The form of business ownership that is the most easily transferable is the:
a. general partnership.
b. corporation.
c. limited liability company.
d. limited partnership.
A Japanese company operates a ship called the Kinia. If the Kinia sails in U.S. waters, it
must comply with the standards set by the Oil Pollution Act of 1990.
Newt, a gun dealer, offers to sell a rare civil war musket to Rush, another dealer, for
“$15,000, insurance and shipping paid by buyer.” Rush responds, “I accept. Insurance
and shipping costs divided equally between seller and buyer.” The parties:
a. do not have a contract since the acceptance violated the mirror image rule.
b. do not have a contract since Rush’s response was a counteroffer.
c. have a contact and, in the majority of states, the terms of the offeree control.
d. have a contract and, in the majority of states, the different terms will cancel each
other out.
Jerry offers to shovel the snow from Ben’s driveway for $35. Ben replies “OK.” This is
an example of:
a. an implied, unilateral contract.
b. an express, unilateral contract.
c. an implied, bilateral contract.
d. an express, bilateral contract.
Ed was an independent owner of a chain of TV stores. He successfully got customers
into his store by cutting his prices on widely advertised name-brand products in order to
sell other products for which he received a bigger profit. When the manufacturers of
three of the name-brand products discovered Ed’s actions, they agreed secretly to stop
selling him their TVs. The three manufacturers:
a. are doing nothing illegal, as they did not get Ed to agree to anything.
b. are free to agree not to deal with Ed since the public can go elsewhere and will not be
hurt economically.
c. can choose either as a group to deal or not to deal with any retailer they want.
d. are engaged in a rule of reason violation of the antitrust laws if their action harms
competition.
West Virginia passed a statute regulating working conditions in its mines. If the statute
is challenged in court on substantive due process grounds:
a. it would be presumed invalid and would be struck down since it involves a
fundamental right to work.
b. it would be presumed invalid but would be struck down only if it is not necessary to
achieve a compelling government interest.
c. it would be presumed valid since it regulates economic or social conditions.
d. it carries no presumptions, but must be evaluated based on the procedures involved.
A “holder” of order paper can be described as:
a. the payee.
b. any person in possession of the instrument.
c. any person in possession of the instrument if it is payable to or indorsed to him.
d. the first party to come in contact with a negotiable instrument.
In January, Eddie contracts to sell 100 bushels of soybeans that fall. This contract:
a. is void. He cannot contract to sell a crop before it is even planted; the goods must be
in existence.
b. is void. The soybeans must be identified to the contract at the time he contracts to sell
them.
c. can be valid; but title to the soybeans cannot pass until the soybeans exist.
d. can be valid, and title to the soybeans passes when the contract is signed.
Horizontal cooperative strategies would include all EXCEPT:
a. market division.
b. price fixing.
c. reciprocal dealing.
d. bid-rigging.
Jenny is an officer of a corporation. She made a difficult business decision. When
challenged about her decision, the court ruled she had acted in good faith and that the
business judgment rule applied. As such:
a. Jenny will not be held personally liable for a decision that results in money losses to
the company.
b. Jenny’s decision will be reviewed by a court.
c. Jenny is immune from a lawsuit.
d. Jenny must resign from the board.
Grand Lighting Co. has filed a petition for voluntary bankruptcy under Chapter 7 of the
Code. The following property will be exempt from the bankruptcy process:
a. work tools.
b. up to three company cars.
c. up to $20,200 in the value of the companys real property.
d. All of the above.
e. None of the above.
Which of the following cannot file a bankruptcy petition under the Code?
a. Aztec, a foreign corporation doing business in the United States.
b. Milan, a citizen of Bosnia, who owns property in the United States.
c. Debra, a resident of Michigan, whose liabilities do not exceed assets.
d. Stan, an American citizen, who refuses to undergo credit counseling.
e. All of the above.
Which of the following duties can probably be delegated?
a. An agreement to perform an operation.
b. A contract to paint a picture.
c. An agreement by an attorney to draft a contract.
d. An agreement to paint a house.
Which of the following is correct concerning termination statements?
a. A secured party must file a termination statement when consumer goods are involved
and the debtor has paid for them.
b. The termination statement clears the debtor’s public record with regard to old,
irrelevant financing statements so that the same collateral can be used again to secure a
future loan.
c. The secured party must file a termination statement within 20 days of a consumer
debtor’s demand, provided the debtor has paid the full debt.
d. All of the above are correct concerning termination statements.
When Congress passed a criminal statute called the “Gun-Free School Zones Act,” the
Supreme Court ruled that:
a. the law was valid as a proper exercise of the power to regulate interstate commerce.
b. the law was void for vagueness; thus, it was not valid.
c. the law was not valid since Congress exceeded its power under the Commerce
Clause.
d. although the law was not a proper exercise of the power to regulate interstate
commerce, Congress had the power to create such legislation on other grounds.
Therefore, the statute was valid.
In awarding punitive damages, a court must consider:
a. the reprehensibility of the defendant’s conduct.
b. the ratio between the harm suffered and the award.
c. the difference between the punitive award and any civil penalties used in similar
cases.
d. All of the above.
Judicial review can best be described as the power of federal courts to:
a. review state court decisions.
b. review state executive action.
c. review state and federal legislative and executive action.
d. none of the above.
Which of the following is true about wills?
a. A will can be amended to change specific terms by execution of a codicil.
b. The testatrix cannot disinherit her minor children without stating a reason in the will.
c. If the will meets the legal technicalities, the surviving spouse cannot override it.
d. Once a will is written, it cannot be changed.
The Supreme Courts approach during the period from the 1950s through the 1970s in
deciding cases on constitutional grounds is described as:
a. judicial restraint.
b. judicial activism.
c. judicial review.
d. the dormant aspect of its judicial power.
The Federal Trade Commission requires franchisors to:
a. give prospective franchisees an offering circular at least 14 business days prior to the
signing of a contract or payment of any money.
b. disclose the exact amount of the initial investment required.
c. disclose any litigation the company has ever been involved in
d. disclose how many franchisees have gone out of business in the prior five years.
The United States has agreed to which of the following?
a. GATT.
b. NAFTA.
c. CISG.
d. All of the above.
Administrative agency rules consist of:
a. executive and independent rules.
b. legislative and interpretive rules.
c. informal and “notice and comment” rules.
d. promulgated and unpromulgated rules.
Which of the following are alternatives in dealing with issues of ethics in advertising?
a. Try, in a general way, to minimize racism, sexism, and other exploitation.
b. Include, as part of the development process, a systematic, focused review of the
underlying messages contained in advertisements.
c. Refuse to create ads that are potentially demeaning, insensitive, or dangerous,
recognizing that such a stand may lead to a loss of clients.
d. All of the above are alternatives in dealing with issues of ethics in advertising.
In the case of Sepulveda v. Aviles, the New York Supreme Court, Appellate Division,
found evidence of undue influence in:
a. the relationship based on family connection between Seals and Aviles.
b. Aviless use of Seals funds and credit cards.
c. opinions of Aviles and Seals attorney about Seals mental state at the property closing.
d. All of the answers are correct.
On January 16, Deb offers to sell her waterbed to Colleen for $600. Colleen accepts and
agrees to pay Deb $600 on January 27. Which of the following is correct?
a. Until January 16, the contract was executory.
b. On January 16, the contract was executed.
c. This contract is a unilateral contract.
d. There is no contract until January 27.
InMarubeni America Corp. v. United States, the federal appellate court ruled that the
Nissan Pathfinder was, for tariff classification purposes a motor vehicle for the
transport of passengers. The classification of goods is significant because:
a. the tariffs will vary depending on the classification.
b. the fair value will vary depending on the classification.
c. the subsidy will vary depending on the classification.
d. the dumping duty will vary depending on the classification.
Which of the following statements is correct with respect to state efforts to offer
protection to companies targeted for hostile takeovers?
a. Courts offer the only legal protection to companies targeted for hostile takeovers.
b. Statutory law offers the only legal protection to companies.
c. Both statutory law and the state courts have provided some degree of protection for
companies.
d. State courts and state statutes have offered no protection for companies targeted for
hostile takeovers.
The “dormant aspect of the Commerce Clause:
a. is also known as the “negative aspect.
b. means that there are many unused powers still available to the government to
regulate trade between the states.
c. guarantees that Congress has the power to regulate trade with foreign countries that
have not yet developed trade practices with the United States.
d. guarantees that the states have the power, even if unused, to impose regulations
affecting interstate commerce.
Great State Bank loans money to Seth, securing the loan with property owned by Seth.
Great State Bank is advised by its attorney to file a financing statement. Great State
Bank doesn’t understand why it should spend the extra money for this filing, since Seth
has told them that he has no other creditors. Why should Great State Bank file a
financing statement?
a. There are criminal penalties for failing to file.
b. The financing statement allows Great State Bank to repossess the collateral on
default without a court order.
c. The financing statement will protect Great State’s priority rights with other creditors
by giving notice to other creditors that it claims a security interest in the collateral.
d. Filing the financing statement is necessary to complete the attachment requirement in
order to create a security interest.
What is ethics
a. Always telling the truth
b. The study of how people should act
c. Following the law
d. none of these answers is true
Which of the following is NOT a stakeholder?
a. a business competitor.
b. shareholders.
c. employees.
d. the environment.
Theresa and Bobbi bought a racecar together. They agreed to share all expenses and
split net profits equally. There was no agreement as to the duration of the partnership.
After about a year, Bobbi decided she was tired of the racing business and left the
partnership. Bobbi did not violate the partnership agreement. Theresa claims Bobbi’s
leaving was wrongful. Is Theresa correct?
a. Yes, Bobbi was legally required to secure Theresa’s permission before leaving the
partnership.
b. Yes, Bobbi had a legal duty to stay in the partnership until Theresa was willing to
agree to end the relationship.
c. Yes, Bobbi had a legal duty to stay in the partnership until a new partner could be
found.
d. No, in a partnership at will, a partner has the right to leave the partnership at any
time.
Jeremy was terminated by his employer for violating company rules. He challenged the
termination by filing a grievance. Eventually, the matter went to arbitration and
Jeremy’s termination was ruled to have been improper. The employer filed a claim in
court to have the arbitrator’s ruling overturned since it claimed the facts clearly
demonstrated Jeremy had violated the express rules of the company. The employer
claimed that the arbitrator had ignored the obvious and had committed a serious mistake
of fact. A court may refuse to enforce an arbitrators ruling if:
a. it is proven that the arbitrator made a serious error of fact.
b. the court finds the ruling is contrary to public policy.
c. Both of the above are correct.
d. Neither of the above is correct.
GBH, an accounting firm, was hired to prepare financial statements for E-treme. GBH:
a. cannot show the working papers to E-treme unless there is a valid court order.
b. cannot show the working papers to E-treme unless it obtains permission from the
AICPA.
c. can show the working papers to anyone that asks, since the accountant owns them.
d. must allow E-treme access to the working papers.
A party to a contract has a duty to investigate the other party’s factual statements.
Sandra and Joe own a hobby farm as tenants in common. They also own a vacation
home as joint tenants. What is the difference between the tenancy in common and joint
tenancy?
If the offer does not specify a type of acceptance, the offeree may accept in any
reasonable manner and medium.
Spam is illegal per se.
When a party to a contract fails to fulfill all of her promises, she has breached the
contract. What response does a court typically have for a breach?
Thomas Reep, was the president of First National Bank in Clarksville. R.L. Moore
approached Reep requesting the bank to open an account in the name of Texas
Continental Express, Inc., a corporation owned by his two sons. R.L. had no affiliation
with the corporation nor any financial interest in it. R.L. promised Reep that he would
open several accounts in First National that would more than amount to the business of
his sons. R.L. assured Reep that if anything came up in connection with the sons’
account, Reep was to contract him directly. Upon these conditions, First National
proceeded to furnish a regular checking account and bank draft services for Texas
Continental. Sometime later, First National paid two drafts overdrawing the account by
$448,942. When Reep contacted R.L. about the overdrawn account, R.L. assured Reep
that money would be deposited in the account. When Reep called back a few days later
to find out why the money had not been deposited, R.L. informed Reep that his wife
had suffered a nervous breakdown the night before and the deal was off. First National
Bank brought suit to enforce R.L.’s promise to pay the debts of Texas Continental. What
is the likely outcome?
Utilitarian ethics holds that decisions should be made on the basis of practicality, and
whatever action is most convenient should be favored.
Dennis and Claudia were partners who operated a retail store. They agreed to end the
partnership. Dennis agreed to stay at the store and oversee the going-out-of-business
sale. Claudia agreed to deal with the accountants and other related matters not directly
related to the hands-on operation of running the store. Claudia received notice that the
store’s liability policy would expire on July 1. She decided not to renew the policy and
let it lapse. The going-out-of-business sale would not be completed until August 1. In
July, a customer slipped and fell in the store. When Dennis learned that Claudia had
allowed the liability policy to lapse, he was very upset and claimed he should not be
liable for the customer’s injury. Is Dennis liable to the customer? Explain.
The case citation Pereda v. Parajon, 957 So.2d 1194 (2007) reveals that Pereda is the
plaintiff.
Discuss the concepts of contributory negligence and comparative negligence.
In business law, a lawyers primary job is to represent the client in contract litigation.
Ralco was preparing Heidi’s tax return. In confidence, Heidi revealed some information
to Ralco. Under the federal accountant-client privilege, the information Heidi disclosed
is protected from disclosure in a criminal action by the U.S. government.
Damages must be estimated with reasonable certainty.
Vernon and David are the controlling shareholders in E-treme, Inc. Discuss the
obligations that Vernon and David owe to the minority shareholders.
Pharm-Ace holds a patent on a drug. Pharm-Ace used the patent (evidenced by the
patent certificate) to secure a $1 million loan from First Bank. The patent is chattel
paper.
If Milan asks a court to order Pamela to stop reprinting his copyrighted material, he is
seeking a legal, rather than an equitable, remedy.
Jan is a controlling shareholder in E-treme, Inc. Under the law, controlling shareholders
must include minority shareholders in any favorable arrangements that they make for
their own stock.