Legal Exam 3

Partnership

A business in which two or more persons combine their assets and skills

involuntary bankruptcy

An involuntary bankruptcy occurs when the debtor's creditors force the debtor into bankruptcy proceedings. An involuntary case cannot be filed against a charitable institution or a farmer

As a director and officer of Max Transport, Inc., Max would most likely be considered to have breached his duty of loyalty if he: a. suggests to the other members of the board that the company should purchase a new line of trucks. b. personally takes advantage of a business opportunity that the officers and directors of Max Transport voted against. c. buys stock in Arnold's Transport, Inc., a competing trucking firm. d. becomes a director of CineMax, a chain of multiplex theaters.

C

Bee Hive Honey, LLC's members include Chad, Dolores, and others. For purposes of suing and being sued, Bee Hive Honey is a. an aggregate of Chad, Dolores, and the other members. b. a natural person in the members' "family." c. a legal entity apart from the owners. d. a non-participating third party.

C. legal entity apart from the owners

Defenses for employment discrimination

Business Necessity •Disparate-impact(unintentional) Bona Fide Occupational Qualification •Race, color, and national origin cannot be a BFOQ Seniority Systems- workers with more years of service are promoted first or laid off last. After-Acquired Evidence-evidence that the employer discovers after a lawsuit has been filed. •Limits damages

Acme Co. just completed the incorporation process and received its articles of incorporation from the state. At the first organizational meeting of the new company, the officers' most important task is to: a. create a hiring policy. b. amend the articles of incorporation. c. adopt bylaws. d. determine the details of the stock sale.

C

Arnie is a member of Bowling & Billiards, LLC, a limited liability company. Arnie can participate in the firm's management a. only to the extent that he assumes liability for the firm's debts b. only to the extent of his investment in the firm c. to any extent d. to no extent

C

Members of limited liability companies are shielded from personal liability in many situations.

True

Tim is considering forming a business and wants to ensure he avoids double taxation. In order to best meet his objective, he should avoid forming a: a. general partnership. b. limited liability company. c. sole proprietorship. d. corporation.

D

Limited Liability Limited Partnership (LLLP)

Difference between LP and LLLP is that the general partner has limited liability, like a limited partner, up to the amount of investment.

When choosing a business entity, entrepreneurs should consider:

Ease of creation The liability of the owners Tax considerations The ability to raise capital

corporate officers

Employees of a corporation who are appointed by the board of directors to manage the day-to-day operations of the corporation

Employer-Employee Relationship

Employer hires employee to perform certain tasks; employer has right to control conduct of employees (employees are agents)

FMLA Benefits and Protections

Employer must continue worker's health care on same terms. Employee must be restored to their original position or to a comparable position upon return to work (unless the employee is a "key" employee).

Independent contractor relationships

Employers do not have "control" over details of IC's work performance. Agency may - or may not - be involved depending on facts.

nonprofit corporation

Formed for purposes other than making a profit.

Alien Corporation

Formed in another country

Franchise

Franchisor (owner of trademark, trade name or copyright) licenses Franchisee to use the trade mark, trade name or copyright in the sale of goods or services.

unsolicited (not asked for) credit card liability

If a consumer receives an unsolicited credit card in the mail that is later stolen, the company that issued the card cannot charge the consumer for any unauthorized charges.

FTC (Federal Trade Commission)

preventing unfair and deceptive trade practices, including deceptive advertising.

The Americans with Disabilities Act (ADA)

prohibits disability-based discrimination in all workplaces with fifteen or more workers.

The Age Discrimination in Employment Act (ADEA)

prohibits employment discrimination on the basis of age against individuals forty years of age or older.

Title VII of the Civil Rights Act

prohibits job discrimination against employees, applicants, and union members on the basis of race, color, national origin, religion, and gender at any stage of employment

Telephone Consumer Protection Act (TCPA)

prohibits telephone solicitation using an automatic telephone dialing system or a prerecorded voice and illegal to transmit ads via fax without first obtaining the recipient's permission

FTC Mail or Telephone Order Merchandise Rule

protects consumers who purchase goods via mail, Internet, phone, or fax. Merchants are required to ship orders within the time promised in their advertisements and to notify consumers when orders cannot be shipped on time.

Chapter 7

provides for liquidation proceedings (the selling of all nonexempt assets and the distribution of the proceeds to the debtor's creditors).

Ruta is a supervisor for Subs & Suds, a restaurant. Tim is a Subs employee. The owner announces that some employees will be discharged. Ruta tells Tim that for sexual favors she will give him an excellent performance review and recommend a raise. This is

quid pro quo harassment

. QuikPay Inc. extends credit to consumers. QuikPay is subject to the Equal Credit Opportunity Act, which prohibits credit discrimination based on

race

Adjustable-rate mortgage

rate of interest paid by the borrower changes periodically.

A door-to-door salesperson convinces David and his wife Sonia to buy a vacuum cleaner. The next day, they learn that the same vacuum cleaner is available at a local discount store for one-third the price that they paid for it. In most states, David and Sonia have: a. ninety days to cancel the transaction. b. thirty days to cancel the transaction. c. three days to cancel the transaction. d. twenty-four hours to cancel the transaction.

c

American Insurance Co. reviewed its customers for creditworthiness. American Insurance found that a number of its customers had lower credit scores than expected. Without disclosing the reason, American Insurance increased the rates of insurance on new customers who had credit scores below a certain threshold. American Insurance: a. has violated no law. b. has committed a willful violation of the Fair Debt Collection Practices Act. c. has committed a willful violation of the Fair Credit Reporting Act. d. has violated the Fair and Accurate Reporting Transactions Act

c

Bartell contracts with LaRonda to remodel and retile a bathroom. LaRonda finishes the job and gives Bartell a bill for $14,000 for labor and materials. Bartell refuses to pay. In this case, LaRonda may seek: a. an innkeeper's lien. b. an artisan's lien. c. a mechanic's lien. d. nothing; she may bring a suit only for breach of contract.

c

Carl tells Jenny that he will give her a raise if she agrees to have a romantic relationship with him. In legal terms, this is known as: a. invidious harassment. b. settled harassment. c. quid pro quo harassment. d. hostile-environment harassment.

c

Carolina files for Chapter 7 bankruptcy and the automatic stay goes into effect. Even so, which of the following creditors may continue to collect the debt owed by Carolina? a. Carolina's credit card company to whom she owes $12,425 for a trip to Paris six months ago. b. The bank to whom she owed $250,000 on a mortgage for her home. c. Carolina's first husband to whom she owes monthly support payments. d. The car dealer from whom Carolina bought her Mercedes two years ago.

c

Cowland, Inc., manufactures a low-cost generic meat alternative. It adds a filler to the meat that it does not list on its label. Cowland's actions violate federal requirements relating to the labeling of food products. These requirements are enforced by: a. Regulation Z. b. the CPSC's rules against deceptive advertising. c. the U.S. Food and Drug Administration (FDA) and the U.S. Department of Agriculture (USDA). d. the Fair Labeling Authority within the Department of Commerce.

c

Donald is buying a house and obtains a loan from the lender. The document Donald signs giving the lender an interest in Donald's house as security for a debt is called a: a. guaranty. b. deed. c. mortgage. d. promissory note.

c

Eastminster Presbyterian Church has an opening for a new head pastor. Mohammed, who is a Muslim, applies for the job. The church declines to hire him and continues to look for other applicants. If Mohammed files a claim of illegal discrimination against the church, the church: a. can contend that the Equal Employment Opportunity Commission's (EEOC's) "eighty percent rule" is irrelevant when there is only one available job. b. can assert that its hiring practices are not intentionally discriminatory. c. may assert a bona fide occupational qualification (BFOQ) defense. d. can claim that Mohammed did not make out a prima facie case of illegal discrimination.

c

Edward brings a valuable piece of jewelry to Luisa's shop for repairs. One of Luisa's assistants mistakenly allows Edward to take the jewelry without paying for the repairs. Luisa sues Edward to recover payment for the repairs, and wins. Edward does not have the cash to pay Luisa. Luisa asks the court to issue an order to the sheriff to seize some of Edward's property to pay off the debt. Luisa is seeking a(n): a. mechanic's lien. b. writ of attachment. c. writ of execution. d. order of garnishment.

c

Eric brings a valuable watch to Sherry's clock shop for repairs. One of Sherry's assistants mistakenly allows Eric to take the watch without paying for the repairs. Sherry sues Eric to recover payment for the repairs, and she asks the court to direct the sheriff to seize and take custody of the watch before the trial. Sherry is seeking a: a. suretyship. b. writ of certiorari. c. writ of attachment. d. garnishment.

c

Erin works for a dry-cleaning company that has a contract with the U.S. government. To save on cleaning fluid, her boss orders her to wash some clothes that are supposed to be dry-cleaned in a washing machine. When the courier hired to pick up the cleaned garments arrives, Erin tells him about her boss' actions. Erin tells no one else about what is going on and is later fired. Erin: a. will be reinstated to her former job, because when she told the courier of the problem she was merely exercising her First Amendment right to free speech. b. is protected by the whistleblower statute in her state because she spoke up about her employer's actions. c. is not protected by the whistleblower statute because she failed to inform the proper party of the contract violation. d. is not protected by the state whistleblower statute. It is inapplicable because the contract was with the federal government.

c

Ernest signs a listing agreement with Lisa to sell his house. Before Lisa finds a buyer, the house is destroyed by flooding. In this case, the agency agreement between Ernest and Lisa: a. terminates based on war. b. continues in full force and effect. c. terminates based on impossibility. d. terminates based on changed circumstances.

c

Francis drives a delivery truck for Weston Industries. In the middle of his delivery route, Francis stops to have a two-hour lunch with friends twenty miles away. While in the restaurant, Francis spills some water and another person falls on it. That person sues Weston Industries. To determine liability, a court would likely decide that Francis was acting: a. in misrepresentation of Weston Industries. b. as a negligent agent. c. outside the scope of employment. d. within the scope of employment.

c

Gerald files a petition in bankruptcy. An automatic stay will apply to actions by creditors seeking to collect Gerald's debts comprised of a. alimony b. child-support c. car payments d. none of the choices

c

Home Enterprises employs Itzak to buy property for a possible residential development. Itzak secretly buys some of the property and sells it to Home Enterprises at a profit. Itzak has breached a. no duty b. duty of accounting c. duty of loyalty d. duty of notification

c

Jamel hires independent contractor Stevenson to create users' manuals for Jamel's small appliances. Jamel: a. cannot own the copyright to the manuals because Stevenson created them. b. will violate Stevenson's rights if he requires a work for hire document. c. can create an agreement in writing that designates Stevenson's work as work for hire. d. automatically owns the copyright to the manuals because he paid Stevenson to create them.

c

Jewelry & Coin Company hires Kelly Ann to buy gems and precious metals from various sources on its behalf. In this relationship, Jewelry & Coin is a. an employee b. an independent contractor c. a principal d. an agent

c

Judy's cousin, Skip, tells Judy that he will sell her car for her when she leaves the country for a church mission for two years. Skip tells her that he will do it for no charge to her. While Judy is gone, Skip forgets about the agreement and does not attempt to sell the car. Judy: a. can sue Skip for breach of contract for failure to perform. b. cannot sue Skip because they are cousins. c. cannot recover anything from Skip because he had no duty to perform since he was a gratuitous agent. d. can sue Skip under tort law because he was negligent in not selling the car.

c

The FTC's Telemarketing Sales Rule (TSR)

requires a telemarketer to identify the seller's name, describe the product being sold, and disclose all material facts related to the sale (such as the total cost). The TSR makes it illegal for telemarketers to misrepresent information or facts about their goods or services.

The Energy Policy and Conservation Act (EPCA)

requires automakers to attach an information label to every new car.

The Nutrition Labeling and Education Act

requires food labels to provide standard nutrition facts and regulates the use of such terms as fresh and low fat.

The Affordable Care Act (commonly referred to as Obamacare)

requires most employers with fifty or more full-time employees to offer health-insurance benefits.

cease and desist order

requiring the company to stop the challenged advertising

Julie's father has been diagnosed with dementia and Julie needs to be home to take care of him for six consecutive weeks. Julie asks her employer, BigCo, for six weeks of medical leave under the Family and Medical Leave Act (FMLA) and for her regular salary to be paid. Is BigCo obligated to grant this request? a. Yes, the Family and Medical Leave Act requires granting employees twelve weeks of paid medical leave per year for a qualifying reason. b. No, the Family and Medical Leave Act only requires granting employees three weeks of unpaid medical leave per year. c. Partially yes, as the Family and Medical Leave Act requires granting employees twelve weeks of medical leave per year for a qualifying reason. However, that leave does not have to be paid leave. d. No, the Family and Medical Leave Act only grants medical leave for treatment of one's own serious health condition, not the conditions of others.

c

Kris represents Josh in the sale of his house as his real estate agent. Kris is entitled to: a. loyalty. b. confidentiality. c. compensation. d. daily updates.

c

Susan agrees to act as a surety for Harris. Harris defaults on his loan, and Susan repays the bank because Harris declares bankruptcy. Susan now has: a. a right of exemption. b. no rights. c. a right of subrogation. d. a right of competition.

c

deceptive advertising

occurs if a reasonable consumer would be misled by the advertising claim.

Artisan's Liens

common law, When a debtor fails to pay for labor and materials furnished for the repair or improvement of personal property, a creditor can recover payment and take priority over other creditors' claims to the same property. (possessory )

Paradise Footwear buys a franchise from Quadrangle Athletic Shoes Inc. This relationship, like all other franchise relationships, is governed by A. contract law B. no law C. the franchise disclosure doc D. Article 2 of the uniform commerical code

contract law

private corporation

created either wholly or in part for private benefit (for profit) and are owned by private individuals

Abigail works for a large pharmaceutical company as a scientist. While testing a potential new drug, she learns that company managers are illegally falsifying results that are being sent to the Food and Drug Administration (FDA) in order to streamline drug approvals. Abigail reports this practice to federal law enforcement. Company managers learn about Abigail's disclosures and fire her. Abigail: a. is protected from wrongful discharge by the exception based on tort theory. b. is not protected from discharge because she is an employee at will. c. is protected from wrongful discharge by the exception based on contract theory. d. is protected from wrongful discharge by the exception based on public policy.

d

Alex files a petition for bankruptcy under Chapter 7. He owes $2.37 million to assorted creditors. Two months before filing, he sold his beach house, which was valued at $600,000, to his brother Jonah for $150,000. If the trustee objects to the sale, most likely: a. the sale of the house will be considered a preference. b. Jonah will keep the house because the sale took place before the petition was filed. c. the trustee will take the house from Jonah and give it to the secured creditor with the largest claim on Alex's estate. d. the trustee will avoid the transfer and take back the house as part of Alex's estate.

d

Byron works at Stich-Rite Clothing Factory. The company is required to maintain safe working conditions under the: a. Safety and Health Organization Act. b. Hazardous Workplace Act. c. Occupational Health Act. d. Occupational Safety and Health Act.

d

Christina has been sued and is worried about losing her "stuff." She understands that there is an exemption for housing, but doesn't want to lose all of her belongings. She most likely will be able to keep all of her personal property listed below except: a. her clothing. b. her pet dog. c. pictures of her family taken over the years and stored in albums. d. a very expensive vase that she purchased on a trip to China.

d

Data & Data Accountants, a private employer, handles bookkeeping for small employers. In most circumstances, with exceptions, federal law clearly prohibits Data & Data from subjecting its employees to a. job-skills tests b. monitoring of business communications c. drug tests d. lie-detector test

d

Dave has forty acres where he grows corn and soybeans. He also has five milk cows and some chickens. Dave sells organic milk and eggs at the local farmers' market. He also drives a school bus. Most years, about 70% of Dave's income is from his agricultural activities and 30% is from his school bus-driving job. If Dave declares bankruptcy, he will file under: a. Chapter 7. b. Chapter 13. c. Chapter 1. d. Chapter 12.

d

Dean is not Paul's agent, but Paul tells Charlie that Dean has always been a good friend and can "handle any of my business affairs." If Dean were to later enter into a contract with Charlie on Paul's behalf, Dean would be acting under an: a. obvious authority. b. implied authority. c. express authority. d. apparent authority.

d

Erin and Dooley, a married couple, borrow $120,000 from Capital & Credit Bank to buy a home. When Erin and Dooley divorce, they are unable to make payments on the mortgage. The market value of the home has declined to less than the balance of the loan. Capital & Credit agrees to a sale of the property for this amount. This is a. a prepayment penalty b. forbearance c. foreclosure d. a short sale

d

Gina buys a piece of pottery from Woodward for her principal, Kelvin. If Woodward knows that Gina is buying the pottery on behalf of someone other than herself but does not know the identity of that person, Kelvin is: a. an independent contractor working for Gina. b. an undisclosed principal. c. an agent for Woodward. d. a partially disclosed principal

d

Jasmine's General Store advertises cans of X-brand tomatoes for $.33 per can, although she does not have any in stock. When customers arrive to buy the tomatoes, Jasmine tells them that her stock of tomatoes has been sold and that she cannot get more at the lower price. She tells customers she has Y-brand tomatoes in stock for $.55 per can and that the Y-brand tomatoes are far superior to the X-brand. Jasmine is: a. employing good business tactics. b. engaging in counteradvertising. c. committing a violation of regulation Z. d. engaging in bait-and-switch advertising

d

Josh works for a federal governmental agency that requires drug testing as a condition of employment. He wants to challenge the constitutionality of the testing in court. For his case, Josh will attempt to rely on: a. the Second Amendment. b. the Eighth Amendment. c. the Thirteenth Amendment. d. the Fourth Amendment.

d

Kera is an hourly employee of Xeon, Inc., who earns a wage of $10.00 an hour. During a busy season, Kera works fifty hours in one week. Xeon pays Kera $11.00 an hour for her overtime pay. Xeon is: a. in conformance with the Fair Labor Standards Act because Kera only worked fifty hours in one week, and thus she is not qualified for overtime pay. b. in conformance with the Fair Labor Standards Act (FLSA) because Xeon is paying an overtime rate. c. not in conformance with the Fair Labor Standards Act because Xeon is obligated to pay no less than 2.5 times Kera's regular pay for hours she worked over forty in one week. d. not in conformance with the Fair Labor Standards Act because Xeon is obligated to pay no less than 1.5 times Kera's regular pay for hours she worked over forty in one week.

d

Kim hires Michelle to go to the art gallery and purchase a specific painting for him. The painting costs $1,500. Because this is the purchase and sale of goods for more than $500, the contract for the painting must be in writing. In order to have a legal purchase of the painting, Kim: a. must have Michelle bring the contract to him for his original signature. b. must not have Michelle hired as his agent. c. may have Michelle sign on his behalf based on their verbal agency agreement. d. may have Michelle sign on his behalf if the agency agreement is in writing.

d

Kurt is fifty-two years old and has worked for a company covered by the Age Discrimination in Employment Act (ADEA) of 1967. He wants to bring a claim of age discrimination against his employer because he was replaced by a younger, lower-paid worker. To make out a prima facie case of age discrimination, Kurt does not have to establish that he: a. was qualified for the job he lost. b. was discharged in a way that creates an inference of discrimination. c. is a member of the protected age group. d. was replaced by someone who was below the age of forty.

d

Maria works for MegaCorp, a large privately owned company specializing in sales of ball bearings. MegaCorp introduces filtering software to block access to certain non-work related Web sites, as well as sites containing sexually explicit images. Would Maria be successful if she legally challenged the new policy? a. Yes, because Maria's Internet use is protected by the First Amendment. b. Yes, because the Electronic Communications Privacy Act prohibits employers from intercepting electronic work communications. c. No, because the Employee Polygraph Protection Act permits employees to refuse to tell employers about their Internet use at work. d. No, because private employers generally are free to use filtering software to block access to certain Web sites.

d

Martha has a small tailoring business that employs five tailors and three shop assistants. Because business is going well, Martha decides to expand. She purchases twice as much cloth, thread, and buttons, and she borrows money to expand her store space. Initially, business continues to increase, but then there is a sharp drop-off and Martha cannot pay her debts. She declares bankruptcy and files a petition for Chapter 11 with the court. The court allows Martha to continue to operate her business. Martha is a: a. receiver. b. liquidated owner. c. trustee. d. debtor in possession.

d

Melon Lawn Co. advertises its new XJ200 lawn mower. Salespersons describing the XJ200 on behalf of Melon Lawn describe it as a "fabulous new mower" that will "take landscaping by storm." Melon Lawn's salespersons are engaging in: a. ineffective advertising. b. deceptive advertising. c. insignificant advertising. d. puffery.

d

Min applies for a job as a receptionist at an accounting firm. If she is denied a job because she is of Asian origin, she may be a victim of: a. direct-treatment discrimination. b. disparate-impact discrimination. c. primary-treatment discrimination. d. disparate-treatment discrimination.

d

Mitchell hires Christina to go from Florida to New York and negotiate a contract for his company. He gives her specific instructions on what should be in the contract and a written letter that gives her authority to sign on his behalf. Christina books a plane ticket, flies to New York, hires a cab, and successfully negotiates the contract. If Christina is paid for the plane ticket and cab fare, as well as meals while in New York, it is most likely under the principal's duty of: a. cooperation. b. travel coverage. c. compensation. d. reimbursement.

d

Elsa participates in an investigation into possible violations of the Civil Rights Act of 1964 at Fabrication Foundry, Inc., where she works. As a result, Elsa's employer demotes her. Elsa can file a

retaliation claim

Insurance Sales Corporation gives preferential treatment in hiring and promotion to the members of all protected classes. This treatment results in discrimination against members of the majority. This is

reverse discrimination

Sarah is employed at Tulip Factory, Inc., as an accountant. Sarah takes military leave and two months later returns from military service. Tulip Factory managers offer Sarah a new job as a junior bookkeeper. This decision: a. does not violate the USERRA because returning service members have no special claim to employment at their employer from which they took military leave. b. violates the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) because returning service members are to be reemployed in the job of their choice. c. does not violate the USERRA because returning service members are to be reemployed in any job that is available. d. violates the USERRA because returning service members are to be reemployed in the jobs that they would have attained had they not been absent for military service.

d

Selma, an elderly widow, gives her young neighbor, Steven, written power of attorney. This means that Steven now: a. is an undisclosed principal. b. has implied authority, but not express authority, to act as Selma's agent. c. is a disclosed principal. d. has express authority to act as Selma's agent.

d

Tammy, age sixty-three, works for Westcon, Inc. Tammy has been showing up for work late, and has a habit of placing confidential work files on her personal computer in violation of company policy. Jack, Tammy's manager, fires Tammy for these reasons. Jack also considers an incidental benefit of Tammy's discharge the fact that they can get someone younger in Tammy's position. If Tammy files an Age Discrimination in Employment Act (ADEA), she will: a. be successful in court because she has a claim of disparate-impact discrimination. b. be successful in court as age was an incidental factor in Tammy's discharge. c. be successful in court as age Tammy's employer had a "mixed motive" for discharging an employee. d. be unsuccessful in court because Tammy's age was not the "but for" reason for her discharge.

d

The Consumer Product Safety Commission (CPSC) determines that a battery-powered mini-truck in which children ride is unsafe. The CPSC has the power to: a. require parents to ship all such trucks in their possession to the CPSC. b. redesign all of the trucks. c. destroy all of the trucks. d. remove the trucks from the market.

d

The Scooter Store notified its employees at 5:00 P.M. on Friday that it was laying off two-thirds of its workforce as of that day and told them not to come in on Monday. It failed to provide advance notice to anyone and in doing so likely violated: a. the Worker Retention Act. b. the Worker Notification Act. c. the Worker Readjustment Act. d. the Worker Adjustment and Retraining Notification Act.

d

The directors and officers of Sports Color, Inc., vote to refuse to declare a dividend. Believing that the refusal is unreasonable, the shareholders can: a. demand that a court declare a dividend. b. return treasury shares in exchange for a dividend. c. overrule the directors and vote to declare a dividend themselves. d. file an action to require the directors to declare a dividend.

d

Wally is blind and would like to work for the Dairy Times writing articles on the dairy industry. Wally uses voice-recognition software that allows him to dictate articles to his computer. His computer is specially designed for visually impaired individuals. The Dairy Times interviews Wally but offers the job to a sighted person instead. Dairy Times may have violated: a. the NLRA. b. 42 U.S.C. Section 1981. c. the ADEA. d. the ADA.

d

Conrad and Delilah are employees of EcoCrop Feed & Seed Corporation. Under the Equal Pay Act of 1963, EcoCrop can legitimately pay different wages on the basis of

seniority

Telemarketing and Consumer Fraud and Abuse Prevention Act

directed the FTC to establish rules governing telemarketing and to bring actions against fraudulent telemarketers.

Neville, a member of a protected class, applies for a job with Origami Paper Products Corporation, but fails the company's employment test and is not hired. Neville believes that the test has an unintentionally discriminatory effect. If so, this is

disparate impact discrimination

domestic corporation

does business within its state of incorporation

limited partnership

entity that limits the liability of some of its owners (limited partners)

A surety can be required to pay an obligation only after the principal debtor defaults and usually only after the creditor has made an attempt to collect from the debtor

false

Advertising that contains an endorsement by a celebrity will not be deemed deceptive

false

Agency relationships do not permeate the business world

false

An involuntary bankruptcy occurs when the debtor forces his or her debtor into bankruptcy proceedings

false

Employers are required to establish retirement plans for their employees.

false

Generally, under the employment-at-will doctrine, an employee may fire an employee even if doing so would violate a federal or state statute

false

One of the key advantages of the corporate form is the unlimited liability of its owners.

false

Only a few types of property—a debtor's wages or bank account, for example—can be garnished.

false

Puffery constitutes deceptive advertising.

false

The partnership is a pass-through entity and a taxpayng entity

false

There are no important consequences if the procedures for incorporation are not followed precisely.

false

To recover workers compensation, an employee must prove that an injury did not occur on the job or in the course of employment

false

in a limited partnership, a limited partner has full responsibility for the partnership and for all its debts

false

Chapter 12

for family farmers and family fishermen) and 13 (for individuals) provide for the adjustment of debts by persons with regular incomes.

public corporation

formed by the government to meet some political or governmental purpose

foreign corporation

formed in X state, doing buisness in Z state

Agency by Agreement

formed through express consent or implied by conduct

publicly held corporation

shares are publicly traded in a securities market

Helene, a disabled person, applies for a job at Industrial Engineering Applications Inc. for which she is well qualified, but for which she is rejected. Industrial Engineering continues to seek applicants and eventually fills the position with a person who is not disabled. Helene is most likely to succeed in a suit against Industrial Engineering for discrimination under the Americans with Disabilities Act of 1990 if she can show that

she was not hired solely because of her disability

Food Safety Modernization Act (FSMA)

gives the FDA authority to directly recall any food products that it suspects are tainted, rather than relying on the producers to recall items.

Luke and Maya form Northwest Air Express, a general partnership. The essential elements of this partnership do not include

good will

Chapter 11

governs reorganization

The limited liability company

hybrid entity that combines the limited liability of a corporation and the tax advantages of a partnership.

Limited Liability Partnerships

hybrid form of business designed mostly for professionals who normally do business as partners in a partnership. allows "pass through" tax advantages and limits on personal liability of the partners

Federal Communications Commission (FCC)

imposes substantial fines ($11,000 each day) on companies that violate the junk fax provisions of the act.

Writ of execution

is an order that directs the sheriff to seize (levy) and sell any of the debtor's nonexempt real or personal property.

Kyla replaces Lomax in his job at Motor Vehicle Manufacturing Corporation (MVMC). To succeed with an age-discrimination claim against MVMC, Lomax will have to show that

lomax must be 40 years of age older

Board of Directors

makes policy decisions and hires officers to run corporation on a daily basis.

judicial Liens

may be used by a creditor to collect on a debt before or after a judgment is entered by a court.

Merlin is a drug addict who has completed a supervised drug-rehabilitation program. Nabil used drugs casually in the past. Both work for Omni Insurance & Investments Inc. Considered to have a disability under the Americans with Disabilities Act of 1990

merlin only

The Worker Adjustment and Retraining Notification (WARN) Act

"layoff law"intended to give workers advance notice so that they can start looking for new jobs while they are still employed. •Applies to employers with at least 100 full-time employees. •Requires 60 days notice before a 'mass layoff.' •An employer that violates WARN can be fined up to $500 for each day of the violation. •Employees can recover back pay for each day of the violation, plus attorneys' fees.

Kip opens an account at a Lotsa Goodies Store, and buys a digital music player and other items, but makes no payments on the account. To collect the debt, Mako, the manager, contacts Kip's parents. This violates

no federal law

Expectation based on Tort Theory

(Fraud) discharge of an employee may give rise to an action for wrongful discharge (discussed shortly) under tort theories. Abusive discharge procedures may result in a lawsuit for intentional infliction of emotional distress or defamation.

Expectation based on public policy

(illegal activity) employer's reason for firing the employee violates a fundamental public policy of the jurisdiction. (whistle blowing)

agency

(principal and agent) "fiduciary"relationship A relationship between two parties in which one party (the agent) agrees to represent or act for the other (the principal).

Principal duties to agent

1. Compensation 2. Reimbursement and indemnification 3. Cooperation 4. Safe working conditions

Agents duties to the principal

performance-Implied condition to use reasonable diligence and skill. If agent fails, possible breach of contract. notification-to principal of all matters concerning subject matter of agency loyalty-Fundamental duty as fiduciary (no conflict of interest); actions must benefit the principal. obedience-Agent has duty to follow all lawful and clearly stated instructions. Accounting-Agent must not commingle principal's funds with his own.

Sole Proprietorship

A business owned by one person, doing business without creating a separate legal entity

"S" corporation

A close corporation that meets the qualifying requirements specified in Subchapter S of the Internal Revenue Code. Avoids double taxation

Employment at will

A common law doctrine under which either party may terminate an employment relationship at any time for any reason, unless a contract specifies otherwise.

close corporation

A corporation whose shareholders are limited to a small group of persons, often family members. (similar to a partnership)

Writ of attachment

A court's order, prior to a trial to collect a debt, directing the sheriff or other officer to seize nonexempt property of the debtor.

benefit corporation

A for-profit corporation that seeks to have a material positive impact

family limited liability partnership (FLLP)

A limited liability partnership (LLP) in which the majority of the partners are members of a family.

Guarantor

A person who agrees to satisfy the debt of another (the debtor) only after the principal debtor defaults. A guarantor's liability is thus secondary.

chain-style business operation

A type of franchise in which the franchise operates under the franchisor's business name and is required to follow the franchisor's standards and methods of business operation.

Manufacturing Arrangement

A type of franchise in which the franchisor provides the franchisee with a formula or ingredient that is necessary to manufacture a product.

Irene wants to start a business selling T-shirts. Irene's top priority is that she alone has complete control over management decisions at all times. Irene should most likely form a: a. sole proprietorship. b. limited liability company. c. partnership. d. corporation

A.

Fair Labor Standards Act FLSA

Act that regulates employee Child Labor,Minimum Wages,tipped workers and Overtime Provisions and Exemptions An extension of wage and hour regulation to workers in interstate commerce.

Suzy signs a written agreement with Phillip, giving Phillip the right to cast Suzy's votes for a certain group of people nominated for the Syllibar Corporation board of directors. This agreement between Suzy and Phillip is known as a: a. derivative agreement. b. proxy. c. cumulative voting agreement. d. subpoena

B

Tammi purchases stock in Vivaldi Corporation. Vivaldi Corporation later encounters legal issues and faces significant legal claims. As a shareholder, Tammi's liability is: a. unlimited. b. limited to her investment in the stock. c. just like that of partners. d. limited to a maximum of $50,000

B

Sweet Treats, Inc., wants to market a new snack food. On the product's label, standard nutrition facts are

B. required

Carl is negotiating a franchise contract with Frank's Deli, a franchisor and a competitor of McDonald's. Frank's Deli is willing to give Carl 'territorial rights' to Orange County, where Frank will open his franchise. Frank's Deli, however, will not specifically state that the franchise given to Carl is exclusive. The territorial rights clause will most likely: a. not help Carl because Frank's Deli has the power to open any franchise it wishes by law regardless of any contract terms. b. help Carl keep additional Frank's Deli franchises from entering Orange County. c. not help Carl keep out other franchises because the territorial rights are not exclusive. d. help Carl keep additional McDonald's franchises from entering Orange County

C

Charlotte and Regina are opening a new business venture to sell gourmet cupcakes. One of the important characteristics in starting a limited liability company is: a. the amount of start-up capital required. b. choosing the name. c. limited liability for members. d. the number of shareholders

C

Henry and Ryan each invest $10,000 in a limited partnership as limited partners, so each has a 50% interest. Tracey sues the limited partnership and obtains a $100,000 judgment. Henry's liability is: a. unlimited. b. $100,000. c. $10,000. d. $50,000.

C

Rena incorporates her business, Rena's Rhinestones, in her home state of Maryland. She wants to expand and sell some of her jewelry in Virginia. In Virginia, her company will be considered: a. an alien corporation, because her business has been chartered in another state. b. a public corporation, so she will probably not have to obtain a license to do business there. c. a foreign corporation, and she will probably have to obtain a certificate of authority to do business there. d. an open corporation, so she can do business in any state that allows open corporations to operate.

C

Sarah owns half of Smith Realty, Inc., and her brother, Bill, owns the other half. Sarah routinely uses the company car, which is supposed to be only used for taking clients to view property, to run her personal errands. She also routinely uses company funds for personal uses, but always pays the money back into the corporation. When Smith Realty failed to pay its lawyer for work completed on its behalf, the lawyer sued both Smith Realty as well as Sarah and Bill personally. In this situation the court likely will: a. not allow Sarah and Bill to be sued individually because Smith Realty is a close corporation. b. dismiss the case because Smith Realty is a close corporation. c. pierce the corporate veil due to Sarah's commingling of interests. d. not pierce the corporate veil because there was no commingling of interests.

C

Ariana is an officer of New Stage, a theater production company. Without telling any other officers or the board of directors, she decides that New Stage should try to sell gardening tools over the Internet. She makes contracts with suppliers and a Web-based remote-order-fulfillment company. The only action that may not be taken is: a. the corporation can file a lawsuit against her for damages. b. the state attorney general may seek an injunction against the transactions or seek a dissolution order from a court. c. the shareholders can file a lawsuit on behalf of the corporation. d. she can file a lawsuit against the corporation for damages.

D

Jordan files for bankruptcy because he has debts of $1 million that he cannot pay. He would like to sign a document to assure his kind aunt Matilda that he will repay all of the $30,000 that she lent him. Jordan could have this debt discharged in the bankruptcy but would rather not. In this situation, Jordan: a. can do nothing because he has filed the petition; only the trustee can control his finances. b. cannot sign any agreement that he will pay Matilda, because it would give preference to one creditor over the others. c. can sign a revisionary loan. d. can sign a reaffirmation agreement.

D

Ruis Corporation, a publicly held corporation, has thirty-five members on its board of directors. In order to conduct business efficiently, the chairman of the board is proposing that five committees be created: the executive committee, the human resources committee, the marketing committee, the research and development committee, and the sales committee. Seven members of the board would serve on each committee and each board member would serve on only one committee. This is: a. illegal, because the federal law sets a maximum of four board committees per corporation. b. legal, because the board may function as it sees fit within the boundaries of the bylaws. c. illegal, because the Sarbanes-Oxley Act requires an international compliance committee. d. illegal, because the Sarbanes-Oxley Act requires an audit committee.

D

The agency with the chief responsiblity to prevent unsafe food and drugs from being sold is

FDA

Federal Regulation of Franchises (The Franchise Rule)

FTC requires franchisors to disclose certain material facts that a prospective franchisee needs to make an informed decision concerning the purchase of a franchise.

Agency by Estoppel

Principal causes a third person to believe that another person is the Principal's Agent, and the third person acts to her detriment in reasonable reliance on that belief.

Agency by Ratification

Principal either by act or by agreement ratifies conduct of a person who is not in fact an agent

Exceptions based on contract theory

Some courts have held that an implied employment contract exists between the employer and the employee. If the employee is fired outside the terms of the implied contract, he or she may succeed in an action for breach of contract even though no written employment contract exists. (employment contract)

Agency by Operation of Law

The agency relationship is based on a social or legal duty (spouses)

OSHA (Occupational Safety and Health Administration)

The fundamental federal law aimed toward safety in the workplace.

Bait and Switch Advertising

The low price is the "bait" to lure the consumer into the store. The salesperson is instructed to "switch" the consumer to a different, more expensive item.

Counteradvertising

This requires the company to advertise anew—in print, on the Internet, on radio, and on television—to inform the public about the earlier misinformation.

voluntary bankruptcy

To bring a voluntary petition in bankruptcy, the debtor files official forms designated for that purpose in the bankruptcy court. The law now requires that before debtors can file a petition, they must receive credit counseling from an approved nonprofit agency within the 180-day period preceding the date of filing.

An employer can voluntarily pay overtime to ineligible employees.

True

Limited liability companies are entities apart from their owners

True

Ace Products manufactures and markets a product called Grow Tall. Ace claims in its advertising, without supporting evidence, that Grow Tall will make its users grow a minimum of six inches taller than their current height. The Federal Trade Commission (FTC) will likely find that the ad is: a. deceptive, and the FTC may issue a cease-and-desist order. b. not deceptive, because buyers are obligated to be aware that some advertising claims are untrue and should avoid purchasing products that make impossible claims. c. not deceptive, and the FTC may therefore issue a counteradvertising order. d. deceptive, and the FTC may declare that it is bait-and-switch advertising.

a

As a surety for a loan that Duke did not pay, Caden pays the debt in full. If Duke does not declare bankruptcy, Caden has a right of: a. reimbursement. b. contribution. c. foreclosure. d. exemption.

a

Bayou Development Corporation hires Coastal Brokerage Associates to sell the condominiums in a building at Bayou Development's resort. The agency will terminate a. after the condos have been sold. b. if the prices of the condos must be reduced to sell them. c. once Bayou Development obtains insurance to cover the property. d. when Bayou Development pays Coastal Brokerage its first commission.

a

Bernard is an expert on exotic flowers. Custom Floral Arrangements, Inc., hires Bernard to order exotic flowers for its arrangements. Bernard does not examine the quality of the flowers he orders on behalf of Custom Floral. Bernard has breached A. duty of performance B. duty of loyalty C. duty of notification D. no duty

a

California Produce Company hires Drew to work on California Produce's shipping dock, checking outgoing loads and dispatching the company's drivers. With respect to California Produce, Drew is most likely a. an agent b. an independent contractor c. a work for hire d. a principal

a

Charlie tells Jamal that Marisol has agreed to allow him to sell her racing bicycle. Marisol is present at the time, hears the conversation, and says nothing. Jamal agrees with Charlie to buy Marisol's bike. Marisol then refuses to sell the bicycle. Marisol claims that she is not bound by the agreement formed by Charlie and Jamal because Charlie is not her agent. Marisol likely is: a. bound by the contract, under a theory of agency by estoppel. b. not bound by the contract because of a rescission. c. not bound by the contract because she did not have an agency agreement with Charlie. d. bound by the contract, under a theory of agency by operation of law.

a

Dara gives her agent, Marla, money to purchase a new commercial oven. Marla takes the money and deposits it into her personal checking account. Marla then accidentally spends some of Dara's money. Marla has violated her duty of: a. accounting. b. payment. c. loyalty. d. cooperation.

a

Dina and Michelle buy a house together and sign a document to borrow some of the money for the house. The contract provides that they will pay a single rate of interest for the first five years of the loan and then the rate will vary depending on a specific index rate. This type of contract is: a. an adjustable-rate mortgage. b. a traditional home contract. c. a prepayment mortgage. d. a fixed-rate mortgage

a

During Belinda's Chapter 7 bankruptcy proceedings, the bankruptcy judge distributes her estate to creditors, but denies her a discharge, so she remains liable for the remaining unpaid portion of all claims. Which of the following would provide the court grounds to deny a discharge? a. She fraudulently concealed or destroyed financial records during the course of the bankruptcy. b. She acted in good faith. c. She refused to sign a reaffirmation agreement. d. She relinquished all of her property.

a

Garry drives a truck as an employee for Heavy Hauling, Inc. Garry would most likely be considered acting outside the scope of her employment if he a. crashed into a car at the airport while off duty b. hit a pedestrian in a parking lot during "working: lunch c. ran over an attendant at a gas station while refueling the truck d. smashed into a store whole intoxicated on duty

a

Geraldo receives mechanized telemarketing calls for sales of time-share homes even though he registered on the national "Do Not Call" registry. This registry was established by an amendment to the FTC's: a. telemarketing sales rule. b. truth in telemarketing rule. c. fair marketing rule. d. electronic disclosure rule.

a

Grocer's Choice is the largest employer in the Pacific Northwest. It is covered by numerous federal employment laws. As such, it is required by the Family and Medical Leave Act of 1993 (FMLA) to provide employees with up to: a. 12 weeks of unpaid family or medical leave during any 12-month period. b. 5 weeks of unpaid family or medical leave during any 12-month period. c. 24 weeks of unpaid family or medical leave during any 12-month period. d. 10 weeks of unpaid family or medical leave during any 12-month period.

a

Harold owes Soundstage Services for services rendered two years ago for which he has not paid. Soundstage's owner calls Harold at home once a week at four o'clock in the morning claiming that he is working for a collection agency and asks when payment will be made. The owner of Soundstage is in: a. violation of the Fair Debt Collections Practices Act. b. compliance with the Truth-in-Lending Act. c. compliance with the Fair and Accurate Credit Transactions Act. d. violation of the Fair Credit Reporting Act.

a

Hauser takes temporary family leave from his job at Gelato Confectionary Corporation to care for a new baby. On Hauser's return from the leave, Gelato must a. restore Hauser to his original position. b. reimburse Hauser for his expenses while on leave. c. promote Hauser to the status of a key employee. d. do nothing.

a

Ingmar asks Jessie to contract with Jessie's high school classmates to babysit Ingmar's new baby. Jessie orally agrees to do so. This is a. an agency by agreement. b. an agency by estoppel. c. an agency by ratification. d. not an agency relationship.

a

Jason instructs his agent Miguel to obtain a piece of artwork from Martina by threatening to beat her if she refuses to sell the artwork. Miguel follows Jason's instruction and beats Martina when she refuses to sell the item. In this situation: a. both Jason and Miguel are liable for Martina's injuries. b. Miguel alone is liable for Martina's injuries. c. Miguel can seek an indemnification against Jason. d. Martina cannot recover damages for her injuries in court because Miguel was acting as an agent.

a

Lindsey promises Mountain State Bank that she will be responsible for a loan taken out by her niece, Emma. The agreement is that at the moment the debt is due, Mountain State may demand repayment from Lindsey. This is known as a: a. suretyship. b. bond. c. creditors' composition agreement. d. foreclosure.

a

Livia takes temporary family leave from her job at Meatpackers Corporation to care for a new baby. On Livia's return from the leave, Meatpackers must a. restore Livia to her original position b. reimburse Livia for her expenses while on leave c. promote Livia to the status of a key employee d. do nothing

a

Lucille is married to Marcus. Lucille buys food for their children's lunches and charges the cost to Marcus's account. This is a. an agency by operation of law b. an agency by estoppel c. an agency by ratification d. not an agency relationship

a

Misha owes money on several different credit cards. He owes enough money that he may be forced to declare bankruptcy. Rather than declare bankruptcy, he asks the creditors to reduce his debt amounts so that he can pay them off. The creditors and Misha sign a contract that provides for the payment of some of the debt and the elimination of the rest of the debt. This is called: a. a composition agreement. b. a writ of execution. c. a writ of attachment. d. an order of garnishment.

a

Nikki and Jim own a corporation together. Nikki owns 48 shares of stock and Jim owns 52. They consider themselves investors, so they elect a board of three directors to oversee the business. To ensure that Nikki can elect at least one director, the corporation should: a. use cumulative voting. b. be the directors themselves. c. set aside one director for Nikki, one for Jim, and select the third by random drawing. d. use straight voting

a

Redcap Dairies sells yogurt that it knows to be contaminated by a harmful mold. Redcap Dairies would be held responsible to consumers under the: a. Federal Food, Drug, and Cosmetic Act. b. Federal Safety and Food Adulteration Act. c. Fair Packaging and Labeling Act. d. Federal Trade Commission's 'cooling-off laws.

a

Rick agrees to customize Melissa's wedding ring. The cost is $10,000. After the job is complete, Melissa refuses to pay. As long as Rick retains possession of the ring, he may seek to recover the cost of the labor with: a. an artisan's lien. b. a judicial lien. c. a mechanic's lien. d. an innkeeper's lien

a

Roland files a petition in bankruptcy. After all his assets have been sold and the proceeds distributed among his creditors, Roland's remaining debts a. are discharged b. will be paid by the court c. must be paid by roland D. are put on hold until Roland has sufficient means to pay them

a

Sybil agrees with Tyrone and other professional athletes to sign contracts with promoters and others on the athletes' behalf. Sybil is a. an agent b. an emplyee c. employer d. a principal

a

The University Smyth has an admissions policy that requires a certain number of points to be automatically awarded to minority applicants. This type of policy is likely a violation of the: a. equal protection clause. b. establishment clause. c. access to education clause. d. advancement clause.

a

Through careless manufacturing practices, Metalworks Company makes and distributes unsafe products that are sold to Nabi and other consumers. This may be subject to sanctions under a. federal and state law b. federal law only c. no law, according to the principles of freedom to contract d. state law only

a

When Kimberly begins working for Pharmco Industries, the company tells her that at a future date, after so many years of employment with the company, she can receive retirement pay. Her rights to receive pay upon retirement would be considered: a. vested. b. sheltered. c. inferred. d. accrued.

a

Professional Corporation

a corporation formed by lawyers, doctors, or other professionals

Boni, the owner of Café Rico, knows about, but does not take any action to prevent, the sexual harassment of employees. Boni and the café may be liable for such harassment by

a customer or a co worker

Fixed-rate mortgage

a fixed, or unchanging, rate of interest, so the payments remain the same for the duration of the loan.

Suretyship

a promise made by a third person to be responsible for the debtor's obligation. It is an express contract between the surety (the third party) and the creditor. the surety is primarily liable for the debtor's obligation

Under federal law, the calorie content of the food on a menu must be posted by Organic Mix, LLC, if Organic Mix is

a restaurant chain with 20 or more locations

Distributorship

a type of franchising arrangement in which the franchisor makes a product and licenses the franchisee to sell it

Mortgages

a written instrument that gives the creditor a lien on the debtor's real property as security for payment of a debt. The creditor is the mortgagee, and the debtor is the mortgagor.

Preston wants to be his own boss and is considering starting a business. He has to decide which form of business organization to adopt and will most likely consider all of the following except: a. publicity and public relations. b. his need for start-up capital. c. the various types of liability to which owners are subject. d. tax issues.

a. publicity and public relations

the Federal Food, Drug, and Cosmetic Act (FDCA).

act protects consumers against adulterated (contaminated) and misbranded foods and drugs. The FDCA establishes food standards, specifies safe levels of potentially hazardous food additives, and provides classifications of foods and food advertising.

The Family and Medical Leave Act (FMLA)

allows employees to take time off from work for family or medical reasons or in certain situations that arise from military service. requires employers with over 50 employees to provide up to twelve (12) weeks unpaid leave for employees that have worked at least a year

Lien

an encumbrance on (claim against) property to satisfy a debt or protect a claim for the payment of a debt

Noah and Orin do business as Personnel Providers, an employment agency. In most states, for purposes of suing and being sued, Personnel Providers, which is a partnership, would be treated as

an enitity

Adam is a sole proprietor. He must file for bankruptcy to reorganize his debt under a repayment plan so he can pay his creditors and continue operating his business. He should file a: a. Chapter 12 bankruptcy. b. Chapter 13 bankruptcy. c. Chapter 10 bankruptcy. d. Chapter 7 bankruptcy.

b

Aliza files for bankruptcy. In addition to the amount she owes her secured and unsecured creditors, she owes her friend Megan $500. In order to be entitled to receive a portion of Aliza's estate, Megan, along with the other creditors, should file a: a. bill of attainder. b. proof of claim. c. petition in bankruptcy. d. notice of exemption

b

Before filing a Chapter 7 bankruptcy petition, Tricia sells her diamond watch to Dale Kehoe BMW whom she owes for the purchase of a used car, because Tricia and Dale are close friends and neighbors. The transfer: a. is a fraudulent transfer. b. is a preference that can be avoided. c. is fine, because Dale Kehoe BMW is a secured creditor. d. is fine, because the diamond watch was exempt property.

b

Buckley is a general partner in Cut-Rate Shipping, LLLP, a limited liability limited partnership, which cannot pay its debts. Buckley is personally liable for the debts a. in proportion to the number of partners in the firm. b. to no extent. c. to the extent of his capital contribution. d. to the full extent.

b

Cheryl knows that Jake is looking to buy a new scooter. She sees one that would be perfect and negotiates with the seller on Jake's behalf. She signs a contract for the scooter using her name but clearly indicating that she is working for Jake. She actually is not. When Jake sees the scooter, he loves it and agrees to pay the contract price. If agency exists in this situation, it is agency by: a. estoppel. b. ratification. c. operation of law. d. agreement.

b

Dollars & Sense, Inc., is incorporated in the state of New Jersey and is doing business in the state of New York. In New York, Dollars & Sense is properly referred to as a. a domestic corporation b. a foreign corporation c. an alien corporation d. a public corporation

b

Executives at MegaCorp refuse to promote Nora, and then fire her, because of a preference to have only men in top leadership positions. Nora files a lawsuit against MegaCorp claiming sex discrimination. During the lawsuit, MegaCorp learns that Nora had been stealing company assets for five years. A possible outcome of this information may: a. ban Nora from filing a legal claim. b. limit the amount of damages for which the employer is liable. c. shield an employer entirely from discrimination. d. not have any effect as such evidence is irrelevant in Title VII cases.

b

Febo is an employee of Guitar & Drum Company. Guitar & Drum's employee manual states that workers, such as Febo, will be dismissed only for good cause. With respect to the employment-at-will doctrine, this is a. an example of the doctrine b. an exception based on contract theory c. an exception based on public policy d. an exception based on tort theory

b

Hady's Health Services advertises numerous "miracle cures" such as a hair growth cure for baldness. The FTC has received numerous complaints about several of these cures. The FTC most likely will require Hady's to stop false advertising for all of its products by issuing: a. a state complaint. b. a multiple product order. c. a complaint to a federal judge. d. a counteradvertising mandate.

b

Investment Sales Corporation wants to monitor its employees' electronic communications. Investment Sales's best course of action to avoid liability under laws related to employee monitoring is to notify a. no one b. its employees c. its clients d. the public generally

b

Jason is a small-business owner. He has a dry cleaning business. One year, Jason has to replace nearly all of his equipment, and the rent on his building increases. Jason borrows money to cover his expenses. Business is slow, however, and Jason eventually realizes he must declare bankruptcy. Neither Jason nor his creditor wants the expense and hassle of going to court. They can settle their creditor-debtor relations outside of court through a: a. petition. b. workout. c. revisionary loan. d. Chapter 13 reorganization.

b

John works at San Marino Food Store as an assistant store manager. John's boss, Michael, does not approve of John's interest in football. Michael believes that baseball is the better sport. As a result, Michael fires John. Assuming no other contractual relationship exists between John and his employer, John: a. is protected from wrongful discharge by the exception based on contract theory. b. is not protected from discharge because he is an employee at will. c. is protected from wrongful discharge by the exception based on tort theory. d. is protected from wrongful discharge by the exception based on public policy.

b

Julio lives in an area with a high percentage of Hispanic workers. Many of these workers are legal immigrants who have relatively little college training. If, when Julio applies for his job, he is given an examination designed for a college graduate, and if he and most Hispanic applicants fail to pass the test, the employer: a. has almost certainly done nothing wrong. b. might be engaged in disparate-impact discrimination. c. might be engaged in disparate-harm discrimination. d. might have violated the Americans with Disabilities Act.

b

Laura and Juan have an agreement where Laura will sell Juan's baseball card collection while he is out of the country. Juan does not give any specific instructions on how this should be done. To fulfill her duty of obedience, Laura must: a. seek out instructions from Juan's closest relative. b. act in good faith. c. request specific instructions in writing. d. not perform on the contract and is excused from performance.

b

Lizzie works for Gary in his dance supply shop and is authorized to sell inventory but not to order new merchandise. Rena, a sales representative for a new line of dance wear, comes into the store, and Lizzie places an order with her. When Gary learns the details of Lizzie's purchase, he wants to ratify the contract. The one condition that is NOT necessary for ratification is: a. Rena and Gary must have legal capacity to engage in the transaction. b. Rena must withdraw from the transaction before Gary ratifies it. c. Gary must know all the material facts about the transaction. d. Gary must affirm Lizzie's order in its entirety.

b

Lumber Mill Inc. is a private employer with more than twenty employees. Its employment practices do not indicate a past pattern of discrimination. It is located in Metro City, which has recently seen an increase in the number of its citizens who are members of protected classes. Under the Civil Rights Act of 1964, Lumber Mill is a. required to promote diversity in its workplace, but not to implement an affirmative action policy. b. not required to implement an affirmative action policy. c. required to implement an affirmative action policy until the number of its minority employees is proportional to the number of minority individuals in Metro's labor pool. d. required to implement an affirmative action policy that considers race merely as a plus factor.

b

Mary is a data-entry employee at Computer Services, Inc., a small computer company. Mary's sole job is to input information into a computer from paper invoices and spreadsheets. Mary develops chronic carpel tunnel syndrome, rendering her unable to type. As a reasonable accommodation, she requests that her employer hire a new employee to do the data entry on her behalf. Mary's request: a. is a reasonable accommodation under the ADA, because an employer must accept the accommodation preferences of the employee. b. is not a reasonable accommodation because Mary's request would place an undue hardship on the company. c. is a reasonable accommodation under the Americans with Disabilities Act (ADA), which her employer is legally bound to accommodate. d. is not a reasonable accommodation because Mary does not qualify as disabled under the ADA.

b

Mary is a lender who offers credit throughout the United States. John applies for credit to start a restaurant business. Mary denies John credit because she believes that older persons like John are not reliable for paying back debt. Mary has violated: a. the Consumer Product Safety Commission. b. the Equal Credit Opportunity Act. c. the Federal Food, Drug, and Cosmetic Act. d. the Fair Credit Reporting Act.

b

Mouth & Gums, Inc. (CSI), engages in deceptive advertising when it markets its product Oral Rinse as able to kill germs over long periods of time. In an action against Mouth & Gums, the firm is ordered to stop its false advertising of Oral Rinse and other products. This is a. counteradvertising order b. a multiple product order c. a cooling off law a validation notice

b

Napoleon owns Napoleon's Construction and agrees to renovate Mrs. Cernan's bathroom. She will provide him with the plans and then he will do the work in the manner he determines is most cost effective and appropriate. Napoleon is likely to be classified as: a. a disclosed principal. b. an independent contractor. c. an employee. d. a partially disclosed principal.

b

Patricia hires Albert to sell Patricia's expensive sports car. Albert agrees on a sale with Zeke, who wants to purchase the car for its powerful engine and well-kept condition. Albert does not disclose Patricia's identity to Zeke. Albert also does not disclose the fact that Albert is an agent for someone else. Zeke tenders the purchase price to Albert, but Patricia refuses to deliver the car as agreed. In this situation: a. Patricia is not bound to perform because the agency relationship was not disclosed. b. Patricia is bound to perform. c. Patricia is not bound to perform because Albert did not act within the scope of his authority. d. Patricia is not bound to perform because Patricia's identity was not disclosed.

b

Ramona discovers that a credit reporting agency shows her having not paid a loan that she paid off last year. She writes to the credit reporting agency and requests an investigation. The agency must: a. hire a private investigator to review Ramona's bank accounts and other financial records. b. investigate and delete any errors in Ramona's report. c. inform the creditor of the error and tell the creditor to contact Ramona for further information. d. pay Ramona $1,000 and investigate the alleged error.

b

Rico's Grill, Inc., is solely owned by Rico Vito. Rico's Grill borrows $10,000 from a local bank to finance the purchase of a new range. The payments are to be made monthly over a two-year period. The bank: a. under the Fair Credit Reporting Act, must disclose all of its own credit terms, as well as those of two competing lenders. b. need not make any special disclosures. c. under the Truth-in-Lending Act, must disclose to Rico, clearly and conspicuously, all of the credit terms and conditions of the loan. d. is exempt from the disclosure requirements of the Truth-in-Lending Act because its business includes more than just lending.

b

Sam goes out shopping, and using his wife Juanita's credit card he buys $221-worth of groceries. Under agency law, Juanita will probably be deemed: a. liable for the purchase because Sam is her employee. b. liable for the purchase, based on the creation of an agency by operation of law. c. not liable for the purchase, based on Sam's lack of a power of attorney. d. not liable for the purchase, based on Sam's duty of performance.

b

Sarah asks Sergio to mow her lawn. Sergio, who is overloaded with work, contracts with Dan to do the work for him as an independent contractor. As Dan is mowing, Sarah walks out of her house and the lawnmower throws a rock and hits Sarah, causing serious injuries. In this situation, Sergio is: a. not liable for Sarah's injuries because she breached her duty of notification. b. probably not liable for Sarah's injuries. c. liable for Sarah's harms because Dan is an independent contractor. d. liable for Sarah's harms because he has a responsibility to control the actions of his employees.

b

Sarah has to move from the East Coast to the West Coast for her job. Elmo agrees to act as Sarah's agent to sell her New York condo. As her agent, Elmo owes Sarah all of the following duties except: a. performance. b. payment. c. loyalty. d. notification.

b

Selena signs a power of attorney appointing Kim only for the purpose of signing on her behalf relating to the sale of her house. The power of attorney will normally terminate based on: a. termination by either Selena or Kim. b. the purpose being achieved. c. mutual agreement between Selena and Kim. d. a lapse of time

b

To start his business, Neil borrows money from every source available to him, including all his credit cards and a line of credit at his bank. The business fails, and Neil files a voluntary Chapter 7 petition in good faith to discharge his debts. In the meantime, he returns to work as an attorney, where he makes over twice the median family income in his state. Neil's debts will most likely: a. be discharged, provided that he follows all the rules. b. be paid, at least in part, after his case is converted to a Chapter 13 repayment plan. c. not be discharged, because claims for amounts borrowed to start a business fall under an exception to discharge. d. be paid, at least in part, after his case is converted to a Chapter 11 reorganization plan.

b

Tranh owns a home with a fixed-rate mortgage. Unfortunately, the real estate market has a downturn and his home is now worth less than he owes on the mortgage. In addition, Tranh is laid off from his job. Rather than go through the time and cost of a foreclosure, the bank gives Tranh permission to sell the property for the market value and agrees to forgive the balance of the loan. This is called: a. a workout agreement. b. a short sale. c. a prepayment. d. a forbearance.

b

Trucking Dispatch Company and Ucello put their agency agreement into a written document that describes the rights and duties of both parties. Ucello, as the agent, has a. apparent authority b. express authority c. implied authority d. none of the above

b

Veronica's corn cakes are packaged with labels that say, "Veronica's delicious popped corn cakes. 20 popped corn cakes. Net weight: 5.3oz. Manufactured in Plano, Texas." Regarding the Fair Packaging and Labeling Act, the label is missing: a. information about the history of the company. b. information about the packager or distributor. c. information about the corn farming practices. d. information about the members of the company's board of directors.

b

Western Fitness advertised a new Omnibike that was specially designed to help users lose weight faster. It cited the example of Julie, who lost weight faster on the Omnibike than with other exercise products. What Western Fitness did not disclose is that in their study of thirty users of the Omnibike, Julie was the only one who lost weight faster than with other exercise products. Western Fitness's claims are: a. half-truths, which would be legal because the statement about Julie is accurate. b. half-truths, which would likely constitute deceptive advertising. c. wholly false because most users of the OmniBike did not lose weight faster. d. wholly true, because Western Fitness's statement about Julie is accurate.

b

Yakov hires Melina to be his Vice President for Marketing. The job description is pretty broad but does not include the ability to hire or terminate lower-level employees in the Marketing division. If Melina has this power, it is based on her: a. express authority. b. implied authority. c. obvious authority. d. apparent authority.

b

Jasmine receives an unsolicited credit card in the mail and tosses it on her desk. Without Jasmine's permission, her roommate Ilene uses the card to buy a new tablet for $500. Jasmine is

not liable for any amount

Mechanic Liens

statutory liens, Sometimes, a person who has contracted for labor, services, or materials to be furnished for making improvements on real property does not immediately pay for the improvements. Place it on property

Debt & Loan Collection Agency calls Ethel several times a day, and sometimes in the middle of the night, about an overdue bill that a Furniture4U store turned over to Debt & Loan for collection. This is a violation of

the Fair Debt Collection Practices Act

A principal or employer normally is not liable for an agent's crime even if the crime was committed within the scope of authority or employment.

true

A sanction known as counter advertising requires a company to advertise anew to inform the public about earlier misinformation

true

An agent has the implied authority to do what is reasonably necessary to carry out express authority.

true

Certain employees are exempt from federal overtime provisions.

true

Certain employers must provide advance notice of a layoff to the affected workers

true

Employers have a general duty to keep workplaces safe.

true

FTC is charged by Congress with the broadly stated goal of preventing unfair and deceptive trade practices

true

Like Social Security, Medicare is funded by contributions from the employer and the employee.

true

Most employers with fifty or more employees are required to offer health-insurance benefits.

true

Under the doctrine of respondeat superior, an agent is liable for the principal's negligence.

true

the agent has the right to be compensated, to be reimbursed and indemnified, and to have a safe working environment

true

Tory borrows $10,000 from USA National Bank to remodel a room in her home. This transaction is subject to

truth in lending act

multiple product order

which requires a firm to stop false advertising for all of its products, not just the product involved in the original action.

sexual harrassment: Hostile work environment

•Occurs when workplace is permeated with discriminatory intimidation, ridicule, insult so severe and pervasive that it alters the conditions of the victim's employment and creates an abusive working environment.

State Regulation pf Franchises

•Primarily aimed at protecting franchisees from unfair practices and bad faith terminations by franchisers.

Sexual Harassment: Quid Pro Quo

•Something for something" •Involves demands for sexual favors are demanded in return for job opportunities, promotions, salary, increases or other tangible benefits.

Anson is a citizen of Connecticut. He suffers severe injuries in a car accident. He hires a Michigan attorney to bring a multimillion-dollar claim against the car manufacturer. The attorney belongs to an LLC whose members are from several states including Connecticut. After losing the product liability claim, Anson brings a malpractice lawsuit against the attorney. He: a. may file in a state court in Connecticut or Michigan. b. must file in federal court. c. may file in a state court in Connecticut or Michigan, or in federal court. d. may file only in a Connecticut state court.

A

Betty, a corporate director, has engaged in a number of acts that constitute a conflict of interest between her and Global Mfg., Inc. The corporation shareholders want to remove her, and in most jurisdictions can do so: a. for cause. b. only when her term expires. c. when the shareholders vote at the next annual meeting. d. in good faith.

A

Carmen is the vice president for marketing for Nita's Web Design. She also sits on the board of directors. Carmen would be considered: a. an inside director b. an illegal director. c. an outside director. d. ineligible to serve on the executive committee

A

Doug is the vice president of product development for a corporation that makes flavored honey. Doug proposes to the board that they approve three new products: chili-flavored honey, seaweed-flavored honey, and black-licorice honey. Doug and his team have market tested the flavors, and they received positive reviews from focus groups. The board approves the flavors, which then fails miserably and cost the company thousands of dollars. If some shareholders sue the board for its decision to market the flavors, the board most likely will: a. not be held responsible because of the business judgment rule. b. not be held responsible because of the duty of loyalty. c. be held responsible for letting such horrible flavors go to market. d. be held responsible because of the business judgment exception.

A

Galen and Leslie are directors, but not officers, of Tropical Travels, Inc. Tropical Travels becomes embroiled in a controversy over airline kickbacks. As directors, Galen and Leslie can be named in any lawsuit that may result from the company's actions. If they have any expenses related to the lawsuit, they may be compensated for those under their right of: a. indemnification. b. compensation. c. participation. d. inspection.

A

George owns 300 shares of preferred stock in a company. By owning preferred stock, George has: a. priority over holders of common stock as to dividends. b. a fixed maturity date for his shares. c. priority over holders of common stock as to dividends and the right to force the company to buy back the shares. d. the right to force the company to buy back the shares

A

Julie, Manuel, and Emilio are three dentists who formed a limited liability partnership (LLP) for their dental practice. Emilio accidentally removes the wrong tooth of a patient. The patient sues the partnership for negligence and wants to hold all three doctors personally liable. A court will most likely find: a. Emilio personally liable for negligence, but not Julie and Manuel. b. Emilio and Julie personally liable for negligence, but not Manuel. c. all partners personally liable for negligence. d. Emilio and Manuel personally liable for negligence, but not Julie.

A

Micah and Jonah want to start a corporation but want to be taxed as a partnership. They should form: a. an S corporation. b. a C corporation. c. a public corporation. d. a benefit corporation

A

Michael, Sarah, and Mindy are partners in a limited partnership that buys commercial real estate. Michael and Sarah are limited partners and Mindy is a general partner. Business is booming so Mindy asks Sarah for help. Sarah offers to buy land from LandInvest Co., and holds herself out as a representative of the limited partnership. Sarah drafts the contracts, participates in the negotiation, and completes the sale on her own. Sarah also takes on bookkeeping and related tasks to free up Mindy to locate new sellers. If a dispute arises with LandInvest Co. related to the contract and LandInvest Co. sues the limited partnership, it is possible that: a. Sarah will be held personally liable even though she is a limited partner, and Mindy will also be held liable as a general partner. b. Sarah will not be held personally liable because she is a limited partner. c. Mindy will not be personally liable as a general partner. d. All of the limited partners will held personally liable.

A

Quentin operates an ice cream franchise which has shops throughout the United States. CoolCream Co., the franchisor, supplies the ingredients and formula so that Quentin can create the ice cream in his store and sell it fresh to customers. This relationship is known as a: a. manufacturing or processing-plant arrangement. b. distributorship. c. chain-style business operation. d. joint development enterprise.

A

Tyler and Stanton are members of an LLC. They have no operating agreement. Tyler and Stanton have a dispute. They look to the LLC statute for an answer, but the statute does not cover this situation. In this case, courts often: a. apply state partnership law. b. order the LLC to dissolve. c. apply state corporate law. d. force the members to solve the dispute themselves

A

Xavier consults with an attorney and some business acquaintances from the chamber of commerce about the management of his LLC. He is told that management may take one of two forms, a member-managed LLC or a manager-managed LLC. In the second form: a. the managers may be members, nonmembers, or a combination of both. b. members may not participate in management of the LLC. c. a state-appointed receiver manages the firm. d. the managers must be certified public accountants (CPAs).

A

A court awards a judgement to loan collection agency, who is the creditor, against Margret, who is the debtor. After the judgment, the creditor requests a court order seize Margret's property to ensure that the judgment will be collectible. This is a. a judicial lien b. a writ of attachment c. a writ of execution d. a violation of most state laws

A and C

Mack is an oil executive. He wants to start a new company with different partners to explore some drilling opportunities. His attorney advises him about the various business forms. When discussing the LLC form, his attorney mentions that one of the biggest disadvantages of the LLC form is that: a. there is no uniform law governing LLCs in the United States. b. its members have limited liability for LLC debts. c. it is taxed like a partnership unless the members choose differently. d. LLC members pay no taxes

A.

Mary, Thomas, and Franklin form an LLC for the purpose of running a restaurant. Each invests $10,000 into the LLC. Two weeks after the LLC is formed, Joanne patronizes the restaurant and suffers from severe food poisoning. If Joanne sues the LLC: a. the members could be liable for $10,000 each, the amount of their investment. b. the members could be personally liable, but not for their investments in the LLC. c. the members could be both personally liable and liable for their investments. d. neither the members nor their investments will be liable in any capacity.

A.

Yen grants his cousin, Art, a franchise in Yen's sandwich shop. Yen writes the agreement so that he controls every detail of Art's shop, such that it is exactly the same as Yen's original shop. Yen even consults with Art about hiring employees and safety practices. One of Art's employees fails to clean up a spill and a customer is injured. The customer sues Yen. In this case, Yen: a. risks liability under the doctrine of respondeat superior. b. will not be liable because it is Art's sandwich shop. c. will be liable because of res ipsa loquitur. d. will not be liable because Yen is the franchisor, not the franchisee.

A.

Francine is interested in starting a new financial services company where she will manage the investments of others. She wants to generate her own funding as well as lead the business once it gets started. Francine will assume all risks and rewards of the new enterprise. Francine would be considered an entrepreneur because she is: a. someone who can expertly manage other people's investments. b. a person who knows how to evaluate which stocks to purchase. c. someone who initiates and assumes the financial risk of a new business enterprise. d. a person who can grow a business quickly.

C. Someone who initiates and assumes the financial risk of a new business enterprise

Doug, Frank, and Sarah want to form an entity for their new accounting firm. They want to ensure that each avoids personal liability for the malpractice of the other partners so they should form: a. a limited partnership. b. a limited liability partnership. c. a general partnership. d. a joint venture

B

To make, sell, and distribute candy that Ethan has developed, he incorporates his business and designates his sister and brother as corporate officers. He sells them shares of stock. No shares are offered to the public. The three agree that if any one of them decides to leave the business, the others will buy that person's stock. Ethan's corporation is most likely: a. an alien corporation. b. a close corporation. c. a benefit corporation. d. an S corporation.

B

Elliot is suing Acme, Inc., for a breach of contract, but because Acme has very little in assets, he asks the court to pierce the corporate veil and hold the officers personally liable. In which of the following situations would the court likely approve Elliot's request? a. The officers make their decisions based on information presented to them, but they have been unaware that the information is incorrect. A corporation that is too thinly capitalized could be grounds for piercing the corporate veil. b. The corporation was undercapitalized from the beginning and never had sufficient assets to operate as a viable business. c. The officers loaned money to the corporation in an attempt to delay any adverse actions. A corporation that is too thinly capitalized could be grounds for piercing the corporate veil. d. The corporation has struggled to make a profit from the beginning. A corporation that is too thinly capitalized could be grounds for piercing the corporate veil.

B.

Orville and Perry are negotiating a franchise agreement. Perry, the potential franchisee, asks Orville for information about the franchise. In this case, Orville: a. is under no obligation to disclose information to Perry about the franchise. b. is required to disclose certain material facts that a prospective franchisee needs in order to make an informed decision concerning the purchase of a franchise. c. must disclose all information about the franchise to Perry. d. is required to disclose specific facts related to the conduct of competitive franchises and the management of historical operations by the franchisor.

B.

Jason, Julian, and Rebecca are members of a longstanding and successful LLC. The three members want to dissolve their LLC and distribute their assets but they know the LLC has debts. Once all the LLC's assets have been sold, the proceeds: a. are equally shared among the members without regard to other liabilities. b. are distributed equally to the members, and then creditors are paid with the remaining assets. c. are distributed to pay off creditors first and member capital contributions next. Any remaining amounts are then distributed to members in equal shares or according to the operating agreement. d. are distributed to pay off member capital contributions first and creditors next. Any remaining amounts are distributed to members in equal shares or according to the operating agreement.

C

Tough TVs, a corporation, makes a profit in its first year of existence. The managers of the corporation decide to reinvest the profits. The reinvested profits are called: a. public earnings. b. dividends. c. retained earnings. d. shareholder profits.

C

Floors R Us, a franchisor, cancels its franchise agreement with Bernardo, the franchisee, without any notice. Floor's action: a. is an act in the ordinary course of business. b. will allow Bernardo a right to reimbursement of his franchise fee. c. is likely a wrongful termination. d. is a violation of federal law.

C.

Gary, Harold, Daniel, and Brian form a real estate partnership in 2013. In 2015, Brian dissociates himself from the partnership. After a partner's dissociation, under the Uniform Partnership Act the partnership: a. can freely choose whether to purchase Brian's partnership interest and how much value it will pay. b. dissolves and distributes all assets. c. must purchase his or her partnership interest based upon the buyout price. d. can freely choose whether to purchase Brian's partnership interest, and if it does not purchase Brian's interest, Brian will remain a partner.

C.

Norman is a franchisee of MegaFurnishings, a furniture store. Norman breaches the franchise agreement. The contract states that the franchisee, Norman, must be given notice of termination but does not specify a time for termination in the agreement. In this case, MegaFurnishings must give: a. no time for termination at all, as the contract is silent. b. the opportunity to Norman to specify a termination period as Norman chooses. c. a reasonable time, with notice, to wind up the business. d. fourteen days to terminate, pursuant to federal franchise law.

C.

Tuller wants to start a commercial trucking business and also wants to form his own limited liability company (LLC). Tuller, as the only member of the LLC, will make all relevant decisions, contribute all of the investment, and be responsible for all of the risks and rewards. Tuller's proposed LLC will be accepted by: a. no state, as at least two members are uniformly required to create an LLC. b. a few states. c. a majority of states. d. all states, as no state requires at least two members to create an LLC.

C.

Genevieve is a member of the board of directors and the chief financial officer of The Shoe Fits. Under the duty of care that she owes the corporation, Genevieve does not need to: a. attend presentations and make a careful study of business choices before making decisions. b. attend board meetings and oversee the corporation's employees and other officers. c. read reports and other materials to be reasonably informed. d. oversee every aspect of the business, including such things as ordering merchandise and arranging for janitorial services

D

Keenan wants to incorporate his business. He buys business cards and labels with the name "Keenan's Kwips" on them and begins selling gag gifts. Keenan follows the rules for incorporation in his state, including a statement that he is the sole shareholder, and he is granted a certificate of incorporation. The only problem is that Keenan has an error in his address on all the paperwork. Keenan's business is probably a: a. corporation by estoppel. b. public corporation. c. de facto corporation. d. de jure corporation

D

Mark is a director of Bromley Corp. Mark also owns a printing company named BooksMark. Bromley Corp. needs a marketing brochure printed. If BooksMark is being considered as the printer for that brochure, Mark must: a. resign from the board if anyone questions the conflict of interest. b. never enter into a contract like this. c. do nothing other than vote for the contract. d. fully disclose his interest to the other board members and abstain from voting on the matter.

D

Matt and Chad form an LLC, and Matt later decides to withdraw as a member. They do not have a provision in their operating agreement regarding withdrawal of a member but they do live in a state that has adopted the ULLCA, which means that: a. the LLC must dissolve within 120 days. b. Matt will lose all of his interest in the LLC. c. Matt must find a new member to purchase his interest at a fair value. d. the LLC must purchase Matt's interest at fair value within 120 days.

D

Product Management, LLC, has forty members. Two of the members died the previous year. Under the Uniform Limited Liability Company Act (ULLCA), on the death of the two members: a. the LLC continues, but only with a court order allowing the LLC to do so. b. the LLC must dissolve. c. the other members may continue to carry on the LLC's business, even if the operating agreement mandates dissolution on the death of a member of the LLC. d. the other members may continue to carry on the LLC's business unless the operating agreement provides otherwise.

D

The seven members of Fast Commerce, LLC, want to start their company as quickly as possible. The members, in their haste, do not bother to draft an operating agreement. If a dispute arises between two of the members: a. the federal uniform LLC statute will apply to the dispute. b. in many states, the state LLC statute will not apply because an operating agreement is required for an LLC to exist. c. the LLC will dissolve. d. the state LLC statute will apply to the dispute.

D

Marvin and Maria start selling handmade jewelry to distributors nationwide and intend to form an LLC. Marvin and Maria enter into four contracts with distributors while the LLC is in the process of being formed, but before the LLC is formally in existence. Once Marvin and Maria form the LLC: a. the contracts are enforceable if this were a corporation, but not for an LLC. b. the contracts are unenforceable by any party. c. the contracts are unenforceable by the LLC, only Marvin and Maria personally. d. if the LLC adopts the contracts, it can then enforce the contract terms.

D.

Farrah and Grant are shareholders of Hong Kong Restaurants, Inc. As shareholders, they must approve a. conducting a merger b. deciding to pursue new business opportunities c. negotiating a contract between management and labor d. none of the choices

a

Pualani and Quentin do business as partners in Rio Vista Builders, a residential construction firm. For federal income tax purposes, Rio Vista would be treated as

a pass through entity

Hillside Vineyards is a family limited liability partnership. All of the partners must be a. natural persons only b. natural persons or persons acting as fiduciaries for natural persons c. persons acting as fiduciaries for natural persons only d. related

b

Ridgeline Bank provides Shirley with a mortgage to buy a home. The rate of interest is fixed for three years and then adjusts annually. This is a. a fixed-rate mortgage b. an adjustable-rate mortgage c. a creditors composition agreement d. a guaranty agreement

b

Tina designed a new type of handbag that has proven to be very popular. She begins manufacturing these handbags on a large scale and considers her options for setting up a business to market the bags nationwide. She opts for a distributorship franchise, under which she will: a. avoid certain taxes and fees. b. license distributors to sell her handbags. c. grant dealers the right to her trade name. d. pay for one half of the franchisee's start-up costs.

b

Eddie and Eric enter into a partnership agreement to sell gourmet dog biscuits. If they do not specify how long the general partnership will last, the partnership will end: a. in twelve months. b. whenever either partner wants to end it. c. whenever both partners agree to end it. d. in one year plus one day.

b.

Madeline very much wants to be a franchisee of BurgerBarn, a popular chain-style business operation. BurgerBarn shows Madeline the franchise contract, which includes the requirement that all franchisees obtain materials and supplies exclusively from BurgerBarn. Madeline objects to this provision. This contract term is: a. unenforceable because it violates the Federal Trade Commission's (FTC) Franchise Rule. b. enforceable because franchisors are permitted to require franchisees to obtain materials and supplies only from them. c. enforceable because franchisees cannot negotiate contract terms with franchisors d. unenforceable because it violates antitrust laws.

b.

William, Irene, Jason, Barbara, and Immunographics, Inc., form a partnership for the purposes of developing designs for medical products. This partnership is: a. invalid because a partnership cannot have more than three members. b. valid because corporations can be a partner in a partnership. c. valid because partnerships generally require at least one corporation as a partner. d. invalid because corporations cannot be a partner in a partnership.

b. Valid because corporations can be a partner in a partnership

Eloise is a director for Frozen Yogurt Company. Eloise is also a director for Gelato Desserts, Inc. When the board of Frozen Yogurt considers entering into a contract with Gelato Desserts, Eloise must a. resign from one of the boards. b. resign from both boards. c. make a full disclosure of any conflict of interest. d. use her best business judgment in voting on the proposed deal.

c

Lewis is a director of Mines & Refineries, Inc. Using information that is not available to the public, Lewis makes a profit trading in Mines & Refineries stock. Lewis is most likely liable for breach of a. no duty or rule b. the business judgment rule. c. the duty of loyalty. d. the duty of care.

c

Nancy joins with other creditors to force Odette, a debtor, into bankruptcy. One of the goals of bankruptcy law with respect to creditors is to a. provide that creditors will continue to lend to insolvent debtors b. protect creditor assets from diminution in value c. ensure equitable treatment of creditors who are competing for a debtors assets d. make all debtor property available for creditors

c

Trey owns 250 shares of common stock in a toy-store company. This means that he owns a percentage of the company based on the proportion of shares he owns out of the total shares issued by the company. With this ownership he also acquires rights to: a. determine the amount of dividends that will be paid. b. vote and receive a fixed sum on a fixed date. c. vote. d. vote and receive dividends before any other creditors.

c

Katrina and Shannon form a general partnership to operate a gourmet kitchen business. In most states, if they do not specify their respective management rights then: a. the partner who invested more capital has a greater voice in management. b. one partner has superior management rights. c. both partners have equal management rights. d. one partner manages the business and the other provides the capital.

c.

Nikki and Orlando are limited partners in Port City Exports, a limited partnership. To avoid personal liability for partnership obligations, they must not a. acquire an interest in the firm. b. contribute property to the firm. c. engage in activities independent of the firm's business. d. participate in the firm's management.

d

The shares of Home Mortgage Corporation are publicly traded in securities markets. Home Mortgage Corporation is a. a close corporation b. a privately held corporation c. a public corporation d. a publicly held corporation

d

ysco, Inc., gives to all 15,000 of its shareholders the right to purchase newly issued shares of Lysco stock in proportion to the percentage of shares they currently own and before anyone else is offered the shares. This right is known as: a. a cumulative voting right. b. a proxy right. c. an attachment right. d. a preemptive right.

d

Marsha is a sole proprietor of a small quilting shop. She has considered changing her business structure, but she cannot find an alternative structure that would give her the main advantage she enjoys as a sole owner. The main advantage is that she: a. receives dividends. b. is taxed as a corporation. c. assumes very limited risk. d. receives all the profits.

d. receives all the profit

Silvano owns Textbooks Plus, a sole proprietorship that sells textbooks and other school supplies. When Silvano dies, Textbooks Plus will automatically

dissolve

Kari is the sole proprietor of Living Earth Garden Shop. As a sole proprietor, on the business's profits, Kari pays

only personal income taxes

A franchisee is generally legally indepedent of the franchisor

true

A limited liability company can be held liable for any loss or injury caused by the wrongful acts or omissions of its members

true

A limited liability company can be taxed as a partnership

true

Contracts in which creditors discharge debtor's debts for amounts less than what is owed are referred to as composition agreement

true

If a corporation has S corporation status, it can avoid the imposition of income taxes at the corporate level.

true

If a homeowner defaults, or fails to make the mortgage payments, the lender has the right to foreclose on the mortgaged property.

true

In choosing a form of business organization for a new enterprise, important factors include the ablility to raise capital

true

Liens generally take priority over other claims against the same property.

true

Shareholders have the power to vote to elect or remove members of the board of directors.

true

The articles of incorporation serve as a primary source of authority for the corporation's future organization and business functions

true

The intent to associate is a key element of a partnership

true