Business Law 12B Final Exam

A hotel owner is not liable for loss or damage to its guests' personal property under any circumstances.​

False

A partnership is when three or more persons agree to carry on as co-owners of a business for profit.

False

A principal is not normally liable for the tort of an agent committed within the scope of the agency or employment.

False

A sole proprietorship is subject to "double taxation."

False

A special power of attorney permits an agent to transact all business for a principal.

False

A will cannot appoint a guardian for minor children.

False

An LLC with two or more owners is always taxed as a corporation.

False

An agent's implied authority cannot be implied by custom.

False

Bankruptcy proceedings are held in state courts.​

False

In the majority of states, debtors may use only federal, not state, exemptions to exempt certain property from the bankruptcy.

False

Real property can not be turned into personal property by any method.​

False

Shareholders elect the corporate officers.

False

The alter-ego theory is used to pierce the corporate veil when the corporation was under capitalized.

False

The franchise agreement is signed between the franchisor and the secretary of state in which the franchise is operating.

False

The right to participation means that corporate officers are entitled to participate in all board of directors' meetings and have a right to be notified of these meetings.

False

A will is a final declaration of how a person desires to have his or her property disposed of after their death.

True

Before filing for bankruptcy, a consumer-debtor must receive credit counseling.

True

Generally, a finder of lost property can claim title to the property against the whole world—exceptthe true owner.

True

Generally, a partnership can own property in the partnership's name.

True

In determining whether a franchisor has acted in good faith when terminating a franchise agreement, the courts usually try to balance the rights of both the franchisor and franchisee.

True

Joint and several liability means that a third party has the option of suing all of the partners together or one or more of the partners separately.

True

The Board of Directors elect the corporate officers.

True

The equal dignity rule requires that if a contract entered into by an agent must be in writing, the agent's authority with the principal must also be in writing.

True

The filing of a petition for bankruptcy will automatically stay most legal actions against the debtor.

True

Who is the party of a trust that manages the trust property?

Trustee

Lima, an agent for Mindwonder Games LLC, executes an unauthorized contract with NOW Marketing Inc. The deal is highly advantageous to Mindwonder, and the company ratifies the contract. The contract is​

Valid

A sole proprietorship is

When one person owns the business

After a partnership determines to terminate the relationship, which is the process called after this point?

Winding Up

Laura writes on a piece of paper, "I owe you $400," signs it, and gives it to Max. This instrument is

not negotiable, because it does not include an express promise to pay.

Barry draws a check payable to "Cash" and presents it to Dollars & Sense store for payment. This instrument is

​a bearer instrument

Donna goes through an involuntary bankruptcy proceeding. An involuntary bankruptcy occurs when​

​a debtor's creditors force the debtor into bankruptcy proceedings

To adjust debt and institute a repayment plan, Diana—who is not a corporation, a partnership, or a family farmer or fisherman—may file a petition in bankruptcy for relief through​

​a repayment plan.

Patty files a petition in bankruptcy. At the moment of filing​

​an automatic stay goes into effect.

Fact Pattern 25-1 Erin draws a check payable to "Foodland" to buy groceries. Refer to Fact Pattern 25-1. Erin's check is most likely​

​an order to pay

To obtain office supplies for Doctors Medical Clinic, Emma executes a draft in favor of Floyd. A draft is

​an unconditional written order to pay money

Ester sells stock in Fast Food Inc. to Gayle. Ester does not hand the stock certificates to Gayle, but gives her the key to a safety-deposit box in Heartland Bank in which the certificates are locked. This is​

​constructive delivery

Ben manages a warehouse and its inventory for Coffee Shops, Inc. To operate this part of the business, Ben's authority can be inferred​

​from the position Ben occupies.

Gary tells his daughter Heidi that she can have his restored 1932 Ford Coupé when he dies, but he does not add this to his will. This is​

​not a gift.

Camille signs an instrument in favor of Donald that states it is "subject to a certain agreement between Camille and Enzo." This instrument is

​not negotiable, because it is made subject to a separate agreement

On behalf of Bubbly Drinks Company, Calvin signs an instrument in which he promises to deliver 100 cases of soda as payment to Dispatch & Delivery, Inc., on April 1. This instrument is

​not negotiable, because soda is not a medium of exchange authorized or adopted by a government as currency.

Ben signs a promissory note for $1,500 in favor of Community College. The note is undated but specifies that it is "payable one month after date." This note is

​not negotiable, because the maturity date cannot be determined from the face of the instrument.

Marcy owns land in North Dakota under which deposits of oil shale are discovered. Marcy sells the rights to the shale to Oil Mining Inc. Once the oil in the rock is removed, it will be considered​

​personal property.

Carly files a petition in bankruptcy. One of the goals of bankruptcy law with respect to a debtor is to​

​provide a fresh start, free from creditors' claims.

A probate court's function is to administer any legal problems surrounding a will.

True

A gift is a voluntary transfer of property ownership for which consideration is given.​

False

The minimum number of directors in California with three shareholders or more is

3

A publicly held corporation is:

A corporation whose shares are publicly traded on a securities market such as the NYSE.

Generally, franchise contracts can be terminated for cause. Which of the following may be included as part of a termination clause in a franchise agreement as good cause.

All of the other answers: Insolvency of the franchisee, Failure to meet specified sales quotas. The death or disability of the franchisee

Which of the following is true?

An LLC is a legal entity apart from their owners

Farmer John is plowing a field on his tractor. He gets into a terrible accident and flips his tractor over and is losing blood at an alarming rate. Although he is pinned to the ground by the tractor, he finds a rock and starts to write out his will in the fender of the tractor. He actually writes out his entire will and signs it at the end. All of his assets are to go to his child, Macdonald. A probate court would

Approve of this will because it is a holographic will

The first document that one must submit to the Secretary of State in order to incorporate an entity is called:

Articles of Incorporation

To form an LLC what must be filed with the secretary of state?

Articles of organization

In a corporation, who is responsible for the overall management of the corporation?

Board of Directors

Who has the responsibility for all policy-making decisions necessary to the management of all corporate affairs?

Board of Directors

The length of time of the franchise between the franchisor and franchisee is set by

Contract

Who runs the daily operations of the corporation.

Corporate Officers

The fiduciary duty of loyalty applies to

Corporate Officers and Directors

The Easter Bunny made a will to give all of his real property to The Elf on a Shelf. This type of gift is called a

Devise

A corporation incorporated in the state of California is considered what type of corporation in California?

Domestic Corporation

Dona owns factory machinery and the tools to service it, as well as office furniture, including computers. Emily owns patents, trademarks that identify the products made under those patents, and stock in the company that sells those products. Personal property includes items owned by

Dona and Emily.

Which one of the following is a fiduciary duty

Due Care

Which of the following is a fiduciary duty of a partner?

Duty of due care

Santa Clause was too busy to make a will and passed away. This is called

Dying Intestate

What factors are NOT usually considered by the court in piercing the corporate veil for a corporation?

Failure to pay corporate taxes.

An inside director is

Is an officer of the corporation who is also a director

Which of the following is the best and most accurate statement of a Durable Power of Attorney?

It allows a person to act on behalf of another. It is valid when someone becomes incapacitated.

An advantage of a "S" corporation is:

It is treated as a partnership for tax purposes.

LLC stands for

Limited Liability Company

Who owes a fiduciary duty to the LLC?

Managers and members of the LLC

Mandel works for Amazon. While driving his employer's vehicle to a call on a customer, Mandel decides to stop at a 7/11 to get a soda and Takis Fuego for himself because he was hungry and thirsty. The store is about 3 blocks off his route. As Mandel approaches the store, he negligently runs into a parked vehicle owned by Chan. Who is liable for the damage that Mandel caused to Chan's vehicle?

Mandel and Amazon

Who can manage an LLC?

Member and manager managed

Owners of a LLC are called

Members

Sumner Redstone was about 90 years old and worth about 3 billion dollars. He was suffering for the initial stages of Alzheimer disease (which is a loss of memory). He had two children, Mutt and Jeff. They lived on the other side of the country but visited when they could and had a good relationship with their father. The original will gave the entire estate to Mutt and Jeff to share it equally. When Sumner was about 88 years old he met Sally Golddigger. Sally was 25 years old. Sally told Sumner how important he was to her. Sally also visited him every day and provided companionship. Sumner changed his will to give all of his assets to Sally. Sumner died at the age of 90. Which of the following is the most accurate?

Mutt and Jeff can have the probate court void the will based upon Undue Influence

Which of the following is NOT true regarding a Directors exercise of due care in performing their duties?

Never take action against the best interests of the employer

A partnership generally is a pass-through entity for income tax purposes.

True

The Old Lady Who Lived In A Shoe had so many children. It was actually 20. She was also married to Humpty Dumpty. When she passed away all of children and her spouse were alive. She died without a will. How is her separate property divided?

One third goes to the surviving spouse and two thirds are divided equally among the children

Which document is used for a LLC to decide how to operate the various aspects of the business?

Operating Agreement

The owners of a corporation are called

Shareholders

Rhett works at Scarlett's Service Station. After work, in the station's restroom, Rhett finds a diamond ring lost by Thalia. Title to the ring belongs to

Thalia

John Goodyear is a partner in a tire store with 4 other partners. He is on the floor and deals with customers. He orally promises that "each tire will be warranted for normal wear for 40,000 miles. Which of the following is true.

The partnership is bound by this promise based upon the concept of implied powers.

Which of the following is not an element of a partnership

There must be a written agreement between the partners to be a legal partnership

The purpose of cumulative voting is

To allow minority shareholders to be represented on the board of directors

Charles Kane was making a will. He had his attorney, Johnnie Cochran type out the will and he signed it. No one else signed the will. Mr. Kane dies with his last words being "Rosebud". Mr. Kane has a wife named Anne Nicole Smith. However, he also has a child named Tori Spelling from a previous marriage. The will states that Tori gets everything and Anne Nicole Smith gets nothing. Which of the following is the most accurate?

Tori and Anne Nichole Smith will each get their intestate share because the will is invalid.

A corporation is liable for the torts committed by its agents or officers within the course and scope of their employment.

True

A debtor must be insolvent to file for bankruptcy relief.

True

A disclosed principal is a principal whose identity is known by a third party with whom an agent contracts on the principal's behalf.

True

A key advantage of a LLC is the owners are generally not personally liable

True

A major disadvantage of the sole proprietorship is that the owner is personally liable for any loss or liability incurred by the sole proprietorship.

True

Roland files for Chapter 7 bankruptcy. After all his assets have been sold and the proceeds distributed among his creditors, Roland's remaining debts, subject to certain exceptions

are discharged.

A franchise is an arrangement in which the owner of _____________________ property licenses others to use it in the selling of goods or services.

copyright trade name trade dress intellectual trademark

What is a corporation called if it has substantially complied with all of the conditions precedent to incorporate.

de jure

Jane signs an instrument using a "J" with a swirl around it. With this mark for a signature, the instrument is

negotiable

Gail owes $5,000 in unpaid taxes. Using the back of an old t-shirt, she executes an instrument for $5,000 that otherwise meets the requirements for negotiability. This instrument is likely

negotiable.

A partnership with no fixed period of duration is called a

partnership at will

The business judgment rule will

protect a corporate officer from liability for a honest mistake of judgment

Fact Pattern 25-1 Erin draws a check payable to "Foodland" to buy groceries. Refer to Fact Pattern 25-1. With respect to Erin's check, Foodland is

the payee

Bud approves on behalf of Cody—but without authorization—a contract with Dick to build a new silo. Cody does not ratify the contract. Later, Dick tries to enforce the deal against Cody. This attempt will be

totally unsuccessful

Flo, an agent for Grover, enters into a contract on Grover's behalf with Hong that must be in writing to be enforceable under the Statute of Frauds. Failure to comply with the equal dignity rule, with respect to this contract, can make the contract voidable at the option of​

​Grover

Rob steals a damaged, broken bike that is parked, unlocked, in a bike rack. He repairs, paints, and replaces parts on the bike until it is like new. The original owner, Sue, then claims it. The bike belongs to​

​Sue because Rob stole it