Commercial Law
Exam Review
Course Introduction
Commercial Law explores the legal principles and regulations governing business transactions and commercial relationships. The course covers key topics such as contract law, sale of goods, agency, negotiable instruments, and secured transactions. Students will examine the legal frameworks that facilitate trade, protect commercial interests, and resolve disputes within domestic and international markets. Through case studies and practical examples, the course equips students with a foundational understanding of how legal rules apply to the operation of businesses, helping them navigate the complexities of the commercial world with confidence and integrity.
Recommended Textbook Managers and the Legal Environment Strategies for the 21st Century 7th Edition by Constance E.
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24 Chapters
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Page 2
Chapter 1: law, value creation, and risk management
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Q1) The ______ approach recognizes that "business decisions consist of continuous,interrelated economic and moral components."
A) Procedural
B) Systems
C) Conciliatory
D) Mandated
Answer: B
Q2) A legally astute manager understands that legal analysis is often ambiguous.
A)True
B)False
Answer: True
Q3) Which of the following is a type of law referencing formal rules embodied in constitutions and statutes enacted by legislatures?
A) Public
B) Private
C) Substantive
D) Remedial
Answer: A
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Chapter 2: Ethics ant the law
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Sample Questions
Q1) Refer to fact pattern 2-1. Which of the following is the theory on which Richard will most likely rely?
A) The employer-freedom principle
B) The employment-at-will principle
C) The free-country theory
D) The free-market theory
Answer: B
Q2) If an action does not maximize shareholder value,and the firm has no ethical reason to act,the action should not be taken.
A)True
B)False
Answer: True
Q3) In 2010,the average CEO of a company in the Standard and Poor's 500 Index took home more than _____ times as much as the average worker.
A) 50
B) 100
C) 300
D) 500
Answer: C
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Page 4
Chapter 3: Courts, sources of law, and dispute resolution
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Sample Questions
Q1) Negotiating business contracts by means of telephone calls or the mail is insufficient to provide a state court with personal jurisdiction over an individual so long as the individual is out-of-state when such contacts are made.
A)True
B)False
Answer: False
Q2) The critical test under the Due Process Clause in determining whether jurisdiction over an out-of-state defendant exists is:
A) Whether the defendant has certain minimum contacts with the state such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.
B) Whether the out-of-state defendant has ever visited the state.
C) Whether the out-of-state defendant has certain minimum contacts with the state such that maintenance of the suit does not offend liberty concepts.
D) Whether the out-of-state defendant has ever lived in the state.
Answer: A
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Chapter 4: Constitutional bases for business regulation
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Q1) Which of the following was the result at the U.S.Supreme Court level in Citizens United v.Federal Election Commission regarding the constitutionality of the federal law providing that televised electioneering communications funded by anyone other than a candidate must include a disclaimer setting forth identifying information as to sponsorship?
A) That the law was unconstitutional only if a corporate entity, not an individual, sponsored the communication.
B) That the law was unconstitutional only if an individual, not a corporate entity, sponsored the communication.
C) That the law was unconstitutional in that it involved small expenditures as well as larger ones.
D) That the law was constitutional.
Q2) The U.S.Supreme Court has original jurisdiction over cases affecting ambassadors and cases in which a state is a party.
A)True
B)False
Q3) Under what circumstances is state law preempted in favor of federal law?
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6
Chapter 5: Agency
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Q1) Agents owe a fiduciary duty to the principal.Describe the specific responsibilities that are generated by this duty.Discuss fully.
Q2) The person hiring an independent contractor bargains both for the results and the means of achieving the results.
A)True
B)False
Q3) The principal has the right to demand reimbursement from the agent for any damages paid to a third party because of an agent's negligence.
A)True
B)False
Q4) The Electronic Signatures in Global and National Commerce Act provides that contracts executed by electronic agents are invalid.
A)True
B)False
Q5) Federal law provides that electronic agents may legally bind a user to click-wrap agreements.
A)True
B)False
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Chapter 6: Administrative Law
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Sample Questions
Q1) What are the four primary ways in which an administrative agency functions?
A) Making rules, conducting formal adjudications, taking informal discretionary actions, and conducting investigations.
B) Issuing notice, conducting formal adjudications, taking informal discretionary actions, and conducting investigations.
C) Issuing notice, making rules, taking informal discretionary actions, and conducting investigations.
D) Making rules, conducting informal adjudications, taking formal discretionary actions, and conducting investigations.
Q2) As set forth in the text,what are the seven basic steps for working successfully with an administrative agency?
Q3) Formal administrative adjudications at the federal level typically include a prehearing discovery phase.
A)True
B)False
Q4) Administrative agencies are usually part of the legislative branch.
A)True
B)False
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Chapter 7: Contracts
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Sample Questions
Q1) The statute of frauds requires certain types of contracts to be evidenced by some form of written communication.
A)True
B)False
Q2) A(n)________ is any agreement to accept performance that is different from what is called for in the contract.
A) accord and satisfaction
B) anticipatory repudiation
C) frustration of purpose
D) mutual rescission
Q3) An agreement between two parties that provides that the buyer will buy all of a particular product from a particular seller is called a[n] ______.
A) illusory promise
B) requirements contract
C) output contract
D) fulfillment contract
Q4) Describe the three standard measures as listed in the text that courts have developed to measure monetary damages in contract cases.Explain how each would be measured.
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Chapter 8: sales,licensing,and e-commerce
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Sample Questions
Q1) The few cases that have considered click-wrap licenses have generally found which of the following?
A) That the licenses are enforceable
B) That the licenses are enforceable only for software costing $100 or less
C) That the licenses are enforceable only for software costing $100 or less and that is designed for business, not consumer use
D) That the licenses are unenforceable
Q2) A contract for the sale of land is governed by Article 2 of the UCC.
A)True
B)False
Q3) Explain the different types of warranties that exist under the UCC.
Q4) Under the UCC doctrine of commercial impracticability as applied by the UCC,a failure to perform is a breach even if performance is made impractical by an event unforeseen by the contract.
A)True
B)False
Q5) What is the rule regarding the enforceability of a contract for the sale of goods that comes within the statute of frauds if no quantity is specified?
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Page 10
Chapter 9: Torts and Privacy protection
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Sample Questions
Q1) The wrongful interference with the right to the quiet use and enjoyment of land is associated with the tort of
A) trespass.
B) nuisance.
C) ultra hazardous activities.
D) strict liability.
Q2) __________ is the publication of statements derogatory to the quality of the plaintiff's business,to the business in general or to the plaintiff's personal affairs in order to discourage others from dealing with him or her?
A) Disparagement
B) Critical falsehood
C) Defamation
D) Malicious derogatorism
Q3) Intent may be transferred.
A)True
B)False
Q4) Set forth the majority rule in relation to an accountant's liability for negligence to a third party with whom the accountant does not have a contractual relationship as well as the source of the rule.
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Chapter 10: product liability
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Sample Questions
Q1) The preemption defense involves certain ________,which set minimum safety standards for products.
A) federal laws
B) court decisions
C) state laws
D) private guidelines
Q2) Which of the following products has traditionally been viewed as "unavoidably unsafe" by the courts?
A) Medical services
B) Outdoor consumer goods
C) Some vaccines
D) Automobiles
Q3) For a defendant to be held strictly liable,the plaintiff must prove that the defect existed at the time the product left the defendant.
A)True
B)False
Q4) Strict liability in tort applies only to products,not to services.
A)True
B)False
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Chapter 11: Intellectual property
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Sample Questions
Q1) A patent holder must personally make use of the invention.
A)True
B)False
Q2) Refer to fact pattern 11-1. Assuming the validity of the earlier patent,which of the following is true regarding Harry's statement that Samantha could not be guilty of patent infringement because she was unaware of the earlier patent when she began marketing her combs?
A) Harry was correct.
B) Harry was incorrect, and Samantha can be held liable for direct patent infringement.
C) Harry was incorrect, and Samantha can be held liable for indirect patent infringement.
D) Harry was incorrect, and Samantha can be held liable for contributory patent infringement.
Q3) A design dictated by function may be protected by a(n)________ patent.
A) equivalents
B) design
C) utility
D) useful articles
Q4) Discuss in detail common law rights,if any,in a trademark in the U.S.
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Chapter 12: The employment agreement
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Sample Questions
Q1) Generally,employees who earn less than _________ per week are automatically considered eligible for minimum wage and overtime as required by the Fair Labor Standards Act.
A) $240
B) $300
C) $455
D) $550
Q2) The Patient Protection and Affordable Care Act prohibits insurers from denying health-care coverage or charging higher premiums due to preexisting conditions.
A)True
B)False
Q3) List exceptions,if any,to the Employee Polygraph Protection Act's ban on polygraph testing.
Q4) Because of sufficient federal protection,states have not enacted laws addressing illegal immigration.
A)True
B)False
Q5) What standards are applied in regard to judicial review of ERISA decisions by plan administrators?
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Chapter 13: civil rights and employment discrimination
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Sample Questions
Q1) What did the U.S.Supreme Court conclude in Price Waterhouse v.Hopkins,the case referenced in the text in which a female was denied partnership in an accounting firm after being told that to improve her chances for partnership,she should walk more femininely,talk more femininely,dress more femininely,wear make-up,have her hair styled,and wear jewelry?
A) That the employer committed sexual stereotyping constituting illegal discrimination.
B) That the employer committed sexual stereotyping, but that such stereotyping did not constitute illegal discrimination.
C) That the employer committed sexual stereotyping but that in such cases, only nominal (minimal) damages are available.
D) That while such statements constituted sexual stereotyping, the employer could avoid liability if it could show that it had received client complaints regarding the female's masculine-type qualities.
Q2) Specifically set forth what courts consider in order to determine whether there is a hostile or abusive work environment.
Q3) Set forth the categories of individuals classified as disabled under the Americans with Disabilities Act.
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Chapter 14: Criminal law
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Q1) Which of the following types of immunity prohibits any criminal prosecution of a witness that relates to any matter discussed in his or her testimony?
A) Transactional
B) Use
C) Nolo contendere
D) Plea
Q2) The term actus reus is often used to describe a guilty
A) thought.
B) mind.
C) deed.
D) intent
Q3) The number of U.S.federal criminal offenses is in the range of ______.
A) 300
B) 1,000
C) 5,500
D) 19,500
Q4) Most computer-aided thefts can be prosecuted under traditional state larceny laws.
A)True
B)False
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Chapter 15: Environmental law
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Sample Questions
Q1) An important step in comprehensively managing environmental liability and reducing penalties for noncompliance is to conduct periodic environmental audits.
A)True
B)False
Q2) Which of the following was the result in New Jersey v.EPA,the case in the text involving whether the EPA violated the clean Air Act when it delisted electric utility steam generating units from the list of sources of mercury pollution listed in the Clean Air Act and instituted a cap-and-trade system whereby plants emitting more than their allotments of mercury could buy credits from other plants?
A) The court upheld both the delisting and the cap-and-trade provision.
B) The court upheld the delisting provision but invalidated and the cap-and-trade provision.
C) The court invalidated the delisting provision but upheld and the cap-and-trade provision.
D) The court invalidated both the delisting and the cap-and-trade provision.
Q3) Compare the substantial continuity test in regard to successor liability with the mere continuation test. Which test is applied by the majority of states?
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Page 17
Chapter 16: Antitrust
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Sample Questions
Q1) Refer to fact pattern 16-2. Which of the following best describes the situation by which Number One Oil Company and other companies impose maximum price restrictions?
A) Horizontal price-fixing
B) Vertical price-fixing
C) Adverse price-fixing
D) There is no antitrust term for the practice.
Q2) In a ________ action under the Sherman Act,state attorneys general may bring civil actions for injuries sustained by residents of their respective states.
A) parens patriae
B) private attorneys general
C) Herfindahl-Hirschman
D) resale price maintenance
Q3) Courts apply the per se rule when reviewing most tying arrangements and will,therefore,consider business justifications proffered by the tying firm.
A)True
B)False
Q4) What types of price-fixing agreements are considered horizontal price-fixing?
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Chapter 17: Consumer Protection
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Q1) The Truth-in-Lending Act limits credit card liability to $50 per card for unauthorized charges made before a card issuer is notified of a lost or stolen card.
A)True
B)False
Q2) Congress has made it a federal crime to engage in the extortionate extension of credit.
A)True B)False
Q3) Which of the following is true regarding USDA standards for organic food?
A) Neither pesticides, genetic engineering, growth hormones, nor irradiation may be used.
B) Pesticides may be used, but genetic engineering and the use of growth hormones is disallowed.
C) Pesticides and irradiation may not be used, but genetic engineering and the use of growth hormones is allowed.
D) The USDA has no standards for organic food.
Q4) The U.S.Supreme Court has ruled that compounded drugs are illegal.
A)True
B)False
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Chapter 18: real property and land use
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Sample Questions
Q1) Which of the following are situations in which ownership rights are shared by two or more individuals?
A) Tenancy in common
B) Tenancy by the entirety
C) Both tenancy in common and tenancy by the entirety
D) Neither tenancy in common nor tenancy by the entirety
Q2) As a general rule,a real estate broker may act for more than one person in a real property transaction without the knowledge of all parties to the transaction.
A)True
B)False
Q3) Sales of real property interests to nonresident aliens may be regulated by the state but are not regulated by the federal government.
A)True
B)False
Q4) A trust is a form of co-ownership of property.
A)True
B)False
Q5) Compare and contrast joint tenancy and tenancy by the entirety.
Q6) What must a person do to acquire a parcel of land by adverse possession?
Page 20
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Chapter 19: Forms of business organizations
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Q1) A member of the board who also serves as an officer is a(n)________ director.
A) inside
B) interested
C) outside
D) employed
Q2) _______ refers to a method by which courts hold shareholders individually liable for claims against a corporation.
A) Reverse liability
B) Piercing the corporate veil
C) Upholding the ethical theory
D) Unveiling
Q3) In a joint venture,the authority of one member to bind the partnership is more limited than in a general partnership.
A)True
B)False
Q4) In what five categories does the Franchise Rule require a franchisor to make material disclosures to prospective franchisees?
Q5) Define class voting. Why would a group of investors be interested in a guarantee of class voting?
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Chapter 20: Directors, Officers, and Controlling
Shareholders
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Q1) Refer to fact pattern 20-1. Did Tonya violate any duties owed to the corporation?
A) Yes, by buying the land for herself without disclosure to the corporation, she violated the corporate opportunity doctrine.
B) Yes, by buying the land for herself without disclosure to the corporation, she violated the duty of responsible decision making.
C) Only if the land involved was worth over $50,000 did she violate any duties because any smaller amount would be considered de minimus.
D) No.
Q2) A ________ is an agreement in a proposed takeover that allows the board of directors to negotiate with other bidders or to terminate a merger agreement.
A) termination clause
B) fiduciary out
C) revolving door
D) no talk provision
Q3) The duty of care includes the duty to make informed decisions.
A)True
B)False
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Page 22
Chapter 21: Public and Private Offerings of Securities
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Sample Questions
Q1) Which of the following is not an accredited investor under Rule 501?
A) any national bank
B) any director of the issuer
C) any corporation with total assets in excess of $1 million
D) any natural person with a net worth in excess of $1 million
Q2) Refer to fact pattern 21-3. Which of the following are true regarding selling efforts to institutional investors during this period.
A) Such efforts are called roadshows and are legal so long as SEC requirements are followed.
B) Such efforts are an illegal type of promotion referenced as selling promotions.
C) Such efforts are called concerted sales and are legal so long as the SEC gives prior approval.
D) Such efforts are simply called felonies and can result in fines as well as jail time.
Q3) Proxies give the proxy holder the right to vote the shares owned by the person who signs the proxy card.
A)True
B)False
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Chapter 22: Securities Fraud and insider trading
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Q1) A prediction about the future can be a misstatement under Rule 10b-5,but only if the person making the prediction does not believe it at the time.
A)True
B)False
Q2) If a purchase or sale by an officer,director,or greater-than-10 percent shareholder that would otherwise result in recoverable short-swing profits was involuntary and did not involve the payment of cash and if there was no possibility of speculative abuse of inside information,than a court may hold that it was a(n)________ to which no liability will attach.
A) innocent transaction
B) approved negotiation
C) unorthodox transaction
D) designated sale
Q3) There is no provision in the security laws for the payment of bounties to individuals whose tips result in insider trading prosecutions.
A)True
B)False
Q4) List the seven elements of a Rule 10b-5 cause of action.
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24
Chapter 23: Debtor-Creditor Relations and Bankruptcy
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Q1) A Chapter 7 discharge is not available to a debtor who has received a discharge in a bankruptcy filed in the preceding _______ years or in a Chapter 13 case filed in the preceding _______ years.
A) two, four
B) six, seven
C) eight, six
D) seven, six
Q2) Discuss the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA")in regards to whether Chapter 7 or Chapter 13 relief is appropriate.
Q3) A revolving loan is based upon the continuous extension of credit of an unlimited amount.
A)True
B)False
Q4) Interest is generally computed on a ________ basis.
A) yearly
B) monthly
C) weekly
D) daily
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25
Chapter 24: International Business
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Q1) In the United States,the value of an article for customs purposes is normally the ________ value,which is the price indicated on the sales invoice.
A) customs
B) transaction
C) domestic
D) international
Q2) Countries are prohibited by international law from regulating the percentage of foreign ownership of businesses that are incorporated within their borders.
A)True
B)False
Q3) The principle that each World Trade Organization member must accord to all other member countries tariff treatment no less favorable than it provides to any other country is known as the _______ principle.
A) most favored nation
B) preference
C) bound nation protection
D) product enhancement
Q4) What is the act-of-state doctrine,and how is it generally applied by U.S.courts?
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