protection of public health,safety,and morals.
C) for protection of property.
D) for protection of the state.
Answer: C
Q2) Laws that prohibit defamation,invasions of privacy,and reputation exist primarily:
A) for protection of the person.
B) for protection of public health,safety,and morals.
C) for protection of property.
D) for protection of the state.
Answer: A
Q3) Trust is a fundamental basis of the capitalist system that is central to the expectations of investors,customers,and other firm stakeholders.
A)True
B)False
Answer: True
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Chapter 4: The Constitution As the Foundation of the Legal Environment
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Q1) A constitution is the written document that establishes the structure of the government and its relationship to the people.
A)True
B)False
Q2) Which of the following is not protected under the privileges and immunities clause?
A) right to go to another state and make a contract
B) right to go to another state and vote in local elections
C) right to go to another state and purchase property
D) right to go to another state and open a business
Q3) When the president negotiates a treaty with a foreign country and submits it to the Senate for approval,the president's action is:
A) an express Constitutional amendment.
B) an amendment by judicial interpretation.
C) an amendment by practice.
D) the power of manifest destiny.
Q4) Ex post facto laws can be adopted by either states or the national government.
A)True
B)False
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Chapter 5: Government Regulation of Competition and Prices
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Q1) When large-size enterprises plan to merge,they must give written notice to the Interstate Commerce Commission.
A)True
B)False
Q2) 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
Q3) A divestiture order is a decree ordering a defendant to dispose of excessive ownership or control of interests in competing enterprises.
A)True
B)False
Q4) Vertical mergers:
A) occur between firms that have a competitor relationship.
B) occur between firms that have buyer and seller relationships.
C) are not covered by the Clayton Act.
D) are always protected by the federal government.
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Chapter 6: Administrative Agencies
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Sample Questions
Q1) The "public comment" period for proposed administrative agency rules must be at least __________ days.
A) 30
B) 60
C) 90
D) 120
Q2) Concerning administrative investigations:
A) agencies are severely limited by the constitutional protection against unreasonable searches and seizures.
B) a search warrant is always required to search premises.
C) papers and records generally may be subpoenaed by an agency.
D) a person does not have constitutional protection against unreasonable searches and seizures.
Q3) An administrative agency:
A) is not empowered to act as a court with regard to its own regulations.
B) acts as a specialized court of limited jurisdiction.
C) can hear complaints only in the presence of a jury.
D) cannot impose penalties for violation of its regulations.
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Chapter 7: The Legal Environment of International Trade
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Q1) The International Monetary Fund (IMF)was formed to shorten the duration and lessen the disequilibrium in the international balance of payments of its members.
A)True
B)False
Q2) 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
Q3) U.S.courts will assume jurisdiction and apply antitrust laws to conduct business outside the United States if the activities of the business firms outside the United States have a direct,substantial,and foreseeable impact on U.S.commerce.This is based on what principal?
A) the "jurisdictional rule of reason"
B) the "act-of-state doctrine
C) the "effects" doctrine
D) comity
Q4) Law is the result of the desire of the lawmaker to achieve certain goals.
A)True
B)False
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Chapter 8: Crimes
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Q1) Due process includes the right to be heard,question witnesses,and present evidence.
A)True
B)False
Q2) Destroying information stored on a computer may be a crime.
A)True
B)False
Q3) James Smith,a health inspector for the state of Missouri,inspected a restaurant owned by Salley Slick.Smith found numerous health violations in the restaurant and fined Slick accordingly.When Smith notified Slick of the infractions,Smith strongly suggested that $5,000 "would sure prove handy in the Spring" when he planned to purchase a new fishing boat.Slick understood Smith's obvious hint and offered Smith $5,000 if he would lose the paperwork concerning the failure of the restaurant to meet proper inspection guidelines.Smith accepted the $5,000 and lost the paperwork.One month later,Smith returned to the restaurant and told Slick that he would reappear every month and find violations unless Slick produced $1,000 each month to go toward the purchase of a fleet for Smith.Slick agreed to make the $1,000 payments.What crimes have been committed by Smith and Slick?
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Page 10
Chapter 9: Torts
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Q1) To determine whether the defendant is liable for negligence,a reasonable person standard is employed.
A)True
B)False
Q2) Torts are classified as:
A) intentional only.
B) negligence only.
C) strict liability only.
D) intentional,negligence,and strict liability.
Q3) The tort of invasion of privacy always requires the misappropriation of another's name or likeness.
A)True
B)False
Q4) John owed Barney money.Barney called John's home several times per day for five weeks asking for repayment,with some of the calls coming after midnight.Barney might be liable for:
A) defamation.
B) wrongful interference with a contract.
C) intentional infliction of emotional distress.
D) trespass.
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Chapter 10: Intellectual Property Rights
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Sample Questions
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) In order to protect themselves from disclosure of proprietary or confidential information,businesses may:
A) implement security measures to prevent access by outsiders.
B) enforce contractual nondisclosure agreements against departing employees.
C) limit disclosure of such information to those with a need to know.
D) all of the above.
Q3) A trademark is any word,name,symbol,device,or combination of these used to identify a product.
A)True
B)False
Q4) Although processes and machines are eligible for patent protection,manufactures and compositions of matter are not.
A)True
B)False
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Chapter 11: Cyberlaw
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Q1) The Internet Tax Freedom Act (ITFA)prohibits companies from charging sales tax on Internet transactions.
A)True
B)False
Q2) The tort of invasion of privacy has some application to cyberspace communication.
A)True
B)False
Q3) Cleaning up your name on Google using one of several services is a good way to eliminate any suspicions perspective or current employers may have about you.
A)True
B)False
Q4) The term "cyberlaw" refers to laws and precedent applicable to Internet transactions and communications.
A)True
B)False
Q5) The term "cyberspace" describes the World Wide Web and Internet communication.
A)True
B)False
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Chapter 12: Nature and Classes of Contracts: Contracting
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Sample Questions
Q1) The promisor in a contract may also be called the:
A) obligor.
B) grantor
C) obligee
D) grantee
Q2) An implied contract is one in which the agreement is shown not by words,written or spoken,but by the acts and conduct of the parties.
A)True
B)False
Q3) A contract for an amount greater than $1 million must be made under seal or it is not binding.
A)True
B)False
Q4) An obligation to pay for the reasonable value of services rendered when there is no contract would be called:
A) quasi-contractual.
B) quasi-enforceable.
C) semi-lawful.
D) valid.
Page 14
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Chapter 13: Formation of Contracts: Offer and Acceptance
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Q1) An option is itself a contract to refrain from revoking an offer.
A)True
B)False
Q2) If an offer requires that acceptance be communicated by a specific date and the acceptance is properly dispatched by the offeree on the final date,
A) no contract is formed,since the offeror will undoubtedly receive the dispatched acceptance after the deadline for acceptance.
B) a contract is formed,but the contract is voidable at the election of the offeror.
C) the acceptance is timely and a contract is formed,even though the offeror actually receives the acceptance well after the specified date has passed.
D) the acceptance is timely and a contract is formed,but only if the offeror actually receives the acceptance by the deadline specified for acceptance.
Q3) An output contract is too vague to be a legally-enforceable agreement.
A)True
B)False
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Chapter 14: Capacity and Genuine Assent
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Q1) A party who speaks with a reckless disregard for the truth not knowing of the falsity of his or her words cannot be liable for fraud.
A)True B)False
Q2) In order for fraud liability to arise,the listener must actually rely on the false statement of fact.
A)True B)False
Q3) Ordinarily,a party to a contract has no duty to volunteer information to the other party.
A)True B)False
Q4) A factual incapacity may exist when,because of a mental condition caused by medication,drugs,alcohol,illness,or age,a person does not understand that a contract is being made or understand its general nature.
A)True B)False
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Chapter 15: Consideration
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Q1) Sara Student wished to pay off her $5,000 student loan.If she sends in a check for $3,000 and the creditor cashes the check,the debt will be fully satisfied provided the check is marked "paid in full."
A)True
B)False
Q2) For a bilateral contract to be enforceable there must be:
A) mutuality of obligation.
B) an illusory promise.
C) forbearance.
D) adequacy of consideration.
Q3) Dave Tompkins was up late one night watching a television campaign for a charitable organization.The organization was seeking donations in order to construct a new building that would serve as the organization's headquarters.One of Tomkins' favorite performers appeared to promote the campaign,and this prompted Dave to telephone in a pledge.Tomkins pledged $10,000 to the charity and,feeling good about his action,finally went to sleep.The next morning,Tomkins regretted making the pledge because its enforcement would cause great personal financial hardship.Will the charity be able to legally enforce the pledge Tomkins made? If so,why might the charity choose not to enforce a lawful pledge?
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Page 17
Chapter 16: Legality and Public Policy
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Questions
Q1) When a court finds a clause of a contract unconscionable at the time it was made,it may enforce the remainder of the contract.
A)True
B)False
Q2) To stabilize the industry,manufacturers of the same or similar products may agree that each will market its product in a specified geographic area of the country and will not market its product in the territory assigned to other manufacturers.
A)True
B)False
Q3) Companywide standardized form contracts imposed on a "take-it-or-leave it" basis by a party with superior bargaining strength are called contracts of collusion.
A)True
B)False
Q4) Legislation commonly requires that an installment-sale contract specify the cash price,down payment,finance charges,and insurance costs.
A)True
B)False
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Chapter 17: Writing, Electronic Forms, and Interpretation of Contracts
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Q1) Suzy Anders enters into an oral contract to purchase a tract of land from Bill Hermes.The land is considered worthless,but Anders feels that she has discovered a possible usage that would drastically increase the value of the land.To assure herself of the potential value of the land,Anders orally hires an attorney to investigate the title and records associated with the land in question.Before gaining any information from her attorney,Anders orally contracts with a builder to construct a huge building on the site.Because of the size of the project,a completion time is difficult to predict.Anders now discovers that the land is indeed useless,a fact that she obtains through information from her attorney.
Anders now refuses to honor her contracts with Hermes,her attorney,and the builder.Must Anders honor her contractual agreements?
Q2) The parol evidence rule may not apply if:
A) the contract is materially incomplete.
B) the parties disagree on the meaning of the contract.
C) there is no ambiguity regarding the terms of the contract.
D) one party is unable to perform the contractual obligations.
Q3) Provisions of a contract will be considered separately and not as a whole.
A)True
B)False
Page 19
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Chapter 18: Third Persons and Contracts
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Q1) It is necessary that a third-party beneficiary be identified by name.
A)True
B)False
Q2) In a contract in which a tenant borrowed money from a bank for the purpose of adding a bathroom to her apartment,the landlord is:
A) a direct beneficiary.
B) in privity of contract with the tenant.
C) a third-party beneficiary.
D) an incidental beneficiary.
Q3) In general,an assignee stands:
A) in a position subordinate to the assignor.
B) exactly in the position of the assignor.
C) in a position superior to the assignor.
D) in a position similar to,but not equal to,the assignor.
Q4) A third person does not have the status of an intended third-party beneficiary unless it is clear at the time the contract was formed that the parties intended to impose a direct obligation with respect to the third person.
A)True
B)False
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Chapter 19: Discharge of Contracts
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Q1) A homeowner who refinances her home mortgage may cancel the transaction:
A) if the terms of the contract were less favorable than anticipated.
B) within three business days.
C) only if she was the victim of fraud.
D) upon payment of a $1,000 penalty,as required by a Federal Trade Commission rule.
Q2) A house-painting contract is discharged if continual rain makes it impossible to complete the painting by the time specified in the contract.
A)True
B)False
Q3) When parties contract expressly for a particular subject matter,the contract is discharged if the subject matter is destroyed through no fault of either 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 20: Breach of Contract and Remedies
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Q1) Consequential damages may not be recovered,even if they were within the contemplation of the parties at the time of contracting.
A)True
B)False
Q2) 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
Q3) When a written contract does not correctly state the agreement already made but the parties either party make seek a(n):
A) rescission
B) injunction
C) reformation of the contract
D) action for specific performance
Q4) If there is a breach of contract,the law requires that the other party terminate the contract and bring a lawsuit.
A)True
B)False
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Chapter 21: Personal Property and Bailments
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Sample Questions
Q1) Most courts consider an engagement ring to be a conditional gift.
A)True
B)False
Q2) If while trespassing a hunter kills game,the game belongs to that hunter.
A)True
B)False
Q3) Sylvia and Morris were married and owned their home as tenants by the entirety.When Morris died,his will said that he left his half of his home to his brother Tim.Sylvia objects to this.The ownership of the home:
A) belongs solely to Sylvia by survivorship.
B) is now a joint tenancy between Sylvia and Tim.
C) is now a tenancy in common between Sylvia and Tim.
D) belongs to Sylvia and the state,in equal and divisible shares.
Q4) Which of the following forms of cotenancy does not have right of survivorship?
A) joint tenancy
B) tenancy by entirety
C) tenancy in common
D) community property
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Chapter 22: Legal Aspects of Supply Chain Management
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Q1) In most states,statutes limit or provide a method of limiting the common law liability of a hotelkeeper.
A)True
B)False
Q2) A warehouse receipt is not considered a document of title.
A)True
B)False
Q3) A transferor makes certain implied warranties to the transferee when a bill of lading is transferred.These warranties are:
A) that the bill of lading is genuine.
B) that the transfer is rightful.
C) that the transferor has no knowledge of any defects.
D) all of the above.
Q4) A transferee of a nonnegotiable warehouse receipt acquires only the title and rights that the transferor had actual authority to transfer.
A)True
B)False
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Chapter 23: Nature and Form of Sales
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Q1) The provisions of Article 6 concerning bulk transfers are designed to protect creditors.
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) UCC Article 2 applies not only to contracts for the sale of familiar items of personal property,such as automobiles or chairs,but also to the transfer of commodities,such as oil,gasoline,milk,and grain.
A)True
B)False
Q4) A sale of goods is defined under UCC Article 2 as transfer of title to intangible property for a price.
A)True
B)False
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25
Chapter 24: Title and Risk of Loss
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Q1) Title passes to the buyer at delivery:
A) in all situations
B) when goods are shipped FOB place of destination
C) when goods are shipped FOB shipment
D) never
Q2) Future goods can be identified before they are manufactured.
A)True
B)False
Q3) Anne Robertson obtained telescopes from the See-Well Optics Company at dealer prices on the pretense of being a dealer in optical equipment.See-Well later determined that Robertson was not,had never been,and did not plan to be a dealer in optics.By the time these facts emerged,Robertson had succeeded in selling the telescopes to several individuals located throughout the country.These buyers had responded to advertisements placed by Robertson,who again had represented herself as a dealer in optical equipment.The buyers had purchased the telescopes in good faith at prices consistent with comparable equipment.See-Well located these buyers and demanded that the telescopes be returned as property obtained through fraud.Do the buyers of these telescopes have to return their purchases?
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26
Chapter 25: Product Liability: Warranties and Torts
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Q1) A seller cannot be held liable for the breach of an express warranty if the seller honestly believed that the warranted statement was true.
A)True
B)False
Q2) It is necessary to the creation of an express warranty that the seller use formal words such as "warrant" or "guarantee."
A)True
B)False
Q3) Which of the following is not a product liability theory that protects buyers and allows them to recover for injury and economic loss?
A) express warranty
B) implied warranty
C) strict tort liability
D) assumption of the risk
Q4) An express warranty can be disclaimed even if it was a critical part of the bargain to the buyer.
A)True
B)False
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Chapter 26: Obligations and Performance
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Q1) If a contractually-specified mode of transportation is not available,the:
A) contract is automatically voided.
B) seller must make delivery by a commercially-reasonable substitute.
C) buyer must arrange to pick up the goods.
D) seller must make personal delivery.
Q2) The obligation of all parties to perform in good faith is the same because everyone is required to be honest.
A)True
B)False
Q3) A party to a sales contract who is afraid that the other party will not perform may seek to gain additional confidence by demanding some form of:
A) bailment.
B) security.
C) assurance.
D) assignment.
Q4) Upon a seller's tender of nonconforming goods and the buyer's rejection of them,the transaction has ended.
A)True
B)False
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Chapter 27: Remedies for Breach of Sales Contracts
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Q1) A liquidation of damages clause in a consumer contract is enforceable if it: A) is not in excess of twice the provable damages.
B) is agreed to by both parties to the contract.
C) reasonably attempts to estimate the actual harm caused by a breach.
D) is a reasonable amount designed to punish the breaching party.
Q2) A buyer can be barred from claiming a breach if the sales contract expressly states that the buyer will not assert any defenses against the seller.
A)True
B)False
Q3) A buyer who breaches a contract after making a down payment generally will be subject to the rule that the seller may retain the full down payment as damages.
A)True
B)False
Q4) The tort statutes of limitations tend to be __________the UCC statute of limitations.
A) shorter than B) longer than C) equal to D) excluded by
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Chapter 28: Kinds of Instruments, parties, and Negotiability
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Q1) Negotiability is the characteristic that distinguishes commercial paper and instruments from ordinary contracts.
A)True
B)False
Q2) Article 3 of the UCC establishes a __________-year statute of limitations for most actions involving negotiable instruments.
A) one
B) two
C) three
D) four
Q3) Action taken by one on behalf of another is:
A) agency.
B) negotiability.
C) representative capacity.
D) Identification of principal.
Q4) A negotiable instrument may be partly printed and partly typewritten.
A)True
B)False
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Page 30
Chapter 29: Transfers of Negotiable Instruments and Warranties
of Parties
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Q1) A blank indorsement turns a(n)__________instrument into a(n)__________ instrument.
A) negotiable;non-negotiable
B) non-negotiable;negotiable
C) bearer;order
D) order;bearer
Q2) To enforce an implied warranty of an indorser,the party claiming under the warranty must give the indorser notice of the breach within fourteen (14)days after the claimant learns or has reason to know of the breach and the identity of the indorser.
A)True
B)False
Q3) A transferor may be able to set aside a negotiation obtained by fraud or duress unless:
A) a minor is involved.
B) the negotiation was part of an illegal transaction.
C) the negotiation was beyond the powers of the corporation.
D) the instrument has been acquired in the meantime by a holder in due course who did not know of the misconduct.
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Chapter 30: Liability of the Parties Under Negotiable Instruments
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Q1) The law gives certain holders of a negotiable instrument a preferred standing by protecting them from all defenses when they sue to collect payment.
A)True
B)False
Q2) A holder may:
A) demand payment.
B) bring suit for the collection of an instrument.
C) give a discharge or release from liability on the instrument.
D) all of the above.
Q3) A holder can recover from any of the parties who are liable on the instrument,regardless of the order of the signatures on the instrument.
A)True
B)False
Q4) Which of the following will not be considered value in connection with determining holder in due course status?
A) performing the act for which the instrument was given
B) promising to perform an existing legal obligation
C) receiving the instrument as security for a loan
D) taking the instrument in payment of a debt
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Chapter 31: Checks and Funds Transfers
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Q1) Ordinarily,the drawee bank is liable to the drawer when it pays a check on which the drawer's signature has been forged.
A)True
B)False
Q2) Checks that involve amounts of more than $5,000 generally trigger the bank reporting requirements under the USA Patriot Act.
A)True
B)False
Q3) A debit transaction occurs when a person making a payment requests such payment be made to the beneficiary's bank.
A)True
B)False
Q4) A check may be certified by a bank on request of the drawer or the holder.
A)True
B)False
Q5) A check is drawn on the assumption that the bank has sufficient funds in the drawer's account for payment.
A)True
B)False
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Chapter 32: Nature of the Debtor-Creditor Relationship
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Q1) Bailment given as security for the payment of a debt is a(n):
A) pledge
B) contribution
C) guaranty
D) indemnity
Q2) The creditor first must proceed against the debtor before suing the surety.
A)True
B)False
Q3) Suretyship and guaranty transactions have the common feature of a promise to answer for the debt or default of another.
A)True
B)False
Q4) Letters of credit are a form of advance arrangement for financing.
A)True
B)False
Q5) Which of the following is correct concerning suretyship and guaranty?
A) A surety is always liable from the moment the principal is in default.
B) A guarantor is always liable from the moment the principal is in default
C) Both a.and b.
D) None of the above.
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Chapter 33: Consumer Protection
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Q1) A consumer may waive all defenses otherwise provided for by law.
A)True
B)False
Q2) The category of protected consumers for many statutes has been expanded to include partnerships,corporations and government entities.
A)True
B)False
Q3) A consumer claiming that there has been a violation of a consumer protection statute has the burden of proving that the statutory definition of "consumer" has been satisfied.
A)True
B)False
Q4) When a credit application is refused,it is sufficient that the lender give the applicant a written statement saying: "application refused."
A)True
B)False
Q5) The Fair Credit Reporting Act applies only to consumer credit.
A)True
B)False
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Chapter 34: Secured Transactions in Personal Property
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Q1) When the filing of a financing statement is defective:
A) the security interest is lost.
B) the filing fails to perfect the security interest.
C) the security interest is perfected through the court's application of equitable principles.
D) the public notice of the creditor's interest is still effective.
Q2) Generally,a secured creditor who has repossessed collateral may retain the collateral and cancel the debt.
A)True
B)False
Q3) When a seller sells on credit and is given a security interest in the goods,that interest is called:
A) a purchase money security interest.
B) a future transaction.
C) a floating lien.
D) none of the above.
Q4) Consumer goods are not subject to perfection of a security interest.
A)True
B)False
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Chapter 35: Bankruptcy
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Q1) Arthur was involuntarily petitioned into bankruptcy by three of his creditors.When the trustee reviewed Arthur's books and records,the trustee discovered the following transactions: (a)Three weeks before the filing of the petition,Arthur paid cash for $17,000 worth of inventory for his store;and (b)Twelve days before the filing of the petition,Arthur paid $300 in full satisfaction of his store's most recent electric bill. The trustee is considering attempting to set aside both of these transfers as preferential transfers.Discuss the advisability of the trustee's attempt to set aside these transfers.
Q2) The debtor will be denied a discharge if:
A) the debtor had been extravagant.
B) the debtor incurred debts because of negligence.
C) the debtor received a discharge ten (10)years previously.
D) the debtor refused to obey a lawful order of the court.
Q3) A discharge releases the debtor from the unpaid balance of most debts including taxes and tax penalties.
A)True
B)False
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Chapter 36: Insurance
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Q1) Mike Reilly suffered the loss of his home as a result of a chimney fire that was caused by the ignition of soot in the chimney.This fire would be described as:
A) a friendly fire.
B) arson by negligence.
C) a strict liability fire.
D) a hostile fire.
Q2) An insurer who wrongfully refuses to defend the insured is liable for:
A) breach of contract.
B) insurance fraud.
C) the tort of wrongful interference with contractual relations.
D) the tort of malicious prosecution.
Q3) For property insurance,an insurable interest must exist:
A) at the time the policy is purchased.
B) at the time of the loss.
C) both at the time the policy is purchased and at the time the loss is sustained.
D) for at least thirty (30)days before the loss is sustained.
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Chapter 37: Agency
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Q1) 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
Q2) If a principal terminates an agency without giving notice of the termination to third persons,the agent may retain the power to make contracts that will bind the principal and third persons.
A)True
B)False
Q3) A written authorization of agency is called a power of attorney.
A)True
B)False
Q4) The Uniform Durable Power of Attorney Act (UDPAA)changes the general rule that insanity of a principal terminates an agent's authority to act for the principal.
A)True
B)False
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Chapter 38: Third Persons in Agency
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Q1) Statements or declarations of an agent:
A) will not bind the principal.
B) will bind the principal if the statements were made by an agent while transacting business within the scope of agency authority.
C) will not bind the principal if made after performance of the transaction concerned.
D) none of the above.
Q2) Hiring an individual with a criminal record is conclusive proof that the employer is liable for the tort of negligent hiring.
A)True
B)False
Q3) When a person makes a contract as an agent for another but lacks authority to do so,the contract:
A) binds the principal but not the agent.
B) binds the principal and the agent.
C) does not bind the principal.
D) none of the above.
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Chapter 39: Regulation of Employment
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Q1) The NLRA prohibits discrimination against employees for engaging in union activities even if they are warned of the possible consequences of their union activities.
A)True
B)False
Q2) Which of the following groups may legally be paid less than minimum wage?
A) Full time college students
B) Individuals with impaired productive capacity due to mental disability
C) Both a.and b.
D) Neither a.nor b.
Q3) Collective bargaining agreements generally are subject to a ratification vote by the employees.
A)True
B)False
Q4) Subject to statutory restrictions,parties are free to make an employment contract on any terms that they wish.
A)True
B)False
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Chapter 40: Equal Employment Opportunity Law
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Q1) 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
Q2) When an employee alleges religious discrimination because of an employee-observed religious practice:
A) the employer must bypass seniority rules to accommodate the employee.
B) the employee must honor all bona fide religious practices.
C) the employer must make reasonable efforts to accommodate religious beliefs.
D) the employer must call in a substitute worker at additional cost.
Q3) To successfully pursue a Title VII lawsuit,the plaintiff generally must belong to a protected class.
A)True
B)False
Q4) Equal employment opportunity laws provide protection for minorities and women,but the disabled are not within the protection of the laws.
A)True
B)False
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Chapter 41: Types of Business Organizations
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Q1) In a corporation,a large number of investors may pool their assets to finance a large business enterprise.
A)True
B)False
Q2) A limited liability partnership:
A) is taxed like a corporation.
B) provides limited liability for all partners.
C) shields innocent partners from personal liability beyond their investment.
D) All of the above.
Q3) The Petroleum Marketing Practices Act gives gas station __________ the opportunity to continue in business by purchasing the entire premises used in selling motor fuel when the franchisor decides to sell the property and not renew a lease.
A) franchisees
B) licensors
C) joint venturers
D) partners
Q4) Corporations are subject to a form of double taxation.
A)True
B)False
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Chapter 42: Partnerships
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Q1) A creditor of an individual partner cannot proceed against any specific items of partnership property,but can obtain a charging order against that partner's interest in the partnership.
A)True
B)False
Q2) A partner may withdraw from the partnership without liability: A) unless the withdrawal violates the partnership agreement. B) when the partnership is not for a definite purpose. C) when the partnership is not for a definite time.
D) all of the above.
Q3) A partner is considered an employee of the partnership when doing work that would ordinarily be done by an employee.
A)True
B)False
Q4) The Uniform Partnership Act,a codification of partnership law,has been adopted by 49 states.
A)True
B)False
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Chapter 43: LPs, LLCs, and LLPs
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Q1) Under the Revised Uniform Limited Partnership Act,limited partners may engage in certain "safe harbor" activities without losing their protection from liability.These activities include being a contractor for,or an agent or employee of,the limited partnership or of a general partner.
A)True
B)False
Q2) Management of an LLC is vested in its:
A) members
B) partners
C) shareholders
D) managers
Q3) A limited liability company pays federal income tax.
A)True
B)False
Q4) Limited liability is not a feature of general partnership law.
A)True
B)False
Q5) A limited liability company is identical to a Subchapter S corporation.
A)True
B)False
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Chapter 44: Corporate Formation
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Q1) A successor enterprise is not subject to the contract obligations of the former business if:
A) one corporation is absorbed by another through merger.
B) a corporation merely purchases the assets of another business.
C) two or more corporations consolidate.
D) none of the above.
Q2) A corporation is considered a person for purposes of the due process clause of the United States Constitution.
A)True
B)False
Q3) A public corporation is:
A) also know as a public utility.
B) organized for charitable and benevolent purposes or for purposes of finance,industry,and commerce.
C) established for governmental purposes and for the administration of public affairs.
D) all of the above.
Q4) A corporation is an artificial person that is created by governmental action.
A)True
B)False
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Chapter 45: Shareholder Rights in Corporations
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Q1) Under the RMBCA,a preincorporation subscription agreement is irrevocable for three (3)months unless the subscription agreement provides a longer or shorter period,or all of the subscribers agree to revocation.
A)True
B)False
Q2) Shareholders exercise direct control over their corporation.
A)True
B)False
Q3) An individual who has been authorized to vote the share of another stockholder is said to be voting by:
A) trust.
B) proxy.
C) estoppel.
D) agency.
Q4) Shares of stock that have been issued to stockholders in a corporation are said to be outstanding.
A)True
B)False
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Chapter 46: Securities Regulation
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Q1) The Securities Exchange Act of 1934 is concerned with the secondary distribution of securities in the national securities markets and in the over-the-counter markets.
A)True
B)False
Q2) The Securities Act of 1933 requires a seller to provide a prospectus to each potential purchaser of an original issue of securities.
A)True
B)False
Q3) Which of the following powers is not available to the SEC pursuant to the Remedies Act?
A) The SEC may start administrative proceedings against any person or entity regulated by the SEC.
B) The SEC may start administrative proceedings against any person or entity not regulated by the SEC.
C) The SEC may order an accounting and disgorgement of ill-gotten gains.
D) All of the above powers are available to the SEC under the Remedies Act.
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Chapter 47: Accountants Liability and Malpractice
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Q1) Professionals who fail to exercise normal care and skill in the performance of a contract for their services may be sued for a special type of breach described as:
A) sub par performance.
B) illegal practice.
C) malpractice.
D) competence reservation.
Q2) To bring a tort action for malpractice,a plaintiff must show that the defendant's breach was at least:
A) intentional.
B) negligent.
C) reckless.
D) fraudulent.
Q3) Any disclaimer by an accountant that excludes liability for malpractice based on negligence is void.
A)True
B)False
Q4) Accountants are equally liable to interlopers and rightful third parties.
A)True
B)False
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Chapter 48: Management of Corporations
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Q1) Ordinarily,the management of a corporation is not liable to third persons if the managerial policies cause loss to such third persons.
A)True
B)False
Q2) The business judgment rule is applied by the courts as a presumption that must be overcome by the person challenging a director's actions.
A)True B)False
Q3) Most states permit action to be taken by the board of directors without holding an actual meeting.
A)True
B)False
Q4) The sale of corporate assets outside the regular course of a corporation's business is an example of an extraordinary matter.
A)True B)False
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Chapter 49: Real Property
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Q1) Licensees are on the premises with the permission of the landowner.
A)True
B)False
Q2) An easement is a right to use another's property that belongs to the land that is benefited.
A)True
B)False
Q3) Liens on land may be created voluntarily by the owner of land or involuntarily against the wishes of the owner.
A)True
B)False
Q4) Technically,land is considered as extending downward to the earth's center and upward indefinitely.
A)True
B)False
Q5) A condominium is a combination of co-ownership and individual ownership.
A)True
B)False
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Chapter 50: Environmental Law and Land Use Controls
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Q1) States that do not meet federal standards under The Clean Air Act are known as nonattainment areas.
A)True
B)False
Q2) Due diligence usually consists of searching public records and inspecting the land.
A)True
B)False
Q3) Public zoning and restrictive covenants in deeds have a similar purpose,but each has a different source of authority.
A)True
B)False
Q4) Nuisances may be classified as either private nuisances or public nuisances.
A)True
B)False
Q5) The zoning power permits any regulation that is conducive to advancing public health,welfare,and safety.
A)True
B)False
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Chapter 51: Leases
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Q1) A landlord has the right to enter a leased premises without notice:
A)for emergency purposes.
B)for repairs and evaluations.
C)both a.and b.
D)none of the above.
Q2) A tenancy by sufferance describes a tenancy that can be terminated at any time upon proper notice.
A)True
B)False
Q3) If a tenant fails to pay rent on time the landlord:
A) has an automatic lien on the tenant's personal property for the money due.
B) has the right to lock the tenant out of the property.
C) may take legal steps to evict the tenant.
D) all of the above.
Q4) Inference occurs when a landlord prevents a tenant from accessing the property. A)True B)False
Q5) Renewal provisions in a lease are strictly construed against the tenant.
A)True
B)False
53
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Chapter 52: Decedents Estates and Trusts
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Q1) When specifically bequeathed property is sold or given away by the testator prior to death,the bequest is considered "redeemed."
A)True
B)False
Q2) The judge,not the decedent,has the privilege of naming who is to administer the estate of a person who has died with a will.
A)True
B)False
Q3) Letters testamentary:
A) are given to an administrator.
B) are given to an executor.
C) require a bond to be filed by the person to whom they are given if the will exempts the requirement.
D) none of the above.
Q4) Probate is the act by which:
A) the court declares an instrument is a valid will.
B) a qualified person may contest the will.
C) the witnesses sign an attestation clause.
D) publication of the will takes place.
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