Introduction to Business Law
Exam Questions
Course Introduction
Introduction to Business Law provides students with a foundational understanding of the legal principles and frameworks that govern business activities. The course covers essential topics such as contract law, torts, agency, sales, negotiable instruments, and the regulatory environment affecting businesses. Emphasis is placed on the legal structures of business organizations, dispute resolution processes, ethics, and the impact of law on business decision-making. Through case studies and practical examples, students learn to recognize legal issues and apply legal reasoning to business scenarios. This course equips students with the knowledge necessary to navigate legal challenges in the business world and fosters an appreciation for ethical and legal considerations in management.
Recommended Textbook
Dynamic Business Law The Essentials 4th Edition by Nancy Kubasek
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Page 2
Chapter 1: An Introduction to the Fundamentals of Dynamic Business Law
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Q1) Private law involves disputes between private individuals or groups and their government.
A)True
B)False
Answer: False
Q2) An alternative name for case law is ________.
A)common law
B)statutory law
C)constitutional law
D)equity
E)ethics
Answer: A
Q3) Crimes are prosecuted by:
A)Only injured individuals
B)Any interested person,whether injured or not
C)State governments only
D)The federal government only
E)The state or federal government
Answer: E
Page 3
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Chapter 2: Business Ethics and Social Responsibility
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Q1) The Golden Rule is the idea that we should interact with other people in a manner consistent with the way we would like them to interact with us.
A)True
B)False
Answer: True
Q2) The social responsibility of business consists of the expectations ________ impose(s)on firms.
A)the community
B)future generations
C)management
D)employees
E)shareholders
Answer: A
Q3) In 2007,Dole was sued by a group of its employees for:
A)Low wages
B)Age Discrimination
C)Bribery
D)Sex discrimination
E)Ignoring safety recommendations in their use of pesticides
Answer: E
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Chapter 3: The Uslegal System and Alternative Dispute Resolution
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Sample Questions
Q1) Interrogatories are:
A)written questions
B)depositions taken in the state in which the defendant resides
C)depositions taken in the state in which the plaintiff resides
D)in-court testimony given under oath
E)in-court testimony given under affirmation
Answer: A
Q2) Assume you know that Robert has told a lie about a friend of yours,Yolanda.You tell Yolanda that she should sue for defamation,but she has no interest in that.Can you sue on behalf of Yolanda?
A)Yes,so long as you give any money received to Yolanda.
B)Yes,but only if Yolanda signs a permission slip at the court.
C)Yes,but only if the dispute is for an amount under $25,000.
D)No,because there is no venue.
E)No,because you have no standing.
Answer: E
Q3) Quasi in rem jurisdiction is also known as attachment jurisdiction.
A)True
B)False
Answer: True
Page 5
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Chapter 4: Administrative Law
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Sample Questions
Q1) The two classifications of agencies are:
A)legislative and executive.
B)legislative and independent.
C)judicial and independent.
D)executive and independent.
E)judicial and executive.
Q2) An administrative law judge's decision may not be directly appealed to a court.
A)True
B)False
Q3) What types of powers do administrative agencies have?
A)Legislative and judicial
B)Judicial and executive
C)Executive and legislative
D)Legislative,judicial,and executive
E)None,since administrative agencies have only advisory authority (i.e.,they advise the executive,legislative,and judicial branches of government regarding their particular areas of expertise,but must defer to the three branches of government to actually address those particular areas)
Q4) List and describe the steps involved in hybrid rule making.
Q5) List the stages and requirements of informal agency rule making.
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Chapter 5: Constitutional Law
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Q1) When can government agents obtain a search warrant?
A)When they can establish reasonable cause
B)When they can establish probable cause
C)When they can establish cause to a substantial certainty
D)Anytime they have an informant
E)Anytime the judge is in his office and they show identification as government agents
Q2) Explain the Central Hudson Gas & Electric Corp.v.Public Service Commission of New York test for commercial speech and set forth your opinion as to whether the Central Hudson test should be expanded to provide additional protection for commercial speech.
Q3) The common law process of ________ allows courts to review legislative and executive actions to determine whether they are constitutional.
A)executive fiat
B)judicial deference
C)legislative deference
D)judicial review
E)res ipsa loquitur
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Chapter 6: Criminal Law and Business
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Q1) Courts have defined a pattern of racketeering under the Racketeer Influenced and Corrupt Organizations (RICO)Act as more than ________ action(s).
A)one
B)two
C)three
D)four
E)twelve
Q2) Carla learns that her employer,a healthcare facility,is committing fraud against the government by filing false Medicare claims.Under which of the following laws might she personally receive a portion of any recovery obtained by the government?
A)The Racketeer Influenced and Corrupt Organizations Act.
B)The False Claims Act.
C)The Sarbanes-Oxley Act of 2002.
D)The Medicare Recovery Act.
E)The Healthcare Fraud Act.
Q3) An individual (i.e.,a private party)cannot file a criminal law suit.
A)True
B)False
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Chapter 7: Tort Law
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Sample Questions
Q1) Blow-Up.Jeanie is hauling several containers of gasoline in her vehicle in preparation for riding her personal watercraft.On the way home,Jeanie stops at the automatic teller machine at her bank and exits her car.Holly pulls behind her and negligently rear-ends Jeanie's car.The car explodes and results in the bank building burning to the ground.The bank sues Holly for negligence claiming that Holly should have to pay for the entire bank building.The bank claimed that it should be able to recover under the res ipsa loquitur doctrine.Which of the following is true regarding the bank's claim that it should be able to recover under the res ipsa loquitur doctrine?
A)The bank is correct because under that doctrine defendants are liable for any harm caused.
B)The bank is correct only if Holly has sufficient insurance to cover the bank burning. C)The bank is correct only if it can be established that Holly was a repeat driving offender.
D)The bank is incorrect because the thing does not speak for itself.
E)The bank is incorrect because res ipsa loquitur is a defense.
Q2) Strict liability is liability due an intentional act or negligence.
A)True
B)False
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Chapter 8: Real, Personal, and Intellectual Property
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Q1) Scuba Diving.Marcy invented a new type of mask for scuba divers that was not subject to fogging.She agrees to allow Jenny to manufacture and sell the mask.She receives a sum of money for every mask that Jenny sells.Similarly,Marcy entered into an agreement with Frank to allow him to sell the masks,but only if he also purchased non-patented diving suits from Marcy.All parties proceeded to do very well with their sales.Which of the following describes the agreement between Marcy and Frank?
A)It is a legal tying arrangement.
B)It is a legal cross-licensing agreement.
C)It is an illegal tying arrangement.
D)It is an illegal cross-licensing agreement.
E)It is both a legal tying and a legal cross-licensing agreement.
Q2) What three criteria must be satisfied in order to obtain a patent that is not a design patent?
Q3) A license is an irrevocable right to use some part of another's land for a specific purpose without taking anything from it.
A)True
B)False
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Page 10
Chapter 9: Introduction to Contracts and Agreement
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Sample Questions
Q1) A quasi-contract is an agreement by the parties to prevent unjust enrichment.
A)True
B)False
Q2) As of the publication of the textbook,how many states still allow a contract without consideration to be enforced if it is under seal?
A)Five
B)Eight
C)Ten
D)Twenty-three
E)Thirty-seven
Q3) All contracts can be categorized as either ________ or ________ contracts.
A)unilateral; equilateral
B)equilateral; trilateral
C)bilateral; trilateral
D)unilateral; bilateral
E)bilateral; equilateral
Q4) In the absence of a time condition in the offer,the offer will expire after thirty (30)days.
A)True
B)False
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Chapter 10: Consideration
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Q1) In a bilateral contract,the consideration for each promise is a return promise.
A)True
B)False
Q2) Which of the following is a correct statement regarding illusory promises?
A)Illusory promises are not consideration.
B)Illusory promises are consideration.
C)Illusory promises qualify as consideration when past consideration is at issue.
D)Illusory promises qualify as consideration when promissory estoppel is at issue.
E)Illusory promises can constitute consideration,but only when a sale of goods is involved.
Q3) Define the terms liquidated debt and unliquidated debt,and discuss when an accord and satisfaction is enforceable.
Q4) In an unliquidated debt,there is no dispute about the fact that money is owed and the amount of money owed.
A)True
B)False
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Chapter 11: Capacity and Legality
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Q1) Define the offense of usury,and discuss the two situations discussed in the textbook where loans may exceed the maximum interest rate despite the existence of usury statutes.
Q2) What is the legal significance in most states when a minor misrepresents his or her age?
A)That if a competent party relies on a misrepresentation in good faith,the minor gives up the right to disaffirm the agreement.
B)That the minor must restore the competent party to that party's pre-contract position before obtaining the disaffirmance.
C)That the minor may disaffirm the contract,but the competent party has the right to sue the minor in tort and recover damages for fraud.
D)That misrepresentation does not affect the minor's right to disaffirm the contract.
E)That misrepresentation results in the minor receiving a return of only the monetary consideration (if any)he or she paid to the other contracting party.
Q3) Describe the test most states follow regarding the capacity of intoxicated persons to enter into contracts.
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Chapter 12: Reality of Assent
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Q1) Mistakes in contract law do not result from untrue statements made by one party to the contract.
A)True
B)False
Q2) When a contract is voidable,it may be ________ or canceled.
A)rescinded
B)decertified
C)void ab initio
D)antedated
E)quid pro quo
Q3) Which of the following is/are found when one party was forced into an agreement by the wrongful act of another?
A)Duress
B)Negligence
C)Fraud
D)Duress,negligence,or fraud
E)Duress and fraud,but not negligence
Q4) What must a plaintiff prove in order to establish fraudulent misrepresentation and recover damages as a result?
Q5) What is the result of a contract being voidable?
Page 14
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Chapter 13: Contracts in Writing and Third-Party Contracts
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Q1) The Uniform Commercial Code requires that contracts for the sale of goods for $500 or more must be in writing in order to be enforceable.
A)True
B)False
Q2) Which of the following is a duty that typically cannot be delegated to a third party?
A)Mowing a yard
B)Payment of money owed
C)Delivering goods
D)Painting a house
E)Painting a portrait
Q3) Which of the following are recognized exceptions to the statute of frauds?
A)Admission,preliminary performance,and promissory estoppel
B)Denial,preliminary performance,and promissory estoppel
C)Denial,partial performance,and beneficial reliance
D)Admission,partial performance,and promissory estoppel
E)Admission,partial performance,and beneficial reliance
Q4) Discuss the factors courts consider in determining whether a party is an intended beneficiary or merely an incidental beneficiary.
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Page 15
Chapter 14: Discharge and Remedies
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Q1) A contract may be discharged by operation of law through ________.
A)alteration of the contract
B)bankruptcy
C)objective impossibility of performance
D)alteration of the contract,bankruptcy,or objective impossibility of performance
E)alteration of the contract or bankruptcy,but not by objective impossibility of performance
Q2) Suppose that Jeremiah was unfairly terminated before his employment contract expired,and he had to spend $500 to find another job.His job search expenditures would be considered ________ damages.
A)incidental
B)punitive
C)liquidated
D)nominal
E)statutory
Q3) Distinguish between objective impossibility of performance and subjective impossibility of performance,and describe the three main situations in which courts find objective impossibility.
Q4) List the ways by which a party's contractual obligations can be terminated.
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Chapter 15: Formation and Performance of Sales and Lease Contracts
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Q1) Used Car Problems.ABC Motors sold a used car to Frank,who wrote a bad check for the car and left town but not before he sold the car to Betty,who paid $1,100 (a fair price for the car)believing that Frank had all rights to sell it.Assuming that ABC Motors was an innocent purchaser from the thief,which of the following is true regarding Betty's obligations,if any?
A)She is not required to return the car because Frank held voidable title,not void title.
B)She is not required to return the car under the UCC because she paid over $1,000 for it.
C)She is required to return the title because Frank held voidable title,not void title.
D)She is required to return the title under the UCC because she paid under $5,000 for it.
E)Under the UCC,the car should be sold with ABC and Betty splitting the proceeds.Under the UCC,the car should be sold with ABC and Betty splitting the proceeds.
Q2) Corporate stocks are treated as goods under the UCC.
A)True
B)False
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Chapter 16: Sales and Lease Contracts: Performance, Warranties,
and Remedies
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Q1) An implied warranty is any description of the good's physical nature or its use,either in general or specific circumstances,that becomes part of the contract.
A)True
B)False
Q2) Which of the following must a buyer do in obtaining cover?
A)Demonstrate good faith in obtaining the substitute goods,and pay a reasonable amount for the substitute goods
B)Pay a reasonable amount for the substitute goods,and act without unreasonable delay in purchasing the substitute goods
C)Act without unreasonable delay in purchasing the substitute goods,and purchase goods that are reasonable substitutes
D)Pay a reasonable amount for the substitute goods,act without unreasonable delay in purchasing the substitute goods,and purchase goods that are reasonable substitutes
E)Demonstrate good faith in obtaining the substitute goods,pay a reasonable amount for the substitute goods,act without unreasonable delay in purchasing the substitute goods,and purchase goods that are reasonable substitutes.
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Chapter 17: Negotiable Instruments: Negotiability and Transferability
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Q1) A promise made by a bank to pay a payee a certain amount of money at a future time is called a ________.
A)note
B)draft
C)novation
D)check
E)certificate of deposit
Q2) Which of the following is an incorrect statement regarding the Uniform Commercial Code's signature requirement for a negotiable instrument?
A)An "X" will suffice if the party intended that the mark be placed on the instrument and uses that mark to identify himself.
B)A signature may be made by means of a device or machine.
C)A signature may be made manually.
D)The signature of an agent on behalf of the principal binds the principal and satisfies the signature requirement.
E)The Uniform Commercial Code is fairly strict in interpreting what constitutes a signature.
Q3) Set forth the six requirements for an instrument to be negotiable.
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Chapter 18: Holder in Due Course, Liability, and Defenses
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Q1) When a party signs a negotiable instrument without knowing that it is,in fact,a negotiable instrument,the party can claim ________.
A)negligence
B)recklessness
C)malice
D)fraud in the factum
E)fraud in the factum and fraud in the inducement
Q2) What type of liability occurs when a person signs a negotiable instrument?
A)Warranty
B)Payee
C)Signature
D)Primary
E)Secondary
Q3) The Uniform Commercial Code's definition of good faith is strictly a subjective standard.
A)True
B)False
Q4) A holder in due course must take the negotiable instrument in good faith.
A)True
B)False
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Chapter 19: Secured Transactions and Bankruptcy
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Q1) Bankruptcy remedies are available to individuals and corporations,but not to partnerships.
A)True
B)False
Q2) Everett buys a new bicycle on credit from Bicycle City.Bicycle City has a security agreement for a purchase-money security interest in the bicycle but did not file a financing statement.Everett,however,discovers that he does not have enough money to pay his rent.Therefore,he sells the bicycle to his neighbor,Helen,who is unaware of Bicycle City's security interest in the bicycle.Everett fails to make payments on the bicycle,and Bicycle City seeks to repossess it.Discuss the rights and obligations of the parties.
Q3) Which of the following means that bankruptcy relief is ordered and that the bankruptcy proceedings can continue?
A)An order of relief
B)A petition
C)A declaratory judgment
D)A temporary injunction
E)A permanent injunction
Q4) What must a creditor do to become a secured party?
Q5) List three advantages associated with perfection by possession.
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Chapter 20: Agency and Liability to Third Parties
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Q1) When an agent acts within the scope of her authority on behalf of a disclosed or partially disclosed principal,the agent is liable for the acts of the principal.
A)True
B)False
Q2) Under which of the following does a principal give an agent broad authority to sign legal documents on behalf of the principal,as opposed to authority for only a specific purpose?
A)A general power of attorney
B)A specific power of attorney
C)A localized power of attorney
D)A durable power of attorney
E)An equitable power or attorney
Q3) An agent's duty of ________ to the principal includes the agent's obligation to perform the duties as specified in the agency agreement.
A)cooperation
B)notification
C)loyalty
D)performance
E)obedience
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Page 22
Chapter 21: Forms of Business Organization
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Q1) Sole proprietorships are terminated when the sole proprietor dies.
A)True
B)False
Q2) Brice just finished a residence in internal medicine and wants to go into practice with Horace and Joyce.Brice tells you that while he needs to practice with other physicians for call coverage and for other reasons,he does not want to be personally liable should the other physicians be found guilty of malpractice.You discuss various incorporation options with him,but he tells you that he would like to form a partnership.What business forms would you recommend to him and why?
Q3) In a manager-managed LLC,the managers must be members of the LLC.
A)True
B)False
Q4) Distributorships are franchises in which the franchisor manufactures a product and licenses a dealer to sell the product in a non-exclusive territory.
A)True
B)False
Q5) A sole proprietorship requires very few legal formalities.
A)True
B)False
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Chapter 22: Corporations: Formation and Organization
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Q1) ________ own(s)the corporation.
A)Directors
B)Officers
C)Shareholders
D)Affiliates
E)The state
Q2) In order to prevent a defective corporation from escaping corporate responsibility,a court may hold that the entity is a(n)________.
A)corporation in fact
B)implied corporation
C)corporation by estoppel
D)corporation with reservation
E)qualified corporation
Q3) Discuss the rights of corporations under the United States Constitution's Bill of Rights.
Q4) An individual director or officer may not personally benefit from decisions made by the board of directors.
A)True
B)False
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Page 24
Chapter 23: Securities Regulation
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Q1) A person who controls,is controlled by,or is in common control with the issuer is known as a(n):
A)affiliate
B)associate
C)general partner
D)limited partner
E)insider
Q2) When a company employee or executive uses material inside information to make a profit,he or she is engaging in:
A)Embezzlement
B)Insider trading
C)Grafting
D)A Ponzi scheme
E)Solicitation of bribery
Q3) A person who violates the Securities Act of 1933 can be fined,but he or she cannot be subject to imprisonment.
A)True
B)False
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Chapter 24: Employment and Discrimination Law
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Q1) The Family and Medical Leave Act guarantees all eligible employees up to ________ weeks of unpaid leave during any ________ month period for designated family-related occurrences.
A)4; 24
B)12; 24
C)12; 12
D)20; 12
E)20; 24
Q2) The ________ Act is also known as the Labor-Management Relations Act.
A)Taft-Hartley
B)Occupational Safety and Health
C)Fair Labor Standards
D)Wagner
E)Landrum-Griffin
Q3) What is the federal minimum wage?
A)$5.85
B)$6.00
C)$6.50
D)$7.00
E)$7.25
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Chapter 25: Consumer Law
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Q1) To be subject to the Truth in Lending Act,a loan must be for ________ unless it is secured by a mortgage on real estate.
A)$50,000 or more
B)$50,000 or less
C)$30,000 or more
D)$40,000 or less
E)$25,000 or less
Q2) The existence of deceptive advertisements alone is sufficient to prove damages for recovery when individual civil suits are filed for deceptive advertising.
A)True
B)False
Q3) Used-car sales laws are uniform in every state.
A)True
B)False
Q4) When sellers advertise a low price for an item generally unavailable to the consumer and then push the consumer to buy a more expensive item,they are engaging in "bait-and-switch" advertising.
A)True
B)False
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