The Federal Trade Commission promulgated Telemarketing Sales Rules regulating the
activities of telemarketers. One of the rules prohibits telemarketers from calling a
person’s residence at any time other than between 8:00 a.m. and 9:00 p.m. This
legislative rule has the effect of a statute.
David has worked as a CPA for Accountants R Us for about eight months. When his
wife had a baby, he requested to take some time off. He believes he is allowed to do so
pursuant to the Family and Medical Leave Act.
When may an employer require an employee to submit to a lie detector test?
a. When the employee has been hired for less than 90 days
b. When the test is part of an on-going investigation into crimes that have occurred.
c. When the employer has reason to believe the employee is using illegal drugs on the
job.
d. When all employees are being questioned using a lie detector.
Jason and Stacey go to the movie theater and decide to use a camcorder to film the
show so they can watch it again with their friends later at home. They have:
a. made an ethical, legal, wise economic decision since the cost of viewing the movie in
the theater again is too high for their limited budget.
b. violated the Family Entertainment and Copyright Act, and committed a criminal
offense.
c. violated the No Electronic Theft Act.
d. committed an ethical but illegal act by violating the Digital Millennium Copyright
Act.
Which of the following would not be considered a fraudulent conveyance or a voidable
preference under the provisions of the Code? Immediately prior to filing bankruptcy:
a. debtor sells assets well below fair market price to Freddie, a friend.
b. debtor sells his car at a public auction, thinking that it would bring a decent price, but
the car brings an amount well below fair market value.
c. debtor’s corporation transfers assets to stockholders in lieu of cash dividends.
d. debtor pays $650 to “Nation on Line” for the past ten months of Internet service.
An unliquidated debt can be described as:
a. a debt in which both its existence and amount is in dispute.
b. a debt in which the existence or amount is in dispute.
c. a debt disputed by the creditor but not the debtor.
d. a debt undisputed by either party.
A trademark lasts for:
a. 20 years after the application is filed.
b. 70 years after the death of the creator.
c. 10 years, but it can be renewed for an unlimited number of terms as long as it is used.
d. as long as it is kept confidential.
Which of the following statements express the purpose of the Truth-in-Lending Act?
a. To require lenders to charge a “reasonable” rate of interest.
b. To help small business.
c. To provide consumers with information necessary to make the best credit decision.
d. To help lenders limit state laws.
Andy’s business is not able to pay its debts, and the prospects for its finances to improve
are slim. Andy decides not to continue the business. In this case, Andy should file a
voluntary petition for which type of bankruptcy?
a. Chapter 7.
b. Chapter 11.
c. Chapter 13.
d. Chapter 12.
Tom receives an e-mail from someone alleging to be a Nigerian government official
who has stolen money from the government. He needs some place safe to keep the
money for a short time. The official promises that, if Tom lets his bank account be used
for this purpose, Tom will be allowed to keep a percentage of the stolen money. Tom
gives in to the temptation and provides his account information. Instead of receiving
money, Tom loses everything he had in the account to the scammer. In this situation:
a. prosecution can be under state law.
b. prosecution can be under the Computer Fraud and Abuse Act.
c. a civil action can be brought under Section 5 of the FTC Act.
d. All of the above.
Identity theft:
a. is a relatively new crime that was created through use of the Internet.
b. affects about 8 million American victims each year.
c. has slight impact on the victim since consumer law protects owners of credit cards
and limits their loss to $50 if they promptly report the loss of their card.
d. is now addressed by only state statutes.
Which of the following parties can defeat a perfected security interest?
a. A “buyer in ordinary course of business.”
b. A buyer of consumer goods if the buyer is not aware of the security interest, gives
value for the goods, will continue to use the goods as consumer goods, and the secured
party has not filed a financing statement.
c. A buyer who purchases chattel paper or an instrument in the ordinary course of
business, and then takes possession.
d. All of the above are correct.
David has worked as a CPA for Accountants R Us for about eight months. When his
wife had a baby, he requested to take some time off. He believes he is allowed to do so
pursuant to the Family and Medical Leave Act.
Under the federal legislation known as OSHA:
a. employers must keep records of all workplace injuries.
b. employers must keep records of positive results of workplace drug tests.
c. employees must keep their work area free from recognized hazards.
d. employers may monitor workers e-mail messages if the monitoring is done in the
ordinary course of business and the employer provides the e-mail system.
Liability policies, such as personal liability, professional malpractice, or business
liability insurance, do not protect the insured against:
a. a personal injury on the insured’s property, such as the mail carrier who slips and falls
on the owner’s sidewalk.
b. intentional torts.
c. a negligent act or omission by the property owner.
d. someone injured by the insured away from home or business.
In a civil case, the plaintiff must prove the case:
a. by a preponderance of the evidence.
b. by clear and convincing evidence.
c. beyond a reasonable doubt.
d. None of the above; the burden of proof is on the defendant.
The Teresa Harris v. Forklift Systems, Inc. case held:
a. for there to be sexual harassment, the conduct must affect an employee’s
psychological well-being.
b. conduct need not affect an employee’s psychological well-being to constitute sexual
harassment.
c. Title VII does not apply to sexual harassment cases.
d. Title VII does not apply to same-sex harassment.
Dersett Trucking hauls granite for the major granite companies in Minnesota. Dersett
Trucking does not make its trucking services available to the general public. Dersett
Trucking is a contract carrier and does not incur strict liability.
Jerry purchased a laptop computer for his personal use from Computer City on an
installment loan contract. The sales contract stated that in the event the contract is
assigned to a third party, the purchaser (Jerry) promises he will not assert any claim or
defense against the assignee which he might have against Computer City. Computer
City immediately assigns the contract rights to Finance USA. The computer stops
working within two weeks of the purchase.
a. This is a valid waiver of defense clause. Jerry signed the contract, so he can’t raise a
defense to Finance USA.
b. Finance USA is an intended third party beneficiary and may therefore enforce the
contract.
c. In general, this type of waiver is not permitted in consumer contracts, so Jerry can
raise his claim against Finance USA.
d. This is a delegation of Jerry’s duties and the delegator remains liable on the contract
unless a novation agreement is made.
Hank owns 100 shares of cumulative preferred stock in Wayside Transport, Inc. Kelsey
owns 50 non-cumulative preferred shares, and Oleg owns 120 shares of common stock.
Wayside does not pay dividends in 2007. In 2009:
a. Hank and Kelsey must receive their 2009 dividends before Oleg is paid any 2009
dividends.
b. Oleg cannot receive any 2009 dividends until Hank is paid for the 2007 dividends.
c. Kelsey cannot receive the dividends Wayside could not afford to pay in 2007. She
will just lose them.
d. All of the above.
Which of the following limitations does not apply to the government in civil
proceedings to take a person’s liberty or property?
a. Procedural Due Process.
b. The Takings Clause.
c. Substantive Due Process.
d. The Equal Protection Clause.
Which of the following statements could create an express warranty?
a. “This is the best car available in town.”
b. “This motorcycle will double in value in the next ten years.”
c. “These tires have 10,000 miles on them.”
d. “This antique is quite a bargain.”
Sara sent letters to 1,000 people offering to send them information that would guarantee
them a profit in the stock market if they sent her $99.95. If they sent her the money, the
brief, generally known information she sent them said: “Buy stocks when their prices
are low, and sell when the prices are high. Sara is guilty of:
a. mail fraud.
b. larceny.
c. embezzlement.
d. nothing. She merely thought of and executed a clever way to make money.
Robert hired James, a CPA, to prepare his tax returns. James was too busy and
delegated the work to Sara, also a CPA. This delegation is:
a. enforceable, as Sara is also a CPA.
b. enforceable, as there was no expectation James would do the work.
c. not enforceable, as Robert hired James to perform personal services.
d. not enforceable, as this violates public policy.
The biggest change in litigation in the last decade is:
a. an explosive rise of electronic discovery.
b. a decrease in the use of discovery.
c. the replacement of interrogatories with depositions.
d. the use of juries in appellate courts.
The advantages of trademark registration include all EXCEPT:
a. potential damages are higher.
b. after five years the mark becomes almost impossible to challenge.
c. it allows the trademark owner to use the TM symbol to put others on notice of the
protection.
d. the mark is valid nationally.
Roberto sued Monica for injuries received in a traffic accident. If Monica does not
respond to the complaint and summons served by Roberto within the prescribed time
limits, Roberto may obtain a:
a. judgment on the pleadings.
b. summary judgment.
c. pretrial conference.
d. default judgment.
Tu-thumbs buys a used paint sprayer from the local paint store. The sprayer had a large
sign on it which said “AS IS.” The dealer made no promises or statements concerning
the performance of the paint sprayer. When Tu-thumbs attempts to spray paint his
house, the trigger on the sprayer sticks in the “on” position and before Tu-thumbs can
pull the electrical cord to cut the power, paint is sprayed all over his prize Borzoi dog
that is scheduled to be shown in a dog show the next day. Tu-thumbs sues the
dealership. Who wins?
a. Dealer wins; there were no express warranties and all implied warranties have been
successfully disclaimed.
b. Tu-thumbs wins; he can recover on the basis of express warranties.
c. Tu-thumbs wins; he can recover on the basis of the implied warranty of
merchantability because the word “merchantability” was not used in the disclaimer.
d. Dealer wins; even though there were implied warranties, the damage to the dog could
not have been foreseen.
Turtle World orders 200 small sea turtles from Reptile World. After the sea turtles had
been identified to the contract but before the risk of loss had passed to Turtle World, the
turtles were released into the ocean by a militant animal rights group who broke into
Reptile World to set the animals free. Under this scenario:
a. Turtle World cannot successfully sue because the contract is void.
b. Turtle World can cover, then win a judgment against Reptile World for the difference
between the contract price and the cover price, plus incidental and consequential
damages, minus expenses saved.
c. Turtle World can successfully sue for specific performance because sea turtles are
everywhere.
d. Turtle World is entitled to a judgment for compensatory damages, but not
consequential damages.
The power of federal agencies is limited by:
a. statutory control in the enabling legislation and the Administrative Procedures Act.
b. political control by Congress and the President.
c. judicial review.
d. All of the above.
The purpose of recording a deed or other real estate transaction is to:
a. establish the rights between the grantor and the grantee.
b. assure the grantee that a transfer of real property is now complete.
c. establish the type of deed granted (i.e. warranty deed, special warranty deed, or
quitclaim deed).
d. put the rest of the world on notice that the transaction occurred between the grantor
and the grantee.
When a party to a contract makes a unilateral mistake, the contract:
a. generally can be rescinded by the mistaken party.
b. is void.
c. can be rescinded by either party.
d. generally cannot be rescinded by the mistaken party unless the contract is
unconscionable or it is proven that the nonmistaken party knew of the error.
In analyzing a situation to determine how to act ethically, a business manager should:
a. gather background information by either talking firsthand with the people involved or
by talking to those who gained information informally through the company
“grapevine.
b. narrowly focus on a single issue.
c. determine whether an alternative violates important values.
d. All of the answers are correct.
Generally, constitutional protections do NOT apply to:
a. acts of the federal government.
b. acts of state government.
c. acts of administrative agencies.
d. acts of privately owned businesses.
If a public company decides not to solicit proxies for a shareholder meeting, it need not
give shareholders the information that would have been required in a proxy statement.
Most contracts are discharged by mutual agreement of the parties.
Rick wrote a song entitled “Wonderful.” At the bottom of the first page of music he
wrote “© 1990 by Rick Reed.” Four months later a local band was playing his song at a
bar. Rick felt that the bar was an inappropriate setting for his music. What is his
remedy?
Both the buyer and seller may have an insurable interest in the same goods at the same
time.
If the President vetoes a bill and if both the House and Senate repass the bill by a
two-thirds margin, the bill becomes law.
Discuss the two federal statutes that give Americans the power to acquire or protect
personal information.
Controlling shareholders have no fiduciary responsibility to minority shareholders.
The union representing workers at Blue Ridge Co. were unable to reach a collective
bargaining agreement with management. The union may legally stage a strike in which
members stop working but remain at their job posts, physically blocking replacement
workers from taking their places, so the strike is more effective.
Norm and Frank have a legal contract that is silent with regard to an assignment of the
contract. In order for Norm to assign all or part of his rights under a contract, Frank
must grant such permission to Norm.
In order for a federal court to have jurisdiction, there must be a federal question
involved and at least $75,000 in dispute.
Either party may demand rescission of a fully executed oral contract if it was required
to have been in writing under the statute of frauds.
If the seller has made a substantial beginning in manufacturing customized goods, then
an oral contract may be enforceable regardless of the amount of money involved in the
contract.
Richard received his credit card bill and noticed an error. He wrote to the company the
next week, pointing out the error in his bill. Under the law, what is the credit card’s
obligation once it receives Richard’s letter?
Irving is shopping at the local Computers R Us store and agrees to buy a computer for
his home “on the condition of personal satisfaction.” If Irving takes the computer back
to the store stating that he doesn’t like the computer, then the seller must accept the
return of the computer and terminate the contract.
Some courts have held that employee handbooks create binding contract terms.
There is strong evidence that ethical behavior pays off financially for businesses.
DoorWay Computers, Inc., the trademark owner of “DoorWay,” sought a court
injunction to prevent Handyman Hardware, Inc. from using the domain name,
“DoorWay.com.” A jury will decide whether DoorWay is entitled to this remedy.