Entrepreneurship Law
Mock Exam
Course Introduction
Entrepreneurship Law is a comprehensive course exploring the legal principles and frameworks that impact the formation, development, and operation of entrepreneurial ventures. The course covers essential topics such as business entity selection and formation, intellectual property protection, contract negotiation, financing and securities regulations, employment law, and compliance with governmental regulations. Through case studies and practical scenarios, students gain insight into how legal considerations influence business strategies and decision-making in startups and small businesses, equipping them with the foundational legal knowledge necessary for successful entrepreneurship.
Recommended Textbook
Andersons Business Law and the Legal Environment Comprehensive 23rd Edition by Twomey
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51 Chapters
2716 Verified Questions
2716 Flashcards
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Page 2
Chapter 1: The Nature and Sources of Law
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Sample Questions
Q1) Statutory law can be created by all of the following except:
A) Congress.
B) state legislatures.
C) local governments.
D) by the courts.
Answer: D
Q2) The Uniform Commercial Code is a good example of uniform state laws.
A)True
B)False
Answer: True
Q3) Statutory law includes U.S. Supreme Court opinions.
A)True
B)False Answer: False
Q4) Procedural law creates legal rights and duties.
A)True
B)False
Answer: True
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Page 3
Chapter 2: The Court System and Dispute Resolution
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Sample Questions
Q1) The types of civil cases that a private citizen can file in federal district courts include:
A) cases in which any state in the United States is one of the parties.
B) cases between citizens of different states that involve damages of $75,000 or more.
C) cases brought by the citizen of one state against the state government of the same state.
D) criminal charges against a state representative.
Answer: B
Q2) A judge rules on the admissibility of evidence presented in the trial.
A)True
B)False
Answer: True
Q3) Federal district courts are the trial courts of the federal court system.
A)True
B)False
Answer: True
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4
Chapter 3: Business Ethics, Social Forces, and the Law
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52 Verified Questions
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Sample Questions
Q1) Moral relativists solve ethical dilemmas according to time and place.
A)True
B)False Answer: True
Q2) To Immanuel Kant, an action is ethical if it is fair and done for the right reasons.
A)True
B)False Answer: True
Q3) Freedom from economic domination is a personal right protected under United States law.
A)True
B)False Answer: True
Q4) Differences among businesses preclude the development of any universal categories of ethical behavior.
A)True
B)False
Answer: False
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Page 5
Chapter 4: The Constitution As the Foundation of the Legal Environment
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Sample Questions
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) 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.
Q3) The concept of equal protection of the law:
A) applies to both state and federal governments.
B) prohibits any classifications whatsoever.
C) applies only to conduct by private parties.
D) does not permit reasonable classifications.
Q4) The Due Process clause now guarantees protection against loss of property rights without a chance to be heard.
A)True
B)False
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Chapter 5: Government Regulation of Competition and Prices
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Sample Questions
Q1) Under the Clayton Act, a divestiture order is:
A) notification from the Department of Justice that a merger is about to occur.
B) notification from the Department of Justice that a merger did not occur.
C) a decision by a court requiring a defendant to sell an enterprise.
D) an order by a court requiring an enterprise to dispose of its inventory.
Q2) Under the Robinson-Patman Act, wholesalers may give new distributors free advertising and other services to help them compete with other distributors who have been doing business for a number of years and have become firmly established.
A)True
B)False
Q3) The Sherman Act does not prohibit:
A) a company from engaging in purposeful conduct to exclude competitors.
B) a seller from dominating a market because of superior product or business.
C) competitors from agreeing not to deal with certain buyers.
D) contracts to fix prices.
Q4) Unfair competition is controlled by:
A) statutes.
B) administrative agencies.
C) administrative regulations.
D) all of these.
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Chapter 6: Administrative Agencies
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Sample Questions
Q1) 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
Q2) Which of the following is part of an administrative agency's power to investigate?
A) an investigation to determine whether additional administrative rules need to be adopted
B) an investigation to ascertain facts with respect to a particular suspected or alleged violation
C) an investigation to determine whether the defendant in a proceeding before the agency is complying with its final order
D) all of these
Q3) Which of the following is beyond the enforcement power of an agency?
A) requiring proof of compliance with agency regulations
B) issuing a cease-and-desist order
C) convicting of criminal violations
D) imposing civil penalties
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Chapter 7: Crimes
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Sample Questions
Q1) If a person unlawfully gains access to a computer and fraudulently causes goods to be "lost" from their true destination, he might be guilty of _______.
A) circumventing logistics transfers.
B) computer raiding.
C) economic espionage by computer.
D) diverted delivery by computer.
Q2) White-collar crimes generally involve violence.
A)True
B)False
Q3) The Foreign Corrupt Practices Act applies to businesses with their principal offices located in the United States.
A)True
B)False
Q4) All states recognize _________, which protects privileged documents and notes from seizure by the government, even with a warrant.
A) the warrantless search privilege
B) the "plain view" privilege
C) the attorney-client privilege
D) the Fifth Amendment privilege.
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Chapter 8: Torts
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Sample Questions
Q1) Commercial exploitation, also called right of publicity, is a form of invasion of privacy.
A)True
B)False
Q2) A business may lose the shopkeeper's privilege if:
A) the customer is kept an unreasonable amount of time.
B) the shopkeeper acted with reasonable suspicion.
C) the shopkeeper acted with necessary force.
D) the shopkeeper kept the customer over 1 hour.
Q3) Philip Laws leased an apartment from Candice Sutton. Laws had notified Sutton on more than one occasion that the wooden steps to his apartment were decaying and in need of repair. Laws claimed that he had to leave the outside light on to avoid portions of the steps that no longer would bear his weight when he came in at night. Sutton promised to repair the steps while Laws was away on a business trip. Accordingly, Laws did not leave lights on during his absence. When he returned three nights later, Laws was injured when one of the steps broke under his weight as he was entering his apartment. Laws sued Sutton. Sutton replied that she should not bear liability for Laws' injury because Laws knew of the condition of the steps and had not taken the customary precaution of lighting the area. Based on what you have learned in this chapter, decide the case.
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Page 10
Chapter 9: Intellectual Property Rights and the Internet
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53 Verified Questions
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Sample Questions
Q1) Under the Semiconductor Chip Protection Act's _______, competitors may not only study mask works but may also use the results of that study to design their own semiconductor chip products embodying their own original masks.
A) fair use exemption
B) statutory damages waiver
C) reverse engineering exemption
D) semiconductor mask product exemption
Q2) The best way to distribute and sell copyrighted computer programs is using:
A) copyright laws.
B) patent laws.
C) trade secret laws.
D) restrictive licensing.
Q3) Descriptive terms such as locations and colors are never subject to trademark protections.
A)True
B)False
Q4) Protection for trade dress is available under the Lanham Act.
A)True
B)False
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Chapter 10: The Legal Environment of International Trade
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57 Verified Questions
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Sample Questions
Q1) Under which of the following doctrines is it held that a foreign sovereign cannot be sued unless it engages in illegal commercial conduct?
A) act-of-state
B) sovereign compliance
C) Timberlane
D) sovereign immunity
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) The United Nations Conventions on Contracts for the International Sale of Goods (CISG) sets forth uniform rules to govern international sales contracts.
A)True
B)False
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Chapter 11: Nature and Classes of Contracts: Contracting
on the Internet
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53 Verified Questions
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Sample Questions
Q1) In some cases, third persons, such as third party beneficiaries or assignees, have rights on a contract.
A)True
B)False
Q2) An express contract is one in which the agreement is shown by the acts and conduct of the parties.
A)True
B)False
Q3) The effect of an implied contract is not the same as the effect of an express contract.
A)True
B)False
Q4) Negotiable instruments are:
A) formal contracts.
B) informal contracts.
C) option contracts.
D) first-refusal agreements.
Q5) Negotiable instruments are examples of formal contracts. A)True
B)False
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Chapter 12: Formation of Contracts: Offer and Acceptance
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Sample Questions
Q1) Arthur made a bid at an auction by calling out the amount of $250. The auctioneer acknowledged Arthur's bid. There were no higher bids, and before the fall of the auctioneer's hammer, Arthur announced that he was withdrawing the bid. The auctioneer said that it was too late for Arthur to withdraw his bid, because the bid had already been acknowledged. What is the result?
A) Arthur's bid is an ordinary offer that can be revoked.
B) Arthur's bid is firm and cannot be withdrawn.
C) Since the auctioneer had in fact acknowledged Arthur's bid, the bid became an option exercisable at the election of the seller.
D) Since the auctioneer had in fact acknowledged Arthur's bid, a contract had been formed by way of offer and acceptance; accordingly, Arthur's subsequent attempt to withdraw his bid was ineffective.
Q2) A party to an existing contract can modify the agreement without the other party's actual acceptance or approval.
A)True
B)False
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Chapter 13: Capacity and Genuine Assent
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Sample Questions
Q1) Roberta, an educated person, purchased real estate from Maurice. Roberta did not read entirely the contract that she signed. As a result, she did not notice the provision in the contract about the interest imposed on the unpaid portion of the purchase price. She refused to pay the interest specified in the contract. Maurice sued her. Could he recover?
Q2) Contractual capacity is the ability to:
A) read and write.
B) sign a written contract.
C) understand that a contract is being made and to understand its general nature.
D) understand the legal meaning of the contract being made.
Q3) The obligation of a cosigner is discharged by:
A) the minority status of one of the parties.
B) the majority status of one of the parties.
C) the court's declaration of the contract's provision of necessaries.
D) the payment of the debt.
Q4) Status incapacities against married women have largely disappeared.
A)True
B)False
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Chapter 14: Consideration
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Sample Questions
Q1) A landowner's promise to pay a contractor a bonus to complete construction of a building according to the terms of a pre-existing contract between the landowner and the contractor is:
A) binding if the promise is in writing.
B) binding, since the promise is made by a non-merchant.
C) binding, since the promise is made to a merchant.
D) ordinarily not binding on the promisor.
Q2) A(n) _______ is a promise that depends on the occurrence of a specified condition in order for the promise to be binding.
A) cancellation provision.
B) preexisting legal obligation.
C) conditional promise.
D) good-faith adjustment.
Q3) When a debtor tenders a check stating "paid in full" and the creditor cashes the check, the debt:
A) is always discharged.
B) may be discharged if it is a liquidated debt.
C) may be discharged if it is a unliquidated debt.
D) is never discharged.
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Page 16
Chapter 15: Legality and Public Policy
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Sample Questions
Q1) If an illegal agreement has already been performed, either party can sue for damages.
A)True
B)False
Q2) In an employment contract, agreements not to compete are:
A) illegal
B) uniformly held to be in the public interest and therefore legal
C) valid only if the restriction protects the employee
D) valid, if the restriction is reasonable and necessary for the protection of the former employer
Q3) Sam Wilson often goes to the horse races, participates in his state's lottery, and invests heavily in the stock of major U.S. companies. At work, Wilson is approached by his coworkers and asked to participate in a football pool. "It's totally based upon skill," his friends claim. In addition, Wilson's philanthropic club is holding a raffle in which an individual could win a new car. Are these activities gambling and therefore illegal activities?
Q4) In most states the usury laws apply to loans made to both individuals and corporations.
A)True
B)False
Page 17
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Chapter 16: Writing, Electronic Forms, and Interpretation of Contracts
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Sample Questions
Q1) A promise to pay an attorney a fee owed by a third person can be enforced without a writing.
A)True
B)False
Q2) If words and numbers contradict each other in a contract, the rule of construction favors the words.
A)True
B)False
Q3) Parol evidence may be admitted to show that a provision was omitted as the result of:
A) fraud.
B) mistaken understanding.
C) oral additions.
D) oral modification.
Q4) 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.
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Chapter 17: Third Persons and Contracts
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Sample Questions
Q1) The substitution of an old contract for a new one that replaces an obligation or a party for another is a:
A) novation.
B) warranty.
C) assignment.
D) delegation of duties.
Q2) 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.
Q3) Which of the following is not a third-party beneficiary contract?
A) a contract in which A hires B to give A's niece piano lessons
B) a contract to repair sewers in front of Macy's Department Store
C) a life insurance contract with a named beneficiary
D) a contract between X and Y for Y to install a new door on Z's home
Q4) The rights of an intended third-party beneficiary are destroyed if the contract is discharged in bankruptcy proceedings.
A)True
B)False
Page 19
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Chapter 18: Discharge of Contracts
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Sample Questions
Q1) The federal Consumer Credit Protection Act gives the debtor the right to rescind a credit transaction within three (3) business days when the transaction would impose a lien on the debtor's home.
A)True
B)False
Q2) Which of the following is not an element of an accord and satisfaction?
A) a bona fide dispute
B) a proposal to settle the dispute
C) performance of the agreement to settle the dispute
D) reservation of rights under the federal Consumer Credit Protection Act
Q3) Kentucky Lumber and Millwork Company contracted to supply Rommell Company millwork for use in the construction of a school building. While the work was in progress, the Kentucky Lumber mill was destroyed by fire. For two months thereafter, Kentucky Lumber and Millwork supplied Rommell with millwork purchased from a third party. Kentucky Lumber and Millwork did not wish to continue this plan and declared that the contract was ended. Rommell brought an action against Kentucky Lumber and Millwork to enforce the contract. How will the court decide?
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Page 20
Chapter 19: Breach of Contract and Remedies
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Sample Questions
Q1) 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
Q2) An injured party that does not suffer an actual loss from the breach of a contract is entitled to consequential damages.
A)True
B)False
Q3) When a party waives compliance with one provision of a contract, the other party may thereafter ignore other provisions of that contract.
A)True
B)False
Q4) If an exculpatory clause limits liability for damages caused by negligent conduct, the tortfeasor's liability is:
A) contributorily negligent.
B) not limited if the conduct is willful.
C) limited unless the plaintiff signed a release.
D) limited if the conduct is grossly negligent.
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Chapter 20: Personal Property and Bailments
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Sample Questions
Q1) A gift causa mortis is considered a conditional gift.
A)True
B)False
Q2) A bailee's __________ gives the bailee the right to maintain possession of the bailed property until reasonable storage and/or repair charges are paid.
A) reversionary interest
B) lien
C) remainder interest
D) mortgage
Q3) A bailee's interest in the bailed property can be characterized as:
A) ownership.
B) a fractional proprietary interest.
C) possession.
D) constructive ownership.
Q4) A bailee's lien gives the bailee the right to keep possession of the bailed property until reasonable charges for storage and/or repairs are paid.
A)True
B)False
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Chapter 21: Legal Aspects of Supply Chain Management
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Sample Questions
Q1) The relationship of guest and hotelkeeper ends when the guest:
A) pays his or her bill.
B) advises the hotelkeeper of his or her departure.
C) leaves or ceases to be a transient.
D) has stayed for 30 days and becomes a boarder.
Q2) What is not included in a common carrier's lien on goods that it transports?
A) consequential damages
B) demurrage
C) costs of preserving the goods
D) costs of a sale to enforce the lien
Q3) A hotelkeeper has a bailee's liability regarding property expressly entrusted to a hotelkeeper's care.
A)True
B)False
Q4) Bills of lading for intrastate shipments are governed by the UCC, while those for interstate shipments are regulated by the Federal Bills of Lading Act.
A)True
B)False
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23
Chapter 22: Nature and Form of Sales
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Sample Questions
Q1) The CISG:
A) governs all contracts between parties in countries that have ratified it.
B) applies only to goods bought for personal, family or household uses.
C) applies to contracts in which the predominant part of the obligation is the supply of labor or other services.
D) None of these.
Q2) The UCC permits a court to refuse to enforce a sales contract that it finds to be unconscionable.
A)True
B)False
Q3) Goods physically existing and owned by a seller at the time of a transaction are called existing goods.
A)True
B)False
Q4) 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
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Chapter 23: Title and Risk of Loss
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Q1) Most courts hold that when a customer takes an item from the shelf in a self-service store, there is:
A) no sale.
B) a sale.
C) a contract to sell.
D) a conditional sale.
Q2) If a buyer purchases goods on approval, the buyer's creditors cannot reach such goods until there is an approval.
A)True
B)False
Q3) Someone who finds and resells stolen property passes on a good title to a good faith purchaser.
A)True
B)False
Q4) Generally, a bailee can pass good title to a good-faith purchaser even when the sale was not authorized by the owner.
A)True
B)False
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Chapter 24: Product Liability: Warranties and Torts
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Sample Questions
Q1) Whenever a sale of goods is made, certain warranties are implied unless they are expressly excluded.
A)True
B)False
Q2) A catalog illustration can become the basis of an express warranty.
A)True
B)False
Q3) Ordinarily, a seller's opinion about the good(s) cannot be treated as a warranty.
A)True
B)False
Q4) When a buyer makes a purchase without relying on the seller's skill and judgment, no warranty of fitness for a particular purpose exists.
A)True
B)False
Q5) An express warranty is a statement of fact about the product that becomes part of the basis of the bargain.
A)True
B)False
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Chapter 25: Obligations and Performance
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Q1) Unless otherwise agreed, the proper place for the delivery of goods is:
A) the buyer's place of business.
B) the seller's home.
C) a delivery service selected by the seller.
D) the seller's place of business.
Q2) A party who has demanded adequate assurances must wait 90 days before she can treat the contract as repudiated.
A)True
B)False
Q3) In a cash sale that does not require the physical moving of the goods, the:
A) parties are required to perform concurrently.
B) seller is required to tender the goods before the buyer must pay for them.
C) buyer must pay for the goods in advance.
D) buyer must actually receive the goods before he or she is required to pay for them.
Q4) When a contract to sell identified goods does not specify a place of delivery, the goods are considered delivered at the seller's place of business.
A)True
B)False
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Chapter 26: Remedies for Breach of Sales Contracts
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Q1) A seller may cancel a sales contract if the buyer does any of the following except: A) wrongfully rejects the goods.
B) repudiates the contract.
C) fails to make a payment due on or before delivery.
D) rejects an improper tender.
Q2) When a seller breaches a contract for the sale of goods to a buyer, the buyer is entitled to specific performance of the contract if the: A) goods are unique.
B) market cost of the goods has increased.
C) goods can be purchased in any major city in the country.
D) buyer's customers will be disappointed if the buyer does not obtain the goods.
Q3) A seller's right to retain possession of goods until the seller has been paid is called a: A) seller's lien.
B) buyer's lien.
C) merchandise estoppel.
D) nonpayment tort.
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Chapter 27: Kinds of Negotiable Instruments and Negotiability
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Q1) Any of the following constitutes a signature as an element of negotiability, except:
A) the use of initials.
B) a mark.
C) a trade name.
D) all of these.
Q2) Which of the following terms would make an instrument nonnegotiable?
A) It is dependent upon an event.
B) It is undated.
C) It is payable in foreign money.
D) It gives the holder the right to receive interest.
Q3) The payee has no rights in an instrument until the drawer or the maker has delivered it to the payee.
A)True
B)False
Q4) A promissory note that is payable "on the date of my marriage" is nonnegotiable even if the maker of the note marries.
A)True
B)False
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Chapter 28: Transfers of Negotiable Instruments and
Warranties of Parties
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Q1) When a special indorsement is made, the instrument continues to be order paper and may be negotiated only by an indorsement and delivery.
A)True
B)False
Q2) The warranty liability of a qualified indorser is the same as that of an unqualified indorser.
A)True
B)False
Q3) Which of the following is true of warranties of indorsers?
A) The indorser is not entitled to enforce the instrument.
B) The indorser warrants that the instrument is subject to a defense of any party that can be asserted against the indorser.
C) The indorser warrants that he/she has knowledge of the bankruptcy of the maker, acceptor, or drawer.
D) The indorser warrants that there has been no alteration or other irregularity.
Q4) An instrument may be transferred only by negotiation.
A)True
B)False
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Chapter 29: Liability of the Parties Under Negotiable Instruments
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Q1) A universal defense is so basic that the social interest in preserving them outweighs the social interest of giving negotiable instruments the freely transferable qualities of money.
A)True
B)False
Q2) A holder is on notice that an instrument is defective when the holder:
A) demands payment.
B) brings suit for the collection of an instrument.
C) gives a discharge or release from liability on the instrument.
D) Has actual notice of a defect
Q3) A person who acquires an instrument with knowledge that there is a defense a party may have cannot be an HDC.
A)True
B)False
Q4) A holder becomes a holder in due course if they meet all the following requirements except:
A) Takes the instrument for value
B) Takes the instrument in good faith.
C) Takes an instrument with no notice of defects.
D) Takes an instrument that runs to him.
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Chapter 30: Checks and Funds Transfers
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Q1) When a bank certifies a check, the amount involved in the certification will be debited in the depositor's account until payment of the certified check.
A)True
B)False
Q2) A tender occurs when the holder of a check or other consumer transaction authorization demands payment.
A)True
B)False
Q3) 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.
Q4) 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) Standby letters of credit are used only in international trade situations.
A)True
B)False
Q2) Under the ______, the respective parties are protected by a careful description of the documents that will trigger payment.
A) letter of credit rule.
B) standby letter rule.
C) independence rule.
D) strict compliance rule.
Q3) A guaranty of payment creates a(n):
A) contract of surety.
B) contract of credit.
C) letter of credit.
D) absolute guaranty.
Q4) The issuer of a letter of credit has a duty to verify that the underlying transaction has been performed.
A)True
B)False
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Chapter 32: Consumer Protection
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Q1) The Telephone Consumer Protection Act prohibits all of the following except:
A) automated marking calls without prior express consent.
B) calls to patients' room in hospitals.
C) calls after 9:00 PM.
D) 911 calls.
Q2) The CARD Act substantially restricts the solicitation of credit card accounts for those under the age of 18.
A)True
B)False
Q3) Corrective advertising required by the FTC also is called retroactive advertising. 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
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Page 34
Chapter 33: Secured Transactions in Personal Property
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Q1) A debtor must have rights in the collateral for a security interest to attach.
A)True
B)False
Q2) Attachment provides creditors with rights against debtors.
A)True
B)False
Q3) Consumer goods are classified into different categories based on the physical characteristics of the goods.
A)True
B)False
Q4) Self-help repossession of collateral upon a buyer's default is contrary to public policy and is never allowed.
A)True
B)False
Q5) A financing statement must provide all of the following except: _______.
A) the name of the debtor.
B) the name of the secured party or their representative.
C) the covered collateral.
D) the value of the collateral.
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Chapter 34: Bankruptcy
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Q1) Creditors who hold security for payment, such as a lien or a mortgage on the debtor's property, are less affected by the debtor's bankruptcy.
A)True
B)False
Q2) A transfer of property by a debtor within ______ prior to filing with the intent to hinder, delay, or defraud creditors is called a(n) ______.
A) 3 months, proof of claim.
B) 3 months, voidable preference
C) 12 months, proof of claim
D) 12 months, voidable preference.
Q3) 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.
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Chapter 35: Insurance
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Q1) A contract of insurance is to be interpreted as it would be understood by a person with technical knowledge of the law or of insurance.
A)True
B)False
Q2) An application for insurance: ______.
A) may be oral.
B) generally is attached to the policy and becomes a part of the insurance contract. C) must be prepared by an attorney.
D) has no binding effect on the applicant.
Q3) Sylvia Jurgen operates a florist shop. During a particularly busy day, she allowed one of her employees, Terry Lioni, to use her (Jurgen's) personal car to assist with deliveries. Lioni had just obtained his driver's license. Lioni was involved in an accident that was his fault. Would Jurgen's liability insurance pay in this situation?
Q4) The fact that a partnership is terminated after a life insurance policy is obtained by one partner on another invalidates the policy.
A)True
B)False
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Chapter 36: Agency
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Q1) For ratification to occur, the agent must have purported to act on behalf of, or as agent for, the identified principal.
A)True
B)False
Q2) For a principal to ratify the actions of an agent, all that is necessary is that the principal express the intention to ratify.
A)True
B)False
Q3) If a store owner places Joe as manager and gives him a special nametag, customers may assume that Joe has ______ for the owner in that respect.
A) apparent authority
B) ratification powers
C) special agency
D) universal agency
Q4) An agency coupled with an interest is not terminated by the death of the principal. A)True
B)False
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Chapter 37: Third Persons in Agency
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Q1) Tom Creighton hired Destroy, Inc., a demolition company, to level an old building on a busy downtown lot. Destroy, Inc. was given full rein to decide on the amount of explosives needed and the placement of the charges. Security for the site on the day of the explosion was contracted out to a private security firm. When the appointed day arrived, the building was brought down. However, the building fell in a slightly different direction than that anticipated by Destroy, Inc. Numerous pieces of adjoining property, both real and personal, were severely damaged. Creighton claims that the use of an independent contractor such as Destroy, Inc. has insulated him from liability. How do you respond to Creighton's claim?
Q2) An agent who commits a crime is:
A) always liable.
B) only liable if acting in self-interest.
C) only liable if the act is done to advance the interest of the principal.
D) never liable when acting in the role of an agent.
Q3) In general, a principal is liable for crimes of the agent committed while acting within the scope of the agency, even if the principal did not authorize commission of the crimes.
A)True
B)False
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Page 39
Chapter 38: Regulation of Employment
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Q1) Algonquin Industries was a small business that hired mostly recent immigrants to the United States and paid them a minimum wage. The business prospered and people began to come around to organize the workers into a union. Officials of Algonquin spoke against the advisability of joining the union. Finally, a date for a certification vote was set. In the days leading up to the vote, Algonquin officials began to intimate that those workers who voted against the union would receive overtime opportunities "as they became available." A charge has been brought that this is an unfair labor practice. Decide.
Q2) The Federal Wiretapping Act makes it unlawful to intercept oral and written communications, except: ______.
A) for personal phone calls without the employee's consent.
B) when an employer monitors a firm's phones during the course of business.
C) when an employer monitors an employee's private email.
D) for personal calls after it is ascertained the call is purely personal.
Q3) Which of the following is a permissive versus a mandatory subject of union bargaining?
A) wages
B) hours
C) benefits for already retired workers
D) no-strike no-lockout clauses
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Chapter 39: Equal Employment Opportunity Law
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Q1) The first action generally attempted by the EEOC is:
A) litigation.
B) conciliation.
C) mediation.
D) arbitration.
Q2) Title VII protects members of which racial grouping(s)?
A) black only
B) black, Native American, and Asian-Pacific
C) white only
D) all racial groupings
Q3) 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.
Q4) To be lawful, affirmative action must be time-limited.
A)True
B)False
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Chapter 40: Types of Business Organizations
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Q1) The FRC has adopted a franchise disclosure rule that requires franchisors to give prospective franchisees a full disclosure statement thirty (30) days before a franchisee signs a contract or pays any money for a franchise.
A)True
B)False
Q2) A limited liability company is treated like a partnership under federal tax law and has the limited liability feature of corporations.
A)True
B)False
Q3) 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
Q4) A sole proprietorship is taxed: _______.
A) on a personal level.
B) only on the corporate level.
C) on both a personal and a corporate level.
D) like a partnership.
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Chapter 41: Partnerships
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Q1) A partner has the power to withdraw from the partnership at any time except: ______.
A) when 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) when the partnership violates an agreement.
Q2) When a partnership is dissolved by a partner's bankruptcy, notice: A) is not required.
B) must be given to the other partners only.
C) must be given to third persons only.
D) must be given to both other partners and third persons.
Q3) When the dissolution of a partnership has been caused by operation of law, notice of such dissolution must be given to third persons.
A)True
B)False
Q4) In some instances, persons who are in fact not partners may be held liable to third persons as though they were partners.
A)True
B)False
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Chapter 42: LPs, LLCs, and LLPs
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Q1) Both general partnerships and limited partnerships are created only through the process of executing a certificate.
A)True
B)False
Q2) A court can disregard the LLC entity to hold one or more members personally liable in any of the following situations, except: _______.
A) when members fail to follow formalities.
B) when members commingle company and personal funds.
C) when members ignore the articles of organization.
D) when members vote to make substantive changes to the operating agreement.
Q3) Owners of an LLC are known as shareholders.
A)True
B)False
Q4) If an owner discloses he is an agent of an LLC, he will not be personally liable for the debts and obligations of the entity.
A)True
B)False
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Chapter 43: Corporate Formation
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Q1) An enterprise that conducts business following a merger or consolidation succeeds to all of the following except: ______.
A) all of the rights of the predecessor.
B) all of the property of the predecessor.
C) all of the debts and liabilities of the predecessor.
D) all of the management team of the predecessor.
Q2) If a wire manufacturing company owned a mill to produce the metal used in making the wire, this relationship between the companies would be best be described as: ______.
A) a conglomerate.
B) a holding company.
C) an integrated industry.
D) a merger.
Q3) Private corporations are often called public in business circles when their stock is sold to the public.
A)True B)False
Q4) A corporation may exercise its power to borrow money by issuing bonds. A)True B)False
Page 45
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Chapter 44: Shareholder Rights in Corporations
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Q1) Ordinarily, each shareholder is entitled to one vote for each voting share.
A)True
B)False
Q2) Until a transfer is recorded on its books, a corporation is entitled to treat the person whose name is on its books as the owner of its stock.
A)True
B)False
Q3) Common stock cannot has priority over preferred stock with respect to dividends.
A)True
B)False
Q4) To correctly transfer shares of stock, a physical delivery from the owner of the shares directly to the transferee is required.
A)True
B)False
Q5) Voting trusts are usually illegal.
A)True
B)False
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Page 46
Chapter 45: Securities Regulation
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Q1) The Securities Act of 1933 was created to deal with 'penny stocks' and 'pump and dump schemes'.
A)True
B)False
Q2) The fraud-on-the-market theory creates a presumption of securities fraud based on plaintiff's reliance on defendant's misrepresentations which affected the market price of the company's shares.
A)True
B)False
Q3) Which exemption to registration requirements exempts offerings of less than $5 million to no more than 35 nonaccredited purchasers over a 12-month period?
A) Rule 504 exemption
B) Rule 505 exemption
C) Rule 506 exemption
D) Rule 507 exemption
Q4) State blue sky laws typically deal with fraud and licensing.
A)True
B)False
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Chapter 46: Accountants Liability and Malpractice
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Q1) An accountant guilty of malpractice can be sued: ______.
A) for breach of contract only.
B) for negligence only.
C) for breach of contract or for tort liability.
D) in federal court only if the suit is brought by a third person.
Q2) For accountants, fraudulent malpractice always involves upgrading the financial condition of the firm.
A)True
B)False
Q3) A person not in privity with an accountant is prohibited from recovering for malpractice when the accountant had no knowledge of any use that could affect that party.
A)True B)False
Q4) The privity rule prevents the filing of an accounting malpractice lawsuit by a third party against an accountant.
A)True
B)False
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Chapter 47: Management of Corporations
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Q1) Under the responsible corporate officer doctrine officers and directors are not personally responsible for crimes they have committed when it can be demonstrated that in carrying out such crimes, they acted on behalf of the corporation.
A)True
B)False
Q2) A corporation is liable to a third person for the act of its agent: ______.
A) to the same extent as a natural person would be liable.
B) only if the agent was expressly authorized to perform the act.
C) only if the agent's act was a crime.
D) only if the agent's act was based on an intent to benefit the corporation.
Q3) 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
Q4) A corporation itself may be convicted of a criminal offense if its agent committed the offense acting within the scope of the agent's authority.
A)True
B)False
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Page 49
Chapter 48: Real Property
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Q1) In general, any form of property that may be sold or conveyed may be mortgaged.
A)True
B)False
Q2) Under race statutes, the first party to record the deed holds title to land.
A)True
B)False
Q3) An unrecorded mortgage is not valid and binding between the parties.
A)True
B)False
Q4) A __________ is a combination of co-ownership and individual ownership.
A) cooperative
B) residential lease
C) commercial lease
D) condominium
Q5) A deed is not effective to pass title unless it is properly recorded.
A)True
B)False
Q6) Land extends downward to the earth's center and upward indefinitely.
A)True
B)False
Page 50
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Chapter 49: Environmental Law and Land Use Controls
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Q1) The Jarvis family owned its land for more than 150 years. The Jarvis family traditionally farmed the land and for that purpose maintained farm animals. As years passed, most of the surrounding farms were sold by the owners and the area turned out to be a close-in suburb of a major city. A zoning ordinance was passed that prohibited maintaining a barn or farmyard animals on the land. The Jarvis family was advised that they were unaffected by this ordinance because theirs would be considered a nonconforming use. The members of the Jarvis family lost interest in farming and sold off all their animals. Seven (7) years later, a family member desired to raise a few pigs on the property. Angry neighbors asserted that the family has lost the right to do so. What is your opinion?
Q2) The EPA's highest standard to regulate conventional water pollutants is the best available treatment (BAT) standard.
A)True
B)False
Q3) The current EPA standard for coal-fired power plants is maximum achievable control technology (MACT).
A)True
B)False
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Chapter 50: Leases
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Q1) A tenancy at sufferance describes a tenancy that can be terminated at any time upon proper notice.
A)True B)False
Q2) Igor immigrated to the United States and sought to rent an apartment. He answered an advertisement in a newspaper and signed a lease for an apartment without ever seeing the apartment. Igor found the premises filled with an abundance of debris, rats and insects. Also, the plumbing in the apartment was inoperable. These conditions:
A) do not affect the lease unless the landlord affirmatively warranted the condition of the premises.
B) are the responsibility of the tenant to repair.
C) most likely constitute a breach of the implied warranty of habitability.
D) do not entitle Igor to vacate the premises.
Q3) A landlord is not liable to the tenant for crimes committed on the premises by third persons, unless they are reasonably foreseeable.
A)True
B)False
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Chapter 51: Decedents Estates and Trusts
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Q1) When a person dies with a will, usually the probate judge names who the administrator of the estate.
A)True
B)False
Q2) A beneficiary of personal property by will may be called a devisee.
A)True
B)False
Q3) When property is transferred to a trust, the trustee has legal title and the beneficiary has equitable title.
A)True
B)False
Q4) In certain instances statutes provide that a change of circumstances, such as the marriage of a testator, has the effect of a revocation.
A)True
B)False
Q5) Testamentary intent means the testator understands that certain persons will become the owners of certain property upon her death.
A)True
B)False
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