Legal Environment of Business Study Guide Questions
Course Introduction
The Legal Environment of Business examines the framework of laws and regulations that influence and govern business operations. This course explores fundamental legal concepts, including contracts, torts, agency, business organizations, and the regulatory environment, emphasizing how these areas affect managerial decision-making. Students will analyze case studies and current legal developments to understand compliance, ethical considerations, and risk management within a business context. By the end of the course, students will be able to identify legal issues in business scenarios and apply legal reasoning to resolve common business disputes and challenges.
Recommended Textbook Business Law Text Cases An Accelerated Course 14th Edition by Roger LeRoy Miller
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Page 2
Chapter 1: Law and Legal Reasoning
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Sample Questions
Q1) Administrative law consists of the rules, orders, and decisions of administrative agencies.
A)True
B)False
Answer: True
Q2) The courts, in interpreting statutory law, may rely on the common law as a guide to what the legislators intended.
A)True
B)False
Answer: True
Q3) The Bay City Planning Department, the Coastal County Zoning Commission, the California Environmental Quality Agency, and the U.S. Bureau of Land Management issue regulations. These rules constitute
A) administrative law.
B) case law.
C) constitutional law.
D) statutory law.
Answer: A
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Chapter 2: Business and the Constitution
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Sample Questions
Q1) The Fifth Amendment prohibits unreasonable searches and seizures of persons or property.
A)True
B)False
Answer: False
Q2) The members of Citizens Aware believe that a recently enacted federal law is unconstitutional. They write and sign a petition to the government to repeal the law, refuse to obey the law, and stop others from complying with the law. Under the First Amendment, citizens have a right to
A) petition the government.
B) refuse to obey any law with which they disagree.
C) stop others from complying with the law.
D) all of the choices.
Answer: A
Q3) Some constitutional protections apply to business entities.
A)True
B)False
Answer: True
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Chapter 3: Courts and Alternative Dispute Resolution
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Sample Questions
Q1) No court offers mediation as an option before a case goes to trial.
A)True
B)False
Answer: False
Q2) Litigation is the process of resolving a dispute through the court system.
A)True
B)False Answer: True
Q3) Stephan wins his suit against Tidewater Boats, Inc. Tidewater's best ground for appeal is the trial court's interpretation of
A) the demeanor of the witnesses during the trial.
B) what happened to give rise to the dispute.
C) the dealings between the parties before the suit.
D) the law that applied to the issues in the case.
Answer: D
Q4) The term venue refers to the location of a trial.
A)True
B)False Answer: True
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Chapter 4: Tort Law
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Sample Questions
Q1) Ichiro is injured in a two-car accident and sues Heather, the driver of the other vehicle, alleging negligence. Heather claims that Ichiro was driving more carelessly than she was. Comparative negligence may reduce Ichiro's recovery
A) even if Ichiro was only slightly at fault.
B) only if both parties were equally at fault.
C) only if Ichiro was less at fault than Heather.
D) only if Ichiro was more at fault than Heather.
Q2) Bette backs out of City Parking Garage, colliding with Dill's car. Dill may recover $7,500 to cover the cost of the repairs if Bette failed to act as
A) a blameless person.
B) a faultless person.
C) a careless person.
D) a reasonable person.
Q3) A successful defense releases the defendant from liability for a tortious act.
A)True
B)False
Q4) If no harm results from an allegedly negligent act, there is no liability.
A)True
B)False
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Chapter 5: Criminal Law and Cyber Crime
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Sample Questions
Q1) No federal statute specifically addresses cyber crime.
A)True
B)False
Q2) Reese, driving while intoxicated, causes a car accident that results in the death of Sanyo. Reese is arrested and charged with a felony. A felony is a crime punishable by death or imprisonment for A) any period of time.
B) more than one year.
C) more than six months.
D) more than ten days.
Q3) Criminal law spells out the duties that exist between persons or between citizens and their governments.
A)True
B)False
Q4) In a criminal case, the state must prove its case by a preponderance of the evidence.
A)True
B)False
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Page 7
Chapter 6: Business Ethics
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Sample Questions
Q1) Julie is sales manager for Kelso's Concrete & Stone Products, Inc. In applying ethical principles to the business of the firm, Kelso's and Julie will most likely evaluate
A) what duties and responsibilities should exist for the business.
B) how to maximize profits in the short run
C) how to maximize profits in the long run.
D) marketing campaigns to counter potential bad publicity.
Q2) Ethical reasoning is the process through which an individual rationalizes whatever action he or she chooses to take.
A)True
B)False
Q3) According to utilitarianism, it does not matter how many people suffer a negative effect from an act.
A)True
B)False
Q4) Corporations can be viewed as "citizens" that are expected to participate in bettering society.
A)True
B)False
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Page 8
Chapter 7: Nature and Terminology
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Sample Questions
Q1) All contracts must be in writing to be enforceable.
A)True
B)False
Q2) When a contract's writing is not clear, a court will not consider evidence outside the contract to interpret its terms.
A)True
B)False
Q3) In contract law, intent is determined by the subjective theory of contracts.
A)True
B)False
Q4) Susan enters into a contract with Troy to act as his personal sports trainer. If a dispute later arises and the contract contains unclear terms, the rules of contract interpretation will give effect to
A) the parties' intent as expressed in their contract.
B) what the promisor claims was the parties' intent.
C) what the promisee claims was the parties' intent.
D) what the parties now agree they intended.
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Chapter 8: Agreement in Traditional and E-Contracts
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Sample Questions
Q1) Megan gives out a business card with an e-mail address on it. It is reasonable to infer that Megan has consented to
A) transact business electronically.
B) submit to the recipient's jurisdiction.
C) respond to e-mail sent to that address.
D) nothing.
Q2) An invitation to negotiate-"can you afford this?"-is an offer.
A)True
B)False
Q3) Dispatch Corporation and Hauling, Inc., agree in advance to terms that apply to their future e-transactions. This is
A) a partnering agreement.
B) a click-on agreement.
C) a shrink-wrap agreement.
D) a choice-of-law clause.
Q4) An expression of opinion-"this is excellent"-is an offer.
A)True
B)False
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Chapter 9: Consideration, Capacity, and Legality
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Sample Questions
Q1) A promise made in return for an act or event that has not yet taken place can be fully enforceable.
A)True B)False
Q2) A person who is intoxicated can avoid liability on any contract due to the intoxication.
A)True B)False
Q3) Refer to Fact Pattern 9-1. Tea & Tarts's forbearance from towing is legally sufficient consideration
A) because it is a promise of something of value.
B) only if Sports Bar's patrons park in Tea & Tarts's lot.
C) only if Tea & Tarts's customers cannot park in its lot because it is full.
D) under no circumstances.
Q4) If a minor disaffirms a contract, he or she must disaffirm the entire contract.
A)True B)False
Q5) Two parties can mutually agree to rescind a contract unless it is executory.
A)True
B)False
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Chapter 10: Defenses to Contract Enforceability
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Sample Questions
Q1) Refer to Fact Pattern 10-4. The writing that Alain and Brie signed is
A) completely integrated.
B) conditionally integrated.
C) partially integrated.
D) supplementally integrated.
Q2) Scienter clearly exists if a party knows a fact is not as stated.
A)True
B)False
Q3) Refer to Fact Pattern 10-3. Between Grain and Hearty, there is
A) an oral contract only.
B) a pre-contract only.
C) a written contract.
D) no contract.
Q4) In a transaction for the sale of an auto painting facility, Bright Auto Colors Company tells Custom Cars Corporation that the paints and other supplies on-site are included. The contract says nothing about the supplies on-site, but does state, "This document supersedes all oral promises relating to the sale." Are the supplies part of the sale? Why or why not?
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Chapter 11: Third Party Rights and Discharge
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Sample Questions
Q1) A delegation relieves the party making it of the obligation to perform.
A)True
B)False
Q2) Ben and Ivy enter into a contract under which Ben agrees to cater Ivy's wedding in exchange for a cash down payment. The contract expressly prohibits any transfer of rights. A contract right may be transferred, however, if the transfer involves
A) a right to receive payment.
B) a right to Ben's services.
C) rights under Ivy's insurance policy against Ben's failing to perform.
D) none of the choices.
Q3) Construction LLC agrees to build a store for Discount Retail, Inc., at a specific location. Before the work begins, the local zoning law is changed to prohibit commercial buildings at that location. In this situation
A) Construction is in breach of contract.
B) the local zoning authority is in breach of contract.
C) the contract is discharged.
D) Discount must compensate Construction for its lost profit.
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Chapter 12: Breach of Contract and Remedies
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Q1) Mother & Daughter Jewelers breaches its lease with Longview Mall and vacates the premises six months before the end of the term. In some states, Longview would have to A) avoid reletting the premises to recover damages.
B) use reasonable means to find a new tenant to mitigate damages.
C) relet the premises to recover any damages.
D) sell the premises to recover any damages.
Q2) Ordinarily, the remedy for a seller's breach of a contract for a sale of real estate is specific performance.
A)True
B)False
Q3) In a contract for a sale of goods, the usual measure of compensatory damages is the difference between the retail price and the wholesale price.
A)True
B)False
Q4) Expenses that are caused directly by a breach of a contract are known as primary damages.
A)True
B)False
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14
Chapter 13: Intellectual Property Rights
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Sample Questions
Q1) Data Marketing, Inc., registers its trademark as provided by federal law. After the first renewal, this registration
A) is renewable every ten years.
B) is renewable every twenty years.
C) runs for the life of the corporation plus seventy years.
D) runs forever.
Q2) Mary Kate Inc. allows Ashley Company to use Mary Kate's trademark as part of Ashley's domain name. This is
A) a license.
B) a likelihood of consumer confusion.
C) cybersquatting.
D) trademark dilution.
Q3) RiteMade Machinery, Inc., designs, makes, and sells a drill press. Steel Equipment Company copies the design without RiteMade's permission. Steel's conduct is actionable provided
A) consumers are confused.
B) Steel's conduct is intentional.
C) Steel's conduct reduces the value of RiteMade's design.
D) RiteMade's design is patented.
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Chapter 14: Internet Law, Social Media, and Privacy
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Sample Questions
Q1) Interactive Entertainment Corporation markets its products online. Through the use of cookies, Interactive Entertainment and other online marketers can
A) track individuals' Web browsing activities.
B) gain access to competitors' servers.
C) "sweet talk" consumers into buying certain products.
D) attack competitors' Web sites.
Q2) Cyber torts are torts that arise from online conduct. A)True
B)False
Q3) Online conduct gives rise to only a narrow variety of legal actions.
A)True
B)False
Q4) Employees' posts on social media may be protected under labor law.
A)True
B)False
Q5) The law restricts the "fair use" of methods for bypassing encryption software for noncommercial purposes.
A)True
B)False
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Chapter 15: The Formation of Sales and Lease Contracts
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Sample Questions
Q1) A lessor is a party who acquires a right to the possession and use of goods under a lease.
A)True
B)False
Q2) Car n' Truck Body & Paint Company orders custom paint from Diverse Hues Inc., but Diverse does not deliver. Car n' Truck will probably be unable to enforce the agreement if the parties omitted
A) a price term.
B) a delivery date.
C) a quantity term.
D) shipping arrangements.
Q3) Dian, an agent for Expo Motors, Inc., writes a letter to Flynn on November 1 stating that she will sell him a 2017 Subaru Outback for $25,000 between November 1 and December 31. Dian's letter to Flynn is
A) a merchant's firm offer.
B) an acceptance.
C) an option contract.
D) none of the choices.
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17
Chapter 16: Performance, Breach, and Warranties of Sales and Lease Contracts
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Sample Questions
Q1) A seller is not required to give a written warranty for consumer goods sold. A)True
B)False
Q2) Drive-Away Autos, Inc., sells cars to consumers. To avoid liability for oral express warranties, each Drive-Away sales agreement should note that a car is sold A) as is.
B) in perfect condition.
C) subject to warranties included in the written contract only.
D) with no known defects.
Q3) Pine Mills Inc. and Quality Lumber Company enter into a contract for a sale of plywood to be delivered under a destination contract. This contract requires Pine Mills, the seller, to
A) allow the buyer to reject the goods for any reason.
B) deliver the goods to a particular destination.
C) inspect the goods before tendering their delivery.
D) place the goods into the hands of a carrier.
Q4) Express warranties displace inconsistent implied warranties with no exception. A)True
B)False
Page 18
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Chapter 17: Agency Relationships in Business
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Sample Questions
Q1) An agent's deviation from the lawful clearly stated instructions of the principal is a violation of the duty of obedience.
A)True
B)False
Q2) Agency relationships normally are consensual.
A)True
B)False
Q3) Insurance Sales Corporation hires Jeremy to act as its agent. Insurance Sales's right not to perform a contract entered into by Jeremy, if he breaches their agency agreement, is the right of
A) avoidance.
B) indemnification.
C) nullification.
D) termination.
Q4) Vicarious liability is indirect liability.
A)True
B)False
Q5) If the principal petitions for bankruptcy, the agency is usually terminated.
A)True
B)False
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Chapter 18: Small Businesses and Limited Liability Companies
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Sample Questions
Q1) Members of a limited liability company can stipulate in their operating agreement how voting rights will be apportioned.
A)True
B)False
Q2) Bee Hive Honey, LLC's members include Charlie and Donna. For purposes of suing and being sued, Bee Hive Honey is
A) an aggregate of its members.
B) a non-entity
C) a legal entity apart from its members.
D) a non-participating third party.
Q3) Any business-except a sole proprietorship-must comply with business registration and licensing requirements.
A)True
B)False
Q4) A partner may pursue his or her own interests without automatically violating the partner's fiduciary duties to the partnership and the other partners.
A)True
B)False
Page 20
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Chapter 19: Corporations
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Sample Questions
Q1) Daryl, Elsa, and Ferris are the directors of Go Apps, Inc. Go also has four officers and fourteen shareholders. Dividends can be ordered by the firm's A) board.
B) minority shareholders.
C) officers.
D) majority shareholders.
Q2) Neil, a majority shareholder of Oil Changes Inc., effectively excludes Polly, a minority shareholder, from the benefits of stock ownership in the firm. Polly can
A) assert the business judgment rule.
B) bring a suit for damages.
C) exercise de facto control.
D) force a cumulative vote.
Q3) Directors can delegate work to corporate officers and employees. A)True
B)False
Q4) PrimarySource.com Corporation is a new online, textbook, and school supply business. How can PrimarySource.com obtain capital to finance its operations?
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