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Question
1. A duty imposed on the agent by the common law generally includes the:
duty to
compensate.
duty of loyalty.
duty to reimburse.
duty of
indemnification.
2. Adam offered to buy automobile batteries from Ben. Adam`s purchase order was
complete with respect to all material terms except price, which was omitted. If Ben
accepts Adam`s offer, and the price of automobile batteries is well established in the
industry, which of the following statements is true?
A contract cannot be formed between Adam and Ben if the price is not
included.
A contract can be formed between Adam and Ben only if it can be
proved that the parties intended to enter a contract to discuss the
price.
A contract can be formed between Adam and Ben, but the price will be
treated as a proposed addition to the contract which must be
accepted by both parties.
A contract can be formed between Adam and Ben even though the
price term was omitted.
3. When an agent takes an unauthorized action:
the action cannot be ratified by the principal.
the principal can transfer liability to the agent while enjoying the
benefits of the action.
the principal may not ratify only a portion of the action.
the action may be ratified provided that the principal is a
corporation.
4. A corporation is:
liable for all torts committed by its retired and ex-employees.
liable for all torts committed by its employees while acting within the
scope of their employment.
liable for all torts committed by its employees under the doctrine
of ultra vires.
not liable for the torts committed by its employees while acting on the
instructions of a high-level manager.
5 A large and wellÂknown corporation wants to acquire a plot of ground for a new plant.
To avoid the extra cost, the corporation purchases the land through several agents, each
purporting to be buying personally. In such cases, the corporation is a(n) _____.
undisclosed principal
disclosed principal
partially disclosed
principal
subagent
6 The partnership is liable for torts committed by any partner of the firm while engaged
in partnership business under the doctrine of _____.
estoppel
respondeat
superior
caveat emptor
ultra vires
7 When a contract is silent about the time for performance:
the Uniform Commercial Code takes the same position as the
common law.
it cannot be terminated at any time by either party.
the payment for the goods is due at the time and place at which the
seller deems convenient.
it can be terminated by either party without giving any notice.
8 A contract between an employer and the union, which requires the employer to refrain
from dealing in the products of another employer who is considered to be unfair to the
union, is called a _____.
collective bargaining
agreement
competitive-hit
agreement
hot-cargo agreement
union shop agreement
9 All business corporations derive their existence from the:
Commerce Clause of the U.S.
Constitution.
common law.
state in which they are
incorporated.
federal government.
10 Misrepresentations by an agent made with the intent to deceive a third person:
will make the agent liable to the third person.
will absolve the principal of any liabilities toward the
third person.
will make the third person liable to the principle.
will make the principal liable to the agent and the
third person.
11 A basic principle of corporation law is that:
shareholders are not free to dispose of their
shares by gift.
shareholders are given the authority to manage
the business.
majority rule applies to both shareholder and
director action.
there is an established market for the stock.
12 Apparent authority may exist:
only if actual authority has been conferred on the agent.
if a principal has unintentionally permitted third persons to believe a
person is him/her agent.
if the principal specifically describes the extent of the agent`s powers
in writing or orally and makes him/her a special agent.
when the conduct of the principal causes a third person reasonably to
believe that another has the authority to act for the principal.
13 Helen is a promoter who, prior to forming Bayne Corp., contracted to purchase tileÂ
manufacturing machinery from Owen Machinery Inc. The contract was negotiated and
entered into in the name of Bayne Corp. Subsequently, a certificate of incorporation was
issued to Bayne Corp. Which of the following statements is true of this scenario?
Only Bayne Corp. is liable for the contract with Owen Machinery Inc.
as it received its certificate of incorporation.
Helen would be liable for the contract with Owen Machinery Inc.
If the board of directors of Bayne Corp. issues a suitable resolution,
Helen would be relieved from all liability for the contract with Owen
Machinery Inc.
Since Bayne Corp. was not in existence at the time the contract was
negotiated, the contract is void.
14 Amir bought a television set from Corbel Electronics for $250. Corbel Electronics
delivered a warranty of six years for any manufacturing defect in the product. After three
years of use, the television set caught fire because of a manufacturing defect. The fire
also damaged other goods in Amir`s house. Which of the following statements is most
accurate regarding this scenario?
Amir cannot recover damages for personal injuries under the
warranty from Corbel Electronics.
Amir cannot recover damages for loss in value of the television set.
Amir can claim consequential damages for a breach of warranty
resulting in injury to the property.
Amir`s right to recover damages is barred by the Uniform Commercial
Code`s statute of limitations.
15 If a buyer rejects tender of the goods:
title will be retained with the buyer.
title can be retained if the contract does not
describe the goods.
title will automatically be revested in the seller.
title can be retained only for a limited period of
time.
16 An agent acting at the direction of the principal may render the principal liable if the
agent:
delegates ministerial activities to other employees of the principal.
commits a tort or crime.
is acting on behalf of a nonexistent or incompetent principal.
does not disclose the principal`s name for the duration of the
performance under the contract.
17 Under Article 2 of the Uniform Commercial Code, which of the following
statements illustrates a merchant?
Theodora, a doctor, sells her phone to her friend.
Charles, a chef, sells his car to his neighbor.
Nick, an electronic goods dealer, contracts to sell laptops to
another firm.
Annie, a teacher, contracts to sell her microwave and television
to her friend, Iris.
18 Acceptance of goods occurs when:
a buyer indicates that he or she will take the
goods.
a buyer inspects the goods.
a seller ships the goods to a buyer.
a buyer makes a payment by cash or check
for the goods.
19 Kirby subscribed to purchase 10,000 shares of stock to be issued by Globule Inc.,
an existing corporation. Globule accepted the subscription. The price set forth in the
subscription agreement was $10 per share. When the time came for Kirby to pay the
amount of his subscription, Kirby paid only $6 per share, claiming that such amount
represented the fair value of the shares. Globule delivered the stock certificates to Kirby
for $6 per share. Is Kirby liable to Globule for the other $4 per share?
No, because regardless of what the subscription price was, he cannot
be forced to pay more than the fair market value of the shares.
Yes, because Globule`s stock does not have a par value.
Yes, because regardless of the fair value, a purchaser is liable for
stocks issued for less than the par value.
No, but he is liable for another $2 per share.
20 A partner who wrongfully dissociates:
loses
the right to demand a dissolution.
can participate in the winding up process.
must not be paid the value of his interest for the breach, if the firm
continues.
can ask the court to appoint a receiver on his behalf.
21 Jessica went to Angel Beauty Salon to get a facial. The cosmetic products used by
the beautician contained certain harmful chemicals that reacted with Jessica`s face. This
resulted in several rashes and spots on her face. Which of the following statements is
true of Article 2 of the Uniform Commercial Code in determining the rights and
responsibilities of the parties?
Article 2 of the Uniform Commercial Code would not apply because
Jessica entered into a contract which was predominantly a service
contract.
Article 2 of the Uniform Commercial Code would not apply because
Jessica is not a merchant.
Article 2 of the Uniform Commercial Code would apply because any
contract involving the use of cosmetic products is governed by the
Code.
Article 2 of the Uniform Commercial Code would apply because the
cosmetic products are not Jessica`s tangible personal property.
22 A partner has express authority to do whatever he or she is authorized to do by:
the written articles of partnership.
the written articles of incorporation.
customs and usages of a particular partnership.
customs and usages of similar businesses in a
particular area.
23 According to the LaborÂManagement Relations Act, which of the following is an
example of unfair labor practices by the employer?
Setting excessive initiation fees under a union shop agreement
Coercing an employee to join a union
Coercing an employee in the selection of representatives for
collective bargaining
Establishing or dominating a labor union
24 A public offer by a bidder to purchase a target company`s equity securities directly
from its shareholders at a specified price for a fixed period of time is called a(n) _____.
bond exchange
offer
prospectus
investment
contract
tender offer
25 Rule 10bÂ5 of the Securities Act of 1934 prohibits any person from making a
misstatement or omission of a material fact in connection with the:
mortgage of real estate.
mortgage of constructing a
building.
purchase or sale of any
security.
purchase or sale of a
property.
26 Scott was a member of the board of directors of Buffalo Corporation. Officers of
Buffalo were considering the purchase of new equipment to produce a new product.
The board of directors had not been consulted about the new venture, but Scott found
out about the plan and objected to its implementation. He sought to inspect the
corporate books and records to gain factual information supportive of his position. The
officers refused his inspection request, asserting that Scott had no management function
or power. Under these circumstances, Scott:
is barred from examination of the books and records of the
corporation under the business judgment rule.
has the right to inspect corporate books and records, as information
regarding the corporation and its affairs is essential to perform his
duties.
is barred from examination of the books and records of the
corporation under the doctrine of respondeat superior.
has the right to inspect corporate books only if he is also a majority
shareholder.
27 Natalie injured herself while trimming the sides of her hedge with her electric lawn
mower. In this case, Natalie:
cannot recover under strict liability because she misused the electric
lawn mower.
can recover under strict liability even though her use of the lawn
mower to trim the sides of her hedge was not foreseeable by the
manufacturers.
can recover under strict liability because the lawn mower was by
itself dangerous.
can sue all market manufacturers of electric lawn mowers for
dangerous product designs.
28 An express warranty is created when a seller:
makes an affirmation of fact or promise concerning the goods that
becomes part of the basis of the bargain.
uses descriptive terms as a part of the bargaining process, but the
buyer does not take it into consideration when making the purchase.
sells goods meant for use for ordinary purposes.
avoids using a sample or model as the basis for the contract.
29 Dividends on _____ stock, if not paid in any year, will be payable later when funds
are available.
cumulative preferred
noncumulative preferred
participating preferred
cumulative to the extent
earned
30 According to the registration requirements of the 1933 Act, a prospectus:
should make forecasts of the annual return on a company`s
common stocks.
should include most of the information present in the
registration statement.
should include statements that tout securities.
is a public offer by a bidder to purchase a target company`s
equity securities.
31 An injured buyer can recover consequential damages when a seller breaches a
contract if:
the expenses incurred during storage of goods do not conform to
those called for in the contract.
the buyer purchases goods that have a higher market price than the
contract price in the breached contract.
the goods are not consumer products.
the buyer can show that the damage could not have been prevented
by obtaining substitute goods.
32 A consumer who misuses a product:
can hold the manufacturer liable even if the manufacturer uses a
defense of strict product liability by knowingly assuming an obvious
risk of injury by the consumer.
may not recover under the theory of strict liability.
will recover under the theory of strict liability if the misuse was not
foreseeable.
cannot hold the manufacturer liable for not designing the product so
that it could not be altered even if the danger it created was
foreseeable.
33 The Federal Trade Commission:
requires franchisors to explain the termination, cancellation, and
renewal provisions of the franchise contract.
requires franchisors to disclose the number of franchisees
terminated in the last five years.
prohibits certain contract provisions and franchisee practices
thought to be unfair to franchisors.
prohibits the inclusion of restrictions on franchisees in the
agreement.
34 Esther and Salim are promoters for Kale Inc. Prior to its incorporation, Esther
negotiated several preincorporation contracts with Ian, an investor. She signed each
contract in the name of Kale Inc. Kale subsequently was incorporated, but the Kale
Board of Directors refused to adopt the contracts. Ian later sues Kale, Esther, and Salim
on the contracts. Which of the following statements is true of this case?
Only Kale and Esther are liable as Esther, a promoter of Kale,
negotiated several preincorporation contracts with Ian.
Esther is solely liable as she signed each contract in the name of
Kale Inc.
Kale, Esther, and Salim are liable as they are sued by Ian.
Esther and Salim are liable as they are promoters of Kale Inc.
35 Jack Monroe had bought 200 GE common shares on the New York Stock Exchange
that he could easily sell without any SEC registration. Jack was able to do so because:
it was not a large number of
shares.
he wasn`t selling an insurance
policy.
it was a nonprofit private offering.
he was not an issuer, underwriter,
or dealer.
36 Raunchy, an accountant, has been subpoenaed to testify and produce its working
papers as well as conversations regarding a lawsuit brought against Shyam, one of his
clients. Which of the following statements is true of Raunak`s attempt to avoid having
to present such evidence?
The federal law recognizes the existence of the privileged
communication rule if the accountant is certified.
The privilege of confidentiality is available regarding working papers
since the accountant is deemed to own them.
The privilege of confidentiality is as widely available
as the attorneyclient privilege.
The law does not recognize the existence of the privileged
communication rule between accountants and their clients.
37 A feature which distinguishes commercial agents from distributors and nonagents is
that commercial agents:
generally maintain their own inventory of goods unlike
distributors.
are usually compensated through a straight salary when a
sale is completed.
always bear the financial risk of nonpayment by the
purchaser.
often possess the authority to contract on behalf of their
principals.
38 Jim makes a contract with Ole ta to sell her a 1965 lava lamp, once owned by a
famous artist. Jim later decides that he does not want to sell the lamp to Ole ta. In this
scenario, Ole ta:
cannot get any remedy because the lamp is not a
generic product.
can claim incidental damages.
can compel Jim for specific performance.
can sue Jim for misconduct.
39 Vacancies on the board can be filled:
by appointment by the chief executive officer of a
corporation.
only by a vote of the shareholders.
by appointment by the chairperson of the board.
only by a vote of the corporation`s employees.
40 A buyer has a retail store in Florida and the seller is a manufacturer in California.
If the buyer orders goods from the seller and the goods are shipped
