LAW 531 ACTUAL FINAL EXAM

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. 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 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 CPA’s 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 director’s 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 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 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 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