The board of directors of a corporation:
a. determines the capital structure and financial policy of the corporation.
b. receives no salaries for services, although directors may receive a fee for attending
board meetings.
c. has the power to bind the corporation when acting as a unit or individually.
d. All of these are correct.
If The Raintree Company has accumulated earnings each year but the directors have not
declared dividends for five years, the shareholders may:
a. petition a court of law for redress.
b. override the board by a two-thirds vote.
c. ask for an injunction requiring a dividend to be declared.
d. do nothing but sell their stock.
Which of the following can be raised as a defense to a claim of defamation?
a. That the Internet service provider was publishing information originating from a third
party.
b. That there was a constitutional privilege to comment about the plaintiff who is a
public figure and that the statement was made without malice.
c. That there was a conditional privilege to publish a defamatory statement in order to
protect a legitimate self-interest.
d. All of these.
A completely handwritten will is valid only if witnessed.
a. True
b. False
The possible consequences of a defective incorporation include which of the following?
a. The state may bring an action against the association for involuntary dissolution.
b. A third party may assert that it is not liable to the association.
c. The associates are held personally liable to a third party.
d. All of these.
e. None of these.
A voidable contract results when the contract arises from:
a. physical duress.
b. undue influence.
c. fraud in the execution.
d. a mutual mistake in the meaning of contractual terms and neither party is to blame.
The 1934 Securities Exchange Act requires registration of:
a. all regulated publicly held companies.
b. securities being issued initially.
c. statutory outsiders.
d. tippees.
For a misrepresentation to be material, it must be likely to induce a reasonable person to
manifest assent or the maker must know that it would be likely to induce the recipient
to do so.
a. True
b. False
Mariellas purchase of a ticket to the ballet grants her a license to use the theaters
premises during the performance, but it does not give her an interest in the real
property.
a. True
b. False
Under the 2004 amendments, individuals who violate the Sherman Antitrust Act,
Sections 1 or 2, may be imprisoned for ten years and fined up to $1 million.
a. True
b. False
If a purchaser of all a corporation’s assets continues the seller’s product line, some
courts impose upon the purchaser strict tort liability for defects in products previously
manufactured by the seller corporation.
a. True
b. False
Section 11 of the 1933 Securities Act imposes liability upon an accountant for
negligence in the conduct of an audit.
a. True
b. False
A ‘sale” of goods happens when:
a. the parties agree.
b. the parties sign the contract.
c. title to the goods is passed.
d. a promise to transfer title is made.
X signs a negotiable instrument ordering Y to pay Z the sum of $500. Y is the:
a. maker.
b. drawee.
c. payee.
d. drawer.
A leading proponent of the utilitarian approach to ethics was the eighteenth century
philosopher Immanuel Kant.
a. True
b. False
Zeron Corporation is incorporated in the state of West Virginia. It now wants to open a
retail outlet in Kentucky. Zeron must obtain a certificate qualifying it to do business in
the state of Kentucky.
a. True
b. False
An agent has breached his fiduciary duty in which of the following situations?
a. All of the following choices are correct answers.
b. Where the agent makes a secret profit.
c. Where the agent uses information obtained in the course of the agency for his own
benefit.
d. Where the agent competes with the principal.
Barbara, a CPA, fails to discover a fairly obvious error in the books of her client,
Banana Computers. If Ben relies on Barbara’s certification of the financial statement in
deciding to accept the position of president of the company, Barbara will:
a. in most states be liable to Ben as a third party beneficiary of her contract with
Banana.
b. be liable to Ben only if she has a contract with Ben.
c. not be liable if Ben is not a party to the original contract.
d. not be liable to Ben unless Ben notified Barbara in advance of his intention to rely on
the financials.
Exclusive dealing contracts are illegal and void.
a. True
b. False
The provision that private property shall not be taken for public use without just
compensation is found in:
a. the First Amendment.
b. the Ninth Amendment.
c. state constitutions.
d. the Eminent Domain Statute enacted by Congress.
Infringement of a mark is the unauthorized use of an identical or substantially
indistinguishable mark that is likely to cause confusion, to cause mistake, or to deceive.
a. True
b. False
State laws that regulate the issuance and sale of securities are known as:
a. the Uniform Commercial Code.
b. the MBCA.
c. Blue Sky Laws.
d. None of these.
Collecting banks give to a transferee the same basic warranties as those given by other
parties who transfer commercial paper, except they also may give encoding warranties.
a. True
b. False
Tom breached a sales contract to purchase goods from Jim. In addition to other
remedies available, Jim may be able to recover commercially reasonable expenses
incurred as a result of the breach. These expenses are:
a. incidental damages.
b. punitive damages.
c. liquidated damages.
d. extraordinary damages.
Law is an instrument of social control.
a. True
b. False
A restraint involving collaboration among competitors at the same level in the chain of
distribution is:
a. a vertical restraint.
b. a horizontal restraint.
c. price fixing.
d. a trust.
The U.S. Constitution reserves to the states or to the people:
a. powers also delegated to the federal government by the Constitution.
b. the powers the Constitution does not prohibit to the states.
c. police power.
d. employee safety matters.
After the employee has demonstrated that the employer pays unequal wages for equal
work to members of the opposite sex, the burden shifts to the employer to prove that the
pay differential is based on:
a. a seniority system.
b. a merit system.
c. a system that measures earnings by quantity or quality of production.
d. All of these.
A transaction whereby the tenant transfers away her entire interest under a lease is
called a(n):
a. sublease.
b. assignment.
c. eviction.
d. abandonment.
Any unauthorized indorsement must be asserted within one year under the UCCs statute
of limitations provision.
a. True
b. False
Members of the board of directors may not determine their own compensation.
a. True
b. False
Any violation of Section 2 of the Sherman Act constituting a conspiracy to monopolize
would also constitute a violation of Section 1.
a. True
b. False
A “reasonable person standard” does not apply to children since they do not have the
judgment, intelligence, knowledge, or experience of adults.
a. True
b. False