ACCA Business and Corporate Law 5 — Questions and Answers
Question 1: Under the UCC, what is the 'battle of the forms' and how is it typically resolved?
- A dispute over which state's law governs a contract
- Additional or different terms in an acceptance that conflict with the offer, resolved by UCC Section 2-207 (Correct answer)
- A conflict between oral and written versions of the same agreement
- A dispute when two buyers claim the same goods
Correct answer: Additional or different terms in an acceptance that conflict with the offer, resolved by UCC Section 2-207
UCC Section 2-207 addresses contracts formed when acceptance contains different or additional terms, generally allowing contracts to form while treating conflicting terms as knocked out.
Question 2: What is the primary legal obligation imposed by the Sarbanes-Oxley Act (SOX) on public company executives?
- Executives must own at least 5% of company stock
- CEOs and CFOs must personally certify the accuracy of financial statements (Correct answer)
- Companies must rotate auditors every two years
- Boards must have a majority of executive directors
Correct answer: CEOs and CFOs must personally certify the accuracy of financial statements
SOX Section 302 requires CEOs and CFOs to personally certify that financial statements are accurate and complete, creating personal liability for false certifications.
Question 3: In corporate law, what is a 'poison pill' defense?
- A contractual clause that voids the merger if the acquirer has legal violations
- A shareholder rights plan allowing existing shareholders to buy shares at a discount to dilute a hostile acquirer (Correct answer)
- A golden parachute arrangement for departing executives
- A debt covenant that triggers repayment upon a change of control
Correct answer: A shareholder rights plan allowing existing shareholders to buy shares at a discount to dilute a hostile acquirer
A poison pill is a shareholder rights plan that allows existing shareholders to purchase additional shares at a discounted price if a hostile bidder acquires a trigger percentage, diluting the acquirer.
Question 4: Which legal doctrine holds employers liable for tortious acts committed by employees acting within the scope of their employment?
- Negligent hiring doctrine
- Respondeat superior (Correct answer)
- Vicarious liability exception
- Strict liability rule
Correct answer: Respondeat superior
Respondeat superior ('let the master answer') imposes liability on employers for employee torts committed within the scope of employment.
Question 5: Under contract law, what is the effect of the 'parol evidence rule'?
- Oral contracts are never enforceable in court
- Extrinsic evidence cannot be used to contradict a final written contract (Correct answer)
- Contracts must be witnessed by a notary to be valid
- Verbal modifications to a contract are always permissible
Correct answer: Extrinsic evidence cannot be used to contradict a final written contract
The parol evidence rule bars the introduction of prior or contemporaneous oral agreements to contradict or vary the terms of a final written contract.
Question 6: What is the key feature of a 'nonprofit corporation' that distinguishes it from a for-profit corporation?
- Nonprofit corporations cannot enter into contracts
- Profits cannot be distributed to members or directors but must be used for the organization's stated purpose (Correct answer)
- Nonprofit corporations are exempt from all state laws
- Nonprofit corporations must be operated by volunteers only
Correct answer: Profits cannot be distributed to members or directors but must be used for the organization's stated purpose
The non-distribution constraint prohibits nonprofit corporations from distributing net earnings to members, directors, or officers; all profits must further the organization's exempt purpose.
Question 7: In US antitrust law, which statute prohibits contracts, combinations, and conspiracies in restraint of trade?
- The Clayton Act
- The Federal Trade Commission Act
- The Sherman Antitrust Act (Correct answer)
- The Robinson-Patman Act
Correct answer: The Sherman Antitrust Act
Section 1 of the Sherman Antitrust Act prohibits contracts, combinations, or conspiracies that unreasonably restrain trade or commerce.
ACCA Business and Corporate Law 5
Under the UCC, what is the 'battle of the forms' and how is it typically resolved?