quiz 4

. According to the Uniform Commercial Code, what is a change, without consent, that modifies the obligation of a party to the instrument? A) An alteration B) An accord C) An accord and satisfaction D) A unilateral modification E) A reformation

A) An alteration

Typically, how are corporate directors chosen? A) By a majority vote of the shareholders. B) By a majority vote of the officers. C) By a two-thirds vote of the shareholders. D) The president appoints them, subject to the advice and consent of the shareholders. E) By a unanimous vote of the shareholders

A) By a majority vote of the shareholders.

. Which of the following is the most common type of agency? A) Expressed agency B) Implied agency C) Apparent agency D) Agency by ratification E) Agency by estoppel

A) Expressed agency

In a limited partnership, who assumes unlimited personal liability for the debts of the partnership? A) General partners B) Limited partners C) Special partners D) General partners, limited partners, and special partners E) General partners and special partners, but not limited partners

A) General partners

. Which of the following is a term for a requirement that a minimum number of directors be present at a meeting for decisions made at the meeting to be valid? A) Quorum B) Simple majority C) Electorate D) Super-majority E) Base

A) Quorum

In which of the following situations would a court likely to pierce the corporate veil? A) Shareholders attempt to commit fraud through a corporation. B) A corporation followed statutory mandates regarding corporate business. C) Shareholders' personal interests and corporate interests are separate. D) A corporation had adequate capital when it initially formed. E) None of the above; because a corporation is a legal entity separate from its owners (i.e., its shareholders), a court cannot pierce the corporate veil in order to impose personal liability on shareholders

A) Shareholders attempt to commit fraud through a corporation.

7. In a dispute between two secured parties with unperfected security interests, which of the following is true? A) The party who attached its interest first will prevail. B) The party who attached its interest second will prevail. C) The parties must divide the proceeds evenly between them. D) The party who loaned the most money on the collateral has priority. E) The party who loaned the least money on the collateral has priority.

A) The party who attached its interest first will prevail.

0A corporation is a ________ corporation in the state in which it is incorporated. A) domestic B) foreign C) multinational D) closely held E) public

A) domestic

. An agency relationship that arises when an individual misrepresents herself as an agent for another party and that party accepts the unauthorized act is an agency by _________. A) ratification B) implication C) estoppel D) default E) agreement

A) ratification

. Which of the following is an agreement by which the debtor agrees to pay a debt even though it could be discharged? A) An admission against interest B) A reaffirmation agreement C) A compromise agreement D) An accord and satisfaction E) A novation

B) A reaffirmation agreement

Which of the following is a document a corporation files with the state explaining its organization? A) Certificate of organization B) Articles of incorporation C) Corporate prospectus D) Certificate of institutionalization E) Corporate filing statement

B) Articles of incorporation

A legal entity formed by issuing stock to investors is a ________. A) cooperative B) corporation C) limited partnership D) limited liability partnership E) general partnership

B) corporation

When a holder presents an instrument in a timely and proper manner but acceptance or payment is refused, the instrument has been ________. A) annulled B) dishonored C) converted D) rescinded E) executed

B) dishonored

A person who contracts with another to do something for him but who is not controlled by the other nor subject to the other's right to control with respect to his physical conduct in the performance of the undertaking is an ________. A) employee B) independent contractor C) employee contractor D) agent by estoppel E) agent by ratification

B) independent contractor

By filing a(n) ________ petition under Chapter 7, creditors can attempt to force into bankruptcy a debtor who is not paying debts as they become due. A) voluntary B) involuntary C) declaratory D) injunctive E) interlocutory

B) involuntary

Which of the following is a doctrine used in the context of the principal/employer-agent/employee relationship? A) post hoc ergo propter hoc B) respondeat superior C) stare decisis D) res judicata E) res ipsa loquitur

B) respondeat superior

When a person decides to go into business on his or her own and is solely responsible for management and profits, a(n) ________ is formed A) S corporation B) sole proprietorship C) single-entity partnership D) sole entrepreneurship E) limited liability company

B) sole proprietorship

Which of the following is a group that comes together for the explicit purpose of financing a specific large project? A) A business trust B) A joint venture C) A syndicate D) A franchise E) An enterprise

C) A syndicate

Which of the following types of paper requires delivery and an endorsement by the holder? A) A bearer instrument B) A qualified instrument C) An order instrument D) A conditional instrument E) A certified instrument

C) An order instrument

Which of the following is a way that a corporation can avoid double taxation? A) By forming a C corporation B) By forming a D corporation C) By forming an S corporation D) By forming an F corporation E) By forming a traditional corporation

C) By forming an S corporation

. ________ corporations generally do not offer stock to the public. A) Alien B) Foreign C) Closely held D) Multinational E) Domestic

C) Closely held

3. ________ is/are responsible for running the day-to-day business of a corporation. A) Investors B) Shareholders C) Officers D) Incorporators E) The board of directors

C) Officers

Which of the following rights give preference to shareholders to purchase shares of a new issue of stock? A) Subrogation B) Primary C) Preemptive D) Selective E) Subscription

C) Preemptive

A corporation may distribute its income to shareholders through ________. A) allocations B) grants C) dividends D) provisions E) allowances

C) dividends

A person in a position of trust and confidence is known as a(n) ________. A) third-party beneficiary B) principal C) fiduciary D) independent contractor E) employer

C) fiduciary

A written document containing the signature of the creator that makes an unconditional promise or order to pay a sum certain in money at either a time certain or on demand is called a ________. A) negated instrument B) promised instrument C) negotiable instrument D) promissory agreement E) negotiable agreement

C) negotiable instrument

Which of the following is not a form of authority upon which an agency relationship can be created? A) Expressed agency B) Implied agency C) Apparent agency D) Agency by rescission E) Agency by ratification

D) Agency by rescission

Decisions of courts in ________ have a significant impact on issues involving matters such as shareholder rights because more than one-half of all publicly traded corporations in the United States are incorporated there. A) New York B) California C) Florida D) Delaware E) New Jersey

D) Delaware

Which of the following is a correct statement regarding law governing the incorporation process and corporate taxation? A) Federal law exclusively governs the incorporation process and corporate taxation. B) Federal law exclusively governs the incorporation process while state law exclusively governs corporate taxation. C) Federal and state law jointly address the incorporation process while federal law exclusively governs corporate taxation. D) Each state has different laws governing the incorporation process and different corporate tax rates. E) All fifty states have adopted uniform laws governing the incorporation process and corporate taxation.

D) Each state has different laws governing the incorporation process and different corporate tax rates

Which of the following is generally true regarding the management of a corporation? A) Shareholders do not participate in corporate management. B) Shareholders elect a board of directors. C) The board of directors selects officers to manage the day-to-day business of the corporation. D) Shareholders do not participate in corporate management, shareholders elect a board of directors, and the board of directors selects officers to manage the day-to-day business of the corporation. E) Shareholders participate in corporate management, elect a board of directors, and select officers to manage the day-to-day business of the corporation.

D) Shareholders do not participate in corporate management, shareholders elect a board of directors, and the board of directors selects officers to manage the day-to-day business of the corporation.

9. Checks are payable ________. A) three business days after they are issued B) three calendar days after they are issued C) forty-eight hours after they are issued D) as soon as they are issued E) at a definite time

D) as soon as they are issued

Owners of ________ stock enjoy preferences with respect to assets and dividends. A) concentrated B) premium C) unconditional D) preferred E) common

D) preferred

. If corporate directors fail to sue when the corporation has been harmed by an individual, another corporation, or a director, individual shareholders can file a ________ on behalf of the corporation. A) default judgment B) class action suit C) shareholder's direct suit D) shareholder's derivative suit E) shareholder's distributive suit

D) shareholder's derivative suit

Which of the following is a false statement regarding a sole proprietorship? A) A sole proprietorship requires few legal formalities. B) A sole proprietor has complete control of the management of the business. C) The sole proprietor keeps all the profits from the business. D) Profits are taxed as the personal income of the sole proprietor. E) A sole proprietor is not personally liable for the obligations of the business.

E) A sole proprietor is not personally liable for the obligations of the business.

9. Which of the following are nondischargeable debts under a Chapter 7 bankruptcy filing? A) Claims of willful or malicious conduct by the debtor that caused injury to another person or property. B) Specific student loans, unless payment of the loans imposes undue hardship on the debtor. C) Debts not discharged in previous bankruptcies. D) Judgments against a debtor for claims resulting from the debtor's drinking and driving. E) All of the above.

E) All of the above.

_______ is/are responsible for managing the business of a corporation. A) Investors B) Shareholders C) Incorporators D) Organizers E) The board of directors

E) The board of directors

. Carl, without Eddie's knowledge, impersonates Eddie and thereby convinces Connie, who has never seen Eddie, to write a check to Eddie. Carl forges Eddie's name on the check and deposits it into his, Carl's, account. Which of the following is true regarding whether Connie will be liable for the amount of the check? A) Under the forgery rule, Connie will be held liable. B) Under the transferor rule, Connie will be held liable. C) Under the payee rule, Connie will be held liable. D) Under the imposter rule, Connie will be held liable. E) Under the fictitious payee rule, Connie will not be held liable

E) Under the fictitious payee rule, Connie will not be held liable.

Farmers who want to pool certain crops together to ensure that they get a high market price for their crops should form a ________. A) business trust B) syndicate C) joint venture D) joint stock company E) cooperative

E) cooperative

Which of the following is true regarding the tort liability of employers for the actions of their employees and independent contractors? A) Employers are generally liable in tort for the actions of their employees, while they are generally not liable for the actions of independent contractors. B) Employers are generally liable in tort for the actions of independent contractors, while they are generally not liable for the actions of their employees. C) Employers are not generally liable in tort for the actions of independent contractors or for the actions of their employees. D) Employers are generally liable in tort for the actions of independent contractors and their employees. E) Employers are generally liable in tort for the actions of independent contractors and their employees, but only if the employer has agreed to assume liability in a written contract with the employee or independent contractor.

Employers are generally liable in tort for the actions of their employees, while they are generally not liable for the actions of independent contractors.

. Agency is generally defined as a relationship between a principal and a third-party beneficiary. A) True B) False

False

14. Members of the board of directors of a corporation are appointed by the chief executive officer of the corporation. A) True B) False

False

6. According to the "responsible person" doctrine, directors and officers are not liable for decisions that harm the corporation if they were acting in good faith at the time of the decision. A) True B) False

False

An ordinary IOU satisfies the "unconditional promise or order to pay" requirement for a negotiable instrument. A) True B) False

False

If a demand instrument is a check, the Uniform Commercial Code states that the check is overdue 30 days after its date. A) True B) False

False

Uniform Commercial Code prohibits bank customers from postdating checks. A) True B) False

False

When a creditor sells a consumer good to a debtor on a credit basis or a creditor extends a loan to a debtor for the purchase of a consumer goods, the security interest does not perfect automatically; instead, the secured party must file a financing statement in order for the security interest to perfect. A) True B) False

False

When express authority is granted for an agent to enter into a contract that is legally required to be in writing, most states require the grant of authority also to be in writing. This requirement is known as the "equitable parity rule." A) True B) False

False

Which of the following is defined as the series of legal steps a secured party takes to protect its rights and collateral from other creditors who wish to have their debts satisfied through the same collateral? A) Perfection B) Procedural due process C) Novation D) Strategic credit management E) Substantive due process

Perfection

Which principle states that if an item is transferred from one person to another, the transferee acquires all the rights that the transferor had in the item? A) Shelter B) Holder C) Holder-in-due-course D) Assignee E) Third-party-beneficiary

Shelter

. Check 21 allows banks to forgo sending original checks as part of the collection or return process and instead send a truncated version. A) True B) False

True

2. A power of attorney is a document that gives an agent the authority to sign legal documents on behalf of the principal. A) True B) False

True

3. Instruments payable to "cash" are considered bearer instruments.

True

6. A holder in due course must take the negotiable instrument in good faith.

True

8. The Uniform Commercial Code imposes liability if the party, or the party's agent, signs the instrument.

True

A limited liability company (LLC) is an unincorporated business that is taxed like a partnership with the limited liability of a corporation. A) True B) False

True

A ________ is a specific draft, drawn by the owner of a checking account, ordering the bank to pay the payee from that drawer's account. A) promissory contract B) certificate of deposit C) note D) check E) time instrument

check

10. Creditors can attempt to repossess property during bankruptcy proceedings.

false

. An agent is authorized to act for and on behalf of the ________. A) fiduciary B) principal C) independent contractor D) third-party beneficiary E) incidental beneficiary

principal

A party who is ________ liable is responsible for paying the amount designated on an instrument if the primarily liable party defaults. A) primarily B) secondarily C) customarily D) statutorily E) strictly

secondarily

The Uniform Commercial Code defines a negotiable instrument as a written document that is signed by the maker or drawer with an unconditional promise or order to pay a sum certain in money on demand or at a time certain to bearer or to order. A) True B) False

true