IAB Business Law & Ethics 2 — Questions and Answers
Question 1: Under the Uniform Commercial Code (UCC), a contract for the sale of goods worth $500 or more must be:
- Notarized by a public official
- In writing to be enforceable (Correct answer)
- Approved by both parties' attorneys
- Registered with the state
Correct answer: In writing to be enforceable
The UCC Statute of Frauds requires contracts for the sale of goods of $500 or more to be evidenced by a writing signed by the party to be charged.
Question 2: A bookkeeper discovers their employer has been systematically underpaying employees. The most ethical first course of action is to:
- Ignore it to protect their job
- Immediately report to the media
- Document the discrepancy and raise it internally with management or HR (Correct answer)
- Quit without saying anything
Correct answer: Document the discrepancy and raise it internally with management or HR
Ethical practice requires documenting concerns and raising them through appropriate internal channels before escalating externally.
Question 3: Which type of business structure provides limited liability to all owners while allowing profits to be taxed only at the individual level?
- General partnership
- C-Corporation
- Limited Liability Company (LLC) (Correct answer)
- Sole proprietorship
Correct answer: Limited Liability Company (LLC)
An LLC combines limited liability protection for all members with pass-through taxation, avoiding the double taxation of a C-Corporation.
Question 4: An 'apparent authority' in agency law arises when:
- A principal expressly grants authority to an agent in writing
- A third party reasonably believes an agent has authority based on the principal's conduct (Correct answer)
- An agent acts beyond their authorized scope and the principal ratifies it
- A court orders an agent to act on behalf of a principal
Correct answer: A third party reasonably believes an agent has authority based on the principal's conduct
Apparent authority exists when a principal's words or actions lead a third party to reasonably believe the agent is authorized to act.
Question 5: The concept of 'privity of contract' traditionally means that:
- All contracts must be kept confidential
- Only parties to a contract can sue to enforce it (Correct answer)
- Contracts must be witnessed by a third party
- Contract terms are binding on all employees of a company
Correct answer: Only parties to a contract can sue to enforce it
Privity of contract is the principle that only parties who are direct parties to a contract have enforceable rights or obligations under it.
Question 6: A 'fiduciary duty' in a business context requires that a person:
- Files all financial documents on time
- Acts in the best interests of another party they represent (Correct answer)
- Maintains accurate financial records
- Complies with all tax regulations
Correct answer: Acts in the best interests of another party they represent
A fiduciary duty obligates one party to act loyally and in good faith in the best interests of another, such as a trustee acting for a beneficiary.
Question 7: Under US employment law, which of the following is a protected characteristic under Title VII of the Civil Rights Act?
- Political affiliation
- Educational level
- National origin (Correct answer)
- Marital status
Correct answer: National origin
Title VII prohibits employment discrimination based on race, color, religion, sex, and national origin.
IAB Business Law & Ethics 2
Under the Uniform Commercial Code (UCC), a contract for the sale of goods worth $500 or more must be: