Legal Aspects of Business
Test Preparation
Course Introduction
Legal Aspects of Business provides students with a comprehensive understanding of the fundamental legal principles and frameworks that govern commercial activities. The course explores key topics such as contract law, company law, intellectual property rights, consumer protection, employment law, and dispute resolution mechanisms. By examining real-world case studies and statutes, students learn how legal considerations influence business decision-making and operations. Emphasis is placed on ethical practices, risk management, and the implications of legal non-compliance, equipping future managers and entrepreneurs with the necessary knowledge to navigate the legal environment confidently and responsibly.
Recommended Textbook
Business Law and the Legal Environment Standard Edition 6th Edition by Jeffrey F. Beatty
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2060 Verified Questions
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Chapter 1: Introduction To Law
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Q1) The case citation Pereda v.Parajon,957 So.2d 1194 (2007)reveals that Pereda is the plaintiff.
A)True
B)False
Answer: False
Q2) Common law refers to:
A) law that is the same or similar in all the states.
B) law made when judges decide cases and then follow those decisions in later cases.
C) law made by legislatures in the form of statutes.
D) the legal systems of France, Germany, and Italy.
Answer: B
Q3) Contemporary law's principle of collective responsibility,such as all partners being personally responsible for the debts of the partnership,had its roots in:
A) the Anglo-Saxon method of ensuring public order through tithing.
B) the Anglo-Saxon practice of using "oath helpers."
C) the English use of "shire reeves."
D) the English system of feudalism.
Answer: A
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Chapter 2: Business Ethics And Social Responsibility
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Sample Questions
Q1) In analyzing a situation to determine how to act ethically,a business manager should:
A) gather background information by either talking firsthand with the people involved or by talking to those who gained information informally through the company "grapevine."
B) narrowly focus on a single issue.
C) determine whether an alternative violates important values.
D) All of the answers are correct.
Answer: C
Q2) John Akers,former chairman of IBM,argues that ethics are not important to economic competitiveness.
A)True
B)False
Answer: False
Q3) Life Principles are set by your parents and do not change over time.
A)True
B)False
Answer: False
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Chapter 3: Dispute Resolution
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Sample Questions
Q1) In Jones v.Clinton,the court held:
A) Paula Jones did not demonstrate the essential elements for her claim.
B) Paula Jones was entitled to a summary judgment.
C) public policy required that the case be dismissed because of the President's governmental position.
D) President Clinton failed to comply with a discovery order.
Answer: A
Q2) A United States district court is:
A) the primary federal trial court.
B) an appellate court.
C) a small claims court only.
D) none of the above.
Answer: A
Q3) Emails and their attachments are not subject to pretrial discovery.
A)True
B)False
Answer: False
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Chapter 4: Common Law,Statutory Law,And Administrative Law
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Q1) Psychologist Holtz is working with a patient,Rebecca,who has expressed the intention to seriously harm two of her acquaintances.If you apply the principle set forth by the Supreme Court of California in the Tarasoff v.Regents of the University of California case,Psychologist Holtz:
A) has, because of the bystander rule, no duty to warn the foreseeable victims about Rebecca's expressed intention to harm them.
B) has a duty to exercise reasonable care to protect foreseeable victims of Rebecca's violence.
C) is in a special relationship with patients, and this relationship creates a privilege of confidentiality between the communicants.
D) will be held to a strict duty of care and will be held liable for any victim's injuries if Holtz failed to warn a them of Rebecca's potential violence toward them.
Q2) The majority of work done by legislative bodies is performed in committees. A)True B)False
Q3) Discuss the two federal statutes that give Americans the power to aquire or protect personal information.
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Page 6
Chapter 5: Constitutional Law
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Q1) Judicial review is the power of the federal courts to declare a statute or governmental action void.
A)True
B)False
Q2) The doctrine of preemption is based on the Constitution's:
A) Commerce Clause.
B) Due Process Clause.
C) Equal Protection Clause.
D) Supremacy Clause.
Q3) Generally,constitutional protections do NOT apply to:
A) acts of the federal government.
B) acts of state government.
C) acts of administrative agencies.
D) acts of privately owned businesses.
Q4) The First Amendment to the U.S.Constitution explicitly protects citizens from abridgment of the right of free speech by any level of government.
A)True
B)False
Q5) 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) On its Web site,Otrex,Inc.claimed that its pain reliever was more effective than Nelton,a competing pain reliever.Discuss the elements that Nelton must prove to win a case under Section 43(a)of the Lanham Act.
Q2) As assistant manager of a discount department store,you have been asked to review the store's policy concerning shoplifters.(a)Discuss the legal standard used in most states governing the detention of suspected shoplifters.(b)In reviewing the store's policy,discuss some of the items that you will consider.
Q3) Jim told his manager,Lana,that a co-worker,Diane,had been in prison for theft.Lana checked into the matter and,when she learned that Diane had served time in prison for theft,fired her.
A) Jim is liable to Diane for defamation.
B) Jim is liable to Diane for defamation unless he can show a legitimate reason for having to tell Lana about Diane's prison history.
C) Jim is liable to Diane for defamation only if she is a public figure.
D) Jim is not liable to Diane for defamation.
Q4) Wilma's arm is broken when Paula knocks her down during an argument.If Wilma sues Paula for battery,what damages is Wilma likely to receive?
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Chapter 7: Negligence And Strict Liability
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Q1) Kenneth was exposed to radiation on his job in an environmental cleanup.In a lawsuit against his employer,the court must decide the full extent of both present and future damages rather than allowing Kenneth to return to court years later if medical problems develop at that time.
A)True
B)False
Q2) Kelley went ice skating on a neighbor's pond,but she fell through a thin area into icy waters.Kelley did not have permission to be on the property,and the neighbor did not even know that she was there.Is the neighbor liable for Kelley's injuries?
A) Yes. The neighbor should have posted "thin ice" notices.
B) No. Kelley was a trespasser and the neighbor could only be held liable for intentionally injuring her or for gross misconduct.
C) It may depend on Kelley's age.
D) Yes, the neighbor is strictly liable.
Q3) Palsgraf v.Long Island Railroad Co.addressed the issue of furnishing alcohol to minors.
A)True
B)False
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9
Chapter 8: Crime
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Q1) Miguel reprogrammed a cellular telephone so that it intercepted electronic funds transfers and rerouted them to Miguel's bank account.What crime has he committed?
A) Insurance fraud, since the bank's insurance will have to cover the misdirected funds.
B) Wire fraud.
C) Mail fraud.
D) Embezzlement
Q2) Illegally obtained evidence is not permitted to be used at a criminal trial based upon the:
A) silver plate doctrine.
B) exclusionary rule
C) fair play doctrine.
D) Eighth Amendment.
Q3) There is only one valid reason to punish criminals -- deterrence.
A)True
B)False
Q4) Miranda v.Arizona considered the intent requirement in an armed robbery case.
A)True
B)False
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Chapter 9: International Law
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Q1) MagNet,a small United States computer company,started doing business in a foreign country.The foreign country later decided to take over all computer industry,including MagNet's operation.The foreign country paid MagNet adequate compensation in United States dollars.The foreign country's action is called:
A) comity.
B) repatriation.
C) expropriation.
D) inflow profit streaming.
Q2) In Marubeni America Corp.v.United States,the federal appellate court ruled that the Nissan Pathfinder was,for tariff classification purposes a motor vehicle for the transport of passengers.The classification of goods is significant because:
A) the tariffs will vary depending on the classification.
B) the fair value will vary depending on the classification.
C) the subsidy will vary depending on the classification.
D) the dumping duty will vary depending on the classification.
Q3) Explain what the General Agreement on Tariffs and Trade (GATT)is and give pro and con arguments concerning this agreement.
Q4) Explain the origin and purpose of the World Trade Organization.
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Page 11
Chapter 10: Introduction To Contracts
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Sample Questions
Q1) Which of the following represents a unilateral offer?
A) "I will pay you $50 if you mow my lawn."
B) "I will pay you $50 if you promise to trim that tree."
C) "I will pay you $50 for your CD player."
D) "I will pay you $50 for your backpack."
Q2) Mary goes into Honest Harry's Electronics and purchases a TV.Mary agrees to pay for the TV in 30 days on the store's "30 days same as cash" plan.This is an executory contract.
A)True
B)False
Q3) Shelly offers to sell Jane goods both parties know are stolen.Jane accepts the offer,and agrees to pay for the goods.Later,Jane refuses to accept or pay for the goods.If Shelly sues Jane for breach of contract,what is the probable result?
A) The law would enforce this valid, enforceable contract.
B) Jane would win as this is a voidable contract.
C) Shelly would win as this is a unilateral contract.
D) The law would not enforce Jane's promise, as it does not have a lawful purpose.
Q4) List and briefly describe the basic elements of a contract.
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Page 12
Chapter 11: Agreement
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Q1) You have placed an antique sofa up for auction and the auctioneer has not made any special announcements about the sale.You can withdraw the sofa at any time before the auctioneer closes the sale by announcement or by the fall of the hammer.
A)True
B)False
Q2) Wally owns 200 acres of land.Wally offers to sell the land to Robert for $1,500 per acre.Robert replies that he does not need 200 acres of land but would like to buy 40 acres at $1,500 per acre.Wally agrees to sell but does not identify which 40 acres.Later,Wally refuses to sell any land to Robert.What is the result?
A) Robert wins; this is an enforceable contract with complete and definite terms.
B) Robert wins; the UCC will decide which 40 acres are to be sold.
C) Wally wins; the original offer was not intended to be an offer but merely an invitation to negotiate.
D) Wally wins; this agreement is too indefinite since it does not identify which 40 acres are to be sold.
Q3) Discuss the effect of the Uniform Commercial Code on the law of sales contracts in the area of open terms.
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Page 13
Chapter 12: Consideration
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Q1) Marco agrees to sell Clowns R Us some balloons.The contract states that Clowns may buy as many balloons as it wishes.This agreement is:
A) a requirements contract.
B) an output contract.
C) an illusory contract.
D) an enforceable contract.
Q2) Police Officer Paul apprehends a wanted criminal and then demands the $10,000 reward offered by Crime Stoppers.Which of the following statements is true?
A) Police Officer Paul is not entitled to the reward because past consideration is never valid consideration.
B) Police Officer Paul is entitled to the reward because he puts his life on the line every day.
C) Police Officer Paul is not entitled to the reward because he was under a pre-existing duty to make the arrest.
D) Police Officer Paul is not entitled to the reward but may have an argument under promissory estoppel.
Q3) Discuss the concept of consideration.
Q4) What two exceptions did the UCC create for accord and satisfaction check cases?
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Page 14
Chapter 13: Legality
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Q1) In many states it is illegal to lend money to help someone gamble.
A)True
B)False
Q2) If a court finds as a matter of law that a clause of a contract was unconscionable at the time the contract was made,the court must refuse to enforce the contract.
A)True
B)False
Q3) Wendell,new to the area,selects a doctor from the telephone book and visits that doctor to have a splinter extracted.Unbeknownst to Wendell,the doctor has never passed the state licensing exams.Later,when Wendell discovers the truth,he refuses to pay his bill.If the doctor sues for recovery of the fee,will the court support the doctor's claim?
A) Yes, it was up to Wendell to verify the doctor's qualifications prior to having the splinter extracted.
B) No, the court is likely to take the position that it is not in the public's best interests to enforce contracts with unlicensed doctors.
C) It depends on whether Wendell's injury healed properly.
D) No, but the doctor could probably recover under quasi-contract.
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Page 15
Chapter 14: Capacity And Consent
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Q1) After her 18th birthday Lora may,by words or action,ratify a contract she made during the previous year.
A)True
B)False
Q2) Angie,a minor,wants to avoid a contract she made with Cumberland Cycles.She may disaffirm the contract by:
A) notifying Cumberland orally that she will not honor the agreement.
B) filing a lawsuit to have a court formally cancel the contract.
C) just refusing to perform her obligations under the contract.
D) All of the answers are correct.
Q3) In the case of Sepulveda v.Aviles,the New York Supreme Court,Appellate Division,found evidence of undue influence in:
A) the relationship based on family connection between Seals and Aviles.
B) Aviles's use of Seals' funds and credit cards.
C) opinions of Aviles and Seals' attorney about Seals' mental state at the property closing.
D) All of the answers are correct.
Q4) Discuss the concept of a "material fact" in fraud situations.
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Page 16
Chapter 15: Written Contracts
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Sample Questions
Q1) Amy Hudson has been trying to purchase Glen Cappel's antique desk for some time,but Glen has been reluctant to sell.One evening Glen said to Amy,"Okay,I'll sell the desk for $550." Amy replied,"Thank you,Glen.I accept." The agreement was not reduced to writing,but Glen and Amy did shake hands.Two days later,Amy sent Glen a letter outlining the terms of the agreement,and stating that she would deliver $550 cash according to the agreement within ten days.The letter was signed,"Best regards,Amy." Later,Amy had second thoughts,and refused to go through with the purchase.Nothing had been exchanged at this point.Glen:
A) can enforce the contract against Amy because the statute of frauds is satisfied under this situation.
B) cannot enforce the contract against Amy because her signature was inadequate without her last name under the statute of frauds.
C) cannot enforce the contract against Amy because he did not sign the letter.
D) can enforce the contract because they shook hands on the agreement.
Q2) Which of the following promises ordinarily must be in writing to be enforceable?
A) Promises made as a part of a prenuptial agreement.
B) The agreement to sell a car for $1500.
C) The promise by an executor of an estate to pay a debt of the decedent.
D) All of the above.
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Page 17
Chapter 16: Third Parties
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Q1) Which of the following duties can probably be delegated?
A) An agreement to perform an operation.
B) A contract to paint a picture.
C) An agreement by an attorney to draft a contract.
D) An agreement to paint a house.
Q2) Which statement most accurately describes third party beneficiary rights?
A) A beneficiary may enforce a contract if the parties intended to benefit him and if enforcing the promise will satisfy a duty of the promisee to the beneficiary.
B) If a promisee intended to make a gift to the beneficiary, the beneficiary may not enforce the contract.
C) An intended third party beneficiary has no enforceable rights in a contract.
D) Incidental beneficiaries have enforceable rights against both contracting parties.
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) Discuss the potential liability differences between a delegation and a novation.
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Page 18
Chapter 17: Performance And Discharge
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Q1) As set forth in the Restatement Second of Contracts,which of the following duties are imposed on the parties in the performance and enforcement of a contract?
A) perfect performance; honesty
B) strict performance; team work
C) good faith; fair dealing
D) negotiation; arbitration
Q2) Generally,neither a "time is of the essence" clause nor a "force majeure" clause will be recognized by the courts because these types of clauses are seen as a violation of public policy.
A)True
B)False
Q3) Mary contracted to buy 100 table lamps.Under the terms of the agreement,Mary is to pay for the lamps upon delivery.This is an example of:
A) a condition precedent.
B) a concurrent condition.
C) a condition subsequent.
D) a service condition.
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Chapter 18: Remedies
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Q1) Which of the following statements is incorrect concerning liquidated damages?
A) A liquidated damages clause will be enforced if, when the contract was made, it was difficult to estimate actual damages.
B) The amount of liquidated damages must be a reasonable estimation of the actual harm resulting from a breach.
C) Nominal damages are not the same thing as liquidated damages.
D) Liquidated damages are enforceable even if the amount is considered to be a penalty on the breaching party.
Q2) Tess,a tenant,moves from her apartment in breach of the lease agreement.The landlord,Lenny,may not attempt to rent the apartment until the date of the lease expiration,and so has no recourse to minimize damages.
A)True
B)False
Q3) Identify and describe the four principal contract interests a court may seek to protect.
Q4) Damages must be estimated with reasonable certainty.
A)True
B)False
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Page 20
Chapter 19: Practical Contracts
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Q1) Ambiguities in contracts are always interpreted in favor of the side that wrote the contract,since they are the ones who know what the provision is supposed to mean.
A)True
B)False
Q2) When a party to a contract fails to fulfill all of her promises,she has breached the contract.What response does a court typically have for a breach?
Q3) You should hire a lawyer to review any legal papers you have to sign,including such papers as lease agreements or car purchases.
A)True
B)False
Q4) In a contract modification,the phrase,"charged with such amendment" means:
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.
Q5) Identify and explain at least four situations where a written contract is either necessary or recommended.
Q6) Define and compare the terms "vagueness" and "ambiguity."
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Chapter 20: Introduction To Sales
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Q1) Jones contracts to buy a computer from Martin for $1500.The contract calls for Martin to service the computer quarterly for the first year and to tutor Jones on how to use the software.Is this contract covered by the UCC or common law?
Q2) Elizabeth worked as a salesperson in a carpet store.She was in the midst of divorce proceedings and needed some money.Elizabeth sold her wedding ring.Elizabeth is considered a merchant with regard to the sale of the ring.
A)True
B)False
Q3) The UCC has abolished the common law requirement of consideration in all contracts involving the sale of goods.
A)True
B)False
Q4) Lian contracted for financial services from E-wise.This contract is governed by Article 2 of the UCC.
A)True B)False
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Chapter 21: Ownership And Risk
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Q1) A buyer has an insurable interest in goods when they are identified.
A)True
B)False
Q2) Mayco has received goods from Wallace pursuant to a sale or return agreement.If Mayco subsequently declares bankruptcy,the goods will be:
A) returned to Wallace because title did not pass to Mayco under this type of sale.
B) belong to Mayco and will not be a part of the bankruptcy.
C) subject to the claims of Mayco's creditors under Section 2-326 of the Uniform Commercial Code.
D) will be kept by the bankruptcy judge and clerk.
Q3) Garden World orders 120 hand cultivators from Green Thumb,Inc.When the cultivators arrive,they seem fine,so Garden World accepts them.As the stock person is putting the cultivators on display,she notices that the tines are loose on all the cultivators.Garden World returns the cultivators to Green Thumb,but they are lost when the delivery truck slips on an oily spot in the road and drives into a nearby lake.Discuss who bears the risk of loss for the shipment.
Q4) Discuss the concept of insurable interests.
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Chapter 22: Warranties And Product Liability
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Q1) Tu-thumbs buys a used paint sprayer from the local paint store.The sprayer had a large sign on it which said "AS IS." The dealer made no promises or statements concerning the performance of the paint sprayer.When Tu-thumbs attempts to spray paint his house,the trigger on the sprayer sticks in the "on" position and before Tu-thumbs can pull the electrical cord to cut the power,paint is sprayed all over his prize Borzoi dog that is scheduled to be shown in a dog show the next day.Tu-thumbs sues the dealership.Who wins?
A) Dealer wins; there were no express warranties and all implied warranties have been successfully disclaimed.
B) Tu-thumbs wins; he can recover on the basis of express warranties.
C) Tu-thumbs wins; he can recover on the basis of the implied warranty of merchantability because the word "merchantability" was not used in the disclaimer.
D) Dealer wins; even though there were implied warranties, the damage to the dog could not have been foreseen.
Q2) A tag attached to a tree in a nursery identifying the tree as a Southern Magnolia creates an express warranty.
A)True
B)False
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Chapter 23: Performance And Remedies
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Q1) Identify six possible remedies for a seller when the buyer breaches a contract.
Q2) Neon orders one thousand 25-foot nylon ropes from Hang'em High Co.Upon inspection of the delivery,Neon learns that Hang'em sent five hundred 25-foot ropes and five hundred 20-foot ropes.Neon may:
A) demand that Hang'em send 500 additional 25-foot ropes.
B) accept the 500 conforming ropes and reject the 500 nonconforming ropes.
C) seek an installment contract.
D) declare an anticipatory repudiation.
Q3) In some industries it is a routine practice to draft contracts permitting imperfection in the seller's goods,thereby limiting the effect of the perfect tender rule by the parties' agreement.
A)True
B)False
Q4) Discuss the UCC rules on the limitation of damages in a contract.
Q5) "Course of dealing" refers to prior commercial transactions between the same parties.
A)True
B)False
Q6) Define these terms: usage of trade; course of dealing; and course of performance.
Page 25
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Chapter 24: Secured Transactions
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Q1) Ken decided to open a retail boat dealership.He expects that many of his sales will be credit sales.What should Ken do to protect his interests in the collateral in the credit sales that he makes?
Q2) Great State Bank loans money to Seth,securing the loan with property owned by Seth.Great State Bank is advised by its attorney to file a financing statement.Great State Bank doesn't understand why it should spend the extra money for this filing,since Seth has told them that he has no other creditors.Why should Great State Bank file a financing statement?
A) There are criminal penalties for failing to file.
B) The financing statement allows Great State Bank to repossess the collateral on default without a court order.
C) The financing statement will protect Great State's priority rights with other creditors by giving notice to other creditors that it claims a security interest in the collateral.
D) Filing the financing statement is necessary to complete the attachment requirement in order to create a security interest.
Q3) Explain the difference between attachment and perfection.
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Chapter 25: Creating A Negotiable Instrument
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Q1) Discuss the effect on an instrument of: (a)contradictory amounts between the numerals and amount written in words on a check; (b)the interest rate left blank on a promissory note; and (c)contradictory terms that are typed onto a promissory note and terms that are preprinted on the note form.
Q2) Tyron purchased a $2900 promissory note from Jared for the discounted amount of $2500.Tyron paid value,in good faith and without notice of any outstanding claims against this promissory note that read,"Pay to the order of Jared $2900 on July 1,2009,for the purchase of a 2001 Ford Taurus provided no major problems with the car arise prior to said payment date." Tyron is a holder in due course of a negotiable note.
A)True
B)False
Q3) A possessor of non-negotiable paper has the same rights as the person who made the original contract.
A)True
B)False
Q4) To be negotiated,bearer paper must simply be delivered to the recipient.
A)True
B)False
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Page 27
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) The Gulf States Section,PGA,Inc.v.Whitney National Bank of New Orleans case addressed liability on a negotiable instrument:
A) based on fraud.
B) based on negligence.
C) as an accommodation party.
D) as a signer.
Q3) At the time a check is issued,primary liability falls on:
A) the maker.
B) the drawer.
C) the drawee.
D) None of the above.
Q4) Explain when presentment warranties apply.Identify the presentment warranties on a check and a promissory note.
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Chapter 27: Accountants' Liability
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Q1) Halbeck,LLC was negligent in its audit of E-treme,Inc.Unbeknownst to Halbeck,E-treme used the financial statements to secure a loan from Great State Bank.Under the Ultramares doctrine,Halbeck will be liable to Great State Bank for its losses on the loan.
A)True
B)False
Q2) Generally accepted accounting principles are the rules for preparing financial statements.
A)True
B)False
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.
Q4) Discuss the advantages and disadvantages of using IFRS.
Q5) Discuss how SEC rules affect the legal and the ethical relationship between accountants and the companies they audit.
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Chapter 28: Agency Law
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Q1) Ron is the business agent for Kansas Sunshine,a rock band.He is also the agent for another popular Midwestern rock group,City Sand.Ron negotiates a deal with a Kansas City promoter to have City Sand play after a professional football game.The promoter was willing to pay $250,000 for both groups to play after the game; however,Ron talked her into booking just City Sand for $175,000.Given his contract with City Sand,Ron made more money under this arrangement.Has Ron violated his fiduciary duty to Kansas Sunshine?
A) Yes. It appears that Ron put his own interests ahead of his principal's interests.
B) Yes. Ron cannot, under any circumstances, act as an agent for both groups.
C) Both a and b are correct.
D) Neither a nor b is correct since it is very common for rock band agents to represent several groups at the same time.
Q2) Jolene hired Lacy to find a buyer for her house.Adam was interested in buying the house.If both Jolene and Adam agree,Lacy,a real estate agent,may represent both parties.
A)True
B)False
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Chapter 29: Employment Law
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Q1) It is legal for a private employer to use lie detector tests as part of its usual hiring process.
A)True
B)False
Q2) Under the Americans with Disabilities Act,a person with a disabling illness:
A) is not considered disabled once the illness is being managed with medicines.
B) is not considered disabled unless there is no known cure.
C) is considered disabled, but only at times when hospitalization is required for treatment.
D) is considered disabled, even if the illness is under control.
Q3) Betty wants to hire a secretary who is "mature." In particular,she wants to hire a woman with experience and whose children are grown (so she will not have to be staying home with sick children,etc.).She also wants to make sure the woman is of "sound,Christian character,with solid morals."
To find such an employee,she ran the following ad in the newspaper: "Secretary.Excellent Pay.Quiet professional office.Must not have young children.Must not be opposed to Christian work ethic.References required.555-1111 or write to P.O.Box 114,Ourtown,USA."
Discuss the legal issues raised by Betty's ad.
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Chapter 30: Labor Law
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Q1) 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
Q2) Exec-Pac,Inc.is extremely opposed to having its employees organize.The union attempting to organize a collective bargaining unit filed an unfair labor practices claim with the National Labor Relations Board (NLRB),alleging that Exec-Pac illegally interfered with its unionization drive.The NLRB,convinced that an election would be pointless,waived the requirement of an election and certified the union as the exclusive representative of Exec-Pac's workers.Which statement is correct?
A) The NLRB had to be convinced that the employer's interference with the union's attempt to organize the workers was outrageous.
B) The NLRB has the authority to waive the requirement of a union election if it believes the employer has shown anti-union bias.
C) The NLRB may waive an election if the employer has distributed written materials stating it is opposed to a union.
D) None of the above.
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Chapter 31: Starting A Business
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Q1) To form an LLC,a charter and an operating agreement must be filed with the Secretary of State in the jurisdiction where the business will operate.
A)True
B)False
Q2) Which of the following forms of organization is a compromise between starting one's own business as an entrepreneur and working for someone else as an employee?
A) Limited liability company.
B) Business trust.
C) Close corporation.
D) Franchise.
Q3) 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.
Q4) Briefly discuss the limitations on a corporation electing Subchapter "S" status.
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Chapter 32: Partnerships
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Q1) Randy,Joan,and Arnie are partners.Their agreement did not address dissociation nor how long the partnership would last.Randy decided to leave the partnership.When Randy serves notice he intends to withdraw:
A) the partnership can either buy him out and continue in business or wind up the business and terminate the partnership.
B) the partnership terminates.
C) the partnership winds down.
D) the partnership estoppes.
Q2) 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
Q3) Dusty dissociated from a partnership.To protect himself from debts of the partnership after he leaves,Dusty should:
A) secure an indemnity bond.
B) file a statement of dissociation with the Secretary of State.
C) execute a formal written agreement with the remaining partners.
D) demand that the partnership terminate.
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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) Owners of preferred stock typically have a preference in liquidation.
A)True
B)False
Q3) Corporate stock can be divided into categories called ________,which can be further divided into ________.
A) authorized shares, classes.
B) classes, series.
C) equity, assets.
D) debentures, classes.
Q4) What are some of the advantages for a business to incorporate in Delaware?
Q5) A business corporation can be incorporated under either state law or federal law.
A)True B)False
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Chapter 34: Corporate Management
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Q1) What is the definition of the business judgment rule?
Q2) Discuss the purposes of the "business judgment rule."
Q3) Which of the following must be approved by the shareholders if a company is attempting to avoid a hostile takeover bid?
A) White knights.
B) Staggered board of directors.
C) Supermajority voting.
D) All the above.
Q4) A finding by a court that a manager's decision had a rational business purpose does not necessarily protect the manager from a finding that he breached a duty of care.
A)True
B)False
Q5) A manager used her position in the company to develop a new business the company might have pursued.This is a breach of the:
A) duty of care.
B) duty of non-competition.
C) duty of loyalty.
D) duty of recognition.
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Chapter 35: Shareholders
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Q1) If directors serve on the boards of multiple corporations,the executives of those corporations are less likely to be overpaid.
A)True
B)False
Q2) Quick Supply House breached a contract with MegaCorp.The breach resulted in the loss of a great deal of money to MegaCorp.The board of directors for MegaCorp vote not to sue the supply house since it believes the legal costs would be more than it would probably recover.If a group of shareholders wish to sue the supply house,this would:
A) be a type of direct lawsuit.
B) have to be a derivative lawsuit.
C) be a settlement lawsuit.
D) be an SEC lawsuit.
Q3) Discuss how the Sarbanes-Oxley Act affects Haletronne Co.,a publicly traded corporation.
Q4) A proxy is a vote that is mailed in,like an absentee ballot.
A)True
B)False
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Chapter 36: Securities Regulation
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Q1) Countywide Metals is a small company that incorporates in the state in which it is doing business and plans to offer and sell $100,000 worth of stock only to residents of the county in which it is doing business.Discuss the requirements Countywide must meet for registering its securities.
Q2) A control security is stock which gives the owner a controlling interest in the company.
A)True B)False
Q3) MegaCorp wishes to sell $25 million of securities.The only investors will be 20 institutional buyers.Which of the following applies to this offering?
A) Rule 504 of Regulation D of the 1933 Act.
B) Rule 505 of Regulation D of the 1933 Act.
C) Rule 506 of Regulation D of the 1933 Act.
D) None of the above apply to this $25 million offering.
Q4) Securities issued by banks are exempt from SEC registration. A)True B)False
Q5) What are the three primary ways the SEC creates law?
Q6) What information must be contained in a registration statement?
Page 38
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Chapter 37: Bankruptcy
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Q1) Individual debtors are allowed to keep some assets in a Chapter 7 bankruptcy.
A)True
B)False
Q2) The bankruptcy designed for family farmers is:
A) Chapter 7.
B) Chapter 9.
C) Chapter 11.
D) Chapter 12.
Q3) When Dudley files his Chapter 7 petition,he lists the following debts:
a.
$25,000 in back child support and alimony.
b.
$15,000 for liabilities incurred after drinking and driving.
c.
$10,000 for past-due student loans.
d.
$5,000 for past-due rent to his landlord.
e.
$550 for a past-due phone bill.
How will each of these debts be treated by the bankruptcy court.
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Chapter 38: Antitrust
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Q1) Antitrust laws in the United States remained constant through most of the 1900s.
A)True
B)False
Q2) For the first 70 years after the Sherman Act was enacted,judges were reluctant to enforce it since scholars and economic experts believed the law was a violation of the Constitution's Commerce Clause.
A)True
B)False
Q3) What law prohibits mergers that are anti-competitive?
A) Sherman Act.
B) Clayton Act.
C) Robinson-Patman Act.
D) Radmon Act.
Q4) Explain horizontal price-fixing and vertical minimum and maximum price-fixing.Discuss their status under antitrust laws.
Q5) Companies with substantial assets must notify the FTC before consummating a merger.
A)True
B)False
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Chapter 39: Consumer Law
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Q1) The maximum rate of interest for credit transactions is established by:
A) state law.
B) federal law.
C) the Federal Reserve Board.
D) the FTC.
Q2) The Equal Credit Opportunity Act makes it illegal for a lender to discriminate against a potential borrower because of race,national origin,religion,or sex,but it is permissible to treat a borrower differently if he or she is on welfare.
A)True
B)False
Q3) Brooke uses her credit card to purchase a lawn mower at the local "big box" hardware store,but when she tries to use the mower for the first time,she finds it is not self-propelled as advertised.Does she have any recourse?
Q4) "Bait and switch" tactics are not a violation of FTC rules if the consumer is given a choice of which product to buy.
A)True
B)False
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Chapter 40: Environmental Law
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Q1) Under the Clean Air Act:
A) California was granted special permission to set stricter pollution standards than the federal standards.
B) all states must follow federal automobile emission standards.
C) the states must each set automobile emission standards, which must then be approved by the EPA.
D) the EPA was directed to reduce automobile pollution levels by 50 percent within six years.
Q2) TriColor,Inc.purchased a piece of land from HBC,Inc.Hazardous waste was subsequently discovered on the land.Even though TriColor did nothing illegal,it may be liable under CERCLA for the cleanup costs.
A)True
B)False
Q3) The Toxic Substances Control Act regulates:
A) chemicals other than pesticides, foods, drugs, and cosmetics.
B) insecticides.
C) natural gas.
D) pesticides.
Q4) Discuss the four major provisions of the Clean Air Act.
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Chapter 41: Cyberlaw
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Q1) You make an online purchase of a hooded sweatshirt with the logo of the Dallas Cowboys.The next time you log on,your screen has a banner ad for Dallas Cowboy hats and shirts.This banner ad is most likely the result of:
A) a cookie.
B) a coincidence.
C) the Internet crime of theft of private information.
D) encryption software.
Q2) Which of the following is NOT true under the Electronic Communications Privacy Act?
A) An intended recipient of an e-mail has the right to disclose it to third persons.
B) ISPs are prohibited from disclosing the content of electronic messages to anyone other than the addressee, even if the disclosure is necessary for the performance of the ISP's service.
C) An employer has the right to monitor workers' e-mail if the monitoring occurs in the ordinary course of business or the employer provides the e-mail system.
D) To access e-mail messages that have been stored for 180 days or less, the government must first obtain a search warrant.
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Chapter 42: Intellectual Property
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Q1) Intellectual property:
A) producers are likely to be adequately paid in the free market.
B) production is not subsidized by the government.
C) typically is expensive to produce but cheap to reproduce and transmit.
D) typically is expensive to produce, copy, and transmit.
Q2) A trademark lasts for:
A) 20 years after the application is filed.
B) 70 years after the death of the creator.
C) 10 years, but it can be renewed for an unlimited number of terms as long as it is used.
D) as long as it is kept confidential.
Q3) Explain what a domain name is.Discuss if and how a domain name can be registered as a trademark or if a trademark can be registered as a domain name.
Q4) Martina developed a new type of apple tree which could be reproduced through grafting.She cannot protect her rights in this tree by obtaining a plant patent since the tree cannot be reproduced by planting its seeds.
A)True
B)False
Q5) Briefly discuss a patent,copyright,and trademark.
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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) In many states today a landlord must use reasonable care to maintain safe premises and is liable for foreseeable harm. A)True B)False
Q3) 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
Q4) Discuss the tenant's and the landlord's basic duties under a landlord-tenant relationship.
Q5) Tim is buying a farm.A general warranty deed is the best type of deed for Tim. A)True B)False
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Chapter 44: Personal Property And Bailment
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Q1) Farmer Fred is leasing pasture land from Wealthy Warren.Farmer Fred is working the soil to turn the pasture land into land that will be able to grow crops.As Farmer Fred is preparing the field,he discovers a treasure chest full of gold and silver coins.The coins are all dated before 1810.A finder of treasure trove under common law:
A) was entitled to keep the treasure trove.
B) was required to turn the property over to the owner. Here, under common law, Farmer Fred is required to turn the treasure trove over to Wealthy Warren.
C) was required to turn the treasure trove over to the State.
D) was required to turn the treasure trove over to the federal government who will give the treasure trove to the closest Native American reservation.
Q2) A bailment is different from a gift because:
A) a gift requires consideration, but a bailment does not.
B) a gift requires delivery, but a bailment does not.
C) in a bailment, only possession of the property is transferred to the bailee, whereas with a gift, both possession and ownership must pass to the donee.
D) a gift is always a contract, but a bailment is generally not a contract.
Q3) Distinguish between a contract and a gift.Give an example of each.
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Chapter 45: Planning For The Future: Wills,Trusts,And Insurance
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Q1) The only function of a will is to dispose of a person's property upon death.
A)True
B)False
Q2) 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.
Q3) An executor who is related to the testator is not entitled to compensation.
A)True
B)False
Q4) Mountain Ridge Bank has been named trustee for a $100,000 trust Fred and Martha Betts established for "the living children of the grantors." List the requirements for establishing a trust.Identify the primary obligation of the trustee and discuss the fiduciary duty of the trustee.
Q5) The major disadvantage of a trust is:
A) expense.
B) lack of privacy.
C) it may have to go through an often lengthy probate process.
D) lack of control.
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