BLAW: Quiz 5 - Structuring a Business (Questions)

C

How does the limitation of liability make a corporation well suited to raising large amounts of capital? a) a corporation's investors are protected against limited losses b) a corporation is subject to greater outside scrutiny c) investors are protected against unlimited losses

B

The share structure decided prior to corporation can refer to the number and (A. selection / B. class) of shares.

A

The exercise of care, diligence, and skill in the performance of their duties (A. is / B. is not) usually enough to reduce the exposure to personal liability that corporate directors face.

A

The principal's duties to an agent are normally set out in the contract. What obligations do these contracts usually contain? a) a duty to reimburse the agent for reasonable expenses associated with carrying out the agency duties b) a duty to ratify all contracts entered into by the agent c) a duty to make full disclosure to the agent d) a duty to give notice to third parties of the principal and agent relationship

D

What constrains a lawyer's ability to place herself in a position where her own interests conflict with the interests of the principal? a) a profit rule b) a trust rule c) a constraint rule d) a conflict rule

C

Which statement best describes franchise agreements in Canada? a) Franchisors owe fiduciary obligations to franchisees. b) Franchises are unregulated in Canada. c) Franchisors owe a duty of good faith and fair dealing to franchisees.

B

Which statement best describes the principal and agent relationship? a) The onus is on the third party to ensure the agent is acting with authority of the principal. b) The principal can be liable even if the agent exceeds his authority. c) The principal is always protected from vicarious liability of an agent because an agent is not an employee. d) The principal will not be bound by contracts in which the agent merely had implied authority to enter into the contract on behalf of the principal.

D

A corporation comes into existence a) upon the shareholders entering into a comprehensive shareholder's agreement b) upon the shareholders carrying on business with the goal of sharing profit c) upon the corporation starting the carry on business d) upon the registration of the required corporate documents with the applicable government agency

C

A sole proprietorship is created when the person operating the business: a) registers the business with the appropriate government agency b) incorporates c) commences to operate the business d) starts to make a profit

B

The (A. common / B. preferred) shares of a corporation typically carry the priority right to the distribution of dividends and the proceeds on dissolution.

B

The directors of a corporation a) are agents of the corporation Incorrect Response b) manage the day to day affairs of the corporation c) are liable for the debts of the corporation d) must own shares in the corporation

B

If a Sole Proprietor breaches a contract a) his potential liability is restricted to what he invested in the business b) the other party may claim against the sole proprietor's personal assets c) his potential liability is limited to the value of the business d) the sole proprietorship can get sued but not the sole proprietor

C

What is the term for a third party with whom an agent conducts business on behalf of a principal? a) agent b) defendant c) outsider

A

A corporation can be funded by (A. equity / B. other corporations) or through debt, i.e., borrowing funds.

B

A corporation may be incorporated federally (A. only / B. or provincially).

A

Although Geraldine's job title at a local car dealership is "sales director," in reality, all car deals must be approved by the dealership's owner. One day, Geraldine exceeded her authority and approved a sales contract when the owner was away. Why might the contract be binding on the dealership? a) because she was acting with apparent authority b) because the owner wasn't there to stop her c) because she had authority

B

An agent (A. sometimes / B. automatically) owes a fiduciary duty to his principal.

B

An agent who has been given permission to "download responsibility for performance" (A. is / B. is not) required to personally perform the obligations arising from the agency relationship.

C

Conducting business with the use of an agent a) is usually the last option of a business owner b) is too risky to be used other than in emergency situations c) is an efficient way for the business owner to conduct business d) requires that the agency agreement be approved by the courts

C

Double taxation, is most likely to affect which of the following business structures? a) sole proprietorship b) partnership c) corporation

B

Ellayne manages a busy law practice as a sole practitioner. Which of the following is a major risk of Ellayne's choice of business form? a) complications arising from the inability to contract for employees b) adverse affects of illness or incapacity c) complications arising from the hiring and firing of employees d) adverse affects of taxation of profits

B

From the perspective of an outsider entering into a contract with a partnership, what is an advantage of contracting with a partnership? a) limited liability of the partners b) joint and several liability of the partners c) perpetual existence of the partnership d) shared decision making of the partners

B

Garnett Fashions Ltd. just terminated its long-term agency relationship with the Higa Agency, which it has retained for many years to negotiate purchase contracts with retail outlets for Garnett's manufactured goods. What advice would you give Garnett at this time? a) that Higa has the onus to inform outsiders that it is no longer Garnett's agent b) that Garnett has the onus to inform outsiders that Higa is no longer its agent c) that outsiders have an obligation to confirm an ongoing agency relationship

C

In order to become an agent for a principal, a person a) must complete an agency certification course b) must be a lawyer c) requires no particular certifications d) must be approved by the courts

B

In what way are an agent's actual authority and an agent's apparent authority similar? a) Both must be expressed in writing. b) Both bind the principal. c) Both are defined by statute.

A

Isabella and Emily both attended a recent seminar for directors regarding corporate governance. The seminar focused on the recent departure of certain courts from the traditional shielding of directors from personal liability where their actions were taken in furtherance of their duties to the company and their conduct was justifiable. What type of liability are Emily and Isabella concerned with? a) liability in tort b) liability in contract c) statutory offence liability d) criminal offence liability

A

It is possible to form an agency relationship by words or actions. a) True b) False

A

Ivan is the sole proprietor of Voyageur Transport. He operates Voyageur with three small ships that transport supplies by the riverways to northern settlements after spring breakup. Which of the following most likely applies with respect to Ivan's use of the name "Voyageur Transport"? a) To avoid fines and penalties, the business name must be registered. b) A business name is irrelevant to an owner's ability to sue for business obligations. c) There are no legal requirements for this form of business organization.

A

Jack sent a cover letter with his new purchasing agent, Kuan Huo, advising suppliers of Kuan's authority to transact purchases under $33 000. How would a court considering a dispute in which a plaintiff alleges Kuan had apparent authority to enter into a $42 000 purchase contract most likely resolve this dispute? a) Deny the third party's claim based on the principal's stated limitation. b) Deny a first-party claim on the grounds it ought to have known of the reasonable limitation. c) Deny the outsider's claim based on the agent's unenduring authority.

D

Joint and several liability will apply to partners: a) only if they agree that it will apply b) only if there is a written partnership agreement c) only if there are three or more partners d) even if they agree that they will share equally the debts of their partnership e) only if their partnership is registered with the appropriate government authority

C

Of the 1000 issued and outstanding common voting shares of Trunda Adventures Corp., Isaac holds 501, Marielle holds 250, and Lorenzo holds the remaining 249.Which of the following rests ONLY with Isaac based on this arrangement? a) the right to ask questions b) the right to attend meetings c) the right to control the company d) the right to introduce motions

A

One aspect of an agent's fiduciary obligation is a) the agent cannot act for two principals that compete with each other b) the agent cannot act for two principals even when these principals do not compete c) the agent cannot have another job d) the agent must pay the principal for the principal's out of pocket expenses

B

Shareholders (A. have the right to/ B. may receive) dividends if the corporation is profitable.

B

Sherif is the general manager of a clothing store. His authority to hire an electrician to repair a faulty light in the store would likely arise from which of the following? a) personal care power b) his implied authority c) his fiduciary duty

C

The process of incorporation requires that the required forms be completed and filed with which of the following? a) The shareholders b) Third parties c) The relevant government body

B

Tom's photographs will be exhibited for two weeks in Natural WildLife Gallery Inc., commencing May 1. The gallery is authorized to sell any of Tom's works, as long as they adhere to the agreed price list. What is the nature of the relationship between these parties? a) employment agreement b) agency by agreement c) retainer agreement

B

Under what circumstances would a court "lift the corporate veil"? a) where the corporation has committed a criminal offence b) where the corporation is a "mere facade" concealing the true facts c) where there are fewer than 50 shareholders d) where the corporation's shares are traded on the stock exchange

B

What is one way that a partnership can come to an end? a) breach of warranty of authority b) one partner giving notice to the others of his intention to dissolve the partnership c) the failure to pay annual registration fees with the appropriate registry d) the sale of any of the partnership assets

B

What is the legal term for the corporate practice of paying the litigation expenses of officers and directors for lawsuits related to corporate affairs? a) compensation b) indemnification c) ratification d) surety

A

What is the most likely reason, from a financial liability perspective, for a corporation to be viewed as the most risk-aversive form of business entity? a) It forms a distinct legal entity, liable for its own obligations. b) Any entity that deals with a corporation may demand personal guarantees. c) It shields directors from negligent acts of management. d) It provides limited liability to the corporation's directors.

B

Which of the following employees is mostly likely an agent on behalf of their employer? a) custodian b) sales clerk c) typist d) maintenance worker

C

Which of the following exemplifies the liability of an agent who acts without authority and contracts with a third party? a) The third party is liable to the principal for breach of warranty of authority. b) The principal is liable to the agent for breach of agency by ratification. c) The agent is liable to the third party for breach of warranty of authority.

B

Which of the following forms of business organization provides the most flexibility but also the greatest liability risk for the owner? a) partnership b) sole proprietorship c) joint venture d) corporation

D

Which of the following is NOT normally a source of personal liability for a director of a corporation? a) unpaid employee wages b) unremitted taxes c) failure to maintain health and safety standards d) contracts entered into by the corporation

B

Which of the following is a characteristic of a franchisor-franchisee relationship? a) fiduciary obligations b) duty of good faith c) a limited partnership d) a limited liability partnership

B

Which of the following is a distinguishing feature of a limited partnership? a) The liability of each partner is limited to their capital contributions. b) The liability of some partners is limited to their capital contributions. c) Limited partners may participate in the day-to-day management of the firm. d) Limited partnerships are only available to professionals.

A

Which of the following is an example of a fiduciary duty owed by an agent to a principal? a) duty to avoid conflicts of interest b) duty of personal performance c) duty to ratify on behalf of the principal

D

Which of the following is considered, as a general rule, to be within the scope of an agent's fiduciary duties? a) full disclosure of acceptance of each secret commission and profit b) absolute prohibition against acting for two principals c) sending a client's file for storage with an outside storage facility d) personal interests supersede the interests of the principal

C

Which of the following is required to establish an agency relationship? a) a wide array of transactions b) dealing with the cornerstone of a business c) a delegation of authority

C

Which of the following is the best description of how the Partnership Act regulates partnerships? a) Partners must register which optional rules under the Act apply b) Partners may vary mandatory rules by agreement c) Partners may vary optional rules by agreement

C

Which of the following may result in a loss of limited liability in a corporation? a) employee misrepresentation of a product b) employee negligence c) fraud on creditors

C

Which of the following occurs when a person represents himself as another's agent, even though he is not, and the purported principal then adopts the acts of the "agent"? a) implicated authority b) actual authority c) agency by ratification

C

Which of the following statements best describes how a partnership comes into existence? a) The partners must sign a written partnership agreement. b) The partners must register the partnership. c) Two or more people carry on business together with a view to profit.

A

Which of the following will be most influenced by restrictions contained in the incorporating documents or by a shareholders' agreement? a) transfer of ownership of shares b) voluntary surrender of legal status c) general application laws d) perpetual existence of the entity

B

Which of the following would a risk manager indicate as being a key point with respect to managing agency relationships? a) Choosing to avoid conflicts of interests is an agent's duty. b) Choose wisely, instruct carefully, and review regularly. c) Fiduciary duties must be specified in the agency agreement. d) Fiduciary duties are automatically owed to the principal.