BLAW - Exam 4

Two cars, driven by Fred and Barney, collide. At trial, the jury determines that the accident was 90 percent Fred's fault and 10 percent Barney's fault. Barney's losses total $100,000. If he lives in a state that uses contributory negligence, Barney will recover: A) $0 B) $10,000 C) $50,000 D) $90,000 E) $100,000

A) $0

Decal Corp. incurred substantial operating losses for the past three years, Unable to meet its current obligations, Decal filed a petition of reorganization under Chapter 11 of the federal Bankruptcy Code. Which of the following statements is correct? A) A creditors' committee, if appointed, will consist of unsecured creditors B) The court must appoint a trustee to manage Decal's affairs C) Decal may continue in business only with the approval of a trustee D) The creditors' committee must select a trustee to manage Decal's affairs

A) A creditors' committee, if appointed, will consist of unsecured creditors

3. A corporate charter is filed with: A) A state's Secretary of State office. B) A state's Treasury and/or Revenue Division. C) The United States Department of Commerce. D) All the above.

A) A state's Secretary of State office.

16. The officers of a corporation are: A) Chosen by the board of directors. B) Appointed by the president of the company. C) Elected by shareholders. D) Appointed by the Secretary of State.

A) Chosen by the board of directors.

6. In incorporating E-prise, the promoter gave an incorrect ZIP Code for the registered agent. All of the other requirements for incorporation were met. E-prise is a(n): A) De jure corporation. B) De facto corporation. C) Corporation by estoppel. D) Indemnified corporation.

A) De jure corporation.

Wampo files a Chapter 7 petition for a discharge in bankruptcy. Wampo may be denied a discharge if Wampo: A) Fails to explain a loss of assets B) Fails to list a debt C) Owes back taxes to the IRS D) Owes child support payments

A) Fails to explain a loss of assets

17. Under most state statutes, a corporation may: A) Include in its charter a provision indemnifying directors unless they have engaged in intentional misconduct or bad faith. B) Include in its charter a provision indemnifying directors under any circumstances in the conduct of their duties for the corporation. C) Not include in its charter a provision indemnifying directors who engage in negligent conduct of their duties. D) Not include in its charter any provisions regarding indemnification of directors.

A) Include in its charter a provision indemnifying directors unless they have engaged in intentional misconduct or bad faith.

14. Fashions, Inc. has 12 shareholders. There is no shareholder agreement concerning the board of directors. The company is subject to the Model Act. How many directors is Fashions, Inc. required to have? A) None. B) One. C) Two. D) Five.

A) None.

11. Incorporation protects: A) Shareholders against personal liability for the debts of the company. B) Anyone involved in management of the business against personal liability for wrongdoing. C) The public from wrongdoing by either the shareholders or the management of the corporation. D) All the above are correct.

A) Shareholders against personal liability for the debts of the company.

9. Corporate stock can be divided into categories called ________, which can be further divided into ________. A) Authorized shares, classes. B) Classes, series. C) Equity, assets. D) Debentures, classes.

B) Classes, series.

13. Mike is planning on incorporating his business in the state of Delaware. The corporate name of Mike's business must be different from: A) That of any corporation that already exists in Delaware. B) That of any limited liability company in Delaware. C) The name of any sole proprietorship in Delaware. D) All of the above.

A) That of any corporation that already exists in Delaware.

Grass Co. is in bankruptcy proceedings under Chapter 11. ___________________ serves as trustee. In the case of ________________ the court can approve a plan of reorganization over the objections of the creditors. A) The debtor in possession, a cramdown B) A person appointed by the U.S. Trustee, fraud C) The head of the creditors' committee, reaffirmation D) The U.S. Trustee, a voidable preference

A) The debtor in possession, a cramdown

Which of the following factors is least important in determining whether a manufacturer is strictly liable in tort for a defective product? A) The negligence of the manufacturer B) The contributory negligence of the plaintiff C) Modifications to the product by the wholesaler D) Whether the product caused injuries

A) The negligence of the manufacturer

23. What is meant by the term "piercing the corporate veil"? A) Corporate directors and/or officers may be held personally liable to a person damaged by an act of the corporation. B) Corporate shareholders may be held personally liable to a person damaged by an act of the corporation. C) Both of the above. D) None of the above.

B) Corporate shareholders may be held personally liable to a person damaged by an act of the corporation.

7. Preemptive rights are: A) Not legal in the majority of states. B) Designed to prevent dilution of a shareholder's ownership in the company. C) Required to be offered to shareholders by the Model Act. D) Designed to indemnify managers who act in good faith.

B) Designed to prevent dilution of a shareholder's ownership in the company.

Destiny Manufacturing, Inc., is incorporated under the laws of Nevada. Its principal place of business is in California, and it has permanent sales offices in several other states. Under the circumstances, which of the following is correct? A) California may validly demand that Destiny incorporate under the laws of the state of California B) Destiny must obtain a certificate of authority to transact business in California and the other states in which it does business C) Destiny is a foreign corporation in California, but not in the other states D) California may prevent Destiny from operating as a corporation if the laws of California differ regarding organization and conduct of the corporation's internal affairs

B) Destiny must obtain a certificate of authority to transact business in California and the other states in which it does business

19. MegaCorp is incorporated under Delaware law. It is registered to do business in New York. Legally, in New York MegaCorp is known as what kind of corporation? A) Domestic. B) Foreign. C) Alien. D) Cumulative.

B) Foreign.

Randy works for a vending machine company. One morning, he fills up an empty vending machine that is on the third floor of an office building. Later that day, Mark buys a can of Pepsi from that machine. He takes the full can to a nearby balcony and drops it three floors onto Carl, a coworker who recently started dating Mark's ex-girlfriend. Carl falls unconscious. Which of the following can be considered a proximate cause of Carl's injuries? A) Randy B) Mark C) Both Randy and Mark D) None of these

B) Mark

20. MegaCorp occasionally sells products in Michigan. It does not have an office in that state and does not advertise in Michigan. The company's marketing representatives are based in New York but do travel to Michigan once a year to attend a trade show. Which statement is correct? A)MegaCorp must register in Michigan because its sales representatives attend a trade show in Michigan. B) MegaCorp is not required to register in Michigan because it does not have an ongoing presence in Michigan. C) MegaCorp must register in Michigan because its actions qualify as doing business. D) Whether MegaCorp has to register in Michigan depends on where its shareholders reside.

B) MegaCorp is not required to register in Michigan because it does not have an ongoing presence in Michigan.

Tommie, a six-year-old child, was seriously injured when he stuck a fork into an electrical outlet. His parents sued the restaurant where the incident occurred, claiming it should have had child protective guards on the outlets. Whether the restaurant is liable will be depend on if: A) This is negligence per se B) The accident was reasonably foreseeable C) Research shows it is likely for a child to commit such an act D) This is an ultra hazardous activity

B) The accident was reasonably foreseeable

Spike owes Tenny Olympic Winners, Inc, $200,000. A court awards Tenny's a judgement in the amount of the debt. To satisfy the judgment, Spike's home is sold at public auction for $150,000. The state homestead exemption is $50,000. Tenny's gets: A) Nothing B) $50,000 C) $100,000 D) $150,000

C) $100,000

A corporate stockholder is entitled to which of the following rights? A) Elect officers B) Receive annual dividends C) Approve dissolution D) Prevent corporate borrowing

C) Approve dissolution

24. The executives of Jornaginn Corporation have decided they need to sell 50,000 additional shares of stock to finance their expansion plans. The executives: A) Cannot sell that many shares unless they were authorized initially in the corporate charter. B) Can sell as many shares as the market will bear. C) Are limited by the number of shares authorized in the corporate charter, but this number can be increased by amending the charter and paying a fee. D) Can sell the shares only if the shares have a par value which is close to the current market price.

C) Are limited by the number of shares authorized in the corporate charter, but this number can be increased by amending the charter and paying a fee.

Participating preferred stockholders: A) Only receive payment after other preferred shareholders have been paid B) Only receive payment after common shareholders have been paid C) Are treated like both a preferred shareholder and a common shareholder D) Receive all their payments before all other shareholders

C) Are treated like both a preferred shareholder and a common shareholder

Laura, a brain surgeon, committed a negligent act when she ran a red light and injured Randy, a pedestrian crossing the street. Randy was a mentally impaired adult. A) The "Reasonable Person" standard doe snot apply to Rand since he is mentally impaired B) Laura will be held to a higher standard of conduct than Randy given her superior intelligence C) Both Laura's and Randy's conduct will be based on the "Reasonable Person" standard D) The "Reasonable Person" standard does not apply to Laura nor Randy given their respective degrees of extreme intelligence (one high and one low)

C) Both Laura's and Randy's conduct will be based on the "Reasonable Person" standard

Randy works for a vending machine company. One morning, he fills up an empty vending machine that is on the third floor of an office building. Later that day, Mark buys a can of Pepsi from that machine. He takes the full can to a nearby balcony and drops it three floors onto Carl, a coworker who recently started dating Mark's ex-girlfriend. Carl falls unconscious. Which of the following can be considered a factual cause of Carl's injuries? A) Randy B) Mark C) Both Randy and Mark D) None of these

C) Both Randy and Mark

10. Once a provision is in the corporate charter, it can only be changed by: A) A vote of the shareholders. B) Filing an amendment with the Secretary of State. C) Both of the above are necessary to change a corporate charter. D) Neither a nor b is necessary to change a corporate charter. The board of directors merely needs to file a change of charter form.

C) Both of the above are necessary to change a corporate charter.

Krumy is a debtor in possession which means: A) The property he possesses is exempt from creditor claims B) No property may be discharged until all the secured creditors are paid C) He continue to operate the business while in bankruptcy and also developed a plan for reorganization D) He has priority of claims over business property than personal property

C) He continue to operate the business while in bankruptcy and also developed a plan for reorganization

Zack lives in a state that prohibits factory laborers from working more than 12 hours in any 24-hour period. The state legislature passed the law to cut down on accidents caused by fatigued workers. Ignoring the law, Zack makes his factory employees put in 14-hour days. Eventually, a worker at the end of a long shift makes a mistake and severely injuries a coworker. The injured worker sues Zack. Which of the following terms will be most relevant to the case? A) Res Ipsa Loquitur B) Assumption of the risk C) Negligence per se D) Strict Liability

C) Negligence per se

25. Wizardry Corporation's purpose clause in its charter states, "To operate a home-cleaning service business." After a few years of successful operation, Wizardry is offered the challenge of landscaping a neighboring business. If Wizardry accepts the offer, it would be violating its charter under: A) The de jure doctrine. B) The de facto doctrine. C) The ultra vires doctrine. D) An estoppel theory.

C) The ultra vires doctrine.

4. MegaCorp purchased 10,000 shares of its own stock that had previously been owned by private investors. The stock MegaCorp repurchased is called: A) Authorized and unissued. B) Authorized and issued. C) Treasury stock. D) Repurchased stock.

C) Treasury stock.

Rolf and Louise make down payments on goods to be delivered from ABC Publishing company. Before the goods are delivered, ABC files for Bankruptcy. Besides consumers like Rolf and Louise, ABC owes wages to its employees and taxes to the government. In what order will the debts be paid? A) Consumer deposits, unpaid wages, taxes B) Taxes, consumer deposits, unpaid wages C) Unpaid wages, consumer deposits, taxes D) Unpaid wages, taxes, consumer deposits

C) Unpaid wages, consumer deposits, taxes

Two cars, driven by Fred and Barney, collide. At trial, the jury determines that the accident was 90 percent Fred's fault and 10 percent Barney's fault. Barney's losses total $100,000. If Barney lives in a state that follows comparative negligence, Barney will recover: A) $0 B) $10,000 C) $50,000 D) $90,000 E) $100,000

D) $90,000

Which of the following acts resulting in injury would be negligence per se? A) Janet driving 40 MPH over the posted speed limit B) Ted keeping explosives in his private, locked garage without complying with state law regulating the storage of such materials C) A retailer selling glue containing benzene to a 14-year-old in violation of state law D) All of the above acts are negligence per se

D) All of the above acts are negligence per se

22. Hank owns 100 shares of cumulative preferred stock in Wayside Transport, Inc. Kelsey owns 50 non-cumulative preferred shares, and Oleg owns 120 shares of common stock. Wayside does not pay dividends in 2007. In 2009: A) Hank and Kelsey must receive their 2009 dividends before Oleg is paid any 2009 dividends. B) Oleg cannot receive any 2009 dividends until Hank is paid for the 2007 dividends. C) Kelsey cannot receive the dividends Wayside could not afford to pay in 2007. She will just lose them. D) All of the above.

D) All of the above.

8. Defining a corporation with such information as the corporate name, the number and type of authorized shares of stock, identification of the purpose and the agent, is done through the: A) Charter. B) Articles of incorporation. C) Certificate of organization. D) All of the above. All of these terms are used to

D) All of the above. All of these terms are used to

18. Which of the following statements is correct? A) Bonds are long-term debt secured by company assets. B) Debentures are long-term unsecured debt. C) Notes are short-term debt and may be secured or unsecured. D) All the above are correct.

D) All the above are correct.

Which of the following statements is/are true? A) Shareholders can amend the bylaws B) Directors can amend the bylaws C) Both shareholders and directors must approve any amendment to the bylaws D) Both A and B

D) Both A and B

Lupo files a bankruptcy petition under Chapter 7 to have his debts discharged. The debts most likely to be discharged are claims for: A) Alimony and child support B) Back taxes accruing within three years before the petition was filed C) Certain IRS fines and penalties payable to the government D) Business agency fees and contractor services

D) Business agency fees and contractor services

1. Laurie is incorporating her business. Laurie's home state is Wisconsin. Business will be conducted in California, Michigan, Pennsylvania, and Virginia. Laurie: A) Must incorporate the business in Wisconsin, the home state. B) Must incorporate the business in Wisconsin, California, Michigan, Pennsylvania and Virginia. C) Must incorporate in Delaware. D) Can incorporate the business in any state.

D) Can incorporate the business in any state.

5. In Delaware, lawsuits involving corporations are tried in a special court called: A) Corporate court. B) CEO's court. C) Common court. D) Chancery court.

D) Chancery court.

A voluntary petition filed under the liquidation provisions of Chapter 7 of the federal Bankruptcy Code: A) Is not available to corporation unless it has previously filed a petition under the reorganization provisions of Chapter 11 of the Code B) Automatically stays collection actions against the debtor except by secured creditors C) Will be dismissed unless the debtor has 12 or more unsecured creditors whose claims total at least $5,000 D) Does not require the debtor to show that the debtor's liabilities exceed the fair market value of assets

D) Does not require the debtor to show that the debtor's liabilities exceed the fair market value of assets

Dale is in bankruptcy proceedings under Chapter 13. Which of the following statements is true? A) His debtors must have filed an involuntary petition B) His unsecured creditors will be worse off than if he had filed under Chapter 7 C) All of his debts are discharged as soon as the court approves his plan D) His creditors have an opportunity to voice objections to his plan

D) His creditors have an opportunity to voice objections to his plan

Waldo was driving his truck when a board fell out of the truck bed and onto the road. Louise, who was driving behind Waldo's truck, tried to avoid the board, swerved and struck a telephone pole, causing her severe injuries. Which of the following is correct? A) Waldo is strictly liable to Louise for her injuries B) Waldo was not negligent in allowing the board to fall out of his truck C) Waldo is engaging in ultra hazardous activity D) In a comparative negligence state, the actions of Waldo and Louise will be weighed to determine liability

D) In a comparative negligence state, the actions of Waldo and Louise will be weighed to determine liability

Unger owes a total of $50,000 to eight unsecured creditors and one fully secured creditor. Quincy is one of the unsecured creditors and is owed $6,000. Quincy has filed a petition against Unger under the liquidation provisions of Chapter 7 of the federal Bankruptcy Code. Unger has been unable to pay debts as they become due. Unger's liabilities exceed Unger's assets. Unger has filed papers opposing the bankruptcy petition. Which of the following statements regarding Quincy's petition is correct? A) It will be dismissed because the secured creditor failed to join in the filing of the petition B) It will be dismissed because three unsecured creditors must join in the filing of the petition C) It will be granted because Unger's liabilities exceed Unger's assets D) It will be granted because Unger is unable to pay Unger's debts as they become due

D) It will be granted because Unger is unable to pay Unger's debts as they become due

21. MegaCorp is incorporated in the state of Delaware and is registered only in Delaware. Jolene purchased a MegaCorp product from a company's sales representative following a presentation in Michigan. Jolene was seriously injured by the product in Michigan. Under the Model Act, if Jolene sues in Michigan, can MegaCorp defend the suit there? A) MegaCorp may only defend against a lawsuit in Michigan if it first registers by paying back fees, taxes, and penalties. B) Yes, MegaCorp can bring or defend against a lawsuit in any state regardless of whether the corporation is registered to business in that state. C) Yes, MegaCorp can defend against a lawsuit in Michigan regardless of whether MegaCorp is registered to do business in that state. D) No. Jolene must sue and MegaCorp may defend a lawsuit only in Delaware.

D) No. Jolene must sue and MegaCorp may defend a lawsuit only in Delaware.

12. The directors of MegaCorp learn that an outsider is planning on buying enough voting stock to get herself elected to the board of directors. MegaCorp, which has cumulative voting, quickly puts together a vote of shareholders to eliminate the company's cumulative voting procedure. The shareholders vote to do away with cumulative voting. The outsider, Dawn, who wanted to get herself elected to MegaCorp's board, claims that the company has committed an illegal act. Is she right? A) Yes. The United States Supreme Court has ruled that a publicly held corporation that purposefully sets about to eliminate cumulative voting to prevent a person from getting herself elected to the board has acted illegally. B) Yes, but only if the company is incorporated in a state that has adopted the Model Act. C) No, provided the company did not change its cumulative voting provision solely for the purpose of preventing a particular person from taking advantage of that right. D) No. Under the Model Act, regardless of MegaCorp's motives, it had the right to act as it did.

D) No. Under the Model Act, regardless of MegaCorp's motives, it had the right to act as it did.

Generally, a corporation's articles of incorporation must include all of the following except the: A) Name of the corporation's registered agent B) Name of each incorporator C) Number of authorized shares D) Quorum requirements

D) Quorum requirements

A plaintiff, representing the estate of a deceased who died in a commercial airline crash, sues the airline for negligence but has not direct proof that the defendant airline behaved unreasonably because the plane was lost at sea. Which of the following is most likely to help the plaintiff? A) Stare Decisis B) Res Judicata C) Mens Rea D) Res Ipsa Loquitur

D) Res Ipsa Loquitur

15. Fashions, Inc. has 12 shareholders. The company is subject to the Model Act. What officers is Fashions, Inc. required to have? A) A president, secretary, and treasurer. B) A president and a secretary, and they can be the same person. C) A president, at least one vice-president, a secretary, and a chief financial officer. D) Whatever officers are described in the corporate bylaws

D) Whatever officers are described in the corporate bylaws

2. Carey decided to incorporate her business under the name yStar Inc. Before yStar was incorporated, Carey signed a contract in the name of yStar, Inc. to have some office space remodeled. Which statement is correct? A) yStar is liable on the contract because the contract was signed in its name. B) yStar becomes liable on the contract as soon as it is incorporated. C) yStar is liable on the contract if the contractor knows that the corporation does not yet exist. D) yStar will be liable on the contract only if the corporation adopts the contract.

D) yStar will be liable on the contract only if the corporation adopts the contract.