Biz Law Final Exam

Question 1

A trust has three parties involved. Name the three parties:

A.) The trustee, the grantor, and the beneficiary

B.) The personal representative, the trustee, and the beneficiary

C.) The beneficiary, the trustee, and the fiduciary

D.) The bank, the testator, and the beneficiary

Answer 1

A.) The trustee, the grantor, and the beneficiary

Question 2

Aunt Mary dies and she has no relatives (blood heirs). She leaves everything she owns to Vivian (a total of $60,000 after all administrative expenses). Based on our video class discussion and related outline material, and assuming Vivian was just a friend of Aunt Mary, what is the best answer?

A.) Vivian can reject this inheritance and elect to receive nothing.

B.) Vivian must accept the inheritance but she can give it away.

Answer 2

A.) Vivian can reject this inheritance and elect to receive nothing.

Question 3

When Tom dies, rather than leaving everything outright to his wife Becky, Tom’s will leaves everything he owns in trust for Becky for her life (and Becky has the right to all income from the trust during her life-time), however, on Becky’s death, everything in the trust goes to Tom and Becky’s only son, Riley. Why might Tom do this? Why would he leave Becky only a life estate in his property when he dies rather than leaving her all the property outright?

A.) By using his will to create a trust, Tom avoids probate

B.) Tom insures that Riley or Riley’s heirs eventually inherit his property

C.) The best answer is that Tom insures that Riley or Riley’s heirs eventually inherit his property and by using his will to create a trust, Tom avoids probate

Answer 3

B.) Tom insures that Riley or Riley’s heirs eventually inherit his property

Question 4

Based on our video class discussion and outline material, why was Rosa Parks arrested on a bus in Montgomery, Alabama, on December 1, 1955?

A.) Rosa spit on the bus driver over a dispute regarding the cost of the bus ride

B.) Rosa refused to give up her seat to a white person when ordered to do so by the bus driver (a violation of Alabama law).

C.) Rosa refused to stop dancing on the bus when ordered to do so by the bus driver (a violation of Alabama law). Rosa was dancing the “Charleston” dance.

Answer 4

B.) Rosa refused to give up her seat to a white person when ordered to do so by the bus driver (a violation of Alabama law).

Question 5

Eighty-year-old Clark exhibits confusion, forgetfulness, and disorientation from time to time. To Clark’s doctor, these symptoms indicate the on-start of dementia. Elsa, who has significant contact with Clark, believes that he is in a state of mental decline. These facts indicate:

A.) An urgency that Clark distribute his assets

B.) Clark’s potential lack of capacity to execute a valid will

C.) Elsa’s intent to take advantage of Clark by using undue influence

Answer 5

B.) Clark’s potential lack of capacity to execute a valid will

Question 6

Stieg Larsson, author of the Millennium Trilogy (The Girl with the Dragon Tattoo, etc.), lived with a woman, Gabrielsson, for 30 years and he considered her his wife / life partner but they were never legally married. In 2004, when Stieg died unexpectedly of a heart attack, Stieg was worth over $10 million. Based on our video class discussion and outline material, how much did Gabrielsson receive from the Stieg Larsson estate?

A.) Since she was named as the sole beneficiary of Stieg’s will, she received the entire estate

B.) Since Stieg died without a will, she received nothing, and Stieg’s father got ½ of the estate and Stieg’s brother received the other half.

C.) Since Stieg died without a will, she received ½ of the estate, and Stieg’s father and brother received the other half.

D.) Since Stieg died without a will, she received the first $60,000 of the estate and ½ of the balance of the estate. The other ½ of the estate went to Stieg’s father and brother.

Answer 6

B.) Since Stieg died without a will, she received nothing, and Stieg’s father got ½ of the estate and Stieg’s brother received the other half.

Question 7

If Bosh and Kent owned a warehouse at all times as tenants-in-common, upon Bosch’s death his interest in the warehouse:

A.) Will pass to his wife after the will is probated, assuming Bosch’s will names his wife as the sole beneficiary of Bosch’s estate

B.) Passed to Kent upon Bosch’s death

Answer 7

A.) Will pass to his wife after the will is probated, assuming Bosch’s will names his wife as the sole beneficiary of Bosch’s estate

Question 8

Ray and Vivian get married. It is their second marriage each. Ray, a widower, has four children from his previous marriage, and Vivian has four children from her previous marriage. Once married neither Ray or Vivian adopt the other children. Ray and Vivian put all assets in joint name. Vivian dies. Ray dies without a will and neither of Ray’s or Vivian’s parents are alive, who gets what?

A.) All children of Ray and Vivian get an equal share.

B.) Ray’s children share equally the entire estate, and Vivian’s children get zero

C.) Ray’s children’s get the first $60,000 and then split the estate equally with Vivian’s children

Answer 8

B.) Ray’s children share equally the entire estate, and Vivian’s children get zero

Question 9

Kay has 2 children, Larry (the eldest) and Mona, both of whom predecease Kay. Larry is survived by a son, Nick, and Mona by two daughters, Opal and Pearl. On Kay’s death, if the estate is distributed to Kay’s heirs per stirpes (and not per capita)

A.) Each grandchild will receive one-third of the estate

B.) Nick will receive the entire estate

C.) Nick will receive one-half of the estate, and Opal and Pearl will receive one-fourth each

D.) The grandchildren will not receive anything

Answer 9

C.) Nick will receive one-half of the estate, and Opal and Pearl will receive one-fourth each

Question 10

Based on the Estates & Trusts outline, if a man is married, has no children, has one living parent, and dies “intestate,” the surviving wife will generally receive how much of the property that must go through “probate?”

A.) All property that goes through probate

B.) The first $400,000 and ½ of the rest of the probate estate (the surviving parent gets the other ½ of the probate estate.

C.) The first $350,000 plus 1/2 of the intestate (probate) estate, and the parent receives the remaining 1/2.

D.) The first $150,000 plus 3/4 of the intestate (probate) estate, and the parent receives the remaining 1/4.

Answer 10

D.) The first $150,000 plus 3/4 of the intestate (probate) estate, and the parent receives the remaining 1/4.

Question 11

A mother lives in Indian River and has a farm with 400 acres valued at $400,000. The farm is in the mother’s name only (her husband had previously died). When she dies, she wants to give her estate to her three children equally and avoid probate. Based on our discussion, how could the mother do this?

A.) Have a will that names the children the beneficiary of the estate

B.) Die without a will and have the children inherit by the law of intestate succession

C.) Re-title mom’s property so the three children and mom own the property as “joint tenants’ with right of survivorship.

D.) Put all of mom’s property into a trust, during mother’s life-time, naming the children as the beneficiaries of the trust when mother dies.

E.) Re-title mom’s property so the three children and the mom are joint tenants or put all property in a trust, during mom’s life-time, naming the children as beneficiaries of the trust, are both good answers.

Answer 11

E.) Re-title mom’s property so the three children and the mom are joint tenants or put all property in a trust, during mom’s life-time, naming the children as beneficiaries of the trust, are both good answers.

Question 12

Jim has a $100,000 life insurance policy that names his wife, Lori, as the beneficiary. Jim has a house worth $300,000 that is in joint name with his wife, Lori. Jim has $200,000 in his savings account (Jim’s name only), and Lori has $400,000 in her savings account (Lori’s name only). Jim dies and his will leaves everything he owns to his wife, Lori. Which of the above items must go through “probate” before distribution to Jim’s heirs?

A.) Both the $200,000 savings account and the $400,000 savings account

B.) Only Jim’s savings account of $200,000

C.) Only the $100,000 life insurance

D.) Both the $100,000 life insurance and the $200,000 savings account

Answer 12

B.) Only Jim’s savings account of $200,000

Question 13

Mr. Smith died on October 1, 2020. His will left his entire estate to his blood heirs who survived him to be divided per capita and not per stirpes. Mr. Smith was survived by the following: Tom (his son), Beck (his daughter), and Harry, Larry, and Jerry (his grandchildren from his pre-deceased son, Bill). Who will get what when Mr. Smith’s estate is distributed?

A.) Tom and Becky get 1/5 of the estate each, and Harry, Larry, and Jerry each get 1/9 of the estate each.

B.) Tom, Becky, Harry, Larry, Jerry, and Bill all share equally (1/6 of the estate each).

C.) Tom and Becky get 1/3 of the estate each, and Harry, Larry, and Jerry each get 1/9 of the estate each.

D.) Tom, Becky, Harry, Larry, and Jerry all share equally (and each gets 1/5 of the estate).

Answer 13

D.) Tom, Becky, Harry, Larry, and Jerry all share equally (and each gets 1/5 of the estate).

Question 14

When Rosa Parks died, as discussed in the video lecture/ outline material, her will left everything Rosa owned to her charitable trust to educate people regarding “self-development.” Based on class material, blood relatives of Rosa Parks contested the will of Rosa Parks on what grounds?

A.) Undue influence by the Personal Representative and Trustee of Mrs. Parks’ estate and trust (Elaine Steele & Adam Shakoor).

B.) Lack of testamentary capacity by Mrs. Parks at the time she executed the will

C.) As the natural heirs of Rosa Parks, they were entitled to inherit even if Rosa had a properly executed will leaving everything to a charitable trust.

D.) Both undue influence by the Personal Representative and Trustee of Mrs. Park’s estate and trust (Elaine Steele and Adam Shakoor) and lack of testamentary capacity by Mrs. Parks at the time she executed the will.

Answer 14

D.) Both undue influence by the Personal Representative and Trustee of Mrs. Park’s estate and trust (Elaine Steele and Adam Shakoor) and lack of testamentary capacity by Mrs. Parks at the time she executed the will.

Question 15

James dies intestate and his survivors include his spouse, Lauren, his adopted child with Lauren, Helen, and his two children, from a previous marriage, Aaron and Carl. According to our class Estates & Trusts outline material on the laws of intestate succession, under intestacy laws, Lauren, James’s spouse when he died, will receive how much of James’s estate that goes through probate?

A.) Lauren will receive everything from the probate estate.

B.) Lauren will receive $250,000 plus 1/2 of the intestate (probate) estate, and the children will receive the other 1/2.

C.) Lauren will receive $150,000 plus 1/2 of the intestate (probate) estate, and the children will receive the other 1/2.

D.) Lauren will receive $150,000 plus 3/4 of the balance of the intestate (probate) estate, and the children receive the remaining 1/4.

Answer 15

C.) Lauren will receive $150,000 plus 1/2 of the intestate (probate) estate, and the children will receive the other 1/2.

Question 16

James, an individual, filed a voluntary petition in bankruptcy under Chapter 7. James will not be allowed to go bankrupt if James . . .

A.) Made preferential transfers to certain creditors within 90 days of filing the bankruptcy petition.

B.) Files a fraudulent federal income tax return two years prior to filing the bankruptcy petition.

C.) Obtained a loan using financial statements that James knew were false.

D.) Unjustifiably failed to preserve books and records.

E.) All choices are correct.

Answer 16

D.) Unjustifiably failed to preserve books and records.

Question 17

Jane has $300,000 in general unsecured debts, and she loses her job. Jane files for Chapter 7 bankruptcy. Within 30 days, American Express (Jane’s credit card) sues Jane for the $10,000 of debt that Jane owes American Express. What will happen with this lawsuit?

A.) If Jane does not immediately pay American Express the $10,000, the creditor (American Express) can demand $2,000 in punitive damages.

B.) Jane simply notifies American Express she has filed a petition in bankruptcy and there is an automatic stay of this type of legal action against Jane (the lawsuit becomes part of Jane’s Chapter 7 bankruptcy).

C.) When Jane is sued by American Express, Jane must go to court and defend herself in this lawsuit.

D.) None of the choices are correct.

Answer 17

B.) Jane simply notifies American Express she has filed a petition in bankruptcy and there is an automatic stay of this type of legal action against Jane (the lawsuit becomes part of Jane’s Chapter 7 bankruptcy).

Question 18

Which of the following are non-dischargeable debts under a Chapter 7 bankruptcy filing?

A.) Intentional torts, for example, the willful and harmful touching (battery) of another person.

B.) Alimony and child support.

C.) Both alimony and child support, and intentional torts

Answer 18

C.) Both alimony and child support, and intentional torts

Question 19

When a debtor files a petition in Chapter 7 bankruptcy, which of the creditors listed below has the highest priority for payment when the bankruptcy trustee distributes the debtor’s assets?

A.) Taxes owed to the government

B.) Secured creditors to the extent the secured creditor has security or collateral

C.) Administrative claims for attorney and trustee fees

D.) An ex-spouse for alimony and / or child support.

Answer 19

B.) Secured creditors to the extent the secured creditor has security or collateral

Question 20

Which chapter of the Bankruptcy Code is used to reorganize the debtor’s financial affairs under the supervision of the bankruptcy court?

A.) Chapter 7

B.) Chapter 9

C.) Chapter 11

D.) Chapter 14

E.) Chapter 17

Answer 20

C.) Chapter 11

Question 21

Debtor buys a new car for $30,000 and finances the entire purchase at Chase Bank (the car is the collateral for the loan—Chase Bank is a secured creditor). The car is financed over a seven-year period. After almost five years, when the car is worth $8,000 (the cash value of the car), and the debtor owes Chase Bank $11,000, Debtor files a petition for Chapter 7 bankruptcy. Assuming in this bankruptcy case, general creditors get 10 cents on the dollar for their claims, how much will Chase Bank get in this Bankruptcy case?

A.) $8,000

B.) $1,100

C.) $8,100

D.) $8,300

E.) $5,100

F.) $11,000

Answer 21

D.) $8,300

Question 22

In the material on secured transactions (Article 9 of the UCC) and bankruptcy, professor Sanford told the actual story of a young person in West Michigan, Michael Vorce, who somehow managed to borrow nearly $27 million from various banks and credit unions (like Macatawa Bank). Why would various banks and credit unions loan so much money to Michael Vorce?

A.) Vorce had great parties and bankers knew that if they loaned money to Vorce, the bankers would be invited to the parties.

B.) Bankers loaned the money because they thought Vorce had sufficient collateral (boats) to cover the loans in the event Vorce defaulted on the loans.

C.) Bankers loaned money to Vorce because they knew he was the heir to the Meijer family fortune and the Meijer family would pay off these loans in the event of default.

D.) Both B & C are good answers.

Answer 22

B.) Bankers loaned the money because they thought Vorce had sufficient collateral (boats) to cover the loans in the event Vorce defaulted on the loans.

Question 23

For a creditor (like Best Buy) to get a perfected security interest in the debtor’s property (like a TV that Best Buy sells on credit to the customer or “debtor), generally, the debtor must sign three documents: (1) a security agreement that describes the collateral, (2) a promissory note where the debtor promises to pay the creditor the amount of the debt, and (3) a power of attorney where the debtor gives the creditor control over all of the debtor’s property in the event the debtor does not pay back the debt.

True

False

Answer 23

False

Question 24

Dirk Debtor had over $100,000 in credit card debt and could not pay his bills. Dirk files for Chapter 7 bankruptcy. One hundred days after filing the petition, and before the bankruptcy court has approved the bankruptcy, Dirk wins $2 million in the Michigan lottery. Dirk’s creditors demand to be paid from the lottery winnings. Must Dirk give this lottery money to the bankruptcy trustee for payment of Dirk’s creditors?

A.) Yes, since Dirk won the lottery money within 180 days after filing the bankruptcy petition.

B.) No, because lottery winnings are exempt under the federal bankruptcy law.

C.) No, since Dirk won the lottery money after filing he bankruptcy petition.

Answer 24

C.) No, since Dirk won the lottery money after filing he bankruptcy petition.

Question 25

An NFL football player “crashed” a party where the home-owner asked football player to leave. Football player beat-up and kicked home-owner, before football player left the party. The home-owner called the police and went to the hospital (home-owner had $100,000 in medical bills related to the injury). The police arrested football player and charged him with felony battery. Football player pled guilty to misdemeanor battery. Football player loses his job playing football and now has $500,000 in debt (credits cards and other unsecured debt) and, in addition, football player is being sued by home-owner for $600,000 ($100,000 in medical bills and $500,000 in pain and suffering from the battery by football player). Football player, who only has assets of $20,000 and now works at Wendy’s making $18,000 per year, files a petition in Chapter 7 bankruptcy. Is filing Chapter 7 bankruptcy the right strategy? A.) Football player should file Chapter 13 bankruptcy so he can eliminate all his debt over a 3-5 year-period based on what football player can afford to pay from his job at Wendy’s. B.) Yes, since football player has only $20,000 in assets and potentially $1,100,000 in liabilities. By filing Chapter 7, football player can eliminate all of his debt. C.) Football player should file Chapter 11 bankruptcy since football player does not qualify for Chapter 13. The home-owner lawsuit is a non-dischargeable debt under Chapter 7 but may be paid-off under a Chapter 11 petition.

Answer 25

C.) Football player should file Chapter 11 bankruptcy since football player does not qualify for Chapter 13. The home-owner lawsuit is a non-dischargeable debt under Chapter 7 but may be paid-off under a Chapter 11 petition.

Question 26

Mindy is a 60-year-old woman who lives by herself, works at McDonald’s making $20,000 a year, and Mindy’s only asset is her $100,000 house. Mindy gets sick, goes into the hospital for two-weeks (Mindy has no health care insurance), and when Mindy is released she owes the hospital $150,000 in medical bills. Mindy has no money to pay the hospital since Mindy lives paycheck-to-paycheck. Mindy is worried that the hospital will sue her for the $150,000 in medical bills and Mindy will lose her house. Is there a way Mindy can get rid of her debt and keep her house by filing a petition in bankruptcy? A.) Yes, Mindy can file for Chapter 13 bankruptcy, keep her house, and pay-off her medical bills, based on what she can afford to pay, over a 3-5 year period under Chapter 13 bankruptcy. B.) It is Mindy’s fault that she did not have health insurance to protect her from this type of medical bills. C.) Mindy can file for Chapter 11 bankruptcy, keep her house, and pay-off her medical bills, based on what she can afford to pay, over a 3-5 year period under Chapter 11 bankruptcy. D.) Yes, Mindy can file for Chapter 7 bankruptcy, keep her house, and pay-off her medical bills, based on what she can afford to pay, over a 3-5 year period under Chapter 7 bankruptcy.

Answer 26

A.) Yes, Mindy can file for Chapter 13 bankruptcy, keep her house, and pay-off her medical bills, based on what she can afford to pay, over a 3-5 year period under Chapter 13 bankruptcy.

Question 27

In the video lecture / related course outline, professor Sanford stressed that you should never loan money or extend credit to anyone without some form of “security” (some type of property that the creditor can use to pay toward the debt in the event of non-payment of the debt by the debtor). Overall, this statement is True False

Answer 27

True

Question 28

A pig farmer, Billy, paid approximately $200,000 for an Italian sports car, and the car was in the name of Billy without any lien against the car. Approximately two years later, Billy files a petition in Chapter 7 bankruptcy showing $1 million in debts and only $1,000 in assets. The car was not listed as an asset in Billy's chapter 7 bankruptcy petition. Later, it was discovered that, prior to filing the Chapter 7 petition, Billy had transferred the sports car to his mother for approximately $200. Billy's mother was unaware she was the owner of Billy's car. As a result of all of this, what happened to Billy? A.) Billy was allowed to go bankrupt but the Bankruptcy Court was allowed to get the sports car, sell it, and the money went for the benefit of Billy's creditors. B.) Billy was not allowed to go bankrupt (he ended-up going to jail for bankruptcy fraud for attempting to hide assets from his creditors), and the bankruptcy court got the sports car for the benefit of Billy's creditors. C.) Professor Sanford purchased the sports car at the bankruptcy sale, and this is why he likes to tell this story. D.) Answers A & C are both correct.

Answer 28

B.) Billy was not allowed to go bankrupt (he ended-up going to jail for bankruptcy fraud for attempting to hide assets from his creditors), and the bankruptcy court got the sports car for the benefit of Billy's creditors.

Question 29

Dan Debtor owes John’s Hardware $10,000 for purchases Dan has made on credit (assume this debt is not secured). John and Dan are good friends. Dan Files for Chapter 7 bankruptcy but 60 days before filing the bankruptcy petition, Dan pays John’s Hardware $10,000 so the debt is paid in full. After the Chapter 7 bankruptcy filing, a bankruptcy trustee is appointed. The trustee demands that John’s Hardware give back the $10,000 to the trustee. Must John’s Hardware give back the $10,000? A.) Yes, since the $10,000 was a liquidated payment B.) Yes, because the $10,000 payment was a preferential payment. C.) No, because the payment was made within 90 days before the filing of the bankruptcy petition D.) No, because of the Rule of 11

Answer 29

B.) Yes, because the $10,000 payment was a preferential payment.

Question 30

A teacher (in this question, the creditor) loans $8,000 to a friend (in this question, the debtor), and there is no security for the debt. Later the friend does not pay-back the teacher. If the teacher wishes to get her money back, what must teacher do? Also, note that the teacher and friend are no longer friends (in general, this is one of the reasons you do not loan money to friends and relatives--remember professor Sanford telling you in the video lecture). A.) There is nothing the teacher can do since the teacher had no security for the debt. B.) The teacher can sue debtor (her X-friend) for non-payment of the debt. If teacher gets a legal judgement against the debtor, teacher has two options: garnish the wages of the friend and / or attempt to attach the debtor's property for non-payment of the debt.. C.) Teacher can only attempt to garnish the debtor's wages.

Answer 30

B.) The teacher can sue debtor (her X-friend) for non-payment of the debt. If teacher gets a legal judgement against the debtor, teacher has two options: garnish the wages of the friend and / or attempt to attach the debtor's property for non-payment of the debt..

Question 31

Cindy Smith worked as a receptionist for the XYZ Corporation. While working for XYZ, Cindy joined the Children of Nature's Way, a small cult that demanded total commitment from its members. One of this cult's major rules was that members could only bathe once a year. Cindy, who was completely devoted to the cult and its teachings, obeyed this rule. Eventually, she was removed from her receptionist job because her odor and appearance were offensive to co-workers and visitors. Cindy sues XYZ for religion-based discrimination under Title VII. Which of the following is most likely to be true based on our class discussion of this issue? A.) Cindy will recover. B.) Cindy will not recover, because Title VII only protects members of traditional, established religions against religious discrimination. C.) Cindy will not recover because, while Title VII protects people against discrimination based on their religion, it does not protect against discrimination based on the practices that a religion requires. D.) Cindy will not recover, because XYZ can't reasonably accommodate Cindy's practice without causing itself undue hardship.

Answer 31

D.) Cindy will not recover, because XYZ can't reasonably accommodate Cindy's practice without causing itself undue hardship.

Question 32

In class, we discussed a white man, referred to as ID Adam, who questioned a black woman’s right to use the homeowners’ association swimming pool. When the woman refused to produce an ID, due to racial profiling (no one else was asked to produce an ID), ID Adam called the police on the woman. Later the Homeowners Association issued an apology to the woman, a member of the association, and accepted ID Adam’s resignation from the Association as a pool chair and board member. ID Adam did this on his personal time. When ID Adam’s employer, Sonoco Products, discovered what Adam did, what did Adam’s employer do? A.) The Employer did nothing since what you do on your personal time is of no concern to the Employer. B.) The Employer issued a statement stating, in part, that Sonoco’s core values are built on dignity and respect for all, and we do not condone discrimination of any kind, inside or outside of the workplace. With 20,000 employees across the globe of all races, religions, colors and creeds, we value the diverse experiences and perspectives of all of our employees. We take seriously any incidents that do not reflect our values. C.) The Employer terminated ID Adam’s employment with the company. D.) Both B & C are good answers.

Answer 32

D.) Both B & C are good answers.

Question 33

If you are an “employee-at-will” you can never sue your employer for wrongful discharge if your employment is terminated. True False

Answer 33

False

Question 34

An agent’s implied authority is derived from an agent’s express authority and consists of what is reasonably necessary for carrying out the agent’s grant of express authority. True False

Answer 34

True

Question 35

VIP pets, Inc. hired Aaron to be the manager of one of its stores. VIP Pets sells a wide variety of animals. Aaron was given considerable authority by VIP Pets to operate the store, including the right to buy inventory. Aaron was told that any inventory purchase exceeding $2,000 required the approval of VIP Pet’s general manager. Aaron occasionally would buy, for VIP Pets, a certain breed of dogs from Premier Breeders Inc. Premier paid Aaron 5% of the purchase price as an incentive to do more business with Premier. These “incentive” payments were paid in cash directly to Aaron. VIP Pets management was unaware of these payments to Aaron. Given these facts, what is the best answer? A.) There is nothing wrong with this arrangement and Aaron is allowed to keep the incentive payments B.) What Aaron is doing is wrong and he has a duty to give the incentive payments to his employer (Aaron has a duty to account) C.) Aaron should report the payments to his employer but is allowed to keep the incentive payments even if the Employer demands the payments.

Answer 35

B.) What Aaron is doing is wrong and he has a duty to give the incentive payments to his employer (Aaron has a duty to account)

Question 36

Smith, an employee of Sand Corp., was involved in an accident with Jones, an independent contractor. Jones was making a delivery for Byrd Corp. when Smith negligently passed through a red light resulting in the accident and injuries to Jones and Smith. The accident occurred during Smith's regular working hours and in the course of Smith's employment. If Sand and Byrd have complied with the state's workers' compensation laws, which of the following is correct? A.) Smith will either be denied worker's compensation benefits or have his benefits reduced due to his negligence. B.) Smith will be denied workers’ compensation benefits since Sand was free from any wrongdoing. C.) Jones will be denied workers’ compensation benefits under Sand’s or Byrd’s workers’ compensation policy

Answer 36

C.) Jones will be denied workers’ compensation benefits under Sand’s or Byrd’s workers’ compensation policy

Question 37

Fed-X hired Able as a regular delivery driver. Before hiring Able, Fed-X checked Able’s references and found that Able seemed completely careful and responsible. Fed-X always gave Able quite specific instructions regarding routes, delivery times, etc. One day, after working at Fed-X for five years and while on a regular delivery, Able spotted the boy-friend of his X-wife, Thomas, who was walking down the sidewalk (for some reason Able hates his X-wife and hates anyone who dates her). Able parked his Fed-X truck, walked across the road, and gave Thomas a severe beating telling him not to date his X-wife. Thomas sues Fed-X for the injuries inflicted by Able’s assault and battery. Fed-X will not be liable because: A.) Able is an independent contractor. B.) The doctrine of respondent superior has no application where the agent has committed an intentional tort. C.) Able was not engaged in an inherently dangerous activity. D.) Able did not act within the scope of his employment when attacking Thomas (Able had temporarily left his employment for personal purposes plus this was an intentional tort that Fed-X did not encourage). E.) Both B & D

Answer 37

D.) Able did not act within the scope of his employment when attacking Thomas (Able had temporarily left his employment for personal purposes plus this was an intentional tort that Fed-X did not encourage).

Question 38

XYZ Corporation has an extensive anti-sexual harassment policy, which also outlines a reporting procedure if a company employee is the victim of sexual harassment. In spite of the policy, Harry ignores the policy. Harry Lunchmeat, a middle-level manager for the XYZ Corporation (and, what professor Sanford calls, a Dinosaur), is hot for one of his subordinates, Suzy Straight. Harry propositions Suzy about three times a day. In addition, he frequently sends her pornographic literature in the inter-office mail, exposes himself to her, and tells her about his wife's sexual inadequacies. Even though Suzy refuses to sleep with Harry and tries to ignore his behavior as best she can, Harry gives her two promotions and several raises. Finally, Suzy is unable to perform her job because Harry's attentions are making the job unbearable. As a result of her boss’s behavior, Suzy sues her boss and XYZ (her employer) for sexual harassment under Title VII. What is Suzy’s best theory for recovery? Will Suzy have a quid pro quo claim? A work (hostile) environment claim? Suzy's best claim is for: A.) a quid pro quo claim. B.) a (hostile) work environment claim. C.) Suzy does not have a good sexual harassment claim under either theory. D.) Suzy can recover under both theories.

Answer 38

B.) a (hostile) work environment claim.

Question 39

Ace is an agent for the Parker Manufacturing Company. After completing a $2,000,000 deal with a customer one day, Ace receives a token of personal friendship from the customer’s president: a new $95,000 Porsche 911 sports car. In this case A.) Ace can keep the car because there is no evidence that he breached a fiduciary duty to his employer. B.) Ace must report the gift to Parker, but he can keep the car whether Parker approves of his receiving it or not. C.) Parker must reimburse the customer for the value of the car. D.) Ace must turn the car over to Parker.

Answer 39

D.) Ace must turn the car over to Parker.

Question 40

If the employer has substantial control over the day-to-day operations of the worker, the worker is generally considered an employee and not an independent contractor. True False

Answer 40

True

Question 41

VIP pets, Inc. hired Aaron to be the manager of one of its stores. VIP Pets sells a wide variety of animals. Aaron was given considerable authority by VIP Pets to operate the store, including the right to buy inventory. Aaron was told that any inventory purchase exceeding $2,000 required the approval of VIP Pet’s general manager. On June 20, Matt went to VIP Pet store to buy a ferret. Aaron allowed Matt to handle one of the ferrets without warning the customer, Matt, that this particular ferret had previously bitten many of the store’s clerks. Matt was bitten by the ferret and seriously injured, later losing his finger due to the ferret bite. Assuming Matt sues Aaron and Aaron’s employer, VIP Pets Inc., for negligence, who is potentially liable? A.) Only Aaron is liable because he knew the ferret could potentially bite people and Aaron did not warn Matt, the customer. B.) Only VIP Pets is liable since the Employer is liable for the torts committed by its employees. C.) Both Aaron and VIP Pets Inc. are potentially liable for Aaron’s negligence. D.) Neither Aaron or VIP Pets Inc. is liable since any customer who wants to buy a ferret should know that ferrets tend to bite people, and the customer assumed the risk.

Answer 41

C.) Both Aaron and VIP Pets Inc. are potentially liable for Aaron’s negligence.

Question 42

Mr. Rich employed Professor Sanford (pursuant to a written contract) to purchase a used Porsche 911 in the G.R. area for $22,000 from Mr. Rich’s neighbor. Professor Sanford was instructed to buy the car in his own name and not to tell anyone of Mr. Rich’s plans. Professor Sanford then purchased the Porsche 911 from the neighbor for $22,000, pursuant to a written contract that was signed by both Sanford and the Seller/Neighbor. The neighbor reasonably thought that he was dealing with Professor Sanford and no one else. Which of the following is true? A.) Both Mr. Rich & Professor Sanford are bound on the contract to the neighbor. B.) Rich is bound on the contract to the neighbor, but professor Sanford is not. C.) Sanford is bound on the contract to the neighbor, but Mr. Rich is not bound. D.) Neither Mr. Rich nor Sanford are bound on the contract to the neighbor.

Answer 42

A.) Both Mr. Rich & Professor Sanford are bound on the contract to the neighbor.

Question 43

Anker wishes to give Mix a power of attorney. In general, the power of attorney: A.) Must be signed by both Anker and Mix B.) May continue in existence after Anker’s death C.) May limit Mix’s authority to specific transactions D.) Will be valid only if Mix is a licensed attorney-at-law

Answer 43

C.) May limit Mix’s authority to specific transactions

Question 44

An East Grand Rapids policeman negligently shot himself when he pulled his gun out of his holster when confronting a "bad guy" while the policeman was "on the job" (the policeman claimed that the gun had a very sensitive trigger action). Who is the policeman allowed to sue for his injuries? A.) The city of East Grand Rapids, his employer. B.) The manufacturer of the handgun. C.) Both the City of East Grand Rapids and the manufacturer of the handgun.

Answer 44

B.) The manufacturer of the handgun.

Question 45

In the class presentation and class materials we discussed how Larry Johnson, a former football player for the Kansas City Chiefs, called some sports reporters “H _ _ _ ‘s” and Larry was later suspended for two games (and later traded to another team). Bob Griese, a football analyst, made a comment on national television that Colombian NASCAR driver, Juan Pablo Montoya, was not doing well in the NASCAR standings because “he’s out having a taco . . .”. Bob Griese was later suspended for one game for his remark (and two games later “retired”). What did Larry Johnson and Bob Griese do wrong (based on class material)? A.) Making stereotype comments regarding a person’s ethnic, cultural, or gender identity, is seen as akin to using profanity. B.) Making stereotype comments regarding a person’s ethnic, cultural, or gender identity feeds a climate of intolerance toward various groups of individuals, which also leads to these individuals being assaulted or bullied. C.) Larry Johnson and Bob Griese did nothing wrong because their remarks are protected under the 1st Amendment to the U.S. Constitution. D.) Both A and B are the best answers

Answer 45

D.) Both A and B are the best answers

Question 46

In the video lecture and related outline, professor Sanford said he liked a sole proprietorship as a form of doing business when one first starts a business. Why does Sanford like the sole proprietorship? A.) The owner of the sole proprietorship has limited liability like the corporate form of doing business. B.) While the owner of the sole proprietorship will have unlimited liability for the business debts, the business is inexpensive and easy to form. If personal liability is an issue, buying business liability insurance might be an option to solve the liability problem and might be cheaper than forming a corporation. C.) The owner of a sole proprietorship will pay no taxes on any income earned for the first 5-years. D.) The owner of a sole proprietorship cannot be sued for the first seven years of starting the business.

Answer 46

B.) While the owner of the sole proprietorship will have unlimited liability for the business debts, the business is inexpensive and easy to form. If personal liability is an issue, buying business liability insurance might be an option to solve the liability problem and might be cheaper than forming a corporation.

Question 47

Which of the following statements is true regarding Brewery Vivant, according to the paper assigned for business organizations? A.) Brewery Vivant will run their company being nice to their customers, co-workers, community, and the environment. B.) It is the purpose and philosophy of Brewery Vivant to "Beer the change you want to see in the world." C.) Brewery Vivant issues an annual report on their progress and commitment to the "triple bottom line" - people, planet, and profits. D.) All statements are true.

Answer 47

D.) All statements are true.

Question 48

In a limited partnership (keeping in mind our discussion of the Grand Rapids B.O.B.), who assumes unlimited personal liability for the debts of the limited partnership? A.) General partners B.) Limited partners C.) Special partners D.) General partners, Limited partners, and Special partners E.) General partners, Special partners, but not limited partners

Answer 48

A.) General partners

Question 49

The sustainability movement has caused businesses to manage using the triple-bottom-line (3BL) philosophy. This concept states that business management should consider what three factors in making business decisions? A.) Shareholders, directors, and officers B.) Political candidates, school policies, and gun control C.) Profits, people, and the planet D.) None of the other choices are correct

Answer 49

C.) Profits, people, and the planet

Question 50

In the class materials there was a paper that discussed the criticism of "stockholder capitalism" v "stakeholder capitalism." Which capitalism was called by some "woke capitalism?" A.) stockholder capitalism B.) stakeholder capitalism C.) Neither of the other choices has been called "woke capitalism."

Answer 50

B.) stakeholder capitalism

Question 51

A director, who cannot attend a board meeting due to a good reason, is allowed to vote by proxy. A.) This statement is correct. B.) This statement is incorrect.

Answer 51

B.) This statement is incorrect.

Question 52

Billy BigBucks, a millionaire, forms a corporation so Bill will have “limited liability” with his business. Billy invests $1,000 in the business and the business borrows the rest of the money it needs to operate the business. Billy’s business is called “Back-Yards-R-Us, Limited” and the business installs a swimming pool in Kelly’s backyard (this is the first customer of the business). During construction of the swim pool, a neighbor’s 11-year-old son, Mike, falls into the empty pool and hits his head, causing a serious concussion and brain injury. Billy’s business did not have the required fence around the construction site as required by local law. The neighbor sues Kelly, the home-owner, Back-Yards-R-Us, the business, and Billy BigBucks, the owner of the business, for a total of $500,000. Assuming the parent of Mike wins this lawsuit, and assuming Kelly only has $100,000 in potential assets, and assuming the business only has $1,000 in actual assets, is it possible that Bill BigBucks has personal liability for this lawsuit? A.) Back-Yards-R-Us, Limited, is liable for this judgment to the extent the business has assets (in this case only $1,000) and Billy BigBucks is, also, personally liable assuming the court “pierces the corporate veil” and finds the owner of the business, Billy, personally liable since the corporation was breaking the law. B.) Back-Yards-R-Us, Limited, is liable for this judgment to the extent the business has assets (in this case only $1,000), and Billy BigBucks is not liable since Billy has the “limited liability” of an investor in the corporation. This is the reason why investors form corporations so there is never any personal liability for the debts of the corporation.

Answer 52

A.) Back-Yards-R-Us, Limited, is liable for this judgment to the extent the business has assets (in this case only $1,000) and Billy BigBucks is, also, personally liable assuming the court “pierces the corporate veil” and finds the owner of the business, Billy, personally liable since the corporation was breaking the law.

Question 53

In the weekly material on business organizations, one paper discussed a West Michigan business, Cascade Engineering, that was a "force for good" in West Michigan. According to the paper, how does Cascade Engineering make a positive societal impact in West Michigan and the State of Michigan? A.) Cascade Engineering has a "Hire the Unemployed" program to specifically hire unemployed immigrants from Mexico to help reduce the unemployment rate in the State of Michigan. B.) Cascade Engineering has a "Returning Citizens" program to hire former prisoners. As a result of this program by Cascade Engineering and other Michigan companies, the recidivism rate in Michigan has gone from approximately 45% in 1988, to 26.7% in 2020. C.) All answers are correct.

Answer 53

B.) Cascade Engineering has a "Returning Citizens" program to hire former prisoners. As a result of this program by Cascade Engineering and other Michigan companies, the recidivism rate in Michigan has gone from approximately 45% in 1988, to 26.7% in 2020.

Question 54

It is the Board of Directors for a corporation that is responsible for the overall management of the business. For approximately the last one hundred years, until recently, the Board of Directors would manage to “maximize the profits” of the corporation. This management style was advocated by almost everyone including the famous economist, Milton Friedman, who won a Nobel Peace Prize. Friedman indicated that the only social responsibility a business should have was to maximize profits and increase shareholder value. Further, Friedman argued that any business that did not do this would eventually be driven out of business by the competition. On August 19, 2019, the Business Roundtable, a group of leading business leaders, stated that it should not be the only goal of the business to advance only the interest of the shareholders (the owners of the business). Instead, the management of the business should take into account all “stakeholders.” This was a major philosophical change. Who are some of the “stakeholders” that should be considered in the management of the corporation? Select the best answer. A.) Employees of the corporation B.) Customers of the corporation C.) The society in general, including the goals of sustainability for the planet E.) All choices are correct

Answer 54

E.) All choices are correct

Question 55

For the materials on Business Organizations, professor Sanford assigned three articles on West Michigan businesses: Brewery Vivant, Herman Miller (now MillerKnoll), and Cascade Engineering. All three of these businesses are good examples of business organizations that follow Milton Friedman’s philosophy of maximizing profits for only shareholders and not engaging in any other social or environmental activity (All three organizations practice "stockholder capitalism" that was discussed in a separate paper). True False

Answer 55

False

Question 56

Which of the following is generally not true regarding the management of the corporation? A.) Shareholders elect directors B.) Directors do not participate in corporate management C.) The board of directors select officers to manage the day-to-day business of the corporation D.) All choices are correct

Answer 56

B.) Directors do not participate in corporate management

Question 57

When a company has an annual meeting and all shareholders are invited, normally what do the shareholders do at the annual shareholder meeting? A.) Decide and approve the amount of dividends that should be paid to the shareholders B.) Vote for directors and vote on any major corporate structural changes C.) Vote on officers D.) All of the above

Answer 57

B.) Vote for directors and vote on any major corporate structural changes

Question 58

In the business organization materials, a paper was assigned on Herman Miller (now MillerKnoll or HMI). In 2021, Newsweek recognized HMI as one of "America's Most Responsible" companies. This was due, in part, to which of the following factors? A.) HMI's program each February that recognizes "Black History Month." This program features items like Amanda Gordon's "The Hill We Climb" poem, and articles on the Rev. Martin Luther King Jr.'s writing and speeches. B.) HMI's contributions in the area of the environment, society, and corporate governance, which is reflected in an overall positive ESG score. C.) All answers are correct.

Answer 58

B.) HMI's contributions in the area of the environment, society, and corporate governance, which is reflected in an overall positive ESG score.

Question 59

The Sarbanes-Oxley Act of 2002 (called “socks”) applies to all corporations (both publicly traded and private companies). There are civil and criminal penalties for a violation of this law. True False

Answer 59

False

Question 60

Typically, how are corporate directors chosen? A.) By a majority vote of the officers. B.) By a two-thirds vote of the shareholders. C.) By a majority vote of the shareholders. D.) The president appoints them, subject to the approval of the shareholders E.) By a unanimous vote of the shareholders

Answer 60

C.) By a majority vote of the shareholders.

Question 61

The “Foreign-Natural” Test

Answer 61

If the item found in the food is a “natural substance” the buyer cannot successfully sue.

Question 62

The “Reasonable Expectation” Test

Answer 62

It does not matter if the item found in the food is foreign or natural—what matters is whether the buyer reasonably expected to find such an item in the food.

Question 63

When a food “merchant” sells goods, the seller automatically gives the buyer an implied warranty of merchantability (goods pass in the trade without objection) True False

Answer 63

True

Question 64

When a buyer relies on the seller’s expertise in selecting the goods for the buyer, the seller gives the buyer the “implied warranty of fitness (for a particular purpose) True False

Answer 64

True

Question 65

Buyer from New York ordered goods from Seller, a Los Angeles firm. Seller delivered the goods to Carrier and sent invoices to Buyer marked "FOB Los Angeles." When the Carrier got to Chicago the truck & goods were destroyed by a tornado. Who has ROL for the damaged goods? A.) The Buyer B.) The Seller C.) The Carrier

Answer 65

A.) The Buyer

Question 66

Smith agreed in writing to sell Jones 50 books at $12 each. Before Smith shipped the books, Jones asked Smith if Jones could cancel the order. Smith said he would not cancel the order but agreed to sell the books at $8 each (this modification was not in writing). Jones agreed to this modification. When Jones received the books, the invoice stated that Jones was liable for $600 books at $12 each). What is the best answer? A.) Jones owes $600 (50 books at $12 each since no consideration was given for the modification and the modification was not in writing) B.) Jones owes $400 (50 books at $8 each)

Answer 66

B.) Jones owes $400 (50 books at $8 each) No consideration is necessary for this modification and nothing was required to be in writing since the modification was less than $500.

Question 67

If two parties to a sale of goods K voluntarily agree to modify the agreement, further consideration is necessary to modify the UCC “contract” True False

Answer 67

False

Question 68

If parties voluntarily agree to modify, while no consideration is necessary, it is required that the modification be in writing and signed if the modified contract is for $200 or more (must meet requirements of the Statute of Frauds) True False

Answer 68

False Modification must only be in writing and signed if the modified contract is for $500 or more

Question 69

The UCC states that if the UCC does not have a specific rule to cover the issue, the overall rule is that the UCC favors sellers over buyers. True False

Answer 69

True

Question 70

Under the Statute of Frauds, the sale of goods for $1,000 or more must be in writing unless there is an exception to this rule True False

Answer 70

False The sale of goods for $500 or more must be in writing unless there is an exception to this rule

Question 71

Per the UCC, “specially manufactured goods” or “customer orders” are an exception to goods that need to be in writing. True False

Answer 71

True

Question 72

If the employer has substantial control over the day-to-day operations of the worker, the worker is considered an independent contractor. True False

Answer 72

False The worker is considered an employee

Question 73

What is a POA?

Answer 73

A specific form of expressed authority that grants an agent specific powers (either general or specific)

Question 74

What is Implied Authority?

Answer 74

An agent’s implied authority is derived from an agent’s express authority and consists of what is reasonably necessary for carrying out the agent’s grant of express authority.

Question 75

Principals must be careful when hiring agents since the Principal will be liable for the actions of the agent whenever the Agent has implied or apparent authority. True False

Answer 75

True

Question 76

What duties does an agent have to a Principal?

Answer 76

Duty of loyalty (“fiduciary duty”) The Agent should always act in the best interest of the principal (not in the best interest of the agent) Duty to account – The Agent must always make a complete accounting to the Principal, and anything the Agent receives from a 3rd party must be turned over to the Principal.

Question 77

What is The Doctrine of “Respondent Superior”

Answer 77

Let the principal answer, in general, for the negligence and intentional torts of the agent committed within the scope of the employment.

Question 78

Describe Chapter 13 Bankruptcy

Answer 78

Debtor keeps assets and pay-off unsecured debt, based on what the debtor can afford over a three-to-five-year period (subject to judge approval) If debtor has more than certain amounts of debt, debtor must file Chapter 11 If unsecured debt exceeds $350,000 Unsecured or if secured debt exceeds $1,000,000 the debtor is required to file Chapter 11 bankruptcy, not Chapter 13 If debtor earns more than the average state wage earner, the debtor will not be allowed to file Chapter 7 but must file Chapter 13 (or Chapter 11)

Question 79

Describe Chapter 11 Bankruptcy

Answer 79

Chapter 11 is used to reorganize the debtor’s financial affairs under the supervision of the bankruptcy court. In general, debtor keeps assets and pay-off unsecured debt, based on what the debtor can afford over a period of time, subject to a plan that the bankruptcy judge and the creditors approve.

Question 80

If a business goes Chapter 11 and later it does not work, the business can always later file for Chapter 7 (and “liquidate). True False

Answer 80

True

Question 81

unless the employee is hired for a (1) definite period of time or unless the employee is told their termination would only be for “good cause,” either party can terminate an At-Will employment relationship at any time, even if morally wrong (with certain exceptions). True False

Answer 81

True

Question 82

“Good Cause Employment” is an employee who is hired for a definite period of time or told their termination would only be for “good cause.” True False

Answer 82

True

Question 83

When you are out-of-town on business, you are considered on the job only when performing designated job duties. True False

Answer 83

False Employees who are out of town on business are considered on the job 24 hours a day.