Legal Aspects of Management Exam
Solutions
Course Introduction
Legal Aspects of Management explores the fundamental legal principles and regulations that govern business operations and managerial decision-making. The course covers topics such as contract law, corporate governance, intellectual property, employment law, and dispute resolution, providing students with an understanding of the legal environment in which organizations operate. By examining real-world case studies and legal frameworks, students learn to identify and manage legal risks, ensure compliance, and make informed decisions that align with ethical and legal standards in the business world.
Recommended Textbook
Legal Environment of Business A Managerial Approach 3rd Edition by Sean Melvin
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Page 2
Chapter 1: Legal Foundations
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Q1) Trial lawyers from outside firms,often selected by general counsel when a particular field of expertise is needed,are referred to as _______ .
Answer: litigators
Q2) Civil law systems reject and prohibit the use of precedent,relying solely on strict interpretations of statutes.
A)True
B)False
Answer: False
Q3) Most states have combined courts of law and equity.
A)True
B)False
Answer: True
Q4) Black's Law Dictionary,as cited in the textbook,defines the term "law" as including each of the following except
A) a body of rules.
B) conduct prescribed by a controlling authority.
C) having the power to bind persons.
D) a tool for regulating personal ethics.
Answer: D
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Chapter 2: Business and the Constitution
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Q1) When due process limits the power of the states to regulate certain areas related to individual liberty,this is called
A) state due process.
B) federal due process.
C) substantive due process.
D) procedural due process.
Answer: C
Q2) The legal authority that a court must have to decide a case is called _______ .
Answer: jurisdiction
Q3) According to the decision in Brown v.Entertainment Merchants Association,the Court applied an intermediate-level scrutiny standard because the state's action was related to a fundamental right -freedom of speech.
A)True
B)False
Answer: False
Q4) The government's system of checks and balances is called _______.
Answer: separation of powers
Q5) The right of a state to protect its citizenry is called its _______.
Answer: police powers
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Chapter 3: The American Judicial System, Jurisdiction and Venue
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Q1) Which of the following courts renders decisions binding only on the parties involved in the dispute?
A) The Pennsylvania Supreme Court.
B) The U.S. Supreme Court.
C) The U.S. District Court.
D) The Michigan Appellate Court.
Answer: C
Q2) An Oregon corporation and a New Hampshire corporation have entered into a contract and agreed that any legal disputes will be conducted using New Hampshire law.This agreement is called a
A) state selection clause.
B) venue selection clause.
C) site selection clause.
D) forum selection clause.
Answer: D
Q3) Delaware has courts that exclusively hear commercial matters,and these specialized courts are called ____ courts.
Answer: chancery
Q4) The party petitioning or asking for an appeal is called the _______. Answer: appellant
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Chapter 4: Resolving Disputes: Litigation and Alternative Dispute
Resolution
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Q1) Evidence that proves innocence or nonliability is called ____ evidence.
Q2) A plaintiff must file a lawsuit within a certain time limit called the ____.
Q3) Scoop Masters Inc.has been charged by Fab Flavors Corp.with stealing Fab Flavors' patented process for making ice cream.Fab Flavors' attorney speaks with the company's president and creates a written memorandum of their discussion.During discovery,Fab Flavors must provide the written memorandum to Scoop Masters.
A)True
B)False
Q4) Binding arbitration means that
A) the parties had previously agreed that arbitration would be utilized, rather than litigation, should a dispute arise.
B) the rules of the hearing will be strict in terms of number of witnesses called, duration of the hearing itself, and whether attorneys can be present.
C) the decision of the arbitrator will be final unless the parties agree to reopen the case.
D) the decision of the arbitrator will be final and the parties are barred from agreeing to reopen the case.
Q5) What is a pretrial conference,when does it occur,and what are its purposes?
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Chapter 5: Business, Societal, and Ethical Contexts of Law
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Q1) People and companies that are directly and indirectly affected by another company's decisions are called _______.
Q2) Shania is on the board of directors of a public company.The board is deciding on a new health care plan that would cost its workers more than its current plan,but would save the company millions.After asking herself how she would feel if this decision was announced to the public on the local and national news,Shania decides to vote against changing the health plan.The approach Shania used in making her decision is referred to as the .
A) maximizing profits test
B) invisible hand test
C) universalization test
D) broadcast news test
Q3) Ivan is 85 years old and Gianna,his wife,is 83.They are on a fixed retirement budget and have no disposable income and no savings.Gianna's doctor informs her that she requires a particular medicine that costs $84.They don't have money to buy the medicine,there are no relatives or friends to ask,and there are no programs that can provide them with the money for the medicine.Feeling he has no choice,Ivan goes to the local bank and robs it,handing the teller a note demanding $84 in small bills.Discuss Ivan's action from a moral and ethical point of view.
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Page 7
Chapter 6: Overview and Language of Contracts
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Sample Questions
Q1) In general,contracts for services are governed by A) state common law.
B) state statutory law.
C) the Uniform Commercial Code.
D) federal law.
Q2) A building manager hires a painting company to paint the common areas in the building.The manager will supply all of the paint.This contract is a hybrid contract.
A)True
B)False
Q3) The terms agreement and contract have the same meaning.
A)True
B)False
Q4) All of the following are necessary elements of a contract except A) mutual assent.
B) capacity.
C) writing.
D) consideration.
Q5) _______ is the element of a contract that requires a bargained-for exchange of goods and/or services that are recognized as valuable.
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Chapter 7: Contract Enforceability and Performance
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Q1) In which of the following situations would a delegation of contractual duties be allowed?
A) A surgeon performing brain surgery.
B) An actor hired to perform in a play.
C) A sculptor hired to sculpt your bust.
D) A painter hired to paint your home.
Q2) When one party fails to perform his or her duties under a contract,that party is said to be in total _______.
Q3) An assignment may be of current and/or future rights.
A)True
B)False
Q4) Restitution is classified as an equitable remedy. A)True
B)False
Q5) Kathy and Tom have entered into a contract in which Mike has been named and included as an intended beneficiary by Kathy.Should Tom or Kathy breach the contract,Mike may sue both Tom and Kathy for breach of contract.
A)True
B)False
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Chapter 8: Contracts for the Sale of Goods
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Q1) An irrevocable offer made by one merchant to another is called a _______.
Q2) The statute of frauds provides that certain sales contracts be evidenced by a written agreement.What type of sales contract does this requirement apply to,and what constitutes a writing sufficient to evidence an enforceable contract?
Q3) Which of the following items would be properly subject to a UCC sales contract?
A) A house.
B) A Christmas tree sold in a parking lot.
C) Rights to a patent.
D) An employment contract.
Q4) Article 2 rules for acceptance of offers are more rigid than common law rules.
A)True
B)False
Q5) The UCC permits terms to be added into a contract or filled in as gap fillers; however,a contract between merchants cannot be enforced unless the parties have agreed to and specified a price in their agreement.
A)True
B)False
Q6) _______ is the legal term for the right of ownership in goods.
Q7) A _______ is one that is regularly engaged in the sale of a particular good.
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Chapter 9: Torts and Products Liability
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Q1) When Ford runs a commercial stating that Fords are better than Chevrolets and that "you'll be happier if you buy a Ford," Ford is committing trade libel.
A)True
B)False
Q2) Chelsea's house is for sale,and she is selling it through a real estate agent.The house is listed,and any licensed agent may show the house by using the special accessible key in a lockbox on the front porch.Stan is a licensed agent and brings Paula into the home to show it for a possible sale while Chelsea is not home.Stan and Paula would be considered
A) invitees.
B) licensees.
C) trespassers.
D) guests.
Q3) Violations of safety statutes are sometimes referred to as negligence _______.
Q4) Inducing someone to break a contract with a third party is tortious conduct.
A)True
B)False
Q5) Name the various categories of torts,and explain the essential differences between them.
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Chapter 10: Agency
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Q1) To develop your understanding of agency law,you need to be aware of the legal requirements for creating an agency,the liability of a principal for an agent's conduct,and the remedies available to the parties.
A)True
B)False
Q2) In a fully disclosed agency situation,the agent is not contractually liable to the third party.
A)True
B)False
Q3) A principal has the power to terminate an agency relationship at any time.
A)True
B)False
Q4) One who agrees to act and is authorized to act on behalf of another,a principal,to legally bind the principal in particular business transactions with third parties pursuant to an agency relationship is the _______.
Q5) Tom has been injured on the job,so his employer hires Harry to fill in for him.The agreement with Harry is that he will work until Tom is ready to return.When Tom is indeed ready to return,Harry's position is terminated by an express act defined as _______.
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Chapter 11: Employment Relationships and Labor Law
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Q1) Explain how the Electronic Communications Privacy Act applies to employee privacy and protections.
Q2) Workers' compensation provides benefits for workers who are injured on the job.
A)True
B)False
Q3) Which of the following is not a factor considered when classifying an employee as covered or exempt?
A) Education or skill level.
B) Amount of physical labor required.
C) Whether the employee uses the employer's tools or his or her own.
D) Degree of supervision required by the employer.
Q4) Employers must provide continuing health care coverage to any employee,for a fee,even if terminated,under the
A) Health Insurance Portability and Accountability Act.
B) Consolidated Omnibus Budget Reconciliation Act.
C) Social Security Act.
D) Health Care and Education Reconciliation Act.
Q5) When an employee is being classified as exempt or nonexempt regarding Fair Labor Standards Act coverage,what factors are evaluated to arrive at a determination?
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Chapter 12: Employment Discrimination
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Q1) Once the plaintiff has established a prima facie case under the McDonnell Douglas standard and the defendant has presented justification for the actions taken,the plaintiff must now prove any of the following except
A) the defendant's stated reasons had no basis in fact.
B) the stated reasons were not the true and accurate reasons.
C) the stated reasons were insufficient to explain the defendant's actions.
D) the stated reasons contain a mixed motive.
Q2) In Diaz v.Pan Am World Airways,Inc.,the plaintiff was denied a job as a flight attendant because the airline had a policy of hiring only women as flight attendants.The court held that
A) because the airline proved women were better in certain aspects of the job, gender was a bona fide qualification for the position.
B) because customer and employee preference was so high, gender was a bona fide qualification for the position.
C) customer preference did not make gender a bona fide qualification for the position.
D) hiring men as flight attendants would lead to sexual harassment.
Q3) Disparate treatment is analyzed using the _______ standard.
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Page 14
Chapter
13:
Choice of Business Entity, Sole Proprietorships, and Partnerships
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Q1) Stanton and Francesca have started a general partnership.Stanton has contributed 95 percent of the start-up capital and has the business experience and contacts,while Francesca's primary contribution is the labor necessary to operate the business.Management decisions are jointly made.At the end of the year,the business has shown a $100,000 profit.Stanton and Francesca have no formal written partnership agreement.
A) Stanton is entitled to $95,000, and Francesca gets $5,000.
B) The RUPA mandates that each get $50,000.
C) The RUPA mandates that Francesca be paid a fair amount for her labor contribution and the remaining profits be split with 95 percent going to Stanton and 5 percent going to Francesca.
D) The RUPA mandates that Francesca be paid a fair amount for her labor contribution and the remaining profits be split equally between Stanton and Francesca.
Q2) Capitalization refers to how the business will fund its operations.
A)True
B)False
Q3) A sole proprietorship automatically is dissolved when the owner dies.
A)True
B)False
Page 15
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Chapter 14: Limited Liability Companies and Limited Liability
Partnerships
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Q1) Both managing members and controlling members owe a fiduciary duty to other members.
A)True B)False
Q2) The procedure for collecting additional capital contributions from partners as necessary is called a _______.
Q3) Burt has gone to a commercial bank to negotiate a loan for the LLC in which he is a member.He tells the bank that he is authorized to act on behalf of and to bind the company.What is the best way for the bank to verify whether Burt does in fact have the authority he claims?
A) Get him to sign a written statement.
B) Call another member of the LLC for confirmation.
C) Check the articles of organization.
D) Nothing need be done because all LLC members have the right to bind the company, as do general partners.
Q4) A personal guarantee is a pledge from LLP members of personal assets to guarantee payment obligations of the business venture.
A)True
B)False
Page 16
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Chapter 15: Corporations
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Q1) Kate owns 1,000 shares of stock in a corporation,making her part-owner of the corporation.As an owner,if Kate enters into a contract on behalf of the corporation,the company will be bound by her actions.
A)True
B)False
Q2) A corporation formed to maintain a charitable operation is called a
A) nonprofit corporation.
B) Subchapter S corporation.
C) public corporation.
D) closely held corporation.
Q3) Which of the following is NOT a factor used by courts to determine whether to pierce the corporate veil?
A) Poor management and decision making by an inadequately trained or educated manager.
B) Inadequate capitalization.
C) Evidence of fraud or willful misconduct.
D) Failure to follow necessary corporate formalities.
Q4) A corporation exists as an independent person separate from its principals.
A)True
B)False
Page 17
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Chapter 16: Regulation of Securities, Corporate
Governance, and Financial Markets
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Q1) The purchase and sale of issued securities between investors is called the A) primary market.
B) secondary market.
C) preferred market.
D) common market.
Q2) With regard to financial reporting and corporate governance,what is now required of public companies under the Sarbanes-Oxley Act?
Q3) Debentures are unsecured equity instruments that are issued by a corporation.
A)True
B)False
Q4) Which of the following is not a required preregistration document?
A) the prospectus
B) letters of intent
C) an underwriting agreement
D) comfort letters
Q5) The SEC has the power to initiate criminal actions against individuals or companies that violate security laws.
A)True
B)False
Page 18
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Chapter 17: Administrative Law
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Q1) Mikhail believes that his neighbor Stephanie has been dumping sewage on her property.After the Environmental Protection Agency conducts its investigation,Mikhail is permitted,under the Sunshine Act,to attend the meeting called to discuss the results of the investigation.
A)True
B)False
Q2) What is the first step in the agency rulemaking process?
A) Determine legislative authority.
B) Draft the proposed rule change.
C) File for a hearing to start the formal rulemaking procedure.
D) Study and research of alternatives.
Q3) The concept that in order to pass judicial muster,the evidence must show that the agency made its final decision based on a consideration of relevant factors without any clear errors of judgment is known as the
A) arbitrary and capricious standard.
B) Chevron test.
C) logical-outgrowth test.
D) McDonnell Douglas test.
Q4) Administrative agencies exercise their policymaking function through _______.
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Chapter 18: Environmental Law
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Q1) The National Environmental Policy Act (NEPA)focuses on achieving results like clean air and water.
A)True
B)False
Q2) Superfund requires that all states have emergency procedures in place in the event of a chemical spill.
A)True
B)False
Q3) The National Park Service is considering expanding one of its ranger stations at Yellowstone National Park.The ranger station is located on the side of a mountain and is primarily used for tracking animal populations.The National Park is unsure what the expansion would do to the environment.Before it is able to start construction,the National Park must categorize the expansion under the NEPA as
A) no category required.
B) an environmental impact statement.
C) a categorical exclusion.
D) an environmental assessment.
Q4) The National Environmental Policy Act (NEPA)sets out a _______ for making decisions.
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Chapter 19: Antitrust and Regulation of Competition
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Q1) Which of the following is not a vertical restraint?
A) Market allocation.
B) Tying agreements.
C) Exclusive selling, territorial, and dealing agreements.
D) Price-fixing.
Q2) The _______ test is used to determine whether an entity has monopoly power.
A) share of the relevant market
B) rule of reason
C) vertical integration
D) bright-line
Q3) The Sherman Act applies only to entities that have acted in an unreasonable manner.
A)True
B)False
Q4) Which of the following agencies enforces federal antitrust laws?
A) Securities and Exchange Commission.
B) Federal Bureau of Investigation.
C) Better Business Bureau.
D) Federal Trade Commission.
Q5) Discuss the difference between horizontal and vertical price-fixing.
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Chapter 20: Creditors Rights and Bankruptcy
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Q1) During the liquidation process,secured creditors are paid first and in full provided the value of the collateral equals or exceeds the value of their security interests.
A)True
B)False
Q2) Bankruptcy is primarily governed by
A) federal statutes.
B) state statutes.
C) a blend of state and federal statutes.
D) administrative regulations.
Q3) Which businesses typically need a personal guaranty in order to receive a loan?
A) large businesses
B) small businesses
C) almost all businesses
D) no businesses (Businesses do not need personal guaranties.)
Q4) A(n) _______ stops creditors from pursuing their collection actions.
Q5) What is the means test? Provide an example of how it would be applied.
Q6) Bankruptcy laws come solely from state statutes and case law.
A)True
B)False
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Chapter 21: Warranties and Consumer Protection Law
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Q1) Which of the following is not a requirement for disclaiming a warranty?
A) Statutory authorization.
B) A conspicuous writing.
C) An explanation of why the warranty is being disclaimed.
D) Inclusion of the word merchantability if merchantability is to be disclaimed.
Q2) If Annie borrows money from her aunt Bethany to pay for her kitchen upgrades,Bethany does not need to provide required disclosures under the Truth in Lending Act.
A)True
B)False
Q3) Name and discuss the two categories of warranties.
Q4) When the seller promises that a product is good for a particular activity,the seller is implying the warranty of merchantability.
A)True
B)False
Q5) Victims of odometer tampering are eligible to receive up to triple the amount of their damages.
A)True
B)False
Q6) What is puffery? Provide an example.
Page 23
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Chapter 22: Criminal Law and Procedure in Business
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Q1) Alan is a freshman in the computer science department.One of his professors embarrassed him in class and mocked him,saying that Alan will never be as good as she is with computers.In order to prove the professor wrong,Alan decided to break into the main computer at the Department of Defense and leave a note saying the professor is a spy.Alan hacked into the computer and left the message.He designed the message to erase itself after 13 hours,leaving no trail or damage to the computer.If Alan is discovered to be the hacker,has he committed a crime? Explain.
Q2) In Miranda v.Arizona,Miranda's voluntary confession was suppressed because
A) Miranda asked for an attorney but was questioned before the attorney arrived.
B) Miranda spoke such poor English that he did not fully understand his rights as told to him and an interpreter was not provided.
C) Miranda spoke English but did not read English, so he did not understand that the document he signed was a confession.
D) Miranda was questioned in a police interrogation room and the Court deemed the setting too coercive, particularly since he did not know his rights, and even though he was not forced to talk by the police, his confession was therefore not truly voluntary.
Q3) What are the three purposes or aims of imposing punishment for criminal acts?
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Chapter 23: Personal Property, Real Property, and Land Use Law
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Q1) If a student leaves a book bag in class by accident and the professor takes possession to safeguard the bag,a bailment has been formed.
A)True
B)False
Q2) Frazier has returned from a nursery where he has purchased 21 rose bushes to landscape the exterior of his home.Each bush has its roots wrapped in burlap,and Frazier carried the bushes home in the back of his pickup truck.Frazier has now planted each of the rose bushes.The bushes are real property.
A)True
B)False
Q3) What is meant by the concept that title to personal property and title to real property provide the owner a bundle of rights?
Q4) Travon has agreed to lease a home from Helena on a month-to-month basis.The lease is
A) a life estate.
B) an easement.
C) a tenancy for years.
D) a periodic tenancy.
Page 25
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Chapter 24: Intellectual Property
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Q1) Trade secrets are protectable
A) for 9 years.
B) for 17 years.
C) for 23 years.
D) for as long as the company desires.
Q2) Once a patent has been issued by the U.S.Patent and Trademark Office,the patent cannot be challenged or revoked due to the comprehensive investigation performed by the USPTO prior to issuance.
A)True
B)False
Q3) Your school or college has just received a specialized accreditation for which a lot of work has been done.This specialized accreditation is a great achievement.If the accrediting body takes a picture from your school or college's website and publishes the picture as a thumbnail,along with a hyperlink to your school or college's website,on its site to advertise or announce the accomplishment,the accrediting body is infringing on the picture's copyright.
A)True
B)False
Q4) "Uber" is an example of a[n] _______ trademark.
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Chapter 25: International Law and Global Commerce
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Q1) In Butters v.Vance International,Inc.,Vance International was hired to provide security for the Saudi royal family while they were in California.Butters was employed by Vance International as a security officer.She was assigned to the Saudi detail and worked occasionally as an acting supervisor in a security command post.Vance International recommended to the Saudis that Butters be promoted to a full rotation in the command post.The Saudis rejected this recommendation on their belief that it was against Islamic law to have a woman in the command post.Butters sued over gender discrimination for the loss of promotion.Vance International argued that it was immune under the Federal Sovereign Immunities Act because it was carrying out the orders of a foreign government.The court found that Vance International
A) was not immune because the discrimination took place on American soil.
B) was not immune because the Saudis waived immunity by hiring an American security company.
C) was immune because the Saudis were performing an act peculiar to a sovereign and not a commercial activity.
D) was immune because U.S. courts recognize the jurisdiction of Saudi Arabia's laws for Saudi nationals in the United States.
Q2) What are the roles of the International Court of Justice?
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