Legal Environment of Business Exam
Bank
Course Introduction
Legal Environment of Business explores the fundamental legal principles and frameworks that shape the world of commerce. The course examines sources of law, the structure and function of the court system, and the role of government in regulating business activities. Topics include contracts, agency, employment law, intellectual property, business organizations, and the ethical and social responsibilities of businesses. Students gain practical insights into legal decision-making and risk management, preparing them to navigate the complex regulatory landscape that impacts business operations domestically and internationally.
Recommended Textbook Managers and the Legal Environment Strategies for the 21st Century 8th Edition by Bagley
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Page 2
Chapter 1: Law, Value Creation, and Risk Management
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Q1) Legally astute management teams typically wait until later in the strategic development to bring counsel in and evaluate legal considerations.
A)True
B)False
Answer: False
Q2) Refer to Fact Pattern 1-1.The government regulations pertaining to the use of certain chemicals involved which of the following types of law?
A) Public
B) Private
C) Circumscribed
D) Tangent
Answer: A
Q3) Under the __________ view of the firm,resources can be a source of competitive advantage if they are __________.
A) resource-based, rare
B) systems-based, hard to copy
C) resource-based, available to competitors
D) systems-based, available to competitors
Answer: A
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Page 3
Chapter 2: Ethics and the Law
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Q1) The Organization of Economic Cooperation and Development (OECD)is:
A) comprised of nations form North America, Europe, and Asia-Pacific.
B) a subsidiary of the European Union.
C) comprised of nations who entered into the North American Free Trade Agreement.
D) comprised of states inside the U.S.
Answer: A
Q2) A company's CEO does not play a significant role in instilling a sense of ethics throughout the organization.
A)True
B)False
Answer: False
Q3) The __________ Act illustrates that corporate conduct violating society's expectations can result in new forms of regulation without regard for feasibility or cost.
A) White-Rush Dow Jones Conciliatory
B) Dodd-Frank Wall Street Reform and Consumer Protection
C) Corporate and Securities Reform and Retribution Consumer Protection
D) Securities and Oversight
Answer: B
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4
Chapter 3: Sources of Law, Courts, and Dispute Resolution
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Q1) A federal court of appeals in one circuit must follow an earlier decision on an issue made by a federal court of appeals in another circuit.
A)True
B)False
Answer: False
Q2) When the U.S.Supreme Court decides to hear a case,it issues a __________ ordering the lower court to certify the record of proceedings below and send it to the Supreme Court.
A) commandment
B) writ of order
C) writ of certiorari
D) writ of expo facto
Answer: C
Q3) A cite such as 2004 WL 1208516 may be found on Westlaw.
A)True
B)False
Answer: True
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Chapter 4: Constitutional Bases for Business Regulation
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Q1) The general power retained by the states to protect the health,safety,welfare,and morals of state residents is often referred to as ____ power.
A)police
B)regulatory
C) protective
D)community
Q2) Members of the U.S.Supreme Court are appointed by Congress with the advice and consent of the President.
A)True
B)False
Q3) In the __________ (1965)case,the U.S.Supreme Court first extended substantive due process to the right to privacy,encompassing birth control and a woman's reproductive choice.
A) Roe v.Wade
B) Griswold v.Connecticut
C) Planned Parenthood v.Casey
D) Gonzalez v.Carhart
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Page 6
Chapter 5: Agency
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Q1) Which of the following is true regarding situations in which an agent enters into a contract without authority?
A) The principal is not bound nor is the agent bound.
B) The principal is bound and the agent may be personally liable.
C) The principal is not bound, but the agent may personally liable.
D) Neither the principal nor the agent is bound if the contract is oral; but if the contract is written, both the principal and agent are bound.
Q2) What is considered in determining the scope of an agent's implied authority?
Q3) The person hiring an independent contractor bargains both for the results and the means of achieving the results.
A)True
B)False
Q4) The "Inside Story" discusses how the Telephone Records and Privacy Protection Act of 2006 made it illegal for a person to use fraud to obtain individual customer billing records and other customer information from telephone companies.
A)True
B)False
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Chapter 6: Administrative Law
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Q1) Critics of administrative agencies claim that they violate the doctrine of separation of powers.Explain the basis for this criticism.Explain why agencies are so prevalent despite the absence of any explicit provision for their existence in the Constitution.Discuss fully.
Q2) Generally,federal administrative agencies are created by:
A) Congress.
B) the President.
C) the Supreme Court.
D) the United States Constitution.
Q3) The general rule is that agency action is ripe for judicial review when the impact of the action is sufficiently direct and immediate as to make review appropriate.
A)True
B)False
Q4) The Fifth Amendment's protection against self-incrimination does not apply to corporations.
A)True
B)False
Q5) As set forth in the text,what are the seven basic steps for working successfully with an administrative agency?
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Chapter 7: Contracts
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Q1) Describe the three standard measures as listed in the text that courts have developed to measure monetary damages in contract cases.Explain how each would be measured.
Q2) A contract entered into by a minor is:
A) void.
B) voidable.
C) binding.
D) illusory.
Q3) Liquidated damages are damages that:
A) punish the breaching party.
B) fluctuate with the market conditions.
C) are agreed upon.
D) none of these choices.
Q4) Void means the same thing as voidable in contract law.
A)True
B)False
Q5) In certain cases a court may order specific performance rather than monetary damages.
A)True
B)False
Page 9
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Chapter 8: Sales, Licensing, and E-Commerce
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Q1) The UCC permits a contract to be enforced if the parties intended a binding contract,even though important terms may have been left open for later agreement.
A)True
B)False
Q2) __________ do not relieve a contracting party from their responsibilities under the UCC doctrine of commercial impracticability.
A) Wars
B) Market fluctuations
C) Embargoes
D) Market fluctuations and embargoes
Q3) Many states have applied Article 2 of the UCC to software licenses either directly or by analogy.
A)True
B)False
Q4) The UCC has adopted the "mirror image" rule.
A)True
B)False
Q5) Indicate how a seller may disclaim warranties under the UCC.
Q6) What does Section 201 of the UCC provide regarding a Statute of Frauds?
Page 10
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Chapter 9: Torts and Privacy Protection
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Q1) Which of the following is the best defense to negligence?
A) The plaintiff was a friend of the defendant.
B) The defendant did not intend to harm the plaintiff.
C) The defendant was concerned for the safety of the plaintiff.
D) The plaintiff contributed to his own injuries.
Q2) __________ is the publication of statements derogatory to the quality of the plaintiff's business,to the business in general or to the plaintiff's personal affairs in order to discourage others from dealing with him or her?
A) Disparagement
B) Critical falsehood
C) Defamation
D) Malicious derogatorism
Q3) CASE 9.1,Kubert v.Best(2013)examined the question of whether a third party who was not present,but was __________ the driver of the car who hit the plaintiff,had __________ the person who was injured.
A) texting, a legal duty of care to
B) talking, a legal duty to C) texting, a legal defense to D) texting, distracted
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Page 11
Chapter 10: Product Liability
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Q1) Which of the following provides some protection to defendants in that they establish a rebuttable presumption about how long consumers can continue to safely use a product?
A) Discovery-of-injury statutes
B) Statutes of limitation
C) Useful life statutes
D) Statutes of repose
Q2) Sally purchased a used toaster at a yard sale.The seller told Sally that although the toaster was over ten years old,she had not had any problems with it.Sally takes the toaster home and uses if for a few months.One day,however,as Sally was using the toaster,it malfunctioned and caused a small fire in Sally's kitchen along with significant smoke damage.Sally decides that she wants to sue the manufacturer of the toaster and that she is going to do so within one month of the fire.What would likely be the manufacturer's best defense in a strict liability in tort action brought by Sally?
A) The statute of limitations
B) The statute of repose
C) The fact that Sally bought the toaster at a yard sale, not from a recognized retailer
D) There would be no viable defense.
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Chapter 11: Intellectual Property
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Q1) Arbitrary marks are real words whose ordinary meaning has something to do with the color or shape of the trademarked product.
A)True
B)False
Q2) The __________ doctrine provides that copyright protection does not extend to the useful application of an idea.
A) useful article
B) utility
C) equivalents
D) design
Q3) The Uniform Trade Secrets Act is a federal law.
A)True
B)False
Q4) An invention is "novel" if it is explained in book format.
A)True
B)False
Q5) Copyright protection does not extend to derivative works.
A)True
B)False
Q6) Discuss in detail common law rights,if any,in a trademark in the U.S.
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Chapter 12: The Employment Agreement
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Q1) Employers must complete a(n)_____ form showing verification of the identity and employment eligibility of all persons hired.
A) A-12
B) I-9
C) Imm.1
D) A1
Q2) Joe is the owner of a manufacturing company called ProfitMax.Joe finds out that a union is attempting to organize the employees at ProfitMax.Joe tells you that he will never deal with a union and that he has no plans to pay a higher wage if the union is elected.Joe has plans to tell his supervisors that they may not encourage union activity.Joe has plans to do surveillance regarding which employees attend union meetings so that he can fire them.He is also going to announce to all employees that they will get a raise if they vote against the union.He asks you what his obligations are if the union gets elected and if his other plans are legal.He also wants to know what he can expect from his supervisors,some of whom he is suspicious of supporting the union.What would you tell him?
Q3) Payment of workers' compensation is based on fault.
A)True
B)False
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Page 14
Chapter 13: Civil Rights and Employment Discrimination
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Q1) Under federal law,employees may not waive their rights under the Age Discrimination in Employment Act (ADEA).
A)True
B)False
Q2) Which of the following is generally true regarding front pay in discrimination cases?
A) It is a substitute for back pay.
B) It is equal to one-half the back pay amount.
C) It is a substitute for back pay and is generally awarded in addition to reinstatement.
D) It is equal to what the employee would have received had he or she not been discharged and is generally awarded when reinstatement is inappropriate.
Q3) Leave under the Family and Medical Leave Act is:
A) paid leave.
B) unpaid leave.
C) paid leave for 3 weeks and then unpaid.
D) paid leave for 10 weeks and then unpaid.
Q4) Specifically set forth what courts consider in order to determine whether there is a hostile or abusive work environment.
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Chapter 14: Criminal Law
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Q1) Criminal law protects society principally by:
A) vindicating society's values.
B) compensating the victim.
C) punishing the criminal.
D) defining the rules of social behavior.
Q2) Refer to Fact Pattern 14-1.Can Beatrice be tried again for the same crime?
A) No, because of the double jeopardy bar.
B) Only if at least five of the jurors voted in her favor to acquit her.
C) Only if at least six of the jurors voted in her favor to acquit her.
D) Yes.
Q3) Fully discuss limitations on the protection against double jeopardy.
Q4) Where may U.S.federal criminal offenses be found?
A) The United States Code
B) The Code of Federal Regulations
C) Both the United States Code and the Code of Federal Regulations
D) The United States Code, the Coe of Federal Regulations, and the Model Penal Code
Q5) An arrest is considered a seizure under the Fourth Amendment.
A)True
B)False
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Chapter 15: Environmental Law and Sustainability
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Q1) Set forth the Clean Air Act's four types of air quality goals.
Q2) In the Monsanto Co.v.Geertson Seed Farmscase discussed in the text,the court analyzed the issue of __________,or whether the plaintiffs would suffer a(n)__________ traceable to a challenged act that would be redressed by a favorable decision.
A) industry protection, concrete injury
B) national ambient air quality standards, concrete injury
C) standing, concrete injury
D) public nuisance, concrete injury
Q3) The management of hazardous waste is governed by the __________ as amended.
A) Clean Air Act
B) Clean Water Act
C) Solid Waste Disposal Act
D) Federal Superfund Law
Q4) Which of the following is currently the world's top carbon polluter?
A) Brazil
B) India
C) The U.S.
D) China
Page 17
Q5) Who are potentially responsible parties under CERCLA?
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Chapter 16: Antitrust
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Q1) Set forth when a monopolist has a duty to deal with its rivals and the four elements considered in determining such a duty.
Q2) Vertical market division between a franchisor and a franchisee may be lawful when interbrand competition is enhanced by the limitation on intrabrand competition.
A)True B)False
Q3) Which of the following is the objective of the rule of reason rule?
A) To determine whether the requirements of the per se rule have been satisfied.
B) To determine whether, on balance, the activity at issue promotes or restrains competition.
C) To determine whether in a particular situation a horizontal price fixing has actually harmed consumers.
D) To determine if providers of a good acted reasonably in engaging in a boycott.
Q4) One of the major differences between U.S.and European Union competition laws is the European Union's treatment of horizontal agreements. A)True B)False
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Chapter 17: Consumer Protection
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Q1) The labeling of medical devices is under the jurisdiction of the Food and Drug Administration.
A)True
B)False
Q2) Before implementing a mandatory safety standard,the Consumer Product Safety Commission must find that __________ are inadequate.
A) voluntary standards
B) safety guidelines
C) product designs
D) warnings
Q3) In the Thompson v.W.States Medical Centercase referenced in the text,the U.S.Supreme Court ruled that compounded drugs are illegal.
A)True
B)False
Q4) The Federal Commerce Commission has adopted guidelines specifying when manufacturers and marketers can label their products "Made in USA."
A)True
B)False
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Page 19
Chapter 18: Real Property and Land Use
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Q1) Refer to Fact Pattern 18-1.What should Bruce advise Prudence regarding her plans?
A) That she should forget the project because she would be ineligible for any cleanup assistance and, as owner, would be individually liable for the entire project.
B) That she should buy the property without any investigation and deny knowledge of contamination if later questioned because under federal law she can only be held liable if she had full and informed knowledge of contaminants when she made the purchase.
C) That she should incorporate because while an individual is liable for the entire costs of cleanup, a corporation is not.
D) That by taking appropriate steps to become a bona fide prospective purchaser, she can avoid liability for legacy contamination.
Q2) The ownership interests of tenants in common are by definition equal. A)True
B)False
Q3) Describe in detail the three basic types of deeds including any warranties or guarantees the deeds provide.
Q4) Compare and contrast joint tenancy and tenancy by the entirety.
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Page 20
Chapter 19: Forms of Business Organizations
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Q1) Refer to Fact Pattern 19-1.What is the position of the Federal Trade Commission regarding a franchisor selling a franchise very near to an existing franchise?
A) That the practice is illegal.
B) That the practice is illegal unless the first franchisee provides specific permission for the sale to the second franchisee.
C) That the practice is legal and that no disclosures are required.
D) That the practice is legal but that certain disclosures must be made to the first franchisee when that agreement is made.
Q2) The main issue in CASE 19.3Burwell v.Hobby Lobby Stores,Inc.(2014)involved a question of whetherthe requirements for contraception under the Affordable Care Act (Obamacare)violated the due process rights of Hobby Lobby Stores.
A)True
B)False
Q3) An S corporation cannot have more than one class of stock.
A)True
B)False
Q4) Explain requirements for formation of an S corporation.
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Chapter 20: Directors, Officers, and Controlling Shareholders
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Q1) What is a poison pill? What factors favor keeping a poison pill in place?
Q2) A __________ is an agreement in a proposed takeover that allows the board of directors to negotiate with other bidders or to terminate a merger agreement.
A) termination clause
B) fiduciary out
C) revolving door
D) no talk provision
Q3) The Delaware Supreme Court has held that,regardless of the circumstances,a majority shareholder may never freeze out the minority shareholders.
A)True
B)False
Q4) __________ occurs when a raider acquires stock in a target company and then threatens to comhence a hostile takeover unless the stock is repurchased by the target at a premium over the market price.
A) Revlon mode
B) The Van Gorkom test
C) The Unocal Proportionality test
D) Greenmail
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Chapter 21: Public and Private Offerings of Securities
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Q1) Set forth the three tests under which a general partnership may be found to be a security?
Q2) Assuming requirements are met,Rule 144A permits the resale of unregistered securities to qualified: A) issuers.
B) underwriters.
C) institutional buyers.
D) federal banks.
Q3) If an issuer makes successive sales within a limited period of time,the SEC may __________ the successive sales,resulting in the loss of a private-offering exemption. A) restrict B) register
C) integrate D) qualify
Q4) The completion of a public offering terminates the issuer's relationship with the SEC. A)True B)False
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Chapter 22: Securities Fraud and Insider Trading
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Q1) Under Rule 10b-5,any use of the mails is sufficient to satisfy the interstate commerce condition even if the mail does not leave the state.
A)True
B)False
Q2) In the case of a(n)__________,the U.S.Supreme Court has ruled that the reliance will be presumed under Rule 10b-5 if the fact was material.
A) public statement
B) misstatement
C) omission
D) tip
Q3) Which of the following is true regarding who can sue under Rule 10b-5?
A) Only those who purchased the securities at issue may sue.
B) Only those who sold the securities at issue may sue.
C) Only those who have actually purchased or sold the securities at issue may sue.
D) Anyone who either actually purchased or sold the securities at issue, and also anyone who can prove that he or she would have purchased or sold the securities at issue had they known the true facts may sue.
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Chapter 23: Debtor-Creditor Relations and Bankruptcy
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Q1) A(n)__________ subordination is an agreement between two secured creditors by which the subordinating party agrees that the lien of the other creditor will have priority notwithstanding the relative priorities that the parties' liens would otherwise have under applicable law.
A) unenforceable
B) debt
C) lien
D) equitable
Q2) In CASE 23.2Executive Benefits Insurance Agency v.Arkinson(2014)the U.S.SupremeCourt ruled that some claims Congress labeled as "core" (so-called Stern claims)cannot be adjudicated by a bankruptcy court even if all the parties consent to the bankruptcy court's jurisdiction in advance.
A)True
B)False
Q3) Agreements for term or revolving loans may call for mandatory prepayment when certain events occur.
A)True
B)False
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Chapter 24: International Law and Transactions
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Q1) If a country exerts nationalization over a company's assets provides compensation,__________ has occurred.
A) expropriation
B) privatization
C) extraterritoriality
D) confiscation
Q2) __________ is the process by which a country asserts a right to regulate activities that occur beyond its borders.
A) Internationalization
B) Nationalization
C) Extraterritoriality
D) Appropriation
Q3) One simple way of addressing foreign tax risks is a(n)__________,whereby the local licensee is obligated to pay all taxes other than those specifically allocated to the foreign partner.
A) gross-up clause
B) tax shift clause
C) local commitment clause
D) overseas investment clause
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