Which person argued that a corporate manager’s primary responsibility is to the
shareholders of the organization and that managers should make the company as
profitable as possible while also complying with the law?
a. John Rawls
b. John Stuart Mill
c. Immanuel Kant
d. Milton Friedman
If a minor can cancel a contract, it can be done at any time before the minor reaches the
age of majority or within a reasonable time after reaching majority age.
a. True
b. False
If Denise is hired to work as a cashier, she has the implied authority to do acts
reasonably necessary to carry out her job.
a. True
b. False
The United States has taken a position that legal issues are best resolved by lawsuits
involving parties with conflicting interests presenting their strongest possible case to a
neutral factfinder. Because of this, the legal system in the United States is considered
a. an adversary system.
b. a conflict system.
c. an alternative dispute resolution system.
d. a mediation system.
One purpose of contract law is to determine which agreements are worthy of legal
enforcement.
a. True
b. False
Controlling shareholders have no fiduciary responsibility to minority shareholders.
a. True
b. False
A tort is a violation of a duty imposed by the civil law.
a. True
b. False
Marty, a 16-year-old, contracted with Cream-of-the-Crop Cycles to buy an $8,000
motorcycle. He agreed to make monthly payments until the purchase price plus interest
were paid in full. It is three years later and Marty has not disaffirmed the contract and
has made regular payments on the cycle since turning 18. Which of the following is
correct?
a. The contract is void and Marty has no obligation.
b. The contract is now voidable by Cream-of-the-Crop Cycles.
c. Marty has ratified the contract and is now bound by its terms.
d. Marty has ratified the contract but can still get a return of the payments made while
he was a minor.
Which program was designed as a method for limiting air pollutants in an economically
efficient manner by allowing enterprises to sell its leftover emissions allowance to other
companies or stockpile it for future use?
a. The Kyoto Protocol
b. Cap and Trade
c. Total Maximum Daily Load (TMDL)
d. Resource Conservation and Recovery Act (RCRA)
Amy is on the board of directors of Computers Plus. Computers Plus is looking for a
warehouse to purchase. Amy owns a warehouse. In order for Amy to sell her warehouse
to Computers Plus
a. the transaction must be fair to both Amy and Computers Plus.
b. the disinterested members of the board of directors must approve the transaction.
c. she must resign her position on the board of directors of Computers Plus before any
negotiations for the warehouse begin.
d. a court must review the opportunity to determine its favorability.
From tax returns, the Internal Revenue Service (IRS) has information concerning
Elizabeth Jones. Generally, the IRS may not divulge this information to the Federal
Bureau of Investigation unless Elizabeth has given written consent.
a. True
b. False
Jurisdiction can be described as
a. the study of law.
b. the authority of a court to decide a particular type of case.
c. court cases involving the U.S. Constitution or a federal statute.
d. the burden of proof.
The CAN-SPAM Act
a. applies to virtually all promotional e-mails, whether or not the sender has a
pre-existing relationship with the recipient.
b. requires senders of promotional e-mails to offer an opt-in system to recipients.
c. requires recipients of unsolicited, pornographic e-mails to notify the Justice
Department.
d. requires senders of promotional e-mails to provide a valid return address, which may
be a post office box or a specific physical location.
Generally accepted accounting principles (GAAP) are the rules for preparing financial
statements.
a. True
b. False
Only one party can have an interest in particular goods at a particular time.
a. True
b. False
In order to be considered sexual harassment, the questionable behavior must be directed
at a co-worker of the opposite gender.
a. True
b. False
The prevention of significant deterioration (PSD) program was developed to prevent
deterioration in air quality that would create health problems for those affected.
a. True
b. False
Tim buys a high-powered tool from Binford Tools to use on the construction of his own
garage. Binford Tools provides a full warranty on the tool for the first six months. To
pay for the tool, Tim signs a negotiable promissory note which contains the FTC
Consumer Credit Notice. Binford properly negotiates the note to First Finance. Within
three weeks, the tool stops working and Binford refuses to repair or replace it. In the
meantime, First Finance demands payment from Tim. Under the Federal Trade
Commission rules, this consumer credit situation means First Finance
a. can collect if it is a holder in due course.
b. can collect if it is not a holder in due course.
c. can collect whether or not it is a holder in due course.
d. cannot collect.
L & M loaned Joan $400 so that she could buy her textbooks for the current semester. L
& M’s terms for repayment of the loan (including interest) are $200 in two months,
$200 in four months, and another $100 at the end of the fifth month. The legal
maximum rate of interest on this type of loan is six percent per annum. L & M’s loan is
usurious.
a. True
b. False
Which statement regarding assignment is accurate?
a. Gratuitous assignments are generally revocable regardless of whether they are oral or
written.
b. An assignment for consideration is irrevocable.
c. An assignment becomes valid when the obligor receives notice of the assignment.
d. An assignment must be written and follow all legal formalities.
For the business judgment rule to apply, the manager must
a. be trying to resolve a conflict of interest.
b. have exercised extraordinary care in resolving the situation.
c. have acted in the best interests of the corporation.
d. prove he or she was aware of the decision being made.
Kathleen filed for voluntary bankruptcy and the automatic stay went into effect. The
automatic stay
a. acts to automatically discharge Kathleen’s debts.
b. prohibits creditors from collecting debts against Kathleen that arose before she filed
bankruptcy.
c. stops only secured creditors from taking any act to collect, assess, or recover a claim
against Kathleen that arose before she filed bankruptcy.
d. stops creditors from trying to collect from Kathleen, but it does not stop them from
filing lawsuits against her.
The term F.O.B.:
a. can indicate a destination or shipment contract.
b. stands for “freight on board.”
c. requires the seller to insure the goods for the buyer’s benefit.
d. shifts the risk of loss to the buyer when the goods are identified.
Sandy may be charged a fee, but will not face criminal penalties for writing checks on
an account with insufficient funds to pay them.
a. True
b. False
All Seasons, Inc. ordered $5,000 worth of Christmas decorations from Santa, Inc. The
shipment of decorations was to arrive no later than October 1, but did not arrive until
December 1. All Seasons was able to purchase some of the unfulfilled order through
other suppliers, but had to pay 15% more than the price under contract with Santa, Inc.
As a result of the delay, All Seasons’ sales were down 25%. All Seasons can recover
a. punitive damages.
b. nominal damages.
c. compensatory damages and consequential damages.
d. compensatory damages, consequential damages, and punitive damages.
The Uniform Electronic Transmission Act (UETA)
a. declares that a contract or signature may not be denied enforceability just because it
is in electronic form.
b. declares that E-signatures are invalid.
c. creates a safe cyberspace environment in which business communications cannot be
intercepted or fraudulently altered.
d. has only been adopted in a handful of states.
Which of the following events would have the best chance of excusing performance of
a contract based on commercial impracticability?
a. The price of a raw material increases slightly so that the contract will not be as
profitable.
b. An unforeseeable trade embargo causes prices to triple.
c. The promisor of personal services dies.
d. The subject matter of the contract is destroyed.
Under the fair use doctrine, instructors cannot be liable for copyright violations.
a. True
b. False
ABC Siding, Inc. manufactures aluminum siding. ABC enters into a contract to deliver
siding to Slippery Siding, Ltd., a retailer of aluminum siding. The written agreement
insists that all modifications to the agreement be in writing and signed by both parties.
This prohibition against oral modifications is
a. valid regardless of whether the clause is signed separately.
b. invalid unless the clause is signed separately by Slippery Siding, Ltd.
c. invalid unless the clause is signed separately by ABC Siding, Inc.
d. invalid unless new consideration is supplied by the parties when the modification
agreement is made.
Which of the following would probably NOT be required of employers to reasonably
accommodate its employees for religious beliefs?
a. Flexible scheduling
b. Closing the business on Sundays
c. Reassigning employees within the company
d. Allowing employees to switch work schedules
Betty’s BBQ orally contracts with Denny’s Design House for 10,000 matchbooks at the
price of 10 cents per matchbook. The matchbooks are to be embossed with a logo to be
designed by Denny’s Design promoting Betty’s BBQ. Price, payment terms, delivery
terms are agreed upon between the parties. Denny’s Design creates the logo, gets Betty’s
BBQ’s approval of the design and begins applying the logo on the matchbook covers.
Denny’s Design has almost finished the order when Betty’s BBQ calls to say it has
decided to make the eatery a smoke-free restaurant and cancels the order. Denny’s
Design sues, but Betty’s BBQ states that the agreement is unenforceable under the
statute of frauds. Who wins?
a. Denny’s Design House wins. This situation falls under an exception to the statute of
frauds.
b. Denny’s Design House wins. This is a service contract for design of a logo.
Therefore, the UCC, including the statute of frauds provisions of Article 2, does not
apply.
c. Betty’s BBQ wins. This is a contract for $1000. The statute of frauds requires all sales
contracts in excess of $500 be in writing.
d. Betty’s BBQ wins. The statute of frauds only applies to merchants. Betty’s BBQ is
not a merchant in this instance because it intended to give the matchbooks away and not
sell them.
You have placed an antique sofa up for auction and the auctioneer has not made any
special announcements about the sale. You can withdraw the sofa at any time before the
auctioneer closes the sale by announcement or by the fall of the hammer.
a. True
b. False