Foundation of Legal Environment of Business Flashcards by sophanet phoeun

A blank_____ is created when two or more persons agree to place their money, labor, or skills in a business and to share the profits and losses.

Asole proprietorship

Bgeneral partnership

Climited partnership

DC corporation

general partnership

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A blank_____ corporation is owned by a limited number of shareholders.

Apublic

Bprivate

Cclose

Dnone of the responses are correct

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A member of the board who also serves as an officer is a(n) blank_____ director.

Ainside

Binterested

Coutside

Demployed

inside

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The rules that govern the internal operation of a corporation are called the blank_______.

Acorporate charter

Bbylaws

Carticles of incorporation

Dcorporate articles

bylaws

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Small corporations can avoid double taxation by electing to be treated as a(n) blank_______.

AC corporation

Bclose corporation

CLLC

DS corporation

S corporation

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A blank_____ is a public offer to all shareholders of a corporation to buy their shares at a stated price, usually higher than the market price.

Atender offer

Bleveraged buyout

Ctarget bid

Dmerger

tender offer

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In a blank_____ merger, the shares in the disappearing corporation are automatically converted into shares in the surviving corporation.

Acash out

Bnon-cash

Cfreeze out

Dliquidation

non-cash

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In a blank_____, a stock purchase is financed by debt.

Acash out merger

Bfreeze out acquisition

Cleveraged buyout

Dnone of the responses are correct

leveraged buyout

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A partnership is not automatically dissolved upon a partner’s blank______, and the partners holding a majority of the partnership interests may elect to continue the general partnership.

Adeath

Bbankruptcy

Cwithdrawal

Dall of the responses are correct

all of the responses are correct

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The blank_____ doctrine prevents a third party who acts as if it were doing business with a corporation from later claiming that the corporation is not really a corporation.

Ade jure corporation

Bde facto corporation

Ccorporation by estoppel

Dalter ego

corporation by estoppel

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Which of the following statements is NOT true regarding the advantages and disadvantages of a sole proprietorship?

AA sole proprietorship can be created without formal agreements or state filings.

BThe proprietor reports income from the business on a personal tax return.

CThe proprietor alone bears liability for the losses.

DIt is usually easy for sole proprietorships to raise capital.

It is usually easy for sole proprietorships to raise capital.

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Which of the following statements is NOT true regarding limited partnerships?

AGeneral partners of a limited partnership remain jointly and severally liable for partnership obligations.

BLimited partners assume no liability for partnership debts beyond the amount they have contributed.

CLimited partners are responsible for the management of the partnership.

DLimited partnerships are often used to raise capital.

Limited partners are responsible for the management of the partnership.

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Which of the following requirements is NOT required by a corporation to qualify for S corporation status?

AThe corporation must have only one class of stock.

BThe corporation must file a timely election to be treated as an S corporation.

CThe corporation must have no more than twenty-five shareholders.

DThe corporation generally may not own more than 80 percent of another corporation.

The corporation must have no more than twenty-five shareholders.

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A blank_____ combines the tax advantages of a pass-through entity with the limited liability advantages of a corporation.

limited liability company

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The blank_____ set forth the steps that must be taken to establish a corporation in that state.

AUniform Federal Rules

Bcorporate statutes of each state

Ccorporate bylaws

Dnone of the responses are correct

corporate statutes of each state

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If incorporators cannot show substantial compliance with statutes regarding incorporation but can show that they were unaware of any defect and acted in good faith, a court may treat the entity as a(n) blank_____.

Ade jure corporation

Breal corporation

Cde facto corporation

Dequitable corporation

de facto corporation

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_____ law legal systems primarily rely on case law and precedents.

ACommon

BCivil

CStatutory

DCodified

Common

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The Seventh Amendment to the U.S. Constitution guarantees the right to a jury trial blank______.

A”in all legal suits”

B”in all civil and criminal suits”

C”in suits at common law”

D”in all civil and criminal suits” and “in suits at common law”

“in suits at common law”

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_____ avoids renegotiation of treaties by allowing the president to negotiate trade agreements and then submit them for an up or down vote by Congress with no amendments permitted.

ATreaty approval authority

BExecutive privilege

CForeign affairs priority

DFast-track negotiating authority

Fast-track negotiating authority

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Through the process of blank_____, a nation that was NOT an original party to a treaty can elect to participate in a treaty at a later time.

Aratification

Baccession

Csigning

Dapproval

accession

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_____ is the process by which a country asserts a right to regulate activities that occur beyond its borders.

AInternationalization

BNationalization

CExtraterritoriality

DNone of the above.

Extraterritoriality

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_____ tariffs require the importer to pay a percentage of the value of the imported merchandise.

AAd valorem

BAd hoc

CHarmonized

DCustoms valuation

valorem

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Exports are controlled by means of export blank_____.

Aduties

Blicenses

Csubsidies

Dcustoms valuation

licenses

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A product is blank_____ when it is sold abroad below the current selling price in the exporter’s home market or below the exporter’s cost of production.

Asubsidized

Bdumped

Cunderpriced

Dundervalued

dumped

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\_\_\_\_\_ is the principal U.S. statute addressing unfair foreign practices affecting U.S. exports of goods or services. ASection 301 of the Trade Act of 1974 BSection 502 of the Trade Act of 1990 CThe Unfair Export Limits Act DThe International Control Act

Section 301 of the Trade Act of 1974

The North American Free Trade Agreement provides for elimination of barriers to trade between what countries? AThe United States and Mexico only. BThe United States, Canada, Mexico, and Brazil. CThe United States and all South American countries. DThe United States, Canada, and Mexico.

The United States, Canada, and Mexico.

A blank\_\_\_\_\_ is created when a group of states reduce or eliminate tariffs between themselves but maintain their own individual tariffs as to other states. Acustoms union BCaribbean Basin Initiative Cfree trade area Dmost favored nation

free trade area

Courts apply the principles of blank\_\_\_\_\_ to determine which country's laws should be used to interpret an international contract. Athe United Nations CISG Bconflict of law Cinternational law Ddomestic law

conflict of law

A contract dispute which is heard by a court without reference to a prior arbitration is known as a(n) blank\_\_\_\_\_\_ review. Aappellate Bad hoc Carbitration Dde novo

de novo

Under the principle of blank\_\_\_\_\_, a court will enforce another country's judgments under certain conditions. Acomity Bharmony Cact-of-state Dconciliation

comity

\_\_\_\_\_ is a process used mainly in the area of public international law whereby a third party, often a disinterested government, brings the parties together by establishing communication and providing a site where the parties can meet, often in secret. APublic involvement BGood offices CInternational involvement DBest transactions

Public involvement

Good offices

\_\_\_\_\_\_\_\_ damages compensate a party for losses that occur as a foreseeable result of the breach. AIncidental BReliance CRestitution DConsequential

Consequential

Contract law comes from which of the following? ACase law BStatutes CTradition DAll the responses are correct

All the responses are correct

Which of the following is not one of the basic elements for formation of a valid contract? AConsideration BPromissory estoppel CAn offer and acceptance DA legal purpose

Promissory estoppel

Which of the following is true regarding acceptance? AIn the absence of a provision in an offer regarding how acceptance is to be made, acceptance is effective upon dispatch into a mailbox. BAcceptance is never effective until it is received. CAn offeror may not by law specify that an offer can be accepted only by facsimile to a stated fax number and that the acceptance is not effective until actually received. DAn offeror may revoke an offer so long as the revocation is made before an acceptance is received.

In the absence of a provision in an offer regarding how acceptance is to be made, acceptance is effective upon dispatch into a mailbox.

A blank\_\_\_\_\_\_\_\_\_ contract is a promise given in exchange for another promise. Aunilateral Bbilateral Cmutual Dcollateral

bilateral

A third-party beneficiary is someone who is not Aa legal and recognized type of beneficiary. Bintended to benefit from the contract. Ca party to the original contract. Dintended to enforce the contract.

a party to the original contract.

Liquidated damages are damages that Apunish the breaching party. Bfluctuate with the market conditions. Care an estimate of the damages likely to be sustained from the breach. Dnone of the above

are an estimate of the damages likely to be sustained from the breach.

An agreement between two parties that provides that the seller will sell all of a product that he produces to the buyer is called a(n) Aillusory promise Brequirements contract Coutput contract Dfulfillment contract

output contract

Under traditional common law, the acceptance must be the blank\_\_\_\_\_\_\_\_ of the offer. Aessential terms Bconsideration Cunderstanding Dmirror image

mirror image

Under the doctrine of blank\_\_\_\_\_\_\_\_, a court may invalidate an agreement if one party had sufficient influence and power over the other as to make genuine assent impossible. Afraud Bmistake Cundue influence Ddetrimental reliance

undue influence

Which of the following does not generally make a contract voidable? AFraud BDuress CUnilateral mistake of fact DMisrepresentation

Unilateral mistake of fact

A(n) blank\_\_\_\_\_\_\_\_ is any agreement to accept performance that is different from what is called for in the contract Aaccord and satisfaction Banticipatory repudiation Cfrustration of purpose Dmutual rescission

accord and satisfaction

Which of the following is true regarding a mistake of judgment? AIt is a valid defense to enforcement of a contract. BIt is not a valid defense to enforcement of a contract. CWhether it is a valid defense to enforcement of a contract depends upon the substantiality of the mistake. DWhether it is a defense to enforcement of a contract depends upon: (1) the substantiality of the mistake, (2) whether the risks were allocated, and (3) timing.

It is not a valid defense to enforcement of a contract.

Which of the following is a doctrine that may excuse the government from performance on a contract due to legislative or executive acts? AThe sovereign acts doctrine. BThe legislative and executive acts doctrine. CThe separation-of-powers doctrine. DThe governmental privilege doctrine.

The sovereign acts doctrine.

Under the doctrine of blank\_\_\_\_\_\_\_\_, a court may order restitution if one party has received a benefit for which it has not paid when there was no contract between the parties. Amutuality of obligation Blaesio enormis Cquantum meruit Dpre-contractual liability

quantum meruit

To which of the following does article 2 of the UCC apply? AThe sale of goods. BThe rendering of services. CThe sale of land. DBoth the sale of goods and the rendering of services.

The sale of goods.

What are items of personal property that are attached to real property and cannot be removed without substantial damage called? AConnectors BRelaters CEntanglements DFixtures

Fixtures

Under the UCC, which statement is not true regarding a buyer’s right to reject nonconforming goods? AThe buyer may reject any or all of the goods. BThe right to reject the goods can be waived inadvertently. CThe buyer may treat the goods as if it owned them. DA buyer who has taken possession of goods must hold the goods for a time sufficient to permit the seller to remove them.

The buyer may treat the goods as if it owned them.

Under the UCC, a failure to perform is excused under the doctrine of Aimpossibility Bcommercial impossibility Ccommercial impracticability Dconsumer impracticability

commercial impracticability

Under the Convention on Contracts for the International Sale of Goods (CISG), an offer becomes effective when ## Footnote Athe offeror sends it Bit reaches the offeree Cthe offeree reads it Dthe offeree replies

it reaches the offeree

Under the UCC statute of frauds, which of the following terms must be in a writing order to satisfy the statute? AThe price BThe quantity CThe identity of the parties DThe time and place for delivery

The quantity

Which of the following statements best describes an offer under the UCC? AAn offer is not defined by the UCC. BAn offer is an invitation to buy or sell between merchants. CAn offer is any writing sufficient to describe the goods. DAn offer is contained in the standard business forms.

An offer is not defined by the UCC.

Which of the following is governed by Article 2 of the UCC? AA contract for sale of a commercial building. BA contract for sale of office supplies. CAn employment contract. DA life insurance contract.

A contract for sale of office supplies.

UCC Section 2-319 expressly authorizes the buyer and seller to allocate the risk of blank\_\_\_\_\_\_\_\_ between them as they see fit. Adamages Bspecific performance Cmodification Dloss

loss

When the seller provides the buyer with a document enabling it to pick up goods held at an independent warehouse, the risk of loss passes to the buyer Awhen the goods are picked up by the buyer. Bwhen the contract of sale is signed. Cwhen the buyer receives the document entitling it to pick up the goods. Dwhen the buyer pays for the goods

when the buyer receives the document entitling it to pick up the goods.

A contract is blank\_\_\_\_\_\_\_\_ if its terms are unduly harsh or oppressive or unreasonably favorable to one side. Asubstantively unconscionable Bprocedurally unconscionable Cprocedurally impracticable Dsubstantively impracticable

substantively unconscionable

Which of the following is an example of a statement made by a salesperson that would be considered “puffing”? AThis car will get 35 miles per gallon. BThis is a genuine diamond ring. CThis is an original work of art. DThis copier is the best in the business.

This copier is the best in the business.

If all parties are merchants, additional provisions in an acceptance automatically become part of the contract unless Athe offer expressly limits acceptance to the terms of the offer. Bthe new terms materially alter the original offer. Cthe party making the original offer notifies the other party within a reasonable time that it objects to the new terms. Dall the responses are correct.

all the responses are correct.

Which of the following will not allow a consumer to recover under a breach of warranty? AThe buyer made inappropriate use of the goods. BThe goods were defective at the time of the sale. CThe loss or injury was caused by the defect. DThe seller has no affirmative defenses.

The buyer made inappropriate use of the goods.

If a buyer wrongfully cancels a contract under the UCC, the seller may not recover Athe difference between the market price and the unpaid contract price. Bdamages that are adequate to put the seller in as good a position as performance would have. Cdamages and expenses saved because of the buyer’s breach. Dthe profit that it would have made from full performance.

damages and expenses saved because of the buyer’s breach.

\_\_\_\_\_\_\_\_ do not relieve a contracting party from their responsibilities under the UCC doctrine of commercial impracticability. AWars BMarket fluctuations CEmbargoes DNatural disasters

Market fluctuations

A(n) blank\_\_\_\_\_\_\_\_ contract occurs when one party is induced to enter a contract on a “take it or leave it” basis. Aadhesion Bmerchants Coutput Drequirement

adhesion

Which of the following is not true under Magnuson-Moss Warranty Act? AThe Act requires a supplier of consumer products to give a written warranty. BThe Act applies only when a seller chooses to give a written warranty. CThe seller must state whether the warranty is a full or a limited warranty. DThe Act is federal law.

The Act requires a supplier of consumer products to give a written warranty.

Which of the following is not a rationale of strict product liability? AManufacturers should not escape liability simply because they typically do not sign a formal contract with the end-user. BThe law should protect consumers against unsafe products. CManufacturers should not escape liability simply because they are negligent. DManufacturers and sellers of products are in the best position to bear the costs of injuries caused by their products.

Manufacturers should not escape liability simply because they are negligent.

Which of the following is true regarding the Restatement (Third) of Torts? AIt imposes strict liability for manufacturing defects. BIt imposes a standard predicated on negligence for design defects and defects based on inadequate instructions or warnings. CIt imposes strict liability for manufacturing defects, and it also imposes a standard predicated on negligence for design defects and defects based on inadequate instructions or warnings. DThere is no Restatement (Third) of Torts.

It imposes strict liability for manufacturing defects, and it also imposes a standard predicated on negligence for design defects and defects based on inadequate instructions or warnings.

A product that was sold without a component part properly fastened to the product is an example of a blank\_\_\_\_\_\_\_\_ defect. Adesign Bmanufacturing Cdefective warning Dnone of the above

manufacturing

If a product is unavoidably unsafe, the blank\_\_\_\_\_\_\_\_ determines whether the dangerous product is also defective. Aadequacy of the warning label Bobviousness of the risk Ccare in design and manufacture Dextent of the danger

adequacy of the warning label

Which of the following restricts the statute of limitations as a defense in a product liability lawsuit? AA revival statute. BA liability statute. CA repose statute. DBoth a revival statute and a repose statute.

A repose statute.

Which of the following is true regarding defenses in a products liability action? AThe defendant in a product liability case may not raise the defense of assumption of risk. BDefenses available in product liability actions vary from state to state. CUnder certain circumstances, state product liability law is preempted by federal law. DBoth that defenses available in product liability actions vary from state to state; and that under certain circumstances, state product liability law is preempted by federal

Both that defenses available in product liability actions vary from state to state; and that under certain circumstances, state product liability law is preempted by federal law.

Under the doctrine of blank\_\_\_\_\_\_\_\_\_, when a person voluntarily and unreasonably assumes the risk of a known danger, the manufacturer is not liable for any resulting injury. Aassumption of risk Bcomparative negligence Ccontributory negligence Dassumption of harm

Under the doctrine of blank\_\_\_\_\_\_\_\_\_, the plaintiff’s damages in a strict liability action may be reduced by the degree to which his or her own negligence contributed to the injury. Acomparative fault Bcontributory negligence Cassumption of risk Dboth comparative fault and contributory negligence

comparative fault

Under the rule applied in most states, which of the following justifies holding an acquiring corporation liable to a party injured by a defect in a product sold by the acquired corporation? AThe new company is a continuation of the predecessor corporation. BThe acquiring corporation is in a better position to bear the risk than the consumer. CThe transaction was entered into to escape liability. DAll of the responses are correct.

The transaction was entered into to escape liability.

To prove blank\_\_\_\_\_\_\_\_ in a product liability case, the injured party must show that the defendant did not use reasonable care in the design or manufacture of its product. Anegligence Bstrict liability Cbreach of warranty Ddefect

strict liability

The preemption defense involves certain blank\_\_\_\_\_\_\_\_, which set minimum safety standards for products. Afederal laws Bcourt decisions Cstate laws Dprivate guidelines

federal laws

A statute of blank\_\_\_\_\_\_\_\_ prevents recovery for product injuries by limiting the time period for recovery from the date when the injury occurred. Alimitations Brepose Crecovery Dall of the above

limitations

On a failure to warn claim, adequate warnings and instructions for a product’s safe use can shield a manufacturer from liability for a Aproperly manufactured and designed product. Bdefectively designed product. Cdefectively manufactured product. Dall of the responses are correct.

properly manufactured and designed product.

When multiple manufacturers of identical products are sued in product liability, some courts apportion liability under the blank\_\_\_\_\_\_\_\_ doctrine. Arespondeat superior Bvicarious liability Cmarket-share liability Denterprise liability

market-share liability

Which of the following members of the chain of distribution cannot be strictly liable in a products lawsuit? AThe manufacturer. BThe wholesaler. CThe retailer. DThe occasional seller.

The occasional seller.

The blank\_\_\_\_\_\_\_\_\_ defense shields a manufacturer from liability for a defective design if no safer product design is generally recognized as being possible. Acontractor Binnovative Cstate-of-the-art Dlack of foreseeability

Cstate-of-the-art

The government-contractor defense to product liability will not apply if the Aproduct was produced according to manufacturer specifications. Bmanufacturer possessed less knowledge about the specifications than the government. Cmanufacturer exercised proper skill and care in production. Dmanufacturer did not deviate from the specifications.

product was produced according to manufacturer specifications.