Questions 1 through 3 are based on the following:Desouza was a professor at UCI law school.He was also associated with a law firm in Newport Beach.The firm specialized in appeals to the California Supreme Court and United States Supreme Court which was good for Desouza since he had worked at both courts.Desouza was provided with an office equipped with a desk, chair, computer and printer, and phone.Any expenses he incurred due to his work at the firm were reimbursed by the firm.Since his availability varied because of his teaching schedule, he was paid by the job instead of a salary.Desouza could keep his own schedule which was also due to his availability.His written employment contract specified that he was an "independent contractor."That same contract stated that Desouza could not perform any legal work other than that assigned to him by the firm.Desouza never received any training from the firm; in fact, the senior partner said that Desouza "could train everyone at the firm about appeals."He was not included in the firm's retirement and medical plans since he received those benefits from UCI anyway.Question 1 is on this page; questions 2 and 3 are on the next page.

1.Which of the following is the best indication of "behavioral control" under IRS Publication 15A?

A.Desouza's written employment contract stated that he could not perform any legal work other than that assigned to him by the firm.

B.Desouza never received any training from the firm; in fact, the senior partner said that Desouza "could train everyone at the firm about appeals."

C.Desouza was not included in the firm's retirement and medical plans since he received those benefits from UCI anyway.

D.Desouza's written employment contract specified that he was an "independent contractor."

2.Which of the following is the best argument that Desouza is an employee of the firm?

A.Desouza's written employment contract stated that he could not perform any legal work other than that assigned to him by the firm.

B.Desouza never received any training from the firm; in fact, the senior partner said that Desouza "could train everyone at the firm about appeals."

C.Desouza was not included in the firm's retirement and medical plans since he received those benefits from UCI anyway.

D.Desouza's written employment contract specified that he was an "independent contractor."

3.Which of the following is the best argument that Desouza is an independent contractor of the firm?

A.Desouza was provided with an office equipped with a desk, chair, computer and printer, and phone.

B.Any expenses he incurred due to his work at the firm was reimbursed by the firm.

C.Desouza could keep his own schedule which was also due to his availability.

D.Desouza's written employment contract stated that he could not perform any legal work other than that assigned to him by the firm.

Questions 4 and 5 are based on the following:Pham, Nguyen and Tran were shareholders in a corporation which was in the business of buying houses, fixing them up and then selling them (this is sometimes called "flipping").They each owned one-third of the stock in the corporation.Pham was more knowledgeable about the business so he made most of the decisions.In fact, Nguyen and Tran were not active in the corporation's business other than when they attended annual meetings of the shareholders when they would vote as instructed by Pham.The three shareholders were each paid one-third of the profits out of the corporate bank account.However, Pham also frequently used corporate funds to pay personal expenses such as his house payment.Nguyen and Tran did not know about Pham's frequent use of corporate funds to pay personal expenses.The corporation failed to pay a consultant for services she provided to the corporation according to a contract between the consultant and the corporation.The consultant sued the corporation, Pham, Nguyen and Tran for breach of contract.Questions 4 and 5 are on the next page.

4.How should the court rule with respect to Pham?

A.Pham should win because the general rule is that the shareholder cannot be personally liable for a corporate debt.

B.Pham should win because it is obvious that he had to do all of the work but he received only one-third of the profits.

C.Pham should lose because he, Nguyen and Tran each owned one-third of the stock in the corporation.

D.Pham should lose because he frequently used corporate funds to pay personal expenses such as his house payment.

5.How should the court rule with respect to Nguyen?

A.Nguyen should win because the general rule is that the shareholder cannot be personally liable for a corporate debt.

B.Nguyen should win because it does not matter who did all of the work and how they divided the profits.

C.Nguyen should lose because he, Pham and Tran each owned one-third of the stock in the corporation.

D.Nguyen should lose because Pham frequently used corporate funds to pay personal expenses such as his house payment.

6.A sole proprietorship:

A.Usually has a board of directors to make policy decisions.

B.Is great for a small start-up.

C.Both A and B.

D.Neither A nor B.

7.A general partnership is a separate legal entity which can:

A.Be a party to a lawsuit in its own name.

B.Enter into a contract in its own name.

C.Both A and B.

D.Neither A nor B.

8.Most principal-agent relationships are formed by:

A.Happenstance.

B.Estoppel.

C.The parol evidence rule.

D.Agreement.

9.Which of the following is the best example of where the employer would claim that its termination of an employee was justified by the at-will employment rule?

A.The employee was terminated because her employer requested that she falsify documents to be provided to the IRS.

B.The employee was terminated because she went to Cal State Fullerton and her new supervisor went to Long Beach State.

C.The employee was terminated because she committed repeated acts of sexual harassment.

D.The employee was terminated because she killed another employee who was wearing a MAGA hat at the office.

10.A shareholder of a corporation can:

A.Also be a director of the corporation.

B.Also be an employee of the corporation.

C.Both A and B.

D.Neither A nor B.

Questions 11 and 12 are based on the following:Happy was on the board of directors of Delight Corporation.During a board meeting, the corporation's research team leader announced that the new product being developed (but not yet put on the market) by the corporation was a complete failure despite extensive testing.While it was known publicly that the corporation was developing this new product (lots of good publicity), only the board and the research team knew the product was so bad.When Happy left the meeting, he called his old friend, Joy, and told her the bad news about the new product.Both Happy and Joy immediately sold their stock in the corporation.When the corporation announced to the media the next week that it would not be marketing the new product after all, the corporation's stock lost value.Both Happy and Joy were charged with violating the "insider trading" laws.Questions 11 and 12 are on the next page.

11.Which of the following would be the best theory to use against Happy?

A.Traditional definition.

B.Misappropriation.

C.Both A and B.

D.Neither A nor B.

12.Which of the following would be the best theory to use against Joy?

A.Traditional definition.

B.Misappropriation.

C.Both A and B.

D.Neither A nor B.

13.Adam's employment contract stated that he could be fired only if the employer could show "good cause."At the employer's holiday party, Adam got drunk and asked the employer's best customer to "take off your mask and the rest of your clothes while you're at it."The customer immediately complained to Adam's employer who fired Adam.Adam sued the employer for breach of his employment contract.What should be the result?

A.Adam should win because it is important to improve relationships with customers.

B.Adam should win because he was drunk and he did not say anything about sex to the customer.

C.Adam should lose because offending the employer's best customer could threaten the employer's income.

D.Adam should lose because getting drunk at a holiday party can never be tolerated in business.

14.Which of the following is the best guideline for avoiding alter ego liability?

A.Maintaining contact between the corporation and the shareholder.

B.Maintaining financial control between the corporation and the shareholder.

C.Maintaining behavioral control between the corporation and the shareholder.

D.Maintaining separateness between the corporation and the shareholder.

15.Stalin, an employee of Siberian Camping Equipment, Inc., was told by his supervisor to "lie, steal, cheat . . . anything to make a sale!"Stalin does not want to violate the duty of obedience owed by an agent to his principal.What should Stalin do?

A.Stalin should obey his supervisor's directions even if such obedience would result in violating the law.

B.Stalin should not obey his supervisor's directions if such obedience would result in violating the law.

C.Stalin should ask his priest for advice before acting.

D.Stalin can avoid violating the duty of obedience by obeying his supervisor's instructions or the law; the choice is his.

16.Cheng, Chung and Guan were partners in a partnership.Cheng was in charge of the office and dealt with the partnership's legal and financial matters.Chung was in charge of marketing the partnership to new and existing customers.Guan invested $50,000.00 in the partnership in exchange for 10% of the profits.Which of the following best characterizes Cheng's role in the partnership?

A.Cheng is a general partner.

B.Cheng is a limited partner.

C.Cheng is a limited liability partner.

D.Cheng is a general liability partner.

17.Baptiste was the owner of a company.Her accountant told Baptiste that she needed to fire one of her ten employees.Baptiste could not decide which employee to fire so she looked at a list of the employees' names and decided to fire the employee whose name was at the top of the list.That employee sued Baptiste for wrongful employment termination.Which of the following is Baptiste's best defense?

A.BFOQ.

B.At-will employment rule.

C.After-acquired evidence rule.

D.Good cause.

18.Bond was an employee of Moneypenny Corporation.Bond's employment contract with the corporation stated that he could be required to submit to a drug test once every month.On April 1, 2020, Bond's supervisor at the corporation requested that he submit to a drug test.Bond refused so he was fired.He then sued the corporation for wrongful employment termination.What should be the result?

A. Bond should win since the general rule is that an employer cannot require an employee to submit to a drug test.

B.Bond should win since he had a good faith belief that his supervisor was making an "April Fool's Day" joke.

C.Bond should lose since his employment contract permitted the corporation to require him to submit to a drug test once every month.

D.Bond should lose since employers have a right to maintain a productive, drug-free workplace through reasonable procedures.

19.Goldberg, an employee of the law firm of Robbins & Robbins, was driving to the firm's office from his home one morning.Goldberg was talking on his cell phone with one of the firm's clients about a real estate transaction the firm was handling for the client.Is Goldberg in the course and scope of his employment with the firm?

A.Yes, because he was driving to the firm's office from his home.

B.Yes, because he was doing firm business.

C.No, because he was driving to the firm's office from his home.

D.No, because was doing firm business.

Questions 20 and 21 are based on the following:Emma worked for Lily of the Valley, Inc., a corporation that manufactured baby supplies.According to her employment contract with the corporation, Emma was entitled to be paid a salary of $78,000/year plus a "Christmas bonus" of $10,000 if the corporation sold baby supplies worth at least $10 million over the previous twelve months.Emma was also entitled to be repaid by the corporation for all expenses she incurred on its behalf.The corporation sold baby supplies worth $12 million over the previous twelve months but Emma's supervisor was very critical of her job performance.Questions 20 and 21 are on the next page.

20.Which of the following best justifies Emma's entitlement to the "Christmas bonus" of $10,000?

A.The duty of compensation.

B.The duty of reimbursement.

C.The duty of indemnification.

D.The duty to provide safe working conditions.

21.Emma's entitlement to be repaid by the corporation for all expenses she incurred on its behalf is based on:

A.The duty of compensation.

B.The duty of reimbursement.

C.The duty of indemnification.

D.The duty to provide safe working conditions.

22.The two governing documents for a corporation in California are:

A.The articles of incorporation and the by-laws.

B.The partnership agreement and the by-laws.

C.The operating agreement and the articles of incorporation.

D.The partnership agreement and the operating agreement.

23.Which of the following is the best example of sexual harassment under the quid pro quo theory?

A.Sancho repeatedly asked his co-worker, Mary, for a date but she always said "no!"

B.Nitta, the company owners, told Matsuhashi that he needed to sleep with Nitta to keep his job.

C.Both A and B.

D.Neither A nor B.

24.The employee handbook at the Sanchez Company stated that new employees could not talk to the company's customers unless no senior employees were available.This is an example of:

A.Too many restrictions on new employees.

B.Deference to senior employees.

C.Implied actual authority.

D.Express actual authority.

25.What is the main advantage usually sought by business owners who want to form a corporation for their business?

A.A corporation is an established type of business entity.

B.A corporation is a "pass-through" business entity for income tax purposes.

C.Shareholders do not need to be involved in the day-to-day operation of a corporation.

D.Shareholders' personal assets are ordinarily protected against corporate creditors.

26.In which of the following examples should Cosmo be personally liable?

A.Cosmo, an employee of Lee Financial, Inc., signs a contract for the company to obtain office supplies; Cosmo signs the contract "as representative of Lee Financial, Inc."

B.Cosmo, an employee of Lee Financial, Inc., signs a contract for the company to obtain office supplies; Cosmo signs the contract without any reference to Lee Financial, Inc.

C.Cosmo, an employee of Lee Financial, Inc., signs a contract for the company to obtain office supplies; Cosmo signs the contract "as agent for Lee Financial, Inc."

D.Cosmo, an employee of Lee Financial, Inc., signs a contract for the company to obtain office supplies; Cosmo signs the contract "as an employee of Lee Financial, Inc."

27.Which of the following is a true statement?

A.Double taxation can be a problem for a corporation and its shareholders but it is not a problem for a limited liability company and its members.

B.Double taxation can be a problem for a limited liability company and its members and it can be a problem for a corporation and its shareholders.

C.Double taxation can be a problem for a corporation and its shareholders as well as a limited liability partnership and its partners.

D.Double taxation can be a problem for a limited liability company and its members but it is not a problem for a corporation and its shareholders.

28.Cardiff, an employee of a corporation, was directed by his supervisor to change certain entries in the corporation's financial statements in order to make the corporation's stock appear to be less valuable.Cardiff refused so he was fired.What should be the result if he sued the corporation for wrongful employment termination?

A.Cardiff should win since his termination violated public policy.

B.Cardiff should win since his termination breached his employment contract.

C.Cardiff should lose since his termination did not violate public policy.

D.Cardiff should lose since his termination did not breach his employment contract.

29.Which of the following is the best example of a whistleblower?

A.Sandra told her friend that her employer was illegally dumping toxic waste into the river.

B.Sarah told her neighbor that her employer was illegally dumping toxic waste into the river.

C.Faith told a county environmental compliance officer that her employer was illegally dumping toxic waste into the river.

D.Phu told her business law professor that her employer was illegally dumping toxic waste into the river.

30.Which of the following is an example of the agent's compliance with the business judgment rule?

A.Ho's agent, Minh, thoroughly researched all aspects of a contract proposal before recommending that Ho accept it.

B.Ho's agent, Minh, was careful to avoid any conflicts of interest with Ho when negotiating contracts on Ho's behalf.

C.Both A and B.

D.Neither A nor B.

31.Emily, a partner in a limited liability partnership called Israel & Nguyen LLP, signed a contract on behalf of the LLP.The contract was with Gonzalez who was a long-time LLP client.The LLP then breached the contract.Against whom can Gonzales get a judgment if she sued the LLP and Emily for breach of contract?

A.Emily only.

B.The LLP only.

C.Both Emily and the LLP.

D.Neither Emily nor the LLP.

32.The principal's duty to provide safe working conditions to the agent is usually covered by:

A.The course and scope of the agency.

B.Safety statutes/rules.

C.The contract between the principal and the agent.

D.A hat.

33.Which of the following is true about "debt security" and "equity security"?

A.Debt security is based on a loan, while equity security is based on an investment.

B.Debt security is based on an investment, while equity security is based on a loan.

C.Both debt security and equity security are based on a loan.

D.Both debt security and equity security are based on an investment.

Questions 34 and 35 are based on the following:Harold was an employee of Kumar Industries.His employment contract stated that he could be fired for good cause only.Harold was called into his supervisor's office one Friday afternoon and told by his supervisor that there was good cause for firing Harold had left work at 4:45 p.m. (instead of the usual 5:00 p.m.) on New Year's Eve.The supervisor did not even give Harold the opportunity to explain himself.The supervisor handed Harold a check and told Harold it was his final paycheck because he was fired for leaving work early.Harold sued Kumar Industries for wrongful employment termination.Question 34 is on this page; question 35 is on the next page.

34.What is Harold's best argument in favor of his wrongful employment termination lawsuit?

A.The at-will employment rule was applicable here.

B.Good cause was required to fire Harold.

C.The supervisor did not provide Harold with an opportunity to explain himself.

D.The supervisor never told Harold that he was fired.

35.What is Kumar Industries' best argument against Harold's wrongful employment termination lawsuit?

A.The at-will employment rule was applicable here.

B.Good cause was required to fire Harold.

C.The supervisor did not have to provide Harold with an opportunity to explain himself.

D.The supervisor never told Harold that he was fired.

Questions 36 and 37 are based on the following:Muffin, an employee of Dean's Entertainment (a sole proprietorship owned by Dean), was subjected to many acts of sexual harassment by Dean during the two months she worked for Dean's Entertainment.These many acts included several invitations for a date (she always said "no!"), frequent fondling of her buttocks, and being addressed as "my little hot tamale" and "Dean's dream girl."Muffin finally decided to quit her job after Dean tried to tear her blouse off.Muffin sued Dean for sexual harassment.

36.What should be the result?

A.Muffin should winon a quid pro quo theory.

B.Muffin should winon a hostile environment theory.

C.Dean should win since Muffin chose to quit her job.

D.Dean should win since this happens often in the workplace.

37.Was Muffin constructively terminated from her job?

A.Yes, since Dean made conditions so intolerable that a reasonable person would quit.

B.Yes, since Muffin was an employee and not an independent contractor of Dean's Entertainment.

C.Yes, since she needed to maintain her self-dignity.

D.No.

38.A movie producer, Colton, wanted to make a movie about the life of Professor Charles H. Smith (a white man) at Cal State Fullerton.Colton told an African-American woman, Kersaundra, who applied to play the part of Professor Smith:"Sorry, wrong color, wrong sex."Kersaundra sued Colton for discrimination under Title VII.Which of the following would be Colton's best defense?

A.BFOQ.

B.At-will employment rule.

C.After-acquired evidence rule.

D.Fraud.

Questions 39 and 40 are based on the following:Casper specialized in "trouble-shooting" with computers.He could fix just about any computer problems experienced in business.Casper's biggest client (for which he was "on call" 24/7/365) provided him with an office with computer and internet access which Casper could use to do work for any of his clients.Otherwise, he was not reimbursed by anyone for any of his work-related expenses except his biggest client would pay for Casper to attend an IT conference every year held in Las Vegas over the Labor Day weekend (total cost about $2,500.00).Casper was required by his biggest client to annual online training for sexual harassment and diversity training.His biggest client said that Casper was an "important worker" though his biggest client did employ other computer specialists.Casper's income, after expenses but before taxes, was approximately $165,000/year.

39.Which of the following is the best indication of "type of relationship" under IRS Publication 15A?

A.Casper was "on call" 24/7/365 for his biggest client.

B.Casper was not reimbursed by anyone for any of his work-related expenses except his biggest client would pay for Casper to attend an IT conference every year held in Las Vegas over the Labor Day weekend (total cost about $2,500.00).

C.Casper was required by his biggest client to do annual online training for sexual harassment and diversity training.

D.His biggest client said that Casper was an "important worker" though his biggest client did employ other computer specialists.

40.Which of the following is the best indication of "financial control" under IRS Publication 15A?

A.Casper was "on call" 24/7/365 for his biggest client.

B.Casper was not reimbursed by anyone for any of his work-related expenses except his biggest client would pay for Casper to attend an IT conference every year held in Las Vegas over the Labor Day weekend (total cost about $2,500.00).

C.Casper was required by his biggest client to do annual online training for sexual harassment and diversity training.

D.His biggest client said that Casper was an "important worker" though his biggest client did employ other computer specialists.