Business Law
Test Preparation
Course Introduction
Business Law explores the legal environment in which businesses operate, focusing on the foundational principles and current practices that govern commercial transactions, contracts, agency relationships, and regulatory compliance. The course examines key legal concepts related to business formation, intellectual property, employment law, sales and consumer protection, dispute resolution, and the ethical implications of legal decisions in business contexts. Through case studies and real-world scenarios, students develop a practical understanding of how legal issues impact business strategies and operations, equipping them with the knowledge needed to navigate the complexities of modern business law.
Recommended Textbook Essentials of Business Law 4th Edition by
Jeffrey F. Beatty
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34 Chapters
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Page 2
Chapter 1: Introduction to Law
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Q1) The Governor of Minnesota is part of the state's:
A)federal branch.
B)judicial branch.
C)legislative branch.
D)executive branch.
Answer: D
Q2) Which of the following statements about treaties is true:
A)they must be approved by the Supreme Court.
B)they must be ratified by Congress.
C)they are not binding upon citizens.
D)all of the above.
Answer: B
Q3) The doctrine of stare decisis ensures:
A)predictability.
B)consistency.
C)fairness.
D)all of the above.
Answer: D
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Chapter 2: Business Ethics and Social Responsibility
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Sample Questions
Q1) Unethical behavior can be costly.
A)True
B)False
Answer: True
Q2) Why should ethics be a concern to business?
A)Society as a whole benefits from ethical behavior.
B)People feel better when they behave ethically.
C)Unethical behavior can be very costly.
D)All of the above.
Answer: D
Q3) One result of the Gillette Co.sale to Procter & Gamble Co.discussed in the textbook was that:
A)four percent of the Gillette workforce, or about 6,000 employees, were fired.
B)ten percent of the Gillette workforce, or about 35,000 employees, were fired.
C)Gillette's stock price went down 13 percent in one day when the sale was announced.
D)Kilts, the CEO of Gillette, became unemployed.
Answer: A
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Chapter 3: Dispute Resolution
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Sample Questions
Q1) In a civil case,the plaintiff must prove the case:
A)by a preponderance of the evidence.
B)by clear and convincing evidence.
C)beyond a reasonable doubt.
D)None of the above; the burden of proof is on the defendant.
Answer: A
Q2) The decision issued by an arbitrator is binding upon the parties.
A)True
B)False
Answer: True
Q3) Briefly describe the process of jury selection.
Answer: the process of jury selection is called voir dire.the court's goal is to select an impartial jury.through a series of questions,attorneys for each side attempt to get the most favorable jury for their position.As potential jurors are questioned,either side may exclude a juror for cause (some reason to think the person may not be impartial)or via a limited number peremptory challenges,in which no reason must be stated for excluding a juror.
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Chapter 4: Common Law, statutory Law, and Administrative Law
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Q1) The U.S.Supreme Court was asked to decide whether discrimination based on sexual orientation is a violation of Title VII of the Civil Rights Act.This law forbids discrimination in employment on the basis of sex.In interpreting statutes,the court may use which of the following?
A)The plain meaning rule.
B)Legislative history.
C)Public policy.
D)All of the above.
Q2) Which law regulates how federal agencies make rules,conduct investigations,hold meetings and hearings,obtain information,and reach decisions?
A)The 1964 Civil Rights Act.
B)The Clean Agency Act.
C)The Administrative Procedure Act.
D)The Freedom of Information Act.
Q3) Arbogast Corporation is served with a subpoena to turn over business records to an administrative agency.What are three possible legal grounds the company can raise to avoid producing the requested records?
Q4) Discuss the four most important limitations on the power of federal administrative agencies.
Page 6
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Chapter 5: Constitutional Law
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Q1) Hall was arrested for burning the United States' flag in a protest of governmental policy.His action is protected under the First Amendment's guarantee of free speech because the flag burning is considered symbolic speech.
A)True
B)False
Q2) Every year the U.S.Supreme Court receives about 8,000 requests to review cases.Of this number,the Court will hear about:
A)30
B)100.
C)1,000.
D)8,000.
Q3) Judicial review can best be described as the power of federal courts to:
A)review state court decisions.
B)review state executive action.
C)review state and federal legislative and executive action.
D)none of the above.
Q4) Discuss the Miller test to determine if a creative work is obscene.
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Chapter 6: Torts
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Q1) A business will incur strict liability for damages resulting from:
A)using harmful chemicals.
B)operating explosives.
C)bringing dangerous substances onto property.
D)a defective product manufactured or sold by the business.
E)All of the above.
Q2) Tropical Nectars,Inc.wanted Steve,a famous comedian,to endorse its products.Steve,however,was not interested.Tropical Nectars was not deterred and hired a Steve impersonator for its radio commercials.Tropical Nectars has:
A)intruded into Steve's privacy.
B)defamed Steve.
C)interfered with a business relationship.
D)engaged in conduct that raises the issue of commercial exploitation.
Q3) Punitive damages are intended to punish the defendant for conduct that is extreme and outrageous.
A)True
B)False
Q4) Erika's arm is broken when Alice knocks her down during an argument.If Erika sues Alice for battery,what damages will Erika be likely to receive?
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Chapter 7: Crime
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Q1) Criminal defendants have the right to a lawyer at all the important stages of the criminal process.
A)True
B)False
Q2) When a judge orders a criminal defendant to reimburse the victim,it is called:
A)reimbursement.
B)restitution.
C)damages.
D)compensation.
Q3) List and discuss the protections afforded criminal defendants by the Bill of Rights.
Q4) Congress revised and reauthorized the Patriot Act,but the revised national security letter provisions were found unconstitutional by a federal court.
A)True
B)False
Q5) A crime is a violation of statutory law.
A)True
B)False
Q6) Compare and contrast money laundering and embezzlement.Give an example of each.
Page 9
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Chapter 8: International Law
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Q1) If the United States sets a limit on the number of cars that can be imported,this action is a form of tariff.
A)True
B)False
Q2) MicroWare is a U.S.company based in Utah.It is negotiating to sell $4 million worth of computer goods to a French company,Baranger.MicroWare's attorney suggests that payment be by a letter of credit.What is a letter of credit and why does MicroWare's attorney recommend payment by letter of credit?
Q3) Lindell,Inc.,a U.S.company,and Halden,AG,a German company,entered into a contract under which Halden is to ship party supplies to Lindell.One of the terms of the contract states,"Any disputes that arise under this contract will be resolved in the courts of Germany." This contract term is:
A)a forum selection clause.
B)a choice of law clause.
C)an arbitration clause.
D)not enforceable.
Q4) Explain what the General Agreement on Tariffs and Trade (GATT)is and give pro and con arguments concerning this agreement.
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Page 10
Chapter 9: Introduction to Contracts
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Q1) When promissory estoppel is used by the courts,it is because there is NOT an enforceable contract present.
A)True
B)False
Q2) Unilateral contracts are usually considered illegal.
A)True
B)False
Q3) The common law governs contracts for:
A)services.
B)real estate.
C)employment.
D)All of the above.
Q4) LarsonSoft,Inc.is a software producer that entered into a verbal agreement with XYZ Corporation wherein XYZ agreed to buy LarsonSoft's newly developed software.The agreement also provided that LarsonSoft would supply training personnel,as well as technical personnel,to work with XYZ employees in installing and learning the software.What law governs this agreement?
Q5) The elements of a contract are agreement,consideration,legality,and capacity.
A)True
B)False
11
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Chapter 10: Agreement
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Q1) Brett displays his 1880 spinning wheel at an antique trade show.Mary sees the spinning wheel and is interested in buying it.Brett says he will sell it for $2,500.Mary says she really likes the spinning wheel but is only willing to pay $1,500.Which of the following is correct?
A)Mary's counteroffer terminates Brett's offer of $2,500.
B)If Brett rejects Mary's counteroffer, she can still accept the original offer of $2,500.
C)Brett's statement was not an offer bur merely an opinion.
D)Mary's counteroffer is not valid as she did not wait a reasonable time before making it.
Q2) Spangel Fashions sends out its spring and summer catalog to Cindy.Cindy falls in love with the cute dress featured on the front cover of the catalog.When Cindy calls to order the dress,she is informed that the company has sold out of the dress.Cindy is upset and claims that the store is in breach of contract.She argues that the catalog presented an offer,which she accepted when she called to order the dress.Is Cindy correct? Why/why not?
Q3) Discuss the circumstances under which an offer would be terminated by law and give examples.
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Chapter 11: Consideration
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Q1) If Rudy offers Oscar $200 for his $600 stereo and Oscar agrees,a court will probably:
A)set aside the agreement as being unfair.
B)set aside the agreement because the consideration is inadequate.
C)not set aside the agreement based on the adequacy of the consideration.
D)not set aside the agreement because of the UCC.
Q2) If Annie promises not to drink alcohol until she is 21 years of age in exchange for her aunt's promise of $1,000,the agreement is:
A)enforceable because Annie is giving up the right to do something she would otherwise be entitled to do.
B)enforceable because both parties made a valid promise.
C)not enforceable because Annie does not have a legal right to drink alcohol.
D)not enforceable because Annie's aunt doesn't receive anything of value in exchange for her own promise.
Q3) Contracts in which one party agrees to buy all his requirements of certain goods from the other party are generally unenforceable because there is no definite amount.
A)True
B)False
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Page 13
Chapter 12: Legality
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Q1) In bailment cases,exculpatory clauses:
A)are very rarely used.
B)are somewhat more likely to be enforced than in other types of cases.
C)ordinarily involve an attempt to limit liability for damage to persons rather than property.
D)illegal by statute.
Q2) Best Furniture,Inc.entered into a contract with a consumer,Piotr.He was a recent immigrant to the United States,his English skills were limited and he quit school when he was 16.The contract provided for Piotr to pay $1500 for a sofa,which was worth $400.If Best Furniture sues Piotr under the contract,what is the most likely result?
A)The contract is unenforceable because of the Statute of Frauds.
B)The contract is enforceable because of the parole evidence rule.
C)The contract is unenforceable because it is unconscionable.
D)The contract is enforceable because Piotr agreed to its terms.
Q3) An agreement may violate public policy even if the agreement does not require a party to commit a crime,tort,or violate a statute.
A)True
B)False
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Chapter 13: Capacity and Consent
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Q1) Which of the following statements,if made by a seller who knows the statement to be untruthful,would not be misrepresentation of material fact resulting in a cause of action for fraud?
A)"This horse is only six years old."
B)"There is no better car in the world."
C)"The tires have less than 5,000 miles on them."
D)"This car gets 28 miles per gallon."
Q2) In the case Hess v.Chase Manhattan Bank,USA,N.A.,the Missouri Supreme Court held that Chase had no duty to disclose the ongoing investigation by the Environmental Protection Agency to Hess.
A)True
B)False
Q3) Both fraudulent AND innocent,misrepresentation permit the injured party to rescind a contract.
A)True
B)False
Q4) Spencer,an adult of sound mind,has the legal capacity to contract.
A)True
B)False
Q5) Discuss the concept of a "material fact" in fraud situations.
Page 15
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Chapter 14: Written Contracts
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Q1) Which of the following types of contracts cannot be either contradicted or supplemented by evidence of prior agreements or expressions?
A)Totally integrated contracts.
B)Incomplete contracts.
C)Ambiguous contracts.
D)All of the above.
Q2) In order to satisfy the statute of frauds,a writing must:
A)be a formal written document drafted by an attorney.
B)be signed by the defendant and contain the name of each party, the subject matter of the agreement, and the essential terms and promises.
C)be notarized.
D)All of the above.
Q3) Which of the following promises ordinarily must be in writing to be enforceable?
A)Promises made as a part of a prenuptial agreement.
B)The agreement to sell a car for $1500.
C)The promise by an executor of an estate to pay a debt of the decedent.
D)All of the above.
Q4) Explain the reason behind having a statute of frauds and give arguments for and against having such a statute.
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Chapter 15: Third Parties
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Questions
Q1) Which statement most accurately describes third party beneficiary rights?
A)A beneficiary may enforce a contract if the parties intended to benefit him and if enforcing the promise will satisfy a duty of the promisee to the beneficiary.
B)If a promisee intended to make a gift to the beneficiary, the beneficiary may not enforce the contract.
C)An intended third party beneficiary has no enforceable rights in a contract.
D)Incidental beneficiaries have enforceable rights against both contracting parties.
Q2) Robert hired James,a CPA,to prepare his tax returns.James was too busy and delegated the work to Sara,also a CPA.This delegation is:
A)enforceable, as Sara is also a CPA.
B)enforceable, as there was no expectation James would do the work.
C)not enforceable, as Robert hired James to perform personal services.
D)not enforceable, as this violates public policy.
Q3) Claims for personal injury are generally assignable.
A)True
B)False
Q4) Briefly discuss the enforceability of contracts by third parties.
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Chapter 16: Performance and Discharge
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Q1) The legal right to sue for a breach of contract is subject to a statute of limitations.
A)True
B)False
Q2) Most contracts are discharged by mutual agreement.
A)True
B)False
Q3) In negotiating the purchase of a vehicle,the sales representative told Karla,"I guarantee that you will be personally satisfied with this car." The guarantee was written on the contract when Karla purchased the car.If a controversy arises over Karla's satisfaction,the court will apply a subjective standard,which means Karla's judgment must be reasonable.
A)True
B)False
Q4) Name and describe the types of conditions,explain how conditions are created,and discuss whether it is important to identify the type of condition in a contract.
Q5) A court may never discharge a party who has not performed.
A)True
B)False
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Chapter 17: Remedies
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Q1) Discuss the purpose of an injunction and how the two types of injunctions covered in the textbook are used.
Q2) Rich and Archie sign an agreement in which Archie agrees to deliver ten cases of champagne in 5 days.The parties negotiated and meant to say in the written agreement,delivery in 50 days.If the two cannot settle this dispute,and Archie still wants to deliver the champagne,then Archie should sue for the remedy of:
A)reformation.
B)rescission.
C)restitution.
D)reliance.
Q3) Farmer Elvin is holding 200 pounds of potatoes in storage for Chef Noble but Chef Noble has breached the contract by failing to pay for the potatoes.The potatoes are beginning to rot.If Farmer Elvin sells the potatoes to a local diner to make potato soup and salad,then this action would be considered:
A)a reasonable mitigation of damages.
B)an attempt to maximize damages.
C)an attempt to realize an unwarranted profit.
D)conversion.
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Chapter 18: Introduction to Sales
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Q1) UCC Section 2-204 provides three important rules that enable parties to make a contract quickly and informally.These include all but which of the following?
A)The parties may make a contract in any manner sufficient to show that they reached an agreement.
B)A writing sufficient under the statute of frauds may be a simple memo, a letter, or informal note, but need not itself be a contract.
C)The UCC will enforce a deal even though it is difficult to say exactly when it was formed.
D)A court may enforce a bargain even though one or more terms were left open.
Q2) Which of the following is true regarding an open price term?
A)It makes the contract unenforceable.
B)The price may be fixed by the seller.
C)The price is the "reasonable" price at the time of delivery.
D)The price is set by the buyer.
Q3) Under the UCC,an agreement modifying a contract needs no consideration to be binding.
A)True
B)False
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Chapter 19: Ownership and Risk
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Q1) Ruppart Manufacturing has a contract for the sale of 100 cases of teaching supplies to Teachers Co-op,Inc.Payment of the order is to be made in installments over the next year.Ruppart Manufacturing keeps a security interest in the cases sold to assure payment by Teachers Co-op,Inc.When the order is completed,Ruppart ships the order.Legally:
A)both Ruppart and Teachers have an insurable interest in the supplies.
B)only Ruppart has an insurable interest in the supplies.
C)only Teachers has an insurable interest in the supplies.
D)neither Ruppart nor Teachers has an insurable interest in the supplies.
Q2) Brian left his computer with CompuGeeks for repair.The following week,when he goes back to the shop to pick up his computer,he finds out that CompuGeeks sold it to Ian,a customer who was looking for a used computer.Brian can have his computer back from Ian.
A)True
B)False
Q3) Under the UCC,the party who has title to the goods always has the risk of loss.
A)True
B)False
Q4) Discuss the concept of entrustment.
Q5) Discuss the concept of insurable interests.
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Chapter 20: Warranties and Product Liability
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Q1) If a product is sold "as is",that means that:
A)the seller disclaimed all express warranties, but he may still be held liable on the basis of breach of implied warranty of merchantability.
B)the seller disclaimed all implied warranties.
C)the seller attempted to disclaim warranties, but that is not allowed by the UCC.
D)the seller disclaimed the warranty of title.
Q2) Many states prohibit a seller from disclaiming implied warranties in the sale of consumer goods.
A)True
B)False
Q3) A statute of repose places an absolute limit on when a lawsuit may be filed regardless of when the defect is discovered.
A)True
B)False
Q4) The Magnuson-Moss Warranty Act requires sellers to give written warranties. A)True
B)False
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Chapter 21: Performance and Remedies
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Q1) Which of the following statements is not true regarding the buyer's right to cover?
A)The buyer must cover.
B)The measure of damages in a cover is the difference between the cover price and the contract price.
C)Cover must be done by reasonably obtaining substitute goods.
D)Consequential damages can be recovered in addition to the cover damages.
Q2) Discuss the UCC rules on the limitation of damages in a contract.
Q3) Tender means to make conforming goods available to the buyer.
A)True
B)False
Q4) When a party to a contract notifies the other party that it will not perform the contract as agreed,this conduct is referred to as:
A)specific performance.
B)cover.
C)repudiation.
D)assurance.
Q5) Define these terms: usage of trade; course of dealing; and course of performance.
Q6) Identify six possible remedies for a seller when the buyer breaches a contract.
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Chapter 22: Creating a Negotiable Instrument
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Q1) Define commercial paper and explain what it is used for.
Q2) Forgery is a valid defense against a holder in due course.
A)True
B)False
Q3) There are three kinds of commercial paper: negotiable,non-negotiable and promissory.
A)True
B)False
Q4) Felicia,an elderly woman,does not speak or read English well.Felicia is a recent immigrant to this country.A dishonest immigration officer tells Felicia to sign several documents as being necessary to maintain her legal alien status.Unknown to Felicia,she signs a promissory note.The immigration officer thereafter sells the note to Neighborhood Bank,a holder in due course,who goes after Felicia for payment of the note.Felicia's defense to the Neighborhood Bank is:
A)fraud in the inducement; a real defense.
B)fraud in the execution; a real defense.
C)unauthorized completion; a personal defense.
D)breach of contract; a real defense.
Q5) Explain the shelter rule.
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Chapter 23: Liability for Negotiable Instruments
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Q1) Lance indorses a promissory note to Connie in exchange for consideration.Unknown to Lance,the note is not good because the maker's signature was forged.Connie later attempts to present the instrument for payment to the original alleged maker,Lilly,who is able to deny liability for payment due to the forged signature.Connie may later sue Lance for breach of a transfer warranty.
A)True
B)False
Q2) The UCC requires that anyone wishing to cash a check must provide:
A)a government issued picture I.D.
B)reasonable identification.
C)thumbprint proof of identity.
D)proof of residence.
Q3) Warranty liability is the liability of someone who receives payment on a negotiable instrument.
A)True
B)False
Q4) Drawers and indorsers are secondarily liable on negotiable instruments.
A)True
B)False
Q5) List the warranties a transferor of a negotiable instrument makes.
Page 25
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Chapter 24: Liability for Negotiable Instruments: Banks and Their Customers
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Q1) In the case Kruser v.Bank of America,the Court held that: A)the bank was liable under the Electronic Fud Transfer Act.
B)the bank was liable under UCC Section 4-105.
C)the bank was not liable under the Electronic Fud Transfer Act. D)the bank was liable under the Consumer Protection Act.
Q2) Check #1234 is received for collection by Big Bank at 11:3 a.m.on July 15.Under Article 4 of the UCC,Big Bank generally has until midnight of July 16 to process the check.
A)True
B)False
Q3) Article 4 of the UCC governs bank deposits and collections. A)True B)False
Q4) Carl did not ask First Bank for an ATM card.Nevertheless,First Bank sent Carl an ATM card.The card must be invalid until Carl requests validation. A)True
B)False
Q5) On May 10,Klaus received his bank statement.Explain why Klaus should examine the bank statement within 30 days.
Page 26
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Chapter 25: Secured Transactions
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Q1) Macig enters into a secured consumer debt transaction with Friendly Bank.When Macig pays the loan in full,Friendly Bank is required to file a statement indicating that it no longer claims a secured interest in the collateral.This statement must be filed within one month from the date the debt is fully paid.
A)True
B)False
Q2) If repossessed collateral is sold or otherwise disposed of by the creditor,the time,place,manner,and method of disposal must be:
A)commercially reasonable.
B)scheduled with the debtor so that the debtor is able to attend.
C)court ordered.
D)perfected.
Q3) Aubry purchased a washing machine,a freezer,and a refrigerator from Gateway Appliances on credit,giving Gateway a security interest in the appliances.The appliances were for Aubry's household use.Gateway did not file a financing statement.Six months later,Aubry had a garage sale and sold the appliances to Tam.Tam bought the appliances for her student rental property.Aubry left town owing money on the appliances.If Gateway can trace the appliances to Tam,can Gateway repossess the appliances? Explain in detail.
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Page 27
Chapter 26: Bankruptcy
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Q1) The correct order of payment of claims from the debtor's estate would be:
A)secured claims, priority claims, unsecured claims.
B)secured claims, unsecured claims, priority claims.
C)priority claims, secured claims, unsecured claims.
D)priority claims, unsecured claims, secured claims.
Q2) The start of the bankruptcy process is:
A)the submission of a plan of repayment.
B)the bankruptcy court's issuance of an order for relief.
C)a meeting of creditors.
D)the appointment of a trustee.
Q3) Debts that cannot be discharged in bankruptcy,include all EXCEPT:
A)alimony.
B)income taxes.
C)negligence judgments.
D)fraud judgments.
Q4) Even though Lilian is neither a layer nor a CPA,she can serve as a trustee in a bankruptcy case.
A)True
B)False
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Chapter 27: Agency
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Q1) Mohammad was an employee in the new product development department of Estay Inc.Mohammad was directly involved in the development of a new product that Estay intended to launch in six months.Estay took great care to keep information concerning the new product a secret.Ceries,Inc.,a competitor of Estay,persuaded Mohammad to leave Estay to direct Ceries' marketing department.Which statement is correct?
A)Mohammad can share with Ceries the confidential information he knows about Estay's new product because he was directly involved in its development.
B)Mohammad can share with Ceries the confidential information he knows about Estay's new product because his agency relationship with Estay is terminated.
C)Mohammad cannot share with Ceries the confidential information he knows about Estay's new product because of the equal dignities rule.
D)Mohammad cannot share with Ceries the confidential information he knows about Estay's new product because he has a duty not to disclose confidential information he acquired during the agency.
Q2) The bankruptcy of an agent automatically terminates an agency relationship. A)True B)False
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Page 29
Chapter 28: Employment Law
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Q1) When may an employer require an employee to submit to a lie detector test?
A)When the employee has been hired for less than 90 days
B)When the test is part of an on-going investigation into crimes that have occurred.
C)When the employer has reason to believe the employee is using illegal drugs on the job.
D)When all employees are being questioned using a lie detector.
Q2) Jim was a mechanic.One day when he attempted to weld a car's gasoline tank,it exploded and he was hurt.He filed to collect workers' compensation.His employer resisted on grounds that Jim had been negligent and had also violated the express regulations of the company when he attempted to weld a gasoline tank.Which statement is correct?
A)Jim cannot recover if it is shown that his negligent conduct caused the explosion.
B)Jim cannot recover if it is shown that he violated the express regulations of his employer.
C)Workers' compensation doesn't apply in situations like this.
D)Jim can recover even if he was negligent and violated the employer's rules.
Q3) Discuss the requirements of the Family and Medical Leave Act.
Q4) Define sexual harassment.
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Page 30
Chapter 29: Starting a Business: Llcs and Other Options
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Q1) An S Corporation cannot have more than ____ shareholders.
A)25
B)50
C)75
D)100
Q2) The most common form of business ownership is the sole proprietorship.
A)True
B)False
Q3) Which of the following is considered by the IRS to be a sale of assets,subject to a tax on the value of the assets?
A)Change from the corporate form to an LLC.
B)Change from an LLC to a corporation.
C)Change from a partnership to an LLC.
D)All of the above.
E)None of the above.
Q4) Becoming a franchisee is a compromise between being an entrepreneur and being an employee.
A)True B)False
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Chapter 30: Corporations
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Q1) To be successful in a court challenge regarding an executive's compensation,shareholders must prove that:
A)the board was grossly uninformed before it set the compensation amount.
B)the executive's performance caused the business to become unprofitable.
C)the amount of the executive's compensation was too high in relation to the compensation of the typical employee within the company.
D)the compensation level is not in the company's best interests.
Q2) Shyff decided to incorporate his business under the name of "Zamm." In addition to "Zamm," the Model Act requires that Shyff include one of the following words: "corporation," "incorporated," "limited," or "company" or an abbreviation thereof.
A)True
B)False
Q3) The proceeds,if any,of a derivative lawsuit go to:
A)the shareholders of the corporation.
B)the shareholders who actually filed the lawsuit.
C)the board of directors.
D)the corporation.
Q4) What is the business judgment rule and what is its purpose?
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Page 32
Chapter 31: Securities Regulation
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Q1) Ted is the vice-president in charge of marketing for Barnard Basketry.In any three-month period,he may sell:
A)any amount of stock he owns in Barnard Basketry.
B)no more than 10 percent of the stock he owns in Barnard Basketry.
C)only an amount of stock equal to the average weekly trading volume for the prior four weeks or one percent of the number of shares outstanding, whichever is greater, under Rule 144.
D)any amount of stock he owns in Barnard Basketry as long as it has been more than six months since a private offering of the stock was made.
Q2) Under the National Securities Markets Improvement Act,states may regulate offerings of securities that are:
A)traded on a national stock exchange.
B)Exempt under Rule 506
C)Sold to qualified purchasers.
D)None of the above.
Q3) Identify and explain three options that ease the process of complying with state securities requirements.
Q4) What are the three primary ways the SEC creates law?
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Page 33
Chapter 32: Property
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Q1) Bertha,from Chicago,traveled to San Francisco to attend a conference.Her sister,Martha,lives in San Francisco and consequently,Bertha made arrangements to spend a couple of days with her sister.The next morning sitting at the breakfast table,Bertha realizes that she packed a mismatched pair of shoes (one is black and the other is blue).Luckily,Martha wears the same size of shoes and lends Bertha a pair of black leather pumps.During the day,the shoes are damaged while Bertha is wearing the shoes.Bertha's duty of care would be a duty of:
A)extraordinary care, because this is a bailment for the sole benefit of the bailee.
B)ordinary care.
C)only slight care, because this is a bailment for the sole benefit of the bailor.
D)None of the above are correct.
Q2) The rightful possession of goods by one who is not the owner is the definition of:
A)a gift
B)a bailment.
C)a license.
D)a profit.
Q3) Identify and explain the different types of tenancy.
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Page 34
Chapter 33: Cyberlaw
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Q1) The Children's Online Privacy Protection Act prohibits Internet operators from collecting information from children under what age without parental permission?
A)18.
B)16.
C)13.
D)10.
Q2) The Internet was started in the 1960s as a project to link military contractors and universities.The World Wide Web was created in 1991 as a subnetwork of the Internet.
A)True
B)False
Q3) The Electronic Communications Privacy Act is a federal statute regulating e-mail.
A)True
B)False
Q4) The federal government has preempted the field of online privacy,so states may not pass their own online privacy statutes.
A)True
B)False
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Chapter 34: Intellectual Property
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Q1) Describe what copyright infringement means.
Q2) Rick wrote a song entitled "Wonderful." At the bottom of the first page of music he wrote "© 1990 by Rick Reed." Four months later a local band was playing his song at a bar.Rick felt that the bar was an inappropriate setting for his music.What is his remedy?
Q3) Richard wrote a song called "College Days." He copyrighted the composition and had it professionally printed.A couple years later he was attending a business meeting about 1500 miles from his home.While sitting in a nightclub,he heard a small local band perform a song called "College Memories." The music and words were extremely similar to his song.The composer of "College Memories" claims he never heard of Richard's song and that she is offended he would accuse her of stealing his work.If Richard wishes to sue for copyright infringement,he must prove:
A)only that his song and the infringer's song are substantially the same.
B)that his work was original, and the infringer actually copied his work or that the infringer had access to his song and that the two works are substantially the same.
C)that he sustained money damages as a result of the infringement.
D)that he registered the song for a copyright.
Q4) Briefly discuss a patent,copyright,and trademark.
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