- Connie, the president of a company that makes paper, has a new interest in the environment. She recently went to a seminar on environmental dangers and has decided to take steps to clean things up. She started at home and was also committed to change things at work. Connie had to face the fact that her company has been cheating and is not in compliance with applicable environmental regulations due to dumping in a nearby river. Her company has never been cited, however, because it employs a very large number of people in the community, including the mayor’s wife and the chief-of-police’s brother.
On her mission to clean things up, Connie has decided to go even further than the law requires and install the very latest environmental protections. When she announced her plan, the chair of the company’s board of directors, Brooke, had a meeting with Connie. Brooke told Connie to analyze the situation carefully because the cost of the additional equipment would mean no dividend to shareholders and no raise for employees. Furthermore, Brooke told Connie that installing all of the new equipment would result in higher prices for the company’s paper products and could bankrupt the company because of foreign competition. Brooke hinted that Connie could be fired if she persisted. Brooke suggested that Connie just be concerned with a minimal standard of ethics. Which of the following would be a stakeholder in the company?
The community only
The shareholders only
Future generations only
The community and shareholders only
The community, shareholders, and future generations
- Which of the following is TRUE regarding the liability in tort of employers for the actions of employees and independent contractors?
Employers are generally liable in tort for the actions of their employees, while they are generally not liable for the actions of independent contractors.
Employers are generally liable in tort for the actions of independent contractors, while they are generally not liable for the actions of employees.
Employers are not generally liable in tort for the actions of independent contractors or for the actions of employees.
Employers are generally liable in tort for the actions of independent contractors and also for the actions of employees.
Employers are generally liable in tort for the actions of independent contractors and the actions of employees, but only if the employer has agreed to be liable in a written contract with the employee or independent contractor.
- Which of the following was the result on appeal in the case of Webster v. Blue Ship Tea Room Inc.—the case in which the plaintiff sued after getting a bone caught in her throat while eating clam chowder?
That the plaintiff could recover based upon the implied warranty of merchantability
That the plaintiff could recover based upon the implied warranty of fitness for a particular purpose
That the plaintiff could recover based on an express warranty
That the plaintiff could not recover because she waited too long in which to sue and also because she was not the direct purchaser of the fish
That the plaintiff could not recover for reasons including that the bone should not have been unexpected
- A partnership in which the partners divide profits and management responsibilities and share unlimited personal liability for the partnership’s debt is called a __________.
limited liability partnership
limited liability company
- A person who contracts with another to do something for him or her but who is not controlled by the other nor subject to the other’s right to control with respect to his or her physical conduct in the performance of the undertaking is a(n) __________.
- Which of the following occurs when a party to a contract transfers his or her rights to a contract to a third party?
- Penny is investigating what she needs to do to legally to open a dog grooming business in her city. Which of the following would govern the business?
State statutes, city ordinances, and model laws
State statutes and city ordinances, but not model laws
- Sally agrees to mow Paul’s yard for $300 for the summer. Paul wishes to assign the contract to his grandmother. Sally objects because Paul’s yard is very small while the grandmother’s yard is over an acre. Which of the following is the correct legal outcome for the dispute between Sally and Paul?
Sally will win because Paul’s attempted assignment would increase the duties to which she agreed.
Sally will win because all assignments are invalid without the obligor’s consent.
Sally will win unless Paul paid her the $300 in advance in which case Paul will win.
Paul will win because he may validly assign the contract without Sally’s consent.
Paul will win so long as he tells Sally about the assignment prior to the time she begins any performance whatsoever.
- Which of the following is FALSE regarding a sole proprietorship?
A sole proprietorship requires few legal formalities.
A sole proprietor has complete control of the management of the business.
The sole proprietor keeps all the profits from the business.
Profits are taxed as the personal income of the sole proprietor.
A sole proprietor is not personally liable for obligations of the business.
- If the plaintiff wants a court order that requires the defendant to fulfill the terms of the contract, the plaintiff is seeking __________.
- Gretchen offers $100 to anyone who can return her lost dog, Sparky. Haley returns the dog and requests the money. Gretchen says that there is no binding contract. Which of the following is TRUE regarding Gretchen’s statement?
Gretchen is incorrect because there is a binding bilateral contract.
Gretchen is incorrect because there is a binding unilateral contract that Haley accepted by performing.
Gretchen is correct because there is no binding bilateral contract.
Gretchen is correct because there is no binding unilateral contract.
Gretchen is correct because Haley acted incorrectly by her manner of attempted acceptance.
- Stewart, the owner of ABC Construction, agreed with Joan, the owner of XYZ Hotel, that he would complete renovations on her upscale hotel on the beach in Florida by October 1. The amount due to Stewart under the contract was $250,000. The contract contained a clause by which Stewart would pay Joan $50,000 for each day he was late on completing the project. Unfortunately, a strong earthquake shook the area, and while the earthquake did not damage the hotel itself, Stewart encountered significant difficulty in getting supplies due to the high demand for building material following the earthquake. Because he believed that traveling, himself, to other states to obtain supplies would be prohibitively expensive, he delayed the project for two weeks while waiting for local stores to have sufficient supplies available. Stewart finished renovations six days late. Joan told Stewart that she owed him nothing but that he owed her $50,000. Stewart told Joan that he was suing for the entire $250,000 because it was not his fault the earthquake delayed matters. Which of the following is the appropriate term for the agreement that Stewart would pay Joan $50,000 for each day he was late in completion?
Mitigated damages term
Liquidated damages clause
Acknowledged damages clause
Approved and acknowledged damages clause
- Which of the following are the two primary kinds of performance?
Partial and significant
Partial and complete
Partial and substantial
Complete and substantial
Complete and significant
- The “public disclosure” test is also known as the __________ test.
- Which of the following is FALSE regarding a limited liability partnership?
A limited liability partnership is considered a separate legal entity.
Limited liability partnerships are fairly new.
The business name must include “Limited Liability Partnership” or an abbreviation in the name.
The parties must file a form with the secretary of the state to create a limited liability partnership.
Each partner pays taxes on his or her share of the income of the business.
- Positive abstractions that capture our sense of what is good or desirable are __________.
- Which of the following is TRUE regarding the mirror-image rule and the UCC?
The mirror-image rule applies under the UCC the same as it is applies under common law.
The mirror-image rule that applies under common law does not apply under the UCC.
The mirror-image rule that applies under the common law applies under the UCC only if a lease is involved.
The mirror-image rule that applies under the common law applies under the UCC only if a sale of goods is involved.
The mirror-image rule under the UCC does not apply to common law.
- Which of the following provides that a portion of a copyrighted work may be reproduced for purposes of criticism, comment, news reporting, teaching, scholarships, and research?
The limited-use doctrine
The copyright-use doctrine
The fair-use doctrine
The trade-use doctrine
None of these because there is no such provision
- __________ are investor-owners of a corporation.
Profit and loss owners
- Which of the following is FALSE regarding trade-secret protection?
Competitors may not legally discover trade secrets by doing reverse engineering.
Competitors may discover secrets by going on public tours of plants and observing the use of the trade secret.
Lawful discovery of a trade secret means there is no longer a trade secret to be protected.
An invention may be considered a trade secret.
A design may be considered a trade secret.
- Mistakes in contracts may be classified as __________.
void and voidable
enforceable and voidable
unilateral and void
mutual and enforceable
unilateral and mutual
- Kitty, who had a love of baking, decided to open her own bakery. She decided that she did not need and did not want to pay for a lawyer to advise her on different forms of ownership. Unfortunately, Kitty had not paid attention in business law class. She proceeded, with little thought, to simply open her business called Kitty’s Baking. Bobby came in to order some cookies for his girlfriend, Bitsy, who was allergic to peanuts. Bobby told Kitty that he needed some cookies for Bitsy, but he explained that Bitsy had allergies to peanuts. Kitty told him not to worry because she would make up a special batch just for him. Kitty had hired some assistants because she was so busy. She told an assistant, Cathy, to make up several batches of cookies for different customers, including Bobby, and to leave out the peanuts in Bobby’s order. Cathy, however, forgot the instruction and proceeded to make Bobby’s cookies with crushed peanuts. Bobby picked up the cookies and gave one to Bitsy in the car while they were on the way to the movie in Bobby’s new car. Bitsy became violently ill, vomited in Bobby’s car, and had to have her stomach pumped. Bobby and Bitsy sought recovery from Kitty who told them that Bitsy’s doctor bill and Bobby’s car-cleaning bill were business debts, that the business was new and not making any money at the moment, and that she had no personal liability. Following the incident involving Bobby and Bitsy, Kitty discussed with her parents her problems with the bakery. Kitty’s parents would like to invest in her business and share in any profits, but they do not want to share in the management responsibilities. What type of business did Kitty initially set up?
A limited liability company
A sole proprietorship
An individual proprietorship
A general company
An S corporation
- The __________ is the supreme law of the land.
United States Constitution
Declaration of Independence
United States Code
Uniform Commercial Code
- Which of the following are types of warranties?
Express and unknown
Implied and understood
Acknowledged and express
Express, implied, and acknowledged
Express and implied, but not acknowledged
- A breaching party’s right to provide conforming goods when nonconforming goods were initially delivered is known as __________.
usage of trade
perfect tender rule
course of dealing
- Heather innocently misrepresented the status of a puppy as being a full-blooded Pomeranian when actually it was a mixed breed. Brad had contracted to purchase the dog, but the problem was discovered prior to his paying for the dog and picking it up. Nevertheless, Brad was very angry and felt that Heather should have been more careful. He said that he planned to rescind the contract and also sue her for damages to punish her and deter others from behaving similarly. Which of the following is true regarding the remedies available to Brad?
Because Heather violated the contract to provide a full-blooded Pomeranian, Brad is entitled to rescind the contract and also to the damages he seeks.
Because Heather violated the contract to provide a full-blooded Pomeranian, Brad is entitled to rescind the contract, but he is not entitled to the damages he seeks.
Because Heather is not guilty of any wrongdoing, Brad is entitled to no remedy, and Heather has an additional 30 days in order to honor the contract.
Because Heather is not guilty of any wrongdoing, Brad is entitled to no remedy, and Heather has an additional 60 days in order to honor the contract.
Because Heather is not guilty of any wrongdoing, Brad is entitled to no remedy, and Heather has an additional 90 days in order to honor the contract.
- Monique was licensed to train massage therapists. A new federal agency, the Aesthetic and Massage Commission, was committed to enforcing the statute that licensed massage therapists must refrain from “any act or conduct indicating bad faith, incompetence, dishonesty, or improper dealing.” Monique, while driving home late one night from a party, was stopped by the police and arrested for driving under the influence of alcohol. She pled guilty to the offense. When the Aesthetic and Massage Commission discovered the offense, the officials of the agency met, decided that Monique might drink on the job, and concluded that she might pose a danger to students. Accordingly, her license to teach massage therapy was revoked. Monique threatened to sue to retain her license and was told by the agency head that she had no right to appeal to court because of the nature of the Aesthetic and Massage Commission, and that, in any event, action by an agency is always upheld. Which of the following is TRUE regarding the statement of the agency that Monique had no right to appeal to court?
The agency representative was wrong, and if Monique cannot resolve the issue within the agency, she may appeal to court for judicial review.
Because the agency was set up to protect the safety of the public, the agency representative is correct unless Monique can establish that she entered into a separate contractual arrangement with the agency when she was hired that gave her the right to appeal decisions to court.
Further information is needed regarding whether the agency was an executive agency or an independent agency because while actions of an independent agency may be appealed to court, actions of an executive agency may not be appealed to court.
Further information is needed regarding whether the agency was an executive agency or an independent agency because while actions of an executive agency may be appealed to court, actions of an independent agency may not be appealed to court.
Because the agency was set up to protect the safety of the public, the agency representative is correct, and Monique has no right to a court action and no right to enter into a contractual agreement with the agency regarding appeal rights.
- Which of the following refers to the right of an offeror to revoke an offer?
The offeror is the “originator of his offer.”
The offeror is the “master of his offer.”
The offeror is the “proponent of his offer.”
The offeror is the “adjudicator of his offer.”
The offeror is the “arbiter of his offer.”
- What was the result in the case in the textbook of Lucy v. Zehmer involving whether allegations of joking involving the sale of land prevented the formation of a contract?
The court ruled that the contract would not be enforced because one of the parties was subjectively joking.
The court ruled that the contract would not be enforced because one of the parties was joking, and a reasonable person should have known that.
The court ruled that the contract would not be enforced because the parties had been drinking although they were not intoxicated.
The court ruled that the agreement would be enforced because of the outward manifestations of agreement.
The court ruled that the contract would be enforced because of what the parties verbally said regardless of whether an objective person would have thought joking was involved.
- Jim, who is a bit eccentric, says that he is fed up with the way a certain employer in his town treats employees and that he is going to sue that employer in an effort to improve matters. Jim also says that he is going to start his case at the appellate court level, skipping over all of those “lesser” judges. Jim says that those justices will surely hear him out and that he will also seek a jury. Although he is not a lawyer, Jim believes that the offenses of the employer are so severe that the justices will appreciate his attempt to make things better for the employees involved. Will Jim get a jury at the appellate court level?
Only if the opposing party agrees
In some states but not in others
Only if he is in federal court
Only if he is in state court
- Which of the following is a person who has a duty to act primarily for another person’s benefit?
- Which of the following is TRUE regarding whether the shape of a product or package may be a trademark?
The shape of a product may be a trademark if it is nonfunctional, but the shape of a package may not be the subject of a trademark.
The shape of a product may be the subject of a trademark if it is functional, but the shape of the package may not be the subject of a trademark.
The shape of a product or package may be a trademark if it is functional.
The shape of a product or the shape of a package may be a trademark if it is nonfunctional.
The shape of a package may be a trademark if it is nonfunctional, but the shape of a product may not be the subject or a trademark.
- Which of the following BEST determines the obligations of sellers/lessors and buyers/lessees?
Terms the parties outline in agreements
Rules outlined by the UCC
Terms the parties outline in agreements, custom, and rules outlined by the UCC
Terms the parties outline in agreements and custom, but not rules outlined by the UCC
- In a limited partnership, which of the following have no part in the management of the business?
General partners, limited partners, and special partners
General and special partners but not limited partners
- Patricia, the president of a company that makes batteries, has a new interest in the environment. She recently went to a seminar on environmental dangers and has decided to take steps to clean things up. She started at home and was also committed to change things at work. Patricia had to face the fact that her company has been cheating and is not in compliance with applicable environmental regulations due to dumping in a nearby river. Her company has never been cited, however, because it employs a very large number of people in the community, including the mayor’s wife and the chief-of-police’s brother.
On her mission to clean things up, Patricia has decided to go even further than the law requires and install the very latest environmental protections. When she announced her plan, the chair of the company’s board of directors, Cindy, had a meeting with Patricia. Cindy told Patricia to analyze the situation carefully because the cost of the additional equipment would mean no dividend to shareholders and no raise for employees. Furthermore, Cindy told Patricia that installing all of the new equipment would result in higher prices for the company’s batteries and could bankrupt the company because of foreign competition. Cindy hinted that Patricia could be fired if she persisted. Cindy suggested that Patricia just be concerned with a minimal standard of ethics. Which of the following is the minimal standard that a business must meet in a consideration of business ethics?
Decisions must be legal.
Decisions must meet the criteria of a follower of the WPH Framework for Business Ethics.
Decisions must meet the requirements of the most important stakeholders.
Decisions must receive a majority vote of acceptance by employees.
Both that decisions must be legal and that decisions receive a majority vote of acceptance by employees.
- Which of the following is FALSE regarding the agency relationship?
It is a consensual relationship.
It may be formed by formal written contracts.
It may usually be formed by informal oral agreements.
It exists when the principal takes action to ask another individual to act on behalf of the principal.
People must be trained in the field involved in order to qualify as agents.
- Barry, an auctioneer, was holding an auction on a Saturday morning. At the beginning of the auction, Barry announced that the auction was being held without reserve. At the auction, Mary saw a great deal on a used table. She bid $20 on it. No one else bid anything. Barry announced that $20 was clearly insufficient for the table, that it was worth much more than that, and that he was taking it out of the auction. Mary sued Barry, attempting to obtain possession of the table. What is the likely result in the lawsuit brought by Mary against Barry for the table?
Barry will win because Mary was simply making an offer that he was free to decline.
Barry will win because the price was clearly insufficient for the table.
Barry will win because no acceptance occurred.
Mary will win because the auction was without reserve, and Barry had agreed to accept the highest bid.
Barry will win because he did not inform attendees in writing that the auction was without reserve.
- Which of the following articles of the Uniform Commercial Code (UCC) governs sales contracts?
- A __________ is a FALSE representation of a material fact that is consciously false and intended to mislead the other party.
negligent misrepresentation, fraudulent misrepresentation, and a scienter
negligent or fraudulent misrepresentation, but not a scienter misrepresentation
- Which of the following do NOT meet the UCC definition of a good?
Neither real estate, corporate stocks, nor copyrights meet the definition of goods
Real estate and corporate stocks do not, but copyrights do meet the definition of good
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