Legal Environment of Business
Question Bank
Course Introduction
The Legal Environment of Business examines the framework of laws and regulations that influence and shape business operations. This course provides students with an understanding of the American legal system, including sources of law, court structures, and dispute resolution processes. Key topics include contracts, torts, employment law, intellectual property, agency, and the regulatory environment. Through real-world case studies and practical examples, students learn how legal principles impact business decisions, risk management, and ethical practices, preparing them to identify and address legal challenges in the modern business landscape.
Recommended Textbook
Canadian Business and the Law 5th Edition by Dorothy Duplessis
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1993 Verified Questions
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Page 2
Chapter 1: Knowledge of Law As a Business Asset
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Sample Questions
Q1) Canadian law provides that business owners may discriminate in hiring practices and may ignore the laws of other countries; however, they must comply with the health and safety regulations governing the workplace.
A)True
B)False
Answer: False
Q2) Which of the following is a distinguishing characteristic of the influence of law on the business environment?
A) The influence of law does not have to be exacting and literal.
B) The influence of law demands strict, literal enforcement.
C) The influence of law requires litigation of all disputes.
D) The influence of law creates rules of procedure for planning.
Answer: A
Q3) A supplier who commits to a contract is free of any legal obligations for direct and foreseeable financial consequences the other party to the contract may experience should the supplier breach the contract.
A)True
B)False
Answer: False
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Page 3
Chapter 2: The Canadian Legal System
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Q1) Which governing bodies are the primary regulators of business activities in Canada?
A) the federal and municipal governments
B) the Senates of the federal and provincial governments
C) the federal and provincial governments
D) the provincial and municipal governments
Answer: D
Q2) Federal and provincial legislatures are constitutionally provided with the authority to appoint judges within specified judicial jurisdictions.
A)True
B)False
Answer: True
Q3) The decisions of the Supreme Court of Canada are best described as:
A) binding on all other courts in all Canadian jurisdictions
B) limited to constitutional matters
C) binding only on the government
D) always appeals from the Federal Court of Canada
Answer: A
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Page 4
Chapter 3: Managing Legal Risks
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Sample Questions
Q1) Risk avoidance is always the best policy.
A)True
B)False
Answer: False
Q2) What is the goal of the third step in the legal risk management process?
A) to hire a legal professional or insurance consultant
B) to carry out the plan, assess the probability of loss, and revise the plan
C) to determine priority concerns for risk management
D) to be aware of risks and make conscious decisions about handling them
Answer: D
Q3) Which of the following is an example of risk transference?
A) insurance policy deductibles
B) self-insurance
C) noninsurance
D) insurance
Answer: D
Q4) Having a legal risk management plan is unnecessary for a small business entity.
A)True
B)False
Answer: False
Page 5
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Chapter 4: Dispute Resolution
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Sample Questions
Q1) A controversial development has been the awarding of legal costs against unsuccessful plaintiffs involved in class action suits.
A)True
B)False
Q2) Which of the following is applied to determine how a disputed commercial claim will proceed through the civil justice system?
A) substantive rules
B) procedural rules
C) objective rules
D) mandatory rules
Q3) What is the meaning of "evidence" in the legal environment?
A) the proof presented in court to support a claim
B) facts that are strictly documentary in nature
C) facts that are strictly verbal in nature
D) the oral details of the defence to the claim
Q4) How does a person who wins a case in civil court actually collect on the judgment? What limitations are there on his/her ability to collect?
Q5) Contrast the advantages and disadvantages of alternate dispute resolution.
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Chapter 5: An Introduction to Contracts
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Q1) Under which of the following circumstances would a court be likely to set a contract aside?
A) if there is a lack of sufficient equality of the benefits received by each party
B) if there is an attempt to take advantage of a handicapped, vulnerable person
C) if there were witnesses to the contract
D) if the parties put their contract in writing
Q2) Identify and briefly describe the necessary elements that must be present in order for a court to recognize a contract as a legally binding agreement.
Q3) Matt purchases a car for his son from an auto dealership. A week later, his son discovers a defect that renders the car unsafe. The defect is one that a court would consider to be a breach of contract. What legal recourse is available to remedy this problem?
A) The court's resistance to imposing ethical business standards leaves no recourse.
B) Matt may commence a lawsuit against the dealer for breach of contract.
C) Matt's son may file a lawsuit against the auto dealer for breach of contract.
D) Mat's son can sue the manufacturer of the car for breach of contract.
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Page 7
Chapter 6: Forming Contractual Relationships
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Sample Questions
Q1) In his decision, Lord Wilberforce stated, "No universal rule can cover all such cases; they must be resolved by reference to the intention of the parties, by sound business practice and in some cases by a judgment of where the risks should lie...." What legal rule did Lord Wilberforce establish in his ruling on this case?
A) the postage rule
B) the postman rule
C) the postbox rule
D) the post office rule
Q2) In an option agreement, the offeror sells her right to revoke the offer.
A)True
B)False
Q3) Identify and briefly describe what element is recognized as forming the basis of a contract in common law. Include a brief explanation of what is meant by the legal requirement of certainty of offer and identify and briefly described the circumstances under which a court would endeavour to resolve ambiguities in an alleged offer.
Q4) Once made, an offer cannot be revoked.
A)True
B)False
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Chapter 7: The Terms of a Contract
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Q1) OrganicFoods Inc. enters into a contractual supply arrangement with EcoGrow Inc. EcoGrow contractually promises to supply two tons of organic carrots by May 1, providing carrots will be available. If EcoGrow does not supply the carrots as agreed, how will a court view EcoGrow's obligation to OrganicFoods to do so?
A) Business efficacy makes the obligation conditional.
B) Business efficacy makes the obligation provisional.
C) Business efficacy makes the obligation express.
D) Business efficacy makes the obligation absolute.
Q2) A court has been asked to determine what the express terms of a parties' contract encompass, as well as their purpose in accordance with the parties' intentions. What would most likely be constrained by the application of the parol evidence rule with respect to the contract?
A) expatiated evidence
B) expedited evidence
C) extraneous evidence
D) expunged evidence
Q3) The courts will not imply a duty to act in good faith in commercial contracts.
A)True
B)False
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Page 9
Chapter 8: Non Enforcement of Contracts
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Sample Questions
Q1) What interests do the courts balance in deciding whether a noncompetition covenant, preventing an employee from leaving and going into competition with her former employer, is enforceable? What is the test applied by the courts?
Q2) Sanjip has elected to build up the earth around the cracked foundation of his home prior to listing the home for sale. Sanjip's action will not amount to misrepresentation if he fails to disclose the cracks to potential purchasers.
A)True
B)False
Q3) When is a contract considered to be contrary to public policy? Give an example.
Q4) What is the legal definition of "mistake"?
A) the threat of physical or economic harm that results in a contract
B) an unfair manipulation that compromises someone's free will
C) an error made by one or both parties that seriously undermines a contract
D) a false statement of fact that causes someone to enter a contract
Q5) Intoxication is regarded as a form of mental incapacity under the law.
A)True
B)False
Q6) What must be proven in order to have a contract set aside for misrepresentation?
Q7) What is an "electronic signature," and is it legally valid?
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Chapter 9: Termination and Enforcement of Contracts
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Sample Questions
Q1) Leslie offered to pay Murray $100 a day to show her dog in an upcoming three-day competition. Murray accepted and showed the young male dog, winning best of breed during each day's competition. Leslie paid Murray $300. What is the present status of their contractual arrangement?
A) The contract has been terminated by performance.
B) The termination of the competition frustrated the contract.
C) The payment of the settlement ended the contract.
D) The contract terminated by agreement of the parties.
Q2) Within each provincial jurisdiction, a beneficiary under an insurance contract is entitled to sue under that contract even though the contractual arrangement is between parties other than the beneficiary. How is this legally possible?
A) legislation limiting application of exclusion clauses in life insurance contracts
B) common law reclassification of the application of the doctrine of privity
C) legislative amendment to modify application of the doctrine of privity
D) common law limiting application of exclusion clauses in life insurance contracts
Q3) What four requirements must be met in order for a contract to be terminated by frustration?
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Chapter 10: Introduction to Tort Law
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Sample Questions
Q1) What must a finding of guilt or innocence beyond a reasonable doubt be based on?
A) objective and factual reasoning
B) better than a 50 percent chance
C) logic and common knowledge
D) reason and common sense
Q2) Which of the following circumstances is synonymous with the legal term "joint tort-feasor"?
A) A culpable party has committed more than one tort.
B) It is a form of court order prohibiting certain conduct.
C) All blameworthy parties to the tort share joint liability.
D) A victim is found responsible for a portion of the loss.
Q3) Identify the party on whom attention is focused when a tort has been committed. Are the circumstances the same when a criminal offence has been committed? What is the primary purpose each form of law seeks to achieve with regard to individuals and their wrongful acts?
Q4) Identify and briefly describe the law's rationale for holding employers vicariously liable for the tortious actions of their employees.
Q5) Distinguish between pecuniary and non-pecuniary losses. Which of these can lead to compensation under the principles of tort law?
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Chapter 11: The Tort of Negligence
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Q1) What distinguishes how the House of Lords would address a case involving negligence from how a Canadian court would address the same case?
A) the question of whether the case is novel posed by the Canadian courts
B) the imposition of a judicial policy based on competing interests
C) the question of whether the case is novel posed by the House of Lords
D) the imposition of reasonably exacting legal standards for business
Q2) The standard of a reasonable person is the responsibility owed to avoid carelessness that causes harm to another.
A)True
B)False
Q3) Which of the following is synonymous in law with the standard used to judge whether a person's conduct in a certain instance is negligent?
A) an ordinary standard of care
B) the prima facie test
C) the reasonable person test
D) a professional's standard of care
Q4) In tort law, a relationship of deficient proximity creates a neighbour.
A)True
B)False
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Chapter 12: Other Torts
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Sample Questions
Q1) A retail store owner requests that an unruly patron immediately leave the store. What is the status of the patron?
A) a licensee
B) a non-invitee
C) a trespasser
D) an entrant of right
Q2) The Trade-marks Act contains a statutory form of action that bears a strong resemblance to the tort of passing off.
A)True
B)False
Q3) Which of the following would most likely be used by a court to assess the quantum of an individual's actual monetary damages resulting from defamation?
A) the severity of injury from the falsehood
B) the remoteness of the damages
C) the severity of the defamation
D) the foreseeability of the damages
Q4) Identify who an occupier of a building is responsible for and briefly explain the basis on which the extent of that responsibility is varied.
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Chapter 13: The Agency Relationship
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Sample Questions
Q1) A representation of authority given by a person who purports to be an agent is legally known as a disclosed warranty.
A)True
B)False
Q2) Which of the following is a common characteristic of agency by estoppel and agency by ratification?
A) the law typically favours the principal
B) the reasonable conclusion of existence of agency
C) the adoption of a contract after the fact
D) the lack of the agent's authority to act
Q3) Which of the following is considered, as a general rule, to be within the scope of an agent's fiduciary duties?
A) full disclosure of acceptance of each secret commission and profit
B) absolute prohibition against acting for two principals
C) sending a client's file for storage with an outside storage facility
D) personal interests supersede the interests of the principal
Q4) Identify and briefly describe the ways in which the nature of the authority given to an agent is inherently flexible and easily customized.
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Page 15
Chapter 14: Business Forms and Arrangements
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Q1) Which of the following is a distinguishing characteristic of a product licensing arrangement?
A) The contract typically provides for sharing of profits and losses.
B) It licenses proprietary rights within a specified territory.
C) It licenses the use of the principal/agent relationship.
D) The contract typically specifies the absence of an agency relationship.
Q2) Which of the following would be affected by the subtle differences between a partner's joint liability and joint and several liability?
A) procedures maintaining the right to sue a partner originally excluded in a legal action
B) the extent to which each partner is held individually and collectively liable
C) procedures for recovering damages from all or some of the partners in a legal action
D) the extent to which partnership assets are held accountable to third parties
Q3) Choosing how to own a business is of little consequence to the ultimate determination of who is financially liable for the business.
A)True
B)False
Q4) Discuss the distribution of the profits of a corporation.
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Chapter 15: The Corporate Form: Organizational Matters
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Q1) Rolf called Tim to discuss an as-yet unannounced corporate takeover. Following Rolf's call, Tim purchased securities of both corporations on the basis of relevant material information he received. The securities are held in a joint trading account co-owned by Tim and Rolf. In these circumstances, Rolf is a tippee, Tim is an insider, and both Rolf and Tim are guilty of insider trading.
A)True
B)False
Q2) Which of the following is synonymous with the term "closely held" with respect to corporate entities?
A) unlimited liability corporation
B) limited liability corporation
C) private corporation
D) public corporation
Q3) What is required to be set out in the incorporation documents with respect to the number of shares for each class that can be issued?
A) unlimited number and type of classes of shares
B) maximum number or designation of unlimited for each class
C) minimum number or designation of unlimited for each class
D) limited number of shares for each class
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Page 17
Chapter 16: The Corporate Form: Operational Matters
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Q1) Why would a court consider an accounting of profits to be an appropriate remedy for a breach of the corporate opportunity doctrine?
A) It is the most obvious remedy available to the courts.
B) It facilitates the return of something that belonged to the corporation.
C) It is a readily available calculation to be made.
D) It facilitates quick and effective punishment for white collar crimes.
Q2) Why was the standard of care of a corporation's directors and officers codified?
A) The law required an objective standard to ensure that fiduciaries strive for perfection.
B) The unduly low common law standard of care compromised the duty of competence.
C) Fiduciaries had to exhibit a greater degree of skill than could reasonably be expected.
D) Fiduciaries were held to an unreasonably exacting duty of competence.
Q3) Briefly discuss the oppression remedy. Identify the categories of conduct a court would usually find to be oppressive in nature.
Q4) Briefly discuss statutory derivative actions, including what they permit and what is required for their commencement.
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Chapter 17: Personal Property
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Q1) A bailee who specializes in a certain type of bailment is expected to exercise ordinary diligence but greater care than an ordinary person.
A)True
B)False
Q2) WeMove4U Inc. is a transport company that operates in Alberta and Saskatchewan. The company has recently adopted a new standard charge agreement that severely limits its liability in the event of mishap with bailed property. By pointing out this clause to its customers, WeMove4U is shifting the burden for damage or loss to the bailor, who should purchase adequate insurance coverage.
A)True
B)False
Q3) Identify the common types of bailments.
Q4) Tangible property is composed of personal property, the value of which comes from legal rights.
A)True
B)False
Q5) Identify the issues typically addressed in a commercial chattel lease.
Q6) Identify the risks relating to personal property.
Q7) Describe bailment, and discuss its key issues.
Page 19
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Chapter 18: Intellectual Property
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Q1) A business with a patent monopoly to sell its invention will want to ensure it has a unique domain name on the website that will readily direct its customers to its website address.
A)True
B)False
Q2) The negotiation of the purchase of a domain name from a registered owner may be, but is not always, the result of the exploitive practice of cyber-squatting.
A)True
B)False
Q3) Which of the following distinguishes a patent held by a large commercial entity from a patent held by a small commercial entity?
A) a 17-year patent is granted to a large commercial entity; a small entity receives 20 years
B) a delay is granted to a small commercial entity to facilitate the market testing of its product
C) the amount required to be paid for the approval of patent applications
D) the amount of registry's assessed annual patent maintenance fee
Q4) Discuss the rights attributable to a registered industrial design.
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Chapter 19: Real Property
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Q1) Isabella and Martina are joint tenants of a commercial warehouse. What would happen if either Isabella or Martina were to die?
A) The property would be subdivided, and each half interest would be sold by auction.
B) The survivor would have the right to buy out the deceased owner's interest.
C) Each interest is subject to a right of survivorship, and the rights of the deceased owner would pass to the surviving owner.
D) The rights of the deceased owner would be inherited by the deceased's heirs.
Q2) The rights of the mortgage lender are limited to a combination of the following three remedies: suing the borrower, taking possession of the land, and foreclosure.
A)True
B)False
Q3) Which of the following is "tenant" synonymous with in the realm of real property law?
A) an individual who leases space rather than having outright ownership
B) a contract allowing owners to deal with their respective interests
C) an owner of any form of right or title in land
D) a contract limiting ownership by division in time
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21
Chapter 20: The Employment Relationship
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Q1) In Canada, matters such as criminal record, ancestry, and political beliefs are all examples of prohibited grounds of employment discrimination. Which of the following is the most likely source of these types of prohibited grounds?
A) all Canadian employment legislation
B) legislation in Ontario and Quebec
C) legislation in Manitoba and the Yukon
D) legislation in some jurisdictions
Q2) In order to avoid liability for negligent hiring, the onus rests with an employer, who must prove that it was not careless in hiring, training, or supervising.
A)True
B)False
Q3) The distinction between an employee and an independent contractor for the purposes of vicarious liability is increasingly being called into question by the courts.
A)True
B)False
Q4) Discuss the jurisdiction of both the federal and provincial governments to make laws that affect employees.
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Chapter 21: Terminating the Employment Relationship
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Q1) Which of the following is equally influenced by collective agreements and individual employment contracts?
A) whether an employee simply leaves when the contract term expires
B) the implied term of just cause
C) the amount of notice that must be given, regardless of just cause
D) police officers' special rights in the case of dismissal
Q2) What is the role of the arbitrator in assessing whether the penalty imposed upon a unionized employee by their employer was appropriate in the circumstances?
A) to look for evidence of progressive discipline
B) to order reinstatement without loss of pay, benefits, or seniority
C) to assess why the grievance process failed
D) to fashion a remedy somewhere between dismissal and reinstatement
Q3) Bad faith on the part of an employer is often the result of its claiming unfounded allegations of cause for terminating an employment relationship with an employee.
A)True
B)False
Q4) Explain what "just cause" means, and identify the types of employee conduct that would be considered just cause.
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Page 23
Chapter 22: Professional Services
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Q1) Professional service contracts define the parameters of the work that professionals are engaged to do, provided all essential terms have been included in the agreement at the time it was created.
A)True
B)False
Q2) Which of the following is a common characteristic of the most difficult cases involving professional tort with respect to third parties?
A) breach of fiduciary obligation of professional-client privilege
B) careless advice or misrepresentations causing economic loss
C) breach of fiduciary obligations to maintain confidentiality
D) conflict between the client's and the professional's interests
Q3) The least difficult cases are those in which professionals give careless advice or make misrepresentations causing negative economic consequences to third parties.
A)True
B)False
Q4) List the ways in which professionals can manage risk arising from their professional responsibilities.
Q5) Identify specific obligations that apply to a professional as fiduciary.
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Chapter 23: Sales and Marketing: the Contract, Product, and Promotion
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Q1) A number of terms are automatically implied by the Sale of Goods Act into the contracts of parties, even though they may have expressly agreed to exclude the operation of this legislation with regard to their transaction.
A)True
B)False
Q2) D.A.D. Enterprises Inc. (DAD) is located in Whitehorse. It has entered into a contract for the purchase of goods from Finnigan Fishing Rods & Reels Ltd. In accordance with the terms of the contract, Finnigan must, among other things, arrange shipping. What type of arrangement exists between these parties?
A) p.p.d. Whitehorse
B) c.i.f. Whitehorse
C) c.o.d. Whitehorse
D) f.o.b. Whitehorse
Q3) Which of the following is recognized as a term that cannot be easily classified under the Sale of Goods Act?
A) implied term
B) innominate term
C) condition
D) warranty
Page 25
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Chapter 24: Sales and Marketing: Price, Distribution, and Risk Management
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Q1) Which of the following is considered to be a valid criticism of the pricing code launched in 2002 by several Canadian retail associations in order to avoid legislated regulations relating to the accuracy of automatic scanner pricing?
A) the absence of retailer accountability
B) uncertainty as to whether the Competition Act is strengthened by the code
C) the absence of retailer awareness
D) uncertainty as to whether voluntary codes effectively replace regulation and enforcement
Q2) What is the recommended source for acquiring knowledge of the standards that must be met for both the production and labelling of goods produced by a manufacturer?
A) trade association and specialized professional advisors
B) Trade Association Conformity Continuum Guidelines
C) the Competition Bureau
D) the Competition Bureau's immunity program
Q3) Discuss when an advertiser may legitimately claim a price to be the "ordinary price" of a product.
Q4) List the sources of legal risks in marketing that relate to price.
Q5) Discuss the criticisms surrounding the Scanner Price Voluntary Code.
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Chapter 25: Business and Banking
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Q1) How would a written contract containing an unconditional order to pay a specific sum on demand to a specific bearer most likely be classified?
A) as a promissory note
B) as a cheque
C) as a negotiable instrument
D) as a bill of exchange
Q2) With which of the following is the expression "an assignee can have no better rights than an assignor" synonymous in law?
A) unscrupulous financiers and assignees that sell substandard services
B) an assignee's right is subject to contractual obligations
C) an assignee's independent problems with quality and performance
D) the buyer's nearly absolute obligation to pay the assignee
Q3) Discuss the various aspects of the evolution of credit cards.
Q4) Which of the following is subject to the law of negotiable instruments?
A) credit cards
B) money laundering
C) cheques
D) electronic transfers
Q5) Discuss the purpose of the banking agreement.
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Chapter 26: The Legal Aspects of Credit
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Q1) A financing statement is required to be registered each time a borrower has acquired assets after giving a general security agreement over the borrower's current assets.
A)True
B)False
Q2) Is a personal guarantee of a commercial loan considered to be dangerous?
A) No; once signed, the guarantee must be renewed annually.
B) Yes, owing to the unconditional nature of this primary promise.
C) No; personal assets continue to be protected by limited liability.
D) Yes; their continuing nature includes total debt owned at any time.
Q3) What is the purpose of a letter of commitment?
A) It classifies the borrower's assets in terms of retention by the business.
B) It establishes requirements to maintain inventory and book debts at specified levels.
C) It sets out in a summary manner the basic terms on which the lender is prepared to make the loan.
D) It sets out the borrower's obligation to provide financial reports and maintain specified debt/equity ratios.
Q4) Explain the environmental due diligence process.
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Chapter 27: Bankruptcy and Insolvency
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Q1) What must be acquired in order for a business to continue to function after its insolvency proposal has been approved by its creditors?
A) approval of the court
B) appointment of a trustee
C) majority approval by creditors
D) debtor-in-possession financing
Q2) What are fraudulent preferences, reviewable transactions, and fraudulent conveyances?
A) categories of payments made prior to bankruptcy
B) categories of payments made prior to insolvency
C) classifications of payments made subsequent to bankruptcy
D) classifications of payments made subsequent to insolvency
Q3) Describe the formal actions available to creditors that allow them to remedy a borrower's default on loan repayments.
Q4) A contractual agreement between the debtor and creditors that allows an insolvent debtor to reorganize and continue in business is legally described as an assignment in bankruptcy.
A)True
B)False
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Chapter 28: Insurance
Available Study Resources on Quizplus for this Chatper
70 Verified Questions
70 Flashcards
Source URL: https://quizplus.com/quiz/27019
Sample Questions
Q1) Why is environmental impairment liability insurance expensive and difficult to obtain?
A) because of the lack of cap on punitive damages for environmental liability
B) because most environmental harm is intentionally caused
C) because of the extensive nature of environmental liability
D) because of the lack of environmental operational management policy
Q2) Allowing people to insure property that they have no real interest in may lead to the intentional destruction of the property. To which rule does this rationale apply?
A) life insurance rule
B) indemnity rule
C) coinsurance rule
D) insurable interest rule
Q3) Identify the test for whether the insured has an insurable interest in the thing being insured, and briefly explain the rationale behind this rule.
Q4) A rider is written evidence of a change in an existing policy of insurance.
A)True
B)False
Q5) Identify and briefly describe the basic kinds of insurance.
Q6) Discuss subrogation.
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