To whom does an accountant have potential liability?
a. To his client only.
b. To an intended third party beneficiary.
c. To a foreseen user of the accountant’s work.
d. All of these.
The remedy for a director’s breach of fiduciary duty is:
a. a suit in equity by the corporation.
b. a derivative suit instituted by a shareholder to require the director to pay to the
corporation the profits obtained through the breach.
c. a class action suit by the shareholders.
d. Not onlya suit in equity by the corporation but alsoa derivative suit instituted by a
shareholder to require the director to pay to the corporation the profits obtained through
the breach.
If a company owns 90 percent or more of a subsidiary’s stock, a merger may be effected
with approval of the parent’s board of directors alone, without resort to shareholders.
This is called a:
a. parent-sub merger.
b. board merger.
c. short-cut merger.
d. short-form merger.
Perry is building his house and orders a hot water heater from Jones Co. to be installed
by them. The hot water heater they sent has a 45-gallon capacity, but Perry had ordered
a 60-gallon capacity. Jones cannot provide a 60-gallon heater for two months, so Perry
cancels the contract and gets a heater from another company. Jones Co. says it must be
allowed to install the replacement heater. What result?
a. Jones wins; Perry can only cancel the portion of the contract regarding the goods.
b. Jones wins; Perry can only cancel if installation is also delayed two months.
c. Perry wins since the contract breach concerns the whole contract.
d. Perry can cancel the whole contract, but he is then limited in his recovery of
damages.
Which arguments oppose business involvement in socially responsible activities?
a. Lack of corporate focus on profitability.
b. Unfairness to company employees and shareholders.
c. Lack of accountability.
d. All of these.
Louis agreed to provide all the apples that Cindy’s Cider Mill will need at $3 per bushel
unless weather conditions require additional labor to be hired. The rate would then be
$3.50 per bushel. A freeze warning required Louis to hire 10 additional overtime
workers, raising the cost per bushel to $4.75. Louis wants to get out of his contract. Can
he?
a. No, the parties expected the hardship and provided for it in their contract.
b. No, there is no hardship.
c. Yes, the contract is commercially impracticable.
d. Yes, the freeze is a supervening event.
Title to goods passes according to rules under the Code if the parties have no explicit
agreement as to transfer of title.
a. True
b. False
Which of the following would be considered a material breach of a contract?
a. Partial performance that omits some essential part of the contract.
b. Delivery of 50 chairs in a contract that calls for 100 chairs.
c. An intentional breach of the contract.
d. All of these would be material breaches.
e. Only (a) and (b) would be material breaches.
The enabling statute of an administrative agency requires it to conduct a legislative-type
hearing without allowing for cross-examination in adopting its rules. This is:
a. a formal rulemaking process.
b. an informal rulemaking process.
c. a hybrid rulemaking process.
d. an unconstitutional rulemaking process.
Wilmer and Grace have an executory contract for the sale of some goods. Wilmer files
for bankruptcy and is then discharged by the bankruptcy court. Wilmer has no
obligation to perform under the contract with Grace.
a. True
b. False
Sean breaches an agreement in his employment contract with Inmett Corporation by
also working for Inmett’s major competitor. Sean’s promise to Inmett of his exclusive
personal services may be enforced by injunction.
a. True
b. False
In determining whether a mark is distinctive and famous under the Federal Trademark
Dilution Act, a court may consider factors such as:
a. the duration and extent of the use.
b. the degree of recognition of the mark.
c. the degree of inherent or acquired distinctiveness of the mark.
d. All of these.
A gift causa mortis is a gift:
a. made by a donor after death in her will.
b. that is conditional.
c. made in the contemplation of the donor’s imminent death.
d. That is both conditional andmade in the contemplation of the donor’s imminent death
e. That is both conditional andmade by a donor after death in her will.
Bob owns a business delivering coffee and donuts within the downtown area of the city.
Smith Co. calls him to deliver a large quantity of his products to their local office.
While taking a coffee urn through the Smith Co.’s office, Bob drops it on Lester,
scalding him. Who is liable?
a. Smith Co. and Bob are liable.
b. Bob alone is liable.
c. Lester has to absorb the cost himself since he assumed the risk by working at Smith
Co.
d. Only Smith Co. is liable.
A waiver of presentment will waive the requirement of notice of dishonor as well.
a. True
b. False
Under Chapter 7, the court will not grant the debtor a discharge if the debtor
a. is not an individual.
b. has destroyed, concealed, or failed to keep records.
c. has transferred, removed, or concealed any of his property with intent to defraud his
creditors within 12 months before the filing of the bankruptcy petition.
d. All of these.
The difference between an express contract and an implied in fact contract is the
manner in which the parties manifest assent.
a. True
b. False
Because of the increasing use of criminal sanctions to enforce government regulation of
business, criminal law is an essential part of business law.
a. True
b. False
Deeds must describe the land conveyed, describe the estate conveyed, and indicate the
consideration received by the grantor.
a. True
b. False
A violation of a statute constitutes negligence per se regardless of whether the injured
party is a member of the class protected by the statute.
a. True
b. False
Under the rule of the Third Restatement, if a principal becomes incapacitated, the
agency relationship terminates and all authority ceases.
a. True
b. False
Leslie, the owner of a shoe store, purchased 500 Model XT-50 running shoes from her
supplier, but a price was not stated in the contract. The contract is voidable at Leslie’s
option until the parties agree on a price.
a. True
b. False
In the United States, treaties are not subject to judicial review.
a. True
b. False
Defenses of the insurer include:
a. misrepresentation.
b. judgment pro rata.
c. concealment.
d. Both misrepresentationand concealment.
e. Both judgmentpro rata.and concealment.
The general rule is that an assignee stands in the shoes of the assignor. He acquires the
rights of the assignor but acquires no new or additional rights.
a. True
b. False
Some states have today merged the implied assumption of risk doctrine into their
comparative negligence systems.
a. True
b. False
Z, a seller in Miami, enters into a contract which states that goods are to be delivered to
X, a buyer in New York. Title is to remain with Z until delivery. This is:
a. a shipment contract.
b. an FOB Miami contract.
c. a destination contract.
d. a consignment.
The principal advantage of negotiable instruments is their legitimacy.
a. True
b. False
Alex sees Monas ring, and he thinks it is very valuable. He uses physical duress to
cause her to give him the ring, and he quickly sells it to unsuspecting Hanna’s Antique
Jewelry Shop for $5,000. A month later, Mona discovers her ring on sale at Hanna’s.
Can Mona get the ring back?
a. Yes, since a true owner can always recover her own property.
b. Yes, since Alex had voidable title to the ring.
c. Yes, since Alex had void title to the ring.
d. No, since Hanna was a good faith purchaser for value.
The tort of defamation is best defined as the unreasonable public disclosure of private
facts.
a. True
b. False
What form of organization enables a multinational enterprise to retain control and
authority over all phases of operation?
a. Direct export sales.
b. Wholly owned subsidiaries.
c. Joint ventures.
d. None of these.
Discuss defenses available to the promisor in an action by an intended third-party
beneficiary to enforce the promise.
Under what circumstances has it been held that a search warrant is not necessary?
Discuss the business judgment rule.
Elmer is 55 years old and was recently laid off from his job at the Mid-America
Corporation. He has applied for 30 different jobs, but has been told that the companies
prefer younger workers. Does Elmer have any recourse under federal law?
The Klodhoffer Corporation has assets amounting to $2 million and needs additional
capital to finance expansion of its operation. The board of directors decides to promote
an issue of $1.5 million of common stock in order to raise capital. At the time the stock
is issued, Klodhoffer has 250 shareholders owning common stock. If Klodhoffer is to
trade the stock over the counter, does it need to register with the SEC?
List and generally explain the warranties on presentment.
Identify three ways an agent may agree to become liable on a contract between the
principal and the third party.
What is alternative dispute resolution? What are the various techniques of alternative
dispute resolution, and what are their advantages and disadvantages?
Define and discuss the concept of materiality in relation to misrepresentation
When is a principal liable for her own conduct in tort involving the use of agents?
Compare the social ethics theories of distributive justice, libertarianism, and social
egalitarianism. How are they alike? How are they different? Explain your answer.
A group of investors brings a class action lawsuit against the Z & R Accounting Firm
under Section 10b and Rule 10b-5 of the 1934 Securities Act. Angela, an accountant
with the firm, had done an audit of the Pennymart Inc. books. The audit failed to
disclose that Orrin, the president of Pennymart, had stolen large amounts of cash from
the firm. Pennymart eventually filed for bankruptcy as a result of the thefts. What is the
likely result of the suit?
Define a substituted contract and explain how it affects an agreement.
The Elm Street Accounting Partnership has ordered two maroon office chairs for its
waiting room from the Quality Office Supply Company. Quality sends two
burgundy-red office chairs that the Elm Street partnership rejects. What, if any, rights
does Quality have under the circumstances? Explain.
What is a “merchant?” Identify four provisions in Article 2 that apply to merchants, but
not to others.
Harold, a minor, decided to trade his 1992 truck on a new car at the local dealership.
One week after driving the new car, Harold decides that he cannot afford the payments.
Harold now wishes to disaffirm his purchase and get his old truck back. The dealer
informs Harold that the truck has been sold. Can Harold get the old truck back and
disaffirm his contract with the dealer? Explain.
What is the Council on Environmental Quality?