Question 1
Before a corporation comes into existence:
a. It can be liable as principal
b. It cannot ratify a contract made by the promoter
c. It is illegal to pay promoters for their services
d. It is liable if the board acts to adopt the contract
Question 2
Which of the following is true of a partner's right to compensation?
a. A partner is entitled to salary or wages
b. Compensation is never presumed to be the partner's share of the profits
c. The partners may agree that one or more of them is to be paid a salary which will not be deducted at the end of the year from his profits
d. The partners may agree that one or more of them is to be paid a salary in addition to sharing in profits
Question 3
Under modern approaches to corporation law, the ultra vires doctrine:
a. Is a stringent limitation on the enforceability of contracts entered into by corporations
b. Permits corporate directors to freely prevent enforcement of unattractive contracts
c. Permits the state attorney general to prevent enforcement of corporate contracts that extend beyond the corporation's authorized powers
d. Does not permit the corporation to bring a suit for damages to the corporation against the officers of the corporation
Question 4
In terms of a partnership at will, the partnership may be dissolved:
a. At any time with the consent of both partners
b. At a specific time by any partner
c. At any time by any partner
d. At a specific time with the consent of both partners
Question 5
Partners no longer have fiduciary duties to one another during the winding up process.
a. True
b. False
Question 6
A de facto corporation exists where:
a. The promoters had substantially complied with all mandatory provisions
b. An honest attempt was made to comply with the mandatory provisions of the corporate statue, yet the attempt still failed in some material respect
c. A person holds himself out to be a representative of a corporation, yet no real attempt to incorporate has been made
d. The corporation can be challenged by a third party
Question 7
Under the Model Business Corporation Act, a shareholder may ask a court to dissolve a corporation when:
a. A corporation uses assets for public welfare
b. Directors are in conflict, deadlock cannot be broken by shareholders and the corporation faces ruin
c. Directors are maintaining registered agents without the approval of the shareholders
d. Creditors are acting unfairly or illegally
Question 8
An individual who joins an existing partnership has no liability for partnership debts that arose prior to his joining the partnership.
a. True
b. False
Question 9
Horizontal price fixing:
a. Is also called resale price fixing
b. Can be legally justified if there was a direct agreement between competitors
c. Occurs when the manufacturer gets the retailer to agree to follow the suggested retail price
d. Is an attempt by competitors to interfere with the market and control prices
Question 10
A major purpose of the Bankruptcy Act is:
a. Not to protect debtors against the unfair distribution of the property
b. To protect debtors with protection against the demands for payment by creditors
c. Not to give additional time to debtors to repay their debt
d. To protect debtors from creditors who try to diminish the debtor's assets
Question 11
When a manufacturer sells goods to retail outlets and suggests a retail price, there is no violation of Section 1 of the Sherman Act because:
a. There is no merger of any type
b. There is no contract, combination or conspiracy to fix the price
c. There is no indication of an intent to monopolize
d. There is no exclusive dealing contract
Question 12
The Sherman Act:
a. Makes contracts in restraint of trade and monopolization illegal
b. Does not provide criminal penalties for violations of its provisions
c. Does not give the federal courts any injunctive powers
d. Was basically designed to attack tie-in, exclusive dealing and requirements contracts.
Question 13
Most industrial nations have anti-trust laws.
a. True
b. False
Question 14
When a manufacturer states a "suggested retail price" for their products, this violates Section 1 of the Sherman Act.
a. True
b. False
Question 15
Licensing arrangements are:
a. Per se violations of U.S. anti-trust laws
b. Subject to the rule of reason
c. Subject to strict scrutiny analysis
d. Seldom raise antitrust issues
Question 16
A bankrupt person's estate is administered by:
a. The creditors
b. The creditors' committee
c. The trustee
d. The bankruptcy judge
Question 17
Under the Bankruptcy Act, a debtor may keep both property exempted by state law and property exempted under federal law.
a. True
b. False
Question 18
In a typical predatory-pricing scheme, the predator:
a. Reflects changing conditions in the marketplace affecting the marketability of competitor's goods
b. Reduces the sale price of its product to below cost
c. Grants discriminatory price to a customer who has been offered a lawful, lower price by competitors
d. Furnishes customers with certain services that were not provided by the competitors
Question 19
Tie-in contracts occur when a seller refuses to sell a product to a buyer unless the buyer also purchases another product from the seller.
a. True
b. False
Question 20
All of the following are the rights of shareholders except:
a. Having the right to be informed about their investment
b. Having the right to participate in establishing the framework within which the directors exercise their powers of management
c. Having the right to make laws
d. Having the right to govern property interest
Question 21
A director of a corporation has the individual power to:
a. Establish the price for the sale of shares of stock
b. Elect and remove officers
c. Sell, lease and mortgage assets of the corporation outside the normal course of its business
d. The right to inspect the corporate books and records
Question 22
Directors are agents for the corporation by virtue of that office.
a. True
b. False
Question 23
A corporate officer is never held liable for the illegal behavior of a subordinate.
a. True
b. False
Question 24
Which of the following must exist before a shareholder can bring a derivative action?
a. The shareholder must also be an officer or director
b. The shareholder must have owned shares at the time of the wrong against the corporation
c. A majority of the common shareholders must support the action
d. The shareholder should not be an employee of the firm
Question 25
A corporation is liable for all torts committed by its employees in all of the following ways except:
a. While acting in the course of their employment
b. While acting within the scope of their employment
c. Under the doctrine of ultra vires
d. While acting on the instructions of a high-level manager
Question 26
A corporate officer can be found liable for the illegal behavior of a subordinate when the officer:
a. Knew or should have known of the illegal conduct and failed to take steps to prevent it
b. Knew of the illegal behavior and personally benefited from it
c. Did not know of the illegal behavior, but personally benefited from it
d. Only when the illegal activity concerns insider trading
Question 27
This clause bars the insurer from disputing its liability on the policy on the basis of the insured's misrepresentations if the policy has been in force for a specified period of time.
a. Misstatement of age clause
b. Pro rata clause
c. Incontestability clause
d. Coinsurance clause
Question 28
A warranty deed:
a. Conveys title and guarantees to make good any defects in the title
b. Can only be a deed of specific warranty
c. Is used to cure technical defect in the chain of title to property
d. Conveys to the grantee whatever title the grantor has at the time the deed is executed
Question 29
The coinsurance clause:
a. Requires the insured to insure the property to a specified percentage of its fair market value in order to fully recover the value of partial losses
b. Usually requires that the insured purchase insurance equal to at least 75% of the fair market value
c. Usually requires that the insured purchase insurance equal to at least 60% of the fair market value
d. Requires the insured to pay up to a certain amount each year before the insurer's payment obligation begins
Question 30
Dru and James are married and own real property under a tenancy by the entirety. This means:
a. Upon the death of either, the property passes automatically to the surviving spouse
b. They are tenants in common with the added requirement of marriage
c. Either spouse can transfer property by will if the other is still living
d. The tenancy cannot be severed even in case of a divorce
Question 31
When a tenant attaches personal property to leased premises for the purpose of carrying on his/her business, it is called a(n):
a. Domestic fixture
b. Agricultural fixture
c. Trade fixture
d. Ornamental fixture
Question 32
Property insurance contracts are indemnity contracts.
a. True
b. False
Question 33
The basic land ownership interest in the United States is:
a. Fee simple
b. Life estate
c. Affirmative easement
d. Leasehold
Question 34
Insurance companies do not permit the insurer to seek voluntary settlements of liability claims against the insured.
a. True
b. False
Question 35
Many courts have now extended the implied warranty of habitability made by builder-vendors to include subsequent purchasers.
a. True
b. False
Question 36
Which of the following statements is true of the doctrine of employment-at-will?
a. It requires certain reports to the secretary of labor which should disclose a great deal about the financial situation of the union
b. It has been reinforced in the past 50 years by statues such as Title VII, the NLRA and the ADEA
c. It is based on the laissez-faire values of the 19th century, for it leaves both the employer and employee with maximum freedom
d. It gives workers the right to organize and bargain collectively
Question 37
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(n):
a. Collective bargaining agreement
b. Competitive-hit agreement
c. Hot-cargo agreement
d. Union shop agreement
Question 38
OSHA imposes on employers a general duty to:
a. Prevent workplace hazards that may cause death or serious injury
b. Provide reasonable leave periods for family-related health issues
c. Develop and enforce their own health and safety programs
d. Make the workplace more accommodating to women and families
Question 39
Under the ADA, "reasonable accommodation" does not include:
a. Making a facility readily accessible
b. Restructuring jobs
c. Providing adaptive equipment such as electronic readers
d. Providing quality treatment for drug and alcohol dependency
Question 40
The Labor-Management Reporting and Disclosure Act:
a. Requires employers to disclose the wages of their employees
b. Requires a union to have a constitution and bylaws
c. Requires employers to disclose their meeting minutes taken in any union negotiation
d. Requires that manufacturing workers be informed of hazardous chemicals in the workplace
Question 41
Liens:
a. Always have priority over perfected security interests in collateral
b. Never have priority over perfected security interests in collateral
c. Sometimes have priority over perfected security interests in collateral if they arise by operation of law
d. Always gives a retailer priority over a bona fide purchaser
Question 42
Common law liens:
a. Have not been incorporated into statutes
b. Are generally not recognized today
c. Are generally recognized today
d. Are the only liens which exist today
Question 43
Under the UCC, a fixture is defined as:
a. Bought primarily for business, personal or household use
b. Goods held for sale or lease to be used under contracts of service
c. Goods that are so affixed to real property that they are considered a part of the real property
d. Goods other than inventory, farm products or consumer goods
Question 44
If the creditor has possession of the collateral, the security agreement:
a. Should specify the collateral
b. Need not be in writing
c. Need not specify the collateral
d. Should be in writing
Question 45
An interest in personal property that a creditor obtains to secure payment of an obligation is a security interest.
a. True
b. False
Question 46
A purchase money security interest may be automatically perfected if it covers:
a. Future advances
b. Inventory
c. Consumer goods
d. Proceeds
Question 47
The right of a lienholder to possess goods automatically gives the lienholder the right to immediately sell the property if the charges are not paid.
a. True
b. False
Question 48
Which of the following is NOT true of a foreclosure?
a. It is the process by which any rights of the mortgagor or the current property owner are cut off
b. Foreclosure proceedings are regulated by statute and the sale usually takes place under court supervision
c. Proceeds of a foreclosure sale first pay the costs and the debt, with the balance paid to the debtor
d. The creditor has no right to a surplus, but the debtor has rights to a surplus
Question 49
A surety is a person who is liable for the payment of another person's debt.
a. True
b. False
Question 50
If the proceeds of sale of collateral are not sufficient to satisfy the debt, then the creditor is usually entitled to a:
a. Future advance
b. Deficiency judgment
c. Fixture filing
d. Warehousing arrangement
Question 51
Under this theory, the investor's reliance on the integrity of the market was found to justify a presumption of reliance on the misrepresentation
a. The classical theory of insider trading liability
b. The misappropriation theory of insider trading liability
c. The fraud-on the-market theory
d. The interdependence theory
Question 52
Liability under Rule 10b-5 of the 1934 Act requires scienter.
a. True
b. False
Question 53
A person with inside information must either disclose the information before trading or refrain from trading.
a. True
b. False
Question 54
Under this theory, a person's undisclosed, self-serving use of another's information to purchase or sell securities, in breach of a duty of loyalty and confidentiality, defrauds the individual who provided the information.
a. The classical theory of insider trading liability
b. The misappropriation theory of insider trading liability
c. The fraud-on the- market theory
d. The price disparity theory
Question 55
The most important rule of the 1933 Act is that every transaction in securities must be registered with the SEC or be exempt from registration.
a. True
b. False
Question 56
The Securities Act of 1933:
a. Is concerned primarily with private distributions of securities
b. Regulates the sale of securities while they are passing from the hands of the issuer into the hands of the private investors
c. Requires that issuers selling securities make necessary disclosures at the time the issuer sells the securities to the public
d. Requires that any material information about the issuer be disclosed as it is obtained by the issuer
Question 57
The Safe Harbor Legislation:
a. Aims at giving the bidder and the target company equal opportunities to present their cases to the shareholders
b. Applies only when the target company's equity securities are registered under the 1934 Act
c. Holds companies to be immune to liability as long as they warn the public about factors that might undermine their forecasts
d. Applies to transactions executed on a securities exchange as well as face-to-face transactions
Question 58
An accountant may not delegate his/her duties to someone else without the consent of the client.
a. True
b. False
Question 59
The privity doctrine does not limit recovery from a suit to those with a direct contractual relationship to the accountant.
a. True
b. False
Question 60
Under the Balancing Approach, the third party:
a. Cannot recover unless in privity
b. Cannot recover unless the accountant knew the purpose of reports and the identity of user
c. May recover when the accountant knew audited material would be used
d. May recover if determinative factors make liability desirable