Business Law

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Business Law
2014-11-29 19:40:00

Final Review
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  1. A noncupative will is always invalid and unenforceable unless made in front of witnesses.
  2. A person who is so incapable of managing his own affairs that the court appoints a guardian to do so during his lifetime lacks the capacity to execute a will.
  3. A will witnessed by one of the beneficiaries will always be either entirely invalid or invalid as to the interested witness.
  4. In some states, a spouse who is expressly and unequivocally disinherited by their spouse's will may still take a share in the estate.
  5. The expenses incurred by a personal representative in the administration of an estate may be recovered only after the distributions called for under the instrument or the intestacy laws may have been made.
  6. The settlor of a Totten trust may withdraw funds from the res during his lifetime at his discretion and without the consent of the trustee or beneficiary.
  7. Taxes on income paid to beneficiaries under a testamentary trust are taxable to the res of the trust.
  8. Under the common law, parents of an intestate decedent could not share in the estate.
  9. A testator generally may disinherit after-born children by an express provision to that effect in his will.
  10. A living will may take effect during the testator's lifetime, but it is irrevocable once executed.
  11. Joe dies without a will, leaving an estate valued at one million dollars. He is survived by two children, Alice and Ben, and three grandchildren: Al and Ann, who are the children of Alice, and Chuck, who is the son of Joe's daughter Cathy, who died in childbirth. Which of the following statements concerning the distribution of Joe's estate is true?
    All of the above.
  12. Which of the following expenses must be paid from the assets of an estate before claims against the estate by the federal government are paid?
    The cost of the personal representative's required bond
  13. Which of the following types of trusts is commonly employed by public officials to avoid the appearance of conflicts of interest?
    Blind trust
  14. A provision in Gertrude's will states "to my life-long friend and companion, Alice, I give all of what remains of my farm after enough of it is sold to pay my debts." The gift to Alice is best characterized by which of the following terms?
  15. Ron and Nancy, after 25 years of marriage, executed wills, each of which gives the entire estate to the other. They had no children and neither had any living relatives. On their thirtieth wedding anniversary, they had a terrible fight which ultimately led to divorce. Several years after the divorce, Ron remarried, to Phyllis, a 21-year-old fashion model. Ron died on the second night of his honeymoon. Nancy later offered Ron's original and only will for probate. Phyllis contests the will, claiming that she is entitled to the entire estate. What will be the probable outcome in a state which had enacted the UPC, and why?
    Phyllis takes all through intestacy because Ron's will was revoked by the divorce.
  16. A principle by which a bequest in a will may be eliminated after the death of the testator.
  17. The specific property held in a trust.
  18. An implied trust which is imposed by a court to effectuate the supposed intent of the parties.
    resulting trust
  19. The process by which a decedent's estate is managed under the supervision of a court.
  20. A subsequent written modification of an existing will.
  21. The intended beneficiary of an express trust.
    cestui que trust
  22. Death without a valid testamentary instrument in existence.
  23. An implied trust imposed by a court to redress a fraud.
    Constructive trust
  24. A handwritten testamentary instrument
    holographic will
  25. A personal representative named in a will
  26. Property can be defined as anything an individual physically possesses.
  27. A transfer of personal property often does not require documentation to be legally effective.
  28. Violation of a restrictive covenant will generally result in a grantee's forfeiture of the land to the benefit of the grantor.
  29. Traditionally, a landowner owes the same duty to a social guest as he does to a trespasser.
  30. Under the power of eminent domain, the government may take private property for a purely private purpose if it pays the owner "just compensation" (market value).
  31. A landowner owes no duty to a trespasser on his land.
  32. Ownership of mislaid property is automatically vested in whoever finds the property in a public place.
  33. Trade fixtures which are installed by a tenant in order to conduct a business become the property of the landlord when the lease expires.
  34. The owner of real estate on which misplaced property is found becomes the owner of the found property, regardless of who found it, if the real owner cannot be located or does not claim the property within a statutorily specified time period.
  35. A transfer of title to property, without an actual surrender of physical possession, can never be sufficient to meet the delivery requirement of a valid gift.
  36. Ownership in severalty is a form of co-ownership substantially similar to tenancy in common.
  37. Upon a dissolution of marriage in a community property state, an equal division of all property owned by both spouses is made.
  38. A joint tenant may sever the joint tenancy without the consent of the other joint tenant(s).
  39. Under an exclusive agency listing agreement, the seller may avoid paying the broker a commission by finding a buyer on his own.
  40. Under the rule of equitable conversion, if a house burns down after a sales contract is executed but before the closing, the loss falls on the seller.
  41. At common law, the seller of a house makes an implied warranty of habitability to the buyer.
  42. Under a race-notice type of recording statute, the subsequent purchaser prevails only if he has recorded before the prior purchaser.
  43. An attorney?s title opinion protects the buyer from all losses incurred as a result of a defect in title.
  44. A lease that states that the tenant "is entitled to possession of the premises for a period beginning Oct. 1, 2001 and ending April 1, 2002 creates an estate for years.
  45. Automobile insurance policies usually contain incontestable clauses.
  46. A landlord will generally be liable for injuries caused to persons outside the property by defects existing on the property even when the lease expressly provides that the tenant is responsible for all maintenance and repairs.
  47. Oral leases are unenforceable.
  48. Under a tenancy at will, the tenant generally must give notice at least one month prior to terminating the tenancy.
  49. The mortgage is a type of consensual security arrangement.
  50. In a mortgage, the security is real estate.
  51. A mortgage need not be in writing in order to be enforceable.
  52. A mortgage is valid between the parties whether or not it is recorded.
  53. Which of the following is a significant distinction between real and personal property?
    All of the above.
  54. Arthur asked his secretary, Rosemary, if she would like to visit his apartment after work that evening to work on the Simpson account. Rosemary was short of money that week, so she agreed in order to earn some overtime. When Rosemary approached his house that evening, she fell and injured herself when the front step gave way under her weight. Unbeknownst to Arthur, the step was infested with termites which had completely penetrated the step and severely damaged the structure. Rosemary sues Arthur for negligence. Under the traditional rules, who is likely to prevail? (Assume that workers? compensation does not apply.)
    Rosemary, because she was an invitee and Arthur had a duty to warn her of hidden dangers of which he should have been aware.
  55. Alice set her purse on the counter at Bob?s store while she was paying for her purchases. After paying she walked out without taking her purse. Several hours later, Charly, another customer, found the purse on the counter. After determining that the purse contained a substantial amount of cash, Charly told Bob, who then tried to locate Alice. After efforts at locating her proved unsuccessful, Bob and Charly took the purse to the police station. The police, in compliance with a local statute, caused appropriate notice of the finding of the purse to be published, and held it for Alice to claim for the requisite period. The statutory time period passed without Alice showing up to claim the purse. Who will now own the purse and its contents?
    Bob, as the owner of the premises on which unclaimed misplaced property was found.
  56. Dad, afflicted with a terrible case of indigestion, feared that his death was imminent. He called his daughter to his bedside and told her that he wanted to give her a gift of 1,000 shares of IBM stock before he died. He then called his broker and had a stock certificate representing his ownership of the shares cancelled, and a new one issued in his daughter?s name. He had the broker deliver the new certificate immediately, whereupon he placed it in the wall safe in his bedroom and gave his daughter the combination. Dad?s indigestion cleared up several days later, and he then informed daughter that he had changed his mind about the gift of stock. Daughter claims that Dad made her an irrevocable gift and that if he tries to revoke it she will sue him. Can Dad take back the stock?
    Yes, because it was a causa mortis gift and is therefore revocable.
  57. Mary rents a space in a shopping mall where she runs a bakery. She has installed a number of large commercial ovens and a three ton, walk-in freezer. She has an argument with her landlord and decides to break the lease and vacate the premises. The landlord claims that if she leaves, the fixtures she has installed stay with the premises and become his property. Mary, quite naturally, claims otherwise. Who is right?
    Mary, providing she does not damage the premises while removing them and removes them before she surrenders the premises to the landlord.
  58. Which of the following is not a condition that must be met before title to real property may be acquired through adverse possession?
    Possession must be without the knowledge of the original owner.
  59. Sam, seeking to sell his house, enters into an exclusive right to sell type of listing agreement with Bob, a real estate broker. Bob convinces Judy to make an offer to Sam, which Sam accepts after prolonged negotiations. A sales contract is signed, a closing date set, earnest money placed in escrow with Bob, and a mortgage approved for Judy. Judy appears at the closing and claims that Sam beguiled her into signing the sales contract, and refuses to close. Bob insists that he is still entitled to his commission; Sam disagrees. They go to court to settle the dispute. Who is likely to prevail and why?
    Sam, because Bob violated his fiduciary duty by accepting money from Judy.
  60. Which of the following are requirements for a valid contract for the sale of real estate?
    It must include a description of the property.
  61. Phil rented a house from George under a lease which stated that "tenant may occupy the premises for six months beginning September 1, 1983." George required that Phil pay $1,800 in advance for the six month period. When the six months were up, Phil decided that he wanted to stay and attempted to contact George to negotiate another six month lease. When George failed to return his calls or answer his letters, Phil merely sent him another $1,800 and remained in the house. What kind of leasehold estate does Phil possess?
    A periodic tenancy
  62. Joyce rented a store from Larry under a 10-year lease. Among the provisions of the lease was one forbidding subleasing of the premises by the tenant. Two years into the 10-year lease, Joyce sold her inventory and the remainder of her leasehold estate to Mike. Mike was a terrible businessman, and was eventually forced to declare bankruptcy. Larry, in the meantime, had not received any rent for the past six months. Mike was unable to pay, and Joyce refused to pay. Larry takes her to court to recover the rent due under the lease. Who is likely to prevail and why?
    Larry, because an assignor of a lease remains secondarily liable to the landlord.
  63. Without a will.
  64. A personal property interest in the right to display an original work of art.
  65. A personal property interest in the exclusive use of a product name.
  66. A private agreement regulating the use of land which may bind future owners.
    restrictive covenant
  67. Property having no physical existence, but which entitles its owner to certain benefits.
    intangible property
  68. An interest in real property consisting of a right to prohibit another landowner from using his land in a particular way.
    negative easement
  69. The government’s power to take private land for public purposes.
    eminent domain
  70. Immovable structures attached to the surface of the earth.
    real property
  71. A personal property interest in the exclusive right to use a newly-developed procedure for the extraction of hydrogen from water.
  72. A form of intangible personal property consisting of a right to prevent disclosure of particular kinds of commercial information.
    trade secret
  73. Substitutes the insurer for the insured.
  74. Requires the policy holder to have a real interest in the property sought to be insured.
    insurable interest
  75. Contract provision that provides a life insurer cannot contest a policy after it has been in effect for a certain period.
    incontestable clause
  76. Failure of the insured to volunteer material facts.
  77. Protects the insured against claims of others for property damage or bodily injury.
    liability insurance
  78. Property having no physical existence, but which entitles its owner to certain benefits.
    intangible property
  79. Immovable structures attached to the surface of the earth.
    real property
  80. Chattels which become real property by virtue of their relationship to land or buildings.
  81. Acquisition of legal ownership of certain kinds of personal property by the mere exertion of control.
  82. Gifts between living persons.
    inter vivos
  83. Method of obtaining legal ownership of previously owned property without the knowledge or consent of the previous owner.
  84. Principle by which the owner of property becomes entitled to ownership of all that is added to that property by other persons.
  85. Conditional gifts made on the contemplation of death.
    causa mortis
  86. Property over which legal ownership may be established by simply taking possession.
    abandoned property
  87. The commingling of like goods into a single whole in a way that may affect ownership.
  88. A law which gives effect to the first of several deeds to the same property only if it is recorded before the other conveyances.
    notice statute
  89. A form of ownership under which one tenant may not transfer his interest in the estate without consent of the other.
    tenancy by the entirety
  90. A method of delivery of a deed whereby actual physical transfer of the instrument to the grantee may be deferred for an indefinite period.
    commercial escrow
  91. A form of ownership of real property wherein the individual interest in the estate is treated as personal property.
  92. An instrument which may make a conveyance of real estate with defective title with no liability on the part of the seller.
    quitclaim deed
  93. A form of ownership which precludes intestate distribution of a deceased tenant’s interest.
    joint tenancy
  94. A conveyance instrument which guarantees only against defects in title arising after the grantor acquired the estate.
    special warranty deed
  95. A contract whereby a seller of real property agrees to pay a third party a certain percentage of the price received from the sale of his property if that third party procures the sales contract.
    listing agreement
  96. A method by which title to real property may be acquired without the consent of its former owner.
    adverse possession
  97. A contract by which one party agrees to indemnify the purchaser of real property for any losses incurred as a result of certain types of conflicting claims to the property.
    title insurance
  98. A lessee who refuses to surrender the premises upon expiration of the lease.
    tenant at sufferance
  99. A tenancy for a certain unit of time that is renewed automatically for an equal unit of time.
    periodic tenancy
  100. A duty imposed on the landlord to provide premises suitable for residential use.
    implied warranty of habitability
  101. A transfer by the tenant of his entire interest in the leasehold.
  102. A tenancy with a definite beginning and end specified in the lease.
    estate for years
  103. A statutory remedy permitting a tenant to make needed repairs and deduct the cost from the rent payment.
    rent application
  104. The common law relationship between a tenant’s duty to pay rent and a landlord’s duty to provide habitable space.
    independent covenants
  105. Actions by the landlord which so substantially interfere with the tenant’s permissible use of the property so as to justify a termination of the lease by the tenant.
    constructive eviction
  106. A transfer by the tenant wherein he retains a reversionary interest in the leasehold estate.
  107. A tenancy that lasts only as long as the parties desire to maintain it.
    tenancy at will
  108. A corporation doing business in a state in which it is not chartered is always a domestic corporation.
  109. A public corporation is the same as a publicly-held corporation.
  110. A subchapter S corporation can avoid double taxation.
  111. Corporations can be discriminated against by states based upon whether the corporation is foreign or domestic.
  112. A corporate shareholder who commits a tort is not personally liable because corporations provide limited liability for their owners.
  113. A stock split and a stock dividend are synonymous.
  114. A court will under no circumstances order a board of directors to declare a dividend, because that function is always discretionary.
  115. If an investor undertakes activities, no matter how small, the investment is never a security.
  116. Generally, preferred shares of stock do not have voting rights.
  117. A stock purchaser may pay for his stock in something other than cash.
  118. Ultra vires acts are always criminal.
  119. Corporations are liable for the torts of agents, while the agent is in the scope of employment.
  120. The power to manage a corporation is generally vested in the shareholders.
  121. Holders of common stock generally do not enjoy voting rights.
  122. The RMBCA provides that the articles of incorporation may decree a quorum for shareholder meetings, but it may not be less than one-third of the total shares.
  123. Proxies are generally not revocable.
  124. Ousting incumbent management is not a "proper purpose" to allow a shareholder to inspect corporate books and records.
  125. A director must own at least 5 percent of all outstanding shares to entitle him to inspect corporate books and records.
  126. Officers are removed by the board of directors, while directors are removed by the shareholders.
  127. The RMBCA provides that a director's contract with the corporation is void.
  128. Corporations are citizens for purposes of the Privileges and Immunities Clause of the U.S. Constitution.
  129. A "long arm statute" permits state courts to exercise personal jurisdiction over foreign corporations regardless of the sufficiency of contacts the corporation has with the state.
  130. Bankruptcy terminates the existence of a corporation.
  131. A corporation can be dissolved only if all shareholders vote to do so.
  132. Once a statement of intent to dissolve is filed with the secretary of state, a corporation cannot carry on its business, except to wind up its affairs.
  133. A creditor may never bring an action to dissolve a corporation.
  134. Chapter 11 of the Bankruptcy Reform Act concerns reorganization.
  135. A merged company goes out of existence, whereas a company which sold its assets does not necessarily terminate.
  136. In both a merger and a sale of assets, the acquiring corporation always assumes the debts of the selling or merged corporation.
  137. A merger need not be approved by the shareholders.
  138. Which statement about a corporation is false?
    It is always considered to be a person.
  139. A corporation formed in a good faith attempt to comply with an incorporation statute and which operates as a corporation is best described as
    De facto
  140. Which statement is true?
    Corporations are citizens of the state of their incorporation and the state in which the corporation has its principal place of business.
  141. Gloria acts as a promoter for a corporation to be formed. She contracts with Betty to rent office space for the corporation. The contract is in Gloria's name.
    If the corporation is formed and adopts the contract, Gloria is liable unless a novation is given.
  142. Same facts as in Problem 4 above, except that Gloria makes the contract in the name of the corporation to be formed.
    Gloria is liable absent a novation.
  143. Which statement is true?
    Participating shares provide for further dividend distributions after the preferred dividend is paid.
  144. Which of the following is not a normal right of a common stockholder?
    The right to cumulative dividends.
  145. Dividends paid out of the net current earnings and those of the immediately preceding year, both years taken as a single period, even if the balance sheet shows a negative earned surplus are known as
    Nimble dividends
  146. A company's retained earnings are
    Earned surplus
  147. The board of directors of corporation X declares a dividend which is, in all respects, legal and proper. The dividend is not paid and shareholder Sam decides to sue.
    His suit would be a direct action.
  148. Which of the following can be delegated by the board of directors to a committee?
    An audit
  149. Richard is a director of RBA Corporation. He is sued for negligently performing his duties as a director. The suit is a derivative action. Under the RMBCA
    The corporation can indemnify Richard if he is found negligent, with court approval.
  150. The doctrine of ultra vires does not retain force in
    A conveyance of property
  151. The tendency of the courts not to second guess decisions made by corporate management is called the
    Business judgment rule
  152. Shareholder action by the shareholders of both corporations is not required in
    A sale of assets
  153. In exercising his appraisal rights a shareholder must do all of the following except
    Vote in favor of the merger
  154. The attorney general of a state may seek dissolution of a corporation for all of the following except
    When a majority of shareholders request such action be undertaken by the attorney general
  155. Shareholders may successfully seek judicial dissolution of a corporation for all of the following reasons except
    The corporation is not very profitable
  156. Corporation X purchases the assets of Company Y. A creditor of Y sues X.
    Two of the above
  157. Prohibits states from discriminating against non-citizens
    Privileges and Immunities clause
  158. Owed by promoters to the corporation and others
    fiduciary duty
  159. Prohibited from distributing income to members, directors, or officers
    non-profit corporation
  160. Persons who are midwives of the corporation
  161. A characteristic of a corporation but not a partnership
    perpetual life
  162. A governmental entity
    public corporation
  163. An entity operated as a corporation and formed in good faith
    de facto
  164. May be irrevocable for six months
    preincorporation stock subscriptions
  165. A contract between the state and the corporation
  166. A corporation with a small number of shareholders
  167. No further distribution is made to the preferred shareholders after payment of the preferred dividend
    nonparticipating shares
  168. Corporate profits not distributed to shareholders as dividends
    retained earnings
  169. Shares re-acquired by the company
  170. Excess of net assets over stated capital
  171. Shares sold for the price set by the board of directors
  172. The consideration received for shares must in fact equal par value by an objective standard at the time the shares were issued
    true value rule
  173. In the absence of fraud, the judgment of the Board of Directors as to value of consideration received for shares is conclusive
    good faith rule
  174. Bonds
    debt securities
  175. The right to buy stock to prevent dilution of other normal rights
    preemptive right
  176. The most frequent type of dividend
    cash dividend
  177. Are usually irrevocable and limited to ten years duration
    voting trusts
  178. A shareholder's right to be protected from dilution of his percentage of ownership
    preemptive rights
  179. When directors of two different corporations serve jointly on the board of a third corporation
    indirect interlock
  180. Vicarious liability
    respondeat suerior
  181. Promotes minority shareholder representation the board
    cumulative voting
  182. Corporate powers, beyond those explicitly established, necessary or appropriate to operating the corporate business
    implied powers
  183. A suit brought on behalf of a corporation
    derivative action
  184. A person who stands in for the shareholder on a written instrument by which the shareholder casts his votes before the meeting
  185. Powers expressly given to a corporation by statute or in the articles of incorporation
    express powers
  186. Reimbursement for the costs of litigation
  187. An invitation to shareholders to offer their shares for sale at a stipulated price
    tender offer
  188. Federal law regulating corporate takovers
    Williams Act
  189. May occur when a subsidiary corporation is merged into a parent
    short-form merger
  190. Occurs where one corporation is absorbed into an acquiring corporation
  191. Occurs where corporations merge into a new corporation
  192. A nondomestic corporation of another state
    foreign corporation
  193. Accepts service of legal papers
    registered agent
  194. Provide for personal jurisdiction
    long-arm statutes
  195. Does not require an affirmative vote by the board of a target company
  196. A dissenting shareholder's right to the fair value of his shares
    appraisal right
  197. The Securities Act of 1933 is known as the "Truth in Securities" law.
  198. The Securities Exchange Act of 1934 applies to corporations whose equity securities are traded over the counter if the company has at least $10 million in assets and 500 or more shareholders.
  199. The Securities Exchange Act of 1934 does not require disclosures when control of a company is being sought through a tender offer.
  200. Under the Securities Act of 1933, the SEC has the power to issue a stop order to halt trading in the stock, even after the securities have gone on sale.
  201. The SEC's fundamental mission is to assure adequate disclosures in connection with the extension of consumer credit.
  202. The Securities Act of 1933 authorized the establishment of the Securities and Exchange Commission.
  203. The Securities Exchange Act of 1934 is known as the "Truth in Securities Law."
  204. The Securities Act of 1933 does not apply to unincorporated entities.
  205. If a company engages in exclusively intrastate business, the federal securities laws will not apply.
  206. For the purposes of defining a security, the U.S. Supreme Court has stated the following: "The test is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others." In connection with the definition of a security, which of the following is true?
    The fact that investors are required to exert some efforts if a return is to be achieved does not automatically preclude a finding that a scheme is a security.
  207. The Securities Act of 1933
    Is limited to new securities issues
  208. On February 15, Donald, a director of the Mickey Mouse Corporation, purchases 1,000 shares of Mickey Mouse for $50 a share. On June 1, Donald sells the shares for $60 a share. What result?
    Donald must pay back the $10,000 profit even if he had no inside information.
  209. The U.S. Supreme Court has refined Rule 10b-5 in the following manner:
    Before a tippee has a duty to disclose or abstain from trading, there must be a breach of the insider's fiduciary duty.
  210. Which of the following is false?
    The Securities and Exchange Commission (SEC) is composed of ten members.
  211. State securities regulation statutes
    Blue Sky Laws
  212. Applies to new securities issues
    Securities Act of 1933
  213. Applies to trading in the secondary market
    Securities Exchange Act of 1934
  214. Independent regulatory agency that investigates complaints or violations of law in securities transactions
    Securities and Exchange commission
  215. Provides for recapture of short-swing profits made by corporate insiders
    Section 16(b)
  216. Held that proof of scienter is required in private damage actions under Rule 10b-5
    Ernst and Ernst v. Hochfelder
  217. Federal law passed in response to bribery of foreign officials by American companies
    Foreign Corrupt Practices Act
  218. SEC rule providing that a person who has inside information about a tender offer must either disclose the information or refrain from trading
    Rule 14e-3
  219. Prohibits the use of any scheme, device or artifice to defraud in connection with the sale or purchase of any security
    Rule 10b-5
  220. Used by courts in insider trading cases to hold noninsiders liable for misappropriating information from employers
    misappropriation theory