Introduction to Business Law
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Course Introduction
Introduction to Business Law offers students a foundational understanding of the legal environment in which businesses operate. The course explores key principles of contract law, torts, agency, business organizations, and government regulation, providing insights into how laws influence business decisions and operations. Through case studies and practical examples, students learn to identify legal issues, evaluate risks, and apply legal reasoning to typical business situations. This course equips students with essential knowledge to navigate the legal challenges of the business world responsibly and effectively.
Recommended Textbook
Business Law and the Legal Environment Standard Edition 8th Edition by Jeffrey F. Beatty
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Page 2
Chapter 1: Introduction to Law
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Q1) In the United States,the powers of government are divided between a national,state,and several local governments.What is this type of system called?
A)federalism
B)democracy
C)confederation
D)oligarchy
Answer: A
Q2) If the title of an appellate court case appears as Jones v.Smith, A)then it is correct to say that Jones is the plaintiff and Smith is the defendant.
B)it means that Smith won the trial court decision.
C)you cannot determine which party is the plaintiff,because when a defendant loses a trial and files an appeal,some courts (but not all)reverse the names of the parties.
D)the trial judge was Jones and the appellate judge is Smith.
Answer: C
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Chapter 2: Ethics and Corporate Social Responsibility
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Q1) Unethical behavior is a bar to financial success.
A)True
B)False
Answer: False
Q2) John Akers,former chairman of IBM,argued that ethics are not important to economic competitiveness.
A)True
B)False
Answer: False
Q3) Ethical behavior always pays off financially for businesses.
A)True
B)False
Answer: False
Q4) Which person held the belief that the circumstances into which we are born play an important role in our personal outcome?
A)Immanuel Kant
B)John Stuart Mill
C)Milton Friedman
D)John Rawls
Answer: D
Page 4
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Chapter 3: International Law
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Q1) The United States and Argentina have signed the Convention on Contracts for the International Sale of Goods (CISG).Oxtron,Inc. ,a U.S.company,and Leer,an Argentinean company,have entered into a contract under which Oxtron is to ship medical devices to Leer.The contract does not include a choice of law provision.The contract will be governed by
A)the CISG.
B)the ICC.
C)the domestic contract law of Argentina.
D)the domestic contract law of the United States.
Answer: A
Q2) The United Nations Security Council,comprised of all its member nations,is the UN's lawmaking body.
A)True
B)False Answer: False
Q3) Islamic law,the legal system influenced by the religion of Islam,is referred to as shari'a.
A)True
B)False Answer: True
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Chapter 4:
Common Law, Statutory Law, and Administrative Law
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Q1) Which law imposes controls on federal agencies by requiring basic fairness in areas not regulated by enabling legislation?
A)The 1964 Civil Rights Act.
B)The Clean Agency Act.
C)The Administrative Procedure Act.
D)The Freedom of Information Act.
Q2) Big 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?
Q3) The U.S.Supreme Court was asked to decide whether same-sex sexual harassment 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 all of the following EXCEPT
A)the plain meaning rule.
B)legislative history.
C)public policy.
D)enabling legislation.
Q4) Discuss the two federal statutes that give Americans the power to acquire or protect personal information.
Page 6
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Chapter 5: Constitutional Law
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Q1) Tim received a letter from his state college stating that he had been expelled from the school.The letter stated his finance professor reported him to the Dean's office for cheating and that a committee had decided to expel him.He was reminded in the letter he had been disciplined earlier that same year for plagiarizing a term paper.Tim believes his due process rights have been violated by the college.Discuss what factors should be considered to determine the validity of Tim's claim.
Q2) Hal was arrested for burning the U.S.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
Q3) Obscene speech is protected by the First Amendment.
A)True
B)False
Q4) The primary source of federal power to regulate business is the
A)Supremacy Clause.
B)Commerce Clause.
C)Contract Clause.
D)Privilege and Immunities Clause.
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Chapter 6: Dispute Resolution
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Q1) Which of the following is NOT an example of a trial court of limited jurisdiction?
A)A probate court
B)A juvenile court
C)A small claims court
D)A general civil division court
Q2) Disputants Martin and Daulton have hired Thurman to mediate their disagreement.Although Martin and Daulton must accept whatever decision Thurman makes,the mediation has the advantage of keeping Martin and Daulton out of court.
A)True
B)False
Q3) After being served with a summons and a copy of the complaint,a defendant usually files a pleading known as an answer,briefly replying to each allegation in the complaint.
A)True
B)False
Q4) Summary judgment is appropriate when there are no essential facts in dispute.
A)True
B)False
Q5) Briefly describe the process of jury selection.
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Chapter 7: Crime
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Q1) The parties to a criminal trial are the government and the defendant.
A)True
B)False
Q2) The Sixth Amendment declares that a person cannot be tried twice for the same criminal offense.
A)True
B)False
Q3) Which of the following is NOT a component of money laundering?
A)taking the proceeds from a criminal act
B)attempting to conceal the source of the money
C)using the money to commit crimes
D)investing profits back into the company
Q4) In order for the government to obtain a criminal conviction,it must prove its case beyond a reasonable doubt.
A)True
B)False
Q5) Internet auctions are the number one source of consumer complaints about online fraud.
A)True
B)False
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Chapter 8: Intentional Torts and Business Torts
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Q1) If Gloria threw a rock that hit Merle,she is liable for an intentional tort of battery only if she intended to injure or harm Merle.
A)True
B)False
Q2) A national magazine published an article about a famous television star.The television personality is upset because the information contained in the story is not correct.If the actress sues the magazine,
A)she will need to show that the magazine has a history of being "reckless" with facts on a regular basis.
B)she will need to show that the magazine either knew the story was false or acted with reckless disregard of the facts.
C)she will need to show that the magazine failed to attempt to verify the story by trying to contact her or her agent before the story was printed.
D)she will need to show that the magazine could have discovered that the story was false but failed to do so.
Q3) Discuss the four elements that must be proven in order to win a defamation case.
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Page 10
Chapter 9: Negligence, Strict Liability, and Product Liability
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Q1) A branch of tort law that imposes a much higher level of liability when harm results from ultrahazardous acts or defective products is referred to as
A)res ipsa loquitur.
B)strict liability.
C)heightened liability.
D)strict negligence.
Q2) Most states recognize some form of comparative negligence. A)True
B)False
Q3) Palsgraf v.Long Island Railroad addressed the issue of furnishing alcohol to minors. A)True
B)False
Q4) A sports fan,injured by a hockey puck that flew into the stands during an NHL game,would be subject to the defense of assumption of the risk in a suit to recover for her injuries.
A)True
B)False
Q5) Discuss the concepts of contributory negligence and comparative negligence.
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Chapter 10: Privacy and Internet Law
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Q1) What is user-generated content?
A)commercial transactions conducted electronically on the internet
B)unsolicited commercial email
C)anything created and made publicly available by end users
D)large data sets that reveal user patterns,trends,and association
Q2) Under the Stored Communications Act,which of the following are considered electronic communication?
A)voice mail
B)email
C)social media
D)All of these are correct.
Q3) At its inception,the Communications Decency Act of 1996 created broad immunity for internet service providers (ISPs)and websites.
A)True
B)False
Q4) The Electronic Communications Privacy Act of 1986 is a federal statute that regulates email.
A)True
B)False
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Chapter 11: Introduction to Contracts
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Q1) One purpose of contract law is to determine which agreements are worthy of legal enforcement.
A)True
B)False
Q2) Courts may award damages called quantum meruit,which means
A)"as much as he deserves."
B)"to the letter of the law."
C)"let the buyer beware."
D)"something for something."
Q3) One of the factors leading courts away from a laissez-faire approach to contract law was
A)the movement away from requiring written contracts with a seal affixed.
B)a change in relative bargaining power between parties to contracts.
C)the assumption that promises are not legally significant.
D)the assumption that parties had freedom to contract and would have to live with the consequences.
Q4) All oral contracts are quasi-contracts until they are completely executed.
A)True
B)False
Q5) Discuss the requirements of promissory estoppel.
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Chapter 12: Agreement: Offers and Acceptances
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Q1) The intent of the offeror to extend an offer to the offeree is generally determined by reference to
A)the beliefs of the offeror.
B)the subjective intention of the offeror.
C)the assumptions of the offeror.
D)the words and conduct of the offeror.
Q2) Vick Valve Company makes valves for plumbing fixtures.At the beginning of the year,it sends out a price list addressing each one,"To our valued customers." Honest Hank Hardware orders a variety of valves at the prices quoted on the price list.Vick Valve must honor the prices on the list and sell the valves to Honest Hank.
A)True
B)False
Q3) Regarding contracts,in seeking to determine whether there is a meeting of the minds,the courts look to how a reasonable person would objectively view the language or actions of the parties.
A)True
B)False
Q4) What elements are necessary for an offer to be valid? Give two examples of nonoffers.
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Chapter 13: Consideration
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Q1) A promise by Derkin Restaurants to buy all of the produce it needs this next year at an established price from Elfredo's Produce would be an
A)enforceable requirements contract.
B)enforceable output contract.
C)unenforceable illusory contract.
D)unenforceable promise based on past consideration.
Q2) The two basic elements of consideration are intention and agreement.
A)True
B)False
Q3) In January,Alex promised to pay Y-K Inc.$5,000 if it would refrain from filing suit against him on a breach of contract action.Y-K agreed and accepted a $5,000 check from Alex.Which of the following statements is correct?
A)Y-K's promise to refrain from suing Alex was not supported by legal consideration.
B)Y-K's promise to refrain from suing Alex was supported by legal consideration and is enforceable.
C)This is an accord and satisfaction,and Y-K cannot sue.
D)The courts would apply promissory estoppel in this situation.
Q4) What is consideration and what are the two basic elements of consideration?
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Page 15
Chapter 14: Legality
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Q1) Barb has been a children's day care provider for several years in the small town of Sallton.She has decided to give it all up and move to the big city for excitement and adventure.She sells her business to Ken,agreeing not to open a competing business within five miles of Sallton for a period of nine months.After five months of the big city life,Barb is broke and moves back to Sallton.She opens a small day care business.Ken sues on the non-compete clause.What is the most likely result?
A)Ken wins.The agreement is enforceable.
B)Barb wins.The agreement is denying her the right to do the only thing she knows how to do.
C)Barb wins.The agreement is not enforceable because it is not ancillary to a legitimate bargain.
D)Barb wins.The agreement is not reasonable as to time.
Q2) A contract may violate public policy even if the agreement does not violate a statute.
A)True
B)False
Q3) Discuss exculpatory clauses,and designate when an exculpatory clause is unenforceable.
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Page 16
Chapter 15: Voidable Contracts: Capacity and Consent
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Q1) A(n)_______ contract is illegal from the beginning and may not be enforced by either party;a(n)_______ contract is legal but permits one party to escape,if he or she so wishes.
A)disaffirmed;affirmed
B)void;voidable
C)affirmed;disaffirmed
D)voidable;void
Q2) Travis had too many beers at the baseball game.Ed realized Travis was so intoxicated he wouldn't know what he was doing,so he got Travis to sign a promise to sell his motorcycle to Ed for $50.When Travis gets sober,he can attempt to void the contract.
A)True
B)False
Q3) Adrianna wants to purchase a ten-acre tract of land.Under what circumstances would the seller be required to divulge information Adrianna does not possess?
Q4) What is the difference between a unilateral mistake and a mutual mistake? Under what circumstances will a court refuse to rescind a contract based on the defense of a "mistake"?
Q5) Discuss the meaning of "material fact" in fraud situations.
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Chapter 16: Written Contracts
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Q1) Ethel's Exercise World plans to order three weight machines from Pete's Push,Pedal,and Pull,Inc.for a total of $15,000.Pete's demands that Ethel's friend,Moneybags,a wealthy independent businesswoman (not connected with Ethel's business in any way)promise to pay Pete's for the three machines if Ethel's Exercise World does not.Which of the promises in this problem must be in writing to be enforceable?
A)The promise made by Ethel's Exercise World to buy the weight machines.
B)Moneybag's promise to pay if Ethel's Exercise World doesn't.
C)Both Moneybag's promise and Ethel's Exercise World's promise.
D)None of the promises in this problem need to be in writing.
Q2) Which of the following is a "special circumstance" in which an oral contract may be enforceable under the UCC?
A)It is the first transaction between both parties who are not considered to be merchants.
B)The contract is for goods in an amount of $750.
C)The seller is specially manufacturing goods for the buyer and begins work on them before the buyer cancels the order.
D)There are no special circumstances to the UCC;it deems that all contracts must be in writing.
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Chapter 17: Third Parties
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Q1) Kirk purchases a sailboat on credit from Lakefront Sales,and Lakefront keeps a security interest in the boat.Lakefront then assigns the security interest to First Finance Co.Explain what having a security interest means.Under the UCC,what defenses can Kirk assert against First Finance?
Q2) Most types of duties may be delegated.
A)True
B)False
Q3) A third party beneficiary's status occurs
A)after an assignment and delegation.
B)when the third party is informed of the contract.
C)when the third party beneficiary agrees to the contract terms.
D)when the contract is created.
Q4) Lawrence took out a life insurance policy in which his daughter,Madeline,is named as a beneficiary.Madeline is
A)a promisor.
B)an obligor.
C)an intentional beneficiary.
D)an incidental beneficiary.
Q5) Briefly discuss the enforceability of contracts by third parties.
Q6) Discuss the potential liability differences between a delegation and a novation.
Page 19
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Chapter 18: Contract Termination
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Q1) Melody is a recent graduate of State Law School.She lands an impressive employment contract with the firm of Dewey,Cheathem,and Howe,Attorneys at Law,on the stated provision that she pass the upcoming bar exam.This provision in the employment agreement is a(n)
A)condition precedent.
B)condition subsequent.
C)implied condition.
D)concurrent condition.
Q2) The legal right to sue for a breach of contract is subject to a statute of limitations.
A)True
B)False
Q3) Identify the factors courts consider in deciding the validity of commercial impracticability and frustration of purpose claims.
Q4) The law strongly prefers to apply the objective standard to contracts because
A)it requires both parties to carry out their obligations in good faith.
B)the subjective standard gives unlimited power to the promisee.
C)it is almost impossible to breach a contract under this standard.
D)the subjective standard gives unlimited power to the promisor.
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Page 20
Chapter 19: Remedies
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Q1) To win expectation damages,the injured party must prove the breach of contract caused damages that can be quantified with reasonable certainty.
A)True
B)False
Q2) The goal of expectation interest is to
A)serve as a penalty for breaching a contract.
B)award damages under the UCC when the sale of goods is the subject of the contract.
C)put the non-breaching party in the position it would have been in had the contract never been formed.
D)put the non-breaching party in the position it would have been in if the contract hadn't been breached.
Q3) The expectation interest is designed to put the injured party in the position he or she would have been in had both sides fully performed their obligations.
A)True
B)False
Q4) Identify and describe the principal contract interests a court may seek to protect.
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Page 21
Chapter 20: Practical Contracts
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Q1) In a contract modification,the phrase "charged with such amendment" refers to
A)the party who suggested the change.
B)the party who will benefit from the change.
C)the party who will be adversely affected by the change.
D)the party who did NOT suggest the change.
Q2) Farmer's Fortune Insurance has a contract with Farmer Fran to insure her crops against insect damage.The contract does not specify which insects are covered or how much damage is necessary to make a claim.The contract will probably be enforced in favor of
A)Farmer Fran.
B)Farmer's Fortune Insurance.
C)Neither side,as it is ridiculous to try to insure against insects.
D)Cannot determine...would have to go through litigation to decide.
Q3) When a party to a contract fails to fulfill all of her promises,she has breached the contract.What will a court look at in responding to a breach of contract?
Q4) "Scrivener's error" is another (fancier)name for a typo.
A)True
B)False
Q5) Outline the parts of a typical contract.
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Chapter 21: Introduction to Sales
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Q1) In which of the following cases is the predominant purpose the sale of goods?
A)Juanita goes to her dentist to have a cavity filled;while there,she buys a tube of whitening toothpaste the dentist sells at the front desk.
B)Anderson makes an appointment with his stockbroker to purchase 100 shares of Microsoft stock.
C)Millicent purchases ten bags of gravel from a landscaping company;an employee carries them to her truck and loads them for her.
D)Thomas purchases a membership to a health club;his membership entitles him to a free bottle of water with every visit.
Q2) In medieval England,the law merchant doctrine focused on all of the following except A)promises.
B)the sale and exchange of goods.
C)payment.
D)the sale and exchange of real estate.
Q3) Patsy is shopping for a used car.She finds a car she likes at Morley Motors.Discuss how the UCC views each party and the standard of conduct it imposes on the parties in performing the sales transaction.
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Chapter 22: Ownership, Risk and Warranties
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Q1) A buyer obtains an insurable interest when the goods are identified to the contract.
A)True
B)False
Q2) Regardless of the language of the contract,title to goods passes to the buyer at the time and place at which the seller physically delivers the goods.
A)True
B)False
Q3) A gun manufacturer in Helena,Montana,agrees to sell guns and ammunition to the ATF in Washington,D.C.The terms of the contract specify that the goods are to be shipped "FOB,Chicago." When does the buyer acquire title and risk of loss?
A)when the goods reach Chicago
B)when the goods are delivered to the carrier in Montana
C)when the goods are tendered in Washington D.C.by the carrier
D)when the goods reach Washington D.C.
Q4) The UCC looks solely upon "title" to determine ownership in goods.
A)True
B)False
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Chapter 23: Performance and Remedies
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Q1) What is the "perfect tender rule" and what restrictions has the UCC put into place that limit the perfect tender rule's effect?
Q2) Under the "perfect tender rule" the buyer may reject the goods if they fail in any respect to conform to the contract.
A)True
B)False
Q3) Master Glue Hairspray,Inc.contracts to purchase 100 umbrellas with its logo and slogan,"A spray a day keeps the rain and wind away!" specially printed on the umbrellas and its 1-800 telephone number on the umbrella handle.After the seller completes the order,Master Glue refuses to accept or pay for the umbrellas.Because of the special logo and telephone number,the seller has been unable to find a new buyer.If the seller sues Master Glue,what is the proper measure of the seller's damages?
A)contract price minus market value of the goods at the time of delivery
B)contract price
C)lost profits
D)cover price minus contract price
Q4) Identify the possible remedies for a buyer when the seller breaches a contract.
Q5) What is the difference between incidental damages and consequential damages?
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Chapter 24: Secured Transactions
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Q1) Masterview,Inc.purchased a new computer system,which included some computer programs.When Masterview developed financial troubles,two competing creditors of Masterview claimed the right to repossess the computer system and the programs.The UCC distinguishes "software" from "goods" and treats them differently for some purposes,which would be important in this situation.
A)True
B)False
Q2) Wedney,Inc.has a purchase money security interest in one of Yoro Chicken's meat processing machines.Wedney filed a financing statement on the day the machine was delivered,perfecting its interest.Great State Bank already had a security interest in the machine.Which party has superior priority rights in the meat processing machine?
A)Wedney.A PMSI in collateral other than inventory takes priority over a conflicting security interest if the PMSI is perfected at the time the debtor receives the collateral or within 20 days after he receives it.
B)Great State Bank,since it had an earlier security interest.
C)The party who is first to repossess the collateral has priority rights.
D)The creditors have equal priority.
Q3) Explain the difference between attachment and perfection.
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26
Chapter 25: Creating a Negotiable Instrument
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Q1) Commercial paper is a contract to pay money.
A)True
B)False
Q2) Valley National Bank issued a note promising to repay an investor on October 1,2011,three years from the date of issue,plus interest.The note
A)is a certificate of deposit,and it will pay a lower rate of interest than a regular savings account at Valley.
B)is a certificate of deposit,and it will pay a higher rate of interest than a regular savings account at Valley.
C)is a certificate of deposit,and whether the bank pays a higher or lower rate of interest than it pays on its regular savings accounts depends upon particular bank policy.
D)constitutes a trade acceptance.
Q3) An indorsement is the signature of the A)drawer.
B)payer.
C)issuer.
D)payee.
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Chapter 26: Liability for Negotiable Instruments
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Q1) When a person indorses a check,the indorser assumes contractual liability based on the indorsement.This liability expires unless presentment is made
A)within 3 days of indorsement.
B)within 7 days of indorsement.
C)within 30 days of indorsement.
D)within a reasonable time after the indorsement.
Q2) Anyone who presents a check for payment makes certain warranties.Which of the following is NOT one of those warranties?
A)that he or she is a holder
B)that the check has not been altered
C)that the drawee is a solvent institution
D)that all signatures are authentic
Q3) Which of the following is NOT one of the five ways to discharge a negotiable instrument?
A)payment
B)cancellation
C)alteration
D)presentation
Q4) List the warranties a transferor of a negotiable instrument makes.
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Chapter 27: Accountants Liability
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Q1) An auditor suspects its client is committing illegal acts that will have a material impact on its financial statements.What is the auditor legally required to do and under what circumstances would the auditor directly notify the SEC?
Q2) In 2007,the Securities and Exchange Commission (SEC)began to allow foreign companies to use which of the following for its reporting standards?
A)SOX
B)GAAP
C)GAAS
D)IFRS
Q3) The IRS files criminal charges against Rich for evasion of federal taxes.Rich's accountant,Sonya,is summoned to appear in court to testify against Rich.The state where the incident occurred recognizes an accountant-client privilege.Does Sonya have to testify in federal court against her client?
A)Yes.
B)Yes,but only if she is granted immunity by her state.
C)No,the federal court must recognize her state's accountant-client privilege.
D)No,the federal accountant-client privilege will protect her from testifying.
Q4) Under what circumstances are accountants liable to their clients for fraud?
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Page 29
Chapter 28: Agency Law
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Q1) In the case of an undisclosed principal,a third party
A)can only recover from the principal.
B)can only recover from the agent.
C)cannot recover at all.
D)can recover from either the agent or the principal.
Q2) HBR Accounting hired Denise,a CPA,to prepare tax returns.Which statement is correct?
A)Denise is a gratuitous agent and has a duty not to commit gross negligence.
B)Denise is a gratuitous agent and has a duty not to commit ordinary negligence.
C)Denise,as a CPA,is an agent with special skills.She is held to a higher standard than ordinary negligence.
D)Denise,as a CPA,is an agent with special skills.She is held to a lower standard than ordinary negligence.
Q3) If a person accepts the benefits of an unauthorized transaction,or fails to repudiate it,then he is bound by the act as if he had originally authorized it.
A)True
B)False
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Chapter 29: Employment and Labor Law
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Q1) As a general rule,employers have a legal obligation to disclose information about former employees to potential future employers.
A)True
B)False
Q2) Mega Corp.hired permanent replacement workers when its union went out on strike seeking better medical and retirement benefits.After the strike is over,Mega Corp.
A)must give the striking employees their jobs back since this was an economic strike.
B)must give the striking employees their jobs back since this was an unfair labor practices strike.
C)may hire additional workers without considering the striking employees who want their jobs back.
D)does not have to give the striking employees their jobs back since this was an economic strike.
Q3) The Employee Retirement Income Security Act (ERISA)requires employers to establish pension plans for employees.
A)True
B)False
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Chapter 30: Employment Discrimination
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Q1) Alfred has been working for Canyon,Inc.for 12 years,with regular positive performance reviews and promotions.Roger has only been working for Canyon for 3 years.Alfred also has more management qualifications.Yet when a management position is open,Alfred's supervisor advises that Alfred should NOT be promoted to that position.His reason is that he has recently learned that Alfred regularly attends a Narcotics Anonymous support group.Although Alfred has been clean for 16 years,there is fear that he could relapse.What is true?
A)Canyon is allowed to make past drug abuse a barrier to management positions.
B)Although Canyon's behavior is unethical,it is not prohibited.
C)Canyon's behavior is prohibited by the Americans with Disabilities Act.
D)Canyon's behavior is not prohibited by the Americans with Disabilities Act,but it is prohibited by Title VII of the Civil Rights Act.
Q2) Which Supreme Court case had the most influence on the passage of the Civil Rights Act of 1964?
A)Plessy v.Ferguson
B)Brown v.Board of Education
C)Roe v.Wade
D)Griggs v.Duke Power
Q3) Discuss the two categories of sexual harassment.
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Page 32
Chapter 31: Starting a Business: Llcs and Other Options
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Q1) The Federal Trade Commission requires franchisors to
A)give prospective franchisees a franchise disclosure document at least 14 business days prior to the signing of a contract or payment of any money.
B)give prospective franchisees earnings information on the company.
C)disclose any litigation the company has ever been involved in.
D)let prospective franchisees know how many franchisees have gone out of business in the prior five years.
Q2) All the business forms listed below have limited liability EXCEPT the A)limited liability company.
B)general partnership.
C)"S" corporation.
D)corporation.
Q3) Compare and contrast the following forms of business organization as to ease of formation,liability of owners,management,and tax implications: sole proprietorship,general partnership,limited liability company,and corporation.
Q4) Corporations have perpetual existence.
A)True
B)False
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Chapter 32: Partnerships
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Q1) The rules set out in the UPA defining the liability of partners to outsiders can be modified by the partnership agreement.
A)True
B)False
Q2) Ramiro is dissociated from the partnership he helped form ten years ago.If his partners want to continue the business,what must they do? Does it make any difference if the dissociation was wrongful?
Q3) Sandy,Ramon,and Bonnie were partners.Sandy dissociated from the partnership.Bonnie and Ramon decided to continue the business.When Sandy dissociated,there was a $50,000 debt owed to Great State Bank.Which statement is correct?
A)Sandy remains liable on the $50,000 debt owed to Great State Bank.
B)Only Ramon and Bonnie are liable for the $50,000 debt owed to Great State Bank.
C)The debt is extinguished as a result of the dissociation.
D)Whether Sandy remains liable depends on whether she filed a statement of dissociation.
Q4) Identify and briefly discuss the management rights and duties of a partner.
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Chapter 33: Life and Death of a Corporation
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Q1) Who signs the charter and files it with the secretary of state?
A)the incorporator
B)the chairman of the board
C)the promotor
D)the company president
Q2) The lawyer who forms the corporation cannot legally serve as its incorporator.
A)True
B)False
Q3) Fashions,Inc.has 12 shareholders.There is no shareholder agreement concerning the board of directors.The company is subject to the Model Act.How many directors is Fashions,Inc.required to have?
A)none
B)one
C)two
D)five
Q4) When a corporation accepts legal responsibility for a contract,it is called novation.
A)True
B)False
Q5) Discuss how a corporation is terminated.
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Chapter 34: Management Duties
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Q1) A manager who first offers an opportunity to disinterested directors or shareholders who turn it down has the right to take advantage of the opportunity herself.
A)True
B)False
Q2) A manager used her position in the company to develop a new business the company might have pursued on its own.This is a breach of the
A)duty of care.
B)duty of non-competition.
C)duty of loyalty.
D)duty of recognition.
Q3) Major Corporation wants to acquire control of Forte Company.What are some legal steps Forte can take to resist a hostile takeover?
Q4) The Williams Act regulates the conduct of the target company in a takeover situation.
A)True
B)False
Q5) What is the definition of the business judgment rule?
Q6) Discuss the purposes of the business judgment rule.
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Chapter 35: Shareholder Rights
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Q1) Shareholders must begin the litigation process by asking the board of directors to bring suit,an action called
A)proxy access.
B)proper purpose.
C)making demand.
D)benchmarking.
Q2) Matt,a shareholder,can run for director by simply placing his name on the company's proxy statement.
A)True
B)False
Q3) If a public company decides not to solicit proxies for a shareholder meeting,it need not give shareholders the information that would have been required in a proxy statement.
A)True
B)False
Q4) In reality,the officers of the large corporations have a great deal of influence on who will be nominated and elected as directors.
A)True
B)False
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Chapter 36: Bankruptcy
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Q1) Under all chapters of the Bankruptcy Code,most of the debtor's assets are distributed to creditors and the debtor has no obligation to share future earnings with creditors.
A)True
B)False
Q2) Link negligently ran his car into John,causing $50,000 in injuries.Link was intoxicated at the time of the accident.Can Link discharge this debt in bankruptcy?
A)Yes,claims based on negligence are dischargeable.
B)Yes,as long as he didn't intend to hit John's car.
C)No,such claims are not dischargeable in bankruptcy.
D)No,because Link breached a fiduciary duty.
Q3) Individual debtors are allowed to keep some assets in a Chapter 7 bankruptcy.
A)True
B)False
Q4) Chapter 7 bankruptcy is also known as
A)reorganization.
B)reaffirmation.
C)voluntary bankruptcy.
D)straight bankruptcy.
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Page 38
Chapter 37: Securities Regulation
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Q1) A criminal case under the Securities Act of 1933 is prosecuted by A)the SEC.
B)the Justice Department.
C)the Department of the Treasury.
D)the FTC.
Q2) Which of the following is a characteristic of a restricted security?
A)It is purchased in a private offering.
B)It cannot be sold at any time.
C)It is subject to reporting requirements.
D)After six months,it is classified as a control security.
Q3) Which of the following represents a valid Regulation A Tier 1 offering?
A)selling $3 million of securities in any 12-month period with a $250,000 individual investor limit
B)selling $10 million in securities in any 12-month period;investors can't buy more than 10% of their annual income or net worth
C)selling $20 million of securities in any 12-month period with no individual investor limit
D)selling $20 million in securities in any 12-month period;investors can't buy more than 5% of their annual income or net worth
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Chapter 38: Antitrust
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Q1) Both per se and rule of reason violations of the Sherman Act are automatically illegal.
A)True
B)False
Q2) Exclusive dealing contracts,if they have an anticompetitive effect,are illegal under the
A)Sherman Act only.
B)Clayton Act only,
C)Sherman Act and Clayton Act.
D)Sherman Act,Clayton Act,and Robinson-Patman Act.
Q3) Under which circumstance is it legal to charge a lower price to a particular buyer?
A)if the items are the same
B)if the price discrimination lessens competition
C)if the costs of serving that particular buyer are lower
D)All of these are correct.
Q4) Both the Justice Department and the Federal Trade Commission have the authority to enforce antitrust laws.
A)True
B)False
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Page 40
Chapter 39: Consumer Protection
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Q1) A door-to-door salesperson knocks on Mary's door and convinces her to purchase the Wonder Vacuum for $500.Soon after the salesperson leaves,Mary begins to have second thoughts about the transaction.Which statement about the situation is correct?
A)Mary agreed to purchase the vacuum,so she must honor the agreement.
B)Mary can cancel the transaction at any time before midnight of the third business day thereafter.
C)Mary must pay for the vacuum,but she can get a refund if she returns it to the manufacturer within 30 days.
D)Mary can keep the vacuum without paying when it is delivered,as it was purchased in her home.
Q2) The FTC may consider an act unfair if it simply violates public policy.
A)True
B)False
Q3) The Magnuson-Moss Warranty Act requires manufacturers to provide a warranty on their products regardless of cost.
A)True
B)False
Q4) What must a seller disclose under the Magnuson-Moss Warranty Act?
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Chapter 40: Environmental Law
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Questions
Q1) Fresh Air,a nonprofit environmental organization,believes that Cincy Co.is violating the Clean Air Act.The EPA has not taken any action against Cincy Co.In this instance,Fresh Air
A)can file a citizen suit against the EPA.
B)can file an executive order with Cincy Co.
C)cannot file a lawsuit but can ask an administrative law judge to hear its complaint.
D)cannot file a lawsuit but can lobby Congress to force the EPA to act.
Q2) Discuss the major provisions of the Clean Air Act.
Q3) Sam,the chief executive officer of Boch Industries,was prosecuted for violating the Resource Conservation and Recovery Act.Which of the following is correct concerning the penalties?
A)Sam cannot be criminally prosecuted for violating this statute.
B)Sam faces criminal fines as well as imprisonment.
C)Sam faces only criminal fines.
D)The only penalty Sam faces is an injunction to prevent further violations.
Q4) A person who violates the Clean Water Act can face possible imprisonment in addition to other penalties.
A)True
B)False
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Chapter 41: Intellectual Property
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Q1) A patent is available for an idea as well as a tangible application.
A)True
B)False
Q2) The name "Johnson Garage Doors" cannot be a trademark because a surname is already being used and other people have the right to continue to use the name.
A)True
B)False
Q3) A design patent protects the appearance of an item and is valid for 14 years.
A)True
B)False
Q4) The Trademark Law Treaty made it more difficult to apply for trademarks around the world.
A)True
B)False
Q5) A copyright is valid for 28 years after it is obtained and can be renewed for another 28 years.
A)True
B)False
Q6) Identify the main provisions of the Digital Millennium Copyright Act.
Page 43
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Chapter 42: Real Property and Landlord Tenant Law
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Q1) The landlord's first important duty to a tenant is to
A)deliver possession.
B)maintain premises.
C)pay the security deposit.
D)provide eminent domain.
Q2) Professor McDonald owns the following property.Which of these is NOT real property?
A)Professor McDonald's restored Victorian-era house
B)the grove of peach trees on Professor McDonald's property
C)custom-made bookshelves fitted into the library of Professor McDonald's home
D)the books that line Professor McDonald's bookshelves
Q3) Tom rented an apartment from Margaret on a month-to-month basis,with rent due on the first of the month.This type of tenancy is known as a "tenancy at will."
A)True
B)False
Q4) If you grant a nonpossessory interest to Eagle Logging to enter your land and remove timber from ten acres,you have granted Eagle a profit.
A)True
B)False
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Page 44
Chapter 43: Personal Property and Bailment
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Q1) Ali took a seat at a booth at Midway Diner.Between the salt and pepper shakers,Ali noticed something glittering.It was a diamond ring.The ring is
A)abandoned property.
B)an accession.
C)mislaid property.
D)treasure trove.
Q2) Ed wants to give Howard his old car,but Howard says he doesn't want it.Howard later reconsiders and tells Ed he does want the car.His previous repudiation means there is no gift,and Howard has no rights in the car.
A)True
B)False
Q3) Bruce tells his son,"You can have my 1990 truck,but if your grades fall,I'm taking it back." Bruce
A)has made no gift.
B)has made a "revocable gift," which is effective as a gift as long as the stated condition is met.
C)intended to transfer ownership.
D)has made a constructive gift.
Q4) Distinguish between a contract and a gift.Give an example of each.
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Chapter 44: Planning for the Future: Wills, Trusts and Insurance
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Q1) Insurance policies often contain a covenant of good faith and fair dealing.Even if the clause is not in the policy,often courts will imply it.Explain the covenant of good faith and fair dealing and provide an example illustrating when an insurance company might breach this covenant.
Q2) Which of the following does NOTÂ act as a revocation of a will?
A)creating a codicil
B)the testator putting an X through it
C)physically destroying the will by intentionally shredding it
D)signing a new will that expressly revokes prior wills
Q3) The percentage of a decedent's estate that a spouse can claim is called a forced share.
A)True
B)False
Q4) Which type of automobile insurance covers the cost of damage caused by fire,theft,or vandalism?
A)liability insurance
B)comprehensive insurance
C)collision insurance
D)uninsured motorist insurance
Q5) Discuss the differences between a will and a trust.
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