LAW 531 ACTUAL FINAL EXAM

1) Which of the following is a distinguishing feature of a common law legal system?

A. Requiring guilt be proven beyond a reasonable doubt
B. The sole source of law is a comprehensive civil code
C. An appeal process
D. The making of law by the judges and the following of precedent

2) Which best describes the types of agency authority held by officers of a

corporation?
A. Vicarious authority
B. Express and obvious authority
C. Implied and apparent authority only
D. Express, implied, and apparent authority

3) If an LLC fails to follow formalities such as keeping minutes of meetings, which of

the following is true?

A. Only the managers of a manager-managed LLC will lose limited liability.

B. All members will lose their limited liability.
C. This failure will not result in imposing personal liability on any
member.
D. Only the parties responsible for the failure will lose limited liability.
Answer Rationale: Limited Liability Companies are not required to maintain the
formalities of corporation.

4) Martha started a flower shop as a sole proprietor. After 1 year, she was forced to
close the shop because business was so bad. At that time, the business assets
totaled $50,000, but the business liabilities totaled $125,000. Which of the following
statements is true?

A. Martha is personally liable for the additional $75,000.

B. Marthas business creditors can collect only the $50,000 of business
assets.
C. Marthas business creditors can collect only the $50,000 now, but if
Martha ever goes into business again, they can get the assets of the new business.
D. Once Martha terminates the sole proprietorship, the business creditors
cannot even get the $50,000.

5) Partners of a general partnership

A. are protected from litigation against the partnership by statute

B. are liable for the obligations of the partnership only to the extent of their
capital contributions
C. do not have to pay taxes on the profits of the partnership that are
distributed to them
D. are liable for all the obligations of their partnership

6) Which of the following forms of alternative dispute resolution allows both parties
to see the strengths and weaknesses of both sides of the case through the
presentation of evidence?

A. Negotiated settlement
B. Minitrial
C. Mediation
D. Conciliation

Answer Rationale: Conciliation, mediation, and negotiated settlement do not involve

the presentation of evidence.
7) A ___________ is a court-appointed party who conducts a private trial and renders
a judgment.

A. fact-finder
B. arbitrator
C. judicial referee
D. negotiator

8) What is a form of alternative dispute resolution that is often used when the
parties involved do not want to face one another?

A. Arbitration
B. Fact-finding
C. Minitrial
D. Conciliation

9) Which of the following is true regarding mediation?

A. A mediator often meets with both parties at the same time.

B. A settlement agreement is never reached with a mediator.
C. A mediator does not make a decision or award.
D. If a settlement agreement is not reached in mediation, then the parties
hire a new mediator.

10) There are no accountants on the board of the Oriole Corporation, a privately
held corporation. The board routinely relies on a Certified Public Accountant (CPA) to
explain the financial situation of the corporation. The board does not do an
independent analysis of the CPAs report. In these circumstances, the board is

A. violating a duty of loyalty

B. violating a duty to exercise due care
C. violating the business judgment rule
D. not violating any duty

11) Self-dealing by a director of a corporation can best be described as

A. A breach of a director's duty of notification

B. A breach of a directors duty of care
C. A breach of the Business Judgment Rule
D. There was no breach of duty
Answer Rationale: Directors do have duties to the corporation. The good business
judgment rule deals primarily with third parties outside the corporation. The duty of
notification is not an issue of self-dealing.
12) Which of the following is likely to be a breach of a corporate officers or
directors duty of care?

A. Failing to anticipate a precipitous drop in consumer demand of the

companys product
B. Failing to make a reasonable investigation of relevant facts
C. Failing to predict the unexpected startup of a new competitor
D. Failing to foresee a sudden rise in the interest rate

13) In what ways may officers and directors be protected by the corporation from
liability for actions taken as an officer or director?
A. The officer or director must purchase personal liability insurance to cover
such losses.
B. Have the corporation purchase liability insurance and indemnify
the officers and directors.
C. Officers and directors cannot be protected from liability.
D. Officers and directors are automatically protected from liability by virtue
of corporate.

14) If a plaintiff voluntarily participates in a risky activity that results in injury, what
is the most likely defense to a claim that the plaintiff assumed the risk?
A. Contributory negligence
B. Defendant was negligent per se
C. Defendant assumed the risk under the danger invites rescue
doctrine
D. Comparative negligence
Answer Rationale: Contributory negligence and comparative negligence are
alternative legal doctrines to determine how risk is allocated; they do not directly
address the issue of assumption of the risk. Negligence per se is not necessarily
involved in assumption of the risk cases.
15) Mark is the treasurer of Sky-Hi Tech Corporation and, as such, he is responsible
for protecting the assets of the corporation. One of Marks subordinates, Jill, is in
charge of reconciling the monthly corporate bank statements. Over a period of
several months, Jill embezzled a large amount of money from Sky-Hi Tech, covering
up the theft using her bank reconciliations. If Mark had adequately supervised Jill,
she could not have embezzled this money. Marks actions (or inactions) constitute a
breach of his duty of

A. due care
B. obedience

C. loyalty
D. good business judgment

16) Barry buys a new sports car. The car sits low to the ground and because of the
styling, visibility to the rear is limited. About a month after Barry buys the car, he
backs over his pet poodle as he is leaving for work. In his strict liability suit against
the car manufacturer, Barry will

A. win because driving a sports car is an inherently dangerous activity

B. win on the basis of design defect
C. win on the basis of packaging defect because the car could have been
packaged in a differently styled body
D. lose because he assumed the risk of backing up in a car when he
could not see to the rear

17) If a judge rules that a party lost its case because of the Statute of Frauds, the
judge has essentially stated which of the following?

A. The losing party purposely deceived the other party about a material fact.
B. The losing party will not be allowed to introduce evidence to contradict a
written agreement.
C. The losing party cannot enforce an oral contract that should have
been in writing.
D. The losing party was found by the court to have lied, and therefore will
lose the case.

18) What does the parol evidence rule do?

A. It limits the ability of parties to written contracts from

introducing certain evidence related to the contract.
B. It sets the rules for admissibility of evidence relating to releasing a
criminal from a prison term.
C. It sets the general rules for the admissibility of evidence in criminal
actions.
D. It determines which contracts are required to be in writing.

19) ABC LLC and XYZ Corp. entered into a contract whereby ABC is to supply XYZ
with widgets. After receiving the first shipment of widgets, XYZ finds that the
widgets, while meeting the physical standards specified in the contract, do not
perform as XYZ anticipated. The contract is silent as to performance specifications,
but XYZ suspects that ABC knew that it was manufacturing and supplying widgets
that would not perform according to industry standard. XYZ initiates a lawsuit
against ABC, alleging that ABC knowingly supplied defective widgets. What process
will XYZ use to help it develop its case against ABC?

A. Pleadings
B. Motion for summary judgment
C. Discovery
D. Trial
Answer Rationale: Pleadings are documents filed with the court. A motion for
summary judgment and trial both occur after a party has developed its case against
the opposing party.

20) Under the Employee Retirement Income Security Act (ERISA), an employees
benefits must vest

A. within 10 years
B. by the time of the employees retirement
C. in total within 5 years or gradually within 7 years

D. only as provided in the pension plan

21) Which of the following statutes provides that it is legal for employees to
organize a union?
A. The Norris-LaGuardia Act
B. The National Labor Relations Act
C. The Labor-Management Relations Act
D. The Worker Adjustment and Retraining Notification Act
Answer Rationale: The National Labor Relations Act limits employers' actions against
unions. The Labor-Management Relations Act concerns "unfair labor practices." The
Worker Adjustment and Retraining Notification Act concerns plant closings and mass
layoffs. As a statutory law, the requirements of ERISA are explicit and provide clear
vesting benefits to employees.
22) William was a factory worker at the Spruce Industries plant. When management
found out that William is gay, he was fired. The plants action is

A. not prohibited under federal law

B. a violation of Title VII
C. a violation of the Equal Pay Act
D. a violation of the Americans with Disabilities Act

23) Janet is manager of a bank. She has all the qualifications to be promoted to
bank manager. In fact, she is better qualified than any of the men being considered
for the position. However, the owner of the bank believes that bank customers will
not accept a woman as bank manager, so the owner promotes one of the males.
The owners actions would best be described as what?

A. Quid pro quo

B. Hostile work environment
C. Gender discrimination
D. Pregnancy discrimination

24) Which one of the following statutes allows a prevailing party to recover
attorneys fees in an action against the government for an action of an agency?

A. The Freedom of Information Act

B. The Government Compensation Act
C. The Administrative Procedure Act
D. The Equal Access to Justice Act

25) Which of the following would prevent someone from acquiring land by adverse
possession?

A. The person never had to fight the original owner to remain on the land.
B. The person lived on the land secretly so that the original owner
would not find out he or she was there.
C. The person lived on the land without the original owners permission.
D. The person was the only person who lived on the land in question.

26) Which of the following would be classified as tangible personal property, as

opposed to other property categories, such as fixtures or intangible property?
A. A freestanding desk
B. Built-in cabinets in an office
C. A copyright to a literary work
D. A field of corn

27) As the CEO of a high tech company, you become aware that your chief
competitor is working on a new computer program that will revolutionize your
industry. You know that if you can find out several key functions about the new

product, your own programmers will be able to duplicate the function of the
program without actually copying its code. Which of the following actions can you
ethically take?

A. Paying the garbage company to deliver the competitors garbage to you

B. Hiring a former employee of the competitor and paying her a bonus to tell
you the competitors secrets
C. Hiring a researcher to review all available information about the
competitor, including patents, types and names of employees hired,
reports by the competitor, including all SEC filings
D. Hacking into the competitor's computer systems to find out what you
need

28) From a practical perspective, what are some of the elements of Sarbanes-Oxley?

A. Ensuring transparency, accountability and internal controls

B. Ensuring companies are profitable
C. Ensuring that CEOs do not make more than 10 times the lowest paid
employee
D. Ensuring that large shareholders do not have board representation

29) Under Title IX of the Sarbanes-Oxley Act, the penalty for someone who certifies
any statements as set forth in subsections (a) and (b) of this section knowing that
the periodic report accompanying the statement does not comport . . . is

A. no more than $1,000,000.00 or imprisoned no more than 10 years, or both

B. no more than $500,000.00 or imprisoned no more than 6 months, or both
C. no more than $2,000,000.00 or imprisoned no more than 3 years, or both

D. no more than $5,000,000.00 or imprisoned no more than 20

years, or both
Answer Rationale: False certifications under the Sarbanes-Oxley Act carry
substantial criminal penalties.

30) Which is prohibited under the Sarbanes-Oxley Act?

A. High salaries for corporate executives

B. Using an independent accounting firm for audit purposes
C. Public companies making personal loans to their directors and
executives
D. Directors and executives attending board meetings on a regular basis