Legal Aspects of Business Practice Questions
Course Introduction
Legal Aspects of Business introduces students to the fundamental legal principles and frameworks that govern commercial activities. The course covers key topics such as contract law, company law, intellectual property rights, employment law, consumer protection, and dispute resolution mechanisms. By examining real-world case studies and statutory guidelines, students gain an understanding of how legal considerations impact business decisions and operations. The course equips future managers and entrepreneurs with the knowledge to navigate legal risks, ensure compliance, and make informed decisions that align with the regulatory environment of modern business.
Recommended Textbook
The Legal and Regulatory Environment of Business 16th Edition by O. Lee Reed
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Page 2
Chapter 1: Law As a Foundation for Business
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Sample Questions
Q1) Judicial decisions, called _____ laws, apply to a legal problem and interpret the relevant constitutional, legislative, and regulatory laws.
A) case
B) procedural
C) ordinance
D) commercial
E) code
Answer: A
Q2) The City of Dover has passed a written law banning smoking in most restaurants and bars. Dover has enacted a/an:
A) statute.
B) act.
C) regulation.
D) ordinance.
E) jurisprudence.
Answer: D
Q3) Define a corporation?
Answer: A corporation is a business chartered by the state to do business as a legal person in a certain form of organization.
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Page 3
Chapter 2: The Role of Ethics in Decision Making
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Sample Questions
Q1) The values-based management approach to business ethics illustrates consequentialism through its emphasis on:
A) teaching ethical values to management and supervisory personnel that enhances the profitability of the company.
B) teaching ethical values to all employees that enhance the profitability of the company.
C) teaching ethical values to management and supervisory personnel with the aim of avoiding ethical issues whether profitability is affected or not.
D) teaching ethical values to all employees with the aim of avoiding ethical issues whether profitability is affected or not.
E) teaching ethical values to employees in order to punish them for unethical conduct. Answer: B
Q2) Of the world's 100 largest economies, 49 of them are countries and 51 are companies.
A)True
B)False Answer: True
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Chapter 3: The Court System
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Sample Questions
Q1) Proponents of judicial restraint do not view the role of attorneys and the practice of law as that of social reform.
A)True
B)False
Answer: True
Q2) A request for a second review is, in some states, called a writ of:
A) certiorari.
B) attachment.
C) possession.
D) replevin.
E) mandamus.
Answer: A
Q3) The terms judicial restraint and judicial activism are not exclusive to particular judges and many may share aspects of both in their judicial philosophy.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Litigation
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Sample Questions
Q1) Courts of appeal require the parties to file a document containing a description of the case and its facts and the research benefiting their client's issues. This document is called a _____.
A) decree
B) res judicata
C) brief
D) pleading
E) extradition
Q2) Describe the standard and three criteria that allow the typical long-arm statute to allow jurisdiction over a non-resident defendant?
Q3) The process of requesting and transporting the prisoner from one state to another is called _____.
A) res judicata
B) garnishment
C) execution
D) personal jurisdiction
E) extradition
Q4) When might a third-party defendant be necessary in a trial, and what purpose dies this type of parry serve?
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Chapter 5: Alternative Dispute Resolution
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Sample Questions
Q1) In most state statutes authorizing voluntary arbitration, the agreement to submit to arbitration may be written or oral.
A)True
B)False
Q2) _____ occurs when a trial judge requires the disputing parties to submit to the mediation process before a complaint can be litigated formally.
A) Restorative justice
B) Party-directed mediation
C) Precursor mediation
D) A caucus
E) Court-annexed mediation
Q3) Juries often decide close questions of liability, as well as size of the verdict, against business organizations.
A)True
B)False
Q4) What is a caucus? How is it used in mediation?
Q5) The arbitrator should be disinterested in any financial impact of the decision.
A)True
B)False
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Chapter 6: The Constitution
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Sample Questions
Q1) The public interests served by freedom of expression protect the listener but not the speaker.
A)True
B)False
Q2) Quasi-scrutiny tests are made on cases involving classifications based on _____.
A) gender
B) age
C) race
D) national origin
E) height
Q3) Due process means that government may not act in a manner that is arbitrary, capricious, or unreasonable.
A)True
B)False
Q4) Explain the aspects of the freedom of the press.
Q5) The first ten amendments are known as the Bill of Rights.
A)True
B)False
Q6) List some of the cases that have applied the equal protection clause.
Q7) Explain the four important aspects of amendments and basic protections.
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Chapter 7: The Property System
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Sample Questions
Q1) Through the government's power of eminent domain, it can take private property for "public use," upon the payment of "just compensation."
A)True
B)False
Q2) Name two items on an average university campus that would be classified as personal property and two items classified as fixtures. Fully explain why each item is so classified.
Q3) Stephen, a private individual, intends to bring a public nuisance claim against a textiles plant because its runoff is destroying the natural habitat of the local river's beaver population. Which of the following will permit Stephen to bring a valid claim?
A) Stephen is the leading aquatic biodiversity scientist in the state.
B) Stephen traps the beavers for a living.
C) The state owns the textile plant.
D) The runoff has also caused substantial damage to Stephen's property.
E) The governor owns the textiles plant.
Q4) What steps must be taken for a security interest to attach?
Q5) What property right is granted by a landlord to a tenant, and what are the three ways in which the duration of the grant is qualified?
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Chapter 8: Contract Formation
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Sample Questions
Q1) Fixman Ltd. agrees to renovate Juan's house for $20,000. During the renovation, Fixman demands an additional $5,000 to complete the work, which Juan agrees. Fixman can sue Juan, if Juan fails to pay the additional amount.
A)True
B)False
Q2) Explain the mailbox rule.
Q3) Contract law enables private agreements to be legally enforceable.
A)True
B)False
Q4) Sam goes to a supermarket and fills his cart with food items, pushing it up to a checkout line. Discuss the type of contract Sam and the supermarket have.
Q5) Sarrah agrees to sell her house to Tiffany for $300,000. Tiffany replies that she will be glad to buy the house at $300,000, and asked if the price included the furniture. Sarrah replied that the furniture was not included. Tiffany agreed to pay $300,000, but Sarrah demanded $350,000, stating that Tiffany's counteroffer terminated the earlier offer. Discuss the case.
Q6) What is a covenant not to compete and under what conditions are they valid?
Q7) What are the five essential elements of a valid contract?
Page 10
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Chapter 9: Contractual Performance and Breach
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Sample Questions
Q1) Shareholders of corporations and members of LLCs are protected from tort liability that exceeds the amount of their investment.
A)True
B)False
Q2) _____ occurs when a principal voluntarily decides to honor an agreement, which otherwise would not be binding due to an agent's lack of authority.
A) Novation
B) Ratification
C) Negotiation
D) Release
E) Waiver
Q3) When parties fail to provide details, the law states the buyer's payment is a condition that must be satisfied after the seller has performed his/her duty to deliver.
A)True
B)False
Q4) Material breach represents a less-than-complete performance.
A)True
B)False
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Chapter 10: Torts Affecting Business
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Sample Questions
Q1) In a fit of a store manager hits a customer with a wrench. Discuss the suit the customer can file against the store manager.
Q2) Which of the following is true of comparative negligence?
A) It completely bars the plaintiff from recovering any damages.
B) It allows the plaintiff and the defendant to settle the dispute through arbitration.
C) It allows the plaintiff to claim only putive damages but not actual damages.
D) It allows the plaintiff to claim damages only if a proximate causation is established. E) It compares the plaintiff's and the defendant's fault and reduces the damage award proportionally.
Q3) John rents a movie from Video Rental Co. but instead of returning it he lends it to Sam in whose care the movie is destroyed. What tort did John commit?
A) Conversion
B) Theft
C) Battery
D) Trespass
E) Invasion of privacy
Q4) Name and explain the two affirmative defenses to a negligence claim.
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Chapter 11: Intellectual Property
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Sample Questions
Q1) Civil violation of a trademark or a patent is termed _____.
A) breach
B) infringement
C) repudiation
D) copy
E) intellectual theft
Q2) Which of the following acts protect a "famous" trademark, even if the owner is unable to prove that the public is confused by another's use of a similar mark, and provides the owner with the infringer's profits, and actual damages?
A) Lanham Act
B) Consumer Protection Act
C) Patent Act
D) Intellectual Property Act
E) Trademark Dilution Act
Q3) Monster.com, a job search website, is an example of a collective mark.
A)True
B)False
Q4) Trade dress refers to a color or shape associated with a product or service.
A)True
B)False
Page 13
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Chapter 12: International Law
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Sample Questions
Q1) What is the purpose and application of the Alien Torts Claims Act and how is it applied?
Q2) Parties can use arbitration to avoid the unwanted publicity that often results in open court proceedings.
A)True
B)False
Q3) Discuss the concept of a joint venture.
Q4) The U.S. Export Control and Related Border Security Assistance Program, in order to control the export of technology flowing into dangerous hands, has issued three "red flags" that exporters should be aware of. Identify and discuss these "red flags".
Q5) The World Intellectual Property Organization (WIPO) Arbitration and Mediation Center hears cases involving domain name disputes and cyber-squatting.
A)True
B)False
Q6) A licensing agreement allows an international business to enter a foreign market without any direct foreign investment.
A)True
B)False
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Chapter 13: Criminal Law and Business
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Sample Questions
Q1) Discuss good faith as a defense to accusations of fraud.
Q2) What are the remedies for RICO violations?
Q3) The classification of crime is based on:
A) location.
B) prior record.
C) punishment imposed if convicted.
D) the judge's prerogative.
E) the jury's indictment.
Q4) Grand juries have subpoena powers.
A)True
B)False
Q5) _____ must be obtained by the police prior to a search of a person, any premises, or other property such as the trunk of an automobile.
A) Evidence authorizations
B) Seizure orders
C) Charging orders
D) Court-authorizations
E) Search warrants
Q6) What are sentencing guidelines? Discuss their use in sentencing convicts today.
Q7) What are accessories before a crime and accessories after a fact?
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Chapter 14: Business Organizations
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Sample Questions
Q1) Which of the following is true about publicly held business organizations?
A) These organizations are owned only by a few persons.
B) Decisions regarding selection of appropriate organizational forms are usually limited to these organizations.
C) Shareholders of such organizations can transfer their ownership without interfering with the organization's management.
D) A family-operated business is a classic example of a publicly held business organization.
E) The status of a shareholder in these organizations limits their liability for torts and shareholders mostly forgo their limited liability for cosigning contracts.
Q2) Which of the following is a basic form of business organization?
A) LLC
B) Limited partnership
C) LLP
D) Sole proprietorship
E) S corporation
Q3) Explain the possible organizational form that occurs when two or more people wish to own a business together.
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Chapter 15: The Regulatory Process
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Sample Questions
Q1) Administrative agencies are needed to provide specificity to:
A) refer a problem or area to experts for solution and management.
B) protect the public, especially from the business community.
C) replace competition with regulation.
D) develop detailed rules and regulations to carry out a legislative policy.
E) provide services, having been arisen out of necessity.
Q2) Cost of paperwork contributes the least to the additional costs to the business community.
A)True
B)False
Q3) Regulation decreases the cost of government.
A)True
B)False
Q4) Regulation is a form of taxation. Explain.
Q5) Group of persons with standing to sue includes those who have noneconomic interests.
A)True
B)False
Q6) Is delegation of a rule made by an administrative agency valid?
Q7) How is federal preemption a dual regulation of commerce?
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Chapter 16: Regulating Competition_Antitrust Laws
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Sample Questions
Q1) The _____ to the Clayton Act prohibits all acquisitions in which the effect lessened competition substantially in any line of commerce in any section of the country.
A) Bricker amendment
B) Tyler precedent
C) Wheeler-Lea amendment
D) Robinson-Patman amendment
E) Celler-Kefauver amendment
Q2) In 1914, Congress, recognizing that the Sherman Act needed to be more specific, enacted the _____ as an amendment to the Sherman Act.
A) Clayton Act
B) Fair Credit Billing Act
C) Securities Act
D) Truth in Lending Act
E) Robinson-Patman Act
Q3) The Sherman Act regulates monopolies after they are formed, but does not regulate mere attempts to monopolize.
A)True
B)False
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Chapter 17: Financial and Securities Regulations
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Sample Questions
Q1) Restatements of financial reports have risen in number as a result of Sarbanes-Oxley because companies have made efforts to maintain appropriate compliance with the law.
A)True
B)False
Q2) What must an expert prove to successfully present the defense of due diligence?
Q3) The law prohibits the sale of worthless securities.
A)True
B)False
Q4) The Security Act of 1933 requires the preparation and distribution to potential investors of the:
A) registration statement only.
B) registration statement and prospectus.
C) prospectus and licensing agreement.
D) registration statement, prospectus, and licensing agreement.
E) licensing agreement.
Q5) What are tombstone ads and when do they occur?
Q6) What are the common issues regarding litigation under Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934?
Q7) What does Section 12 of the Securities Act of 1933 deal with?
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Chapter 18: Privacy and Consumer Protection
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Sample Questions
Q1) Which parties relevant to a delinquent debt collection will be regulated, and which will not be regulated, under the Fair Debt Collection Practices Act (FDCPA)?
Q2) What is the purpose of the Privacy Act of 1974?
Q3) Big Prime is a major lender licensed to lend only in Delaware. Big Prime finds that customers in Sussex County perform far below customers in the other counties. Assume that the county which is heavily into farming and low-paying industrial jobs is 25 percent African-American and has a 40 percent population of legal and illegal immigrants. Big Prime finds that while it is profitable overall, it is losing money on the Sussex County loans. Further research reveals that Sussex County is one of the poorest-performing customer bases nationwide and most companies doing business there are losing money. The board of directors decides not to make any more loans in Sussex County. Big Prime is violating provisions of the:
A) Federal Trade Commission.
B) Fair Credit Reporting Act.
C) Truth-in-Lending Act.
D) Fair Debt Collection Practices Act.
E) Equal Credit Opportunity Act.
Q4) Explain the concept of corrective advertising.
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Page 20
Chapter 19: Environmental Regulation and Resource Sustainability
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Sample Questions
Q1) Banks that hold a mortgage on land that turns out to have a toxic waste site subject to the Superfund rules are not liable for the cleanup.
A)True
B)False
Q2) Tort law attacks the pollution problem using the established theories of:
A) nuisance and trespass.
B) negligence and strict liability.
C) nuisance, trespass, and strict liability.
D) trespass, negligence, and nuisance.
E) nuisance, negligence, trespass, and strict liability.
Q3) A private citizen can:
A) report violations of environmental law to the EPA, but cannot act directly.
B) sue polluters through governmental agencies to enforce compliance with environment law.
C) sue public agencies, like EPA, to force the adoption of regulations.
D) sue businesses, but not the government, to enforce rules under environmental statutes like the Clean Air Act and the Clean Water Act.
E) resort to intimidatory tactics against polluting industries.
Q4) What is the technology-forcing aspect of the Clean Air Act?
Page 21
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Chapter 20: Discrimination in Employment
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Sample Questions
Q1) Jessica Hopkins is the marketing manager of a firm. She has a stellar employment record with the firm. Jessica has won very large contracts for the firm and also is at the top of the list for billable hours. In addition, she has impeccable integrity and is considered to be one of the most intelligent members of the firm. The committee responsible for promotions felt that Jessica was not ladylike enough. Jessica was told that in order to be promoted, she needed to "dress more femininely, wear makeup, have her hair styled, and wear jewelry." Can Jessica sue the firm?
Q2) If the employer stops a pregnant employee from working because the employer truly believes that it is in the best interests of the mother and baby, the employer has not violated the Pregnancy Discrimination Act even if the employee is capable and willing to continue working.
A)True
B)False
Q3) The business necessity defense is a defense to suits:
A) alleging disparate treatment.
B) alleging disparate impact.
C) regarding the ADA.
D) arising from HIPAA.
E) arising from GINA.
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Page 22
Chapter 21: Employment Laws
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Sample Questions
Q1) What are the rewards received by the whistleblower as part of the IRS Whistleblowers Rewards Program?
Q2) The FLSA requires employers to provide reasonable break time for nursing mothers. A)True B)False
Q3) Pat Whatmore worked as manager at National Banks. One morning, a National branch received a telephone call from Whatmore, who claimed that he had been forced at gunpoint to help rob the bank. Later that same day, National Banks' regional security manager requested Whatmore to take a polygraph examination in order to eliminate his name from the list of suspects. Whatmore refused and sued the bank for the breach of privacy. Is the bank justified in asking Whatmore to take a polygraph test?
Q4) A WARN notice is mandatory for a case that relates to the sale of a business. A)True B)False
Q5) The U.S. Citizen and Immigration Services broadly categorizes document abuse into four categories. List the categories.
Q6) When may public employees be drug tested?
Q7) What are the provisions of the IRS Whistleblowers Rewards Program?
Page 23
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Chapter 22: Labor-Management Relationship
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Sample Questions
Q1) ColdBev is a California corporation engaged in the production, bottling, and distribution of beverages. In March 1949 it entered into a collective bargaining agreement concerning the wages, hours, and working conditions of its nonsupervisory employees with the United Employees' Association. Beginning in June 1949 the union engaged in activities designed to compel the company to recognize the union as the exclusive bargaining representatives of the company's employees. To enforce their demand for recognition, the union began peaceful picketing of retail stores which sold the plaintiff's products. Picket signs announced that the company's products were made by workers who were not members of the United Employees' Association. What are the activities indulged in by the United Employees' Association termed as? Are the activities legal?
Q2) The NLRB is empowered to take corrective action and award dollar damages to unions and employees.
A)True
B)False
Q3) Under what conditions is picketing to force an employer to recognize an uncertified union an unfair labor practice?
Q4) Name the issues that are classified as compulsory bargaining issues in union negotiations?
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