Deck 9: The Organization of a Business

Question 1

Naya Cortez and Peter Sharma started a car audio business together as a partnership. Which of the following names can they not use for their new business?

A)Cortez, Sharma and Co.
B)Car Audio studio
C)Cortez and Sharma, Ltd.
D)The Audio Experts
E)Both B and D

Answer 1

C

Question 2

Which of the following would be most important factor for a court in deciding whether a partnership exists?

A)That there was no written or oral partnership agreement.
B)An allocation of duties among the parties
C)Evidence the parties carried on business together with an intention to share profits and losses.
D)The use of the parties' personal names in the partnership's business name
E)The evidence the two parties worked together on the same business venture.

Answer 2

C

Question 3

Dorothy Drache and Camina Burana are students. Dorothy has a portable sound system and Camina has business contacts with banquet halls. They agree to run a disc jockey business on weekends. Each will get $100 for a job they do personally and any excess profits will be split 50/50. There is no mention of a partnership, no agreement is signed, and no registration is made. Which of the following is TRUE?

A)Dorothy and Carmina are not partners because an oral partnership agreement cannot be effective.
B)Dorothy and Carmina are not partners because there is no written partnership agreement.
C)Dorothy and Carmina are not partners because they didn't register the partnership with the relevant government agency.
D)Dorothy and Carmina are partners in law
E)Dorothy and Carmina are not partners because they have not made a joint contribution of capital to the business.

Answer 3

D

Question 4

Two students agree to run Saturday dances and to split whatever money they make. There is absolutely no talk of partnership. Which of the following is TRUE?

A)The students are not partners because they did not agree to be partners.
B)The students are not partners because they do not have a written partnership agreement.
C)The students are partners because they agreed to share profits.
D)The students are partners because every business agreement between two people creates a partnership.
E)The students are not partners because one of the indicia of partnership is missing.

Question 5

Dalma, Theo, and Lavinia operated a courier service in partnership. One day while on a delivery, Dalma's truck mounted the curb and drove over the foot of a pedestrian standing on the sidewalk. Dalma was unaware of the accident and drove off. The next day, having looked up the partnership's phone number from the name of the side of the truck, Sanjay, the injured pedestrian, telephoned and advised Theo that he had been injured by one of the partnership's delivery trucks the day before. Theo truthfully responded that he had not heard a report of any accident and hung up the phone. Which of the following is TRUE?

A)Theo is not liable for Sanjay's injuries as he was unaware of the accident
B)The partnership and each of Dalma, Theo and Lavinia are liable.
C)Only Dalma is liable for Sanjay's injuries
D)Only Dalma and Lavinia are liable for Sanjay's injuries.
E)The insurance company for the partnership is the only party that will be held liable

Question 6

Two people own a piece of land together and share profits associated with renting the property but have agreed that neither can sell the property without the consent of the other. What is the legal form of business arrangement that applies here?

A)a sole proprietorship
B)a partnership
C)a limited partnership
D)a corporation
E)a joint venture

Question 7

Which of the following statements with respect to partnership is TRUE?

A)Partnership involves two or more persons carrying on business with a view towards profits.
B)Partnership involves limited liability
C)Partnerships are only created when two or more persons specifically agree to be in partnership
D)Partnerships are only created when they have been properly registered with the government
E)Partnerships are like any form of contract: they can only be created when there is consensus between the parties in the form of offer and acceptance to that effect.

Question 8

Which of the following with respect to partnership is TRUE?

A)Partnership is a separate legal entity.
B)General partners have limited liability
C)General partners have unlimited liability
D)Partners are not agents for each other.
E)Partners must make an equal financial contribution to the partnership.

Question 9

Fiduciary duty in a partnership context best translates as:

A)You must put the other partners' interests ahead of your own.
B)Each partner must watch out for her own interests.
C)Every partner for himself.
D)You must act honestly
E)Both B and C

Question 10

William Jones and Vincent Costa form a partnership to run a construction business. Which of the following names does NOT require registration?

A)Jones and Costa Construction
B)Bill and Vinny's Construction Co.
C)World's Best Construction
D)Canadian Contractors
E)All require registration.

Question 11

Which of the following does not belong in this group?

A)corporation
B)general partnership
C)sole proprietorship
D)franchise
E)limited partnership

Question 12

A person starting a business can protect their personal assets and keep them separate from their business assets by forming

A)a sole proprietorship
B)a general partnership
C)a corporation
D)a franchise
E)a joint venture

Question 13

Tony Gennaro and Sal Mineola buy old cars and repair and sell them. They split the cost of buying the cars and the proceeds of sale. They never agree to be partners. One car has defective brakes and a pedestrian is injured as a result. Tony worked alone on buying, repairing, and selling this car. The pedestrian sues the car owner, who in turn sues Tony and Sal. Which of the following is TRUE?

A)As there was no express partnership agreement, there is no partnership between Tony and Sal.
B)As Tony did the defective repair work, only he is liable.
C)As there was no written partnership agreement, there is no partnership between Tony and Sal.
D)There is a partnership between Tony and Sal implied by law and Sal is liable as a partner.
E)Both B and C

Question 14

Which of the following is a violation of the fiduciary duty of a partner?

A)One partner, without the consent of the other partners, starts another business which is similar to or in competition with the partnership business.
B)One partner, without the consent of the other partners, uses information that he has gained from the partnership for his own advantage.
C)One partner, without the consent of the other partners, uses the partnership property for his own personal use.
D)Both B and C
E)All of the above

Question 15

Ingrid, Bridgit, and Manuel want to start a business selling used computers. Which of the following statements respecting their possible business name is true?

A)They can use the name "I.B.M. Used Computers" because they are using the initials of their own first names.
B)They cannot use the name "I.B.M. Used Computers" because they are not incorporated.
C)They can use the name "I.B.M. Used Computers" if they apply to incorporate the business.
D)They can use the name "I.B.M. Used Computers" if they register the name as a partnership.
E)They cannot use the name "I.B.M. Used Computers" because it would likely mislead the public.

Question 16

Tom Dimaio and Jerry Gluck decided to become partners in the business of cutting lawns. After a few months, Jerry heard of a job cutting lawns at a warehouse. He took the job and earned $100 a day once a week for the summer. Later, Tom found out and demanded a share of the money. Which of the following is TRUE?

A)Jerry did not owe a fiduciary duty to Tom.
B)As Jerry did all the work, he is entitled to all the money for the warehouse lawn cutting.
C)Tom is entitled to a share of the money as a partner
D)Since Tom did not ask to be included in the warehouse venture, Jerry was entitled to seize it.
E)Both A and B

Question 17

What is the main reason a business is required to register its name with the provincial government?

A)To enable the government to monitor the number of businesses operating in the province.
B)To enable any member of the public to search and discover the owner and address of the particular business.
C)To enable a business to limit its liability
D)To develop an information base for taxation purposes.
E)To collect a registration fee as a form of business taxation

Question 18

If a sole proprietorship breaches a contract

A)the owner's personal liability is limited to the amount the person invested in the business
B)only the owner's business assets are available to satisfy the other party's claims
C)only the owner's personal assets are available to satisfy the other party's claims
D)all of the owner's business and personal assets are available to satisfy the other party's claims
E)only the insurance provider of the owner is liable to pay the other party's claims

Question 19

In which of the following situations has the duty between partners NOT been breached?

A)Tom, Dick, and Harry have a partnership in a restaurant business in Winnipeg. Harry opens up a restaurant in Winnipeg as a sole proprietorship.
B)Tom, Dick, and Harry have a partnership in a restaurant business in Winnipeg. Harry is the major shareholder in a corporation that sets up a restaurant in Winnipeg.
C)Tom, Dick, and Harry have a partnership in a restaurant business in Winnipeg. Unknown to Tom and Dick, Harry owns 50% of the shares in the company that supplies the restaurant with its food supplies.
D)Tom, Dick, and Harry have a partnership in a restaurant business in Winnipeg. Harry, unknown to the others partners, creates a catering business during the evening using the restaurant facilities.
E)All situations involve a breach

Question 20

Maury Slater and Harry Katz operate a clothing store as a partnership. They agree that they will not order over $10,000 without having both signatures on the order. Maury is on vacation when Harry orders $20,000 worth of shirts and $5,000 worth of CDs. Maury objects to both purchases and wants to return the goods. The suppliers sue Maury and Harry. What are the partnership's obligations?

A)The partnership is responsible to pay the shirt supplier only.
B)The partnership is responsible to pay the CD supplier only
C)The partnership is responsible to pay both suppliers
D)The partnership is responsible to pay neither supplier.
E)Only Harry is responsible, and to both suppliers.

Question 21

Which of the following statements is TRUE?

A)when a partner dies, the partnership continues to exist and is not dissolved
B)when a shareholder dies, the corporation continues to exist and is not dissolved
C)when a shareholder dies, the corporation is dissolved
D)when a shareholder dies, their shares are must be transferred to other existing shareholders
E)shareholders owe each other a fiduciary duty

Question 22

Fatima and Hani form a partnership to cut lawns for a summer job. Hani does extra work in his spare time and paint a building earning $5,000. Fatima learns of the painting project and claimed a share of the money. Which of the following is TRUE?

A)Hani has to pay a share of the money to Fatima because they are partners
B)Hani has to pay a share of the money to Fatima because he owes her a fiduciary duty
C)Hani has to pay a share of the money to Fatima because the income of all partners has to be shared equally under The Partnership Act
D)Hani does not have to pay any money to Fatima because painting is not part of the partnership act
E)Hani has breached the contract with Fatima and will have to pay her $5,000 plus punitive damages

Question 23

A fiduciary duty exists in which of the following business relationships?

A)business partners to each other
B)directors of a corporation to the corporation
C)a professional advisor such as an accountants to their clients
D)agent to a principal
E)all of the above

Question 24

Betsy Ross and Delia Smart were the only partners in a new business. Betsy contributed $100,000 to the business and Delia contributed $50,000. No thought was given as to how profits were to be divided. At the end of the first year the business made $30,000 profit, and Betsy had done 50% more work than Delia. How will the profits be shared?

A)As there was no express agreement, the Partnership Act will apply to establish the split.
B)The split will be according to their respective contribution of capital, so Betsy will get $20,000 and Delia $10,000.
C)The split will be according to their respective contribution of labour, so Betsy will get $18,000and Delia $12,000
D)The split will be equal
E)Both A and D

Question 25

Krishna and Ravi operate a sari store as a partnership. They agree privately that they will not order supplies over $10,000 without both signatures. When Krishna is on vacation, Ravi orders $20,000 worth of silk. Krishna objects to paying the supplier and wants to return the shipment. The supplier sues the partnership. Which of the following is true?

A)the partnership must pay the supplier because private restrictions don't affect outsiders to the partnership
B)the partnership must pay because it owes a fiduciary duty to the supplier
C)the partnership does not have to pay because Ravi exceeded her authority
D)the partnership does not have to pay because Ravi exceeded her apparent authority.
E)the supplier has to take back the shipment since there were not two signatures on the contract

Question 26

Joint liability means:

A)liability of a corporation but not the shareholders
B)the same as several liability
C)liability shared by a number of persons, each of whom is personally liable for the full amount of a debt
D)liability shared equally between two persons
E)liability of directors and the corporation they represent

Question 27

The Partnership Act provides that if the partners do not agree otherwise, certain terms of a partnership agreement will be implied. Which of the following is NOT such an implied term?

A)Each partner shall be responsible for the losses of the firm only to the limit of each partner's initial cash contribution.
B)Every partner may take part in the management of the partnership business.
C)No partner is entitled to a wage for acting in the partnership business
D)No person may be introduced as a partner without the consent of all the existing partners.
E)The partners will share the profits equally.

Question 28

Unless there are terms in the partnership agreement to the contrary, which of the following will dissolve a partnership?

A)A partner becomes insolvent.
B)A partner wants to withdraw from the partnership
C)A partner requests a change in the partnership agreement
D)Both A and B
E)All of the above

Question 29

Maury Slater and Harry Katz operate a clothing store, Maury's Fifth Avenue, as a partnership. They agree that Maury will concentrate on sales and Harry will deal with the wholesalers. Harry tells all his suppliers not to listen to Maury if he should call. While Harry is in Florida for a two week vacation and Maury is minding the store, Joe Feller, the sales representative for Regency Clothes, one of their major suppliers, pays a visit. He leaves with an order for 200 suites, when Harry returns, he tells Joe he won't pay for them. Can Regency sue Fifth Avenue?

A)Yes. The indoor management rule applies.
B)Yes. Maury had apparent authority to place orders for the partnership
C)No. Regency was aware that Maury did not have authority to make orders.
D)No. The indoor management rule applies only to corporations.
E)Both A and B

Question 30

Unless the partnership agreement provides otherwise, a partnership can be dissolved when

A)a date is specified in the partnership agreement as to when partnership ends
B)a partner dies
C)a partner declares bankruptcy
D)a partner gives notice of intention to withdraw and dissolve the partnership
E)all of the above

Question 31

Which of the following statements with respect to the Partnership Act is TRUE?

A)The Partnership Act overrides any provisions contrary to it set out by the partners in a partnership agreement.
B)The Canadian Partnership Act was enacted by Parliament and created a uniform and cohesive system of partnership law for all of Canada.
C)The Partnership Act states clearly that a partnership is only created by specific agreement between the partners to that effect.
D)The Partnership Act sets out provisions that will govern the relationship between the partners unless those partners have agreed otherwise.
E)None of the above.

Question 32

You are about to form a partnership. You want to make a partnership agreement which will protect your interests in the event that your partner decides to retire. Which of the following is TRUE?

A)Your agreement should have a buy-sell clause in it.
B)Your agreement should contain a method for determining the value of the business.
C)Your agreement should provide for your partner's shares to be appraised in the event of your making an offer for them.
D)Both A and B
E)All of the above

Question 33

Which of the following could NOT be used to determine the value of a partnership if the partners decide to break up the business?

A)an expert appraisal
B)a fixed-price formula
C)arbitration
D)a shotgun clause
E)all of the above could be used

Question 34

Mumtaz, Badia and Ilya are partners in a business partnership, called MBI. Mumtaz contributes $15,000 to the business, Badia contributes $10,000 and Ilya contributes $5,000. The partners agree among themselves that they will share partnership profits and losses in proportion to their contributions. In addition, the partnership borrows $30,000 from the bank. The business doesn't work out, and MBI is unable to repay the loan. Mumtaz pays the bank $30,000. How much can she recover from Ilya?

A)nothing
B)$5,000
C)$10,000
D)$15,000
E)$30,000

Question 35

Your partner unexpectedly dies. Your partnership agreement has a buy-sell clause with a "shotgun" provision. Which of the following is TRUE?

A)The value of your partner's shares will be appraised by an expert.
B)The value of your partner's shares will be determined by arbitration.
C)The value of your partner's shares will be determined by the average earnings of the company over a recent period.
D)The shotgun clause is ineffective because of the death of your partner.
E)The person who now owns your partner's shares must make you an offer for your shares. If you choose, you can instead buy his shares at that price.

Question 36

On the death of a partner:

A)If a partner has a spouse, that spouse becomes a partner.
B)The surviving partners must select a new partner to replace the deceased or the partnership is dissolved.
C)The partnership is dissolved automatically
D)The partnership is dissolved unless the partnership agreement provides otherwise.
E)The partnership reverts to a sole proprietorship.

Question 37

Mumtaz, Badia and Ilya are partners in a business partnership, called MBI. Mumtaz contributes $15,000 to the business, Badia contributes $10,000 and Ilya contributes $5,000. The partners agree among themselves that they will share partnership profits and losses in proportion to their contributions. In addition, the partnership borrows $30,000 from the bank. The business doesn't work out, MBI is unable to repay the loan. The bank sues Mumtaz personally. The amount the bank can legally recover from Mumtaz is:

A)nothing
B)$5,000
C)$10,000
D)$15,000
E)$30,000

Question 38

Heinz Klein is a mechanic. Bettina Lopez has some money to invest. They agree that Bettina will lend money to Heinz to buy cars at government sales, fix them up and sell them. They will split the profits. Bettina says that she wants to have nothing to do with the operation of the business. They agree that they will not be partners. Which of the following is TRUE?

A)They are not partners because they have specifically agreed not to be partners.
B)They are partners because they are sharing profits from a business on a continual basis.
C)Bettina is a limited partner and will not be liable for partnership debts beyond her investment.
D)The partnership is not registered as a limited partnership so Bettina will be liable for partnership debts.
E)Both B and D

Question 39

Which of the following factors does the Court consider in order to determine if a partnership exists?

A)whether there is a joint contribution to the capital to start a business
B)whether the parties have an intention to share profits and losses
C)whether there is joint participation in the management of the business
D)A and B
E)all of the above.

Question 40

Anne and Natasha form a partnership. There is no partnership agreement. Anne does twice as much work as Natasha and wants a bigger share of the profits. Which of the following is TRUE?

A)The court will decide the distribution of profits according to the Partnership Act.
B)The court will split the profits according to the number of hours each worked
C)The court will split the profits equally
D)The court will split the profits based on what is fair
E)Both A and C

Question 41

A limited liability partnership involves:

A)a partnership in which partners who are not negligent are not personally liable for losses caused by the negligence of another partner or of an employee directly supervised by another partner;
B)a partnership in which partners who are not negligent are personally liable for losses caused by the negligence of another partner or an employee directly supervised by another partner
C)a partnership in which some of the partners limit their liability to the amount of their capital contributions and are not active in the conduct of the business
D)a partnership in which partners who are not fraudulent are not personally liable for the losses caused by the fraud of another partner
E)none of the above

Question 42

Virginia hires John as her agent to buy supplies. Byron contracts to send supplies to Wolf through John, knowing John is an agent. The supplies are sent but not paid for so Byron wants to sue on the contract. Which of the following statements is true?

A)Byron has a contract with Virginia only.
B)Byron has a contract with John only
C)Byron has a contract in which John and Virginia are both liable.
D)Byron has no contract with Virginia because he made the agreement with John.
E)Byron has a choice whether to sue Virginia or John.

Question 43

Caterina Valente is given a job as a buyer in a department store. While nothing is specifically said to Caterina, a buyer normally has authority to act as agent for the business. What is this type of authority called?

A)Express
B)Silent
C)By necessity
D)Apparent
E)By estoppel

Question 44

Howe, Hardy, and Harkins, a law firm in Alberta, decides to register as a limited liability partnership. Which of the following is TRUE?

A)Such an entity is not permitted.
B)Henceforth, the firm will refer to itself as Howe, Hardy, and Harkins, LLP.
C)Howe will continue to be liable for the negligence of Hardy and Harkins.
D)Once the limited liability partnership is registered, Howe will not be liable for the negligence of Hardy and Harkins.
E)Both B and D.

Question 45

Sara Vaughan told her tenants that her son would collect rents while she was in Florida. The son did collect the rents in October, November, and December. At Christmas Sara returned home and told her son that she would collect the January rents. The son went first thing in January, before the tenants knew Sara had returned, and collected the January rents. Will the tenants have to pay twice?

A)Yes, because the son collected the money without authority
B)Yes, because the son was not a legal agent at the time.
C)No, because the son had apparent authority
D)No, because the son had actual authority
E)No, because the Tenant Protection Act prohibits double collection

Question 46

Kevin, a contractor, was advised by several persons in his community that Toby had been representing himself around the town, as being Kevinʹs agent and authorized to make home renovation contracts on his behalf. Kevin had in fact not authorized Toby to make these representations on his behalf but did nothing to address the situation. Two weeks later, Myra a homeowner, advised Kevin that she had made a contract to renovate her home with him through Toby and that if he did not carry out the work, she would take legal action against him. Which of the following statements is TRUE?

A)Kevin is not bound by the contract with Myra as Toby had no actual authority
B)Myra cannot enforce the contract against Kevin as she had a duty to verify that Toby had the authority claimed.
C)Kevin is estopped from denying that he has a valid contract with Myra.
D)Myra cannot enforce the contract against Kevin but can sue Toby for fraud
E)Kevin is bound by the contract with Myra but is free to adjust the terms of his performance

Question 47

Sara Vaughan told her tenants that her son would collect rents while she was in Florida. The son did collect the rents in October, November, and December. At Christmas Sara returned home and told her son that she would collect the January rents. The son went first thing in January, before the tenants knew Sara had returned, and collected the January rents. What is the name of the type of authority given to the son when he collected the rents in October, November, and December?

A)Apparent
B)Express
C)By necessity
D)By estoppels
E)Impressed

Question 48

Mumtaz, Badia and Ilya are partners in a business partnership, called MBI. Mumtaz contributes $15,000 to the business, Badia contributes $10,000 and Ilya contributes $5,000. There is no agreement of how they will share partnership profits and losses. In addition, the partnership borrows A $30,000 from the bank. The business doesn't work out, and MBI is unable to repay the loan. The bank sues Mumtaz personally. The amount Mumtaz can legally recover from Ilya is:

A)nothing
B)$5,000
C)$10,000
D)$15,000
E)$30,000

Question 49

Which of the following statements respecting a limited partner is TRUE?

A)A limited partner is sometime called a silent partner.
B)A limited partnership must always be registered.
C)A limited partnership need not be registered if it contains the first and last names of the limited partner.
D)Both A and B
E)All of the above

Question 50

A Court may make an order dissolving a partnership on which of the following grounds?

A)the business conducts illegal activities
B)one partner becomes mentally incompetent
C)dissolution is equitable
D)the business is continually operating at a loss
E)all of the above

Question 51

Kevin, a contractor, authorized Toby to conclude contracts for home renovation on his behalf. Each time Toby met with a potential customer, he would advise the customer that he was acting on behalf of Kevin. Toby concluded a contract with Myra to renovate her home for $1,000. On finding out about the contract, Kevin refused to carry out the renovation as he believed that the price agreed upon was too low. Which of the following statements is TRUE?

A)If Kevin refuses to do the work, Myra can sue him for breach of contract.
B)Kevin is free to increase the price charged under the contract.
C)Myra can sue both Kevin and Toby if Kevin refuses to perform the contract.
D)If Kevin refuses to perform under the contract, Toby must complete the home renovations himself.
E)Myra cannot sue Kevin for breach of contract as the contract was concluded with Toby.

Question 52

John Elliott and James Gardiner form a partnership to buy, repair and sell used cars. John is to do all the work; James supplies $10,000. They sign a limited partnership agreement limiting James's liability to $10,000 but do nothing else with the agreement. Which of the following statements is true?

A)A partners' liability can never be limited to $10,000
B)James's liability could be limited but the failure to publicly register the limited partnership makes the limitation ineffective.
C)James's liability is limited to $10,000 because he is a limited partner in the partnership agreement.
D)Both A and B
E)None of the above.

Question 53

Which of the following would be the appropriate name for a limited liability partnership?

A)Ng and Chiu Association
B)Ng and Chiu LLP
C)Ng and Chiu Company
D)Ng and Chiu Corp.
E)Ng and Chiu Ltd.

Question 54

Alf and Liz set up a partnership to manufacture plastic containers for washing golf balls. They needed $30,000 capital to purchase the machinery. On December 27, Jeff put $30,000 into the partnership for purchasing the machinery on the understanding that he would be a limited partner. Liz was to register the limited partnership but with the New Year and a week's holiday she didn't have an opportunity to do the actual registration until January 15. On January 6, Alf purchased the machinery but decided on an upgraded machine at $50,000. In February, when payments on the machine stopped, the vendor sued Jeff for $25,000, being the balance owing on the purchase contract. In this situation, Jeff would be responsible for which of the following amounts?

A)$25,000
B)$5,000
C)Noting
D)$30,000
E)$12,500

Question 55

Which of the following is NOT a duty imposed by the law on an agent:

A)Duty to act within the scope of authority
B)Duty to act with reasonable care and skill
C)Fiduciary duty
D)Duty to negotiate contracts with third parties in good faith.
E)All of the above are duties imposed on an agent

Question 56

Joan Laxton, a real estate agent, listed a house on behalf of Max Patel, the owner. Joan secretly bought the house through her corporation, HerSelf Co., and resold it at a $20,000 profit. These acts by Joan are a beach of which of the following?

A)contract
B)competence
C)tort
D)fiduciary duty
E)authority

Question 57

Brant Ranger, Paula Potts and Matthew Lane are all tax lawyers and partners in Ranger Potts & Lane LLP. They practiced together and were successful for many years before the partnership ran into difficulties. Lane was retained by Phillip Schooner, a wealthy client. Lane acted negligently for Schooner in several income tax transactions which breached the Income Tax Act and caused millions of dollars in losses to Schooner. Schooner brought a legal action over this. Which of the followings statements is TRUE? Schooner can claim against

A)the firm's assets
B)none of the partners' personal assets
C)the firm's assets and the personal assets of Lane only
D)the firm's assets and all of the partners' personal assets
E)only the insurance provider for the firm

Question 58

A limited partnership may have:

A)no partner
B)a general partner
C)a limited partner
D)B and C above
E)at least two general partners and at least one limited partner

Question 59

Barbara Brown has hired Gerry Grey as her agent to purchase used machines for a manufacturing plant with instructions not to pay over $10,000 per machine. Gerry makes it clear that he is acting as agent for Barbara and makes a contract to purchase a machine for $15,000 from Rick Redd. When Barbara learns of it, she wants to cancel the contract. Which of the following statements is TRUE?

A)The contract with Rick is binding on Barbara because any limitations on an agent's authority not told to third parties are not effective.
B)The contract with Rick is not binding on Barbara because she did not sign it personally.
C)The contract with Rick is not binding on Barbara but it is binding on Gerry because he went beyond his authority.
D)The contract with Rick is not binding on Barbara because she did not ratify it.
E)The contract with Rick is binding on Barbara but she only has to pay $10,000 for the machine

Question 60

Carol Perez was a partner in the accounting firm of Lee, Park and Perez LLP. Carol defrauded a client of $3,000,000. If the client successfully sued for fraud, the client can claim against

A)the assets of the firm only
B)the assets of the firm and Carol Ng's personal assets only
C)the assets of the firm and all of the partners' personal assets
D)the assets of all the partners but not the firm's assets
E)only the insurance provider for the firm

Question 61

Each partner in a general partnership can be personally liable for the full amount of a debt the partnership owes.

Question 62

A joint venture is an agreement between two or more independent businesses to cooperate on a particular project only.

Question 63

An agent who has been authorized to sell property and owing to a failure to make reasonable inquires as to its value sells it for half of the current market value, has breached which of the following legal duties?

A)Fiduciary duty
B)Duty to act with reasonable care and skill
C)Duty to act within the scope of authority
D)All of the above
E)No duty has been breached

Question 64

You are considering buying a Freakin' Fried Chicken franchise. What should you do before proceeding in order to protect your interest?

A)Obtain the names of other franchisees and speak to them.
B)Check with your local business organization or provincial corporate affairs department to see if there have been complains about his franchisor.
C)Retain a lawyer and an accountant
D)Make sure that any deposit paid is held in trust.
E)All of the above

Question 65

A limited partnership is one in which some of the partners limit their liability to the
amount of their capital contributions and are active in the conduct of the business

Question 66

Moe, an electrical contractor, authorized Larry to make contracts with new customers on his behalf. Larry entered into a contract with Curly but did not advise Curly that he was acting on behalf of Moe. If Moe refuses to honour the contract, which of the following statements is TRUE?

A)Curly cannot sue either Larry or Moe
B)Curly can elect to sue either Moe or Larry
C)None of the above
D)Curly can only sue Moe
E)Curly can only sue Larry

Question 67

An agent who has been authorized to sell property and who in exchange for selling the property below market value, secretly receives a payment from the buyer, has breached which of the following duties?

A)Duty to act within the scope of authority
B)Duty to act with reasonable care and skill
C)Fiduciary duty
D)All of the above
E)No duty has been breached

Question 68

Legislation enacted in several provinces to protect franchisees usually require the franchisor to

A)file financial statements publicly
B)list all past and current franchisees
C)list all past and current lawsuits alleging deceptive business practices
D)list the history of any bankruptcy or criminal records of their officers and directors
E)all of the above

Question 69

Trade name means a name used by a business, often in addition to the registered name.

Question 70

A partnership is the relationship between two or more persons carrying on a business with a view to profit.

Question 71

Incorporation ensures that business assets and personal assets remain separate.

Question 72

Which of the following statements about franchises is TRUE?

A)A franchise is a separate legal entity.
B)A franchise is one type of corporation
C)A franchise is not a separate legal entity
D)A franchise is one form of limited partnership
E)A franchise is one type of joint venture.

Question 73

A purchaser of a franchise might have to pay which of the following fees and charges?

A)A fee for use of the franchise's name
B)A percentage of the revenues generated by the business
C)A share of the franchisor's advertising costs
D)Both A and B
E)All of the above

Question 74

The law which states that a partnership dissolves on the death of a partner can never be made inapplicable by a term in the partnership agreement.

Question 75

The "indoor management rule" refers to the principle that a person dealing with a
corporation is entitled to assume that its internal rules have been complied with unless it is clear that such is not the case.

Question 76

The four usual methods of fixing value when a small business is being sold are by an expert
appraisal, a fixed priced formula, arbitration and a shotgun clause.

Question 77

There are four common ways of protecting personal assets: transfer to spouse, partnership
incorporation and insurance.

Question 78

Mark lived in Kingston Ontario and purchased a Kleen Kar franchise for $80,000. A month after he bought the franchise he realized that the franchisor had failed to disclose most of the key information required under the Ontario law regulating franchises and had lied about key facts. Mark soon discovered Kleen Kar was almost bankrupt and the owners had been jailed previously for fraud. As a result Mark

A)could sue the franchisor's officers and directors personally
B)can have the contract rescinded
C)can get back his $50,000 and related costs
D)all of the above
E)can do nothing as he should have investigated more carefully before he bought the franchise

Question 79

The duty imposed on a franchisor when dealing with the franchisee is

A)a duty of good faith
B)a fiduciary duty
C)a duty of honour
C)a very low standard because both sides are business people, it is not a consumer contract
E)only the duty that the two parties negotiated and stated in the contract
TRUE/FALSE QUESTIONS

Question 80

Which of the following are standard terms often in a franchise agreement?

A)exclusivity clause
B)non-competition clause
C)confidentiality clause
D)termination/renewal clause
E)all of the above