Commercial Law Practice Questions
Course Introduction
Commercial Law is a foundational course that explores the legal principles governing business transactions and commercial relationships in both national and international contexts. The course covers essential topics such as contract law, the sale of goods, agency, negotiable instruments, and the legal framework surrounding commercial organizations. Students will examine statutory regulations and case law that shape commercial practices, develop critical understanding of legal mechanisms that facilitate trade, and analyze the rights and obligations of parties engaged in commerce. Emphasis is placed on practical application through case studies and real-world scenarios, equipping students with the knowledge necessary to navigate the complex legal landscape of modern commerce.
Recommended Textbook
Law Business and Society 11th Edition by Tony
McAdams
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Page 2
Chapter 1: Capitalism and the Role of Government
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Q1) Describe the major criticisms or concerns about the privatization of toll roads.
Answer: Private companies are building,maintaining,and operating new toll roads in places such as northern Virginia,suburban San Diego to the Mexican border.Taking the privatization movement a step further,state and local governments are selling or leasing existing roads to private companies.Indiana,for example,leased its 157-mile Indiana East-West Toll Road to an international group for $3.8 billion for 75 years.The new operators can raise tolls each year by 2 percent,the inflation rate,or the increase in GDP; whichever is higher.Critics worry,however,about declining service,excessive tolls,too much profit for the investors,pricing poorer drivers out of access to the roads,and trading secure government jobs with benefits for low-wage private sector jobs without benefits.Nonetheless,increasing government revenue problems suggest that transportation privatization will continue.
Q2) What efforts have been made by Sweden to keep its economy healthy?
A)It has taken an aggressive cowboy capitalism approach.
B)It has followed a policy of comparatively low corporate taxes.
C)It has permitted the sale or lease of public assets to private parties.
D)It has attracted billions in private sector investment to take over a few dozen state-controlled companies.
Answer: B
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Chapter 2: Business Ethics
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Q1) Which of the following statements is true of the False Claims Act?
A)It creates new crimes and raises penalties to as much as 25 years of imprisonment along with heavy fines.
B)It forbids fraud in government contracts and rewards those who help stop fraud.
C)It requires publicly traded companies to establish internal control systems designed to assure the accuracy of financial information.
D)It requires publicly traded companies to disclose whether they have adopted an ethics code for senior financial management,and if not,why they have not done so.
Answer: B
Q2) Which of the following provides the foundation for a moral life built on religion?
A)Intuition
B)Reason
C)Faith
D)Secular knowledge
Answer: C
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Chapter 3: The Corporation and Public Policy: Expanding Responsibilities
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Q1) Which of the following statements is true of the triple bottom-line approach?
A)The only responsible and moral course of behavior is to reap the highest return possible,within the law.
B)Financial success is necessary,but social and environmental responsibilities are of equal importance,and corporations paying attention to those social and economic duties will contribute to both organizational and societal sustainability.
C)The goal of business is to ensure the short-term viability of an organization's plans as organizational priorities change with time.
D)Businesses have only one social responsibility-to use their resources and engage in activities designed to increase their profits,so long as they stay within the rules of the game,which is to say,engage in open and free competition,without deception or fraud.
Answer: B
Q2) According to Milton Friedman,the firm that maximizes its profits is not necessarily maximizing its contribution to the society.
A)True
B)False
Answer: False
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Page 5
Chapter 4: The American Legal System
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Q1) What are the objectives of law in society?
Q2) Discuss the circumstances under which a state court will have in personam jurisdiction over a person.
Q3) Mini-trials are voluntary and nonbinding.
A)True
B)False
Q4) Which of the following categories of law regulates the legal relationship among individuals?
A)Public law
B)Administrative law
C)Constitutional law
D)Private law
Q5) _____ is an element of crime that refers to evil intent.
A)Mens rea
B)Actus reus
C)Stare decisis
D)In rem action
Q6) Appellate opinions are generally published in volumes called reporters. A)True
B)False
Page 6
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Chapter 5: Constitutional Law and the Bill of Rights
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Q1) The defense of the First Amendment is available to government employees who speak out "pursuant to their official duties."
A)True
B)False
Q2) The _____ provides that the right of the people to be secure in their persons,houses,papers,and effects,against unreasonable searches and seizures,shall not be violated,and no Warrants shall issue,but upon probable cause.
A)Fourth Amendment
B)Fifth Amendment
C)First Amendment
D)Second Amendment
Q3) The Fourth Amendment prohibits all warrantless searches.
A)True
B)False
Q4) Discuss the differences between substantive due process and procedural due process.
Q5) Explain in detail the three broad classes of regulatory takings.
Q6) Describe the exclusionary rule,its purpose,and the major criticism of its usage.
Q7) Give a brief account of the creation of the Constitution of the United States.
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Chapter 6: Contracts
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Q1) Which of the following statements is true of the conditions concurrent clause?
A)Each performance is independent.
B)It specifies that the parties are to perform their duties at the same time.
C)An event must occur before the parties are obliged to perform.
D)It excuses performance if a future event transpires.
Q2) In an implied-in-fact contract,the contract is inferred on the basis of the behavior of the parties.
A)True
B)False
Q3) The victim of a breach can recover just the direct losses from the breach and not any indirect losses that were incurred as a consequence of that breach.
A)True
B)False
Q4) Anticipatory breach of contract occurs when a party,before performance is due,indicates by word or deed that she or he will not perform.
A)True
B)False
Q5) Explain any two types of equitable remedies in contract cases with an example each.
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Chapter 7: Business Torts and Product Liability
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Q1) A warranty is simply a non-contract-based guarantee.
A)True
B)False
Q2) Identify the defenses available in strict liability cases.Also explain the coverage under strict liability cases.
Q3) A description of goods which is made part of the basis of a bargain creates an express warranty that the goods shall conform to the description.
A)True
B)False
Q4) Which of the following is the doctrine that in some cases permits the court to infer the defendant's negligence even though that negligence cannot be proved?
A)The doctrine of equal footing
B)The doctrine of res judicata
C)The doctrine of res ipsa loquitur
D)The doctrine of equivalents
Q5) Slander is the spoken form of the tort of defamation.
A)True
B)False
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Chapter 8: Government Regulation of Business
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Q1) Identify the correct statement about a federal agency.
A)An independent federal agency is usually located within the departments of the government's executive branch.
B)In a rule-making situation,a federal agency avoids using the hybrid process.
C)In creating a federal agency,Congress delegates a portion of its authority to that body.
D)A federal agency does not have substantial authority to regulate a specified segment of American life.
Q2) Federal agency rules and orders cannot be challenged in court.
A)True
B)False
Q3) Administrative law principles are generally applicable to the conduct of state and local governments.
A)True
B)False
Q4) In the context of political process,what are the three main arguments that have emerged regarding market regulation by the government?
Q5) Describe the three broad categories of the federal regulatory agencies' authority.
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Chapter 9: Business Organizations and Securities Regulation
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Q1) Although the law of partnerships originated in the common law,all states except _____ adopted the Uniform Partnership Act.
A)Louisiana
B)Alabama
C)Nevada
D)Wisconsin
Q2) Describe the differences between the two classes of partners in a limited partnership.
Q3) Under the 1933 Act,a draft prospectus is included with the filed registration statement.This is known as a _____ prospectus.
A)greenmail
B)red herring
C)crown jewel
D)blue sky
Q4) Equity holders' claims are always satisfied before creditors' claims.
A)True
B)False
Q5) Describe Section 11 of the 1933 Securities Act and explain the defense against it.
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Chapter 10: Antitrust Law-Restraints of Trade
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Q1) A horizontal group boycott is a situation where competitors agree not to deal with a supplier,customer,or another competitor.
A)True
B)False
Q2) Predatory pricing:
A)involves pricing below cost until a competitor drops out and then raising those prices to supracompetitive levels.
B)involves selling substantially identical goods at reasonably contemporaneous times to different purchasers at different prices.
C)prevents distributors from selling to some classes of customers.
D)imposes nonprice restraints including where and to whom products may be resold.
Q3) Which of the following statements is true of vertical restraints?
A)They typically arise from an agreement among competitors themselves.
B)They are to be resolved under the rule of reason.
C)They are per se unlawful.
D)They tend to drive product prices down and quality up.
Q4) Explain the difference between per se antitrust violations and those analyzed under the rule of reason.
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Page 12
Chapter 11: Antitrust Law-Monopolies and Mergers
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Q1) The Sherman Act prohibits attempts to monopolize as well as monopoly itself.
A)True
B)False
Q2) Which of the following is a part of the general legal test for monopolization?
A)Monopoly as a consequence of a superior product
B)Growth or development as a consequence of historic accident
C)The existence of a natural monopoly in that industry
D)The willful acquisition or maintenance of monopoly power
Q3) Which of the following acts is applicable to acquisitions combining domestic and foreign firms and is potentially applicable to acquisitions not involving American firms if the effect would harm competition in the American market?
A)The Sherman Act
B)The Clayton Act
C)The Sarbanes-Oxley Act
D)The Robinson-Patman Act
Q4) The smaller the Herfindahl-Hirschman Index (HHI),the more concentrated the market.
A)True
B)False
Q5) List the potential benefits and hazards of mergers.
Page 13
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Chapter 12: Employment Law I: Employee Rights
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Q1) Thomas,a private-accountant,was humiliated and fired from his job after his employer accused him of embezzling money with no factual basis.When Thomas applied for another job,the former employer told the prospective employer why Thomas was fired.Thomas can sue his employer for _____.
A)résumé fraud
B)defamation
C)invasion of privacy
D)negligence
Q2) With the prior consent by one of the parties to the communication,an employer may lawfully monitor an employee phone call.
A)True
B)False
Q3) Which of the following has the authority to file discrimination lawsuits on behalf of employees despite an arbitration agreement?
A)Equal Employment Opportunity Commission
B)Pension Benefit Guaranty Corporation
C)The United States Civil Service Commission
D)The U.S.Securities and Exchange Commission
Q4) Briefly explain Family and Medical Leave Act.
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Chapter 13: Employment Law II: Discrimination
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Q1) Philip worked as a senior manager at Soft Techvo Inc.,a software company in Minnesota,for over 25 years.At the age of 53,Philip was denied a promotion because the company decided he was too old for the next-level job position.The new position was later filled by a younger employee whom Philip had previously supervised.Under the Age Discrimination in Employment Act (ADEA),Philip should file a:
A)lawsuit against his employer for taking affirmative action.
B)disability discrimination claim against his employer.
C)disparate treatment claim against his employer.
D)retaliation claim against his employer for denying him a promotion.
Q2) Briefly discuss the Civil Rights Act of 1866.
Q3) The employment portions of the Americans with Disabilities Act (ADA) extend to small businesses with fewer than 15 employees.
A)True
B)False
Q4) An employee seeking recovery for sexual harassment under Title VII of the Civil Rights Act of 1964 can only sue the person who actually committed the harassment,not the employer.
A)True B)False
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Chapter 14: Employment Law III: Labor-Management Relations
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Q1) Section 8(a)(5) of the National Labor Relations Act (NLRA):
A)sets out some mandatory subjects over which the parties must bargain.
B)guarantees union members equal voting rights,the right to sue a union,and the rights of free speech and assembly.
C)lists activities constituting unfair labor practices by a labor organization.
D)requires an employer to engage in good-faith collective bargaining with a representative of the employees.
Q2) Which of the following actions of an employer would be regarded as an unfair labor practice as per Section 8(a) of the National Labor Relations Act?
A)Using lockouts as defensive acts to protect businesses against sudden strikes and to prevent sabotage or violence
B)Discouraging membership in any labor organization by discrimination in regard to hiring or any other term of employment
C)Agreeing to bargain collectively with a duly certified representative of the employees
D)Firing employees for indulging in any unlawful activity at the workplace
Q3) Identify the unfair labor practices by management and unions.
Q4) Compare and contrast unfair labor practice strikes with economic strikes.
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Chapter 15: Consumer Protection
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Q1) Describe the requirements to prove that a vehicle is a "lemon" and the remedies generally provided under lemon laws.
Q2) Under the Fair Credit Billing Act (FCBA),a credit cardholder who receives an erroneous bill must complain in writing to the creditor within 60 days of the time the bill was mailed.
A)True
B)False
Q3) In the context of the Bankruptcy Act,a _____ can be voluntarily filed in federal court by a debtor,or creditors can seek an involuntary bankruptcy judgment.
A)Chapter 11 reorganization lawsuit
B)Chapter 15 class action lawsuit
C)Chapter 13 adjustment of debts petition
D)Chapter 7 liquidation petition
Q4) Mere foolishness or want of knowledge constitutes the grounds for unconscionability of contracts.
A)True
B)False
Q5) Describe in brief the functions of the Consumer Financial Protection Bureau (CFPB).
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Chapter 16: International Ethics and Law
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Q1) In an international transaction between parties in two countries where the parties have not specified the law to be applied to the contract,the applicable law will depend on _____.
A)the buyer's place of business
B)the country in which the court is located
C)the special international law statute
D)the place where the goods are used
Q2) Describe the U.N.Convention on Contracts for the International Sale of Goods (CISG) and its role in international trade.
Q3) A _____ is simply an extension of a foreign corporation into the host country.
A)joint venture
B)distributorship
C)branch office
D)foreign agency
Q4) Describe in brief some of the challenges faced in enforcing foreign judgments.
Q5) What are the two factors used to determine whether an international custom exists?
Q6) Arbitration is never used in international trade disputes.
A)True
B)False
Page 18
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Chapter 17: Environmental Protection
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Q1) Which of the following factors has hindered the successful implementation of the Clean Water Act?
A)It remains unclear if the state or the federal government is primarily responsible for the implementation of the act.
B)Its jurisdiction is limited to monitoring the discharge of pollutants into navigable waters.
C)It is implemented by the states under the supervision of the Environmental Protection Agency.
D)It remains unclear exactly what waters are actually covered by the act.
Q2) The Environmental Protection Agency assists both state and local pollution control efforts.
A)True
B)False
Q3) The bulk of the environmental laws and regulations in the United States were drafted to address compartmentalized and discrete issues.
A)True
B)False
Q4) Describe the role of tax laws in environmental protection in the United States.
Q5) Discuss the cap-and-trade program.
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Chapter 18: Internet Law and Ethics
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Q1) Lavender,a beauty salon,uses the symbol of a bouquet of lavender flowers,tied with a maroon ribbon to distinguish its packages from its rivals.The symbol used by Lavender is an example of a _____.
A)patent
B)domain name
C)service mark
D)copyright
Q2) Which of the following is charged with enforcing the CAN-SPAM Act?
A)The United States Commercial Service
B)The Federal Trade Commission
C)The United States Department of Commerce
D)The U.S.Securities and Exchange Commission
Q3) Internet users in the United States pay a fee to Internet service providers for the type and level of service they desire.
A)True
B)False
Q4) The Internet is increasing national boundaries.
A)True
B)False
Q5) Briefly describe the "digital divide" that exists in the United States.
Page 20
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