blaw test 3

It offers limited liability for its shareholders.

Which of the following is an advantage of a corporation?

The covenants of the contract

Which of the following is generally NOT in the introductory paragraph of a contract?

consideration

Which of the following is not required of an agency relationship?

all of the above a. diane, a shoe sales person for a retail store. b. tina, a real estate broker for a large real estate company c. craig, a telephone marketing employee

Which of the following persons is an agent?

Unlike charities, social enterprises can sell stock to investors.

Which of the following statements regarding social enterprises is TRUE?

a cooperation to a LLC

Which of the following transactions would be considered by the IRS to be a taxable sale of assets? Changing the form of business from:

an S corp shareholder

Which of the following would NOT be personally liable for the debts of the business?

members fail to provide adequate capital.

A court may pierce an LLC's veil if

true

A limited liability company, unlike a Subchapter S corporation, can have members that are corporations, partnerships, or nonresident aliens.

false

A partnership is a taxable entity, separate from the partners.

A+ Modeling Agency's lawyer.

A+ Modeling Agency signs a contract with Sandi to do a photo shoot for the local used car dealer's advertising. The contract was most likely written by

false

Alan, a dentist, and his wife Martha, an attorney, can protect their personal assets with limited liability from their business dealings by creating and operating a professional corporation together.

the shares are publicly traded.

All of the following are characteristics of a closely held corporation EXCEPT

general partnership.

All the business forms listed below have limited liability EXCEPT the

false

Ambiguities in contracts are always interpreted in favor of the side that wrote the contract, since they are the ones who know what the provision is supposed to mean.

100

An S Corporation cannot have more than ____ shareholders.

by the conduct of the parties.

An agency relationship can be created

A travel agent files for individual bankruptcy under Chapter 13.

An agency will be terminated in all but which one of the following situations?

true

An agent is always liable for his or her own torts committed within the scope of the agency relationship.

during both working hours and off-duty time.

An agent may not engage in inappropriate behavior that reflects badly on the principal. This rule applies to conduct

false

An agent must obey all instructions of the principal.

good faith

An honest effort to meet both the spirit and letter of the contract is termed

flow-through tax entity.

An organization that does not pay income tax on its profits but passes them through to its owners who pay the tax at their individual rates is called a

true

Any ambiguity in a contract is interpreted against the party who drafted the contract.

false

As a general rule, an agent is liable on contracts entered into on behalf of a fully disclosed principal.

During winding-up

At what stage are the partnership debts paid and the proceeds distributed to the partners?

Delegated his duties

Bob, a house painter, contracts with Ollie to paint a rental house which Ollie owns. Bob hires Rob to take his place as the painter on this contract. What has Bob done?

must indemnify Jim for Maureen's claim.

Cameron, editor of the local newspaper, assigned to Jim the writing of a story about pollution of a nearby stream. Although Jim used reasonable care in gathering and checking his information, unknown to Jim, the story contained a defamatory statement about Maureen. Maureen reads the story and sues Jim for libel. Cameron, who read and published the story

hold Chance but not the company liable.

Chance is a traveling marketing representative for a publishing company. He is an independent contractor and was hired without negligence. One afternoon while driving to a meeting, Chance negligently runs a stop sign and causes an accident. Judy is injured. Judy can

only if they do not have a written partnership agreement that addresses the issue of dispute.

Charles and Becky are partners. If they have a disagreement, the Uniform Partnership Act will govern their respective rights with each other:

may be held liable on the basis of negligent hiring.

Circus Pizza contracted with Art to run its birthday parties. Art's responsibilities included supervising the children and organizing the games. Circus did not investigate Art's background, which included a history of assaulting children. Art assaulted a 7-year-old girl in the restaurant's kitchen during a birthday party. Circus Pizza:

false

Contracts must use formal terminology such as "whereas" and "heretofore" in order to be legal.

true

Cooperatives may be either incorporated or unincorporated businesses.

false

Corporations have a distinct advantage over other forms of business organization in the area of taxation.

true

Corporations have perpetual existence.

Yes, this would be the incorporation of a sole proprietorship.

E. I. James is a writer with a best selling novel. He wishes to create a corporation called "James, Inc." He will be the only shareholder. Can James incorporate his business of writing?

false

Emily runs a children's clothing boutique which takes in local homemade items on a consignment basis. Her standard form contract indicates that Emily has the right to put items on sale without prior approval, but does not specify what effect the sale has on the consignor's payment percentage. Her intent is to keep the same profit she would have had without the sale. She is using ambiguity in her contract to increase her sales and profit.

true

Erica's supervisor told her to arrange for a conference room at the Kelly Inn. Erica has express authority to contract for the room.

all of the above a.words spoken directly to the agent b.conduct c.written words given to one person to give to another person, the agent.

Express authority can be created by:

Farmer Fran.

Farmer's Fortune Insurance has a contract with Farmer Fran to insure her crops against insect damage. The contract does not specify which insects are covered or how much damage is necessary to make a claim. The contract will probably be enforced in favor of

true

Filings are required to form and operate a limited liability partnership

false

Franchise fees can be costly, but they are usually payable over a number of years, after profits are generated from the business.

true

Generally, a joint venture is a partnership created for one limited purpose.

true

Generally, either party to an agency relationship has the power to terminate it at any time.

true

If Denise is hired to work as a cashier, she has the implied authority to do acts reasonably necessary to carry out her job.

true

If apparent authority is present, the principal is liable for even the unauthorized acts of the agent.

true

If partners wish to maintain having protection against personal liability, it is essential to comply with all the technicalities of a limited liability partnership statute.

false

If you have an established relationship with a buyer, you can sell small tracts of land without a written contract.

the party who will be adversely affected by the change.

In a contract modification, the phrase "charged with such amendment" refers to

trust

In its most basic terms, a fiduciary relationship is one of

true

In the case of a typo, a court will reform a contract if there is clear and convincing evidence that the alleged mistake does not actually reflect the true intent of the parties.

An integration clause

Ralph is a professional football player. He signs a valid contract with the Miami Dolphins. Later, he claims that he was also promised free use of the Dolphins' private jet, but this was not in the contract. What type of clause in his contract would prevent him from flying away with this claim?

false

It is unethical to use your lawyer as an excuse for a provision of a contract, such as, "My lawyer insists that I have a liquidated damages clause..."

Frank is entitled to the value in the partnership, but not to become a full partner.

James was a partner in a large firm. He died unexpectedly. His son, Frank, wanted to take over for his father in the partnership and was well qualified to do the work his father had done. Which statement best describes Frank's rights in the partnership if he inherits the interest?

Yes, but only if she discloses the gift to Esday and Esday consents to her keeping the bracelet.

Janet was employed as a sales representative for Esday, Inc. An appreciative customer gave her a diamond bracelet for all her hard work on a complicated contract. Can Janet keep the bracelet?

Jill can only be liable to the amount she initially invested in the business.

Jill was a limited partner in a retail business and was sued by a customer who fell in the store. The customer claimed the business was negligent in caring for its floors. Which statement best describes Jill's potential liability?

Jill can only be liable to the amount of her investment.

Jill was a limited partner in a retail business that was sued by a customer who fell in the store. The customer claimed the business was negligent in caring for its floors. Which statement best describes Jill's potential liability?

Since Jim is a gratuitous agent, he will only be liable for the loss of the car if his conduct constitutes gross negligence.

Jim agreed to show Donna's car to a potential buyer. Donna was not able to be home since she had to attend a meeting. After showing the car, Jim left the keys in it and the car was stolen. Which statement is correct?

John is Tim's principal.

John hired Tim to sell his house. Which statement is correct?

john is tims principle

John hired Tim to sell his house. Which statement is correct?

true

Jolene hired Lacy to find a buyer for her house. Adam was interested in buying the house. If both Jolene and Adam agree, Lacy, a real estate agent, may represent both parties.

true

Larry decided to relocate to Germany. Larry hired Happy Homes, Inc. to find a buyer and contract for the sale of his house in the U.S. The agency relationship between Larry and Happy Homes must be evidenced with a written agreement.

false

Lawyers prefer to negotiate touchy subjects as they arise rather than address them at the beginning of a relationship.

false

Limited liability is a major advantage of a partnership as compared to a corporation.

a. Mohammad cannot share with Ceries the confidential information he knows about Estay's new product because he has a duty not to disclose confidential information he acquired during the agency.

Mohammad was an employee in the new product development department of Estay Inc. Mohammad was directly involved in the development of a new product that Estay intended to launch in 6 months. Estay took great care to keep information concerning the new product a secret. Ceries, Inc., a competitor of Estay, persuaded Mohammad to leave Estay to direct Ceries' marketing department. Which statement is correct?

The contract is void since the agency terminated May 29.

Mrs. O'Leary hired Jenna to sell her house in Michigan. She executed a power of attorney in favor of Jenna authorizing her to do "anything and everything associated with the sale of real estate, acting as a prudent person." On May 30, Jenna finalized a deal with Brandon for the purchase of the house. Brandon and Jenna signed the real estate contract that day. Jenna learned the next day that Mrs. O'Leary had died May 29.

ambiguity.

Nate works as a carnival barker. His employment contract specifies that he can be fired if he "loses his voice." This is an example of

Nikki has breached a fiduciary duty to HBR since she is competing with HBR.

Nikki was an tax accountant with HBR Accounting. Nikki decided to do some tax consulting in the evenings and on weekends. HBR is unaware of Nikki's consulting work. Which statement is correct?

can buy the business only with Pamela's permission.

Pamela hired Lena to sell her business. Lena

reform the contract.

Rich and Archie sign an agreement in which Archie agrees to deliver ten cases of champagne in 5 days. The parties negotiated and meant to say in the written agreement, delivery in 50 days. If the evidence is clear that the two parties intended to agree to 50 days, the courts will probably

cooperative

Seventy farmers in Morgan County joined together to gain the advantages of purchasing seed and fertilizer in bulk and of obtaining better prices when distributing and selling their crops. These farmers have formed a:

true

Some contracting parties are intentionally vague in contract terms.

gratuitous agent.

Someone who is not paid for performing duties is a(n)

give prospective franchisees a franchise disclosure document at least 14 business days prior to the signing of a contract or payment of any money.

The Federal Trade Commission requires franchisors to

false

The Federal Trade Commission will not allow the sale of franchises that are unfair to the franchisee.

boilerplate.

Standard provisions in a contract that are often listed under the heading "Miscellaneous" are called

representations and warranties.

Statements of fact about the past and present are called

false

To be a close corporation, the business must be small, with no more than 20 owners and no more than $500,000 in gross annual income.

all of the above -shares are easily transferable to another person. -perpetual existence. -it is easier to raise funds.

The advantage of a corporation over a partnership is:

its ability to have partnerships and corporations invest as shareholders.

The advantage to an S corporation is

true

The bankruptcy of an agent automatically terminates an agency relationship.

ambiguity.

When a provision in a contract is unclear by accident, it is a case of

franchise

Which of the following forms of organization is a compromise between starting one's own business as an entrepreneur and working for someone else as an employee?

All of the above are evidence of a partnership. a.An agreement to share profits of a business. b.Referring to each other as "partners." c.Agreeing to share in the business's losses.

Which of the following would be evidence that two people intend to be partners?

by verbally agreeing to the changes and shaking hands on the deal

Which of the following is NOT one of the three ways to amend a written contract?

choice of forum

Which of the following is a standard provision frequently found in contracts?

a limited liability company.

The business form that is taxed as a partnership and gives all owners limited liability, is:

a limited liability company.

The business form that offers the limited liability of a corporation and the tax status of a flow-through entity is

true

The case of Apcar v. Gaus illustrates that it is essential to comply with all the technicalities of a limited liability partnership statute.

was first known and used by the Greeks and then spread through the Romans to England.

The corporate form of business

apparent authority

The doctrine of estoppel would most often apply in situations of:

corporation.

The form of business ownership that is the MOST easily transferable is the

its treatment of shareholders for income taxation purposes.

The importance of a Subchapter S corporation is:

false

The most common form of business ownership is the corporation.

respondent superior.

The principle of liability stating that an employer is liable for a physical tort committed by an employee acting within the scope of employment and a nonphysical tort of an employee acting with authority is called

should not hire Elton. Tom has a duty to obey Esday's instructions only if they are legal and ethical.

Tom, the production manager at Esday, was told by his supervisor to hire Elton, a 15- year-old, to operate an industrial machine. Hiring the 15-year-old violates the child labor laws. Tom:

The Federal Trade Commission (FTC)

What federal agency requires that the seller of a franchise give the potential buyer Franchise Disclosure Document (FDD) and audited financial statements?

a disruptive, unexpected occurrence for which neither party is to blame that prevents one or both parties from complying with a contract

What is a force majeure event?

false

You cannot be held liable for the actions of your agents if the agents are violating your instructions.

false

You should hire a lawyer to review any legal papers you have to sign, especially such papers as lease agreements or car purchases.