Legal Aspects of Business Pre-Test
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Course Introduction
Legal Aspects of Business introduces students to the fundamental legal principles and frameworks that govern commercial activities. The course covers essential topics such as contract law, agency, partnership, company law, intellectual property rights, consumer protection, and employment laws. Through real-world case studies and practical examples, students gain an understanding of how legal rules impact business decision-making, risk management, and corporate ethics. By the end of the course, learners will be equipped to identify legal issues in business scenarios and appreciate the regulatory environment in which businesses operate.
Recommended Textbook Business Law and the Legal Environment Standard Edition 6th Edition by Jeffrey F.
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Beatty
Chapter 1: Introduction To Law
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Q1) Hasbro,Inc.,the trademark owner of "Candy Land," sought a court injunction to stop Internet Entertainment Group,LTD from using the domain name,"candyland.com."
Internet Entertainment Group had established a sexually explicit site at the domain name.This injunction would have to be issued by:
A) a jury.
B) a judge exercising equitable powers.
C) an executive order.
D) a subpoena.
Answer: B
Q2) Explain the origins of equity and its place in contemporary American law.
Answer: Historically,in England,judges would at times refuse to hear a case,ruling that there was no legal basis for the claim.The injured party might then take the case to the Chancellor,whose status in the king's council gave him unique,flexible powers.The Chancellor was to accomplish what "good conscience" required,or what was fair and equitable.Today,judges in the United States still exercise equity powers.Only a judge can exercise equitable powers because,historically,there was no jury involved in the Chancery court.An injunction is an example of an equitable remedy.
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Page 3
Chapter 2: Business Ethics And Social Responsibility
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Q1) Utilitarian ethics holds that decisions should be made on the basis of practicality,and whatever action is most convenient should be favored.
A)True
B)False
Answer: False
Q2) Ethics is the study of how people should act.
A)True
B)False
Answer: True
Q3) Ethics is the study of:
A) sovereign immunity.
B) how people should act.
C) respondeat superior.
D) victimization.
Answer: B
Q4) Unethical behavior is a bar to financial success.
A)True
B)False
Answer: False
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Chapter 3: Dispute Resolution
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Q1) An inmate in a state prison claims his United States constitutional rights prohibiting cruel and unusual punishment are being violated by the state correctional facility.This case:
A) may not be decided by a federal court since it involves a state facility.
B) must be decided by the state court where the inmate established residency before going to prison.
C) is a federal question case over which the federal courts have jurisdiction.
D) cannot be heard, as prisoners lose the right to sue.
Answer: C
Q2) Generally,mandatory arbitration provisions in a contract are valid.
A)True
B)False
Answer: True
Q3) An appeals court can rule that a trial court's ultimate ruling was correct even if the trial court made some minor errors during the trial.
A)True
B)False
Answer: True
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Chapter 4: Common Law,Statutory Law,And Administrative Law
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Q1) The Civil Rights Act of 1964,a federal statute,forbids discrimination on the basis of national origin in employment.The Equal Employment Opportunity Commission (EEOC)is the administrative agency that oversees the law.The EEOC issued Guidelines on Discrimination because of National Origin.According to one of the guidelines,the EEOC will presume a violation of the law if an employer sets a work requirement that employees must speak only English in the workplace.This is an interpretive rule because it interprets the Civil Rights Act.
A)True
B)False
Q2) The Environmental Protection Agency was investigating whether Exgrow,Inc.violated the Clean Air Act.Exgrow refused to give the EPA its computerized reports concerning pollution.To get the reports,EPA should use:
A) a stare decisis.
B) a de novo.
C) an excaliber.
D) a subpoena duces tecum.
Q3) Define the common law.Discuss its conflicting goals and the doctrine created to serve one of these goals.
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Chapter 5: Constitutional Law
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Q1) Ikerd was entering the United States from a trip abroad when the Customs Service confiscated some goods she had purchased and brought back with her.The determination of whether the government is attempting to take property and what type of hearing the Customs Service must offer Ikerd,is an analysis of:
A) substantive due process.
B) procedural due process.
C) the Takings Clause.
D) eminent domain.
Q2) Congress passed the federal OSHA establishing job safety standards.Illinois passed its own statute,which had slightly more lenient standards.Illinois workers are only held to the state standards unless they are involved in interstate commerce.
A)True
B)False
Q3) The "takings clause" prevents the government from taking private property for any reason.
A)True
B)False
Q4) Discuss the Miller test to determine if a creative work is obscene.
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Chapter 6: Intentional Torts And Business Torts
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Q1) In an advertisement,FreshAir,Inc.stated that its air freshener lasted for 3 hours while the competitor,Smell Sweet,lasted for only 36 minutes.In fact,Smell Sweet freshens the air for more than 2 hours.FreshAir has not violated the Lanham Act because the First Amendment's guarantee of freedom of speech applies.
A)True
B)False
Q2) Trein,Inc.entered into a one-year,$1 million contract with Mia,a sports celebrity,to promote Trein's products.E-presto Inc.,a competitor of Trein,was interested in having Mia promote its products and knew of her contract with Trein.E-presto offered Mia a three-year,$5 million contract.Mia left Trein and signed with E-presto.Which statement is correct?
A) Trein is liable for tortious interference with a contract.
B) Mia is liable for tortious interference with a contract.
C) E-presto is liable for tortious interference with a contract.
D) Both Mia and E-presto are liable for tortious interference with a contract.
Q3) The First Amendment guarantee of freedom of speech is an absolute right.
A)True
B)False
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8
Chapter 7: Negligence And Strict Liability
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Q1) Kyle was eating clam chowder soup in a restaurant when a very small piece of bone lodged in his throat.Fortunately,he was able to remove the bone with his fingers.However,he was upset by the incident and sued the restaurant for negligence.The most likely result would be:
A) Kyle will not collect any damages since he did not sustain any damages.
B) Kyle will collect damages as bones in chowder are common.
C) Kyle will collect damages if he proves it was possible to prevent tiny fish bones from being present in clam chowder.
D) Kyle will collect damages, as res ipsa loquitur applies.
Q2) Which of the following acts resulting in injury would be negligence per se?
A) Janet driving 40 mph over the posted speed limit.
B) Ted keeping explosives in his private, locked garage without complying with state law regulating the storage of such materials.
C) A retailer selling glue containing benzene to a 14-year-old boy in violation of state law.
D) All the above acts are negligence per se.
Q3) The doctrine of contributory negligence is followed in most states.
A)True
B)False
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Page 9
Chapter 8: Crime
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Q1) Tina is an undercover police officer.One evening she is posing as a prostitute in a bar.Larry,a salesman who is attending an out-of-state convention,begins talking with Tina.After about ten minutes,Tina suggests going to her room for a good time but points out he will need to "donate" $100 to her.Arriving at Tina's hotel room,Larry asks if she is a policewoman.Tina lies and says she is not.When Larry gives her $100,Tina shows him her identification and arrests him.
A) Larry appears to have been the victim of entrapment since Tina lied about being a police officer.
B) Larry appears to have been the victim of entrapment since Tina was the one who suggested the activity that resulted in Larry's arrest.
C) Both of the above are correct.
D) None of the above is correct.
Q2) Congress revised and reauthorized the Patriot Act,but the secret national security letter provisions were later limited by a federal appeals court.
A)True
B)False
Q3) List and discuss the protections afforded criminal defendants by the Bill of Rights.
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Page 10
Chapter 9: International Law
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Q1) What is a major argument against the GATT Treaty?
A) The United States will have to compete against countries with unlimited pools of exploited labor.
B) The United States will lose millions of jobs involving low-end employment and these types of workers are least capable of finding other employment.
C) Both a and b above are major arguments against GATT.
D) Neither a nor b above is a major argument against GATT.
Q2) International comity holds that the courts of one nation lack the jurisdiction to hear suits against foreign governments.
A)True
B)False
Q3) The primary antitrust law in the United States is the:
A) Wagner Act.
B) Sherman Act.
C) SEC Act of 1933.
D) Robinson-Patman Act.
Q4) The United States is the world's largest exporter of agricultural products.
A)True
B)False
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Chapter 10: Introduction To Contracts
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Q1) When Myrtle comes home from work one evening,she finds that her yard has been mowed and trimmed.Later,a man comes to collect for the yard work done.Myrtle refuses to pay for the work since she has never seen the man before and did not hire him to do her yard work.Which of the following answers is most accurate?
A) This is an implied, unilateral contract and she must pay the price requested by the man.
B) This is an express, voidable contract that either party may avoid.
C) The court would order Myrtle to pay the reasonable value of the yard work because of the benefit conferred on her.
D) Myrtle would not have to pay for the yard work.
Q2) Robert,a minor,buys a stereo from Jane for $200.State law allows a minor to disaffirm contracts within a reasonable time after turning 18.Robert disaffirms the contract the day after turning 18 and returns the stereo.
A) This contract was a valid contract, Robert cannot disaffirm.
B) This contract was a voidable contract, Robert can disaffirm.
C) This contract was a void contract.
D) This contract was unenforceable because it needed to be in writing to be enforceable.
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Page 12
Chapter 11: Agreement
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Q1) Regency Construction placed an order for two hundred 2 x 4s from Lumber Jack.If the place of delivery and time for shipping the goods are not specified,the UCC provides:
A) the place of delivery is Lumber Jack's and the time for delivering the lumber is a reasonable time based on normal trade practice.
B) the place of delivery is Regency Construction and the time for shipping is within 30 days.
C) the place of delivery is Lumber Jack's and the time for delivering the lumber is within 30 days.
D) there is no contract because having more than one open term made the offer too indefinite.
Q2) Revocation is the withdrawal of an offer by the offeror.
A)True
B)False
Q3) If the offer does not specify a type of acceptance,the offeree may accept in any reasonable manner and medium.
A)True
B)False
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Chapter 12: Consideration
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Q1) Jamie is building a house on her lot.She invites Earnie of Earnie's Excavation to bid on the excavation job.Earnie observes that the lot next to Jamie's is also under excavation and the soil in that lot is normal and not excessively rocky.Based on the assumption that the soil in Jamie's lot will be similar,he and Jamie agree that the excavation will cost $3,000.When Earnie starts digging,he learns there is solid rock under Jamie's lot.Earnie says it will cost an extra $2,500 for the excavation work.Jamie agrees just to get the job done but later refuses to pay a dime more than $3,000.If Earnie sues,the most likely result would be:
A) Jamie wins, as Earnie was under a preexisting duty to dig the basement.
B) Earnie wins as this modification is governed by the UCC and consideration is not required to enforce a modification of the agreement.
C) Jamie wins as Earnie was not acting in good faith and just wanted to put Jamie in a situation where she didn't have a choice but to agree to more money.
D) Earnie wins, as the modification was due to unforeseen difficulties.
Q2) Agreeing not to open a competing business could be consideration.
A)True
B)False
Q3) What two exceptions did the UCC create for accord and satisfaction check cases?
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Chapter 13: Legality
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Q1) Cynthia and Brian were friends.Brian was a dare devil.Because of his antics,Cynthia thought that Brian wasn't long for this life.Cynthia purchased a life insurance policy on Brian's life.Subsequently,Brian was killed in a car accident.Since Cynthia and Brian were friends,Cynthia had an insurable interest in his life and will be entitled to the insurance proceeds.
A)True
B)False
Q2) The Tavern's secret recipe for its pizza sauce would be considered:
A) a trade secret, and an employment noncompete clause would be enforceable to protect it.
B) a trade secret, and an employment noncompete clause would NOT be enforceable to protect it.
C) just a secret recipe and not something the Tavern could protect in a noncompete clause.
D) an exculpatory clause and not enforceable.
Q3) Public policy means the law that comes from the:
A) state legislature.
B) executive branch of the government.
C) courts that decide what would have a negative impact on society.
D) Constitution.
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Chapter 14: Capacity And Consent
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Q1) An example of the type of relationship required to find undue influence would be:
A) a salesperson-purchaser relationship.
B) a bartender-customer relationship.
C) a doctor-patient relationship.
D) a neighbor-neighbor relationship.
Q2) Jeff was a subcontractor,bidding on a contract for ACE Corp.,the general contractor.When adding up the total of materials and labor,Jeff's secretary mistakenly moved the decimal point one place,ending up with a bid of $3500 rather than $35,000.ACE Corp.accepted Jeff's bid,mostly because all the other bids were over $30,000.When Jeff learned of the mistake,he tells ACE Corp.that he cannot do the job for $3500.If ACE Corp.sues to enforce this contract,what is the most likely result?
A) The contract is enforceable, since there was an offer, acceptance, and consideration.
B) This is a bilateral mistake, so the contract can be rescinded by either party.
C) This is a unilateral mistake, so the contract cannot be rescinded by Jeff.
D) This is a unilateral mistake, but one where ACE Corp. knew that a mistake had been made. Jeff should be able to rescind the contract.
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Chapter 15: Written Contracts
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Q1) The original statute of frauds is the English law that began the practice of requiring written evidence of certain kinds of contracts,but now the British government has repealed the writing requirement for most contracts.
A)True
B)False
Q2) Patrick owned an acre of land which was being divided into building lots.Nancy was interested in purchasing the corner lot.In a signed writing,Patrick stated "I will sell Nancy Grimes a lot on Route 70 for $5,500 cash,payable on April 30,2012." This writing is sufficient under the statute of frauds to make the contract enforceable.
A)True
B)False
Q3) In order to satisfy the statute of frauds,a writing must:
A) be a formal written document drafted by an attorney.
B) be signed by the defendant and contain the name of each party, the subject matter of the agreement, and the essential terms and promises.
C) be notarized.
D) All of the above.
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Chapter 16: Third Parties
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Q1) Linda assigns to Ben a right to receive rent payments.The law implies the following warranty on Linda's part:
A) the tenant is solvent.
B) Linda actually has a right to the rental payments.
C) the tenant will actually pay.
D) No warranties are implied by law in an assignment.
Q2) An assignment is effective from the moment it is made,regardless of whether the assignor notifies the obligor.
A)True
B)False
Q3) Claims for personal injury are generally assignable.
A)True
B)False
Q4) Robert hired James,a CPA,to prepare his tax returns.James was too busy and delegated the work to Sara,also a CPA.This delegation is:
A) enforceable, as Sara is also a CPA.
B) enforceable, as there was no expectation James would do the work.
C) not enforceable, as Robert hired James to perform personal services.
D) not enforceable, as this violates public policy.
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Chapter 17: Performance And Discharge
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Q1) If a condition does not occur:
A) public policy will require only substantial performance by the party for whom the condition failed.
B) the requirement of good faith will be eliminated.
C) one party will probably be discharged without performance being required.
D) it is considered an anticipatory breach.
Q2) Statutes of limitations:
A) define how much money the injured party can sue for under a breach of contract claim.
B) define whether there has been substantial performance of a contract or a material breach.
C) limit the time in which an injured party may sue.
D) only apply to the sale of goods. There is no statute of limitations on a service contract.
Q3) Identify four factors courts consider in deciding the validity of commercial impracticability and frustration of purpose claims.
Q4) Most contracts are discharged by mutual agreement of the parties.
A)True
B)False
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19
Chapter 18: Remedies
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Q1) Compensatory damages are typically assessed against the breaching party:
A) as a penalty for breaching the contract.
B) only under the UCC when the sale of goods is the subject of the contract.
C) to put the non-breaching party in the position it would have been in had the contract never been formed.
D) to put the non-breaching party in the position it would have been in if the contract hadn't been breached.
Q2) If a court awards nominal damages it will generally:
A) award compensatory damages as well.
B) not make a determination as to whether there has been a breach of the contract.
C) award punitive damages for the intentional breach of the contract.
D) award a very small amount of money.
Q3) In a construction contract,there is a $1000 per day estimate of damages for each day that the contract runs over the completion date.The contractor is 30 days late when the job is completed,resulting in a prospective damage award of $30,000.What is this type of clause,and when will it be enforced?
Q4) Identify the considerations the United States Supreme Court outlined for calculating punitive damages.
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Page 20
Chapter 19: Practical Contracts
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Q1) Compare and contrast the perspectives of a lawyer and a client when approaching the negotiation of a contract.
Q2) If the subject of the contract includes issues that may be controversial,it is best to:
A) keep lawyers out of the negotiation, so relationships are not strained.
B) deal with them up front before the relationship is strained.
C) deal with them one at a time, as the problems arise.
D) state your position up front and stand firm when the other party objects.
Q3) Which of the following is NOT a standard provision frequently found in contracts?
A) choice of forum.
B) choice of law.
C) choice of compensation..
D) arbitration.
Q4) If you have an established relationship with a buyer,you can sell small tracts of land without a written contract.
A)True
B)False
Q5) Define and compare the terms "vagueness" and "ambiguity."
Q6) Outline the parts of a typical contract.
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Chapter 20: Introduction To Sales
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Q1) Harriett raises and sells hippos.In order to keep her hippos happy and healthy,she feeds them Hippo Chow,which she buys from the local pet store.Under the UCC,Harriett is:
A) a merchant of both hippos and Hippo Chow.
B) a merchant of hippos, but not of Hippo Chow.
C) a merchant of Hippo Chow, but not of hippos.
D) not a merchant of either hippos or Hippo Chow.
Q2) To simplify,clarify,and modernize the law governing commercial transactions,the UCC permits the use of "open terms" in sales contracts.In the use of "open terms," which of the following is true?
A) The court will use market value and other comparable sales to determine what a reasonable price would have been at the time of delivery if the parties have not settled the price in the contract.
B) If time of payment is not mentioned in the contract, payment within a commercially reasonable time is presumed.
C) If the contract permits the buyer or seller to determine the price during contract performance, the UCC requires the party to do so in good faith.
D) All of the above are true.
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Chapter 21: Ownership And Risk
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Q1) Marco sells goods to Byron for his personal use on the basis that the goods may be returned if Byron is not satisfied with them.The sale is:
A) a "sale or return."
B) a "sale on approval."
C) a consignment.
D) outside the UCC.
Q2) If Terrill steals a digital camera and sells it to Samuel,Samuel will get a valid title as long as he can prove he gave value for the camera and acted in good faith.
A)True
B)False
Q3) Tuan,Inc.contracted to buy 200 monogrammed blankets from Titex,Inc.Tuan paid for the blankets in advance.Before segregating and monogramming the blankets,Tuan filed for bankruptcy.Tuan will not be able to recover the blankets because:
A) Tuan is a merchant.
B) the blankets were not identified to the contract.
C) Tuan became bankrupt after the contract was formed.
D) the goods were specially manufactured.
Q4) Discuss the concept of insurable interests.
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Page 23
Chapter 22: Warranties And Product Liability
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Q1) Under the UCC,no warranty of title arises unless the contract is in writing.
A)True
B)False
Q2) Which one of the following warranties arises in a sale of goods?
A) Implied warranty of title.
B) Warranty against adverse possession.
C) Implied warranty of quiet enjoyment.
D) All of the above arise in a sale of goods.
Q3) Which of the following would be a breach of the implied warranty of merchantability?
A) A knife that cuts its user when slicing a bagel.
B) A radio that does not pick up FM signals.
C) A match that burns a spot in the carpet when accidentally dropped.
D) A watch that does not keep accurate time after getting wet.
Q4) The economic loss doctrine states that,when the injured party is a corporation and the harm is purely economic,the only remedies available are those under the common law.
A)True
B)False
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Chapter 23: Performance And Remedies
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Q1) 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
Q2) The UCC "perfect tender" provision provides:
A) the buyer can reject the entire shipment if any portion of the goods are nonconforming.
B) the buyer must accept the goods if the defects are minor and correctable.
C) the buyer may not accept the conforming part of a shipment and reject the nonconforming part.
D) a buyer must reject nonconforming goods.
Q3) A homeowner has a contract with a firewood supplier to bring a rick of hardwood at the beginning of each month from October through March.If the supplier has brought a mixture of hard and soft woods for the first three deliveries,the homeowner cannot reject a delivery in January just because it includes some soft wood.
A)True B)False
Q4) Discuss the UCC rules on the limitation of damages in a contract.
Q5) Identify six possible remedies for a seller when the buyer breaches a contract.
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Chapter 24: Secured Transactions
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Q1) Spicy & Hot,Inc.is interested in expanding its Mexican food restaurant into a Mexican food catering business.Spicy & Hot,Inc.buys a new delivery van from Van World.Spicy & Hot,Inc.is a buyer in the ordinary course of business when purchasing the van.
A)True
B)False
Q2) Bagsby owns a business selling insects for organic gardening.Bagsby is seeking a loan from First Natural Bank.The loan officer is asking that the loan be secured by Bagsby's inventory of insects,now owned or hereafter acquired.In order to do this,a new security agreement will need to be signed each time Bagsby gets new insects or sells his insects.
A)True
B)False
Q3) A PMSI can be created only in goods and software.
A)True
B)False
Q4) Faith owns a copyright in a book she recently wrote.She applies for a $10,000 loan through Cumberland Bank and wants to use the copyright as collateral.Explain if and how the bank can perfect a security interest in such collateral.
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Page 26
Chapter 25: Creating A Negotiable Instrument
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Q1) Margo is in possession of a check issued to her by Felix.The check states,"Pay to the order of Margo." If Margo wishes to transfer the check to Pete to pay a debt she owes him,all she needs to do is strike out her name on the front of the check,write in Felix's name and give it to him.
A)True
B)False
Q2) On March 1 Donna wrote a check for $296 to Sun Services.When will the check be overdue? What is the effect of the check's being overdue? What is the effect if the check is stamped "Insufficient Funds" by Donna's bank?
Q3) George's Wholesaling agrees to purchase 1000 pounds of bananas from Chickadee Exports at 39 cents per pound.George's does not have the money for the bananas now,but promises to pay in two months.Chickadee Exports wants George's business but needs the money now.Chickadee (as drawer)prepares an instrument ordering George's (as drawee)to pay $390 to Primary Bank (the payee).This is an example of a: A) check.
B) trade acceptance.
C) promissory note.
D) None of the above.
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Chapter 26: Liability For Negotiable Instruments
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Q1) Warranty liability is the liability of someone who gives payment on a negotiable instrument.
A)True
B)False
Q2) Maurina is an agent of Southland,and she is authorized to sign checks on Southland's bank account.If Maurina signs a check without indicating that she is simply an agent,Maurina will be personally liable on the check.
A)True
B)False
Q3) An accommodation party on a negotiable instrument:
A) must receive consideration.
B) is secondarily liable on the instrument.
C) is the same as a "guarantor" under the UCC.
D) has the same liability to a holder as the person for whom he signed.
Q4) List the warranties a transferor of a negotiable instrument makes.
Q5) Drawers and indorsers are secondarily liable on negotiable instruments.
A)True B)False
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Chapter 27: Accountants' Liability
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Q1) Teresa is suing her accountant for fraud.To win,Teresa must show that she justifiably relied on the accountant's fraudulent statement.
A)True
B)False
Q2) GBH,an accounting firm,was hired to prepare financial statements for E-treme.GBH:
A) cannot show the working papers to E-treme unless there is a valid court order.
B) cannot show the working papers to E-treme unless it obtains permission from the AICPA.
C) can show the working papers to anyone that asks, since the accountant owns them.
D) must allow E-treme access to the working papers.
Q3) Adam claimed that N & A,its accounting firm,negligently prepared an audit.To hold the accounting firm liable,which of the following elements must be established?
A) Scienter or guilty knowledge.
B) A fiduciary relationship.
C) Failure to exercise due care.
D) An executed engagement letter.
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Chapter 28: Agency Law
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Q1) Janet was employed as a sales representative for Esday,Inc.An appreciative customer gave her a diamond bracelet for all her hard work on a complicated contract.Can Janet keep the bracelet?
A) Yes. The bracelet was given to Janet personally and intended for her.
B) Yes, but only if she discloses the gift to Esday and Esday consents to her keeping the bracelet.
C) No. An agent is not allowed under any circumstances to personally profit as a result of the agency relationship.
D) No. The bracelet is regarded as an unfair trade practice and violates antitrust law.
Q2) Which of the following is not required of an agency relationship?
A) Consideration.
B) Fiduciary relationship.
C) Consent of the parties to act as agent or principal.
D) Control of principal over agent's conduct.
Q3) If apparent authority is present,the principal is liable for even the unauthorized acts of the agent.
A)True
B)False
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Chapter 29: Employment Law
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Q1) Whistleblowers are employees who disclose illegal behavior on the part of their employers.
A)True B)False
Q2) If an employee is an employee at will,the common law allows the employer to fire the employee for a good reason,a bad reason,or no reason at all.
A)True
B)False
Q3) Prior to the Industrial Revolution,the primary law of employment was that,absent an agreement otherwise,a worker was hired for a year at a time.
A)True
B)False
Q4) Under the federal legislation known as OSHA:
A) employers must keep records of all workplace injuries. B) employers must keep records of positive results of workplace drug tests. C) employees must keep their work area free from recognized hazards.
D) employers may monitor workers' e-mail messages if the monitoring is done in the ordinary course of business and the employer provides the e-mail system.
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Chapter 30: Labor Law
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Q1) At one point in American history,American courts regarded any coordinated effort by workers as a criminal conspiracy,and courts convicted workers merely for the act of joining together,even if no strike took place.
A)True
B)False
Q2) All of the following might be in the same collective bargaining unit except:
A) secretarial workers.
B) clerical workers.
C) the executive secretary.
D) the department manager.
E) Both c and d.
Q3) Valley Mart told its employees that they would be fired if they actively supported a unionizing effort.Valley Mart has committed an unfair labor practice.
A)True
B)False
Q4) Rick and Allan want to start a union in the small factory where they work.Outline the basic procedures they will need to follow to get a union recognized as the exclusive bargaining unit for the company employees.
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Chapter 31: Starting A Business
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Q1) Charles and Ellen,an unmarried couple,run an ice cream store.The business is not incorporated and they have filed no formation papers with the state.Their business is a:
A) sole proprietorship.
B) partnership.
C) joint venture.
D) limited liability company.
Q2) What federal agency requires that the seller of a franchise give the potential buyer an offering circular and audited financial statements?
A) The Securities and Exchange Commission (SEC).
B) The Interstate Commerce Commission (ICC).
C) The Federal Trade Commission (FTC).
D) The Franchise Sales Commission (FSC).
Q3) LLCs have become popular for all except which of the following reasons:
A) management flexibility.
B) tax status as a partnership.
C) uniformity of law.
D) limited liability.
Q4) Briefly discuss the limitations on a corporation electing Subchapter "S" status.
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Chapter 32: Partnerships
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Q1) Which of the following events occurs first with respect to the ending of a partnership?
A) Termination.
B) Winding up.
C) Dissolution.
D) Distribution of proceeds.
Q2) Identify and briefly discuss the management rights and duties of a partner.
Q3) 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
Q4) Elion was a partner in a partnership.Elion's death would be considered a wrongful dissociation.
A)True
B)False
Q5) Alicia and Ted have a written agreement wherein they will share the losses of their joint business.This agreement is strong evidence they are partners.
A)True
B)False
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Chapter 33: Life And Death Of A Corporation
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Q1) Zach decided to incorporate his business under the name of "Zamm." In addition to "Zamm," the Model Act requires that Zach include one of the following words: "corporation," "incorporated," "limited," or "company" or an abbreviation thereof.
A)True B)False
Q2) Isabel,Wesley,Gina,and Lucas worked together intensively to form and become the only shareholders of a corporation that is environmentally conscious.Is there anything they can do to avoid having shares of stock in their company sold to someone who does not share their vision for the environment?
Q3) What are some of the advantages for a business to incorporate in Delaware?
Q4) Identify four circumstances that might persuade a court to pierce the corporate veil.
Q5) A corporation by estoppel is based on fairness rather than strict legal rules. A)True B)False
Q6) A business corporation can be incorporated under either state law or federal law. A)True B)False
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Page 35
Chapter 34: Corporate Management
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Q1) Which of the following statements is correct with respect to state efforts to offer protection to companies targeted for hostile takeovers?
A) Courts offer the only legal protection to companies targeted for hostile takeovers.
B) Statutory law offers the only legal protection to companies.
C) Both statutory law and the state courts have provided some degree of protection for companies.
D) State courts and state statutes have offered no protection for companies targeted for hostile takeovers.
Q2) A director violates the corporate opportunity doctrine if he or she competes with the corporation,unless the disinterested directors approve of the director's actions.
A)True
B)False
Q3) Anti-takeover tactics include all EXCEPT:
A) staggered board of directors.
B) negative tender offers.
C) greenmail.
D) chewable poison pills.
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Page 36
Chapter 35: Shareholders
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Q1) 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
Q2) A majority of shareholders of FamLi Co.wish to expel Glenn,a minority shareholder.In most states,the company cannot expel Glenn unless:
A) it pays a fair price for Glenn's stock.
B) there is a legitimate business purpose for expelling him.
C) Both of the above.
D) Neither a nor b
Q3) There is a trend for boards of directors to be made up of more independent directors who are less likely to simply go along with whatever the CEO wants.
A)True
B)False
Q4) A shareholder proxy is generally revocable at any time. A)True
B)False
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Chapter 36: Securities Regulation
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Q1) The SEC creates law in all but which of the following ways?
A) Bringing cease and desist orders.
B) Issuing releases.
C) Promulgating rules.
D) Writing no-action letters.
Q2) Section 16 of the 1934 Act prohibits short-swing trading on the part of any person who is:
A) an officer of a corporation.
B) a director of a corporation.
C) any shareholder who owns ten percent or more of the corporate stock.
D) All the above.
Q3) Techno is planning a security offering under Regulation D,Rule 506.Under this rule,Techno can:
A) offer up to $5 million in securities over 12 months.
B) offer up to $1 million in securities over 12 months.
C) can offer an unlimited amount of securities.
D) can only offer an amount equal to twice its initial capitalization.
Q4) The Fallwater Partnership wants to incorporate and is considering using a DPO.Explain what a DPO is and discuss the advantages and disadvantages of this course of action.
Page 38
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Chapter 37: Bankruptcy
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Q1) Artistic Framing,a business with $120,000 of unsecured debt,needs to file for bankruptcy,but wants to continue in business.Discuss what chapter of the Bankruptcy Code should be used,and discuss the effect of the 2005 amendment to the Code on the proceedings.
Q2) Which of the following statements concerning a Chapter 11 reorganization plan is true?
A) A reorganization plan will be confirmed by the court only if a majority of each class of creditors votes in favor of the plan.
B) A reorganization plan can be confirmed by the court over objections of some creditors if the court determines that the plan is feasible and fair.
C) Only the bankruptcy court has the authority to confirm or reject the reorganization plan. Creditors do not have a right to vote on the plan.
D) A reorganization plan binds only the debtor and not the creditors.
Q3) The bankruptcy designed for family farmers is:
A) Chapter 7.
B) Chapter 9.
C) Chapter 11.
D) Chapter 12.
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Chapter 38: Antitrust
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Q1) Companies with substantial assets must notify the FTC before consummating a merger.
A)True
B)False
Q2) The Clayton Act prohibits anti-competitive mergers.
A)True
B)False
Q3) The FTC blocked the merger of Staples,Inc.and Office Depot because they controlled a large percentage of the national market for office supplies.
A)True
B)False
Q4) Discuss when monopoly power is not a violation of Section 2 of the Sherman Act.
Q5) This agreement violates the:
A) Sherman Act.
B) Clayton Act.
C) Robinson-Patman Act.
D) None of the above.
Q6) Antitrust laws in the United States remained constant through most of the 1900s.
A)True
B)False
Page 40
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Chapter 39: Consumer Law
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Q1) Victoria has a MasterCard with a credit limit of $9,000.This is:
A) open-end credit.
B) closed-end credit.
C) an installment loan.
D) a secured debt.
Q2) The issue in the Gray v.American Express Co.case involved:
A) lost credit cards.
B) disputed bills.
C) unfair interest rates.
D) privacy.
Q3) John loans George money and they sign a written agreement whereby George will repay John in monthly installments.Is this loan subject to the Truth-in-Lending Act?
A) Yes, if the loan is for more than $1,000.
B) Yes, if John and George live in different states.
C) No, if John is not in the business of offering credit.
D) No, if John and George are related.
Q4) Consumer credit reporting agencies are unregulated governmental agencies.
A)True
B)False
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Chapter 40: Environmental Law
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Q1) The EPA brought an administrative action against Boch Industries for violating the Clean Air Act.The administrative law judge ruled in the EPA's favor.Boch Industries:
A) can appeal the decision to a U.S. Court of Appeals and then to the U.S. Supreme Court. B) can appeal to the U.S. Congress and then to the Chief Justice of the Supreme Court. C) can appeal to the Chair of the EPA.
D) cannot appeal the decision.
Q2) Cincy,Inc.is building a $20 million dollar addition onto its distribution facility.To build the facility,Cincy must fill in two acres of wetlands.Under the Clean Water Act,Cincy must obtain a permit before filling in the wetlands.
A)True
B)False
Q3) The cost-benefit trade-off is particularly complex in environmental issues because those who pay the cost often are not the ones who receive the benefit.
A)True
B)False
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Chapter 41: Cyberlaw
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Q1) Tom receives an e-mail from someone alleging to be a Nigerian government official who has stolen money from the government.He needs some place safe to keep the money for a short time.The official promises that,if Tom lets his bank account be used for this purpose,Tom will be allowed to keep a percentage of the stolen money.Tom gives in to the temptation and provides his account information.Instead of receiving money,Tom loses everything he had in the account to the scammer.In this situation:
A) prosecution can be under state law.
B) prosecution can be under the Computer Fraud and Abuse Act.
C) a civil action can be brought under Section 5 of the FTC Act.
D) All of the above.
Q2) The Internet was started in the 1960s as a project to link military contractors and universities.The World Wide Web was created in 1991 as a subnetwork of the Internet.
A)True
B)False
Q3) Maria,who lives in the United States,gains unauthorized access to a bank's computer system and steals financial information about customers.Of what is Maria guilty,and under what statute(s)could she be prosecuted?
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Chapter 42: Intellectual Property
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Questions
Q1) Jack goes to Fast Copy Center and pays to have 40 copies of a textbook made.Jack then sells the photocopied versions of the book to fellow students for $60 a copy (as opposed to the $95 textbook price).The textbook author learns of this and sues Jack and the copy center.Which statement is correct?
A) Jack and the copy center are both liable to the author.
B) Jack is liable to the author but the copy center is not.
C) The copy center is liable to the author but Jack is not.
D) Neither the copy center nor Jack is liable to the author.
Q2) Unlike with patents,the ideas underlying copyrighted material need not be novel.
A)True
B)False
Q3) Briefly discuss a patent,copyright,and trademark.
Q4) Which of the following words could be registered as a trademark?
A) Crunchy peanut butter.
B) Low-fat peanut butter.
C) Green peas.
D) yStar peanuts.
Q5) A patent is available for an idea as well as a tangible application.
A)True
B)False
Page 44
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Chapter 43: Real Property And Tenant-landlord Law
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Q1) Yi conveyed a piece of land by general warranty deed.The deed included a covenant of seisin.With this covenant,Yi promised that:
A) she has the power to make the conveyance.
B) the land is free from any easement, profit, mortgage, etc.
C) no other person can lawfully claim the land.
D) she owns whatever estate she is conveying.
Q2) A tenancy with no fixed duration is a:
A) tenancy from month to month.
B) tenancy at will.
C) periodic tenancy.
D) tenancy for years.
Q3) The bank who lends money in exchange for a mortgage on the borrower's house is considered to be the:
A) mortgagee.
B) mortgagor.
C) profitor.
D) profitee.
Q4) Discuss the factors a court will consider when deciding the issue of whether a landlord is liable for a criminal attack against a tenant.
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Chapter 44: Personal Property And Bailment
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Q1) If property is mislaid,the finder of the property will have a superior claim to possession of the property against everyone except the true owner.
A)True
B)False
Q2) In order to constitute a valid gift:
A) the donor must intend to transfer ownership of property immediately.
B) the donee must accept the gift.
C) the donor must deliver the gift property to the donee.
D) All of the above are necessary for a valid gift.
Q3) The difference between an inter vivos gift and a gift causa mortis is that the inter vivos gift is made during the donor's lifetime and a gift causa mortis is a gift is made after the donor's lifetime by the donor's estate.
A)True
B)False
Q4) If one party makes accessions without agreement and the improvements can be "undone" without damaging the property,the improver must undo them.
A)True
B)False
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Chapter 45: Planning For The Future: Wills,Trusts,And Insurance
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Q1) In purchasing life insurance,Kelsey concealed the fact that she has a muscular disease.The insurance company can void the policy if the muscular disease is found to be a material fact.
A)True
B)False
Q2) Per capita means each heir gets an equal share of an estate.
A)True
B)False
Q3) Estate planning has two primary goals: to ensure property is distributed as the owner desires and to minimize estate taxes.
A)True
B)False
Q4) Which of the following property is not affected by a will?
A) Life insurance.
B) Joint tenancy property.
C) Retirement benefits.
D) All of the above.
Q5) Discuss the differences between a will and a trust.
Q6) Identify four ways a trust can be terminated.
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