A depositary bank is any bank handling an item for payment.
a. True
b. False
Lucille bought a new lawn mower on sale at a local discount store. The mower did not
come with an instruction book nor did it have warning labels placed near dangerous
parts of the mower. If Lucille injures herself while using this mower, she can claim that
she purchased a defective product.
a. True
b. False
Negotiability invests negotiable instruments with a high degree of marketability and
commercial utility by allowing them to be freely transferable and enforceable by a
person with the rights of a holder in due course against a person obligated on the
instrument.
a. True
b. False
If a person who has been declared incompetent by the courts enters into an agreement,
that agreement is void, because it does not meet all the requirements of a binding
contract.
a. True
b. False
If the debtor contests the involuntary petition for bankruptcy, the court must enter an
order for relief against the debtor.
a. True
b. False
A person who believes in the situational ethics theory would agree that precise
guidelines for business behavior must be developed and adhered to by business
professionals.
a. True
b. False
The effect of a ‘secondary meaning is that it may make a mark distinctive enough to
allow it to be protected by the Lanham Act.
a. True
b. False
Only the __________ Amendment to the Constitution, which abolishes slavery or
involuntary servitude, applies to the actions of private individuals.
a. First
b. Ninth
c. Thirteenth
d. Fourteenth
The Minnesota Housing Authority plans to begin eminent domain proceedings to
acquire 100 homes to rent to low-income persons. The Housing Authority wants to pay
as little as possible for the homes so that it can acquire more homes in the future, but
the homeowners insist they are entitled to the fair market value of the property. In a
court hearing on the matter, the homeowners are likely to prevail.
a. True
b. False
A gratuitous agent is not subject to the same duty of loyalty that is imposed upon a paid
agent.
a. True
b. False
Identify each of the following corporations by type.
a. Dr. Smith and Dr. Jones are both medical doctors who practice together. They
incorporate their medical practice so that they can offer themselves and their employees
better employment benefits.
b. A group of concerned citizens obtains a corporate charter from the state to form a
local Water Planning and Management Corporation that is authorized to do water
planning on a local level and to grant permits for such purposes as the installation of
ditches, and the encouragement of good water usage practices in their jurisdictional
area.
c. Agatha and Betty, who are sisters, form a corporation in which they are the sole
shareholders. They plan to operate a large retail store that sells collectibles. Agatha is
the president and Betty is the chairperson of the board of directors.
d. Bill and Carl form a corporation to prevent spouse and child abuse. The corporation
operates a shelter for battered women and homeless children.
e. Zeron Corporation is incorporated in the state of West Virginia. It decides to expand
its business to Kentucky. What type of corporation is it in West Virginia? What type of
corporation is it in Kentucky?
The FTC:
a. and an advertiser can enter into a consent decree to force the advertiser to both stop
the running of the advertisement and to publicly admit its advertisement was deceptive.
b. can order a false or misleading advertisement to be stopped through a “cease and
desist order,” but cannot require the violator to correct its advertising.
c. can fine an advertiser for running a misleading advertisement if it fails to comply
with its order to “cease and desist.”
d. All of these are correct.
In a Chapter 7 proceeding, an unsecured creditor who files a claim with the court after
the deadline because he is too busy planning and going on a vacation would be totally
unable to collect.
a. True
b. False
A(n) __________ is a third party who obtains possible benefits but no rights under a
contract.
a. incidental beneficiary
b. intended beneficiary
c. assignor
d. donee beneficiary
Decisions of courts of appeals are published in volumes known as “reports” or
“reporters.”
a. True
b. False
A partner may bind the partnership by her act if she has:
a. actual authority, express or implied, to perform the act.
b. apparent authority to perform the act.
c. Both answers are correct.
d. None of these.
A deposition is a pretrial discovery device, which consists of sworn testimony of a
witness or the opposing party.
a. True
b. False
Sarina goes to Marlin’s Department Store to look for clothes. The store happens to be in
the process of remodeling, and there is a lot of clutter in the aisle. Sarina trips over the
clutter and is injured. Under the Second Restatement, Sarina’s status with regard to the
store is that of:
a. licensee.
b. business visitor.
c. public invitee.
d. trespasser.
The Rutherford Corporation, a publicly held company, has employed Duncan, Saindon
& Associates, PSC, as their accounting firm to perform audit services. Under the
Sarbanes-Oxley Act, the lead auditor of Duncan, Saindon & Associates must rotate
every:
a. year.
b. two years.
c. three years.
d. five years.
A trustee under a Chapter 11 or 13 proceeding performs the same duties as a Chapter 7
trustee.
a. True
b. False
An accountant-client privilege is statutorily recognized in all states, permitting the
accountant to refuse to disclose confidential information gleaned from his client.
a. True
b. False
Whether a transfer is by assignment or by negotiation, the transferee does not acquire
the rights the transferor had.
a. True
b. False
A trustee has a duty to make proper allocation of benefits and burdens between income
beneficiaries and remaindermen. Which of the following statements is true concerning
this allocation?
a. Current expenses are chargeable to the remaindermen.
b. Extraordinary expenses are chargeable to the remaindermen.
c. Money paid for the use of trust property is chargeable to the remaindermen.
d. Any profit from the use of trust property is allocated to the remaindermen.
In a sale on approval:
a. possession, but not title, is transferred to the buyer for a stated period of time.
b. possession and title are transferred to the buyer for a stated period of time.
c. title, but not possession, is transferred to the buyer for a stated period of time.
d. neither title nor possession is transferred to the buyer for a stated period of time.
Elder, an authorized agent for Mullins, signs a negotiable instrument, “Mullins,
principal, by Elder, agent. Mullins has primary liability and Elder has secondary
liability on the instrument.
a. True
b. False
The defense of entrapment arises when:
a. a law enforcement official induces a person to commit a crime whether that person,
under ordinary circumstances, would have done so or not.
b. any person induces any other person to commit a crime when the person induced
would not ordinarily have done so.
c. a police officer or other government official or agent acts to induce an individual to
commit a crime when that individual would not ordinarily have done so.
d. law enforcement officials act aggressively to prevent a crime.
A preauthorized electronic transfer from a consumers account:
a. may be orally authorized at the time the transfer is to be made.
b. must be authorized in writing in advance of the time the transfer is to be made.
c. may be stopped only by written notice to the financial institution at least five
business days before the scheduled date of transfer.
d. is limited to an amount of $500 or less.
A subagent owes a fiduciary duty to both the agent and to the principal.
a. True
b. False
Which of the following is correct with respect to consequential damages under the
Code?
a. Consequential damages include damages for destruction of a warehouse caused by
the explosion of nonconforming goods.
b. Consequential damages include damages for lost profits from a contract to resell
goods which the seller never delivers.
c. Particular needs of the buyer need to be made known to the seller before the seller
can be held responsible for consequential damages relating to those needs.
d. All of these are correct.
Anna has a contract to perform accounting services for Intercend Corporation. She
breaches her contract in a nonmaterial way. Which of the following is correct with
respect to Anna’s liability?
a. Anna is not entitled to any compensation for her services.
b. Anna does not have liability to third party intended beneficiaries.
c. Anna is entitled to the contractually agreed upon fee less any damages or loss her
breach has caused her clients.
d. Anna will get full compensation only after she corrects the breach.
Silence can never be an acceptance.
a. True
b. False