Commercial Law
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Course Introduction
Commercial Law is a foundational course that explores the legal principles governing business and commercial transactions. It covers key topics such as the formation and enforcement of contracts, the rights and obligations of parties in commercial dealings, the sale of goods, secured transactions, negotiable instruments, and agency relationships. The course also examines aspects of bankruptcy, consumer protection, and the regulatory environment affecting businesses. By understanding the legal frameworks that underpin modern commerce, students gain essential knowledge for navigating legal issues in business settings and for further study or careers in law, business, or related fields.
Recommended Textbook Essentials of the Legal Environment 4th Edition by Roger LeRoy Miller
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Chapter 1: Business and Its Legal Environment3
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Q1) A state constitution is supreme within the state's borders so long as it does not conflict with the U.S.Constitution or a federal law.
A)True
B)False
Answer: True
Q2) A substantive law creates or defines legal rights and obligations.
A)True
B)False
Answer: True
Q3) Courts do not depart from precedents.
A)True
B)False
Answer: False
Q4) In a suit against Clem, Dona obtains the cancellation of a contract.This is A)an injunction.
B)damages.
C)rescission.
D)specific performance. Answer: C
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Chapter 2: Shifting Legal Priorites for Business:
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Q1) Devon, a senior at Central High School, participates in a social media forum on which he posts destructive, bullying lies about Beau, a fellow student.Beau's parent complains to Central officials.Under the First Amendment, Central can most likely
A)punish Devon for the posts.
B)transfer Beau to a different school.
C)require that all students' future posts be made on the school's public Web site.
D)post an official note calling Devon's posts "juvenile and silly."
Answer: A
Q2) In the pursuit of profits, Global Enterprises Corporation engages in what some observers consider to be bad corporate behavior.The worldwide explosion of information technology has led to a transparent global economy that makes socially responsible behavior
A)more important.
B)less important.
C)neither more nor less important.
D)both more and less important.
Answer: A
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4
Chapter 3: Courts and Alternative Dispute Resolution
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Q1) A court can not exercise jurisdiction over an out-of-state defendant who has only done business in the state over the Internet.
A)True
B)False
Answer: False
Q2) Negotiation is the most complex form of alternative dispute resolution.
A)True
B)False
Answer: False
Q3) In Fancy Frills Corporation's suit against Glamour Stores, Inc., the jury returns a verdict in Fancy's favor.Glamour files a motion asking the judge to set aside the verdict and begin new proceedings.This is a motion for
A)a judgment in accordance with the verdict.
B)a judgment on the pleadings.
C)a new trial.
D)judgment n.o.v.
Answer: C
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Chapter 4: Ethics and Business Decision Making
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Sample Questions
Q1) Absolute mandates such as the commandment "Thou shalt not steal" can be justifiably broken if there is a benevolent motive.
A)True
B)False
Q2) Margaret is the top manager of Pecans, Inc.She sets strict ethical standards for all employees.Margaret, however, often takes some of the company's best nuts and sells them from her house.The ethical tone at Pecans, Inc.is
A)likely to be good because Margaret has set such strict standards for her employees.
B)not likely to be good because although Margaret sets strict ethical standards for the other employees, she does not follow them.
C)not related to either Margaret's ethical standards or her own unethical behavior.
D)not likely to be good because employees tend to resent strict ethical standards.
Q3) The categorical imperative cannot be applied to many business actions. A)True B)False
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Chapter 5: Constitutional Authority to Regulate Business
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Q1) Justice For All, a political organization, files a claim to challenge a Colorado statute that limits the liberty of all persons to broadcast "annoying" radio commercials.This claim is most likely based on the right to
A)equal protection of the law.
B)indictment.
C)procedural due process.
D)substantive due process.
Q2) Jim operates Jim's Fruits & Vegetables, a small market stocked entirely with produce grown on his adjacent farm.Under what clause of the Constitution can the federal government regulate Jim's activities What is Jim's best argument against federal regulation of his farm and business
Q3) The President appoints federal judges with the advice and consent of the Senate.
A)True
B)False
Q4) The commerce clause of the U.S.Constitution is found in
A)Article I, Section 8.
B)Article I, Section 2.
C)Article VIII, Section 1.
D)Article II, Section 8.
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Chapter 6: Administrative Law
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Sample Questions
Q1) In most instances, an agency is not required to obtain a search warrant before a physical search for evidence is conducted.
A)True
B)False
Q2) In reviewing the actions of the U.S.Office of Nuclear Energy and other agencies, the courts
A)are usually reluctant to review questions of fact.
B)rarely defer to the technical expertise of administrative agencies.
C)often rule on the merits of policy determinations.
D)never defer to an agency's interpretation of law.
Q3) The U.S.Citizenship and Immigration Service issues a rule.Like the rules of other federal administrative agencies, this rule is compiled in
A)the Administrative Register of the Federal Government.
B)the Code of Federal Regulations.
C)the Federal Rules of Civil Procedure.
D)the United States Code.
Q4) Unlike those who violate statutes, violators of agency rules are not punished.
A)True
B)False
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Chapter 7: Torts and Product Liability
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Q1) Furious Toyz Corporation makes skateboards, which it sells to consumers, including Gitana.Gitana is injured due to a defect in the board that causes an accident in which Haley, a bystander, is also injured.In a product liability suit based on strict product liability, Furious Toyz may be liable to
A)Gitana and Haley.
B)Gitana only.
C)Haley only.
D)no one.
Q2) Under the "danger invites rescue" doctrine, a person who tries to rescue another individual from harm is liable for any injuries to the individual.
A)True
B)False
Q3) Bella owns a farm in Colorado.Doyle drives his sport utility vehicle off a highway and onto Bella's land.Doyle commits trespass if he
A)does not have Bella's permission to drive on the property.
B)drives onto the property for recreational purposes.
C)harms the property in a material way.
D)harms the property in any way.
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Chapter 8: Online Developments:
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Q1) Grace hosts Harvest, a social networking site.Idle Fields, a competitive site, hires Jeb to anonymously post on Harvest stories that question its privacy practices.Harvest might most successfully sue Idle Fields for A)slander of quality.
B)intentional infliction of emotional distress.
C)false imprisonment.
D)none of the choices.
Q2) Catalyst Corporation is a small, U.S.-based business that makes sophisticated polymers for export.Under the National Export Initiative, the federal government is A)erecting barriers to deny free access to foreign markets.
B)boosting lending to small businesses, especially for export purposes.
C)placing less emphasis on exports than other governments.
D)playing a less active role in promoting exports in emerging markets.
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Chapter 9: Criminal Law and Cyber Crime
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Sample Questions
Q1) Mariah takes off her ring and places it on her desk while she works.Without her knowledge or consent, her coworker Nita picks up the ring, puts it on, and walks away.Nita has likely committed A)burglary.
B)forgery.
C)larceny.
D)no crime.
Q2) Posing as a representative of Global Games Company, Ferris e-mails Evan, a job seeker, asking him to forward personal banking information so that if he is hired, payroll checks can be deposited directly into his account.Evan supplies the data, which Ferris promptly sells to Dixie.This is
A)no crime.
B)employment fraud.
C)phishing.
D)vishing.
Q3) Ciera defrauds thousands of consumers through ads on television.This is A)wire fraud.
B)no crime.
C)phishing.
D)burglary.
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Chapter 10: Intellectual Property and Internet Law
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Q1) Copyright protection is automatic-registration is not required.
A)True
B)False
Q2) Standard Corporation can not claim a trademark in the phrase "Quality Is Standard" if the phrase
A)has a secondary meaning.
B)is descriptive.
C)is generic.
D)means nothing.
Q3) Chocolate Chip Cookie Corporation (4C)obtains, and gives its employees, a list of the customers of Sugar & Spice Sales, Inc.(3S).Under the law that applies to trade secrets, 4C's conduct is actionable provided
A)consumers are confused.
B)4C's conduct is intentional.
C)4C uses the list.
D)4C does not have 3S's permission to use the list.
Q4) A generic term is not protected under trademark law unless it acquires a secondary meaning.
A)True
B)False
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Chapter 11: International Law in a Global Economy
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Q1) A foreign citizen can bring a civil suit in a U.S.court for a violation of a treaty of the United States.
A)True
B)False
Q2) Soleful Shoes, Inc.owns property in Somalia.The Somalian government seizes the property.In order for the seizure to be considered an expropriation and not a confiscation, the Somalian government must
A)pay just compensation to Soleful Shoes.
B)give Soleful Shoes at least thirty days notice of the seizure.
C)give Soleful Shoes at least ninety days notice of the seizure.
D)notify the U.S.government before the seizure.
Q3) Expropriation occurs when a government seizes private property for an illegal purpose and awards just compensation.
A)True
B)False
Q4) Dumping is the sale of imported goods at "greater than fair value."
A)True
B)False
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Page 13
Chapter 12: Business Organizations
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Q1) Rafi, a director of Super Service Station Corporation, does not attend a board meeting for three years.During that time, Twyla, Super's president, makes improper loans that cost the company $100,000.Rafi is most likely
A)liable for negligence.
B)liable for violation of the business judgment rule.
C)not liable because missing meetings is an honest mistake.
D)not liable because missing meetings is only poor judgment.
Q2) If a franchisor unfairly terminates a franchise, a court will provide a franchisee with a remedy.
A)True
B)False
Q3) A corporation does not possess the same right of access to the courts as natural persons.
A)True
B)False
Q4) State limited liability company statutes are uniform.
A)True
B)False
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Page 14
Chapter 13: Beyond Our Borders:
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Sample Questions
Q1) Eduard is a shareholder of Deutsche Internationale, a German firm.In Germany
A)most claims against firms are alleged in shareholders' derivative suits.
B)the law does not provide for derivative litigation.
C)derivative actions can only challenge directors' actions that shareholders could not legally ratify.
D)if a derivative action is unsuccessful, a firm can sue the plaintiff.
Q2) Taylor, a paralegal, works for Polk, an attorney.Before filing a bankruptcy petition for Polk on behalf of a client in the U.S.Bankruptcy Court for the District of Arizona, Taylor has a question about the filing.Taylor can access a chat box via the court's Web site and
A)send and receive text messages.
B)leave voice messages.
C)get verbal responses to questions in not less than ten minutes.
D)contact other paralegals, attorneys, and their clients quickly.
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Chapter 14: Formation of Traditional and E-Contracts
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Q1) Inadequate consideration may reflect a lack of bargained-for exchange.
A)True
B)False
Q2) Vernon claims that his contract with Ulani is voidable.If their contract is avoided
A)both parties are released from it.
B)both parties must fully perform their obligations under it.
C)a wholly different contract is agreed to.
D)a wholly different contract is imposed "as if" the parties had agreed.
Q3) Demi promises to buy a house from Caleb, who promises to vacate the property on June 1.If these promises are in writing, they are most likely
A)enforceable.
B)unenforceable.
C)void.
D)voidable.
Q4) The terms of a shrink-wrap agreement may be enforced in the same way as the terms of other contracts.
A)True
B)False
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Chapter 15: Contract Performance, Breach, and Remedies
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Q1) Damon contracts to repair the turf on a soccer field for Carousel Sports Park.Damon knows that without the repair, Carousel will have to cancel an upcoming game.Damon does not perform as promised.As consequential damages, Carousel can recover
A)the cost of new turf.
B)the difference between Damon's price and the actual cost of repair.
C)the loss of profit from the canceled game.
D)nothing.
Q2) Red's Plumbing Service substantially performs its contract with Shady Grove Condominiums, Inc.Shady Grove is entitled to A)damages.
B)nothing more.
C)repudiation.
D)alteration.
Q3) Voluntary consent can be used as a defense to the enforceability of a contract if the consent is lacking because of a mistake.
A)True
B)False
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Chapter 16: Sales and Leases
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Q1) Fred goes to Carla, a knowledgeable dog breeder, and tells her that he wants to get a dog that will be good with small children.Carla sells Fred a dog.When Fred takes the dog home, it bites both his small children and causes them serious injuries.Fred can sue Carla for breach of
A)an express warranty.
B)an implied warranty of fitness for a particular purpose.
C)an implied warranty of merchantability.
D)a warranty of title.
Q2) Robert is selling his used lawnmower.He wants to disclaim any implied warranties.Robert
A)can not disclaim implied warranties.
B)should include a written disclaimer that the lawnmower is being sold "as is."
C)should orally disclose all known faults of the lawnmower.
D)should include a written warranty of title.
Q3) A firm offer by a merchant may be oral.
A)True
B)False
Q4) UCC Article 2 applies to sales of goods, real estate, and services.
A)True
B)False
Page 18
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Chapter 17: Creditors Rights and Bankruptcy
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Q1) Lionel files a voluntary petition for bankruptcy under Chapter 7.The court will likely deny a discharge of Lionel's debts if he
A)conceals records of his financial condition with the intent to defraud a creditor.
B)does not have sufficient assets to pay all his secured creditors.
C)filed for bankruptcy twelve years ago.
D)has a criminal record.
Q2) Thirty-one days before filing a petition in bankruptcy, Dee transfers property and makes payments that favor one creditor over another.These are A)affirmation agreements.
B)preferences.
C)secured interests.
D)unsecured debts.
Q3) A surety can assert the debtor's bankruptcy as a defense.
A)True
B)False
Q4) Certain types of property are exempt from writs of execution or attachment.
A)True
B)False
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19
Chapter 18: Mortgages Foreclosures After the Recession
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Q1) If a loan is not paid within a reasonable time after a notice of default, the borrower will receive a notice of sale.
A)True
B)False
Q2) Negative amortization occurs when the monthly payments are insufficient to cover the interest due on a loan.
A)True
B)False
Q3) With an interest-only mortgage, the borrower can choose to pay only the interest portion of the monthly payment for a specified period of time.
A)True
B)False
Q4) Liberty Bank provides Michelle with a standard mortgage with an unchanging rate of interest to buy a home.Payments on the loan remain the same for the duration of the mortgage.This is
A)a fixed-rate mortgage.
B)an adjustable-rate mortgage.
C)an interest-only mortgage.
D)a violation of the law.
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Chapter 19: Employment, Immigration, and Labor Law
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Q1) Generally, employers can monitor employees' electronic communications made in the ordinary course of business, as well as employees' personal communications.
A)True
B)False
Q2) Julie works as an employee for Organic Produce Express, Inc.(OPI).Rowan, who is unemployed, collects unemployment compensation.This compensation is provided by a tax on
A)Julie and other employees.
B)Julie, OPI, and other employees and employers.
C)OPI and other employers.
D)not Julie, OPI, or other employees or employers.
Q3) Sunny Energy Company wants to genetically test its workers for potentially significant, future health problems.Sunny may
A)discharge employees who test "positive."
B)discriminate against job applicants who test "positive."
C)deny group health insurance for its employees who test "positive."
D)not make employment decisions based on genetic testing.
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Chapter 20: Beyond Our Borders:
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Q1) Geo Global Corporation, a U.S.firm, requires its employee Marcy to stay connected with work after office hours through a smartphone.In the United States, Marcy and other employees who are required to use mobile devices after work may have a valid claim to overtime wages if they
A)are not exempt under the overtime regulations of the Fair Labor Standards Act.
B)are not reimbursed by their employers for the use.
C)are supplied with the devices by their employers.
D)do business with international contacts.
Q2) PowerSoft Corporation creates an internal social media network using enterprise social networking software and systems.Concerns about the use of an internal social media network include how to
A)keep the data safe.
B)make the data public.
C)provide access to all files to all employees.
D)maintain a personal, lively, and entertaining tone.
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22
Chapter 21: Employment Discrimination
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Q1) Employers who do not accommodate the needs of persons with disabilities must demonstrate that the accommodations would cause undue hardship.
A)True
B)False
Q2) Refer to Fact Pattern 17-2.To succeed with a claim against COC under the Americans with Disabilities Act, Beth will have to show that
A)Beth consistently met the essential requirements of her job.
B)COC refused to make reasonable accommodation for Beth.
C)Dian is unqualified for Beth's position.
D)the doors were installed as an act of intentional discrimination.
Q3) Refer to Fact Pattern 17-1.To succeed with an age-discrimination claim against CBC, Manny will have to show that
A)Lita is not qualified for Manny's job.
B)Manny is qualified for his job.
C)NBC's qualifications for Manny's job are too high.
D)no one could do Manny's job as well as he could.
Q4) Gender can be a bona fide occupational qualification.
A)True
B)False
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Chapter 22: Environmental Law
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Q1) Remote Disposal Company operates a hazardous waste storage facility.Concerned that there may be a release of chemicals from the site, Remote sells the property to Serene Developers, Inc.If there is a release, Remote is most likely A)liable.
B)not liable because the site was sold before the release.
C)not liable because Remote was concerned about the release.
D)not liable because Remote no longer operates the facility.
Q2) Only offshore oil facilities that discharge oil into navigable waters are liable for the clean up costs.
A)True
B)False
Q3) Operators of public water systems must meet the Environmental Protection Agency's standards regardless of the economic and technological feasibility. A)True
B)False
Q4) States may not restrict emissions from motor vehicles.
A)True
B)False
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Page 24
Chapter 23: Antitrust Law and Promoting Competition
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Q1) Precious Metals Corporation, a raw materials vendor, sells its commodities in certain quantities to Quarry Refining Company for a certain price but charges Rich Assets, Inc., a Quarry competitor, a higher price.This is most likely a violation of A)the Clayton Act.
B)the Federal Trade Commission Act.
C)the Sherman Act.
D)no antitrust law.
Q2) No person may be a director for two competing corporations at the same time.
A)True
B)False
Q3) Cooperative research by small-business firms is exempt from antitrust law.
A)True
B)False
Q4) Antitrust legislation was created because of the belief that competition leads to lower prices.
A)True
B)False
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Chapter 24: Online Developments:
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Q1) Cool Corporation makes energy-saving air conditioning units.Cool anticipates a change in the demand for its products as a consequence of climate change.One argument in favor of requiring Cool to disclose this information is that it could lead to A)additional protections under the Sarbanes-Oxley Act of 2002.
B)an increase in the number of shareholder suits against competitors.
C)sound investment decisions by investors.
D)the conversion of Cool from publicly held to privately held.
Q2) DeLuxe, S.A., is a French company with offices and operations located throughout Europe.With respect to the direction and control of DeLuxe and other firms in continental Europe, the prevailing coordinated model of corporate governance gives priority to the interests of a corporation's A)directors.
B)executive and financial officers.
C)shareholders.
D)stakeholders-employees, managers, suppliers, customers, and the community.
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26
Chapter 25: Investor Protection, Insider Trading, Corp Gov
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Q1) Few securities can be resold without registration.
A)True
B)False
Q2) Corporations' chief executive officers are directly accountable for the accuracy of financial statements filed with the Securities and Exchange Commission.
A)True
B)False
Q3) To raise capital to form Plasticity Corporation with Quinn, Rona sells bonds and stock in other companies, and plans to register an initial public offering under the Securities Act of 1933.SEC Rule l0b-5 covers A)most forms of securities.
B)only bonds.
C)only securities registered under the Securities Act of 1933. D)only stock.
Q4) SEC Rule 10b-5 prohibits the commission of fraud in connection with the purchase or sale of any security.
A)True
B)False
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