This document provides the questions and multiple choice answers to 30 questions that appear to be from a law school final exam on various business law topics. The questions cover areas like the distinguishing features of common law, types of agency authority in a corporation, liability implications of LLC formalities, sole proprietorship liability, partnership obligations, alternative dispute resolution methods, duties of care and loyalty for corporate directors and officers, defenses to assumption of risk, statutes of limitations, employment discrimination, intellectual property issues, and provisions of Sarbanes-Oxley.

1. LAW 531 Final Exam
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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?

2. 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.
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. Martha’s business creditors can collect only the $50,000 of business assets.
C. Martha’s 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

3. C. Mediation
D. Conciliation
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 CPA’s
report. In these circumstances, the board is

4. 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 director’s duty of care
C. A breach of the Business Judgment Rule
D. There was no breach of duty
12) Which of the following is likely to be a breach of a corporate officer’s or director’s duty of
care?
A. Failing to anticipate a precipitous drop in consumer demand of the company’s 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

5. 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
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 Mark’s
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. Mark’s 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

6. 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
20) Under the Employee Retirement Income Security Act (ERISA), an employee’s benefits must
vest
A. within 10 years

7. B. by the time of the employee’s 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
22) William was a factory worker at the Spruce Industries plant. When
management found out that William is gay, he was fired. The plant’s
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 owner’s actions
would best be described as what?
A. Quid pro quo
B. Hostile work environment
C. Gender discrimination
D. Pregnancy discrimination

8. 24) Which one of the following statutes allows a prevailing party to
recover attorney’s 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 owner’s 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?

9. A. Paying the garbage company to deliver the competitor’s garbage to you
B. Hiring a former employee of the competitor and paying her a bonus to tell you the
competitor’s 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
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