Bus_71_Homework_3_ID-C_chap_14_16-20_6x25_wo_Ans
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Bus_71_Homework_3_ID-C_chap_14_16-20_6x25_wo_Ans

Course Number: BUS 71, Fall 2011

College/University: San Jose City College

Word Count: 8481

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Business 71 MW Gunhee Han Homework Questions Chapters 14, 16-20, (6 x 25 random) ID: C _c___ 1. Rita owes $6,000 in unpaid taxes. In the sand of Seaside Beach, she executes an instrument for that amount that otherwise meets the requirements for negotiability. This instrument is likely a. negotiable. b. nonnegotiable, because an instrument must be on paper. c. nonnegotiable, because sand is not sufficiently...

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71 Business MW Gunhee Han Homework Questions Chapters 14, 16-20, (6 x 25 random) ID: C _c___ 1. Rita owes $6,000 in unpaid taxes. In the sand of Seaside Beach, she executes an instrument for that amount that otherwise meets the requirements for negotiability. This instrument is likely a. negotiable. b. nonnegotiable, because an instrument must be on paper. c. nonnegotiable, because sand is not sufficiently permanent. d. nonnegotiable, because the government does not appreciate it. P. 416 Be in writing. A writing can be on anything that is readily transferable and has a degree of permanence. _a___ 2. To borrow money to finance the start-up of his business, Bob executes an instrument in favor of City Bank. For the instrument to be negotiable, the signature a. can be anywhere on the instrument. b. must be anywhere on the lower half of the instrument only. c. must be in the lower left-hand corner of the instrument only. d. must be in the lower right-hand corner of the instrument only. P. 416 Be signed by the maker or drawer. The signature can be anyplace on the face of the instrument. _b___ 3. Kelly signs an instrument in favor of Leo that states it is " subject to a certain agreement between Kelly and Mona." This instrument is a. negotiable. b. nonnegotiable, because it is made subject to a separate agreement. c. nonnegotiable, because it refers to a separate agreement. d. nonnegotiable, because Kelly and Mona are not the same persons. P. 416 Be payable to order or to bearer, unless it is a check. An order instrument must identify the payee with reasonable certainty. _d___ 4. Maria signs an instrument payable to the order of National Loans, Inc., "on or before" June 15. This instrument is a. negotiable. b. nonnegotiable, because the maker can move up the payment date. c. nonnegotiable, because moving up the payment date is optional. d. nonnegotiable, because the exact payment date cannot be determined from the face of the instrument. P. 416 Be payable on demand or at a definite time. An instrument is still payable at a definite time, even if it is payable on or before a stated date or within a fixed period sight or if the drawer or maker has an option to extend the time for a definite period. _a___ 5. Julie signs a check payable to the order of Kwik-Mart Stores, Inc., that does not include a date. This check is a. negotiable. b. nonnegotiable, because it does not include a date. c. nonnegotiable, because it is payable to Kwik-Mart. d. nonnegotiable, because it is signed by Julie. P. 416 Any instrument that is payable on sight, presentation, or issue, or that does not state any time for payment, is a demand instrument. _b___ 6. To obtain office supplies for All-Care Auto Clinic, Britney executes a draft in favor of Chris. A draft is a. a conditional promise to pay money. b. an unconditional written order to pay money. c. a qualified promise to set aside a sum of money. d. a restricted promise to deliver goods at a future date. P. 417 A draft is an unconditional written order to pay rather than a promise to pay. _a___ 7. Alpha Company issues a trade acceptance with itself and Beta Company as parties. A trade acceptance is a. a draft. b. an order to accept delivery of money. c. a promise to accept delivery of goods. d. a promise to deliver goods. P. 418 A trade acceptance is a draft that is commonly used in the sale of goods. _d___ 8. To pay for improvements to Diners Cafe, Earl executes a negotiable instrument in favor of First County Bank. They are the only parties to the instrument. A negotiable instrument that has only two parties is a. a bank draft. b. a check. c. an indorsement. d. a promissory note. P. 419 A promissory note is a written promise made by one person (the maker) to another (the payee). _a___ 9. Eve possesses an instrument that is "payable to bearer." She loses it. Fred finds it. On this instrument, Fred may a. collect payment. b. not collect payment, because he did not give value for it. c. not collect payment, because he found it. d. not collect payment, because he is not the "bearer." P. 422 Negotiating bearer instruments A bearer instrument is negotiated by delivery that is by transfer into another persons possession. _b___ 10. Jack receives a check from Kappa Company and indorses it "without recourse." This indorsement is a. a blank indorsement. b. a qualified indorsement. c. a restrictive indorsement. d. a special indorsement. P. 423 Without recourse qualified (blank for further negotiation) No signature liability. Transfer warranty liability if breach occurs. _c___ 11. Gina writes and signs a check payable to "Happy Market." Irma, Happy's manager, indorses the check "For deposit only." This is a. a blank indorsement. b. a qualified indorsement. c. a restrictive indorsement. d. a special indorsement. P. 423 For deposit only restrictive for deposit (blank for further negotiation) _b___ 12. Wyatt inherits a promissory note from Xena, his aunt. Wyatt has no notice that the note has been dishonored or is overdue. Wyatt has the rights of a. a holder and an HDC. b. a holder only. c. an HDC only. d. neither a holder nor an HDC. P. 423 A holder of a negotiable instrument is an HDC if he or she takes the instrument (1) for value, (2) good faith, (3) without notice. _d___ 13. A+ Auto Rentals owes Apex Auto Dealership $2,000. A+ executes a note to Apex as security for the debt. This security a. does not constitute sufficient consideration for HDC status. b. does not satisfy the value requirement for HDC status. c. satisfies the consideration requirement for HDC status. d. satisfies the value requirement for HDC status. P. 423 An HDC must have given value for the instrument. The concept of value in the law of negotiable instrument is not the same as the concept of consideration in the law of contracts. A promise to give value in the future is clearly sufficient consideration to support a contract. _a___ 14. Perfect Roofing Company receives a check from Quik Mart for fixing its roof, and indorses the check to Repair Supplies, Inc. (RSI). Sam, RSI's owner, gives the check to Todd as a gift. In this situation, the party who is not an HDC of the check but who acquires HDC rights under the shelter principle is a. no one. b. Perfect Roofing. c. Sam. d. Todd. P. 426 Shelter principle is the principle that the holder of a negotiable instrument who cannot qualify as a holder in due course, buy who derives his or her title though an HDC, acquires the rights of an HDC. _a___ 15. Tina indorses a check. Tina is potentially liable for a. any amount paid on the check after Tina indorsed it. b. any amount paid on the check at any time. c. any amount paid on the check before Tina indorsed it. d. the amount paid to Tina when she indorsed the check. ____ 16. Ada is the maker of a note, on which Bart is secondarily liable. Cash & Credit Company (C&C) is the current holder of the note. Bart will be obligated to pay the note if a. Ada defaults on the note. b. C&C breaches a transfer warranty. c. C&C negotiates the note to Delta Collection Agency, a third party. d. C&C presents the note for payment. Fact Pattern 14-1 Alpha Office Properties signs a check payable to Beta Landscape Design, Inc., drawn on Alpha's account at City Bank and dated June 1. Beta indorses the check to Delta Lawn Care Corporation. ____ 17. Refer to Fact Pattern 14-1. To hold Alpha secondarily liable, Delta must present the check for payment within a. one year of its issue. b. six months of its date. c. thirty days of its date. d. thirty days of its indorsement. ____ 18. Ann is the maker of a $1,000 promissory note in favor of Bob. Bob indorses the note to Cody who, in turn, indorses it to Dru, the present holder. If the note is dishonored, the party entitled to recover payment from Cody is a. Ann. b. Bob. c. Dru. d. no one. Fact Pattern 14-2 Holly writes a check on her account at InterBank to Jerry to pay a debt. Jerry negotiates the check by indorsement to Kelly. ____ 19. Refer to Fact Pattern 14-2. Kelly can obtain payment of the check from Jerry a. if InterBank dishonors the check and Kelly timely notifies Jerry. b. only if Holly and InterBank refuse to pay the check. c. only if Holly refuses to pay the check. d. under no circumstances. ____ 20. Bob writes a check on his account at County Bank to Dona, a famous singer. The person claiming to be Dona is an imposter, however, named Eve. Eve indorses the check to Frank, for whom County Bank cashes the check. Ultimately, the loss will most likely fall on a. Bob. b. County Bank. c. Dona. d. Frank. ____ 21. Moe, the owner of National Sales Company, stores blank National checks in an unlocked office drawer. Owen, an employee, forges Moe's signature on one of the blank checks and indorses it to Payday Loans, Inc. With respect to Payday, Moe a. is definitely liable. b. is definitely not liable. c. may be liable if the forgery is not obvious. d. may be liable if the storage of the checks facilitated the forgery. ____ 22. Quincy signs a check payable to Regal Investors, Inc., and gives it to Regal, leaving the amount blank but authorizing Regal to fill in the check for $1,000. Regal fills in $1,500 and negotiates the check to State Bank, to whom Regal owes $1,500. State Bank, an HDC, can enforce the check for a. $0. b. $500. c. $1,000. d. $1,500. ____ 23. Chris convinces Dion, who does not understand English, to sign a $1,000 note that Dion believes is an application for a credit card. Chris negotiates the note to EZ Finance Company. Dion a. can avoid payment on the note even if EZ is an HDC. b. can avoid payment on the note only if EZ is a holder. c. must pay EZ the amount that it paid for the note. d. must pay the note in full. ____ 24. Dandy Furniture Store borrows $100,000 at 6 percent interest from Easy Loan Company and signs a promissory note for that amount. Easy changes the amount of the note to $120,000 and increases the rate to 8 percent. Easy materially altered the note when it changed a. neither the amount nor the interest rate b. the amount and the interest rate. c. the amount only. d. the interest rate only. ____ 25. Alpha Company gives a $3,000 promissory note to Best Delivery Service to deliver a load of computer chips to Alpha's plant. The chips are contaminated during transit, and are useless to Alpha on delivery. Alpha's best defense to payment on the note is a. breach of warranty. b. failure of consideration. c. illegality. d. nondelivery of an instrument. ____ 26. Rich Financial, Inc., files a financing statement regarding a transaction with Standard Business Company. To be valid, the financing statement must contain all of the following except a. a description of the collateral. b. a statement of the purpose for the transaction. c. Rich's name. d. Standard's name. ____ 27. Show-Me Display Company, a creditor, agrees to sell display cases to Total Retail, Inc. (TRI). TRI agrees to make monthly payments on the cases, which serves as collateral for the debt until the balance is paid. To protect its claim in the collateral, Show-Me should a. personally contact TRI's other creditors. b. file a financing statement with the appropriate state or local official. c. send notice by mail to TRI's potential customers. d. station a Show-Me employee on TRI's premises. ____ 28. County Bank wants to perfect its security interest in collateral owned by Delta Sales Company. Most likely, a financing statement should be filed with a. the local chamber of commerce. b. the county clerk. c. the federal loan officer. d. the secretary of state's office. Fact Pattern 16-1 Technical Support Corporation uses its office equipment as collateral for a loan from United Bank. The bank files a financing statement with the secretary of state in the state in which Technical Support was chartered. One year later, Technical Support changes its name to Vector, Inc. ____ 29. Refer to Fact Pattern 16-1. United Bank's perfection will remain effective for a. five years from the date of the name change. b. five years from the date of the original filing. c. six months from the date of the name change. d. no time. ____ 30. Refer to Fact Pattern 16-1. To continue the effectiveness of its original filing, United Bank must a. file a continuation statement after the original filing expires. b. file a continuation statement before the original filing expires. c. file a new financing statement within four months of the name change. d. repossess the equipment that served as collateral for the loan. ____ 31. Dependable Credit Corporation asks Eagle Supply Company to agree to a security agreement that provides for coverage of the proceeds from the sale of after-acquired property. This is a. a first-in, first-out rule. b. a floating lien. c. a funds guaranty. d. a future advance. ____ 32. Eagle Capital Company and First National Bank are secured parties with security interests in property owned by Great Commercial Corporation. Between these security interests, the first to be filed or perfected has priority over other filed or perfected security interests in a. most circumstances. b. no circumstances. c. states that have not adopted Article 9 of the UCC. d. states that require a security agreement to be signed and dated by the creditor. ____ 33. Qwik Credit Corporation lends $20,000 to Ross. A financing statement is filed on May 1, but the security agreement is not signed until Ross gets the money on May 4. Ross also borrows money from State Bank, which advances funds, files a financing statement, and signs a security agreement on May 2. Ross used the same property as collateral for both loans. In a dispute between the lenders over rights to the collateral, Qwik Credit will a. lose, because State Bank perfected first. b. lose, because State Bank's interest attached first. c. win, because Qwik Credit filed first. d. win, because Qwik Credit's interest attached first. ____ 34. Friendly Credit Corporation (FCC) believes that Gary might dispose of the assets that FCC expects to receive as payment for Gary's debt before FCC can obtain a judgment. FCC may ask a court to issue a writ of a. attachment. b. contribution. c. execution. d. redemption. ____ 35. Bob owes $5,000 to Consumer Lender Corporation (CLC). As a prejudgment remedy to collect the debt, CLC could use a. attachment. b. contribution. c. execution. d. redemption. ____ 36. Ace Credit Company wants to collect Brigit's debt by garnishing the funds in her City Bank account. Garnishment is a. a postjudgment remedy and a prejudgment remedy. b. a postjudgment remedy only. c. a prejudgment remedy only. d. neither a postjudgment remedy nor a prejudgment remedy. Fact Pattern 16-2 Beta Software Corporation is a new company that needs to borrow money to meet its payroll. Carl, president and owner of Beta, asks First National Bank to loan Beta the funds. ____ 37. Refer to Fact Pattern 16-2. If First National insists that Carl sign the loan application, making himself personally liable for payment whether or not Beta defaults, Carl will be a. a guarantor only. b. a surety only. c. a guarantor and a surety. d. none of these choices. ____ 38. Refer to Fact Pattern 16-2. If First National insists that Carl sign the loan application, making himself personally liable for payment only if Beta defaults, Carl will be a. a guarantor only. b. a surety only. c. a guarantor and a surety. d. none of these choices. Fact Pattern 16-3 Dina asks Edie to co-sign a credit application so that she can borrow money and buy a sport utility vehicle from Finest Quality Motors. ____ 39. Refer to Fact Pattern 16-3. If Edie signs the application only after language is included that requires Finest to exhaust its legal remedies against Dina before looking to her, then Edie is a. a guarantor and a surety. b. a guarantor only. c. a surety only. d. neither a guarantor nor a surety. ____ 40. Refer to Fact Pattern 16-3. If Edie is a guarantor, then the guaranty is required to be in writing because of a. the debtor's right of redemption. b. the co-signer's right of contribution. c. the creditor's transfer of possession. d. the Statute of Frauds. Fact Pattern 16-4 Mary's home is in a state that has a $30,000 homestead exemption. Mary defaults on a $60,000 debt that she owes to National Mortgage Company. Mary's home is sold at auction for $80,000. ____ 41. Refer to Fact Pattern 16-4. National may recover a. $0. b. $30,000. c. $50,000. d. $60,000. ____ 42. A petition for a discharge in bankruptcy under Chapter 7 may be filed by a. First Savings & Loan Association, a corporation. b. Holly, an investment adviser. c. Interstate Insurance Company, a corporation. d. Regional Employees Credit Union, a corporation. ____ 43. On May 1, Ace Credit Company loans Bob $10,000 and perfects a security interest in the home entertainment center that Bob buys with the money. Bob files for bankruptcy on May 12. With respect to this debt, Bob must file a statement of intention that indicates whether he a. filed for bankruptcy with the intent to defraud Ace. b. informed Ace that he would soon file for bankruptcy. c. intends to redeem the collateral, reaffirm the debt, or surrender the goods. d. would suffer undue hardship without the entertainment center. ____ 44. On July 1, Excel Holidays, Inc., a travel agency, files a Chapter 7 petition in bankruptcy. Among Excel's debtors are Fran who deposited $2,000 on June 1 to prepay a vacation trip and Gwen, Excel's employee, who is owed sixty days' pay. Between Fran and Gwen a. Fran and Gwen are entitled to equal, proportionate payments. b. Fran has priority to payment. c. Gwen has priority to payment. d. neither Fran nor Gwen are entitled to payments. ____ 45. Jack files a bankruptcy petition under Chapter 7. Among his debts are support owed to his ex-wife Kayla, overdue state income taxes, unpaid local traffic fines, and amounts representing student loans owed to Loyal University. The debts most likely to be discharged if their payment imposes undue hardship on Jack include the claims for a. back taxes. b. domestic support. c. government fines. d. student loans. ____ 46. Roy, the owner of Standard Business Company (SBC), sells SBC to Tim for a note payable to Roy for $100,000. Tim does not pay the note and files for bankruptcy under Chapter 7. The debt represented by the note is a. dischargeable if $100,000 now seems to be a high price for SBC. b. dischargeable under any circumstances. ____ 47. ____ 48. ____ 49. ____ 50. ____ 51. ____ 52. ____ 53. c. not dischargeable if Tim concealed assets to defraud Roy. d. not dischargeable under any circumstances. Natural Resources, Inc. (NRI), files for bankruptcy under Chapter 11 and assumes the role of a debtor in possession. In this role, NRI is similar to a. a creditor at a Chapter 7 creditors' meeting. b. a family farmer after a discharge under Chapter 12. c. a secured creditor in possession of collateral under Chapter 13. d. a trustee in a liquidation proceeding under Chapter 7. Micro Corporation's creditors agree to a workout with the firm. This is a. a Chapter 11 bankruptcy proceeding. b. an accountant's summary of a debtor's financial situation. c. a privately negotiated adjustment of creditor-debtor relations. d. a reorganization of corporate debts and debtors. Tony believes that he needs to obtain a Chapter 13 discharge in bankruptcy. A Chapter 13 bankruptcy proceeding can be initiated by a filing of a petition by a. a creditor only. b. a creditor or a debtor only. c. a debtor only. d. a trustee only. Gus owes support to his ex-wife Heidi, unpaid student loans to Intrastate College, and fraudulently incurred debt to Jiffy Loan Company. Gus files a petition for bankruptcy under Chapter 13 and is granted a discharge. Among the debts that will not be discharged include the claims of a. Heidi, Intrastate, and Jiffy. b. Heidi only. c. Intrastate only. d. Jiffy only. Fred starts up, and assumes the financial risk of, Graphic Ads, a new enterprise. Fred is a. a franchisee. b. a franchisor. c. an agent. d. a sole proprietor. Jody owns Kappa Sales, a sole proprietorship. Jody's liability is a. limited by state statute and varies from state to state. b. limited to the extent of capital expenditures. c. limited to the extent of his or her original investment. d. unlimited. Bree, who runs a livestock breeding business, owes the Circle C Ranch $400,000. Bree agrees to pay the Circle C a percentage of her profits each month until the debt is paid. Because of this agreement, the Circle C is a. Bree's creditor and partner. b. Bree's creditor only. c. Bree's partner only. d. neither Bree's creditor nor her partner. Fact Pattern 19-1 Dean starts up E-Sites, an Internet service, and leases office space in a building owned by Fred. The lease requires Dean to pay Fred a base rental of $250, plus 10 percent of E-Sites' profits, each month. The term is two years. Dean hires Gina to work at E-Sites' tech support desk at an hourly wage of $9.00, plus a commission of 10 percent of the profits. The term is also two years. ____ 54. Refer to Fact Pattern 19-1. Dean and Fred are ____ 55. ____ 56. ____ 57. ____ 58. ____ 59. ____ 60. ____ 61. ____ 62. a. not partners, because Fred does not have an ownership interest or management rights in ESites. b. not partners, because the lease includes a "base rental." c. not partners, because the rent includes only 10 percent of the profits. d. partners in a partnership for two years. Quik Pizza is operated as a partnership. For tax purposes, Quik Pizza a. is a tax-paying entity. b. is required to file an information return but is not a tax-paying entity. c. pays 1/2 of the taxes if there are two partners. d. pays 1/4 of the taxes if there are three partners. Mary, Nick, and Owen want to form a limited partnership to manage MN&O Services. A limited partnership must have at least a. one general partner and no limited partners. b. one general partner and one limited partner. c. one limited partner and no general partners. d. one managing partner. Alice, Bob, and Carol want to form a limited partnership to manage two restaurants: Alice's Restaurant and Bob's Deli. In most states, a limited partnership is created when a. a certificate of limited partnership is filed. b. a partnership agreement is executed. c. the business for which the firm is formed actually begins. d. the partners make their capital contributions. Lee is a limited partner in Metro Contractors, a limited partnership, which cannot pay its debts. Lee 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. Jay is a member of Kappa, LLC, a limited liability company. Jay is liable for Kappa's debts a. in proportion to the total number of members. b. to the extent of his capital contribution. c. to the extent that the other members do not pay the debts. d. to the full extent. Dan is considering forms of business organization for his financial advisory firm. Like most states, Dan's state requires that to form a limited liability company, he must file with a central state agency a. articles of certification. b. articles of formation. c. articles of organization. d. no specific documents. Accounting Applications, LLC, is a limited liability company. Unless indicated otherwise on Accounting's federal tax form, the firm will be taxed as a. a corporation. b. a partnership. c. a sole proprietorship. d. a syndicate. American Products, LLC, is a limited liability company. Rather than distribute its profits to its members, American wants to reinvest the profits in its business. For this reason, American may prefer to be taxed as a. a corporation. b. a partnership. c. a sole proprietorship. d. a syndicate. ____ 63. Mighty Products, Inc., and New Capital Corporation form a joint venture. A joint venture is similar to a. a corporation. b. a partnership. c. a sole proprietorship. d. a syndicate. ____ 64. Klay, Lorne, and Mitch form a syndicate to buy a National Football League team. This syndicate could be set up as a. a corporation only. b. a corporation or a partnership. c. a partnership only. d. neither a corporation nor a partnership. ____ 65. Downwind Properties Corporation and Eastern Investments Company transfer their property to Financial Management, Inc., which manages the property and distributes the profits to Downwind and Eastern. This is a. a business trust. b. a joint stock company. c. a joint venture. d. a syndicate. ____ 66. Consumers in Delta City form a business organization to provide, without profit, an economic service to its members. This is a. a business trust. b. a cooperative. c. a corporation. d. a joint stock company. ____ 67. Evan is the owner and manager of a business trust. Under the terms of a business trust, Evan is required to a. distribute the profits and manage the property. b. distribute the profits only. c. manage the property only. d. neither distribute the profits nor manage the property. ____ 68. Ira buys an exclusive territory in which he is authorized to set up a plant to manufacture Smooth Yogurt Company products. After receiving the essential formula, Ira begins manufacturing. This is a. a chain-style business operation franchise. b. a distributorship franchise. c. a manufacturing or processing-plant franchise. d. no franchise. ____ 69. Nina wants the exclusive right to sell Oven-Rite Corporation appliances in a certain area. If Oven-Rite agrees, it will likely require Nina to pay a. a license fee and a percentage of the sales. b. a license fee only. c. a percentage of the sales only. d. neither a license fee nor a percentage of the sales. ____ 70. Dean buys a franchise from Excel Realty, Inc. In their agreement, Excel may specify a. neither Dean's business form nor standards its of operation. b. the business form and the standards of operation. c. the business form only. d. the standards of operation only. ____ 71. Eve is a franchisee of Fresh Food, Inc. Their contract gives Fresh a right to control Eve's operations, including supervising the employees. Eve's employee Glen commits a crime against Eve's customer Harry. Harry files a suit against Fresh. With respect to Glen's crime, under the reasoning of the court in Case 19.2, Kerl v. Dennis Rasmussen, Inc., Fresh is most likely a. liable because Fresh supervises Eve's employees. b. liable because Harry was Fresh's customer. ____ 72. ____ 73. ____ 74. ____ 75. ____ 76. ____ 77. ____ 78. ____ 79. c. not liable because Eve is responsible for her employees. d. not liable because Harry was Eve's customer. Pete's Pizza, Inc., grants a franchise to Randy to operate a Pete's Pizza restaurant. Pete's Pizza may charge Randy a. a license fee and a price for supplies. b. a license fee only. c. a price for supplies only. d. neither a license fee nor a price for supplies. Comfort Wear, Inc., a franchisor of shoe stores, wishes to standardize the pricing practices of its franchisees that have engaged in price-cutting to increase their respective shares of the market. The most prudent remedy might be for Comfort to a. reduce the quantity of the products that it sells to its franchisees. b. suggest the prices at which its franchisees sell their products. c. terminate the franchisees who cut prices. d. undercut the business of those franchisees who cut prices by opening competing stores in the franchisees' territory. Under Connecticut law, as explained in Case 19.3, Chic Miller's Chevrolet, Inc. v. General Motors Corp. , a franchise agreement can be terminated a. at will, by the franchisor. b. only as set forth in the franchise agreement. c. only for poor economic performance on the part of the franchisee. d. only with good cause. Bob operated a pet grooming shop under a franchise agreement with Clean Pets Corp (CPC). The agreement allowed CPC to terminate the franchise if Bob was fined for cruelty to animals. After an investigation initiated by a customer complaint, Bob was fined for cruelty. CPC terminated the franchise. Bob filed a suit against CPC for wrongful termination. Based on the decision in Case 19.3, Chic Miller's Chevrolet, Inc. v. General Motors Corp., the court will most likely rule in favor of a. Bob, because CPC had no good cause to terminate the franchise. b. Bob, because the fine for cruelty was based on a customer complaint. c. CPC, because a franchisor can terminate a franchise at any time. d. CPC, because the franchise was terminated for good cause. Mia and Nick are employees of Omega Corporation. Mia commits a tort, and Nick commits a crime, within the course and scope of their employment. Omega may be held liable for a. Mia's tort only. b. Mia's tort and Nick's crime. c. Nick's crime only. d. neither Mia's tort nor Nick's crime. Upstate Variety, Inc., is a retail sales corporation that is owned by six shareholders. Upstate is a. a close corporation. b. a national corporation. c. an S corporation. d. a professional corporation. Business Sales, Inc. (BSI), files its articles of incorporation with the appropriate government agency. Least likely to appear in the articles is a. BSI's corporate purpose. b. the minutes of BSI's first organizational meeting. c. the name of BSI's registered agent. d. the value of BSI's shares. Gem Corporation, like other business corporations, issues securities to a. increase its market share. b. increase its visibility. ____ 80. ____ 81. ____ 82. ____ 83. ____ 84. ____ 85. ____ 86. ____ 87. ____ 88. c. obtain financing. d. reduce its production costs. Discount Outlets, Inc., issues bonds. Bonds a. are issued by businesses only. b. are sometimes referred to as "stock with preferences." c. have fixed maturity dates. d. require periodic interest payments from their owners. Cody and Dina form Eagle Corporation. Eagle has a board of directors, a chief executive officer, a chief operating officer, and fifty-two shareholders. Eagle is governed by its a. board of directors. b. incorporators. c. officers. d. shareholders. Sly and Tio incorporate their business as Uno, Inc. The first board of directors may be appointed by Uno's a. employees. b. incorporators. c. officers. d. shareholders. Lon and Meri act as the incorporators for New Corporation. After the first board of directors is chosen, subsequent directors are normally elected by a majority vote of New's a. board of directors. b. incorporators. c. officers. d. shareholders. Owen and Pam are two of ten authorized directors of Quality Company. In most states, the minimum number of Quality directors that would constitute a quorum is a. two. b. five. c. six. d. zero. Kim is a director of Light Service Corporation (LSC). With respect to LSC, Kim's most important right is the right of a. compensation. b. inspection. c. participation. d. service. Irma, Jim, and Kelly are the directors of Liberty Corporation. Liberty has nine officers and forty-six shareholders. Dividends are ordered by the firm's a. board of directors. b. incorporators. c. officers. d. shareholders. Ron, a director of Super Corporation, does not attend a board meeting for three years. During that time, Tina, Super's president, makes improper loans that cost the company $100,000. Ron is most likely a. liable for negligence or mismanagement. b. liable for violation of the business judgment rule. c. not liable because missing meetings is an honest mistake. d. not liable because missing meetings is only poor judgment. Penny owns one share of stock in Quincy Corporation, as evidenced by a stock certificate. Penny loses the certificate. Her ownership of the stock is a. forfeited immediately. ____ 89. ____ 90. ____ 91. ____ 92. b. forfeited within ten days of a third party's claim to ownership. c. forfeited within thirty days if she cannot find the certificate. d. not affected. Lara owns 100 shares of Mighty Company. Mighty issues 10,000 new shares. According to her stock certificates, Lara is entitled to buy another 100 shares at the time of the new issue. This is an example of a. participative rights. b. preemptive rights. c. prerogative rights. d. purgative rights. In all states, Beta Company and other corporations can pay dividends from a. gross profits. b. net profits. c. retained earnings. d. surplus. Kelly transfers shares of stock that she owns in Local Company to Mac. A shareholders' meeting takes place before Mac's ownership is entered in Local's stock book. A vote at the meeting can be cast by a. Kelly and Mac. b. Kelly only. c. Mac only. d. neither Kelly nor Mac. US Products, Inc., limits the sale of its shares by reserving the option to buy any shares offered for resale by its shareholders. This is a. a preemptive right. b. a right of first refusal. c. a shareholder's derivative right. d. a stock-subscription agreement. Fact Pattern 20-1 Ray is a shareholder of Small Business Company (SBC). When the directors fail to undertake an action to redress a wrong suffered by SBC, Ray files a suit on the firm's behalf. ____ 93. Refer to Fact Pattern 20-1. Any damages recovered by Ray's suit will go to a. Ray. b. SBC. c. SBC's directors. d. the state in which SBC is incorporated. ____ 94. Cole is a shareholder of Delta, Inc. Cole will be deemed to have a fiduciary duty to Delta and its minority shareholders if he has a. a restriction on the transferability of his shares. b. a right of first refusal. c. a sufficient number of shares to exercise de facto control. d. owned his shares longer than any other Delta shareholder. Fact Pattern 20-2 Ample Corporation combines its assets and debts with those of Xantha Corporation to form AXCorp. ____ 95. Refer to Fact Pattern 20-2. The formation of AXCorp is a. a consolidation. b. a dissolution. c. a liquidation. d. a merger. ____ 96. Refer to Fact Pattern 20-2. AXCorp acquires a. all of Ample's and Xantha's assets. b. half of Ample's and Xantha's assets. c. none of Ample's and Xantha's assets. d. only assets that Ample and Xantha acquired after their combination was proposed. ____ 97. Refer to Fact Pattern 20-2. AXCorp assumes a. all of Ample's and Xantha's debts. b. half of Ample's and Xantha's debts. c. none of Ample's and Xantha's debts. d. only debts that Ample and Xantha incurred after their combination was proposed. ____ 98. Salt, Inc., wants to acquire or merge with Spice Corporation. The board and the shareholders of Spice are resisting. Salt should a. file an article of acquisition with Spice. b. file a plan of merger with the secretary of state. c. make a tender offer to the shareholders of Spice. d. petition a court for the involuntary dissolution of Spice. ____ 99. Standard Corporation can be compelled to dissolve by its a. creditors. b. customers. c. employees. d. shareholders. ____ 100. Zeta Corporation is in the process of ending its existence. The process by which Zeta's assets will be converted into cash and distributed to its creditors and shareholders is known as a. dissolution. b. receivership. c. termination. d. winding up. Fact Pattern 17-1 Roz and Sara work as clerks in Trina's Hot Clothes Shop. Trina withholds federal taxes from their pay, and controls the methods and details of the performance of their work. Roz and Sara are not authorized to modify the prices or other terms of a sale at the shop. ____ 101. Refer to Fact Pattern 17-1. At the shop, Roz and Sara are a. independent contractors. b. not Trina's agents or employees, or independent contractors. c. Trina's agents and employees. d. Trina's employees only. ____ 102. Refer to Fact Pattern 17-1. Trina hires Unity Cleaning Company to clean the carpets of her shop. Trina gives Unity instructions as to what needs to be cleaned and when. Unity is a. an independent contractor. b. not Trina's agent or employee, or an independent contractor. c. Trina's agent and employee. d. Trina's employee only. ____ 103. Cody contracts with Drew to act as her agent in a fraudulent marketing scheme. Cody does not successfully complete the scheme. Drew can recover from Cody for a. breach of contract. b. breach of implied warranty. c. breach of the duty of performance. d. none of these choices. ____ 104. Irma retains Jerry as her authorized agent, unaware that Jerry is a minor. Jerry enters into a contract with Ken on Irma's behalf. The contract is a. binding on Irma. b. binding on Jerry and Ken, but not Irma. c. binding on Ken, but not Irma or Jerry. d. void. ____ 105. Jill introduces Kelly to her friends as "my associate." Kelly purports to act as Jill's agent in several business transactions with those friends. If Jill is liable for Kelly's actions, it will be under a. the doctrine of estoppel. b. the equal dignity rule. c. the fiduciary principle. d. the good faith statute. ____ 106. Macro Corporation and National Purchasing Company may create an agency agreement a. by conduct, in writing, or orally. b. by conduct or orally only. c. in writing only. d. under no circumstances. ____ 107. Jay holds himself out as possessing special accounting skills. As an agent, he must exercise the degree of skill or care expected of a. a person having those skills. b. an average, unskilled person. c. a reasonable person. d. the principal. ____ 108. Dan, an agent for Eve, signs an agreement with Fred on Eve's behalf but neglects to tell Eve that the agreement requires the payment of a certain tax. The government prosecutes Eve for failing to pay the tax. Eve is a. liable, because Dan's knowledge is imputed to Eve. b. liable, because Fred's knowledge is imputed to Eve. c. not liable, because Dan did not tell Eve about the tax. d. not liable, because Fred did not tell Eve about the tax. ____ 109. Prospective Enterprises (PE) employs Quinn to buy property for a possible commercial development. Quinn secretly buys some of the property and sells it to PE at a profit. Quinn has breached a. no duty. b. the duty of accounting. c. the duty of loyalty. d. the duty of notification. ____ 110. Internet Services, Inc., employs Joe as an agent. During the agency, Joe acquires new skills. After the termination of the relationship, Joe uses those skills in a new job. Joe has breached a. no duty. b. the duty of loyalty. c. the duty of notification. d. the duty of performance. ____ 111. Regional Investment Corporation (RIC) hires Sam, a real estate agent, to locate investment properties for RIC. Sam learns of a warehouse available for $100,000, buys it himself, and offers it to RIC for $200,000. Under the reasoning of the court in Case 17.3, Cousins v. Realty Ventures, Inc., Sam a. breached the agent's fiduciary duties to the principal. b. did nothing wrong. c. failed to take advantage of a business opportunity. d. set an unreasonable price based on current market value. ____ 112. Pam is an agent for Refined Chemicals Corporation. Refined Chemicals owes Pam the duty of a. accounting. ____ 113. ____ 114. ____ 115. ____ 116. ____ 117. ____ 118. ____ 119. ____ 120. b. obedience. c. performance. d. safe working conditions. Regional Products, Inc., hires Sam to act as its agent. Tina sues Regional for Sam's negligent conduct. Regional's right to sue Sam for an equal amount of damages is the right of a. avoidance. b. cooperation. c. indemnification. d. reimbursement. Glen is an agent for High Flight, Inc. On High Flight's behalf and at its request, Glen pays Ilsa for certain plane maintenance and repair services. Glen's right to obtain the amount of those payments from High Flight arises under the principal's duty of a. avoidance. b. cooperation. c. indemnification. d. reimbursement. Ann is a businessperson acting as an agent for Business Sales, Inc. (BSI). In an ordinary business situation, Ann a. can contract on BSI's behalf without further authority or ratification. b. cannot contract on BSI's behalf. c. must obtain BSI's written authority to enter into a contract for BSI. d. must obtain BSI's later ratification of a contract entered into for BSI. Quick Supplies Company (QSC) requires its customers to pay by check. Ron, a QSC driver, tells customers on his route that they can pay him with cash. When QSC learns of Ron's collections, it takes no action to stop it. Ron steals some of the cash. QSC may be suffer the loss under the doctrine of a. apparent authority. b. equal authority. c. express authority. d. implied authority. Alpha Sales, Inc., employs Britney as a sales agent. Alpha gives Britney a furnished office and an expense account. Consumer Retail Company (CRC) orders goods from Britney, who fills the order with goods from Deal EZ Corporation. The goods are defective. CRC may recover damages from Alpha on the ground of a. apparent authority. b. equal authority. c. express authority. d. implied authority. Elin, an agent for First Credit Corporation (FC), enters into an unauthorized contract with Great Expectations, Inc. (GE), purportedly on FC's behalf. This contract will be enforceable if it is ratified by a. any third party. b. Elin. c. FC. d. GE. Aron, an agent for Bright Sales, Inc. (BSI), enters into an unauthorized contract with Consolidated Corporation (CC) purportedly on behalf of BSI, which refuses to perform. Aron is liable to a. BSI and CC for breach of contract. b. BSI for misrepresentation. c. CC for misrepresentation. d. no one. Elle is an agent for Fresh Food Corporation. Elle makes a misrepresentation when entering into a contract on behalf of Fresh with Gala Grocery Stores, Inc. Gala a. is estopped from performing the contract. b. may rescind the contract. c. must perform the contract. d. must ratify the contract. ____ 121. Eve hires Frank to do some remodeling work in her office. The relationship between Eve and Frank is client and independent contractor. While working, Frank drops a tool on Gary, Eve's customer, causing an injury. Eve is a. liable to Gary because he was injured on Eve's property. b. liable to Gary unless Frank's act is intentional. c. not liable because Frank is an independent contractor. d. not liable to Gary because Frank is Eve's employee. ____ 122. Gil is a purchasing agent for H&H Ranch with the authority to buy cattle at a certain auction. After the cattle have been bought, the agency relationship terminates a. automatically. b. following notice to all actual cattle sellers. c. following notice to all potential cattle sellers. d. following published notice in a local newspaper. ____ 123. Ida hires Jim, a real estate broker, to act as her agent to sell her land for $10,000. Oil is discovered beneath the land, causing its market value to increase one hundred-fold. The agency agreement is likely a. still in force if Ida gives Jim additional consideration. b. still in force if Jim does not mention the oil to prospective customers. c. terminated by mutual consent of the parties. d. terminated by operation of law. Fact Pattern 17-2 Quinn employs Roy as his authorized business agent on April 1. Quinn's son Stan petitions a court to declare Quinn mentally incompetent. The court grants Stan's request on May 1. ____ 124. Refer to Fact Pattern 17-2. Roy enters into a contract on Quinn's behalf on May 15, before Roy knows of the court's action. The contract is a. binding on Quinn. b. binding on Roy. c. binding on Stan. d. void. ____ 125. Mary hires Nina, a real estate broker, to sell her warehouse. The warehouse burns down before being sold. Nina is a. Mary's agent until Mary's insurer pays Nina's commission. b. Mary's agent until the burnt warehouse is sold. c. Mary's agent until the warehouse is rebuilt and sold. d. no longer Mary's agent. ____ 126. Ilsa works as a clerk for Java Caf at minimum wage. The minimum-wage rate is revised a. annually, according to the rate of inflation. b. every seven years, according to changes in the cost of living. c. periodically by Congress. d. whenever the president issues an executive order to revise the rate. ____ 127. Kyle works as a forklift operator for Local Warehouse Company. Assuming that Kyle meets other requirements, the maximum number of hours that he can work per week without overtime pay is a. thirty-nine. b. forty. c. forty-one. d. unlimited. ____ 128. To fulfill a temporary contract, Alpha Communications Company needs some employees to work overtime. All of the following employees may work more than forty hours per week except a. Beth, who is under sixteen and on spring break. b. Carl, who is an executive. c. Diane, who is a professional. d. Earl, who is an outside salesperson. ____ 129. Jay works as an employee for Kitchen Appliances, Inc. (KAI), which is subject to the Occupational Safety and Health Act. Jay is killed in a work-related accident. To avoid a fine, KAI must notify a. the Social Security Administration. b. the U.S. Department of Health and Human Services. c. the U.S. Department of Justice. d. the U.S. Department of Labor. ____ 130. Ken works for Local Excavation Corporation (LEC). While operating a backhoe, Ken suffers an injury. Ken will be compensated under state workers' compensation laws only if a. Ken does not have medical insurance. b. Ken is completely disabled. c. Ken's injury was accidental and occurred on the job or in the course of employment. d. Ken successfully sues LEC. ____ 131. Alex is an employee of Bigg Corporation. To help pay for employees' loss of income on retirement, contributions are required by law to be paid by a. Alex and Bigg. b. Alex only. c. Bigg only. d. neither Alex nor Bigg. ____ 132. Lila retires from her job as a systems analyst for Marketing Solutions, Inc. Lila's Social Security benefits are fixed by statute and will a. automatically increase with the cost of living. b. increase with the cost of living only when the statute is "re-fixed." c. increase with the cost of living whenever revenues increase. d. not increase with the cost of living. ____ 133. Luke is a maintenance employee for Natural Products Company. Under the Employee Retirement Income Security Act, Luke's contributions to his pension plan vest a. after five years of employment. b. after five years of retirement. c. five years before retirement. d. immediately. ____ 134. Mia works as an employee for National Interstate Industries, Inc. (NIII). Owen, who is unemployed, collects unemployment compensation. This is provided by a tax on a. Mia and Owen only. b. Mia, NIII, and Owen. c. NIII only. d. not Mia, NIII or Owen. ____ 135. Allied Industries, Inc., wants to monitor its employees' electronic communications. To avoid liability under laws related to employee monitoring, Allied should discuss the monitoring with a. no one. b. the employees. c. the government. d. the public generally. ____ 136. Security Guards, Inc. (SGI), is a security service firm. SGI may subject its employees to a. drug tests and lie-detector tests. b. drug tests only. c. lie-detector tests only. d. neither drug tests nor lie-detector tests. ____ 137. Leo works as an employee for Maxim Corporation, a private employer. Maxim announces that it will start random drug testing of its employees. To resist this policy, Leo may look for protection under a. a federal administrative agency rule. b. a state constitution or statute. c. the U.S. Constitution. d. none of these choices. ____ 138. A+ Accounting Corporation, a private employer, handles bookkeeping for small employers. In most circumstances, with exceptions, federal law clearly prohibits Omega from subjecting its employees to a. AIDS tests. b. electronic monitoring of business communications. c. genetic tests. d. lie-detector tests. ____ 139. AAA Personnel, Inc., discharges Barb, who feels the discharge is due to her religious beliefs. She decides to file an employment-discrimination suit against AAA. She should contact the Equal Employment Opportunity Commission a. after filing the suit. b. any time or no time. c. at the same time the suit is filed. d. before filing the suit. Fact Pattern 18-1 Flo works for General Construction Contractors (GCC) but is the only woman on her shift. The male workers often play minor pranks on each other. Flo attempts a prank. Hank, her supervisor, fires her, because "GCC doesn't hold with pranks." ____ 140. Refer to Fact Pattern 18-1. Flo files a suit against GCC under Title VII. To succeed, Flo must show that Hank's statement was a. a legitimate, nondiscriminatory reason for Flo's discharge. b. also her feeling about pranks at GCC. c. only a pretext for Flo's discharge. d. unofficial GCC policy. ____ 141. Refer to Fact Pattern 18-1. To successfully defend itself in Flo's suit, GCC must show that Hank's statement was a. a legitimate, nondiscriminatory reason for Flo's discharge. b. not Flo's feeling about pranks at GCC. c. only a pretext for Flo's discharge. d. unofficial GCC policy. ____ 142. Auto Repair Shop does not take any action to prevent sexual harassment of its employees. Auto Repair may be liable for such harassment by a. a customer only. b. a customer or an employee. c. an employee only. d. not a customer or an employee. ____ 143. Eve is twenty-five years old, Frank is fifty years old, and both work for Growing Business, Inc., which has thirty employees. Parties protected under the Age Discrimination in Employment Act include a. Eve and Frank. b. Eve only. c. Frank only. d. neither Eve nor Frank. ____ 144. Jill is thirty-five years old, Kyle is forty-five years old, and both work for Little Company, which has ten employees. Parties protected under the Age Discrimination in Employment Act include a. Jill and Kyle. b. Jill only. c. Kyle only. d. neither Jill nor Kyle. ____ 145. Macro Corporation replaces Neal, a fifty-two-year-old employee, with Olivia. Neal files a suit against Macro under the Age Discrimination in Employment Act. To establish a prima facie case, Neal must show that he was discharged under circumstances that give rise to a. a certainty of discrimination. b. an impossibility of discrimination. c. an inference of discrimination. d. an unlikelihood of discrimination. ____ 146. Nick is a registered Democrat and Opal has AIDS. Based on this information, members of protected classes include a. Nick and Opal. b. Nick only. c. Opal only. d. neither Nick nor Opal. ____ 147. Dan has severe myopia, which is correctable with lenses, Eve is blind, and both work for First National Bank. Considered disabled under the Americans with Disabilities Act a. are Dan and Eve. b. is Dan only. c. is Eve only. d. is neither Dan nor Eve. ____ 148. Dick is easily embarrassed, Elin is easily sunburned, and both work for First City Bank. Considered disabled under the Americans with Disabilities Act a. are Dick and Elin. b. is Dick only. c. is Elin only. d. is neither Dick nor Elin. Fact Pattern 18-2 Beth, who has a disability, is an employee of Corporate Office Company (COC). After the installation of new doors on COC's building, Beth finds it nearly impossible to get in and out. For repeatedly failing to be on time, COC replaces Beth with Dian, who does not have a disability. ____ 149. Refer to Fact Pattern 18-2. To successfully defend against Beth's claim, COC will have to show that a. Beth consistently failed to meet the essential requirements of her job. b. COC cannot make changes to the doors without undue hardship. c. Dian is qualified for Beth's position. d. the doors were not installed as an act of intentional discrimination. ____ 150. Capital Corporation requires its employees to have a high school diploma. Del files a suit against Capital and shows that this requirement has a discriminatory effect. Capital, claims that there is a connection between a high school education and job performance. Capital has a. an after-acquired evidence defense. b. a bona fide occupational qualification defense. c. a business necessity defense. d. no defense.
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