Legal Environment of Business Study Guide Questions
Course Introduction
The Legal Environment of Business explores the fundamental principles of law that affect commercial transactions, corporate operations, and organizational decision-making. This course examines the structure and function of the U.S. legal system, contracts, agency, torts, employment law, intellectual property, and the regulatory environment influencing businesses. Students will analyze how statutes, regulations, and case law shape the rights and responsibilities of businesses and individuals, develop critical analytical skills to identify legal risks and opportunities, and gain a practical understanding of how legal considerations impact strategic and day-to-day business decisions.
Recommended Textbook Managers and the Legal Environment Strategies for the 21st Century 8th Edition by Bagley
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Chapter 1: Law, Value Creation, and Risk Management
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Q1) As used in the text,the term "legal astuteness" refers to the ability of a manager to avoid situations making consultation with legal counsel necessary.
A)True
B)False
Answer: False
Q2) 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
Q3) Law is not just a static external force acting upon managers and their firms; rather law and organizations are "endogenously coevolutionary."
A)True
B)False
Answer: True
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3
Chapter 2: Ethics and the Law
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Q1) Which of the following international organizations adopted a convention criminalizing bribes to government officials and recommending a prohibition on the tax deductibility of bribes?
A) The Foreign Corrupt Practices Consortium
B) The Organization of Economic Cooperation and Development
C) The International Business Legal and Ethical Revision Association
D) Transparency International
Answer: B
Q2) Which of the following is NOT an example of St.Thomas Aquinas' requirements for a law to be just?
A) The law must be within the power of individuals to fulfill it.
B) The law must be consonant with a reasoned determination of the universal good.
C) The law must be formed to promote a private benefit to the majority.
D) The law must be widely promulgated.
Answer: C
Q3) Utilitarianism seeks to equalize the benefit to everyone.
A)True
B)False
Answer: False
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Page 4
Chapter 3: Sources of Law, Courts, and Dispute Resolution
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Q1) Refer to Fact Pattern 3-1.Which of the following is the most likely result in regard to Bruce's claim that the lawsuit could only be appropriately filed in a state court?
A) The court would likely rule that federal court jurisdiction failed to exist because the parties were not all residents of the same state.
B) The court would likely rule that federal court jurisdiction failed to exist because the amount in controversy was excessive..
C) The court would likely rule that federal court jurisdiction existed based on the presence of a consumer complaint.
D) The court would likely rule that federal court jurisdiction existed based on diversity of citizenship.
Answer: D
Q2) An interrogatory would be a tool by attorneys in the discovery process.
A)True
B)False
Answer: True
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Chapter 4: Constitutional Bases for Business Regulation
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Q1) In theCitizens United v.Federal Election Commission case referenced in the text,regarding the constitutionality of corporate political expenditures,the U.S.Supreme Court:
A) upheld federal laws banning corporate independent expenditures on political candidates and also upheld the federal prohibition on the use of corporate treasury funds for electioneering communications or express advocacy.
B) upheld federal laws banning corporate independent expenditures on political candidates but struck as unconstitutional the federal prohibition on the use of corporate treasury funds for electioneering communications or express advocacy.
C) struck down as unconstitutional federal law banning corporate independent expenditures on political candidates but upheld the federal prohibition on the use of corporate treasury funds for electioneering communications or express advocacy.
D) struck down as unconstitutional federal law banning corporate independent expenditures on political candidates and also struck down as unconstitutional the federal prohibition on the use of corporate treasury funds for electioneering communications or express advocacy.
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Chapter 5: Agency
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Q1) Sam is an employee of Binky,Inc.While delivering a truckload of binkies to a local retailer,Sam decided to stop at his bank to deposit his paycheck.The bank is three blocks from the retailer and it takes approximately 15 minutes to deposit a check.While Sam is in the bank,the truck rolled down the street because Sam negligently forgot to set the parking brake.The truck crashed through the window of Market,killing two people and causing $500,000 in damage.Discuss the issues involved in determining whether Binky,Inc.is liable for the damages at issue.If Binky,Inc.is liable,can it recover against Sam for the damages?
Q2) Which of the following are autonomous computer programs that can be dispatched by the user to execute certain tasks?
A) Electronic agents
B) Software identifiers
C) Click programs
D) Fortran identifiers
Q3) Agency is perhaps the most pervasive legal relationship in the business world.
A)True
B)False
Q4) What factors do courts consider in determining whether an act of an agent was within the scope of employment?
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Chapter 6: Administrative Law
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Q1) As set forth in the text,what are the seven basic steps for working successfully with an administrative agency?
Q2) In theUnited States v Morgancase referenced in the text,the U.S.Supreme Court ruled it __________ for a court to permit questions regarding the __________ of the agency.
A) impermissible, ripeness
B) impermissible, subpoena powers
C) permissible, mental processes
D) impermissible, mental processes
Q3) Which of the following agencies was created following the terrorist attacks of September 11,2001,to be responsible for civilian aspects of national security?
A) The Stateside Protection Commission
B) The Department of Homeland Security
C) The Department for Protection of Civilians
D) The Critical Civilian Defense and Protection Agency
Q4) Discuss what is meant by the ripeness doctrine,why it is needed,when issues involve ripeness usually occur,and when a dispute is generally ripe for determination.
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Chapter 7: Contracts
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Q1) __________ of a contract occurs when one party knows ahead of time that the other party will __________.
A) Anticipatory repudiation, breach the contract
B) Anticipatory repudiation, perform the contract
C) Mutual performance repudiation, breach the contract
D) Conditional performance, breach the contract
Q2) Mutuality of obligation applies only to bilateral contracts.
A)True
B)False
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) 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.
Q5) List the elements necessary for the doctrine of promissory estoppel to be applied.
Q6) What are the four basic elements necessary for a valid contract?
Page 9
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Chapter 8: Sales, Licensing, and E-Commerce
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Q1) What is the rule regarding the enforceability of a contract for the sale of goods that comes within the statute of frauds if no quantity is specified?
Q2) If parties to a contract dispute a missing term,the court could simply fill-in the missing term using the __________ provisions of the UCC.
A) Gap-Filler
B) Conditional Acceptance
C) Battle of the Forms
D) Knockout Rule
Q3) Under the UCC doctrine of commercial impracticability as applied by the UCC,a failure to perform is a breach even if performance is made impractical by an event unforeseen by the contract.
A)True
B)False
Q4) The UCC applies identical rules concerning the sales of goods to merchants and nonmerchants.
A)True
B)False
Q5) What does Section 201 of the UCC provide regarding a Statute of Frauds?
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Chapter 9: Torts and Privacy Protection
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Q1) The tort of malicious prosecution protects the right to enjoy the benefits of legally binding agreements.
A)True
B)False
Q2) Refer to Fact Pattern 9-2.Assuming she has the financial resources or sufficient insurance,can Blake recover the entire $100,000 from Cathy?
A) Yes.
B) No, but only because she was found to be less at fault than Blake.
C) No, because joint and several liability is in effect.
D) Only if Blake can establish that Tony is insolvent can he recover the entire amount from Cathy.
Q3) Under the doctrine of __________,the plaintiff may recover only the proportionate amount of damages attributable to the defendant's negligence.
A) contributory negligence
B) comparative negligence
C) contribution
D) indemnity
Q4) Define and explain the theory behind the economic loss rule.
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Chapter 10: Product Liability
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Q1) Which of the following is true under the UCC regarding the requirement of privity in regard to a breach of warranty action?
A) The UCC limits liability to those in privity with the seller who are injured by the goods.
B) The UCC extends protection to those in privity with the seller who are injured by the goods and also to those in the buyer's household reasonably expected to use, consume, or be affected by the goods and who are injured by the goods.
C) The UCC extends protection not only to those in privity with the seller, but also to any person who may reasonably be expected to use, consume or be affected by the goods and who is injured by the goods.
D) The UCC has alternate provisions regarding the need for privity from which adopting states may choose.
Q2) Under what circumstances will a successor corporation be held liable in a product liability action under the traditional successor liability rule?
Q3) A court is not bound by the Restatement's formulation of product liability law.
A)True
B)False
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Page 12
Chapter 11: Intellectual Property
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Q1) A design dictated by function may be protected by a(n)__________ patent.
A) equivalents
B) design
C) utility
D) useful articles
Q2) Mandy purchased a business law book and used it during her business law class.She later loaned the book to Steven,and then to Christen.Another student accused her of copyright violation and threatened to report her to the book publisher and also to her school's ethics board.Did Mandy violate the copyright laws?
A) Yes.
B) No, because her loans would be covered by the fair use doctrine.
C) No, because her loans would be covered under the first sale doctrine.
D) No, because her loans would be covered under the equivalency doctrine
Q3) Service marks are a form of trademarks.
A)True
B)False
Q4) Trade secrets are protected for an indefinite time.
A)True
B)False
Q5) Discuss in detail common law rights,if any,in a trademark in the U.S.
Page 13
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Chapter 12: The Employment Agreement
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Q1) Refer to Fact Pattern 12-2.Which of the following would likely enable Paige to keep her insurance with the accounting firm until she is eligible for Medicare?
A) The Health Insurance Portability and Accountability Act
B) The Consolidated Omnibus Budget Reconciliation Act
C) The Employee Security Act
D) The Insurance Protection Act
Q2) __________ purport to give an employer the right to recoup some or all of an employee's stock option gain if he or she goes to work for a competitor within a certain period of time following exercise of the option.
A) Climb back provisions
B) Incline clauses
C) Let loose clauses
D) Clawback provisions
Q3) Melody just got out of law school and went to work at Big Law Firm.One of her first assignments is to help a partner who just got reassigned to the employment law section of the firm.The partner asks her to provide information regarding the legality of drug testing.What four factors should Melody tell the partner are considered in determining whether drug testing will be deemed permissible in a particular situation?
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Chapter 13: Civil Rights and Employment Discrimination
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Q1) A plaintiff claiming disparate impact discrimination based on sex must prove that the employer intentionally discriminated against him or her by denying a benefit or privilege of employment (such as a promotion or pay raise)based upon the individual's sex.
A)True
B)False
Q2) An impairment is a disability under the ADA only if it__________ an individual's ability to perform __________ as compared with most people in the general population.
A) completely prohibits, a major life activity
B) excludes, a major life activity
C) substantially limits, a major life activity
D) impairs in any way, any life activity
Q3) How long must an employee have worked for an employer in order to be eligible for leave provided by the Family and Medical Leave Act?
A) Two years
B) Twelve months
C) Six months
D) 120 days
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Page 15
Chapter 14: Criminal Law
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Q1) Criminal recklessness is when a person consciously intends to cause the harmful result.
A)True
B)False
Q2) Under the __________ a corporate officer may be found guilty of a crime if she bore a "__________" to a violation of a statute dealing with "products that may affect the __________."
A) Responsible Corporate Officer doctrine, responsible relation, health of consumers
B) Direct Liability doctrine, responsible relation, health of consumers
C) Vicarious Liability doctrine, responsible relation, health of consumers
D) Responsible corporate officer doctrine, supervisory relation, privacy of consumers
Q3) The defendant formally pleads guilty or not guilty at the:
A) arraignment.
B) preliminary hearing.
C) indictment.
D) trial.
Q4) Fully discuss limitations on the protection against double jeopardy.
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Page 16
Chapter 15: Environmental Law and Sustainability
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Q1) The need to file a lawsuit in each case and the complexity of the common law made nuisance a cumbersome way to control environmental pollution in an industrialized society.
A)True
B)False
Q2) Set forth the Clean Air Act's four types of air quality goals.
Q3) The Resource Conservation Recovery Act imposes criminal sanctions for any person who "recklessly" transports hazardous waste to a facility that does not have an EPA permit.
A)True
B)False
Q4) Under the Clean Air Act,if a nonattainment area fails to develop an adequate plan to attain the national standard,which of the following penalties may be imposed?
A) No penalties may be imposed by the federal government because only individual states may impose penalties.
B) Limits on the use of federal highway funds.
C) Limits on drinking-water hookups.
D) Both limits on the use of federal highway funds and limits on drinking-water hookups.
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Page 17
Chapter 16: Antitrust
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Q1) Refer to Fact Pattern 16-2.Which of the following best describes the situation by which Number One Oil Company and other companies impose maximum price restrictions?
A) Horizontal price-fixing
B) Vertical price-fixing
C) Adverse price-fixing
D) There is no antitrust term for the practice.
Q2) The Local Government Antitrust Act expressly exempts municipalities from antitrust monetary damages,while expressly limiting equitable remedies such as injunctions.
A)True
B)False
Q3) Refer to Fact Pattern 16-1.Frank,a first year law student and gym member,is suspicious; but he does not know what violation to claim.Which of the following is the correct term for an illegal agreement by providers of the same good or service to charge a set fee?
A) Horizontal price fixing
B) Vertical price fixing
C) Substantial price fixing
D) Predatory price fixing
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Chapter 17: Consumer Protection
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Q1) The Federal Trade Commission has _____ commissioners who serve for _____-year terms.
A) seven; four
B) ten; five
C) six; six
D) five; seven
Q2) Refer to Fact Pattern 17-2.Which of the following is the term that best describes the process Janie uses in preparing the drug?
A) Combining
B) Compounding
C) Integrating
D) Servicing
Q3) In CASE 17.2 Stokely-Van Camp,Inc.v.Coca-Cola Co.(2009),the court analyzed whether a(n)__________ for a sports drink marketed by Coca-Cola constituted a(n)__________ in violation of the __________.
A) advertisement, false and misleading advertising, Federal Trade Commission Act
B) trade Secret, theft of intellectual property, Lanham Act
C) advertisement, false and misleading advertising, Lanham Act
D) formula, theft of intellectual property, Trade Secret Espionage Act
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Page 19
Chapter 18: Real Property and Land Use
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Q1) In the simplest type of ownership,property is owned by a partnership.
A)True
B)False
Q2) A sublease is legally the same thing as an assignment of a lease.
A)True
B)False
Q3) As part of any legislative proposal or other major governmental action that will significantly affect the quality of the environment,the government must generally include an environmental assessment (EA).
A)True
B)False
Q4) __________ is the division of a city into districts and the application of specific land-use regulations in each district.
A) Zoning
B) Nonconforming use
C) Subdivision process
D) Constitutional taking
Q5) Compare and contrast joint tenancy and tenancy by the entirety.
Q6) What must a person do to acquire a parcel of land by adverse possession?
Page 20
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Chapter 19: Forms of Business Organizations
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Q1) States may not impose a higher fiduciary duty upon partners than that set forth in the Revised Uniform Partnership Act.
A)True
B)False
Q2) Which of the following is generally true regarding the liability of members of a limited liability partnership for malpractice?
A) Members split evenly among themselves 50% of any assessed liability for malpractice against any member with the limited liability company retaining liability for the remaining 50%.
B) Members are not liable for their own malpractice or for the malpractice of other members because recovery for malpractice may only be obtained from assets of the limited liability partnership itself.
C) Members are liable for their own malpractice but not for the malpractice of other members.
D) Members are liable for their own malpractice and also for the malpractice of other members.
Q3) In what five categories does the Franchise Rule require a franchisor to make material disclosures to prospective franchisees?
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Chapter 20: Directors, Officers, and Controlling
Shareholders
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Q1) What is greenmail? What is a standstill agreement? When,if ever,is the process of greenmail protected by the business judgment rule?
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) What is a no-shop agreement?
A) An agreement whereby shareholders agree to not replace directors for a certain period of time.
B) An agreement whereby directors agree to not replace officers for a certain period of time.
C) An agreement whereby a target company agrees with a potential purchaser not to actively solicit other bidders but retains the right to negotiate with parties who submit unsolicited bids to the target.
D) An agreement whereby shareholders agree to not replace directors or officers for a certain period of time.
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Chapter 21: Public and Private Offerings of Securities
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Q1) A well-seasoned issuer is a firm that either has at least $100 million public worldwide common equity float held by nonaffiliated,OR has issued an aggregate of at least $100 million of registered non-convertible debt securities in the past three years.
A)True
B)False
Q2) In CASE 21.1 Lawson v.FMR,LLC (2014),the question before the U.S.Supreme Court was whether the __________ Act whistleblower protections extended to __________ of __________ contractors of __________ corporations.
A) Sarbanes-Oxley, employees, private, public
B) SEC 1934, employers, public, private
C) Private Securities Litigation Reform Act, employees, private, public
D) SEC 1933, employers, private, public
Q3) According to the SEC,a hyperlink embedded within a prospectus causes the hyperlinked information to be treated as part of the prospectus.
A)True
B)False
Q4) Set forth the difference between firm commitment underwriting and best-efforts underwriting.
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Page 23
Chapter 22: Securities Fraud and Insider Trading
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Q1) Which of the following is NOT true regarding the misappropriation theory of insider trading?
A) If a trader discloses to a source of nonpublic information that he or she plans to trade on the basis of that information, there is no violation under the misappropriation theory.
B) Liability under the misappropriation theory requires deception.
C) The misappropriation theory widens the class of persons who can be found liable for insider trading.
D) The trader cannot be held liable unless he or she is an insider of the company whose securities are traded.
Q2) Which of the following is NOT a part of the safe harbor provision for forward-looking statements under the 1934 Act?
A) A statement containing a projection of revenues, income, or other financial items.
B) A statement of the plans and objectives of management for future operations.
C) A statement of future economic performance.
D) A statement in a financial statement prepared in accordance with generally accepted accounting principles.
Q3) List the seven elements of a Rule 10b-5 cause of action.
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Chapter 23: Debtor-Creditor Relations and Bankruptcy
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Q1) A(n)__________ clause in a loan document provides that any breach by the borrower under any other loan agreement constitutes an event of default.
A) attached
B) dragnet
C) cross-default
D) cross collateralization
Q2) A loan agreement may be preceded by a(n)__________ which is a letter outlining the terms and conditions on which the lender will lend.
A) term sheet
B) advance notification
C) contract addendum
D) attachment
Q3) A repayment plan under a Chapter 11 bankruptcy must either be accepted unanimously or pass the "best interests of creditors" test.
A)True
B)False
Q4) What is required in a filing for a voluntary petition in bankruptcy? An involuntary petition?
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Page 25
Chapter 24: International Law and Transactions
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Q1) Customary practice arises from legislative action.
A)True
B)False
Q2) The __________ was created to provide financing for the purchase of U.S.exports.
A) World Bank
B) U.S.Bank
C) Export-Import Bank of the U.S.
D) U.S.Trade Association
Q3) A product is __________ when it is sold abroad below the current selling price in the exporter's home market or below the exporter's cost of production.
A) subsidized
B) dumped
C) underpriced
D) undervalued
Q4) The transfer of technical data to a foreign citizen while present in the U.S.is generally not considered to be an export.
A)True
B)False
Q5) What is the act-of-state doctrine,and how is it generally applied by U.S.courts?
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